Editorial/Economic Daily News：Singapore’s Experience and International Competitiveness (2012.3.20)

Two recent reports are well worth reflecting on by Taiwan’s government and people. One is an interview given to a Singaporean newspaper by Grace T.H.W. Group chairman Winston Wong (son of late Formosa Plastics tycoon Wong Yung-ching), in which he reveals that his son has become a Singaporean citizen. The other is a speech delivered to the Control Yuan last week by Stanley Yen, president of the group that owns the Landis Taipei hotel. Yen warned that Taiwan was ‘eating yesterday's reserves’ of human and economic resources. These reports can’t compare with issues like U.S. beef imports or ‘lean meat powder’ for their ability to create a stir, but they certainly are food for thought for those concerned about Taiwan’s economic development and international competiveness. When the government issues its vision for a ‘golden decade,’ or drafts plans for joining the Trans-Pacific Partnership (TPP) within ten years, building international competitiveness and attracting talent must be listed among the top policy priorities.

In terms of economic competitiveness, the Economist Intelligence Unit’s 2012 ‘Hot Spots: Benchmarking Global City Competitiveness’ report ranks Singapore as Asia’s most competitive city and the third most competitive in the world, while Taiwan is fifth in Asia and 37th in the world. Singapore only broke away from Malaysia to become independent in 1965. Its area is one third that of New Taipei City, and its population of 5.2 million is not quite one fourth of Taiwan’s, giving it a population density ten times that of Taiwan with no resources to speak of. How Singapore built a strongly competitive economy in under half a century is worth exploring and understanding.

Like its namesake lion, Singapore is good at using its strengths to advantage, constantly pushing new policies and building a superior environment to attract international companies and outstanding international talent. At present, more than 7,000 international enterprises have a presence in the city-state, and 60 percent of them have established headquarters there. The international (non-resident) population has risen from 3 percent of the country's total population 40 years ago, to 10 percent 20 years ago, and 25 percent today. From this one can see the extent of Singapore’s internationalization and its outstanding success at attracting talent.

This kind of success reflects Singapore's competitive advantage, which it derives mainly from its talent, or ‘brain pool.’ Stanley Yen’s concerns about Taiwan’s future talent shortage are of a piece with the conclusions of ‘Annual Global CEO Survey 2012” report by international accounting firm PricewaterhouseCoopers (PwC). According to the report, the short supply of high-caliber talent is the main challenge facing today’s corporations, and it is already having a critical impact on how they develop. Taiwan faces continued industrial transformation and migration of production overseas, but it has overemphasized contract manufacturing and failed to create an environment for industrial upgrading, making it that much harder to cultivate talent at home. So now, while Taiwan’s government and corporations must dedicate themselves to nurturing and retaining talent, it will also be critical to recruit first-rate talent from Asia and around the world.

There are a number of policy insights we can learn from the experience of Singapore and other highly competitive countries.

One example is tax policy, which affects both economic growth and social fairness. In the past, experts have recommend that Taiwan address its fiscal imbalance by raising the sales tax, from a relatively low 5%, and at the same time consider complementary measures to soften the inflationary impact, such as exemptions or subsidies for daily necessities. Despite this, Taiwan’s lawmakers have been too timid to discuss raising the tax. Singapore, in contrast, has raised its sales tax rate three times in the past decade, from 3 percent to 7 percent. It also cut income taxes and exempted from tax certain types of income, such as overseas personal income.

Singapore’s approach, using its international advantage in taxes to attract outside foreign investment and develop its economy, may not be entirely applicable in Taiwan, but its strategy and political will are useful reference points for a discussion of how to achieve balance between social justice and national competitiveness.

In a democratic and diverse society, different voices must be heard on any government policy, as with oil and gas price adjustments, ‘actual price’ property taxes, or whether conditions warrant resuming U.S. beef imports. On the government’s part, these issues demand extensive and careful planning, efficient administration to win the public’s trust, and patient communication with legislators and the public using objective, concrete analysis. The public also needs to see things objectively, put aside short-term interests and work together to build Taiwan’s international competitiveness.