SINGAPORE: At shopping malls, countless delivery trucks pull up every day to replenish stocks, causing minor traffic jams. But this inefficiency could be resolved – with some out-of-the-box logistical collaboration.
“Instead of 10 trucks going to the same mall to deliver 10 different products, you have one truck that takes 10 products to the mall,” said Finance Minister Heng Swee Keat.
“Then you would not only save on transport costs, you save on time that is taken and the labour that is needed,” Mr Heng said in a recent interview with current affairs programme Talking Point.
“And instead of the delivery man having to (distribute the products to) three different shops in the mall, if there is a central location in the mall to which everything can be delivered, then they will just spend five minutes instead of 30 minutes,” he added.
Mr Heng chairs the Committee on the Future Economy, and one of the key threads of its deliberations is how to encourage more collaboration among businesses here.
The idea is to not just reduce inefficiencies and boost productivity – especially with labour constraints hitting home – but also to capitalise on economies of scale as well as combine companies’ strengths so that they can take on the world market.
One example Mr Heng cited was the Singapore Furniture Industries Council. “They are coming together to develop the skills of their people, to share resources, so that each of them can enjoy a lower cost per unit of output. They are coming together to market their products together, so that the Singapore-brand can be more prominent.”
“Our food manufacturers are doing likewise,” he added.
He clarified that competition among companies was good - particularly for consumers. “I think the key question is, what is it that we should be competing on, and what is it that we should be collaborating on?”
For examples, he recalled a visit to Switzerland a few years ago when he was Minister for Education. “I visited companies who trained young workers but they don’t need all of them. They share the rest with other companies … even though they are competitors.
“And they said, well, if our industry is not competitive globally, my company cannot possibly succeed. And therefore it is in our interest to do that.”
‘EVERY FIRM FOR ITSELF’ THE ETHOS FOR 50 YEARS
But that same collaborative spirit could find it harder to take root here in Singapore.
It does not come naturally to local firms which were “built to compete” over the last half-century, said Mr Ho Meng Kit, chief executive of the Singapore Business Federation (SBF).
Said Mr Ho: “From day one of our industrialisation, we’ve opened up the Singapore economy to foreign MNCs and we never have protected our local industry ... We never said, let’s cooperate against a foreign company. So as a result of that, it is every man and every company for themselves, competing in order to have the best job.
“That was the culture and the ethos for the last 50 years.”
“I don’t think it will change overnight,” Mr Ho added. “What we hope is perhaps the Government can create greater incentives. For example, if a local company is going to partner with another local company (on research and development), perhaps you offer better tax incentive.”
But businesses should also act to work together, he said: “No one owes businesses a living, and I don’t think businesses should be dependent on Government for their livelihood.".
MORE NOW WILLING TO WORK ABROAD
Another critical move, in order for Singapore’s future economy to thrive, is to internationalise – businesses and individuals alike.
It will no longer be enough to just look at doing business or working here, commentators told Talking Point.
Mr Heng observed an encouraging trend – that more Singaporeans are now willing to venture overseas and out of their comfort zone.
“Years back, we had great difficulty getting Singaporeans to go abroad, especially to our Asian region,” he said. But that has changed. Today, there are “a large number of Singaporeans” in the region, and last year IE Singapore facilitated the internationalisation of about 28,000 companies, he noted.
The Committee on the Future Economy will look at how to better prepare companies for doing business across borders, where “it’s a different set of rules and regulations, and a different business culture”, said Mr Heng.
It will also work on identifying new markets and sectors where Singapore can have a global competitive edge.
This is vital, said SBF chief Mr Ho. “The foreign direct investment strategy has run its course of delivering significant transformation for Singapore, because we are limited in land and resources. Going forward, what we need to do is to develop an economy that overcomes these constraints, which means an economy outside of Singapore.”
JOB LOSSES, AS LOCAL FIRMS MOVE OVERSEAS?
UOB economist Francis Tan thinks that in the next five years, we could see more Singapore manufacturers moving overseas.
There has been a structural change in the nature of regional competition, said Mr Tan, with the birth of the ASEAN Economic Community on Dec 31, 2015, eliminating many trade barriers.
Singapore has the highest business costs among the 10 ASEAN countries. To compete against neighbours with lower costs and wages, companies here will need to either move up the value chain rapidly – or look hard at relocating their manufacturing base elsewhere in the region.
With this happening, “we may see middle managers in Singapore having to move overseas as well”, he said. But lower-end jobs once provided by these companies could be lost here for good.
“If you have been employing 300 people and you decide to shift to a country like Vietnam, immediately we are going to see these 300 people losing their jobs. That’s for sure,” said Mr Tan. “But it’s important to know that it’s temporary. In the longer term, I think it’s better for Singapore’s economy that a firm producing low value-added products at a very low price relocates.
“Singapore would continuously attract a much higher-skilled workforce then. That’s a lot better for the longer run,” he said.
Watch the full episode of Economy at a Turning Point here.