Pergamon

doi:10.1016/S0264-2751(02)00119-1

Cities, Vol. 20, No. 2, p. 115127, 2003 2003 Elsevier Science Ltd. All rights reserved. Printed in Great Britain 0264-2751/03 $ - see front matter

www.elsevier.com/locate/cities

Singapores competitiveness as a global city: development strategy, institutions and business environment
Loo-Lee Sim*, Seow-Eng Ong, Adeesh Agarwal
Department of Real Estate, National University of Singapore, 4 Architecture Drive, Singapore 117566

Ali Parsa, Ramin Keivani

Faculty of the Built Environment, South Bank University, 202 Wandsworth Road, London SW8 2JZ, UK

With globalization, cities are facing increasing competitions as centers for activities and nodes for multi-national corporations. As a result, cities have to ensure that their institutional structures cater to the rising demand from such corporations. There is an increasing need for institutional thickness and free market systems. In the past four decades, Singapore, an investment driven city, has provided businesses with a secure and efcient business environment. Through semi-structured interviews with senior policy makers and private experts, this research identies the institutional framework in Singapore and how this set up interacts with and inuences the business environment and city development. However, the need to elevate itself into a knowledge based economy requires a more nimble and uid relationship between the institutions and the businesses. 2003 Elsevier Science Ltd. All rights reserved.
Keywords: Globalization, Institutions, Business environment, Singapore

Processes of globalization and impact on cities

Over the past decade an extensive body of literature has been developed on world cities and global cities. One important concept that pervades through the literature is that of a metropolis as a command center for the operations of multinational corporations, as a locus of advanced services and information-processing activities (Amin and Thrift, 1994; Budd, 1995; Castells, 1996; Godfrey and Zhou, 1999; Hall, 1966; Lo and Marcotullio, 2000; Mohan, 2000; Newman and Thornley, 1996; Reed, 1981; Sassen, 1991; Scott, 2001; Short and Kim, 1999; Sykora, 1994). Sassens work (1991, 1994a, 1995) shows a world city as the locus for the critical servicing of global capital. Using advanced producer services as the distinguishing characteristic, she came up with a hierCorresponding author. Tel.: +65-6874-3556; fax: +65-6774-8684; e-mail: rstsimll@nus.edu.sg

archy of cities (Sassen, 1991), while Castells (1996) tried to advance theoretical knowledge of the world city network. Important concepts, which emerged from the body of literature, are complementarities and competition. As pointed out by Taylor (1997) global cities exhibit a hierarchical tendency. Forming networks, they engage in complementary activities; at the same time, they compete with each other to attract investments as illustrated in the studies reviewed in the following sections. Urban hierarchies, complementary activities and synergies The concept of a hierarchy of cities was shown in a pioneering work by Reed (1981), who identied a structure of nancial centers with ve hierarchical levels. Friedmans (1986) World city hypothesis shows that world cities act as control centers for world capital accumulation, and consequently, they acquire specic economic and social structures. His complex spatial hierarchy suffers from a data prob115

Singapores competitiveness as a global city: Loo-Lee Sim et al.

lem. Following this seminal work, many studies take the form of measuring attributes of world cities and then ranking them (Brotchie et al., 1995; Daniels, 1993; Lyons and Salmon, 1995; Sassen, 1994a, 1994b, 1995). In The Global City (1991) and Cities in a World Economy (1994a), Sassen used producer services (advertising, accountancy, legal services) to rank global cities and showed New York, London and Tokyo to be at the apex. These cities were shown to be functioning as highly concentrated command points in the organization of the world economy. They were identied as key locations for nance and for specialist service rms, and were at the same time, sites of production of innovations. They also acted as markets for the products and innovations produced. Taylor et al.s (2002) urban hierarchies through the power of cities and their connectivity showed Tokyo as a global command center, and Tokyo and Hong Kong as dominant centers. Competition Another concept in the literature on global cities is that of competition among cities. These have always competed with each other to attract investment, but globalization, advances in information technology and structural changes have altered the terms of competition between cities. Sassen (1991)s triad of competing global cities, namely New York, London and Tokyo, was conrmed in another study by Frost and Spence (1993). Krugman (1996) argued that competitiveness is an attribute of companies, not of cities, regions, countries or continents, but Porter (1998) showed that national environment affects the competitiveness of rms. To him, understanding the role of a nation would yield some fundamental insights into how competitive advantage was created and sustained (Porter, 1998). Kresl (1995) identied a dichotomy between economic determinants (factors of production, infrastructure and similar) and strategic determinants (policy factors and institutional design). According to him, the individual citys government and private sector entities can enhance a citys competitiveness and enable it to achieve the most desirable economic outcomes possible. To Duffy (1995), ofcials and politicians have to increase involvement of sectoral interests. Co-ordination between groups with very different institutional arrangements is a key issue, that is, civic co-operation is very important. Competitive and comparative advantage Many theories have also been developed to explain FDI, and the competitive and comparative advantage of rms and countries (Porter, 1998; Dicken, 1998; Dunning, 1993). The fundamental hypothesis in Dunnings (1993) investment development cycle model is that there is a systematic relationship between the determinants of outward/inward FDI ows and the
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stage and structure of a countrys economic development. Porters (1998) competitive advantage approach of global competition focuses on inter-rm competition. His diamond used three main building blocks, namely global competitive environment, competitive strategy and organizational structure to explain the competitiveness of rms. He, however, argued that the national environment affects competitiveness of rms and understanding the role of nations would provide insights into how competitive advantage was created and sustained. In his model conceptualizing urban performance, Begg (1999) showed that the inuences on urban competitiveness are price and non-price factors of rms, local environment, and governance and policy inuences. He emphasized that policy at the urban level is very important in determining the competitiveness of cities. This is supported by Yeung (1998)s study, which showed that cross-border investment ows between Malaysia and Singapore are largely linked to their development strategies and policy orientations. Dicken et al. (1994) stated that virtually all local governments make strenuous efforts to attract TNC investment into their territories, but little after-care or after-sales service is provided. They suggested that local authorities should strive to provide an attractive business environment in which TNCs can operate; in this respect, national policies are as important as local. This was supported by Cheshire and Gordon (1995), who reiterated the important role of local environments in the competition between cities to gain investment. One signicant aspect that emerged from these studies is the recognition of the increasing importance of the business environment as a determining factor in the competitiveness of a city. Central to this is the role of policy factors and institutional design of a city. As a result, the institutional approach has gained importance in explaining the competitive and comparative advantage of cities.

The institutional approach

The institutional approach has gained importance for analyzing the diversity of economic formations in different localities in recent years. New institutionalism emphasized collective decisions in economic processes as compared to simply focusing on economic explanations. It analyses the existence and importance of political, legal and social institutions, which govern human behavior within the bounded rationality of agents decisions (DArcy and Keogh, 1996; Healey, 1999; Hodgson, 1998; North, 1990; Powell and DiMaggio, 1991). To North (1990), institutions are rules of the game in a society. Organizations, whether political, economic or social, behave and perform within a framework dened by institutions, which are regarded as both formal and informal rules. Formal rules are laws and regulations while the informal rules are

Singapores competitiveness as a global city: Loo-Lee Sim et al.

norms, conventions, traditions and customs. Institutions were seen to be the principles found in acknowledged norms, rules of behavior (Healey, 1999; Powell and DiMaggio, 1991). Thus, the institutionalists viewpoint is that economic, social and political decisions cannot be explained merely as expressed in the decisions of individual actors operating independently. Decisions and actions are structured by their interactions with others, their social obligations and networks and their frames of reference (Healey, 1999; Powell and DiMaggio, 1991). The emphasis is on embeddness, that is, economic action and outcomes are affected by actors dyadic relations and by the structure of overall network of relations (Grabher, 1993). The institutional approach emphasized the importance of seeing economic action as social action, of understanding networks which function between markets and hierarchies on a semi-permanent basis, and of tracking the processes of institution-building (Granovetter, 1985). Amin and Thrift (1994) postulated the idea that the performance of local economies in a globalizing world is critically dependent upon their institutional thickness. This concept is elaborated as a strong institutional presencea plethora of institutions of different kinds (including rms; nancial institutions; local chambers of commerce; training agencies; trade associations; local authorities; development agencies; innovation centers; clerical bodies; unions; government agencies providing premises, land and infrastructure; business service organizations; marketing boards) to provide the basis for the growth of particular local practices and collective representations (Amin and Thrift, 1994, p 14). In addition to the rst factor, they added three further factors identied by Powell and DiMaggio (1991). These are as follows: 1. High levels of interaction amongst the institutions in a local area. Institutions must actively interact with each otherhigh levels of contact, cooperation, and information exchange, which may lead, in time, to a degree of isomorphism. Contacts and exchanges are often embodied in shared rules, conventions, and knowledge, which serve to constitute the social atmosphere of a particular place or locality. 2. Development of well-dened structures of domination and/or patterns of coalition resulting in the collective representation of what are normally sectional and individual interests and serving to socialize costs or to control rogue behavior. 3. Development amongst participants in the set of institutions of a mutual awareness that they are involved in a common enterprise, that is a commonly held industrial agenda which the collection of institutions both depends on and develops. This thickness, which both establishes legitimacy and trust will continue to encourage and foster

entrepreneurship and consolidate the local embeddedness of industry. Thus, the institutional approach does not only emphasize on the presence of institutions per se but also the process of institutionalizationthe institutionalizing processes that both encourage and support diffused entrepreneurshipa recognized set of conduct, supports, and practices. The right institutional mix is also important; it is only through the construction of adaptable institutional mixes that places can hold down the global (Amin and Thrift, 1994, p 260).

Studies on Singapore as a global city

Beaverstock et al.s (2000) roster of 55 world cities at three levels: 10 Alpha, 10 Beta and 34 Gamma world cities, showed Singapore to be one of the Alpha (top ten) cities. Taylor et als (1998) study also identied the city-state to be the most important world city in Southeast Asia. Taylor et al. (2002) highlighted that both Hong Kong and Singapore are highly connected world and gateway cities, international nancial centers, and also regional command centers. However, in addition, Hong Kong is also seen to be a dominant center. Similarly Yeung et al.s (2001) study showed Singapore and Hong Kong standing out as the top choices for RHQs in the Asian region because they offer a strategic location on the global transport and communication network, high quality producer services, skilled labor, and rich social and cultural amenities. Lam (2000) argued that the two rivals adopted very different economic development strategies; the interventionist approach of Singapore compared to the laissez-faire principle of Hong Kong. According to him, the two extremes will become more alike in the foreseeable future, for reasons of political feasibility for Hong Kong. Singapore will be more free market-oriented while Hong Kong will be more interventionist. Other studies have shown that London, New York, Tokyo and Singapore have become global complexes not only of economic power, but also of social and cultural inuences in the world economy (McDowell, 1997; Sassen, 1995; Thrift, 1994). Thus, in their study of Singapore as a global city, Yeoh and Chang (2001) proled it as a meeting-place of four transnational groups comprising high-skilled managerial elites, low-waged immigrant labour, creative talents in the arts and world tourists, and attributed this to the governments policy of attracting the world to Singapore. Yeung (1998) concluded that the cross-border investment ows between Malaysia and Singapore are largely linked to their development strategies and policy orientations. Similarly, Hos (2000) study on the competitive strategies of Sydney, Hong Kong and Singapore showed that Singapore keeps its competitive position by developing planning initiatives aimed at transforming the local urban environment to attract regional head-quarters of companies. Physical infra117

Singapores competitiveness as a global city: Loo-Lee Sim et al.

structure development for economic growth has also been a key component in the planning of Singapore for more than three decades. This has served to attract MNCs, but from the 1980s, the government has launched a series of pro-IT plans to enhance Singapores status to that of a world city. In order to maintain its competition edge, Singapore liberalized its telecommunications market in April 2000. The city-state has also created a high quality urban environment. To Marcotullio (2001), Singapore stands out as an excellent example of overcoming many of the problems associated with rapid globalization driven development due to its successful environmental management strategy.

Singaporean overview
Singapores development model has been built on the recognition by the public administration of value addition and adaptation of an export oriented growth model, a strategy employed by most emerging markets in Asia. In the 1970s the development model moved from an industrialization strategy to a higher and more sophisticated manufacturing, which included, among others, computer peripherals and parts, and software packages. The 1980s saw a strategy transition towards the technology intensive sectors. From the early 1990s the strategic path was focused on high knowledge intensive companies, and one that entailed globalization and regionalization challenges. The development of the Singapore Science Park to cater to such facilities is one of the efforts to promote such businesses in Singapore. Subsequently, development has been driven by both high value added production and business and IT services. Although Singapore had experienced double-digit growth from the late 1980s to the 1990s, as a result of the 1997 Asian nancial crisis, the Singapore economy grew by only 1.5% in 1998. It is now beginning to turn around (Figure 1). As a result of the recession, institutions in Singa-

pore developed focus groups to study and recommend the best approach to weathering future downturns and sustain the economic and social development. In May 1997, the Committee on Singapores Competitiveness (CSC) was formed with a mandate to review and develop a path for Singapores drive to become a globally competitive knowledge based economy. The institutions acknowledge the renewed importance of developing a more resilient development model specically due to the global economic downturn and political instabilities, coupled with the emergence of China into the global market. Prime Minister Goh Chok Tongs National Rally Speech 2001 outlined the multiple challenges and development strategy that Singapore will need to undertake and presented the vision for Singapore. To take this vision further, as done in the past by the CSC, a new focus group, The Economic Review Committee (ERC) was established in October 2001 to address the emerging global and regional issues impacting Singapores development strategy. With direct marketing by the Economic Development Board and the Trade Development Board, to date, more than 5000 international companies operate in Singapore, with about half having regional operations. With the manufacturing and services sectors, Singapores economy has transformed in terms of the types of business and their higher value-adding activities (EDB website, www.sedb.com). To further the understanding of the international business sectors views of the institutions and their capacity to maintain a successful and competitive economy, this paper relies on the perspectives of diverse business groups, through interviews of senior public and private experts.

Research methodology
The methodological constructs underpinning this research draw upon the institutional school of urban analysis. In essence, this is an examination of rules,

Figure 1 Singapores GDP at current market prices: 19602000. Data source: http://www.singstat.gov.sg

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Singapores competitiveness as a global city: Loo-Lee Sim et al.

regulations, conventions and structures that shape ` processes and resultant interactions vis a vis the citys capacity for attracting and embedding international business. A body of recent work has utilized this approach for the study of urban development and change, particularly in the context of global local interplay and interaction (Keivani et al., 2001; Ho, 2000; Amin and Thrift, 1995; Sykora, 1994). In evaluating institutional capacities in the studies a series of semi-structured interviews was conducted. These involved senior policy makers from different government departments and agencies concerned with economic and urban policy formulation, and implementation. Based on the work on world cities and global urban networks by Sassen (1991, 1994a) and Beaverstock et al. (2000) international private sector participants were drawn primarily from economic sectors that have been identied as being central to the economic globalization process in terms of higher value added functions. To these were added some rms from the more traditional sectors. Overall, a total of 38 interviews in several categories were carried out (Table 1). The questionnaires and the interview program were designed to enable detailed exploration of perceptions and actual experiences of both public ofcials and international rms in respect of a range of institutional processes and capacities, framing and facilitating the business environment. These include general development vision, the stability of the business environment, the impact of specic regulations and the quality of spatial development and infrastructural capacity.

approach employed by Porter (1998) to evaluate the competitive edge in multinational rms, with parameters relevant to the city functioning forming the nodes for the diamond framework. The competitive environment is the city business environment; the competitive strategy is the development vision; and the organizational structure the institutions that govern a city. The inter-linkage that is formed between these three city specic parameters is used as a framework in this paper to better understand Singapores vision and development strategy, and how the institutions interact with businesses to provide a conducive environment for the city to advance to a higher level in the global circuit (Figure 2).

Empirical evidence: the case of Singapore

Vision and development strategy An economic and social vision for a country is considered the path outline for a development strategy. It is both essential and a reection of a countrys future expectations. Over 95% of the respondents stated that the vision of Singapore, designed towards the business and nancial services, high value added production and biotechnology sectors, is formally outlined. This concerted response reects the awareness level that the government initiates in the business community and its statutory boards, so as to allow each of the organizations to plan future actions. Also, public respondents indicated that this vision, in part or whole, has been reiterated in multiple documents and speeches by the respective public gures. The cohesive political structure of Singapore is attributed much of the credit for the formation of this transparent and path detailed vision. This recognition is shown in the World Competitive Yearbook 2001, where Singapore is ranked #1 for government transparency and efciency (Ministry of Trade and Industry, 2001). Singapore also exhibits a high tolerance towards multiculturalism, one of the traits of a global city (Kratke, 2001). With a multi-racial population of 4 million, out of which 25% are foreigners, the institutions have deliberately worked at creating a social framework that is multicultural. Within this vision, the role of foreign talent is seen as an essential driving force for the different business sectors. The number of foreigners on employment pass contributed to 36.9% of the GDP growth in Sin-

Framework for analysis

The literature reveals a built-in process or relationship that revolves around three major elements of a global city that together create its institutional milieu: development vision, the institutions and business environment. This framework is similar to the diamond
Table 1 Categories and number of interviews conducted during the eldwork Category Public Private Management consultants Legal services Financial services IT related services Media and advertising Life sciences Human resources R&D units Property dev and consultancy Electronics Civil Engineering related Oil related industry Total Number 8 3 5 2 5 3 2 1 2 4 1 1 1 38

Figure 2 Conceptual framework

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gapore in the period Q1 1991Q4 2000, which reects the strong role that they play in the economy (Economics Division, Ministry of Trade and Industry, 2001). To further emphasize the role of foreign entities and the talent that they bring along, it is known that the foreign-controlled companies have an important and substantial presence in Singapore. While much fewer in numbers relative to local-controlled companies, they are estimated to account for 42% of GDP (Singapore Department of Statistics, 2001a). To accommodate these multi-national corporations Singapore has developed a modern city center, industrial estates and business parks and an infrastructure that facilitates their activities. Currently, Singapores socio-spatial structure is a reection of its high tolerance for multiculturalism and the development initiatives to transform its local environment to attract multi-national corporations. Competition A country that is globalizing in its vision will become increasingly affected by external events and, hence, will have to face increased competition. The countrys development strategy has, therefore, to meet both internal and external challenges. With the rise of China, Singapore has to face greater competition. Although Hong Kong has been its traditional competitor, both private and public respondents viewed Shanghai as a stronger one in the future. Hong Kongs institutional structure is perceived to create a more vibrant entrepreneurial environment. Its location as a gateway city to China is an added advantage. With the close cultural ties between China and Hong Kong, investors perceive it to be a better platform to launch their entry into the Chinese market. Shanghai, on the other hand, is cited as the magnet for investments and with Chinas emergence into the global market, it will spearhead commercial growth. Given that 70% of the Asian FDI ows into China (Asian Pacic Bulletin, 2001), the function of Shanghai to service the nancial services is seen to be the primary source for competition. The extensive human resource pool available in the Shanghai market, and the capability of the city to service local and international markets, is perceived to be a driving force in the emergence of Shanghai as a primary service center. One view is that a split will emerge in the Asian region, with North Asia having Shanghai as the new focus for investors and Singapore as the hub for Southeast Asia as Singapore has certain comparative advantages. A majority of the responses suggested that Singapore is the most secure and preferred destination for companies operating in the Southeast Asian region. As expected, the role and market dynamics of key trading partner countries become crucial when creating a vision and competing with other regions. The respondents were asked their perception of the regional and global instabilities that may have had or
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are seen to have an impact on Singapores development strategy. Issues discussed were the instabilities in Southeast Asia, the recession in Japan and the USA. The instabilities in the neighboring regions are seen to be both positive and negative. This instability is viewed positively, since investments directed towards the region now ow to Singapore, and negatively, as investors shy away from the Southeast Asian region as a whole. The recession in Japan was not a major concern for Singaporean development. Most respondents viewed the shift of Japanese capital and manufacturing sites to nearby regions as a gradual process, in line with the overall shift of Singapores transformation from a manufacturing base to a service based economy. Also, since these companies have retained their service operations in Singapore, this transition has been less damaging. The recession in the US is seen to have dampened the local economy. The exports to the US have dropped by 5.6% in the period from Oct to Nov 2001 (Singapore Department of Statistics, 2001b). Singapores over-reliance on its electronics exports to the US demonstrated the negative impact of over-dependence on a single country and a sector resulting in the economic setback. Respondents expressed concern over any religious polarization, stemming from the 11 September attacks, that may occur in the future, which could breed an unhealthy environment in this region. Terrorism was also seen as an issue impacting the global markets, even though it was believed that Singapore would remain a moderate and secure environment. Institutional structure Institutions are considered to be the coordinating mechanisms that synchronize the actions of different economic and social agents. In Singapore, the institutions are seen to be adequately focused on each aspect of the economy and converge as a focus group in the event of any restructuring or new projects. This uid institutional framework has enabled them to be more resilient and cohesive in approach when dealing with inadvertent economic events. In these, the EDB spearheads the role of marketing, sustaining and developing further the competitiveness of Singapore. There is recognition in the private sector for EDB as an effective intermediary between them and the government. Co-ordination between the institutions is deemed to be essential to ensure that the vision is implemented in a concerted approach rather than each of them moving towards a different objective. Large percentages: 51.7% and 37.5% of the respondents from the private and public sector, respectively, believe that there is high coordination among the institutions and another 24.1% and 37.5% believe that a moderately high coordination exists. A majority of the respondents, over 90% in the private and 87.5% in the public sector, state that there is sufcient dialogue between the organizations and awareness level is between frequently to always for these institutions. As

Singapores competitiveness as a global city: Loo-Lee Sim et al.

expected, with such a high level of coordination and awareness, the compliance to the strategy by the public bodies was rated to between frequently and always by all the respondents. Such a strong recognition by all parties is noteworthy and reects institutional thickness. Examples were cited in which institutions converge on projects wherein the outcome had an impact on multiple organizations, e.g. the Concept Plan, which has inputs from JTC, HDB, National Parks Board, Land Ofce and URA, to name a few. This exhibits the recognition in the institutions of the need for concerted efforts for multi-disciplinary projects. Other projects such as tourism development initiatives have also seen target groups being formed from multiple institutions. It was further established that a new public organization called Singapore Business Federation will cater to the concerns of the local and international businesses in Singapore. This proactive approach of formulating focused groups to service the business environment is viewed by the industry as a positive quality of the public sector. At a more micro-level, an example cited in favor of this institutional coordination was the concept of re y. As a re y, a person from one statutory board will move to another to enhance his/her exposure to the functioning of different institutions and study their respective policies. This is seen as an effective and a coordinated effort initiated by the institutions to develop civil servants knowledge and awareness of efcient and holistic public body management. Overall, there is a high degree of recognition given to the institutions on their coordination, awareness and efcient compliance in achieving the strategic vision. Laws and regulations guiding vision If markets are global, so must be the regulations and institutions that govern them. Also if the vision is to materialize, there needs to be a synergy between this and the laws and regulations that go with it. Respondents give Singapore high marks in this area with 58.6% and 50.0% of the private and public respondents remarking that this is the case most of the time and an additional 27.6% to 12.5% of the respondents stating that this is always the case. Predictability of major changes in laws and policies Business decisions are based on the stability of the policies and laws within which organizations need to operate. These policies are essential for the long-term planning that multi-national companies conduct before entering a market. Many of the respondents thought that the laws and policies were highly to fairly predictable in major changes. A fair degree of feedback exists before any major change is implemented by the government, thereby allowing the private sector to participate and improve the relevance of policies. Also, there is 80.7% acceptance that insti-

tutions mostly or always stick to announced changes, which is further matched by the public responses. As for the accountability to international investors, the responses range between frequently to mostly accountable, by both respondent groups. Government interaction with private business As the predictability of major changes was high, and subsequently a good feedback process was evident, the questionnaire went further to evaluate the channel that each of the respondent groups employed in policy development. In the case of private respondents, professional associations were the preferred mode of interaction with 66.7% of the private rms. The primary reason cited for this was that a particular business group could voice a collective thought to the government, and thereby provide a stronger case for plan execution. Ofcial correspondence was the second most preferred method, and this became the case when company-specic issues needed to be addressed. Personal contact was also used to a certain extent by large private rms, especially foreign legal rms, which did not have any professional body through which to communicate their concerns. Interestingly, there was acceptance in the private sector of maintaining personal contact with public personnel. Most respondents who chose this mode of communication stated that they played a signicant role in the local economy and subject business sector and therefore there is more active feedback between them and public personnel. However, the respondents emphasized that this relationship was strictly professional and no informal discussions were used to inuence policy decisions. The above is further conrmed with 25% of the respondents choosing professional associations, and 20.8% choosing personal contact as the most often used channel for interaction. As for the public respondents, ofcial correspondence and conferences seemed to be the preferred channel, with each gathering 75% of the votes. Occasional forums and the ofcial chamber of commerce were also used extensively. This mode of interaction suggests that the government prefers to communicate in open seminars, to communicate to specic groups or through ofcial correspondence when it requires direct contact. One public respondent stated that lobby and pressure groups were consulted in instances like environmental issues and therefore specialized international lobby groups were kept informed. As expected, the public body voted for regular forums and conferences as being the most preferred form of interaction (Table 2). Certain key concerns that were brought forward by the respondents on interaction with the government were perceived as policy favoritism towards large businesses and, from the legal sector, a lack of a specic body to integrate their business concerns in Singapore. Media rms, on the other hand, expressed concerns on the restriction imposed on this sector by the government. Overall, the easy accessibility to the
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Table 2 Most commonly used channel of communication Private (%) Regular forums Occasional forums Conferences/seminars/workshops Ofcial correspondence Chamber of Commerce Professional association Personal contact 12.5 20.8 12.5 8.3 25.0 20.8 Public (%) 28.6 28.6 14.3 14.3 14.3

government bodies by the private organizations was cited by most respondents as one of the key reasons for establishing signicant business operations in Singapore. Business security International investors are inuenced to a large degree by the level of business security prevailing in a region. Although located within a volatile region, Singapore has successfully maintained a safe and secure business environment. The governments initiative in creating and maintaining a moderate relationship with neighbors, and working cohesively with different countries through numerous unilateral, bilateral and multilateral free trade agreements, has ensured that private rms are attracted to the city state to conduct their business. All the ve factors, as listed in Table 3, fared well and there was a concerted view that providing a safe and secure business environment has been a goal of the institutions. However, the governments role of deciding the type of business operating in Singapore is seen by some private respondents (20.7%) as an undue political inuence, excessive intervention and contradictory to the free market concept of a global city. A key issue raised was the signicance of the government linked companies (GLCs) in Singapore, which account for approximately 13% of the GDP. GLCs are seen both as a threat and as an opportunity by the industry. One school of thought views it as a deterrent for SMEs as these are unable to compete with government bodies and GLCs. They also perceive it to be an action by the government to rake benets from the private market, and consider this to be unreasonable.
Table 3 Business security Private respondents

As expected, the public respondents also viewed the safe and secure environment as a core asset of Singapore. With the ve factors primarily ranging from high moderate to very high security, the provision of a secure environment is evident. In fact, most respondents viewed Singapore as a safe and secure business location. The secure and stable business environment would not be possible without a sound and good legal setup. The interview delved into three key issues on the legal aspect, namely adequacy of laws, the legal process and the consistency of the judiciary. Private rms voted high for all three of these factors, while public rms responses ranged between high to very high, clearly suggesting that the law was wellrespected. Credit was also given to the transparency and efciency of the legal process, which allowed rms to evaluate the legal implications of any business venture. One private respondent stated that they used the Singapore laws for all their arbitrations in their projects in the ASEAN region. The private organizations deemed the laws in Singapore to be fair and respected. However, an interesting highlight was the need for improving laws in the technology sector, and bankruptcy laws. There should be further development in the information technology laws (specically in security and access restrictions to websites), but it was also recognized that Singapore was far ahead of its immediate neighbors, and has been consciously improving this aspect to bring it to USA standards. As for bankruptcy laws, it was said that these laws do not promote an entrepreneurial environment since at present bankruptcy is viewed as a punishment rather than a business failure. Impact of regulations on international business activity Institutions formulate policies within which the market functions. Singapore is seen as a highly regulated economy, which has put it at a disadvantage to Hong Kong. Since these policies are like the rules of the game, international investors use them as guidelines for investment decisions. As a critical element of a global city, the respondents were questioned on whether the following 12 factors were a deterrent in

Public respondents Higher moderate Lowlower moderate very high security security (%) (%) 12.50 12.50 100.00 87.50 87.50 100.00 100.00

Business security level Security of investment Copyright protection Undue (political) inuence General theft and crime Organized crime

Higher moderate Lowlower moderate very high security security (%) (%) 3.30 3.30 3.30 100.00 96.70 100.00 96.60 96.60

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any way to their business activity. Private rms were very comfortable with the rules, with the majority of the policies not having any signicant impact on their business. The key problems that were cited are property ownership, business nancing and over regulation. All other factors as listed in Table 4 were in the range of lower moderate and below as a policy problem. As for the three highlighted issues, the high cost of property ownership has prevented some rms from having a stable base, but on the other hand, many MNCs did not see this as an issue since they prefer leasing the property and avoiding any exposure to the high capital outlay required for purchasing property in Singapore. Another issue brought forward was the availability of local business nancing. Even though the MNCs did not require loans locally, they perceived the local banks as risk averse. They have only recently become liberal, with the growing competition in this sector. This was further acknowledged by the public respondents. As for the third issue of over regulation, private rms perceived that the systematic and detailed procedures outline the requirements for any process, but the extent of information and paperwork required was viewed as a by the book approach rather than an open-minded approach for the evaluation of a case. According to a public respondent, the over-regulation led to a very safe environment, which covered all loopholes, thereby proving to be secure, but at the same time it limited opportunities for entrepreneurs. All other factors were seen to be favorable to business by the public bodies. They were voted within the low to lower moderate problematic range. From the above, a key issue that emerges is the trade-off between providing a safe business environment and breeding entrepreneurship. All factors that
Table 4 How problematic are the following policies for businesses Private respondents Very lowlower moderate (%) 89.70 78.60 96.40 85.80 92.80 81.50 96.40 96.50 86.70 96.60 100.00 93.40 89.60 96.50 96.60 100.00 74.00 100.00 100.00

were seen to be moderately problematic were perceived to create a safety net for the business to operate within. This may lead to losses in entrepreneurial activities. The future vision of Singapore operating as a service hub will need to strongly view this tradeoff and create an optimal balance between being safe and providing avenues for conducting business. City competitiveness For a better understanding of the potentials and the drawbacks of Singapore, seven macro factors were listed, with each of these factors looking into specic micro issues within each factor (see Table 5). Private rms viewed the overall planning, infrastructure and info-structure to be between high to very high standards. They strongly believed that the institutions give these factors great attention in order to pitch Singapore as a preferred destination for business. One of the areas where Singapore lacked competitiveness was the affordability of space. A total of 60.0% of the private rms believed that the affordability of space was from lower moderate to below and the rising cost of conducting business due to high property costs was cited as one of the key reasons for relocation of land-intensive industries. They further stated that more and more industries will choose to relocate, which could lead to the service-oriented rms moving along with their clients. Therefore, stabilization in the commercial property prices or other factors to reduce business costs was needed. There was a fair degree of approval from the public respondents also, with three of them agreeing that high business costs due to rising property prices need to be addressed to retain businesses in Singapore. As for the quality and adequacy of space, respondents viewed the present standards as high.

Public respondents Higher moderatevery Very lowlower high (%) moderate (%) 10.30 21.50 3.60 14.20 7.20 18.50 3.60 3.40 13.30 3.30 6.60 10.30 3.40 3.30 25.90 87.50 100.00 100.00 100.00 100.00 75.00 100.00 87.50 87.50 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 Higher moderatevery high (%) 12.50 25.00 12.50 12.50

Policies Starting/new operations Property ownership Lease and renting Foreign trade regulations Customs and excise Financing Foreign currency regulations Repatriation of prots Tax regulations/high taxes Infrastructure supply Policy instability Labor regulations Work safety regulations Environmental regulations Ination Costs of regulations Over regulation Crime and theft Corruption

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Table 5 City competitiveness Private Very lowlower moderate (%) Overall planning Infrastructure Coherent planning Quality of CBD Coherent marketing strategy General Infrastructure Intra-city transport Utility networks Street networks Information base Level of ITC networks Quality of space Adequacy of space Affordability of space Res. & development Education Training and employment Long term investment strategy Streamlined planning Fiscal incentives Joint venture Working environment Living environment Pollution abatement Reducing congestion Cultural activities Leisure facilities Retail facilities 3.30 10.00 13.30 6.70 6.70 7.10 7.10 10.30 10.00 3.30 6.70 60.00 44.80 13.40 26.70 3.30 3.60 10.70 37.00 10.00 7.20 10.70 43.40 43.40 7.10 Higher moderate very high (%) 96.70 90.00 86.70 93.30 93.30 92.90 92.80 89.60 90.00 96.70 93.30 40.00 55.10 86.70 73.30 96.60 96.40 89.30 62.90 90.10 100.00 92.80 89.30 56.60 56.60 92.90 Public Very lowlower moderate (%) 12.50 12.50 12.50 37.50 25.00 25.00 25.00 12.50 12.50 12.50 12.50 42.90 42.90 14.30 Higher moderate very high (%) 100.00 100.00 87.50 100.00 87.50 100.00 100.00 87.50 100.00 100.00 100.00 62.50 75.00 75.00 75.00 87.50 100.00 87.50 100.00 87.50 87.50 100.00 100.00 57.20 57.20 85.70

Info-structure Property Innovation Investment

Quality of Life

In terms of innovation, the primary area of concern that was cited by most private and public respondents was the innovational capacity of the city. Research and development was moderately rated, with concern voiced on the actual creation of innovative products as against the adaptation of resources. In training and employment and education, Singapore was ranked in the higher than moderate range. Private respondents clearly acknowledged the governments initiatives to collaborate with world class universities, such as INSEAD, MIT, Johns Hopkins and the Wharton Business School to enhance its talent pool. In terms of investment and wealth creation, the long-term strategy, streamlined planning and scal incentives offered to private rms were all rated high by both groups of respondents. However, the governments initiative to create joint ventures, especially through GLCs, was questioned by private rms. They believed that there is unfair competition for the SMEs in this regard, an issue addressed earlier in this study. As expected, public respondents did not view this as an issue since it created value for the economy and gave high to very high rating for the joint ventures undertaken by them. Finally, each of the respondents was asked to rate the quality of life under the parameters as listed in Table 5. In terms of working and living environment, pollution abatement, reducing congestion and retail facilities, both groups mostly provided higher mod124

erate and above ratings. One respondent was of the view that the retail facilities were excessive. However, in leisure and cultural activities, the score was lower moderate by the respondents. The completion of the Theater by the Bay by the end of 2002 is seen as a venue to boost this quality of life parameter and seen as recognition by the government of its strides towards improving this aspect of life. When judging the city competitiveness for Singapore, there was harmony in the public and private responses on the parameters. Each of the two groups saw potential in elevating Singapore to compete and function as a global center. The overall planning, infrastructure and info-structure, quality of developments, investment capabilities and the quality of life are highly rated. However, the arts, leisure and cultural lifestyle and city vibrancy are seen to be lacking.

Conclusion: revisiting the model framework

When the survey responses in Singapore are applied to the three-way framework for analysis, there are distinct patterns which emerge, showing the inter-linkages among the development vision, institutional setup and the business environment. The vision developed by the government is implemented by the institutions to achieve a secure business environment as shown in Figure 3. The vision is clearly dened and its contents are

Singapores competitiveness as a global city: Loo-Lee Sim et al.

Figure 3 Singapore model framework

transparent. Both the public and private sectors have high awareness of it. There is also high compliance from the public sector and this clear vision is then translated into a development strategy which takes into account Singapores competitiveness and comparative advantage as a global city. The emphasis on high value added sectors such as IT, bio-technology and business services is a clear recognition of the path that is being outlined for the country. In the process of globalization a country/city experiences increased competition. With rapid development in neighboring countries, currency devaluations, regional and global economic changes, Singapore has to balance its regionalization strategy with local development. The respondents viewed the growing importance of China as an opportunity rather than a threat. The need for China to outsource key activities and its rapid development will present multiple opportunities for Singapore to capitalize on through its established network of businesses and expertise. Respondents also viewed India as a big market. The neighboring countries and the ASEAN region as a group are still seen as a strong economic force; acting together they can prove to be a big potential for regional trade. The strong institutional framework required to meet

increased competition was seen to already exist in Singapore. The institutional thickness and the ability to co-ordinate and come together on key issues were seen as strengths. This thickness was clearly represented in the awareness levels and ability to implement the set goals. Also the active feedback with the international business in developing policies allowed businesses to realign their respective objectives and increase their adaptability. This twofold advantage of effective implementation and continuous dialogue on policies will improve with the establishment of the Singapore Business Federation. Notably, the responses from public and private organizations bore similarities that reected the transparency and openness in the business culture. This is one of the keys to a successful city, where interests and aspirations of the business community are in line with the institutions and vice versa. As a result of the strong institutional participation in business facilitation and efcient servicing, there is business security. This is further substantiated by a strong legal sector. Singapore has been commended by all respondents on its ability to maintain a just legal framework that is pragmatic and highly efcient. In addition to the sound legal environment, the regulations for conducting businesses were also seen as
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highly adequate. Except for the affordability of space, the availability of local nance and over regulation, all other issues ranging from the taxes, policy stability, corruption and business set-up, were seen to be pro-business. As for over regulation, there is an increased notion that the government is reducing its intervention, but will continue to inuence in certain aspects of the economy so as to avoid uctuation. High cost of space, however, remains a concern. As for city competitiveness, Singapore is given high points in the majority of the city attributes such as overall planning, infrastructure and info-structure, quality of developments, investment capabilities and the quality of life. It was not surprising when respondents branded Singapore as: a safe and secure city, a favorable place to do business in, and a city where things work! In its drive towards a higher level in the global circuit, Singapore has to deal with greater competition and its development strategy should encompass regional synergies with ASEAN countries, China and India, so as to expand its economic spread. Singapore could leverage on its potentials by creating a niche area to market products from these emerging regions. At a city level, a network of businesses of all sizes that reinforce each other by using knowledge-based technology, termed as an enterprise ecosystem, will have to be created in order to allow functioning of a diverse group of industries. In addition, further deregularization of the nancial markets and lesser reliance on GLCs will become essential to ensure a level playing eld for Singapore market players. Unlike other emerging global cities, Singapore is a unique city-state, both a city and a nation. Thus, for Singapore to realize its vision as a knowledge-based economy there is not only a need to transform from a capital intensive and investment driven growth model to one that entails innovation, value creation and business spread, but also the need to maintain political stability, cordial relations with neighboring countries and synergistic working agreements. For such a transition, there will be further changes in the institutions and the business environment. This transformation into a new economy in the light of greater competition will pose new challenges for Singapore in its drive to become a global city.

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