Peter Drucker is really an amazing man. I learn new things from his book everytime I read them. Last night, I read this book (for the 5th time), this paragraph got me thinking:
The decline of manufacturing as a producer of wealth and jobs changes the world’s economic, social, and political landscape. The economic miracles – Japan, South Korea, Taiwan, Hong Kong, Singapore – were based on exports to the world’s rich countries of manufacturered goods that were produced by developed-country technology and productivity but with emerging-country labour costs. This will no longer work.
Of course, this shouldn’t be a surprise to the leaders of Singapore. Many already know hi-tech manufacturing jobs lost in the last two years are not going to come back. The big question is “What’s next?”.
The big thing which we have right now is Free-Trade-Agreement (FTA). Singapore has inked FTA with numerous countries, such as United State and Japan. Particularly, the FTA with US is will (supposingly) save 200-300M in tariff. While we going to see lots of benefits from the savings in the short term, IMHO, the long term effect is doubtful for two reasons: (1) This (manufacturing as engine of growth) will no longer work and (2) even with the breakdown of WTO talks, countries are aggressively establishing biliteral FTAs.
The long term benefits of FTAs should therefore be focus on the other implications. First, a global economy is emerging with (limited) free-trades among various countries, which ironically will exclude the rest. But this will take many years and hence present a window of opportunity. With FTA with three major “buying” economy (US, Japan and EU), Singapore should focus on FTAs with “selling” economy such as China, India, Indonesia, Thailand, Vietnam etc. The latter is important in order to leverage on their labour cost which Singapore cannot match. We should focus on our core strength in logistics and expand it for both physical and virtual goods.
Second, attract more investments in Singapore with the free-flow of capital. Despite common perspection, economy growth always follow investments, not the other way round. But what industry, particularly the ones which will generate jobs, should we develop? (The same thing is unlikely to work anymore)
I asked the same question at the recent Prof Kim Chan’s seminar on Value Innovation. The answer I got back is to develop entreprenaurs.
The entreprenaur path are unlikely to generate sufficient jobs. But the focus on jobs creation is red-herring. Singapore logistic industry and ICT industry did not started out creating a lot of jobs. It take times to reach today level and hence any new thing we try should not be burden with the task of job creation.
The focus should be on “value”. If there is value, there will be investment and jobs will follow thereafter. What kind of jobs, would depend what kind of industries entreprenaurs will create. But at least, the creation of new industry for Singapore is spread across risk-taking individuals and not just on the shoulder of the government.
But embracing entreprenaur requires a mental switch from the traditional “study hard, get a good degree, work for a big company for huge salary” to “acquire knowledge, find niche, start company”. The good news is the later is already quite common in affluent chinese families. The bad news not many Singaporean is risk-taking after decades of job stability. The fact that job stability is fast disappearing in a global economy has not sunk into many people yet.
Nevertheless, with the FTA and encouraging entreprenaurs, I still feel something is missing from the picture., I don’t have the answer yet but it is something to think about. Hopefully I will have the answer in 2004.
Happy New Year everyone! :-)
