Tuesday, 30 July 2013

Singapore: Monaco of the East!

Cities reinvent and regenerate themselves constantly. At least, cities which thrive and beat the ravages of time to stay relevant are no strangers to change.

Singapore is no exception. During the last ten years, the city explicitly decided to shirk its 'Fine City' image, moving from being a sterile, gum free environment to a hip, happening urban setting. As is often the case, Singapore's policymakers succeeded ... perhaps too well for the city's own good.

The casino, nightlife and incremental lifting of social restrictions worked its magic. From being the fortress 'Gibraltar of the East,' Singapore reinvented itself in the image of Monaco, i.e. the 'Monaco of the East.'

Monaco, of course, is a playground for the world's wealthy. Singapore too has become a playground for the worlds wealthy, particularly China's nouveau riche looking for a 'safer' place to park themselves and their cash. And, the annual haze notwithstanding, breathe fresh air.

Education is a key component of Singapore's drive to retain economic competitiveness in the coming years
To some extent, the 'New Singapore' means accepting larger income gaps between the wealthy and the not so wealthy. According to one widely accepted measure of income inequality, the Gini coefficient, Singapore's income inequality has risen during the last year – even taking into account all government subsidies and other redistribution measures.

However, all is not well in the PAP's (Singapore's ruling People's Action Party) domain.

Singaporeans are pushing back in an unprecedented manner. Locals are unhappy with Chinese immigrants driving Ferraris while subway trains get more crowded; or having to fight with foreigners for places in the local school system.

Nonetheless, there is no turning back for Singapore. The city's 5.3 million people will become 6 or even 6.9 million, maybe not at the PAP's proposed timetable but perhaps sometime within the next decade. (Seats on subway trains will remain a scarcity for commuters, forevermore!)

In the midst of all the changes in Singapore, one change becomes ever more obvious with time: Singapore's price competitiveness is eroding.

According to the latest Mercer cost of living survey, Singapore is the world's fifth most expensive city for expatriates. Hong Kong, Geneva, Zurich and Shanghai are all cheaper cities. The change may not be explicitly policy driven but it is a consequence of multiple factors, including growing Singapore's population by 66 percent in two decades.

To be sure, Singapore has moved beyond the stage of relying simply upon cost to retain economic competitiveness. Nonetheless, can Singapore afford to be the fifth most expensive city in the world and still preserve its 'regional hub' status – or will the Little Red Dot be relegated to being a hub exclusively for knowledge intensive 'Research and Development' areas such as biotechnology?'

Relying on knowledge intensive industries is no bad thing really ... if Singaporeans don't mind the income gap between rich and poor widening further in the coming years.
Imran is a business and management consultant. Through his work at Deodar Advisors and the Deodar Diagnostic, Imran improves profits of businesses operating in Singapore and the region. He can be reached at imran@deodaradvisors.com

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