The Importance of Human Capital to Singapore's Enterprise Ecosystem

Vietor and Thompson pose the question of whether the country's focused microstrategy of enterprise ecosystem combined with the government's macrostrategy of tax incentives would be enough to keep Singapore afloat in the face of competition from China, a weak United States (U.S.) economy, and the country's continued shortage of natural and human capital resources (Vietor and Thompson 15). This case study reveals that Singapore's business environment is characterized by a government that caters to the needs of global capital investment over public interest, a relatively subjugated workforce, and a culture that places high value on efficiency at the cost of promoting innovation. Since Singapore's strategy to become an "enterprise ecosystem" in biomedical science does little to combat these unfavorable characteristics, particularly when it comes to recognizing the best interests of its human capital, it is likely that the answer to the authors' question is negative.

First, Singapore has always been keen to increase foreign direct investment as a means for growth (Vietor and Thompson 8). However, it seems this often comes at the cost of public interest. For example, Singapore has had very few restrictions relating to foreign investment and has charged little to no capital gains tax (Vietor and Thompson 8). In fact, Singapore has gone so far with cutting corporate and personal income taxes, the burden for these reforms has fallen squarely on the shoulders of its lower-income group (Vietor and Thompson 1), the group that is least likely to be able to carry such a burden. Furthermore, its recent push towards a scientific knowledge-based economy requires reforms in its already demanding education system, which runs the risk of leaving a large percentage of its population behind if it fails to increase the country's skill base (Vietor and Thompson 2).

Subsequently, given Singapore's lopsided favorable environment, foreign investors have set up labor-intensive projects in Singapore that failed to keep the public's best interests in mind. With these projects, foreign labor eventually supplemented both skilled and unskilled labor (Vietor and Thompson 9). A senior level civil service officer has even described business as the government's "customer" (9), not the people. Additionally, government bureaucracy has also been modernized to meet the needs of entrepreneurs (Vietor and Thompson 13) and the Technology Investment Fund was established to focus on investing directly in promising private companies (Vietor and Thompson 12). The danger with this is that while the government says it will invest in human capital (Vietor and Thompson 12), many of the policies it promotes seem to be solely focused on the best interests of mulitnational corporations (MNCs), not of its people.

Second, Singapore's reputation as a "Nanny State" (Vietor and Thompson 4) indicates that it has maintained tight control over the social and physical aspects of the island, most notably towards its workforce. Recognizing that subjugation of its workforce was key to attracting foreign investment, one of the first things Singapore's government did after its liberation from Britain was to keep unions at bay (Vietor and Thompson 4). Even the secretary of the National Trade Union Congress (NTUC) has conscripted worker's rights in the name of foreign corporate investment as evidenced by his statement: "In Singapore, having a job is the most important thing. The unions help create the necessary conditions to help encourage companies to come invest in Singapore" (Vietor and Thompson 9).

Ultimately, this strategy has served to subjugate workers to the whims of the government, which in turn means to the whims of the MNCs that the government works so hard to recruit within its borders. For example, it comes as no surprise that Singaporeans are known for their strong work ethic when they are expected to "pull their weight and make themselves relevant to their employer" (Vietor and Thompson 9), especially considering that that employer holds nearly all of the decision making power in retrenchment policies. Furthermore, it also comes as no surprise that 20% of Singaporeans have considered leaving the country, citing an "unresponsive, overbearing government," to which the government responded that they were "quitters" (Vietor and Thompson 9). Such behavior demonstrates that Singapore's workforce is at unrest and that it is advisable for the government to prioritize worker's needs, particularly if it expects those workers to contribute to the country's wanted shift to a knowledge-based economy.

Third, the Singaporean government considers itself to be in a unique partnership with business (9), and touts its efficiency and productivity as key to that partnership. The government has based many of its business policies on attracting MNCs, and as such, has modeled itself to have an efficient government, provide tax incentives, and to provide a docile labor supply (Vietor and Thompson 8) knowing those to be the best way to lure foreign businesses (and it has done this very well). In addition, perhaps most indicative of Singaporean culture towards this issue was its productivity campaign calling "Come On Singapore–Let's All Do a Little Bit More" (Vietor and Thompson 9), which might otherwise been seen as extreme in other cultures.

Consequently, Prime Minister Goh called for the development of a new macroeconomic policy to attract more foreign business, and develop the entrepreneurial, innovative, and science-focused environment necessary for a knowledge-based economy (Vietor and Thompson 14). However, calling for an "innovation mindset" is easier said than done, particularly considering Singapore's heavy emphasis on efficiency above all else. Innovation requires more time and energy than mere efficient processes. In order for Singapore to move from "being an efficiency city to being an innovation nation" (Vietor and Thompson 10), a massive cultural shift is necessary, and this will certainly not happen quickly. Fortunately, some high-ranking Singaporean officials have recognized this. Take for example Lee's comment: "[Y]ou can change policies quickly, but if you want to change mind-sets, promote entrepreneurship or innovation [...] those are not changes you can cause overnight" (Vietor and Thompson 15).

In conclusion, Singapore has maintained tight control of its economy by historically focusing on six policies: investment in the state, active encouragement of foreign investment, a pro-business environment, free trade, a tight monetary policy, and high savings (Vietor and Thompson 7). Recently, upon recognizing that it could not compete in the global economy based solely on cost alone, Singapore did two things: (1) it joined Malaysia and Indonesia to create a "growth triangle" of manufacturing sites and (2) its Economic Development Board (EDB) focused on further diversifying the economy through a two-prong approach (Vietor and Thompson 12). The first prong pushes for a continued focus on the already strong "clusters" of its economy that include chemicals, electronics and precision engineering, logistics and support services, and infocomms and media (Vietor and Thompson 12). The second prong encourages innovation and entrepreneurship in all existing and new sectors of growth (Vietor and Thompson 12). However, the protection of human capital is missing from these policies. Without focusing on the needs of human capital and instead placing MNC's needs over those of its people, it does not appear that Singapore's new enterprise ecosystem will be the panacea Prime Minister Goh believes it to be.

Works Cited

Vietor, R. H. K and Thompson, E. J. "Singapore Inc." Harvard Business School 9.703.040 Rev. Feb. 28, 2008: 1–27. Print.