Essay about Singapore
The Republic of Singapore is a small island state in the Southeast Asia, the smallest in the region and one of the smallest in the world. It has existed as an independent state just a little more than a half of a century. The country is not rich in natural resources. In the past, it did not have to offer to the investors more than a cheap labor force. However, within the last decades, Singapore managed to rise to a leading position among the developing countries. Today, the successful economic policy has turned Singapore into one of the most attractive sites for foreign investment. The government of the country gave priority to technical innovation, due to which the accent of the foreign investment shifted from labor-intensive to skill-intensive branches. The share of services in the national economy exceeded the share of manufacture four times in 2012. At the same time, Singapore started actively investing outward the country, mainly in developing countries, in labor-intensive industries.
The aim of the present paper is to discuss the processes due to which Singapore’s industrial miracle became possible. The first part will highlight cultural, social, political, and economic background of the country. The paper will outline the changes in social views, legislation and other adjustments made to create a favorable atmosphere for attracting investors and developing business. It will also deal with the cultural aspects in general and the culture of business in particular, to explain what kind of a cultural shock can await a foreign investor. Finally, the paper will present an overview of favorable conditions for foreign investment to show what products and industries can expect success in Singapore.
Historical context. The history of Singapore as an independent state is short. After being a British colony for a long time, in 1963 it joined the Federation of Malaya. As the result of different approaches to managing a multicultural society and because of economic tensions, Singapore regained its sovereignty in 1965.
The city-state of Singapore is a multicultural society. Historically, it comprises three main ethnic groups, namely Chinese (74.1%), Malay (13.4%), Indian (9.2%) and other (3.3%). Under the British rule, racial segregation in economic and educational spheres was severe. However, independent Singapore took the line of equal treatment of all ethnic groups. The Singaporean government has to manage racial differences to form a stable, tolerant society that unites racial and cultural identity with a strong feeling of citizenship. The state ideology implements a hyphenated identity concept. It means that national identity is maintained on the state level, without discriminating ethnic identities, and the citizens refer to themselves as Malay-Singaporean, Chinese Singaporean, etc.
Due to this approach, Singapore became one of the most tolerant and non-threatening communities. Language policy requires that each child should study two languages, English (to provide the basis for intercultural communication) and the language of his or her ethnic group (as a mother tongue). It makes Singapore a place where foreigners can feel comfortable and foreign investment is welcome and appreciated. This foreigner-friendly attitude is promoted on the state level; at the same time, the local population is used to cultural diversity and easily accepts newcomers if treated with respect.
Immigration policy. Singapore has always been an immigrant-friendly state. Between the 1960s and late 1990s, the population steadily increased by 30,000 citizens a year due to immigration, and this influx accelerated in the recent years. Today, 40% of Singapore’s population are foreigners. One of the reasons for the encouragement of immigration on the government level was diversification of the local manpower with the accent on specialized skills; another reason was low birth rate and rapid ageing of the local population. However, this policy engendered some cultural and social problems, such as increased resource competition and inevitable need of cultural adjustment. Today, the country stresses the necessity of high quality education for the local population. It will reduce the need for foreign workers and will allow harnessing the influx of immigrants.
Cultural shock. Immigrants and sojourners experience a culture shock arriving in any new country. In Singapore, the shock is particularly connected with the cultural variety gathered on such a small area. In general, Singapore is much westernized. It offers all modern conveniences, advanced infrastructure, housing and entertainment facilities. Business relations are also more straightforward and European-like than in most Asian countries. The language should not be a problem, with English as a state language. However, the local accent is so specific that Singaporean English, or Singlish, is difficult to understand for an unaccustomed ear. Thus, the cultural shock, if ever experienced, is mild and can be alleviated by previous learning about the country.
Multiculturalism is a great surplus but a great challenge as well. A foreigner experiences a unique mix of cultures, traditions, cuisines, and aromas. Common sense, understanding and tolerance are often necessary to cope with the impressions and not to offend the feelings of the local people, even though they might be used to foreigners. Business etiquette is defined by the three major ethnic groups, each having own traditions, customs, religion, and taboos.
Singaporean business etiquette is somewhat different from the European one. For example, giving small presents to business partners is an acceptable sign of respect; however, sharp and cutting items are inappropriate presents as they are associated with hostility. Again, clocks, watches and number four are death reminders and should be avoided as well. Private questions are not perceived as interference; Singaporeans consider them to be a way to learn about their business partner as a person. Business is often discussed at business lunches that can last longer than usual. One should take into consideration religious views of the counterpart. For example, Malays are Muslim, and Indians are Hindu. Therefore, if one treats a Malay business partner to a lunch, one should avoid alcohol and pork; beef is a religious taboo for Indians. Negotiation style of Singaporean managers depends on their ethnic group. Malays mostly conduct negotiations in an intuitive style, which is warm and animated. Indian managers favor a normative style that is more straightforward and western, estimating facts over attitudes. Chinese managers negotiate in factual style that neutral manner of conversation; the Chinese traditionally build relations on doing favors rather that personal involvement and kindness.
Government structure. Singapore inherited its governmental institutions from the colonial period; they copy the British Westminster system with a strong executive power. The constitution of Singapore stipulates separation of power. The executive power belongs to the Cabinet of Ministers under the lead off the Prime Minister. The current Prime Minister is Mr. Lee Hsien Loong. The Parliament of Singapore is unicameral. Together with the President, the Parliament exercises legislative power. General elections to the Parliament take place every 5 years. The President is the head of the state with representative function. The judicial power belongs to the Supreme Court and the State Courts. (“Government”).
Pragmatism and meritocracy. Since 1959, People’s Action Party (PAP) has been in power without changing. The party implements pragmatism and meritocracy as the basic principles of national development. Pragmatism is the state ideology that stresses economic growth as priority goal and condition of the national development. It is often criticized for being a justification for an authoritarian leadership of PAP. However, the results are overwhelming. Singapore has turned into a global city with “an iconic opera house, a skyline of some of the tallest buildings in the world, a giant Ferris wheel (the Singapore Flyer), waterfront developments, casinos and a rejuvenated downtown where old commercial and residential buildings have been converted into boutique hotels, discos, offices and affordable spaces for artists and art groups to operate out of”. Pragmatic reasons dictated adopting laws that facilitate business, attract foreign investment and foreign talent. Due to its homogenous composition, Singaporean government has a possibility to react quickly to various challenges, including economic ones.
One of the greatest advantages of Singapore in the eyes of the world business community is its corruption-free bureaucracy. Polevikova cites the 2012 Report of Transparency international Organization, which rates Singapore the fifth of the least corrupt countries in the world.
Singapore is one of the most rapidly ageing nations in the world. According to the estimates, there one person of five will be over 65 by 2030; today’s proportion is one to eleven. The rate of ageing and low birth rate among the local population prompted to the Singaporean government to promote favorable immigration policy.
The process of globalization had another unpleasant consequence for Singapore, namely widening of the income gap within population. On the one hand, skilled workers and highly trained employees enjoy income on the world’s level; on the other hand, the wages of unskilled workers are just enough to survive. The income disparity is evident throughout all population, but it affects Malays more than other ethnic groups.
Nonetheless, Singaporean society does not enjoy to the fullest such democratic values as media freedom, political accountability and transparency. The preached doctrine of Confucianism act positive as they maintain traditional assurance that hard diligent labor of every individual is the only possible way to prosperity. Kenneth Paul Tan, however, argues that this ideology develops submissive, docile manpower much praised in capitalist economy. He indicates that Singaporean government suppressed militant trade union movement to create attractive conditions for business.
Singaporeans, unlike Europeans or Americans, have a collectivistic mentality. It means that employees show the best result when working in groups; the same concerns training. Family links can be a decisive factor for employment. A foreign employer should take these peculiarities into account when organizing or supervising work.
Singapore pursues the vision of its first Prime Minister Lee Kuan Yew who realized that a country as small as Singapore, with a 2-million multinational population and scares natural resources, had no other way than investing in modernization and securing peaceful and productive coexistence of all its citizens. “For the small and vulnerable nation to survive, the citizenry must stay united, adopt a common ethos on mutual respect and self-reliance, and embrace market-driven, pro-business economic policies”.
Indicators of globalization. The KOF index of globalization takes into consideration three factors, namely economic, social and political. In this regard, Singapore became the world’s fifth most globalized country in 2014, with the index of 88.63. Taken separately, 2014 economic globalization index for Singapore is 96.69 (the first place), social globalization index is 91.61 (the first place), while the globalization index in political field is only 73.06 (the 48th place). Singapore shows high level of integration into world economy and globalization processes, while retaining greater level of political independence. Following numbers prove the level Singapore has reached in recent years. GDP (purchasing power parity) is $339 billion, with GDP real growth rate of 4.1%. GDP per capita is $62,400, which brings the country to the 7th place in the world.
Business incentives. The Government of Singapore encourages foreign companies to start their businesses in the country. The Ministry of Manpower of Singapore claims that the country is “the most competitive Asian country and the world’s easiest place to do business”. Singapore has a lot to attract investors – business-friendly policy, skilled workers with traditionally diligent approach to work, and a variety of business parks and specialized industrial parks to choose a location for headquarters or production facilities.
There are all conditions for prosperous business, such as free market economy, a strong forex market, financial stability, a legislative and regulatory battery, efficient infrastructure, and strategic geographical position. Singapore can boast of the most efficient and corruption-free bureaucracy. Registration procedure is simplified; there are several offices dealing with foreign representations; online registration option is also available. In order to make foreign investment more attractive, Singapore has concluded over 50 Double Taxation Avoidance Agreements. There are also many trade agreements and Investment Guarantee Agreements. Strict copyright and patent laws protect companies’ intellectual property.
A foreign business does not require special government permit to start up in Singapore, except banks and financial institutions, and 100% foreign ownership is allowed. Funds can enter the country and be withdrawn without restriction. With some countries, Singapore concluded bilateral treaties for protection from expropriation and similar interference in private property.
There are following types of foreign business entities allowed for registration in Singapore: a sole proprietorship, a limited partnership, a limited liability partnership, an incorporated company, a subsidiary, a branch, and a representative office. However, most companies choose for the form of subsidiary. In that case, with 100% foreign capital, a subsidiary is considered a resident company and enjoys the advantages of local tax regime. Foreign companies that own subsidiaries in Singapore risk only the invested capital and are protected from the debts and liabilities of their subsidiaries. Singapore can offer one of the most favorable tax regimes in the world. Only income obtained from local sources is taxed; offshore income will be taxed only if it is transferred to Singapore. Priority sectors receive tax incentives.
Due to the steady and sound government policy, Singapore can offer a stable climate for trade and investment. The Singaporean Dollar keeps strong positions with a low inflation level. “The exchange rate system is free of restrictions on payments and transfers for current international transactions”. The country overcame the economic recline of 2008 relatively quickly and easily due to “a countercyclical large fiscal stimulus and monetary easing, while strong economic fundamentals, openness to international trade/ foreign investment, and labour market flexibility provided important buffers”. A strong, consequent and pragmatic rule and a sound, corruption-free environment are other factors to guarantee stability.
Changes in Economic Policy. The country undertook restructuring of its fiscal system from direct to indirect taxation. Priority sectors, such as healthcare, education and social support enjoy tax incentives. The corporate income tax reduced from 22% in 2004 to 18% in 2007. The tax on goods and services rose from 5% to 7%.
Singapore is an active participant in WTO. As a member of ASEAN, Singapore works permanently to create a single trade market and production base in the Asian region. In 2009, it joined the Agreement for Common Effective Preferential Tariff Scheme for the ASEAN Free Trade Area. Singapore has concluded over 50 bilateral Free Trade Agreements within ASEAN as well as with other countries.
Tax incentives were offered to the following spheres of business: Research and Development (R&D); Manufacturing, Services; IP Hub, Manufacturing, Services; development and expansion of business; Finance and Treasury Centers and Manufacturing; and IT Hub (Enter Singapore Business).
Prospective investment sectors. Most multinational corporations, such as Apple, Microsoft, Google, Procter and Gamble, DBS Bank already enjoy the advantages of locating a business in Singapore. For many of them, Singapore is a strategic point for further expansion and investment in East-Asian region. Healthcare and beauty industries, pharmaceutics, manufacture, electronic goods, real estate, online marketing, and many other sectors of economy, offer good prospect of business development. New start-ups can also use the healthy business environment and opportunities offered by Singapore.
“Creative industries” pertaining to arts and culture, media, and design have gained government support in the 2000s. Singapore has an ambition of standing up to the world’s biggest cultural centers, such as London, Paris, or New York. However, there are some obstacles in the way connected with Singapore’s image as a niche economy and legislative restrictions of the freedom of expression. In order to overcome the cultural gap and to facilitate the development of the “creative” sector, the country adopted the policy of importing foreign talents. It invited well-known companies to the country in order to give an impulse for the local creators. For example, Japanese digital animation companies LucasFilms, Electronic Arts (EA) and Koei quickly led Singapore to the leading position in the sector.
The all-the-year-round tropical climate, wonderful ocean beaches and beautiful nature with rich flora and fauna make Singapore a touristic paradise. In 2012, tourism yielded S$23 billion to the national budget. Therefore, every business connected with tourism will flourish there. It can be a travel agency, an airline, a taxi, guide services, hotel and accommodation, restaurant, cafe, or a boutique, or any other service to cater the needs of the tourists. Souvenirs and local food are always in demand. Fashion points are popular both with tourists and the locals. Tourists from all over the world come for shopping to Singapore; the local people are also fond of well-known fashion brands, such as Levis, Aldo, Chanel, Zara, and H&M.
Another prospective branch is information technology. Singapore has become a renowned IT hub. Involvement of foreign talent and training of local people ensure rapid development of IT industry in the country. As mentioned above, Microsoft and Apple and other IT companies have their headquarters or branches in Singapore. Any business connected with information technologies can be profitable, for example wireless networks, web development, social networking, website designing, etc. Telecommunications is another branch to develop.
Biotechnology is a branch that gets substantial government support in every aspect currently. Advertising of this knowledge-based industry is also done on governmental level. Many well-known international concerns, such as Pfizer, Novartis, and GlaxoSmithKline allocate resources in Singapore.
Education is one of the major concerns of the government; it receives much attention and support. Educational institutions in Singapore offer high quality of academic education; they are popular with the Southeast Asian students who strive for acquiring better knowledge not far from their home countries. A business that provides accredited courses on various actual topics would be successful in Singapore.
Singapore has made a remarkable progress in recent decades. Singapore government managed to conciliate the major races due to the wise policy of multiculturalism. Tolerance to foreigners made it possible to turn Singapore in a place attractive for foreign tourism and business. The Singaporean government implements immigrant-friendly policy and offers favorable conditions for foreign investment. The widespread knowledge of English as a language for intercultural communication makes it easier to find, train and manage the manpower. Confucian attitude to work promoted by the government creates favorable and sound working condition.
The indicators of prosperity of the nation are among the highest in the world, and Singapore is considered a good and safe place to live and do business in. Scarcity of natural resources shifted the economic priorities into trade, services and technologies sector. The country invested in quality education for its citizens and attracted foreign talent to generate the impulse for development of the desired branches. Many multinational corporations located their headquarters in Singapore. Today, healthcare, information technologies, design, biotechnologies, education, banking and finance, knowledge-intensive manufacture are the branches supported by the government. Tourism and adjoining industries are also prospective investments. The one who decides to locate a subsidiary in Singapore or to start up a new business there will benefit from the favorable tax regime and tax incentives.
The country is trying to find a balance between globalization and retaining its identity, innovations and traditions, new tendencies brought by immigrants and centuries-old local culture. It has made a good progress but the prospects are still brighter.