Asia Inc

Dec 1996

BUSINESS: Asia's best business city -- The winner, Singapore

It's Singapore
Our readers speak: You can't beat the Lion City for efficiency and stability. But stay tuned for new opportunities in low-cost, labor-rich Manila and Jakarta

Imagine a city with the market opportunities of Hong Kong, the labor supply of Manila, the office rents of Jakarta, the clockwork certainty of Singapore and the easygoing quality of life of Sydney. If such a nirvana were to exist, Asia’s business elite would be falling over each other to snap up office blocks.

Alas, we live in an imperfect world. A world in which Hong Kong’s office rents are as high as its skyscrapers, where Manila is known as much for its crime rate as for its labor skills, where Singapore’s efficiency is coupled with a job-hopping work force, and where Sydney’s lifestyle is marvelous if you don’t mind the commute to and from Asia proper. You spend half your life on a plane! exclaims one businessman.

This is the collective wisdom of Asia, Inc. readers, who cast their votes in a poll mailed with recent issues. The survey caps a year-long examination of Asia’s top regional hubs, during which our team of correspondents put 10 leading Asian cities under the microscope, checking rhetoric against reality.

Asia, Inc. selected eight criteria for readers to consider in judging Asia’s top city in which to establish a regional corporate headquarters: work-force availability, market opportunity, affordability, pro-business climate, telecommunications, infrastructure, quality of life and overall impression. The result? With 43 percent of the readers’ vote, the overwhelming winner is . . . Singapore.

In some ways, the result was a foregone conclusion. No other city in Asia offers a hardware-software package like Singapore’s namely, great infrastructure and a strategic location, combined with political stability and attention to business needs. Singapore’s bureaucrats seem to be on the same wavelength as the city’s corporate leaders, possibly because they went to the same business school. Says Philip Yeo, chairman of the Singapore Economic Development Board (EDB): This is an affirmation that our efforts in ensuring Singapore remains a competitive business environment have paid off.

Growth potential is a significant issue for our readers, and this is where Hong Kong comes on strong, rating No. 1 in the category of market opportunity. Despite the looming change of sovereignty, readers express strong confidence in the continued prosperity of China’s gateway city. Says Peter Read, general manager of the trade-research unit of Asia Market Intelligence Ltd. in Hong Kong: As China’s significance in the world economy increases and Hong Kong becomes more integrated into China, its focus will inevi-tably become more Sino-centric. Though Shanghai may emerge as a rival for foreign investment, Read believes Hong Kong will continue to be a serious player: There will be enough to go around. Hong Kong will remain crucial for Guangdong and [the rest of] South China.

Business aside, few readers believe cramped and concrete-encased Hong Kong equals Singapore in quality of life. And these days, the Lion City is determined to further hone its lifestyle advantage with a concerted effort to become the region’s cultural hub. Recent blandishments for the bored bourgeoisie have included the staging of Aida and a new arts museum. And possibly with an eye on rival Sydney and its famous harborfront Opera House, Singapore is now building its own arts center on Marina Bay, due for completion in 2001.

Sydneysiders can take heart, though: Imitation is, after all, a form of flattery. James Hou, product manager at Pai Tai Industrial Co. in Taipei, believes no other city in the region offers the combination of arts, culture and theater that Sydney does. And as the overall runner-up to Singapore in our poll, with 19 percent of the vote, Sydney is clearly not all play and no work. Hong Kong-based Alan Fairnington, regional president for Asia-Pacific of advertising giant J. Walter Thompson Co., is a big fan of Sydney for other reasons: Overall, Sydney has a great talent bank of well-disciplined, talented people. On average, the talent level in advertising in [the rest of] Asia is far below that of Sydney, Tokyo or Bombay.

However, Singapore-based Donald Saunders, vice president of Platinum Technology Pte. Ltd.’s Asia office, has a different concern: In Sydney, you’re in Asia, but not of Asia. Basing your Asian operations in Sydney is like basing your operations for the Americas in Rio de Janeiro.

Surely, business-location decisions are made for weightier reasons than access to the beach, ballet or bucolic splendor. Still, in a subtle dig at Singapore and Hong Kong, a leading bureaucrat in Australia’s New South Wales administration says: It’s often the wife of the CEO who influences the choice. And if she finds she can’t afford to be a member of two golf clubs, or can’t afford a car, she will vote for Sydney.

Though the survey’s findings affirm some common beliefs that Bangkok’s infrastructure is declining rapidly, for one some of these long-held impressions need to be updated.

For example, Manila fares poorly in the infrastructure category, yet that impression doesn’t account for recent improvements. In 1993, residents faced nearly 300 power failures; today, power supply is virtually uninterrupted. Telephone lines have doubled since 1993 and new high-rise buildings are dotting the skyline. Between 1994 and 1995, the number of multinationals establishing headquarters in Manila tripled, from 14 to 43. Norman You, managing editor at AT&T of Shanghai Ltd., calls Manila a tiger-in-waiting.

Other impressions of Asia’s top business cities:

¥ Work-force availability: Manila, with 20 percent of the vote, squeaked past another labor-rich city, Jakarta (19 percent). Surprisingly, 16 percent of readers are undeterred by Singapore’s chronic skilled-labor shortage. They may well be impressed by the Lion City’s regular recruitment missions to India, Australia and New Zealand to help Singapore-based companies find skilled staff.

¥ Market opportunity: Though Hong Kong holds a firm lead here with 23 percent of the vote, cities to watch include Jakarta and Kuala Lumpur, tied for second place with 18 percent each, which suggests confidence in their home markets and key geographical locations.

¥ affordability: Jakarta, a city where prime office rent is only $245 per square meter a year and a Toyota Corolla sells for a relatively modest $28,000, is considered the most cost-effective city of the 10, according to 22 percent of readers. Singapore, meanwhile, is feeling the effects of its skilled-labor shortage. Managers in Singapore, for example, are more costly than in any other city in Asia, except Tokyo. Still, Singapore is committed to offering value for money, says the EDB’s Yeo. At higher skill levels, training is being boosted to meet specific industry needs. At the work-force level, we are encouraging continual retraining to ensure that productivity more than compensates for worker wages.

¥ Infrastructure: For Asia’s country-hopping executives, efficient airports and ease of access to the departure gate is of paramount importance. No prizes for guessing the winner: It’s Singapore, hands down. Says Todd Wynne-Parry, director of development at Westin Hotel Co. in Singapore: Hong Kong is good for your China business. But for the whole rim, at this point, being able to use Changi airport and Singapore is more advantageous.

Yet for all its laurels, Singapore can’t afford to rest. In 1995, government officials spoke proudly of winning the Asian research-and-development center of U.S.-based home-appliance manufacturer Whirlpool Corp. Such an R&D center, they said, was exactly the kind of investment Singapore wanted to encourage, along with information-

technology and media businesses like pop-culture broadcaster MTV Asia. Yet, just a year later, Whirlpool decided to shut down the $10 million center and relocate its regional headquarters to Hong Kong, closer to its China manufacturing operations. The company plans regional research sites in China and India, another key manufacturing base.

Meanwhile, MTV has shifted its Mandarin-language production unit to Taipei and is producing its new MTV India channel in Bombay, though the company’s regional headquarters remain in Singapore. Now, the flavor of the year is the Discovery Channel, which moved from Hong Kong to Singapore in August. We enjoy considerable cost-savings by consolidating our operations in Singapore, says Anya McDonald, publicist for the American-owned documentary channel, adding that technical operations have been based in Singapore since 1994 because uplink and post-production costs are cheaper than elsewhere in the region.

As cities parade their assets before jaded multinationals, companies are becoming increasingly demanding in their search for the best deal in the region. Nearly one-third of our survey respondents have relocated offices in the past two years, and 40 percent expect to move in the next two. Westin’s Wynne-Parry maintains that few decisions are permanent. Though an unabashed fan of Singapore, he cautions:

Singapore needs to retain its competitive advantage with reasonably priced office space. In the U.S., major headquarters do move to different places, like Seattle or Atlanta, as opposed to established centers like New York or Chicago. Senior executives are looking for a better quality of life. This trend bodes well for cities like Kuala Lumpur.