Re-engineering economic space: the case of Singapore's transborder industrialization "gambits" in Asia.

• Author: Yeoh, Caroline

ABSTRACT

The exportability of Singapore's industrial-development model to other Asian environments has been one of the hallmarks of the city-state's regionalization program, together with the state-led, market-driven intervention that has underscored the city-state's development strategies. The paper presents an empirical analysis on the portability of this transborder industrialization strategy, and contributes new insights to the discourse on state-enterprise networks in promulgating transnational entrepreneurial ventures. Empirical evidence from on-site surveys and interviews in Indonesia, China, Vietnam and India will be presented. Our study concludes that, while the calculated, schematised efforts have been remarkable, this attempt at re-engineering economic space beyond the city-state has not fully accounted for the intricacies of either economic, or socio-political, realities in the host environments.

Key Words: Singapore, Regionalization, Transborder Industrialization, State-Enterprise Networks

INTRODUCTION

Over the last four decades, Singapore has risen to be Southeast Asia's premier world-city, as well as an important base for multinational manufacturing. Singapore's reputation for corruption-free administration and infrastructural efficiency, coupled with the overall integrity of its legal and financial systems, have played a central role in attracting foreign direct investments to fuel the city-state's economic development (Rodan 1989, Huff 1995). However, rising business costs--in the late 1970s and early 1980s--rendered it an imperative for Singapore's economic planners to expand the island's investment horizons through an overseas direct investment program (Wong and Ng 1991, Regnier 1993). The main ideas were set out in the policy paper, Gearing Up for an Enhanced Role in the Global Economy (Singapore Economic Development Board (SEDB) 1988). The 1990 Global Strategies Conference and the 1993 Regionalization Forum added new dimensions to these deliberations (SEDB 1990, 1993a), while the policy documents, Singapore Unlimited and Regionalization 2000, encapsulated the stratagem for Singapore's participation in the dynamic growth of China, India, Indonesia and Vietnam (SEDB 1995a, 1995b). Outward direct investments expanded strongly in the early 1990s (Okposin 1999); presently, about 70 percent of Singapore's outward FDI goes to Asia, but the relative share of ASEAN has declined with the increased importance of China and more recently, India. As with inward FDI, outward FDI has been influenced by government policy initiatives and incentives.

Often perceived as an archetypal interventionist state, Singapore's strategy to remain economically competitive in the global economy can be interpreted as the building of platforms for national growth through the management of strategic alliances and 'collaborations' with private or semi-private enterprises on national economic projects (Low 1998). The Singapore government's role as a facilitator and partner is evident from the creation of familiar Singapore-havens via industrial parks in neighboring countries and the restructuring of taxation policies (Singapore Ministry of Finance 1993). The state also embarked on fostering trusted regional networks identical to those within its domestic market, whereby interlocking interests and perceived commonality of values, crystallized a system of cooperative competition. Implicit in this stratagem was the government's intent to draw on its state enterprise network (or, in local parlance, Singapore Inc.), and extend this network to facilitate business ventures in the region (SEDB 1993b). Theoretically, the 'vested interests' within the interlinked collaborative system serve to expedite processes, garner exclusive incentives, and negate inept bureaucracy (Yeoh et al 2004a)

The strategy, itself, featured a plethora of state interventions. Involvement in the township development is threefold: firstly, senior politicians are enlisted to negotiate the projects' institutional framework (which typically involved garnering special investment conditions in the host locations), and to secure endorsement from host-country governments, to give the projects political patronage and protection. Secondly, 'government-selected' consortia, typically comprising Singapore government agencies and government-linked companies, take on the role of primary investors in infrastructure development. This is premised on the reluctance of private-sector firms to take on investments of such scale and long payback period. As well, the high risks involved in venturing into a relatively undeveloped and unfamiliar locale, where political, social and environmental conditions are suspect, compounded with uncertainty of investor interest, renders it inherently unattractive to private enterprises (Zutshi and Gibbons, 1998). Thirdly, the state actively markets and promotes the flagship projects to Singapore-based multinational enterprises (MNEs), on top of the internationalization of Singapore companies; as well, the presence of government agencies and government-linked companies, as 'business architect' and 'knowledge arbitrageur', adds significant weight to the promotional efforts.

In the next section, we outline a brief introduction to, and explanation of the political and historical backgrounds of, the industrial parks referred to in our study. Thereafter, we detail the methodology of our field research, following which we present our findings and the preliminary conclusions we draw from them; and then, with reference to the empirical findings, we discuss the issues and challenges the parks face, and finally conclude that, while the parks have achieved some limited success, they have been, and remain, vulnerable to the combinations of socio-political and simple economic factors that radiate from their host environments.

SINGAPORE'S OVERSEAS INDUSTRIAL PARKS

The regional industrial parks program was a critical component of Singapore's regionalization drive, premised on the combined attraction of Singapore-styled management, and location-specific advantages present in said economies; all of this while, as envisioned by transborder industrialization strategies, generating additional economic space for Singapore-based companies, both indigenous and foreign, to redistribute resource-dependent operations to lower-cost production sites, while upgrading their Singapore-operations to higher-end activities which require the city-state's unique set of competencies (Perry and Yeoh, 2000).

BATAMINDO INDUSTRIAL PARK (BIP)

The prototype for Singapore's overseas industrial-parks program, Batamindo Industrial Park (BIP) is located on the Riau island of Batam. BIP was launched in 1992. The Park started as a joint-venture between Singapore's government-linked companies (GLCs) and the Salim Group of Indonesia, with the individual partners contributing their own brand of 'capital' to the development of the estate. Singapore's main industrial infrastructure builder, Jurong Town Corporation, and Singapore Technologies Industrial Corporation (now SembCorp Industries), led the design, physical development, and management of the estate. The Salim Group, Indonesia's largest business conglomerate at that time, with its close links to senior politicians and privileged access to the major investment projects in the Riau Islands, provided a guarantee of priority with respect to regulatory controls and government permissions. This division of responsibilities assured Singapore of priority placing on regulatory issues in the host environment, while still enabling the strategist city-state to leverage on its reputation for transparency, reliability and efficiency to foreign investors (Yeoh, et al., 2004b).

Designed to be a self-sufficient, self-contained environment with communication and business linkages running through Singapore, thus bypassing Indonesia's bureaucracy, BIP's prototype structure includes internally-managed power generators, a water treatment plant and sewerage system, telecommunications facilities, and commercial centres. BIP has its own shipping and warehouse provider, offering freight transportation to and from Singapore. The strategic intent was to create a manufacturing enclave that mirrors conditions in Singapore, providing the premium 'Singapore' development standards in a low-income economy. Labor is mainly recruited from Java and Sumatra.

BIP's first tenants were mainly subsidiaries of American, European, and Japanese multinationals already operating in Singapore. Cumulative investments and export value in BIP topped US$2billion and US$2 billion in 2005 respectively, and the number of tenants increased from 17 in 1991 to 85 in 2005. Of these, 39 were Japanese companies with Singapore-owned companies the next largest concentration at 25. American and European investors accounted for less than 20 percent of the total client base. There is a concentration of electronics operations, mainly various component assembly processes, and supporting activities to the electronics sector such as plastic moulding and packaging. Out of a total employment of 65,000, over 85% are female, most aged from 18-22.

VIETNAM-SINGAPORE INDUSTRIAL PARK (VSIP)

VSIP is Singapore's flagship investment in Vietnam. The plan was first mooted in March 1994 by the then Vietnamese Prime Minister, Vo Van Kiet, and Singapore's then Prime Minister, Goh Chok Tong. Launched in 1996, the 500-hectare park is strategically located in Binh Duong Province, 17 km north of Ho Chi Minh City, and is within a 40-minute drive from the international airport and seaports. A self-contained, self-sufficient industrial park with prepared land plots and ready-built factories, bolstered by Singapore-style management expertise and infrastructure support, VSIP offers investors a 'hassle-free', one-stop service, ready-built factories and Singapore-styled management expertise and infrastructure support. A...