Singapore has seen an influx of new corporate offices as companies relocate from other parts of Asia. The government could do more to keep them there.
by Francesca Ross
Over 40% of the global Fortune 500 companies have their Asia-Pacific headquarters in Singapore. This fuels a brain drain from across Asia which brings highly-educated professionals and executives to work in ASEAN’s strongest economy.
Hong Kong hosts 34% of corporate headquarters for the region and mainland China has just 16%, say PriceWaterhouseCoopers (PwC). Supporting local and foreign investors to uncover new business opportunities, strategic planning and creating economic space is behind Singapore’s success as a regional hub, data from the management company explains.
Multinational companies are moving their headquarters to Singapore
General Motors already moved the headquarters of its international division to Singapore from Shanghai. The agribusiness firm, Archer Daniels Midland has done the same. Other large companies, such as IBM, have partially transferred staff from their Chinese operations. Japanese giant Panasonic recently moved the head office of its refrigerator compressor business to Singaporean premises.
Harvey Koenig, head of ASEAN Incentives Advisory at management firm, KPMG explained, “Sectors such as aerospace, biomedical science and financial services have continued to come and invest in Singapore by virtue of things like political stability, being able to find the right kind of talent, and supporting infrastructure like banking facilities to support high value-added activities.”
Professionals are increasingly moving away from China
High-calibre professionals are increasingly moving out of China and into Singapore as the levels of pollution are significantly lower and education opportunities are much better for their families. Companies also benefit from easier transport links from Singapore than operations in Shanghai or Beijing. The downside is that it is a high-cost location and sectors such as manufacturing struggle to survive in an environment of steady wages and comprehensive regulation.
Malaysia feels the pain of the brain drain into Singapore industries
The drain to Singapore is about people as much as operations. Malaysia is particularly affected by the loss of its talented young graduates across the causeway to Singapore.
Around 400,000 Malaysians are thought to be working in the island nation. This is because a professional graduate can earn RM20,000 (US$4,607) in Malaysia but would have accumulated RM429,100 (US$98,848) more for a similar job in Singapore.
Unemployment of 3.5% as of February 2017 was also driving migration, Dr Zakariah Abdul Rashid, executive director of the Malaysian Institute of Economic Research (MIER) explained. “Nearly half a million of people were unemployed and out of that, 200,000 were youths,” he told reporters.
Social and cultural attitudes mean young people are looking overseas for work
Social and cultural factors are also pushing people abroad. The continuing stalemate between Prime Minister Najib and his opponents means many would prefer to seek opportunities in a progressive economy overseas. The Malaysian leader has launched the new 2050 Transformation Plan (TN50), to stem this tide and encourage young people to engage in national politics.
Najib’s government will now need to use his transformation plans to strengthen the demand and supply side of the market for talent. This means giving businesses the means, through grants or favourable taxation, to look for new managers or expand their facilities to retain local knowledge and bring overseas talent home.
It was support from the Singapore Economic Development Board that brought Panasonic out of Japan and into Singapore. Malaysia could follow the same model. The Talent Corporation, Residence Pass and Returning Experts Programme are all steps in the right direction.
Concrete actions could secure Singapore’s position as a regional hub
The Singaporean local talent pool also suffers from a steady flow of citizens leaving the country. Over a third of Singaporeans with a postgraduate degree would prefer to leave, compared to 17% of those with secondary school education. This shows that this is more than a problem of opportunity – brain drain relates deeply to social attitudes in young people across the region.
There are a number of steps Singapore can take to grows its weight as a global anchor for big business and attract and retain the world’s brightest minds, say PwC. These will also increase employment opportunities for locally trained graduates.
First, local businesses should invest more on productivity and be less reliant on labour. Quality of work should be the most important factor. The government should also renegotiate on tax treaties. In particular, treaties with America that will help Singapore-based companies successfully access and negotiate the US market.
The final suggestion is that Singapore should truly stand up as a regional leader if it wants to be the leading regional business hub. This means pushing for full ASEAN integration to promote market access. The bigger the market is, the bigger the opportunity and the bigger the companies that will come to call Singapore their home.
The brain drain need not be the burden on Southeast Asia that it used to be. Highly skilled graduates once had to go to Europe, America or Australia to make their way in the corporate world. The rise of Singapore as a global hub, together with a push towards ASEAN integration, could make the region’s brightest minds the driving force behind a better future.