Deregulation of the Services Sector

The recent regional economic turmoil has altered the backdrop for economic growth and cost competitiveness. Singapore needs to undertake appropriate reforms and strategies to remain competitive. One area in which Singapore is still a laggard is the deregulation of services. Compared to the manufacturing sector, the services sector is still very much closed and inefficient. However, the Internet is accelerating the tradability of services, and as a result, the services sector in every country will increasingly be subject to global rather than domestic or regional competition. In addition, given the blurring boundary between goods and services, an efficient and competitive services sector will be a vital factor contributing to the vibrancy of the manufacturing sector. The government therefore stepped up the deregulation of the services sector ¨C in financial services, telecommunications, electricity and gas.

In May 1999, the MAS further unveiled its banking sector liberalization package, which included measures to allow new entrants into the banking industry, improve corporate governance, remove the foreign shareholding limit, and allow for more regulatory flexibility concerning the operations of local banks. The aim is to move towards a more open and competitive environment, so as to spur the development and upgrading of local banks, and develop a more dynamic financial sector.

In February 2000, the Info-Communications Development Authority (IDA) brought forward the introduction of full market competition in the telecommunications sector by two years, starting April 2000. Direct and indirect foreign equity limits for all public telecommunications services licences were also lifted. An earlier liberalization of the telecommunications sector would attract major players and help develop a strong and vibrant info-communications industry, which depends on globally competitive telecommunication rates and services.

As power is a key component of business costs, Singapore has to be globally competitive in this sector. Within the next two years, the contestable parts of the electricity sector will be opened up fully and competition will be introduced in the natural gas industry.

Committee on Singapore¡¯s Competitiveness

The Committee on Singapore¡¯s Competitiveness (CSC)¡¯s vision is for Singapore to become an advanced, globally competitive, knowledge economy over the next decade, with manufacturing and services as the twin engines of growth.

Manufacturing will remain an integral component in the Singapore economy, but developing capabilities in the whole manufacturing value chain beyond production, from R&D and design to marketing and sales will also be needed. At the same time, Singapore will develop into a premier services hub in Asia with a global orientation, with strong competencies in both our traditional hub services as well as new, high growth services. The domestic sector will be competitive and vibrant, capable of producing world-class companies and internationally competitive industries. The workforce will be cost-competitive with world-class capabilities in business management, technology, innovation, production and services, and international market development.

Singapore will become a knowledge-based economy where the basis for competitiveness will be the capabilities and intellectual capital to absorb process and apply knowledge and to move quickly. Singapore will be an open cosmopolitan society, attractive to global talent and connected with other global nodes. Together with the global talent, a critical mass of risk-taking entrepreneurs, innovators and arbitrageurs will move the economy ahead in the Information Age.

Eight Key Strategies Are Recommended To Support Singapore¡¯s Competitiveness Strategies

• Manufacturing and services as twin engines
  To lessen dependence on any single sector or market, thereby reducing vulnerability and providing a broader and more resilient economic base.
• Strengthening the external wing
  To add a complementary source of growth to the domestic economy to help overcome our domestic resource, market and talent constraints.
  
  
• Developing world-class companies
  To increase the depth of corporate profile and broaden the economic base for more sustained and resilient growth.
  
  
• Strengthening the base of local enterprises
  To realize their maximum potential and to entrench their relevance as important strategic partners to MNCs and GLCs in the long run.
  
  
• Human and intellectual capital as a key competitive force
  To develop a world-class workforce, comprising domestic and foreign talent, which is motivated, cost-competitive and with outstanding capabilities.
  
  
• Leveraging on science, technology and innovation as competitive tools
  To upgrade existing industry and business clusters and to build core capabilities to position Singapore as a global IT hub in the Asia Pacific.
  
  
• Optimizing resource management
  To continually optimize the allocation of scarce resources to support the needs of various industries.
  
  
• Government as business facilitator
  To play an active role to support and facilitate the private sector through provision of sound, consistent economic policies and a regulatory environment that is conducive to the conduct of business.

SINGAPORE: OVERALL ECONOMIC PERFORMANCE