Singapore Inc. MBA 290G Case 2 September 12, 2007

1. Singapore Inc.MBA 290G Case 2September 12, 2007 Sarah Boyd, Vincent Escobedo, Gayathri Raghavendra, Jay Taneja

2. Outline • Singapore Today • How is it similar to or different from the SF Bay Area? • How did Singapore become the success story it is? • Metrics of success • Porter’s Diamond • Other factors • Where does Singapore want to be tomorrow? Are they on the right trajectory?

3. Singapore – A Snapshot Singa Pura, Malay for “Lion City” • Area: 699sq km • Population: 4 million+ • Demographics: 76% Chinese, 15% Malay, 6% Indian • Government: Parliamentary Democracy

4. Singapore & SF Bay Area: The Numbers 1. Conutryreports.org; 2. http://abag.ca.gov; 3. http://www.state.gov/r/pa/ei/bgn/2798.htm ; 4. http://www.bayareacouncil.org ; 5. http://www.beaconecon.com/products/Presentations/BAWTC01_11.pdf

5. Singapore and SF Bay Area: Similarities Major Industry Clusters: Semiconductor and Biotech Major Ports Singapore: 24,792,400 TEUs in 2006(16) Oakland: 2,391,598 TEUs in 2006(7) (10-15% of US container cargo) (6) www.mpa.gov.sg (7) www.portofoakland.com,

6. Singapore and SF Bay Area: Differences

7. The Rise of Singapore Per capita GDP growth ~ 5% from 1975-1999 2000: 10.1% 2001: Worldwide slump, -2.2% 2004: Major turnaround, 8.8% (8) Asian Economic Journal 16 (3), 267–283, (9) United Nations Statistics Div. http://unstats.un.org, (10) US Bureau of Economic Statistics

8. The Rise of Singapore: Why and How?

9. The Rise of Singapore: Why and How? • Factor Conditions • Location (heart of major sea lanes) • NO natural resources – had to be smart, depend on trade • Infrastructure (Physical, financial) • IP Policy • Labor pool (work ethics, trained vs untrained, skill level, foreign vs domestic) • Government • Strong ties between pro-business state & industry • Govt. is consistent and not corrupt • Govt. anticipates infrastructural needs • Actively built/crafted IP environment • Strong handling of unions, wage policies, education, • policies to attract foreign students & workers

10. The Rise of Singapore: Why and How? • Demand Conditions • Small domestic market led to pro-business, pro-foreign, export oriented policy • Positive for electronics, communications: early adopters, “technology crazy”, discerning and demanding • Negative for biotech: relatively new industry, no stress test for bio-ethics issues • Government • Encourages widespread use of technology • Tablet PCs in school • Curbs freedom of expression/media

11. The Rise of Singapore: Why and How? • Related and Supporting Industries • For biotech => Chemical Island • For hi-tech => Electronics Manufacturing • Broad based benefits from shipping and transportation industry, legal and IP services, logistics, data management, and more recently brand management • Government • Following cluster model for industry development • Targets entire value chain in an industry to offer • a stronger value proposition to • individual firms

12. The Rise of Singapore: Why and How? • Firm Structure, Strategy, Rivalry, • Structure: Gradually moving away from state-owned • Strategy: Attract foreign investment with business friendly environment • Rivalry: Intense rivalry faced by Singapore Inc, but very low level of domestic competition for firms • Government • Primary driver of growth; salaries of policy makers • tied to GDP growth

13. The New Singapore: What next? Current Strategy Goals • Transform Singapore into a knowledge-based economy • Move up the value chain • Encourage innovation Measures • Focus on education, creative learning • Move from dual pronged approach to Triple Helix model (State-Industry  State-Industry-Academia) • Encouraging VC & PE • Focus on specific clusters like biotech; media

14. The New Singapore: Comments and Recommendations Labor and Talent Pool • Increasing dependence on foreign contribution • Young Singaporeans moving away (overbearing state, inflation) • Shortage of home-grown entrepreneurs • Focus on increasing local skill set and skill levels

15. The New Singapore: Comments and Recommendations Focus on Biotech

16. The New Singapore: Comments and Recommendations Creating an entrepreneurial mindset is a long term project, especially in a society where conformity is the form • Increase contribution from non-governmental sources • Give universities more autonomy • Reduce government stake in companies, encourage more local competition • Deregulation is a serious challenge (11) Giving Singapore a SV Mindset, BusinessWeek, August 2000

17. The New Singapore: Comments and Recommendations • Other Concerns with current strategy • Social backlash • widening gap between rich and poor • locals feel (43%)(12) government cares more about foreign professionals than local population • aging population that cannot support itself • High Savings Rate • Reduces available pool of capital • Could be diverted to stem property market inflation or invest in skill enhancement programs (12) Singapore goes back to its Roots, Financial Times, Aug 07

19. The New Singapore • Growth thus far has mostly been achieved by increasing inputs • More labor, more capital, more investment, more education, more training • This cannot go on! • Need new strategy! (12) Singapore goes back to its Roots, Financial Times, Aug 07

20. Singaporeans and Saving(13) Gross National Savings: 46% in 2001 (13) 2001 CPF Annual Report via case study