Practically Perfect

Why is Singapore held as the benchmark for the logistics industry?

Walking around Singapore, one is unable to escape the observations
most visitors and investors have of the island nation. Singapore is clean. Orderly. Diverse. Startlingly efficient. Modern and highly organised. In the early days of this Asian metropolis, its leaders sought to model the country into the “Switzerland of the East”. Most things, including the governance of the country, run like clockwork. Vehicles that enter city limits at specific times automatically pay for road tolls through a small wireless unit onboard. Singapore’s air-conditioned, clinically clean food courts offer regional and inter- Practically national cuisine in gleaming malls. The population of 4.5 million people never demonstrates. When things are said to happen — they do. ‘Almost perfect’ for business at least.

In too many ways the ambitious young nation resembles the overachieving students its young aspire to be, chasing perfection, top grades and international accolades relentlessly. To be the best. To be recognised. Recognised, they are – Singapore has an enviable business report card that tells the story of how in just 43 short years of nationhood the country has become the gold standard for logistics and business, not only in Asia, but in the world. It’s been touted as the ‘Second most competitive economy in the world’, after the United States, ‘Most Cost-Competitive Place for Business’, trouncing developed western countries and Japan by a long shot. It’s also been proclaimed to be the ‘World’s easiest place to do business’ and have the ‘Best quality for port infrastructure’ not to mention the ‘Best seaport in Asia’ and many more.

The Gold Standard DHL’s John Allan, Global CEO, attributes Singapore’s winning formula to “worldrenowned efficiency, extensive connectivity, excellent infrastructure and great human capital.”

The cluster of air cargo facilities in the country’s eastern end, in and around the world-famous Changi Airport, is home to an integrated cargo village comprising nine airfreight terminals, two dedicated express and courier centres including DHL’s hub, and a cargo megaplex. The area within the cargo village is a free trade zone so all transshipment can be broken down and reconsolidated without needing to clear customs formalities.

As an example of how Singapore is dedicated to continue producing the conducive business environment and infrastructure, the cargo megaplex was built with the aim of easing cargo flow and optimising efficiency — the facility’s components were specially designed with the aim of reducing waiting time and preventing traffic congestion.

Senior Minister for Trade and Industry, S. Iswaran, confirms this dedication, pointing to Singapore being “home to over 7,000 MNCs due to its strategic position within the
Asia-Pacific and our conducive business environment”.

Yet a conducive environment is only half the story. Highly developed, the tiny republic is among the world’s most affluent with a per capita GDP of US$35,163. Its literate, educated and skilled workforce uses English as the language of business, in spite of three other ethnic tongues being official languages. In a region known for corrupt politicians and unstable governments, Singapore’s leaders are said to possess longevity and long term vision. That many of its leaders have experience in the private sector and other corporations explains the pro-business approach in all industry. Free trade agreements help too, with a large number of countries including Australia, the United States, Switzerland, Norway, Iceland, Japan, Korea, India, Jordan, Peru, Panama, New Zealand, Brunei, Chile and more on the way.

Singapore’s skyline at night

Logistics plays a special role in the country. Strategically situated, it is well placed for regional and international business with China, Japan and Korea to the east, India and the Middle East to the west, connected to the Southeast Asian peninsula and Indonesia and Australia to the south. Its East-West location accounts for why it has been a flourishing entrepôt centre and port for most of its known history, when ships coming from the West towards China and India would call at the port of Singapore for supplies. Today, Singapore is the world’s busiest port and a major aviation hub with thousands of links to every part of the world. With robust infrastructure, comprehensive facilities and services supporting its ports and airports, and a good road system, logistics is a key component of the economy.

Singapore Merlion

Best in the class and relentless Despite dominance in several logistical areas, Singapore is not taking anything for granted. Already the world’s busiest transshipment hub, largest refrigerated reefer port and the leading bunkering port, port authorities acknowledge the need to stay competitive, especially since higher volumes are expected. The port, which occupies a large part of the southern and western coast, is investing heavily in expanding its comprehensive range of facilities and services. Port operator PSA Singapore spent S$5 billion (US$3.48 billion) over the last 10 years developing facilities across two key phases. When completed in 2009, annual container capacity across four terminals
is expected to reach 35 million boxes. Phase Three and Four, to be carried out to the tune of S$2 billion (US$1.39 billion), are already underway to expand annual capacity up by 40 per cent by 2013. Though the newest terminal of Changi Airport, Terminal Three, recently opened in January 2008 plans are already underway to build Terminal Four, and give the multi-million dollar upgrades and facelifts to terminals two and three.

Singapore was an early adopter of information communication technology (ICT) for business, and has not hesitated to invest in ICT for the logistics industry. As it stands, the Infocomm Development Authority of Singapore (IDA) and the Maritime and Port Authority of Singapore jointly launched an ambitious S$12 million (US$8.36 million). “Infocomm@ SeaPort” programme aimed at enhancing connectivity and communications for the seaport community, promoting operational and service excellence and increasing opportunities to attract new business. Wireless broadband is now available to ships within 15 kilometres of Singapore’s southern coastline to allow real time communication with customers and business partners. Earlier initiatives implemented, such as the Radio Frequency Identification (RFID), have also borne fruit for its partners. A nation-wide platform, TradeNet, provides an electronic data interchange system for the public and private sectors to exchange trade messages and other information, in addition to a suite of e-Services for the logistics community such as import, export and transshipment documentation procedures.

Things happen quickly in Singapore. Companies can be set up in a matter of days. All kinds of applications and permits, even police reports, can be filed and paid for online. These facilities allow businessmen to apply for employment passes, double tax deductions and even register companies and factories. There is even an online system in place to allow port customers to place pilot orders, tug orders and orders for waterboats.

Challenges to the throne Neighbours are not letting Singapore rest easy. Booming Shanghai has already overtaken powerhouse Hong Kong to become the world’s second largest container port next to Singapore. The Thai Canal plan hopes to emulate the Panama and Suez Canals by cutting across the Isthmus of Kra. While far from being an immediate feasibility, the idea is thrown around every couple of years. If it ever materialises Singapore stands to lose the strategic importance she has held for centuries. Its closest neighbour, Malaysia, whom it was part of very briefly in the 1960s, has launched more than one attempt to challenge Singapore.

The most audacious challenge thus far has been the port at Tanjung Pelepas, situated at a location close to Singapore in the nearest Malaysian state of Johor, and offering cheaper services and facilities. Maersk, which owns 30 per cent equity in the port’s holding company, moved all its operations from Singapore to Tanjung Pelepas in 2000, which was a crushing loss for Singapore, as Maersk was then the largest shipping company there and in the world. This was followed soon after by the departure of Taiwanese giant Evergreen, in 2002. Tanjung Pelapas’ modest size does not yet come close to challenging Singapore’s dominance, but has all the signs that point towards Malaysia’s dedication to challenging her smaller, richer neighbour. Not only is the port at Tanjung Pelapas undergoing continued expansion, there is also an ambitious plan at the federal level aiming to develop Johor into a trade, investment and logistics centre, amongst other things, under the Iskandar project.

Whether Malaysia, Thailand, Shanghai or Hong Kong can overtake Singapore’s ports and airports remains to be seen, but Singapore remains always one step ahead of the competition and is not waiting to find out. For every berth a competitor builds, Singapore will build more. For every facility that a competitor presents as equal and cost-effective compared to Singapore’s, Singapore will point to its comprehensive suite of other services that add value and increase efficiency. With a resilient, focused government leading the charge with business leaders, demonstrated commitment to securing the future and a much lauded workforce and infrastructure, Singapore’s position as the gold standard in logistics is safe, for now.