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News : Innovation Last Updated: Nov 13, 2010 - 6:53:06 AM

Singapore seeks to attract global mid-sized companies and Asian enterprises with the help of 'multipliers'
By Michael Hennigan, Founder and Editor of Finfacts
Oct 26, 2010 - 5:31:33 AM

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Stamford Raffles of the East India Company, selected the island of Temasek (the Malay for 'sea town'; 'Singapura' is a Malay word for 'lion city') as a better location for a trading post than the island of Penang, which is located at the northern entrance of the Straits of Malacca and Raffles used a succession dispute embroiling the Sultanate of Johor to get the necessary local agreement. The birth of colonial Singapore was in 1819 and the port came into prominence with the advent of the steamship and the opening of the Suez Canal in 1869.

The Singapore Economic Development Board (EDB) announced this month that it is stepping up its collaboration with what it terms 'multipliers' to attract global mid-sized companies and Asian enterprises to Singapore.

The city state of 4.8m people, has for long been a magnet for large multinationals and the EDB says that with the growing economic importance of Asia, the agency is seeing more global mid-sized companies interested to use Singapore as their base to foray into Asia, and also Asian enterprises keen to leverage Singapore as a launch-point to regionalise and internationalise.

The global mid-sized companies and Asian enterprises have less in-house resources to drive their expansion strategies and may require facilitation when venturing into new and unfamiliar markets. This initiative therefore aims to ease the initial set-up of smaller companies from US, Europe and other non-Asian countries, as well as Asian enterprises in Singapore. These companies would be able to tap on the resources of multipliers that offer extensive global networks and strong business support services. It is in line with a key recommendation from the Economics Strategies Committee earlier this year to help anchor Singapore’s position as a key Global-Asia Hub.

"Singapore offers a unique vantage point for global mid-sized companies to orchestrate their activities across Asia; and for Asian enterprises to grow in South East Asia and beyond. By partnering with multipliers, EDB hopes to further strengthen our engagement with these companies and build on our long-standing partnerships with MNCs,” said Dr Beh Swan Gin, managing director of EDB.

One of Singapore's key public-private sector partnership initiatives has been the LEAP program, which stands for the Locally-based Enterprise Advancement Program, geared to co-fund the operations of private sector organizations that play the roles of multipliers. These multipliers help nurture Singapore-based enterprises, by attracting foreign enterprises from abroad, and by developing new and existing industries. LEAP also encourages and supports these multipliers in developing their capabilities and to carry out new activities that can generate substantial economic spin-offs for Singapore.

Up to 50 multipliers come from a wide-range of industries, including multimedia, assistive technology and disruptive technologies.  In addition, there are also multipliers from Korea and Europe. Collectively, the LEAP multipliers support more than 700 enterprises in Singapore.

ODM Innovations Pte Ltd for example, was founded in April 2006 as a LEAP Partner with EDB. Its vision is to provide a platform for Singaporean innovators, designers and companies with new and innovative concepts to develop into a commercial product. It aims to drastically reduce the cost in product development for innovators, designers and startups in the form of product design, prototyping, mass production as well as marketing.

American Scott Anthony who is managing director of another multiplier, Innosight Ventures,  recently wrote on the Harvard Business Review blog that, "Governments often feel that their role is to invest in cutting-edge technology. However, new-to-the-world technologies that promise never-seen-before performance won't have much impact in emerging markets. Instead, these markets need 'great leaps downward' - - simplifying and cost-reducing technologies that promise to open up historically locked markets."

The Singapore Business Federation (SBF) has become the first multiplier of the Global-Asia Hub program and it can provide ready turnkey services for new foreign companies through business partners across venture capitalists, financiers, consultants and research institutions. "SBF will seek out companies with innovation and knowledge-intensive activities, especially those with strong intellectual properties,” according to its Tony Chew, chairman of SBF.

The nine other 'multipliers' - - set-ups with strong business support services or global networks - - will likely be country chambers such as the Singapore-German Chamber of Industry and Commerce, EDB said. 

A particular attraction of Singapore, apart from its famed efficiency and its intolerance for corruption, is its protection of intellectual capital.

EDB partners SBF to attract global mid-sized companies and Asian enterprises to Singapore. A Memorandum of Understanding (MOU) was signed between Dr Beh Swan Gin, MD of EDB (l) and Tony Chew, chairman of SBF, on Oct 06, 2010.

Last month, Singapore’s deputy prime minister and minister for defence, Teo Chee Hean, said the Lion City has attracted about 26 innovative foreign infocomm start up enterprises, bringing in more than SG$50 million (US$37.5 million) of investment and creating 260 high-level jobs in the past year.

The start-ups, from the US, Israel, Sweden and China, have established engineering centres on the island.

EDB's Dr. Beh said on the strategy of attracting smaller enterprises: "We want them to know that Singapore welcomes them even if their initial presence may be small, such as a small sales or representative office."

Also this month, Singapore announced that it would invest S$3.7bn (US$2.86bn) in biomedical sciences research for the period 2011 – 2015.

Today, over 100 global biomedical sciences companies are based on the island and BMS manufacturing output for 2009 was S$21bn, up by more than three times from S$6.3bn in 2000. In terms of BMS’s share of Singapore’s total manufacturing output, it was 10% in 2009.

Irishman Declan J. Mansfield, who is based in South-East Asia and Australia, has been in Singapore in recent days discussing funding for biomedical products and he says in relation to the comparison of Singapore and Ireland: "The difference between the 2 governments leads me to believe Ireland is in denial about its loss of capacity, will, and financial ability to create a new Innovation Center for Pharma other than as - - -a pass-through economy -- for Big Business profits and taxes."

Exports from Big Pharma and medical device firms in Ireland account for more than 50% of merchandise exports and in the period 2004/2009, exports from the sector increased by 25% but there were few jobs added.

The Big Pharma firms face losses of revenue of $100bn in the next 5 years from patent expirations.

Pharmaceutical Industry: Proportion of sales from newer drugs drops; $65bn spent in US on R&D in 2009; 200,000 jobs to go in 2009-2015

Expect a slowdown in Singapore's economic activity going forward, notes Selena Ling, head of treasury research & strategy from OCBC Bank. She tells CNBC's Lisa Oake and Bernard Lo that 2011 will bring about a return to more normalized growth levels.

Economy and Change

Singapore's economy plunged 9.5% from peak to trough during the global recession and following growth of 18% in the first half of 2010, there may be a technical recession in H2 but for the year, the growth is expected to be about 15%.

Singapore’s trade to GDP ratio is the highest in the world at more than 450%.

Morgan Stanley economists say policymakers intend to capitalise on the three secular trends of urbanization, ageing and growing affluence, which would be manifesting most prominently in Asia.

While Singapore may not yet have the solutions or products catering to such emerging trends in the region, the idea is to provide a platform in Singapore to bring together the public, quasi-public and private sectors to test-bed and co-develop relevant products, which is hopefully then scalable and exportable to global markets.

While the strategy is laid out, issues still remain - - policymakers need to develop the unique selling-point which would entice corporates to come to Singapore rather than to test-bed ideas elsewhere in Asia. Moreover, after the test-bedding phase, the difficulty also lies in identifying the part of the production value-chain which Singapore can fit in and profit from. Just as some of these mega trends are emerging, relevant industries in Singapore are also in the infant stages and where expertise is absent; it would have to be developed for the value to be milked.

The Infocomm Development Authority of Singapore (IDA) estimates that Singapore needs 10,000 more tech workers each year, of which half will have to be met by importing foreign workers.

A new book by Dan Senor and Saul Singer, Start-Up Nation: The Story of Israel’s Economic Miracle, explores the culture behind Israel’s economic success.

The authors say that a key lesson from Israel is that innovation is not just something that goes on inside companies; it comes from a wider culture that fosters both innovation and entrepreneurship. Israel is a country of immigrants — there are over 70 nationalities represented in this tiny country. Two out of every three Israelis are newcomers, or the children or grandchildren of newcomers. The Israeli battery-operated car grid company Better Place was founded by the son of an Iraqi immigrant. The Israeli company Koolanoo - - the third-largest social networking site in China — was founded by the child of an Iranian immigrant. The Internet music start-up FoxyTunes — which was recently sold to Yahoo for tens of millions of dollars — was founded by a young Ukrainian immigrant. Walk around Israeli neighborhoods, and you’ll find yourself dealing with Israelis from Ethiopia, Poland, Yemen, Russia, and Australia, to name a few.

Immigrants are natural risk takers since they were willing to uproot themselves and start over. In particular, the great wave of immigrants from the former Soviet Union in 1990 to 2000 brought to Israel a tremendous boost in engineering talent just as the tech sector began to take off. Israel is also the most pro-immigration country; politicians there actually compete with each other with campaign promises to bring in more immigrants, not fewer.

Singapore, which seceded from the Federation of Malaysia in 1965, has had a record of success and there is a little doubt that  it will continue to be among the winners.

“Many Russian companies look at Singapore as a gate to the Asian money,” Andrei Sharonov, managing director of Toika Dialog, told CNBC:

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