By Thusitha de Silva
When Morgan Stanley’s head of emerging market equities, Ruchir Sharma, recently excluded Singapore from his list of breakout emerging countries in the next decade, not many would have been surprised. His remarks were related to growth prospects of countries he singled out as breakout nations, including Asean neighbours Thailand and the Philippines. Singapore has moved beyond emerging market status and there are expectations that Singapore’s economic growth will not be able to match the consistently high rates prior to the advent of the global financial crisis in 2008.
Still, Sharma articulated two points in particular that offered some food for thought for those who care about Singapore’s future. He was bullish on the growth prospects of South Korea, citing its innovative capabilities and ability to produce global brands—like Singapore, South Korea is not exactly an emerging country. He also said that governments would do well to count the mounting costs of state capitalism and start cutting back the role of the state, and putting more of their state-owned companies in private hands.
For Singapore, these two points are arguably inter-related. It’s no secret that the state has an overwhelming influence on Singapore’s economy. You only have to look at a reliable proxy for Singapore’s broader economy like the Straits Times Index, which contains the largest home-grown companies, to understand their wide reach. About half of the 30 companies in the benchmark index are linked to state-owned Temasek Holdings, including the likes of Singapore Airlines, DBS and CapitaLand. Such companies tend to be among the bigger employers in Singapore, and this is even before we factor in the civil service as well as workers in government-linked bodies like the Land Transport Authority (LTA), the Housing and Development Board (HDB) and PUB.
Lack of excitement
With such a huge responsibility to the Singapore workforce, it would be reasonable to think that these entities should set trends in innovation, and to some extent they have. For instance, CapitaMall introduced the first real estate investment trust (REIT) in Singapore in 2002, helping to create a new asset class for many investors, LTA was the driving force behind the Electronic Road Pricing (ERP) system, which was introduced in 1998, while the PUB can take credit for the development of NEWater.
Such organisations have been lauded for their excellence not only in Singapore but overseas too. But for many Singaporeans, such innovations don’t really set the pulse racing. Despite Singapore’s heady economic development since independence, there has never been a Samsung or Hyundai. Perhaps Singapore Airlines has come closest to being a global brand, but it is facing increasing competition in its space and is not the world’s best airline any more.
It would appear that a key quality of a global brand is to have a sense of patriotism that makes you want to buy local products. Many global brands tend to be big in their home markets, too. In fact, they would need to become big in their local markets before they can venture abroad. But even as they do so, there’s often still room to grow in their local markets.
This doesn’t tend to be the case for Singapore. Companies from the city-state venture overseas because there is a limit to Singapore’s capacity for their goods or services. So, the motivation to grow is somewhat different. The city-state tempers this situation by always trying to identify new trends that it can leverage on–hence, the recent announcements by the government relating to 3D printing and space technology. However, any regional leadership in these areas from Singapore necessarily requires that there be bigger markets elsewhere for such things. Otherwise, it is unlikely to work out for the city-state.
With a small domestic market, it is hard to grow a global brand, but not impossible. For instance, Switzerland is famous worldwide for precision watches and chocolates–things that people can get passionate about. What’s stopping Singapore for creating something that stirs the passions? Perhaps it has something to do with the heavy presence of the government in the local economy.
Innovation is hard, but it is likely even harder to legislate for innovation. In the meantime, one gets the feeling that innovation is not necessarily fun here as it has to be pursued with some concrete end-result within a specified time frame. If an innovator’s passion is dictated by terms and conditions, that’s more than half the battle lost. Singaporeans are not dumb. They don’t wholeheartedly embrace anything that seems contrived or dishonest. There can be no short-cuts or innovation vouchers.
For it to work, innovation has to be lived, with no constraints. The process may hurt, may be prolonged, but at the end of the day, it has to bring joy to a lot of people. Singaporeans have made Singapore rich enough to encourage such activity with no terms and conditions. Failure is an option. And if you must mention it, though it seems a bit tardy and petty to do so in this context, profits will certainly follow.
