atans1

Is the government making the same mistake?

In Economy on 10/11/2010 at 5:26 am

I was reading this blog entry abt the cost between shipping overland and by sea when I came across this:  This divergence between the cost of shipping overland and the cost of shipping by sea has long shaped the planet’s economic geography. It’s why so many of the rich world’s major cities are located along waterways and why large port cities came to be dominant manufacturing hubs despite their high land costs. During the 20th century, overland shipping costs fell sharply, enabling a dispersal of manufacturing activity from expensive centre cities. But the costs never equalised …

Think of Hong Kong (now HK/ Shenzhen because HK’s manufacturers moved to Shenzhen); and Guangzhou City, Chungching and Shanghai. They are ports and dominant manufacturing hubs.

So how come S’pore never became a dominant manufacturing hub? I mean we have the port

– World’s Busiest Transhipment Hub – about one-fifth of the world’s total container transhipment throughput, and 6% of global container throughput.

– One of the World’s Largest Refrigerated Container (Reefer) Ports – over 6,500 reefer points; handled about 1.1 million TEUs of reefers in 2009.

– Excellent Connectivity – 200 shipping lines with connections to 600 ports in 123 countries. This includes daily sailings to every major port in the world. ( According to PSA’s website)

And we are very MNC- friendly.

Come the next GE, I hope the RP or SDP ask this question when the PAP and the MSM trumpet the PAP’s many achievements. One wonders why the governing party did not engineer this combination of port and big manufacturing hub?

During the 60s, 70s and early 80s, S’pore was one of few countries globally that was MNC-friendly, an advantage we lost in the late 80s, and in the early 90s because of reforms in China, Latin America and Eastern Europe. As it was cheaper to manufacture in these places, the MNCs moved on. Remember the disk drive industry, once S’pore’s single biggest employer? And the MNCs are now moving on from China to places like Vietnam and Indonesia.

Could it be that we did not as Ngiam Tong Dow (one of Dr Goh’s lieutenants) implied, “grow our own timber”? (Or words to that effect.) The govmin neglected local industry, preferring to drive growth via the MNCs?

It did not realise that an MNC’s loyalties are to its shareholders, and to a lesser extent to the city, or region where its HQ is located? So it is no surprise it is always “moving on”.

If local businesses had been better supported (like in Japan, Taiwan, Korea and China), even if they became MNCs and moved on, they would have likely kept highly-skilled work here (like they did in above countries), in addition to their HQs. In Germany, even as MNCs and SMEs moved on to produce overseas, they kept very skilled work in Germany.

Did it goof by not trying to build local industry while attracting MNCs?  It struck such a balance in banking, allowing the local banks to grow, while attracting international banks to set up operations here.

It isn’t just history.

Could it be with its emphasis on attracting MNCs to do their R&D here, the governing party is repeating the mistake (if it is a mistake) on overrelying on MNCs?  Granted trying to do advanced R&D without the MNCs is very difficult, and we lack the local businesses that have the R&D expertise.

Update on 11 November] And yet S’pore’s GDP is now bigger than that of M’sia. The PAP must have done more the critics are willing to credit it with.

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  1. I think there may be several other reasons apart from the costs of transportation. One big factor is the supply and cost of labour, which Singapore obviously doesn’t have compared to China. Singapore could never attract factories at a large scale because it did not have an abundant and consistent supply of cheap labour.

    At the same time, unlike the close relationships between Hong Kong, Taiwanese businessmen with China, Singapore could not develop similar relationships with Malaysia and Indonesia to take advantage of the larger labour markets there because a) either these countries were directly competing against Singapore, and b) Singaporeans did (and still do) not have an entrepreneurial spirit that is comparable to Hong Kong or Taiwan.

    I suppose you probably can attach some blame to the PAP government in that the GLCs and TLCs are partly responsible for extinguishing entrepreneurship.

    • Point taken abt labour force.

      On local entrepreneurship, if one analyses the relationship between the PAP and the big local businesses in the 60s and 70s, both sides were mistrustful of each other. The big local businessmen preferred to remain merchants or financiers (liquid assets) or move into property (quick gains) rather than manufacture.

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