SINGAPORE IS DYNAMIC BECAUSE OF STRONG MANUFACTURING TIES
By Peter Gourlay

Singapore, cited as having the best business environment in Asia, offers multinationals a unique platform for manufacturing and R&D. The small city-state of 4.5 million people provides companies with alternatives to many of the political hurdles that companies face when locating in Greater China (Taiwan, Hong Kong and China). As China continues to draw manufacturing from the West and increasingly from Asia itself, multinationals are carefully balancing their investments in the region.

Singapore is the largest U.S. trading partner in the Associations of Southeast Asian Nations (ASEAN). As the logistics, communication, IT, financial services and management hub among the 10 countries of ASEAN, Singapore provides entree to a market of more than 500 million people.

Multinationals see the benefits of setting up operations in Singapore. It not only offers a launching pad for the region, but its modern R&D base, knowledge economy and quality of life are hard to match. More than 7,000 multinationals have established their headquarters in the city-state.

According to the U.S. Commercial Service in Singapore, companies vouch for Singapore's critical role as a gateway to ASEAN. Of the 1,500 American companies currently operating in Singapore, 90 percent have regional or subregional responsibilities.

Trade has been the lifeblood of Singapore going back to its days as the British Empire's trading hub for the region. That trading legacy continues and is best exemplified by Singapore's leadership status in several sectors of manufacturing. To the surprise of many, manufacturing accounted for 28 percent of the country's gross domestic product in 2004, according to Singapore's Economic Development Board (EDB). The EDB is the leading government agency that plans and executes strategies to develop Singapore as a thriving global hub for business and investment.

The fact that Singapore is best recognized by its shimmering skyscraper skyline adds to the perception that manufacturing doesn't play much of a role in its economy. To the contrary, manufacturing is a very important part of Singapore's economy and, together with the services sector, it fuels the country's economic growth. Credit Suisse First Boston recently estimated the manufacturing sector will grow about 5.8 percent in 2005. Not bad for a country that has the world's fifth-highest per capita income.

Singapore punches way above its weight. It has the third-largest oil refinery in the world - after Houston and Rotterdam - and is one of Asia's largest petrochemical manufacturing centers. The city-state is a world ship-repairing leader and is also the top aerospace repair center. Singapore has developed strong markets in electronics, biomedical sciences, mechanical engineering and chemicals.

Manufacturers are attracted to Singapore due to the multiplier effect of Singapore's high-quality logistics capability. Much of that logistics capability was spawned by Singapore's aerospace industry and seaport, the world's busiest port with more than 400 shipping lines calling on 700 ports worldwide. Established foreign manufacturers in Singapore are continuing to expand, as they move up the value chain and reinvest in their operations and R&D. For its small population, Singapore has a high density of trained engineers and science graduates. Singapore boasts 90 research scientists and engineers per 10,000 people.

New investments span the gamut. Several global automotive players have set up regional distribution centers in Singapore, including DaimlerChrysler, Volvo, Toyota, GM and Yamaha. Seagate, the world's largest producer of hard disk drives, invested $130 million in a new media plant, reinforcing Singapore's position as the world's storage capital.

"We continue to make strategic investments in Singapore by leveraging established infrastructure and tapping the significant technological and human capital this island-nation has to offer," explained Bill Watkins, Seagate's president and COO. Dell opened the new Singapore Design Center (SDC) - the first in Southeast Asia - where new display and imaging products will be designed, tested and manufactured. The 35,000-square-foot SDC is Dell's fifth global design center, with others in Taiwan, China, India and the United States.

"Singapore offers a robust technology ecosystem, with the right elements in place - a highly-skilled, highly-educated talent pool that's relevant to our needs; a pro-business environment; sound infrastructure; and good connectivity," said Dell CEO Kevin Rollins. "I think the excitement is in the numbers we are hiring, the technology and patents that we are going to generate from Singapore."

Tremendous Vision
Singapore is already one of the world's leading pharmaceutical locations. Top global pharmaceutical companies that have made Singapore their base for global active pharmaceutical ingredients (API) manufacturing are Aventis, GlaxoSmithKline, Merck & Co., Novartis, Pfizer and Schering-Plough, all of which operate multi-purpose plants that can manufacture a broad range of APIs.

The country now aims to double its biotechnological production from $8 billion to $16 billion in the next 10 years. "Singapore has identified biomedical sciences (BMS) as the fourth pillar of its manufacturing industry, further strengthening the current electronic, chemical and engineering sectors," said David Ross, regional vice president of FedEx South Pacific.

FedEx Express, which has been operating in Singapore since 1984, has its South Pacific regional headquarters established in Singapore - covering from Hong Kong in the north to Australia in the South - and employs nearly 750 staff across the island. "The industry's strong performance to date has meant that this target has been exceeded by a third, and was reached one year ahead of schedule," Ross said.

Although a lot of global biotech has been focused on acquisitions, Singapore has been successful in attracting large amounts of investment. Novartis recently announced the opening of the Novartis Institute for Tropical Diseases (NITD) in Singapore's new two-million-square-foot, state-of-the-art Biopolis research facility. The institute focuses on advanced biomedical research for neglected diseases. It is a public-private partnership between Novartis and EDB.

According to the EDB, CIBA Vision has planned investments of $250 million in a new manufacturing facility at the Tuas Biomedical Park. Singapore was chosen because its well-developed transport infrastructure allows CIBA Vision to be close to its customers in the region.

"CIBA Vision's new facility represents another vote of confidence in our medical technology industry," said Singapore Minister Vivian Balakrishnan. "Global medical technology companies are attracted to Singapore because of our well-trained local workers, our vibrant R&D community and our status as a strategic manufacturing and logistics base."

As a small city-state surrounded by much larger resource-rich countries, Singapore must continue to lead and innovate for it to remain competitive and relevant to the region.

"Amidst external economic shifts and changing business models, Singapore is constantly reinventing itself to remain relevant to global businesses and create value for them," said Ko Kheng Hwa, managing director of EDB. Singapore has become a global hub allowing companies from all parts of the world to congregate, to exchange models and methodology and financial capital.

According the Political and Economic Risk Consultancy, Singapore is the least-corrupt country in Asia and scores top marks in diverse areas such as political risk to work force productivity, from the quality of life to prospects for making profits - areas that truly matter to businesses. The British commercial code, strong legal system and the predominance of the English language make Singapore the optimal place to expand into the Asian region.

Singapore has shown tremendous vision in positioning itself as a great bastion of globalization on display in all of its magnificence. MT

Peter R. Gourlay is the Senior Advisor for Corporate Relations at JHPIEGO and chairman of the Business Growth Committee of the World Trade Center Institute. He can be reached at pgourlay@ jhpiego.net.