Singapore has gained the top place in this year’s IMD World Competitiveness Ranking. Having engaged extensively with Singapore’s business and government sectors over the past two decades, this comes as no surprise.
Exceptional sustained economic performance, a relentless focus on government and business efficiency, and world-class infrastructure, have led Singapore to set the bar in many of the areas ranked by IMD in the World Competitiveness Yearbook 2019
Singapore is one of the most dynamic and business-oriented nations in the world.
Singapore’s achievements in gaining the coveted first place are certainly worth celebrating. Especially when one considers that in 1959, the year in which Castro and Lee Kuan Yew gained power in Cuba and Singapore respectively, Cuba was more economically advanced than Singapore1
. Cuba now languishes at the bottom of most economic indicators in Latin America, while Singapore is a global leader on several indicators including on human capital, ease of doing business and now on competitiveness.
At a time of escalating trade tensions across the Pacific, the Singapore model is a reminder that openness and maintaining a global outlook is the only way to remain a competitive and prosperous economy.
Three pillars are particularly worth noting: Singapore’s economy is open, especially open to trade and capital; Singapore builds and attracts a first-class labour force; and, it fosters an innovation ecosystem.
These are underpinned by the country’s excellent infrastructure, which facilitate its global connectivity. The Port of Singapore and Changi Airport are among the busiest in the world.
The port connects over 200 shipping trade routes to more than 600 ports across 120 countries. While the airport is a natural stopover hub for more than 100 airlines traversing the Pacific, enroute to more than 380 cities around the globe.
Singapore’s sustained economic growth – and subsequent wealth – is the result of decades of committed economic policy and its openness to international capital and technology, investment-friendly policies and support for a competitive market.
The economy continues to grow at a healthy rate, averaging 1.5–2.5 per cent in the first quarter of 20192
, which is on par with other advanced economies. Singapore’s trading capacity is almost three times its GDP – a noteworthy achievement given its small size.
Singapore’s pro-business approach includes various incentives for foreign companies. For example, as an added benefit to the country’s highly competitive tax regime, foreign companies wishing to open international or regional headquarters can obtain incentives including a reduced corporate tax rate, while grants may be awarded to those investing in training to encourage the adoption of new technologies, industrial R&D and professional knowhow
Singapore also offers one of the lowest tariff regimes in the world. It has an extensive free trade agreement (FTA) network of 23 FTAs that includes bilateral and multilateral agreements. The FTA network together with a comprehensive double tax agreement network is the envy of other jurisdictions also competing for the interest of multinationals.
There are over 37,400 international companies with headquarters in Singapore, including 7000 multinationals with at least half of them using Singapore as their regional headquarters for their Asia Pacific business.
Overall, it is Singapore’s institutions that drive the quality of openness of its economy.
The Economic Development Board (EDB) is often studied as a benchmark agency, to model how to drive industrial policy, investment attraction, and global competitiveness in a coordinated, consistent and coherent manner. In Australia it would be the equivalent of merging Austrade with significant parts of the Department of Industry, Innovation and Science, attracting talent on par, if not better than McKinsey, while promoting absolute policy certainty.
With no natural resources to rely on, Singapore has embraced people as its most important asset. Over decades, it has invested heavily in education, skills and training, topping the World Bank’s 2018 Human Capital Index. Its students consistently perform the best globally in numeracy and literacy skills, and its teaching models are the envy of the world.
This has given Singapore a first-class labour force that is highly educated, motivated and productive.
Combined with favourable personal tax rates and streamlined professional visas, Singapore has excelled at attracting the best talent both locally and from around the world.3
This vibrant, multilingual and highly skilled labour force has powered the growth of Singapore’s services sector, which accounts for over 70 per cent of its workforce.
Singapore is actively investing in building a thriving innovation ecosystem, with a vision of transforming the economy through enterprise and innovation, to support the next generation of businesses, and to continue to foster a knowledge-based economy.
Public investment in research and innovation has grown consistently over the last 25 years. Singapore invested S$16 billion over 2011 to 2015, to establish itself as a global research and development hub, with a further S$19 billion committed for the national Research Innovation and Enterprise Plan (RIE2020) over 2016 to 20204
To put this in perspective, Australia has invested just over A$1 billion in its National Innovation and Science Agenda, over four years from 2015-195
. Notably, the Australian economy is roughly four-times the size of Singapore.6
Learning from Singapore’s pursuit of excellence
Singapore is not without its challenges. These include slowing population growth and a shrinking workforce which have led to a fall in labour productivity over time, exceptionally high personal and business costs, and a reducing premium return on capital employed while other markets have become more competitive.7
However, it is Singapore’s continuous process of self-examination of its acute challenges and pursuit of excellence that has led to it climbing to the top of IMD’s rankings.
The IMD index makes the case that countries undertake different paths to competitiveness.
Ranking at 18 on this year’s index, Australia has performed fairly – and has moved up a position on 2018.
But if we are to improve on our competitiveness, there may be much we can learn from Singapore’s approach to openness, talent, innovation, self-examination and commitment to excellence.
Not least is Singapore’s remarkable ability to leverage its open economy and highly skilled multilingual workforce to attract investment, create a global services hub and be a springboard for businesses into the Asian region, in particular India and South East Asia.
By 2030, Asia’s lower-middle income countries will have middle-class markets that are US$15 trillion bigger than they are today – that’s growth of more than 11-times the size of Australia’s current GDP. Research previously undertaken by Asialink Business
found that annual services exports to Asia could be worth more than A$160 billion by 2030, while supporting more than one million Australian jobs.
So, if Australia’s own prosperity will be interlinked with our ability to reduce the distance from the needs of Asia’s massive services markets, then we should take notes from Singapore, the most competitive economy in the world.
1. Maria Mondeja (2017), Notes on Singapore’s Development Strategy, University of Chicago Law School
2. Singapore MIT - https://www.singstat.gov.sg/-/media/files/news/gdp1q2019.pdf
3. Straits Times, https://www.straitstimes.com/asia/se-asia/singapore-tops-new-world-bank-human-capital-rankings-based-on-health-education
4. Prime Minister’s Office, Singapore, https://www.nrf.gov.sg/rie2020
5. Commonwealth Government Department of Industry, Innovation and Science, https://www.industry.gov.au/strategies-for-the-future/boosting-innovation-and-science
6. World Bank
7. Manu Bhaskaran (2018), Getting Singapore in shape: Economic challenges and how to meet them, Lowy Institute.
World Competitiveness Yearbook 2019