Singapore Mncs Singapore as a Destination for Essay

  • Length: 12 pages
  • Sources: 1
  • Subject: History - Asian
  • Type: Essay
  • Paper: #87835118

Excerpt from Essay :

Singapore MNCs

Singapore as a Destination for Multinational Corporations (MNCs)

Today, the Southeast Asia region have emerged as a collective of conflicting and developing states to serve as a global hub for international business operations. The continually growing emphasis on globalization and trade liberalization between the western and eastern spheres is having a determinant impact on the outlook for such nations as Vietnam, Cambodia, Thailand and Laos. And most particularly, as Southeast Asia has revealed itself as an increasingly attractive operational venue for multinational corporations (MNCs), Singapore has emerged as an extremely popular venue for profitable investment in technology and production endeavors. As a result, Singapore has emerged as a highly competitive player in the international market, drawing companies from all over the developing and industrialized world with an environment that has been praised as relatively free from corruption, unencumbered by bureaucratic red tape and highly economically dynamic. As the research presented hereafter will demonstrate, Singapore is among the world's most attractive destinations for international trade, Foreign Direct Investment (FDI) and the incorporation of MNCs. In addition to being a world leader in an array of fields and industries, Singapore remains one of the foremost world capitals for international finance. As a result, both its local population and the modern influx of foreign business persons enjoy a degree of per capita wealth that is unique in Asia and the world at large. Hereafter, the research will investigate some of the features that have helped to make Singapore such a singular force on the world market, particularly as these features concern the business environment which is made available to the inquiring Multinational Corporation.

Legal and Political Environment:

Certainly, a defining feature of Singapore's legal operating environment is the highly touted freedom associated with business enterprising. To an extent that has had a defining impact on the whole Southeast Asian marketplace, Singapore has pursued a model of late 20th century capitalism that has produced extremely favorable results for its leading industries and firms. Recognizing the close correlation between the nation's domestic growth and its continuing evolution as a global force, Singapore's government has worked hard to court MNCs by establishing an environment in which conducting business is removed of unnecessary barriers. The result is a context unique in the world economy for its ability to promote deregulation of key business functions without sacrificing stability or ethical functionality. According to the Monetary Authority of Singapore (MAS)(2011), "the Swiss-based international Institution for Management Development's 2010 Competitiveness Yearbook, Singapore has been ranked as the most competitive country in the world. This is what a World Bank report had to say about doing business in Singapore 'It takes an entrepreneur just over 6 working days to get a new business going in Singapore, with low start-up costs. Overall, taking into account other factors, including business licensing, taxes, credit legal rights and investor protection, Singapore has about the most business-friendly regulation in the world.'" (MAS, p. 1)

This is a defining feature of the legal environment into which a foreign business enters itself and suggests that there are no shortage of incentives to establish operations in Singapore. Such freedom of enterprise has been made possible by a degree of regulatory control in terms of transparency and accountability in Singapore, creating a context that is often remarked upon as being one of the most ethically sound in the larger global business community. According to the article by Yin (2003), Singapore's central government has played an important part in balancing between ethical and legal regulation and allowing businesses to move about freely in pursuit of growth. Yin remarks that "the government plays a crucial role in eliminating corruption, building the necessary infrastructure and institutions to support economic development, and taking the lead in business ventures through government-linked companies. The multinational corporations also played a significant role in Singapore's economic development process." (Yin, p. 1)

Quite to this point, Singapore's political orientation toward the courtship of foreign corporations speaks to this reciprocal relationship. The nation's leaders have continually demonstrated a willingness to push for yet more favorable operating conditions for multinational firms. As the text by Yin points out, this is directly evident in the tax policies that have been implemented and even intensified to the favor of foreign enterprises. Yin notes that beginning in 2002, the budget office "reduced the corporate and top personal income tax rates from 24.5% and 26% respectively to 22% effective from 2003. In this year's budget statement 2003, the Minister did not change the rates but reiterated the government's stance to bring down the tax rates to 20% by 2005." (Yin, p. 1) This suggests a commitment on the part of Singapore to make it easier and more profitable for firms to set up operations and continue to benefit from said operations in a unique way even as labor costs in other parts of Southeast Asia out-price the skilled Singaporean worker.

Driving Factors for MNCs:

Certainly, the features described in the section above present a very attractive opportunity to multinational firms. During the early phases of its economic development in the 1960s and 1970s, Yin reports that a swelling interest in conducting operations by MNCs was fueled by lower labor costs in Singapore. (Yin, p. 1) Today, its economic growth is such that this is no longer the major appeal for MNCs, particularly as lower-wage markets have opened up in close proximity of Singapore since the end of the Cold War. This has transformed the driving factors for MNCs to make headquarters in Singapore, with the stability of the business environment and the relative freedom of this environment from corruption creating a highly lucrative place to conduct business. As Yin reports, the stasis achieved between wage fairness and business profitability have helped to create a uniquely placid labor scenario. Yin indicates that "the PAP government is essentially pro-business. It remains in power since independence. Among other things, the enactment of the Employment Act and Industrial Relations (Amendment Act) in 1968 promoted calmness in labor relations and industrial environment. To many Singaporeans, going on strike appears alien and socially unacceptable. More importantly perhaps is that the government is clean and honest thus eradicating uncertainties in doing business in Singapore." (Yin, p. 1)

For the MNC, this is likely to mean a significantly lowered vulnerability to disruptions-based either on the discontent of laborers or the legal intervention of the state itself. The freedom associated with operations in Singapore is facilitated by a setting in which certain measures have been taken preemptively to prevent conflict. This is so between the labor force and its employment just as this is so between corporate enterprises and the government itself.

There is one area of discomfit between labor and employment that is raised in accessible research on the subject. This largely concerns the ratio of hiring in MNCs, which some report tends to favor the employment of foreign rather than domestic labor. The result is a concern for some that the continued influx of MNCs will have a deleterious effect on the employment opportunities available to Singaporean citizens. That said, the condition does promote yet another advantage for the MNC, which is imposed upon with relatively little regulatory pressure where the nationality-makeup of personnel is concerned. According to (2010), "companies can also bring in foreign professionals, managers and executives on employment passes to meet their staffing needs. There is no quota for Employment Pass holders. However the applicant must be paid a basic monthly salary of at least $2,500 and have acceptable qualifications." (, p. 1)

This means that a multinational firm with particularized personnel needs will not be restricted in this area by regulations in Singapore. This may be a driving factor for MNCs as they seek out suitable contexts for operation. Yin also helps us to identify a set of factors relating to the development of Singapore as a nation which might also drive foreign business ventures to set up shop there. Singapore is highly urbanized, highly industrialized and among the most sophisticated nations in the world from an infrastructural standpoint. According to Yin, Singapore boasts highly integrated electronic grids, fiber-optic cable systems and internal transportation services. Additionally, its airports and especially its coastal ports are among the busiest and most highly regarded in the world for their technological efficiency and soundness of design. (Yin, p. 1) All of these are features which appeal to foreign business enterprises, not only in terms of providing a suitable environment for conducting business but also in terms of suggesting a future that is poised toward continued long-term growth. In its ports, Yin notes, Singapore has created a destination for global trade that projects to flourish well into the future, girding the host of business opportunities presented to the Multinational Corporation. Coupled with its strategically ideal location between the Western ports of the U.S. And the Eastern ports of Japan, its focus on developing such infrastructural capabilities suggests that Singapore's future as a global financial giant is at least partially insured.…

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