Singapore Competitiveness Report
SingaporeCompetitivenessReportSingapore Competitiveness Report 2009foreword byMichael E. PorterHarvard Business SchoolChristian KetelsAshish LallNeo Boon Siongwith research assistance fromLEE KUAN YEW SCHOOL OF PUBLIC POLICYNATIONAL UNIVERSITY OF SINGAPORE469C Bukit Timah Road, Oei Tiong Ham Building, Singapore 259772www.lkyspp.nus.edu.sg/ACIStevenson Q. YuSusan Chung Lai Ling
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SingaporeCompetitivenessReportforeword byMichael E. PorterHarvard Business SchoolChristian KetelsAshish LallNeo Boon Siongwith research assistance fromStevenson Q. YuSusan Chung Lai LingSingapore COMPETITIVENESS REPORT1
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Table of ContentsForeword.7Executive Summary.9Chapter 1: IntroductionSingapore’s Competitiveness Challenge in 2009. 19The Report’s Conceptual Approach. 19Report Outline. 21Chapter 2: Economic PerformanceStandard of Living.25Prosperity.25Equality.27Quality of Life. 28Components of Prosperity Generation. 28Labour Productivity. 28Labour Mobilisation. 30Purchasing Power. 31Assessment.33Chapter 3: Intermediate Economic Outcome IndicatorsTrade.37A Case Study: Electronics Exports. 41Investment. 47Innovation. 49Entrepreneurship.52Assessment.53Chapter 4: Competitiveness FundamentalsAssessing Competitiveness.57Endowments.57Macroeconomic Competitiveness. 58Social Infrastructure and Political Institutions. 58Macroeconomic Policy. 60Microeconomic Competitiveness. 61Business Environment Quality. 61Factor Conditions. 62Context for Rivalry and Strategy.73Demand Conditions.75Supporting and Related Industries. 76Company Sophistication. 80Singapore’s Competitiveness in Perspective. 80Chapter 5: ConclusionsSummary of Findings. 85Implications. 86Recommendations. 87SINGAPORE COMPETITIVENESS REPORT3
BoxesBox 1Box 2Box 3The Global Economic Context: What Changes Will the Crisis Bring?. 44International Rankings of Innovative Capacity.70A Case Study of Singapore’s Interactive Digital Media Cluster.78List of FiguresFigure 1.01Figure 1.02Figure 2.01Figure 2.02Figure 2.03Figure 2.04Figure 2.05Figure 2.06Figure 2.07Figure 2.08Figure 2.09Figure 2.10Figure 2.11Figure 2.12Figure 2.13Figure 2.14Figure 2.15Figure 3.01Figure 3.02Figure 3.03Figure 3.04Figure 3.05Figure 3.06Figure 3.07Figure 3.08Figure 3.09Figure 3.10Figure 3.11Figure 3.12Figure 3.13Figure 3.14Figure 3.15Figure 3.16Figure 3.17Figure 3.18Figure 3.19Figure 3.20Figure 3.21Figure 3.22Figure 3.23Figure 3.24Figure 4.01Figure 4.02Figure 4.03Figure 4.04Figure 4.05Figure 4.06Figure 4.07Figure 4.08Figure 4.09Figure 4.10Figure 4.11Figure 4.12Figure 4.134The Competitiveness Framework: Determinants of Prosperity.20Assessing Competitiveness. 21Singapore’s per-capita GDP per capita, in thousands of 1990 PPP .25Comparison of GDP per capita.26GINI Coefficient Comparisons, latest year.27Singapore’s Gini Coefficient among Employed Households.27Human Development Index and Components.28Labour Productivity and Growth.29Relative Productivity and Prosperity.29Change in Sectoral Labour Productivity.30Participation and Growth.30Contributions to Change in Labour Mobilisation, 2000-2008.31Comparison of Female Labour Participation Rates, 2009 Estimates.31Country-level Price Comparisons.32Normalized Comparative Price Levels of selected Cities.32Price Accessibility for Selected Products. 33Total Factor Productivity. 33Trading Trends. 37Extent of Re-Exportation.38Comparison of Global Manufacturing Export Shares.38Share in Global Trade of Goods and Services.39Top Five Goods Export Destinations.39Top Five Goods Import Origins.39Domestic Exports Destination in 2008. 40Top Five Service Export Partners, by type of Service. 40Top Five Service Import Partners, by type of Service. 41Singapore’s Electronics Performance. 41Top 25 Destinations of Singapore Electronics Exports.42Singapore Electronics Production by Broad Segment.42Electronics Demand versus Production.43Production of Electronics Components.43Investment Intensity.47Relative FDI Inward Indicators.47Presence of Foreign Investment. 48International Comparison of Patenting Activity.49Comparative Organizational Patents.50Singapore-owned Patents in the USPTO (2004-2008).50Patent Applications by Field of Technology (2002-2006). 51Singapore Patent Applications in 2007. 51Papers in the Engineering Citation Index (2007).52Measures of Entrepreneurship (average of available 2000-2007 data).52Evolution of Singapore’s Macroeconomic Competitiveness.59Government Effectiveness Scores of Top-Rated Countries. 60Evolution of Singapore’s Microeconomic Competitiveness. 61The Porter Diamond.62Ease of Doing Business Ranks, 2008-2009. 64Comparison of Doing Business Components. 64Math and Science Test Scores, 2007. 66Innovation Input Trends.67Comparison of Private R&D Spending, 2006. 68Relative Comparison of R&D Researchers, 2007. 68Relative Comparison of R&D Personnel, 2007. 69Attractiveness as Financial City.72Global Internet Use and Penetration.72SINGAPORE COMPETITIVENESS REPORT
List of FiguresFigure 4.14Figure 4.15Figure 4.16Figure 4.17Internet Use Comparisons.73Consumer Sophistication Survey, 2007.75Singapore’s Export Profile in 2007, Porter Cluster Methodology.77New Global Competitiveness Index and Singapore’s 2009 Ranks. 81List of TablesTable 2.01Table 3.01Table 3.02Table 4.01Table 4.02Table 4.03Table 4.04Table 4.05Table 4.06Table 4.07Table 4.08Table 4.09Table 4.10Table 4.11Table 4.12Table 4.13Table 4.14Table 4.15Table 4.16Table 4.17Table 4.18Table 4.19Table 4.20Table 4.21Table 4.22City Prosperity in 2005.26Profitability of FDI in Selected Industries. 48Top Ten Non-OECD M&A Acquirers.49Ethnic Demographics in Singapore.58Social Infrastructure and Political Institutions Indicators.59Macroeconomic Policy Indicators. 60Factor (Input) Conditions and Components.62Logistical Infrastructure Indicators.63Ranks in the 2007 Logistics Performance Index.63Shipping Statistics.63Administrative Infrastructure Indicators.63Innovation Infrastructure Indicators.65Average Education Levels.65Public Education Expenditures.65Comparative Reading Scores.67Growth of Innovation Inputs.67Academic Ranking of World Universities, 2009. 69Capital Market Infrastructure Indicators . 71Financial Sector Development, 2009. 71Communications Infrastructure Indicators.72Context for Rivalry and Strategy Indicators.73Largest Companies in Singapore.74Demand Conditions Indicators.75Supporting and Related Industries Indicators.76Company Sophistication Indicators. 81SINGAPORE COMPETITIVENESS REPORT5
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SingaporeCompetitivenessReportFOREWORDThe Asia Competitiveness Institute (ACI) was created to provide policy-relevant analysis oncompetitiveness in Singapore and the ASEAN region, based on rich data and a comprehensiveframework. Singapore is widely known for its expertise within government, but Singaporeanleaders saw clear value in objective outside ideas from an institution dedicated to understandingthe “big picture” of where Singapore and ASEAN are heading.The Singapore Competitiveness Report 2009 is an important milestone in realizing this vision.On behalf of ACI’s International Advisory Panel, I would like to congratulate the ACI team forthis important piece of work.The Singapore Competitiveness Report highlights the need for Singapore to define a new model ofan innovation-driven economy that fits its specific capabilities and ambitions. Singapore cannotfollow the same approach as the U.S., Japan, or other advanced economies.The Report highlights the virtue of a stable economic strategy in this time of global economiccrisis and uncertainty. Singapore’s fundamental model is working and there is no need for drasticchanges. Singapore has shown a remarkable ability to reinvent the key tenets of its competitivemodel in line with its rising level of development. The report suggests that government needs tosupport these changes and the overall resilience of the economy. A new approach towards ASEANcollaboration is one of the steps that can make a significant contribution in this direction.Our ambition with ACI and the Singaporean Competitiveness Report is to provide governmentleaders with data and frameworks to make more informed policy decisions, whether or not they agreewith every conclusion or recommendation. My hope is that this first Singapore CompetitivenessReport achieves this purpose and become a model for many other reports to follow.Michael E. PorterWilliam Lawrence University Professor, Harvard Business SchoolChair of the International Advisory Panel, Asia Competitiveness InstituteSINGAPORE COMPETITIVENESS REPORT7
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EXECUTIVESUMMARYEconomies around the globe are in turmoil. The downturn issignificantly deeper and more global than anything experiencedsince the Great Depression. Unlike their predecessors at the time,policy makers have now reacted strongly, bailing out banks,launching stimulus packages, and using old and new monetarypolicy instruments. The outlook now seems slightly more positive,especially in Asia: the rate of decline has fallen and the hopeis increasing that while a drawn-out period of adjustment liesahead, it will not be the abyss that bankers and exporters werefacing in late 2008 and early 2009.However, in this period of dramatic shocks, forecasts have becomemuch less accurate than in periods of stable trends and calm.There is little reliable experience on how consumers, investors,and producers will react to the massive government efforts underway. This uncertainty affects not only the short term but also thelonger term. Will the crisis only be a - albeit historically deep bump on the road? Or will it lead to changes in economic policyand structures that alter the course of economic developmentfor individual countries and regions?The Singapore Competitiveness Report 2009, the first in thisnew series of regular assessments by the Asia CompetitivenessInstitute (ACI) at the Lee Kuan Yew School of Public Policy,provides data and analysis to inform the discussions on the impactof the crisis on the medium-term development of Singapore’scompetitiveness. It does not aim to provide a better forecaston what will happen over the next six or twelve months; otherresearch centres, financial institutions, and government agenciesprovide in-depth coverage of this question.Instead, the aim is to put the short-term developments into thecontext of the fundamentals that will drive economic developmentover longer periods of time. Clearly these are related: many ofthe policy choices made today will impact the fundamentals thatexist tomorrow, even if their primary motivation now is to dealwith the immediate crisis at hand. In this time of economic crisis,the Report’s discussion of the medium-term fundamentals aimsto contribute to a better recognition of these linkages.Key Competitiveness Challenges for SingaporeImproving competitiveness is a constant challenge all economiesface, no matter the level of prosperity they have already reached.This constant challenge then translates into more granular questionsthat individual countries face at a given point in time. For Singapore,we examine three such specific questions that currently shape thecompetitiveness debate. For all of them, the Report suggests aframework to address them, explores the relevant data available,and provides the authors’ evaluation.First, the global crisis has hit Singapore harder than many of itsAsian peers, despite the fact that Singapore ranks comfortablyamong the most competitive locations in the region. Is the crisisindicating that Singapore’s economic model does have seriousweaknesses? Are there indications that the crisis has triggered oraccelerated the transition of the global economy towards a newscenario in which Singapore’s strengths are less valuable?Second, Singapore is transitioning from an investment-driveneconomy to an innovation-driven economy. This is both anexplicit ambition of the government and the assessment of manyoutside observers. How far has the country progressed on thispath? What are the outcomes on innovation measures? And howmuch has the profile of Singapore’s competitive strengths shiftedfrom one typically associated with investment-driven economies(strong business environment, especially physical infrastructure,solid skill base, rule of law, openness to trade and investment)to one more in line with the needs of an innovation-driveneconomy (strong innovation system, IP protection, quality oflife, company sophistication and strategy, demand sophistication,entrepreneurship)?Third, despite the overall economic growth in the last fewyears, there are concerns about Singapore’s ability to generatesustainable productivity growth, especially on total factorproductivity. Relative to the United States, Singapore made nogains on productivity between 1995 and 2008, after registeringstrong and consistent catch-up in the previous period. Is thisslow-down a sign of structural problems, or is it largely cyclicalor driven by external shocks? If it is structural, what explainsSingapore’s failure to continue the previous catch-up to theproductivity levels of other advanced economies?Each of these questions could easily motivate an independentstudy. This Report addresses all three of them, drawing onone integrated conceptual framework to organize data frommultiple sources. The overall picture that emerges is guardedlyoptimistic: Singapore is not facing a fundamental threat to itseconomic position, certainly not in the short- to medium-term.But Singapore will have to refine its strategic direction and makesome rather fundamental adjustments in its economic structureif it aims to move to a new level of competitiveness.The Report’s Conceptual ApproachThe Report’s analysis is grounded in the competitiveness frameworkthat Professor Michael E. Porter of the Harvard Business Schooland Chairman of ACI’s International Advisory Panel, has developedover the last two decades. This framework is flexible in capturingthe role of many different types of factors on competitiveness. Itrecognizes their interdependence and makes no prior assumptionsabout the critical role of any individual factor. In fact, one ofthe framework’s explicit uses is to support the identification ofpolicy priorities based on the specific circumstances that existin an economy at a given point in time, rather than providinggeneric policy advice.The central tenet of the competitiveness framework is thenotion that productivity – the ability to create valuable goodsand services through the use of a country’s human, capital,and natural resources – is the ultimate driver of sustainableprosperity. Productivity depends both on the value of the goodsand services produced and on the efficiency with which theyare being provided. High competitiveness, then, is ultimatelyreflected in high productivity.Productivity is as an outcome influenced by a large number offactors that are shaped by the collective action of all participantsin an economy. One set of factors, organized under the headingof macroeconomic competitiveness, set the overall context inwhich companies operate. These factors include the qualityof social infrastructure and political institutions as well as ofmacroeconomic policy. They do not affect productivity directlybut create the opportunity space in which productivity-enhancingactions can be taken.SINGAPORE COMPETITIVENESS REPORT11
The other set of factors, called microeconomic competitiveness,captures the way companies operate and the external dimensionsthat have a direct impact on the results of their activities. Thesefactors include the sophistication of companies, the strengthof clusters, and the quality of the business environment. All ofthem have a direct impact on productivity.The Report uses multiple sources of data to assess Singapore’scompetitiveness in this broad framework. It focuses on analysingand presenting this data in an integrated fashion, while addingadditional primary data only in selected areas where gaps exist.The objective is to present the best possible analysis given thedata available, rather than conducting extensive primary researchas part of this Report.The data is organized in a number of key categories that providediff
The Singapore Competitiveness Report 2009 is an important milestone in realizing this vision. On behalf of ACI's International Advisory Panel, I would like to congratulate the ACI team for this important piece of work. The Singapore Competitiveness Report highlights the need for Singapore to define a new model of
Competitiveness in context - Essay Competitiveness and disparities The analysis of the relationship between competitiveness and inequalities adds an additional level of complexity to the debate. The ambiguity in defining competitiveness in sections of the literature, for example, makes it difficult to shed light on the linkages. In the European .
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