Is the Singapore Economic Strategies Committee (ESC) recommendations old dressed up as just new?

February 11, 2017

Q: What is your first hand assessment of the recommendations of the ESC? Do you think the criticism of the opposition labeling it as same old, same old are valid?

A: Thus far. The strokes are very broad. Very little specifics – but that is not an indictment of the ESC recommendations per se – that’s just how it is in the first cut. On the first roll out of anything that proposed change. It’s like reviewing a painting for the very first time. One stands some distance to take a full sweep of it to get an initial feel. The theme.

After that one moves closer to examine the brush strokes – the specifics and it all combines to create a picture.

As it is I think the opposition should have held back on their assessment till further details emerge.

But then again even I am just a farmer. So farmers rarely ever get invited to such events. What do I know.

Q: Guild wants to know can we learn anything meaningful from the ESC recommendations?

A: Tell the Guilds of course. In the US. There is an agency known as the NTSB. Every time planes, trains or cars crash and burn. These guys put on white overalls and sieve thru the carnage to determine the causal factors that led to those accidents – they actually do quite a good job of piecing together the anatomy of the disaster from beginning to end. After that they make their recommendations to plane, car or tractor manufacturers and that is how things get better, safer and much more reliable.

So I think many of my regular readers will be reviewing the ESC recommendations very closely – as even if it is a lousy proposal, there are certainly valuable lessons to gleaned in respect to what not to do if your firm or country wants to succeed in the globalized age.

We don’t just learn from following the winners. We also do the same by not doing the things the losers do.

Q: I sense a very sarcastic tone in your reply….(cut off by interruption).

A: You have every right to gauge my reply based on what I said. But you don’t a right to impute bad faith on my part – as I do have a valid point. In this world it is not so simple as just learning the seven habits of highly effective people a la Stephen Covey. As much as learning for to deal with the seven highly ineffective people to succeed.

That is my point.

Q: Stick out your neck. Please. I sense you are being cautious in your critique. Could be that you didn’t sleep at all. Did you go hunting last night? Do share what are the points that concern you most about the ESC recommendations?

A: If you insist Kompf. Only these have to be lightning points to mull over. As I really need to hit the field in a while.

Firstly, many of the ESC recommendations are still predicated on the old hat idea of growing the economy thru FDI (foreign direct investments) via presumably multinationals that hire workers to make stuff that would be exported. That to me is OK. As every country. No matter how mature it is technologically or industrially conforms to that model of growth to some extent or degree. Samsung and Japan are both highly industrialized and they’re at the cutting edge of innovation – but they too are very much plugged into the FDI mode as many electronic products use their chips and contrary to even expert assessments not all of these are home grown – but since the OEM’s (original equipment manufacturers) have acquired core competencies in these areas, it makes sense for firms like Apple or even General Dynamics to outsource the production of these parts to those countries. So it’s not entirely true to say the FDI business model is passé – it is a robust business model as it makes perfect manufacturing strategy.

But even these highly developed nations that regularly leverage on innovation and creativity appreciate the limits of the FDI growth model – that’s to say they are mindful there are limits, constraints and even factors that may in the long run militate against sustainable economic growth. Even second tier tech countries such as Taiwan, China and to highly developed countries like Germany, Sweden et al have a healthy mid band of innovators that develop their own products and specialized services.

My feel is not enough attention is given to the specific area to grow such firms – where it might be just a one man show cum inventor enterprise that is able to some how find a niche alongside the juggernaut FDI type OEM based firms.

FDI is good if ONLY you can move up the value chain – but not many countries can make that sort of tech leap.

Do you want to know why Apple products are made in China? It’s an awful truth – but the real reason is because the US no longer has the core competencies necessary to manufacture such products – they can conceptualize, design etc etc. But manufacturing is a skill set in it’s own right – it is a core competence a skill of arms in it’s own right.

So let’s be clear not all FDI’s are necessarily bad. Many are good as they’re akin to universities that allow the natives to gain core competencies to build stuff in both quantities and quality and cost that can be transformed into competitive advantage to one day produce their own branding – Japan does this so did Korea. Taiwan followed suit. So did Hong Kong. But in the case of Singapore she’s a dud.

This should prompt us to ask why?

Q: Maybe that why the Singapore government wants to ramp up the population to jump start that sort to tech leap?

A: No one denies to grow an economy coherently – intellectual critical mass or fire power is a strategic precondition. But Kompf – you will NEVER ever find it spoken or written anywhere that the definition of critical mass is either 1, 2, 5, 5.5 or even 6.5 or 10 million people.

You mean to grow tech wise all you need to do is stuff as many smart people into a telephone booth or squeeze as many of them into a small island like Singapore?

Then I say – you have been seduced by the PAP propaganda machine.

As when you take the trouble to look around, the world’s most progressive societies have succeeded with much smaller populations. Stuttgart with a population of about 0.6 million is home to Mercedes – they also have the same problem of having to manage an increasingly elderly workforce. But do you see them bringing in Russians? Munich has only a population of about 1.2 million and is home to BMW – again do you see the German PM mooting the idea of bringing in workers to fill that intellectual deficit, Smaland-Sweden with a population of about 0.7 million is home to Ikea and Zurich with a population of about 0.4 million is the financial capital of Continental Europe. Ditto. And the list goes right on…..

So let us put a bullet into the myth…better still empty to whole magazine into it lah – that is so often propogated by the propagandist press and officialdom that to grow the economy one needs to ramp up the population to X, Y or Z people – as anecdotal evidence clearly proves this is not only false, but to insist time and again that is true is both dishonest and disengenous.

Now I insist Kompf. One more time please. Why hasn’t the OEM’s in Singapore being able to make that tech leap like the rest of the tiger economies?

Q: I don’t know. Besides this is supposed to be an interview where I ask questions and you provide answers.

A: Kompf tell me how good is knowledge of poetry?

Q: What has that got to do with anything that we are discussing now?

A: Everything. Tell me what happens when the falcon cannot hear the falconer?

Now I have to hit the field. Today is another working day. It will be tough as it’s hot like hell.

Q: I quote you, ‘Do you want to know why Apple products are made in China? It’s an awful truth – but the real reason is because the US no longer has the core competencies necessary to manufacture such products – they can conceptualize, design etc etc. But manufacturing is a skill set in it’s own right – it is a core competence a skill of arms in it’s own right.’

Do you see most SME’s in this same category and why are you so critical of that approach?

A: The appellation SME in the Singapore manufacturing strategy context is the highest level of misrepresentation – as firstly many of them are not small or for the matter medium sized. Some definitely are. But those who regularly supply parts and components and specialized technical services to multinationals based in Singapore are not. Instead of capital goods. I will use lay language like machinery. The inventory of their machinery are comprehensive, level of core competence in their respective field of expertise in my considered opinion is world class.

And this leads me to the supplementary question you asked – why am I so critical of this approach? Because if you think about it the business relationship between these SME and multinationals is parasitic – it’s like a tick on a dog. If that multinational is booming – the SME that supplies to that MNC will also boom. But the cost to be part of the boom for the SME will always be significantly higher than the MNC. Because they have to expand – they have to get more machines, invest in more training and start new production lines to existing ones. So what you are in fact doing is building systematic weaknesses in the manufacturing strategy.

It’s OK if that MNC that let’s manufactures vibrating operated toys to bring one thousand happiness to spinsters on lonely nights – but what if they decide to pack up one day and disappear elsewhere to cheaper cost centers such as China?

What happens to that SME then? Where do they go from there? After all the management has already invested so much in people and hardware and now the main customer has decided to jump ship, so where do they go from there?

To exacerbate matters. Low cost centers such as China. Especially in the coastal free trade regions also have SME’s who can not only perform as competently as those based in Singapore. But in many cases their SME’s can leverage on economies of scale to even migrate upwards in the value chain by branding their own range of product lines – if you look at local Chinese brands such as Li-Ning that markets sports apparels who do think manufactures their sport shoes? It’s firms like Stella. And where did firms like Stella accumulate their core competencies to manufacture world class sports shoes that even regularly features in Olympic events – they learnt it all from firms like Nike, Adidas, Puma et al.

Same thing for the locally grown Chinese automative industry – FAW Group, SAIC Motor, Chang’an (Chana), Geely, Chery, Jianghuai (JAC), Great Wall, and Guangzhou Automobile Group. Now you have never heard of these brands before – but if you go to certain parts of Africa – yon see them everywhere. Are they well made? Well it depends. But my point again is where do these firms get their die cast engines, carburetors, engine management software from – again they got it by first being just SME’s that supplied stuff to firms like Audi, Volkswagen et al who once joint ventured with them to manufacture cars for the China market.

My point is the equivalent of the Chinese EDB or Japanese MITI are staffed by very serious people who all subscribe to my adage – business is war!

They don’t build systematic weak points or fissures into their manufacturing strategy – so if Nike decides to move to Cambodia they will just quip good riddance lah – that’s to say they all without a single exception have a fall back plan. A plan B.

That is what if you must know is what is sorely missing from the ESC – a plan B where the SME’s in Singapore can con’t to not only prosper but take over their market share should these MNC’s jump the Singapore boat.

Q: A philosophical farmer. Do you know that I actually like you very much. I am especially fond of much effort you actually put in to come across as proletarian. As you’re ashamed of your own aristocracy. I do wonder sometimes why the guilds are so fascinated by you. To be honest it is quite understandable.

A: Krummes Holz gibt auch gerades Feuer…ya?

Q: I do insist the we converse in standard english?

A: Why? Is it because language gives you the permission to distanced yourself from me? Strange isn’t it that the Guilds would send a highly educated woman to these parts. A philosophical farmer? Yes. That’s certainly an embarrassment Kompf. Frankly I can’t think of anything more ridicolous – you know there is a author. His name Paul Auster. In one of his books. I think it’s entitled Brooklyn follies. There’s such a thing as a philosophical taxi driver as there might exist philosophical farmers. Would you like me to read a passage to you?

Q: If you like.

A: ‘He tended to be out and about, looking up old friends from high school and college who had landed in New York, meeting new people through the old peo­ple, spending his money in bars, dating women when the oppor­tunities arose, and generally trying to put together a life for himself—or something that resembled a life. More often than not, these attempts at sociability ended in painful silence. His old friends, who remembered him as a brilliant student and wickedly funny conversationalist, were appalled by what had happened to him. Tom had slipped from the ranks of the anointed, and his downfall seemed to shake their confidence in themselves, to open the door onto a new pessimism about their own prospects in life. It didn’t help matters that Tom had gained weight, that his former plumpness now verged on an embarrass­ing rotundity, but even more disturbing was the fact that he didn’t seem to have any plans, that he never spoke about how he was going to undo the damage he’d done to himself and get back on his feet. Whenever he mentioned his new job, he described it in odd, almost religious terms, speculating on such questions as spiritual strength and the importance of finding one’s path through patience and humility, and this confused them and made them fidget in their chairs. Tom’s intelligence had not been dulled by the job, but no one wanted to hear what he had to say anymore, least of all the women he talked to, who expected young men to be full of brave ideas and clever schemes about how they were going to conquer the world. Tom put them off with his doubts and soul-searchings, his obscure disquisitions on the nature of reality, his hesitant manner. It was bad enough that he drove a taxi for a living, but a philosophical taxi driver who dressed in army-navy clothes and carried a paunch around his middle was a bit too much to ask. He was a pleasant guy, of course, and no one actively disliked him, but he wasn’t a legiti­mate candidate—not for marriage, not even for a crazy fling.’

Q: I don’t think you’re like Tom not at all. And if you must know really know why I prefer to converse in English and not German – it’s simply because I’ve been warned how eloquent you can be. It’s not a question. Only you are not Tom. You are not my dear Darkness.

A: You know what Fraulein. I really appreciate that. But I really have to go for that mug shot in the sky right now.

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