Singapore Competitiveness: A Nation in Transition

Transcription

1 Launch of the Asia Competitiveness Institute Singapore Competitiveness: A Nation in Transition Prof. Michael E. Porter Harvard Business School Singapore 28 November 2006 This presentation draws on ideas from Professor Porter s books and articles, in particular, Building the Microeconomic Foundations of Prosperity, in The Global Competitiveness Report (World Economic Forum, 2006); Clusters and the New Competitive Agenda for Companies and Governments, in On Competition (Harvard Business School Press, 1998); Clusters of Innovation Initiative ( a joint effort of the Council on Competitiveness, Monitor Group, and ongoing research. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means electronic, mechanical, photocopying, recording, or otherwise without the permission of the author Additional information may be found at the website of the Institute for Strategy and Competitiveness,

2 Trends in the Global Economy Globalization of markets Globalization of value chains Globalization of knowledge Innovation and skill an increasing share of value added Services an increasing share of value added Competitiveness depends on productivity The bar for competitiveness is rising Competitiveness in the global economy is a positive-sum game 2

3 Singapore Competitiveness in Transition Singapore is one of the most impressive success stories of economic growth in the 20 th century The country has successfully weathered a series of external shocks from the Asian crisis ( ) to the bursting of the IT bubble (2001) to SARS (2003) It is now on a challenging path to move from an economy based on efficiency to one based on differentiation and innovation The track record so far is encouraging, but much work lies ahead An enduring strength of Singapore is its willingness to question whether the current sources of its economic success are sustainable 3

4 Real PPP-adjusted GDP per Capita, 2005 $45,000 $40,000 $35,000 $30,000 $25,000 $20,000 $15,000 $10,000 $5,000 $0 Prosperity Performance Selected Countries U.S. Norway U.K., Sweden, Belgium, Australia, Ireland Switzerland Austria Finland Singapore Denmark Iceland Hong Kong NL France Japan Canada Italy Germany Spain New Zealand S Korea Greece Czech Rep. Hungary Slovakia Mexico Poland Malaysia China (8.8%, Turkey Thailand $6,290) Philippines Sri Lanka India Indonesia Myanmar Laos Vietnam 0% 1% 2% 3% 4% 5% 6% Source: EIU (2006), authors calculations Growth of Real GDP per Capita (PPP-adjusted), CAGR,

5 Innovation and Competitiveness Prosperity Productivity Competitiveness Innovative Capacity Innovation is more than just scientific discovery There are no low-tech industries, only low-tech firms 5

6 GDP per Employee, US-$, Italy Spain Portugal Myanmar Labor Productivity Level and Growth Netherlands Switzerland Canada Germany Mexico Philippines Selected Countries Norway Austria Belgium France UK Australia, Denmark New Zealand Sri Lanka -1% 0% 1% 2% 3% 4% 5% U.S. Sweden Finland Japan Malaysia Ireland Taiwan South Korea Slovakia Turkey Hong Kong Greece Growth of Real GDP Employee, CAGR, Czech Rep. Thailand Indonesia Bangladesh Singapore Iceland Hungary Poland Vietnam India Source: Groningen Growth and Development Centre and The Conference Board,

7 International Patenting Output Selected Countries Annual U.S. patents per 1 million population, U.S Japan Taiwan 150 Switzerland Finland Germany Israel Sweden 100 Canada South Korea Denmark Netherlands Austria 50 France Australia U.K. Norway Italy Singapore 0-8% -3% 2% 7% Compound annual growth rate of US-registered patents, Source: USPTO,

8 Determinants of Competitiveness Macroeconomic, Political, Legal, and Social Context Microeconomic Foundations The The Sophistication of of Company Company Operations and and Strategy Strategy The The Quality Quality of of the the Microeconomic Business Business Environment A sound macroeconomic, political, legal, and social context creates the potential for competitiveness, but is not sufficient Only firms can create wealth, not government 8

9 Factor (Input) Conditions Availability of high quality, specialized inputs available to firms Human resources Capital resources Physical infrastructure Administrative infrastructure (e.g. registration, permits) Information infrastructure (e.g. economic data, corporate disclosure) Scientific and technological infrastructure Natural resources Determinants of Competitiveness Enhancing the Business Environment Context for for Firm Strategy and Rivalry A local context and rules that encourage productivity e.g., incentives for capital investments, intellectual property protection Incentive systems based on merit Open and vigorous local competition, especially Related and Supporting Industries Access to capable, locally based suppliers and firms in related fields Presence of clusters instead of isolated industries 9 Demand Conditions among locally based rivals More sophisticated and demanding local customer(s) Local customer needs that anticipate those elsewhere Unusual local demand in specialized segments that can be served nationally and globally Successful economic development is a process of successive economic upgrading, in which the business environment evolves to support and encourage increasingly sophisticated ways of competing

10 Traditional Strengths of the Singaporean Business Environment Context for for Firm Strategy and Rivalry Factor (Input) Conditions World-class infrastructure Efficient government services and regulations Well-trained and flexible workforce Solid financial market High openness to global competition Aggressive attraction of foreign companies Attractive tax regime Professional management and governance of governmentlinked companies Related and Supporting Industries Focus on selected clusters (electronics, chemicals, logistics, financial services) to overcome small economy-disadvantages Demand Conditions 10

11 Upstream Cluster Development Oil and Gas, Houston Downstream Oil & Natural Gas Exploration & Development Oil & Natural Gas Completion & Production Oil Transportation Gas Gathering Oil Trading Gas Processing Oil Refining Gas Trading Oil Distribution Gas Transmission Oil Wholesale Marketing Gas Distribution Oil Retail Marketing Gas Marketing Oilfield Services/Engineering & Contracting Firms Equipment Suppliers (e.g. Oil Field Chemicals, Drilling Rigs, Drill Tools) Specialized Technology Services (e.g. Drilling Consultants, Reservoir Services, Laboratory Analysis) Subcontractors (e.g. Surveying, Mud Logging, Maintenance Services) Business Services (e.g. MIS Services, Technology Licenses, Risk Management) Specialized Institutions (e.g. Academic Institutions, Training Centers, Industry Associations) 11

12 Singapore Export Portfolio by Cluster, % 12.00% Information Technology Singapore s world export market share, % 8.00% 6.00% 4.00% Entertainment and Reproduction Equipment Power and Power Generation Equipment Change In Singapore s Overall World Export Share: -0.07% Business Services Communications Equipment Oil and Gas Products Publishing and Printing Chemical Products 2.00% Tobacco (1.9%, -3.6%) Motor Driven Products Hospitality and Tourism Heavy Machinery Singapore s Average World Export Share: 2.34% Aerospace Engines 0.00% -2.00% -1.50% -1.00% -0.50% 0.00% 0.50% 1.00% 1.50% 2.00% Change in Singapore s world export market share, Source: Prof. Michael E. Porter, International Cluster Competitiveness Project, Institute for Strategy and Competitiveness, Harvard Business School; Richard Bryden, Project Director. Underlying data drawn from the UN Commodity Trade Statistics Database and the IMF BOP statistics. 12 Exports of US$10 Billion =

13 Singapore Export Portfolio by Cluster, (continued) Singapore s world export market share, % 2.50% 2.00% 1.50% 1.00% 0.50% 0.00% Financial Services Business Services Analytical Instruments Transportation and Logistics Lighting and Electrical Equipment Jewelry, Precious Metals and Collectibles Change In Singapore s Overall World Export Share: -0.07% Marine Equipment Sporting, Recreational and Children's Goods Fishing and Fishing Products Metal Mining and Manufacturing Agricultural Products Furniture Apparel Textiles Building Fixtures and Equipment Construction Materials Footwear Communications Services Medical Devices Forest Products Automotive Processed Food -0.50% -0.40% -0.30% -0.20% -0.10% 0.00% 0.10% 0.20% 0.30% 0.40% 0.50% Change in Singapore s world export market share, Source: Prof. Michael E. Porter, International Cluster Competitiveness Project, Institute for Strategy and Competitiveness, Harvard Business School; Richard Bryden, Project Director. Underlying data drawn from the UN Commodity Trade Statistics Database and the IMF BOP statistics. 13 Oil and Gas Products Biopharmaceuticals Singapore s Average World Export Share: 2.34% Plastics Production Technology Construction Services Leather and Related Products Prefabricated Enclosures and Structures Aerospace Vehicles and Defense Exports of US$10 Billion =

14 Stock of FDI as a % of GDP, Average % Foreign Investment Stocks and Flows Selected Countries 140% Singapore 120% 100% 80% Vietnam 60% 40% 20% New Zealand, Hungary Denmark Switzerland Germany Sweden Portugal U.S. Thailand Spain Greece, Norway Finland Korea China Slovenia India Iceland Japan Italy, Turkey Netherlands Ireland Czech. Rep. Slovakia 0% 0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50% FDI Inflows as a % of Gross Fixed Capital Formation, Average Source: UNCTAD (2005) 14

15 Singapore Export Share Trends World Export Market Share 2.50% 2.00% 1.50% 1.00% Goods Services Total 0.50% 0.00% Source: WTO (2006) 15

16 The Process of Economic Development Shifting Roles and Responsibilities Old Model New Model Government drives economic development through policy decisions and incentives Economic development is a collaborative process involving government at multiple levels, companies, teaching and research institutions, and institutions for collaboration Competitiveness must become a bottom-up process in which many individuals, companies, and institutions take responsibility Every community and cluster can take steps to enhance competitiveness 16

17 Institutions for Collaboration Selected Massachusetts Organizations, Life Sciences Life Sciences Industry Associations Massachusetts Biotechnology Council Massachusetts Medical Device Industry Council Massachusetts Hospital Association University Initiatives Harvard Biomedical Community MIT Enterprise Forum Biotech Club at Harvard Medical School Technology Transfer offices General Industry Associations Associated Industries of Massachusetts Greater Boston Chamber of Commerce High Tech Council of Massachusetts Informal networks Company alumni groups Venture capital community University alumni groups Economic Development Initiatives Joint Research Initiatives Massachusetts Technology Collaborative Mass Biomedical Initiatives Mass Development Massachusetts Alliance for Economic Development New England Healthcare Institute Whitehead Institute For Biomedical Research Center for Integration of Medicine and Innovative Technology (CIMIT) 17

18 Singapore in Transition: Focus of Current Economic Policies Innovation Create new competitive advantages for Singapore Investments in universities R&D fund for companies / clusters Reform of school system Focus on more creative environment Entrepreneurship Address existing competitive disadvantages of Singapore Support internationalization of Singaporean companies Liberalization of domestic markets, e.g. telecom FTAs with US, ASEAN, etc. Efficiency Defend Singapore s core competitive advantages Tax reductions Social policy Defend Singapore s social fabric Progress Package of spending for low-income citizens 18

19 Singapore Biotech Cluster Evolution Over Time 1995 Bioprocessing Technology Centre 2000 Genomics Institute of Singapore Biomedical Research Council Bioethics Advisory Committee Tuas Biomedical Park 2002 Singapore Tissue Network Institute of Bioengineering and Nanotechnology Cancer Syndicate 2004 A*Star and JDRF provide grants to support 7 stem cell research projects Pfizer opens US$220 million manufacturing plant Centre for Drug Evaluation Johns Hopkins Singapore 2001 Bioinformatics Institute Novartis Institute of Tropical Diseases Biomedical Sciences Manpower Advisory Committee Groundbreaking of Biopolis 2003 BioPolis opens for business Center for Natural Product Research privatized to form MerLion Pharma National University of Singapore and Duke University agree to open a Graduate Medical School 2005 Launch of new biotech courses in Ngee Ann Polytechnic Novartis breaks ground on US$115 million production facility in Tuas Biomedical Park Albany Molecular Research established Research Center Source: Research by HBS student teams in 2005 Li-Mei Chee, Kola Luu, Gopal Raman, Hwee Yee Yong 19

20 National Economic Strategy Value Proposition What is the unique competitive position of the nation? What roles in the world and regional economies? What unique value as a business location? For what range or types of businesses and functions can the nation be competitive? Developing Unique Strengths Achieving and and Maintaining Parity with with Peers What elements of the business environment are essential to the national value proposition? What existing and emerging clusters must be mobilized? 20 What macro/political/legal/social improvements are necessary to maintain parity with peer countries or regions? What areas of the general business environment must improve to maintain parity with peer countries or regions?

21 Asia Competitiveness Institute Barriers to competitiveness improvement: The lack of objective, relevant microeconomic data to analyze competitiveness and track the impact of competitiveness efforts The lack of an independent research organization separate from the government The individuals with advanced training in the concepts and practice of competitiveness The Asia Competitiveness Institute (ACI) will have an important impact on all three dimensions As the node in an emerging network of professionals and institutions throughout the ASEAN region, ACI will also become a central facilitator of more effective regional co-operation on competitiveness 21

22 Asia Competitiveness Institute Action Priorities Organizational launch Initial research projects Strategic plan for ACI Official ACI launch Recruitment of 2 Senior Research Fellows and 2 Research Fellows or equivalent HBS case study on Singaporean competitiveness Singapore Competitiveness Report Assembly of Singapore competitiveness data and development of competitiveness research database Projects on Indonesia and Vietnam Network building Education and training Stakeholders Related Institutes, universities and government bodies Regional media Microeconomic of Competitiveness course as an elective in LKY SPP 5-day executive program Explore customized programs for ASEAN governments 22

23 Asia Competitiveness Institute Conditions for Success Independence Permanence Inclusiveness Clear intellectual framework World class research Strong leadership 23