Opinion: From Additive to Multiplicative Growth – Sparking Value at New Intersections of People, Places and Production

A competitive city attracts workers, entrepreneurs and companies with the opportunity to create more income with less effort than an alternative location would.

For the first 50 years of Singapore’s history, this was about leap-frogging other countries in the region by providing first world quality at third world cost to attract multinational investments. This meant providing affordable housing and education for the workforce, the allocation of land and facilities for industrial use, and transport networks to enable the easy flow of people and goods internationally. Today, multinationals in Singapore make high value products that are shipped across the world—pharmaceuticals, specialty chemicals, semiconductors, laboratory equipment and industrial machines.

Looking ahead, the basis for competitiveness is changing. First, the open multilateral trading environment that enabled Singapore’s growth through most of our history has changed. The global economy is now much more complex with the resurgence of national strategic competition and industrial policy.

Singapore cannot compete with larger countries on cost and industrial subsidies. Instead, we need to double down on providing speed and efficiency, and the quality of our ecosystem both locally and regionally. Second, Singapore is already a mature economy and cannot be sustained by catch-up growth alone. We need to innovate our way forward, and combine the building blocks of our economy in new ways to deliver value for our region and the world. The way we do so must facilitate emergence—the ability of the economy to reinvent itself in keeping with the times. Third, the aspirations of our people are shifting. More are looking for opportunities with outsized impact and purpose, whether in leadership positions, or creative roles with scope for greater agency and autonomy such as new venture creation, product development and the like.

What does this mean for how we redefine the basis of competitiveness in the next lap, and how will our conception of a liveable city change alongside it?

Regionalising Our Economy

The fragmentation of the global economy means that our immediate region is an important ballast for growth, as is Singapore’s role connecting our region to the world.

The region’s relevance is growing as a production base as multinationals seek to diversify their supply chains from China, and as an attractive and relatively open market in its own right. Southeast Asia is already the world’s 5th largest economy, and has a rapidly growing middle class that is expected to double from a quarter of the population today to more than half in 2030. The size of the middle class will reach 300 million, exceeding that of the United States’ 200 million, and be disproportionately young, urban and digital.

What remains unchanged is Singapore’s role in the region—with manufacturing and services as twin engines of growth and development. Our manufacturing sectors enable us to sell to markets far away and give our people and the region’s companies the chance to work with globally leading businesses, best-in-class management practices and cutting-edge technology. Our services sectors largely serve the region and give us the potential to play the role of innovator to bring our global know-how to address the unique needs of our region. Up until now, the twin engines have run independently by and large, enabling Singapore to diversify our economy, but the increasing development and sophistication in our region also means that they can now come together in synergistic ways—for example, by harnessing family wealth in the region to invest in digital and sustainable product development in Singapore which will in turn catalyse the region’s growth trajectory; by tapping on the know-how of our factories and supply chain teams to help multinationals orchestrate local supplier development and technology transfer in the region; and by repurposing our research and development capabilities to serve the region’s needs, such as the application of our bio-manufacturing capabilities to green a variety of industries in the region, from textile dyeing to biofuels.

As our role in global manufacturing value chains and regional innovation grows, we will come up against resource constraints—for example, land for new manufacturing investments. We will need to re-imagine Singapore as a liveable city not just of 600 km², but connected and integrated with our region of 4.5 million km² and its rich, diverse and complementary ecosystem.

Collectively as a system, Singapore’s air, land and sea transport serve as critical hub infrastructure to enhance its connectivity to the rest of the world (Unsplash, Land Transport Authority, Teo ZhiYi)

Creating Value at the Intersections of Industries

Singapore is a mature economy. Over time, our growth has been powered by the addition of new pillars of strength—in electronics, chemicals, biomedical sciences, and information and communication technologies. Much of this growth has been capital-intensive, requiring significant amounts of land and electricity, and in return generating outsized GDP and productivity growth for Singapore and a world-class reputation for quality. There are natural limits to this type of additive growth, and Singapore must move past this focus.

To be vibrant and innovative, we need to think in terms of multiplicative growth. This means earning supernormal profits not just from dominating a single industry or value chain, but seeing the opportunity to create new value from the intersections of existing industries, networks and flows. This represents a shift from industrial policy paradigms of picking preferred sectors to grow, to thinking much more in terms of network economics—in LinkedIn for example, the most valuable person is not necessarily the one with the largest physical network, but the one that has the highest chance of making unique and value-adding connections for others in the network—by virtue of having the most connections, being connected to the most influential individuals in the network, or serving as a bridge between communities which otherwise would not have been connected. The ability to combine elements in a unique way is how a company like Finnish energy giant Neste established the world’s largest production facility for sustainable aviation fuel in Singapore by tapping on processing capabilities in Tuas South, and Changi Airport as an aviation hub. This example illustrates that we are able to understand the needs of customers beyond our shores, and apply the world’s best technologies to design and make physical products that serve real-world needs.

One-north is a mixed-development project designed to support innovation and growth around research, science and infocomm technology (JTC)

Singapore is unique in being a densely built-up city-state, with an outsized concentration of sophisticated decision-makers and a great diversity of industries. If urban design can re-imagine how different parts of our economy come together physically to foster a density and quality of business interactions between makers, innovators and financiers across a variety of industries, we can make Singapore the best place to “make the impossible, possible”, and create the future rather than being disrupted by it.

Building Inclusive Growth

A successful city must serve the needs of multiple constituents within its resident population, while also catering to visitors who bring economic benefits and additional diversity. Together, these people power the vibrancy of the city, and the way that they interact with one another impacts its liveability.

This in turn is influenced by the job structure of the economy and its impact on social equality, mobility and how we treat people in different occupations. Throughout Singapore’s history, we have relied on foreign labour to keep costs low, as we competed internationally to catch up on growth. This has led to disparities in our economy and a widening wage gap across different occupations, from nursing to plumbing.

For us to move past our history of catch-up growth, we will need to compete not on costs, but on skills, technology, service and innovation. This means making innovation pervasive, and not just the preserve of certain sectors, firms or entrepreneurs. It means making it worthwhile for individuals to upgrade and professionalise their skillsets in every occupation, especially in technical, service and community care roles. The implication would be consumers having to pay more for certain goods and services in order to raise the wages of those providing them, but at the same time, embracing innovation and higher productivity would lead to increased wages for consumers, allowing these higher costs to be bearable. This paradigm shift, as Mr Ravi Menon lays out in his IPS (Institute for Policy Studies)-Nathan lecture series, is a necessary move towards a new Singapore synthesis—an Innovative Economy, an Inclusive Society and an Inspiring Nation.

Over the long term, the foundation of a competitive economy for Singapore will rest not on dollars and cents, but the ability of our city to bring together people who believe they have broadly equal opportunity to move up in life, and are inspired by purpose and to keep innovating to be relevant in the world.

Note: The views and opinions expressed in the above article are solely those of the author’s and do not necessarily reflect the official policy or position of the EDB.