SINGAPORE is counting on Southeast Asia's economic boom to attract investment as the island's clampdown on foreign labour raises wage costs and makes it difficult for companies to fill positions.
A plan by Southeast Asian nations for a common market through the removal of tariffs and trade barriers for goods and services by 2015 will boost the bloc's appeal as a production base, Economic Development Board chairman Leo Yip said in an interview with Bloomberg TV.
Singapore is poised to benefit as companies expanding in the region set up headquarters and research facilities here even as they build factories elsewhere, he said.
Singapore became Southeast Asia's only advanced economy by moving up the technology ladder, turning a trading port into the region's biggest banking centre and a manufacturer of electronics, petrochemicals and pharmaceuticals. As its bigger, less-developed neighbours lure companies with faster growth rates, larger populations and cheaper workers, the island is forced to find new ways to position itself to stay competitive.
"Singapore is not a low-cost location," Yip said. "Companies understand that but companies come here because they see Singapore as a place where they can harness business growth."
Most of Southeast Asia's 600 million people - about the combined population of the US, Germany and Brazil - will be middle class by 2020, and that will boost demand for goods and services, according to Bain & Co. The region, known as Asean, is forecast to grow 5.2 per cent this year and 5.6 per cent in 2014, according to Asian Development Bank.
"Indonesia has been growing nicely over the last few years, and the Philippines in the last couple of years," Yip said. After investing in China and India in recent years, some global companies "have realised that they perhaps have not paid the attention that they need to in Asean", he said.
"Singapore aims to be the New York of Asean," said Joey Chew, an economist at Barclays plc here . "If the rest of Asean does well, naturally there's a complementary effect for Singapore."
While the economy grew at the slowest pace in three years in 2012, Singapore attracted fixed-asset investments of about S$16 billion (RM41 billion) . Yip said it's on track to meet the 2013 target of S$13 billion in commitments. Bloomberg