Asia Inc
March 1996

BUSINESS: Asia's best business city -- Singapore

By Salil Tripathi

Singapore Swing
The city-state is relying on new downtown glamour and urban efficiency in its bid to become Asia's Premier 21st-century city. But escalating costs and scant resources could short-circuit that dream

A mild breeze wafts over the quayside as water taxis ferry their evening passengers down the river. Harry’s Bar, where Nick Leeson used to bend his elbow, overflows with bankers and brokers with their ties undone and tongues loosened. Waiters at Thai, Japanese, Indian and Italian restaurants lay cutlery on tables lining the waterfront. How can anyone say Singapore is dull? wonders South Africa-born Mike Langton, regional managing director of Bates Advertising. The river, open skies . . . I can’t think of a better way to spend the evening.

It wasn’t always thus. This once-sleepy riverfront was so unremarkable it wasn’t given a proper name. Today it’s still known simply as Boat Quay. But five years ago, Singapore set about transforming the area into a trendy nightspot that gives the city a different, youthful identity where shirtsleeves can be rolled up and hair let down. The party-girl makeover is a rebuttal to critics like Canadian writer William Gibson. In his 1993 Wired magazine profile, Disneyland With the Death Penalty, Gibson calls living in Singapore a relentlessly G-rated experience. The city, he says, is the sort of place you could expect to find if IBM ever bothered to actually possess a physical country.

These days, public profile is a sensitive issue for Singapore. Competition between Asian cities is tougher than ever as they vie for high-profile corporate tenants who can sustain growth into the next century. Companies face a battery of options in deciding where to position themselves within the region: Cities that were considered backwaters just a decade ago are now emerging as future leaders, thanks to fast-growing infrastructure and booming local markets. Location is everything as foreign companies rush to secure a foothold in Asia and local operations realize the benefits of moving part or all of their operations to new growth centers.

Singapore is sparing few pains in promoting itself as a leisurely place to live. An old convent is becoming an arts museum, and a previously unused waterfront plot now boasts Southeast Asia’s biggest convention center and retail area. Next door, construction is beginning on a new arts center, and musicians as diverse as Phil Collins and Yo Yo Ma have begun to make Singapore’s evenings memorable. Surprisingly, considering its restrictions on the media, five satellite broadcasters have recently set up shop here, and accessing the Internet is now a painless process.

The adventurous mood seems to be catching on. The city that once captured the imaginations of Somerset Maugham and Joseph Conrad is even attracting a surprising number of professionals who are opting out of the rat race to try their hand at writing, painting or other artistic passions. Louise Cully, a Belfast lawyer who moved to Singapore last year to become a writer, says: My friends laughed when they heard I was moving to Singapore. But in Britain I never had the time, opportunity or encouragement to write. Everyone kept telling me to go and do real work. Here I can do what I couldn’t do at home.

It is somehow appropriate that Singapore is springing back to life from Boat Quay, the place where the first Western trader landed. Stamford Raffles set foot here in 1819 and won for the British Raj the right to use this strategically located island as an Asian entrep™t, magnifying a dot on the map into one of the world’s busiest harbors and its fourth-largest foreign-exchange market, turning over $117 billion daily.

And with Labuan, Mauritius, Bangkok and Colombo setting up as competing offshore financial centers, the Singaporean government is even considering allowing foreign fund managers to manage part of its $60 billion Central Provident Fund. Singapore’s work force continues to be rated highly for productivity, and the republic has had only two labor strikes since 1978. Organizations such as the World Economic Forum and The Heritage Foundation and international business publications continue to give Singapore top marks as a world-class business location.

Raffles was an employee of the East India Co. but he showed an entrepreneur’s vision when he stumbled upon the island.

Modern Singapore’s early pioneers were also bureaucrats, but they too showed foresight in changing the face of the island, setting it on its way to becoming Southeast Asia’s premier business hub.

Factories and airport runways were built on reclaimed land in anticipation of demand, and rule books were written keeping in mind the needs of large multinational companies. Observes Sajjad Akhtar, a partner at accounting firm and management consultancy Arthur Andersen: Singapore even created the Asian dollar market ahead of its need. It was an opportunity waiting to be exploited, and Singapore seized it.

Today, with Hong Kong’s return to China less than 18 months away, the sense of energy around Singapore acquires new relevance. Long a rival for the headquarters of the non-Japan Asia, Singapore has been quietly picking up victories from its northern rival. Unisys Asia Pacific Ltd., for example, startled Hong Kong by packing up for Singapore in 1994 when costs rose dramatically. Says Unisys President Thomas Yam: Singapore is far more central to Asia. Hong Kong used to be like that, but the talk there now is only about China. China is growing, but so are India, Thailand and Indonesia. And Singapore is closer to those markets.

Singapore is seizing this advantage to carry out a lavish advertising campaign in Hong Kong, publicizing its quality of life, strategic business location and, more importantly, its political stability. New recruits will join some 35,000 Hong Kongers who already have acquired in-principle approvals for permanent residency in Singapore (though only 6,500 have actually moved).

The island republic is preparing for this bonanza by building condominiums, office towers and industrial parks. Those who land here find a product tailor-made for easy business: advanced telecommunications; efficient air and sea ports; smooth traffic; speed in doing business; free flows of capital, funds and labor; a firm judiciary; and a business-friendly bureaucracy that can occasionally walk the extra mile for you, even faxing approvals to your hotel room in two hours.Lindsay Webbe, president of Levi-Strauss Asia Pacific Division, recounts ending a public speech by thanking Philip Yeo, the ebullient chairman of the Economic Development Board (EDB). He then turned to Yeo and said: I have a small problem. My two dogs are still in quarantine and my children miss them. Yeo raised his hand and said: I’ll see what I can do. Webbe says: The surprising thing was that he actually did! His staff followed up, and one of his officers even made a card herself. It was shaped like a bear with two buttons pasted where the eyes should have been, and it was addressed to my four children by name. The card said, Your daddy is doing all he can to get the dogs out and they will be with you very soon.’ I was astonished at the personal detail.

Singapore is indeed a small town, where it seems everyone knows everybody else. Through such attention to detail, Yeo’s EDB has made multinationals its ambassadors. Singapore-based companies don’t lose an opportunity to praise the island’s infrastructure. Says Yam of Unisys: For people who view their efficiency in hours, not days, Singapore is the place.

It might be a good place to be for a large company in a high-tech industry, but smaller companies are hurting some quite badly. A recent survey in Singapore’s Business Times showed 60 construction contractors went bankrupt in 1994 as foreign-owned companies continued to win the larger, more lucrative jobs. Although local companies won 80 percent of jobs under $21 million, foreign outfits won 70 percent of contracts above $71 million.

Part of the reason is that smaller Singapore-based ventures may be less able to cope with the city’s spiraling costs. One medium-size trading company is downsizing because the rent in its gleaming office tower has doubled over the past two years while wages have soared. Salaries for our nonexecutive staff have shot up between 70 and 100 percent in the past five years, laments an executive of the company. What other choice do I have?

According to property consultants Richard Ellis Pte. Ltd., office rents rose 15 percent last year to an annual average of $863 per square meter, making Singapore one of the 10 most expensive cities in the world for office space. Consumer goods are hardly a bargain. A series of tariffs, taxes and complex bidding practices makes car prices here the highest in the world, resulting in mid-range cars like Honda Civics costing more than $100,000.

Rising costs and overcapacity have also taken a chunk out of the retail sector. These days, property owners are scrambling to find tenants to fill hectares of vacant retail space. Hong Kong-owned Lane Crawford department store is attempting to stem losses by converting three of its five floors into office space. Regional shopping-mall openings at Suntec City and the Millennia in the Marina Bay area have only made things worse for the already-struggling Orchard Road shopping district, which is suffering in part from a stronger Singapore dollar and a decline in the number of high-spending tourists.

Still, rising costs have barely detracted from Singapore’s star attraction: dependability. Explains Wayne Lau, a Hawaii-born financial consultant who flouts business convention by attending meetings wearing shorts and T-shirts: Singapore guarantees certainty. And businessmen just love that. Compaq Computer Asia Pacific Pte. Ltd., for example, continues to make personal computers in Singapore, although it might cost less to shift production elsewhere. Why? When a consignment leaves Compaq’s factory, we are sure it will be at the airport in a half-hour and on the plane in two hours, says a company manager.

Such efficiency doesn’t make exciting headlines. Travel writers like British-born Pico Iyer and Dutch-born Ian Buruma have scoffed at the city’s sterile artificiality, joining the chorus of critics who have called Singapore an airport transit lounge or a five-star hotel room. But clockwork regularity keeps Singapore’s economy moving, and most of its citizens are satisfied with the trade-off. After a week in the trenches in Indochina or the Indian subcontinent, it’s one of life’s little pleasures to sleepwalk through customs and immigration at Changi airport. The National Computer Board has devised a system so that a passport can be processed in 30 seconds 15, if you are a Singaporean a performance standard unmatched anywhere in the region.

Such efficiency is a victory for Singapore’s tough-minded government. But if Singapore has delivered on its promises, it must also face persistent criticism about the road it’s taken to get there.

Singapore’s justice is firm and swift. Once its judiciary was convinced that a Filipino maid had murdered two people, she was executed after due process of law, despite concerns in the Philippines that justice was not being done an incident that soured ties between the two asean neighbors. President Bill Clinton’s clemency plea failed to avert the caning that American teenager Michael Fay received for vandalizing private property. While the U.S. State Department’s annual report on human rights is not enthusiastic about endorsing Singapore’s law-enforcement system, the Switzerland-based World Economic Forum obviously has no problem with Singapore’s judiciary, rating it the best in the world.

Last year Catherine Lim, a noted Singaporean fiction writer, published two political commentaries in the pro-establishment Straits Times newspaper that were mildly critical of the government. When Prime Minister Goh Chok Tong asked her to defend her views by joining the opposition and running for Parliament, Lim promptly apologized.

It’s little wonder Singapore is perhaps the only economy of its size where local stock analysts don’t want to be quoted by name. As long as there are restrictions in Singapore on the free flow of information, Singapore can’t expect to be a major fund-management and stockbroking center, says William Overholt, managing director of Bankers Trust Co. in Hong Kong.

Still, Singapore’s rules and regulations can’t control one bugbear: its steamy weather. It is a common year-round sight on Singapore streets to see expatriates in business garb expansively mopping their brows (shades of Sydney Greenstreet in the film Casablanca) as they wait in taxi lines. So far, the government isn’t talking about building an air-conditioned geodesic dome over the island, but some think it should. Nigel Robbins, director of MTV Asia News, who has lived in Britain, Tokyo and Hong Kong, misses the fresh air of cooler climates. I miss seeing my breath in winter, he says. When fresh air is hot it’s not the same.

But from a strictly corporate view, Singapore stacks up as one of the most welcoming cities in Asia in which to do business. Compaq Computer found it was able to pay for the lease on a 3,700-square-meter office in the swanky Suntec City Tower entirely from savings generated by tax breaks granted by the EDB in return for establishing its corporate operational headquarters (OHQ) here.

Lim Soon Hock, until recently managing director of Compaq’s Asia-Pacific operation, says he had only two real choices when deciding on the location for the company’s regional headquarters: Sydney and Singapore. Lim asked six staff members to join two colleagues from Compaq’s Houston head office in developing a strict set of criteria. After a three-month study, the team concluded that Sydney is better in terms of the availability of technical expertise, but Singapore is where the real action is in Asia. Singapore is the epicenter, Lim says.

Compaq is among 60 multinational companies in such businesses as consumer electronics, construction, transportation and pharmaceuticals that have based their Asia-Pacific headquarters in Singapore. In part, they have been lured by the EDB’s OHQ incentive program, launched in 1986 to attract manufacturing companies like Unisys and Compaq that were restructuring operations and enlarging their presence in some markets.

Ten years later, Singapore hopes to lure new manufacturing investment in capital-intensive industries like petrochemicals, precision and mechanical engineering, aerospace, biotechnology, semiconductor wafer fabrication, artificial intelligence and communications. Those companies more dependent on cheap labor can use Singapore’s infrastructure to base their headquarters here, while maintaining plants elsewhere in the region. Says Juergen Fitschen, executive director at Deutsche Bank AG’s regional head office in Singapore: Officials here understand business needs. They don’t sit in ivory towers.

Companies today need the free flow of both technology and people. On this count, Singapore does better than most Asian cities. Getting employment passes is easy for qualified professionals. York Chen, managing director of the Asian business division of Taiwan’s Acer Computer International Ltd., has 20 non-Singaporean senior managers working in his office. Singapore is more relaxed in letting people come here, compared with cities like Kuala Lumpur or Jakarta, he says.

Up to a point. A common criticism among expatriates is the outmoded thinking of immigration officials. With more and more women managers being posted overseas, Singapore is witnessing what Levi-Strauss’s Webbe calls the Trailing Male Spouse Syndrome. Nonworking wives get dependent passes easily. But husbands who follow wives posted to Singapore must find work and secure sponsorship for their own employment pass; otherwise they can stay only on a one-month social-visit pass before they must leave the country to obtain a new pass.

Similarly, while men get employment passes easily, their wives find it hard to get jobs even if they are highly qualified. Local employers shrug it off, saying they prefer to hire Singaporeans because expats depart after two years. Some have even patronizingly told job-seeking expatriate women: Why you need to work? Your husband on expat package, lah! An indignant woman who lived two frustrating years in Singapore before moving back to the U.S. with her husband points out: Expat wives will work for two full years loyally. Locals don’t stay that long in a company.

She is right. One consultant says Singaporean employees suffer from the TBQ syndrome: They undergo Training, collect their Bonus and then Quit. He says: Some reasons for quitting are extremely frivolous. The office isn’t in a nice location or the decor isn’t good. It is a spoiled work force that cannot operate elsewhere. Another banker complains about the poor quality of secretaries. He swears he once gave his new secretary a list of 10 people to call, but after an hour she hadn’t put through a single call. He walked to her desk and found she was still trying the first number. What about the rest? he asked. Flustered, she said: Oh, I thought you wanted to speak to them in this order. Singaporean employees are not known to show initiative or strong convictions, agrees a Hong Kong-based research head at an equity firm: They won’t take a stand.

Whatever the flaws of Singapore, new investment is clearly not affected. Inflow for 1995 was a healthy $6 billion, primarily from the chemical and electronics industries. But in the long run, Singapore’s big handicap as a regional center is the lack of a low-cost hinterland, such as Hong Kong has in China.

Singapore has been able to play a dominant role in the region because the controlled economies of Southeast Asia have made the city an appealing location for business. But in the new liberalized environment, with virtually every city aspiring to be a regional hub, Singapore may face more serious challenges. For example, if costs continue to rise, wouldn’t Bangkok be a more appropriate place to do business with Indochina? Aren’t Kuala Lumpur and Jakarta legitimate places to run operations for Malaysia and Indonesia? And can you really oversee India from Singapore or would Bombay be a better location?

These are serious concerns that could eventually make Singapore an orphan state. Not many manufacturers locate in the Lion City for its modest market of 3 million. But if the past is any indication, the city will manage. Companies will pay the high cost of operating in Singapore as long as it retains its awesome efficiency. Still, there’s little doubt that the island republic will have to remain three to four years ahead of the competition if it wants Boat Quay to continue to shine like a jewel at night.