Thursday, January 17, 2013

Two sides of the same street: Singapore's neighbours determined to close development gap

As neighbours on two sides of the same street strait, Singapore island and Indonesia's Riau islands could not be more different.

Looking at Singapore, one sees a prosperous city-state. A modern metropolis with a postcard pretty Central Business District, coastline fringed with high-rise apartments with (literally) million-dollar views, a harbour which sees one ship arrive/depart every seven minutes or so and an international airport at Changi which is world-renowned.

Look south to the Riau islands and one sees a strikingly different scale of urban development, even with these islands sitting astride the same sea lanes and air routes that helped Singapore prosper.

The situation will change within a decade or so as Indonesia kick starts growth in the Riau islands and Malaysia mimicks Singapore's growth story.

With a somewhat belated realisation that natural harbours are also found in Riau, Indonesia has voiced ambitions to create a deep water port to rival that of its northern neighbour. 

Work starts this year to build wharf space some two kilometres long with the intention of raising Riau's status as a transhipment destination. When the port is ready around 2015, Singapore can expect to feel the heat as shipping lines which call on Singapore no longer have to anchor their operations in the Lion City.

New competition
In and around Singapore, the city-state's neighbours are determined to trace Singapore's growth trajectory and bring greater prosperity to their citizens.

Eastward from Singapore will rise Malaysia's oil storage hub at Tanjung Bin and Tanjung Langsat, on the eastern tip of the Malay peninsula. Its developer, the Johor Petroleum Development Corporation Berhad, has designed fuel farms capable of holding some 10 million cubic metres of POL when the massive complex is ready around 2025.

Off the western end of Singapore stands the Port of Tanjung Pelepas, which in 2000 scored a coup after container ships from Danish shipping giant, Maersk, set course for Pelepas instead of Singapore. The departure of Maersk is said to have accounted for some 10 per cent loss of business for Singapore's port sector. As Johore strengthens its economic clout, so will PTP's status as a regional port.

In Malaysia's capital city, Kuala Lumpur, will rise an international financial district spanning some 70 acres. Malaysian ambitions to establish KL as a global financial centre were made abundantly clear last July when Malaysian Prime Minister Najib Tun Razak unveiled plans to build the Tun Razak Exchange (TRX) in the heart of the city. 

The project has more than symbolic value to the PM: TRX is named after the premier's father. Construction of TRX starts from the middle of 2013.When it is ready around the end of this decade, some 100 of the world's top companies from the banking and finance industry will have an address in TRX. 

Window of opportunity
Singapore needs to make the most of the meagre window of opportunity between groundbreaking and project completion to up its game. It could indeed stand idle and not do anything. However, to maintain status quo while business rivals forge ahead means one is regressing.

It will be clear to Singapore watchers that the common denominator between Indonesia's deep water port project, Malaysia's petrochem hub, Johor's Pelepas container port and KL's upcoming international financial district is the fact that these industry sectors are the same ones that power Singapore's economic engine.

In coming years, Singapore will need to redouble efforts to strengthen strategic relations with longstanding customers in its core economic sectors. The charm offensive needs to get underway before the city-state's neighbours roll-out  incentives to woo the same clients to their spanking new premises with tax breaks, pioneer status and other hard-to-resist goodies. 

Indonesia and Malaysia cannot be expected to throw trillions in Rupiah and billions in Ringgit at these projects only to watch them stand idle. Having had the firsthand privilege of seeing Malaysian business minds at work, Singapore better be in good shape once its regional business rivals are ready to challenge it to a race.

One should remember that business siphoned out of Singapore is unlikely to return. 

Incremental losses from each industry sector could balloon to a sizeable amount, especially for high value industry sectors that our neighbours have set their sights on. 

As container ships get ever larger, the loss suffered by Singapore for every mega container ship that calls elsewhere will be disproportionate to that of yesteryear when ships were designed with more modest payloads.

Looking farther afield, strategic planners in Dubai are also hungry for a bigger slice of the pie. This April, Australian airline Qantas will reroute flights from Australia to London and Frankfurt out of Singapore to Dubai under an alliance with UAE-based carrier, Emirates.

Not so long ago, Singapore's status as a stopover for thirsty airliners on the Kangeroo route from England to Australia looked assured. The critical mass built up from the number of airlines that used Singapore as a refuelling stop saw Changi Airport evolve as a hub for transit travelers.

Alas, technology which has given airliners longer legs has given airline planners options to fly longer routes with fewer stopovers. Indeed, there may well come a day when airlines plying destinations in Europe and the Middle East to Australia could bypass Singapore altogether as a refueling stop.

To avert that situation means pulling out all the stops to ensure this island nation continues to remain business relevant amid change.

Our collective failure will not mean the end of Singapore. As a geographical entity, the city-state will not disappear but will probably putter along on a slow, prolonged death as its economic life slowly ebbs away over decades.

Airlines and shipping lines will still ply air and sea routes around Singapore - the big difference being that the airplanes and ships will stop elsewhere. No stopover means no business, no business means fewer jobs. Shrinking employment spells trouble for the Lion City.

Unless we find new ways to identify and catch the next economic wave, Singaporeans may have to contend with seeing their modern metropolis slump to the status of a has-been, irrelevant to the world economy, outpaced and outfoxed by savvy business minds, a modern age Malacca whose golden era came and went for good, a regional backwater whose best days are but a footnote in Southeast Asian history.


Anonymous said...

Singapore rocks!!!

Anonymous said...

Hmmm, sounds like we should be building sprawling retirement villages and health facilities, rather than finance centres, industrial estates and towering blocks of homes. Basically, an oasis for this ageing society and the neighbours in the madness of the economic development in the region.

Oh well, won't be the first time we're caught flat-footed without the necessary infrastructure in place.

Anonymous said...

you think the opposition parties in S'pore have read this post and understand the kind of competition S'pore is facing ?

Anonymous said...

Only the paranoids will survive.

Anonymous said...

It is bogeyman politinomics. Looks like threats but in the context of the myriads of challenges that this red rock faces, don't think that will rank high. Many such news grabbing attempts have been made in the past and so far most have failed when their political potency failed, political interest change, vested interest disunity surface and economic reality hits home. The reasons for SIngapore survivability is complex and likewise the probability of them succeeding. If China long and tortuous history is a good guide, our demise will be internally germinated and externally supportive. Can we survive another one or two generational change? We seems to bask in our deserved 'golden age' and forget that when you hit the peak, there is only one way next and history is full of such footnotes.