How did government policies enhance Singapore’s attractiveness and competitiveness as a foreign direct investment location ?
Student Number : 0928227
With 14.7% GDP growth recorded in 2010 (BBC), Singapore is currently seen as the fastest growing economy in Asia. In the “island city”, it takes no more than 3 days to open a business compared to the 34 days world average. But the main key of Singapore’s not-so-recent success relies in its ability to welcome considerable flows of Foreign Direct Investments (FDIs). Between 2007 and 2011, it attracted 1.8% of world total FDIs (Economist Intelligence Unit), as much as Brazil for a population of 5M against 190M. Becoming one of the world’s leading investment hubs, we will investigate how Singapore’s government policies managed to ‘open’ its economy, favoring international trade and structuring its unique environment in order to make it “the easiest place on earth to do business in” (World Bank). To do this, we will first see through which processes the government lowered the barriers to entry to its market, mainly using the legal part of the PESTLE analysis. Then we will use some of Porter’s Diamond factor conditions in order to explain how it increased competitiveness, offering the perfect features for a ‘Brain Drain’. And finally we will show how it shaped its environment for it to become the most efficient for companies to work and do business in. But before we conclude, we would like to add a short critical analysis of two points that will be mentioned, emphasizing how the models used could not grasp their limitations as competitive advantages.
When it comes to creating or expanding a business to another country, one of the first problems companies often encounter concerns immigration. Since governments since Singapore’s independence in 1965 were willing to favor international trade due to a limited local market, the country has maintained an open immigration policy, enabling foreign workers to flow in and out of the country without any difficulties. The Immigration and Checkpoints Authority (ICA) has been regulating these movements since 2003 (Ministry of Home Affairs website, 2010), using an efficient system of visas, employment passes and work permits. On top of that, when creating a venture, you can simply apply for an employment pass to the government, registering your business through the ACRA’s website (Accounting and Corporate Regulatory Authority), which processes your request from demand to business creation in 3 days only (Central Intelligence Agency, 2011). Another strong political argument (PESTLE) towards easy entry in Singapore economy is its long history of Free Trade Agreements (FTAs). Throughout the years Singapore has strengthened its relationships with its neighbors and the Triad superpowers, first forming part of the ASEAN FTA in 1967. It then progressively signed agreements with the USA, EU and Japan, extending its customer/supplier network, avoiding unnecessary taxes on flows of goods and services, therefore progressively contracting with the world’s largest companies. In October 2008 and after eight rounds of negotiation, Singapore’s government signed its most recent agreement with the world’s upcoming giant that is China. By signing this so-called CSFTA, Singapore gained substantial competitive advantage, being the first Asian power to establish such an economically advantageous relationship with the world’s big...