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Singapore’s future growth potential depends on local SMEs

I read something very real and very useful not just for Singapore but for any nation wishing to continue growing. Its always great to grow with Foreign Direct Investments (FDIs) but if the local companies and local talents are not built up, the growth would only continue as long as the MNCs still think the country is the most competitive. Note, it must be the most competitive because when it is no longer the most competitive, the Headquarter of the MNC which is a few thousand miles away would just decide to consolidate or close down the business. One real example? Read here: Consolidation, Old plants, Fairchild in Penang ends However, when they are the local companies, their base would forever be in the home country and as long as they keep improving and is quite competitive, they would still be around. Note though that this is not a fault of the MNC because more often than not, they are also a profit going concern and cannot afford to be complacent. Returns to investment must be maximised, right?
Below is a summary of was reported in a local English daily on what has happened in Singapore and should happen in future for future prosperity. According to Centennial Asia Advisors chief executive officer Manu Bhaskaran it is time that Singapore embarks on a new economic model to narrow the income disparities. (Note: I do not know of any country in the world where income disparity is becoming better or the richer are staying the same while the poorer are getting richer)
For the past half century, Singapore has grown from a backwater nation to today’s regional financial and export hub known for its safety, cleanliness and efficiency. However, even with one of the highest-per-capita income in the world, Singaporeans in the lower income brackets face competition from foreign migrant workers and thus depressing wages. On the other hand, highly-skipped expatriates are making housing expensive for many Singaporeans. (Note: Everyone can continue to say HDB flats are clean but I can safely tell you that any Singaporean in Singapore would prefer to live in executive condos instead. Yet these have increased in prices way too much compared to the usual wage growth over the years for the middle income Singaporeans)
There are not going to be huge changes and PAP would still be the majority government but adjustments are needed in the economy. After years of growth being powered by foreign MNCs, policymakers must build up local companies and focus on local force instead of continuously bringing in foreign talent. Foreign MNCs remain important but local companies and talents must start to become prominent. Manu says one example of how the incomes of Singaporeans can be lifted would be to grow the small and medium enterprises (SMEs) sector as this helps to employ skilled labour and help play an important socio-economic role in the country. The government must start opening up opportunities abroad for local companies. (Note: We can see this being done very well by the US or China where they use their influence to help their companies to expand into the emerging markets) 
Manu also believes that Iskandar Malaysia will be critical for Singapore’s growth and mutually beneficial. Both should leverage on each other as Malaysia has land and resources while Singapore has the capital and technology. In fact global cities always have a secondary airport and Iskandar can fulfil this role. A depreciating ringgit has also made Malaysia more attractive for cost-conscious Singaporean companies. When this engine of growth starts in Iskandar, the rest would follow. (Note: My opinion remains the same. The game changer is not the High Speed Rail (HSR) that so many people are talking about. The game changer is more connections so that it becomes efficient to travel to and fro. Singapore or Iskandar has to continue growing. On one hand, one side cannot keep growing if population does not grow. Yet, if population grows faster than the available infrastructure can absorb, prices go up and that’s where property prices would be higher than today! On the other side, Iskandar cannot grow without more investments and if Iskandar stops growing, the infrastructure would also stop growing and very soon Singapore would have to leverage on somewhere else. I hope that somewhere else exists, somehow.) 
MNCs based in Singapore today do not need necessary need to be in Iskandar.  However, they can definitely house some of their expats there when there are better connections. However, local Singaporean SMEs with global ambitions cannot compete by just increasing their capacity in Singapore. They would close shop before they even start. Just look at the biggest investment that every company would have to make for expansion. Space and people. In Singapore, space is premium and it’s priced in SGD. In Malaysia, space is many times more and it’s priced in RM. People? Haha. Do we know how many Malaysians are working in Singapore? Truth is, with tweaks in policies by the Singaporean government, this number would still grow but more of them can be based in Iskandar instead and working in tandem to grow economies of both. All the best yeah. Prosper thy neighbour.
Happy understanding.
written on 16 September 2015
Next suggested article: Buy Iskandar today or tomorrow, still a gamble?

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Charles Tan The Founder The Writer Kopiandproperty
Charles Tan

Charles is Founder of kopiandproperty.com He writes from his investment experience for the the past 20 years in investments including property, stock, unit trust and more as well as readings and conversations with many property gurus in the industry. kopiandproperty.com is an independent property blog which is not affiliated to any media company, property developer or even real estate agencies.

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