Its said you ought to be odd to be the number one. This comes in true for Singapore – a small country with surface area of less than 700 km² having transformed its unfavorable conditions like lack of arable land and natural resource to be a global hub for exports all around the world. Reaping the advantage of its strategic location, Singapore has established itself as the Numero Uno Logistics hub in the Asia (Refer Exhibit 01). While the other major South Asian Countries are lacking far behind Singapore ( Global LPI Rank #2 in 2014) with Malaysia closing at 26th rank and Indonesia seeping in the 59th global ranking as per the global ranking in LPI scores. Courtesy the favorable landscape for doing business and enabling global trade (Refer Exhibit 02) Singapore has established itself as the logistics hub in the world. Thus it becomes imperative to identifying key strengths of the country in the logistics sector which the other Asian countries can adapt and implement to boast their logistics sector.
Knowing Singapore’s Logistics Infra : A Fact File
Singapore enjoys an interim edge today as the logistics hub courtesy it infrastructure development enabling trade across Asia Pacific region (Refer Exhibit 03).The governments proactive and far sighted planning has reaped some concrete results in development of its marine as well as the airspace infrastructure.
Key Strengths of Singapore as Logistic Hub : How major SEA countries along with India and China fare in Logistics Performance vis-à-vis Singapore
As per enincon’s analysis (Refer Exhibit 04) their lies a comparable difference in terms of logistics indicators which are considered to be important for the international freight forwarders:
- Infrastructure to reach or leave the ports and airports
- Border agencies at ports and airports
- Competence of domestic logistics service providers
- The timeliness of delivery
- Tracking and tracing system for imports and exports
- The availability of international shipments when needed
It is pertinent to note that Singapore has the best ranking in term of Customs, Infrastructure and Timeliness as per the logistics service providers. Further in terms of transport infrastructure there lies a significant gap for the countries considered above for instance in case of low income countries like Thailand and Philippines the constraint of inadequate basic infrastructure like road, rail, port are one the potential barriers to integrate in the global logistics chain. While Malaysia and China are the two countries which fair close to Singapore.
Apart from these another parameter where Singapore enjoys an edge is the efficiency of its Custom’s Department. The country has one of the highest percentage in terms of percentage of shipments meeting quality criteria with number of agencies being involved for both imports and exports as only one (Refer Exhibit 06). With the use of information and communication technology Singapore has been able to reduce the clearance time and paper work involved in customs department making it most efficient as compared to other countries in South Asia. To sum up there lies an imperative list of factors which has led to a development of supportive ecosystem for logistics industry in Singapore.
Ecosystem Support for Logistics Development in Singapore
- Government played a proactive role with far sighted planning and supporting schemes: The government of Singapore has a far reaching role in the development of Singapore as the logistics hub courtesy its proactive measures and far sighted planning. Apart from being a stable society, time to time there has been due focus on the development of logistics infrastructure in Singapore. It ensured avoidance of Double taxation agreements, investment guarantee agreements coupled with extensive network of free trade agreement with the adequate spending on development of comprehensive network of air, sea and IT infrastructure. The government had also initiated various measures like free-trade zones and export processing zones, which were industrial sites with ready infrastructure available at highly subsidised rates. The EPZs allowed the duty-free entry of goods destined for re-export. Further to lure investors it tax incentives like reducing tax rates for certain industries from 40% to 4% for up to 15 years.
- Pro-Business Environment and Transparent Legal System makes Singapore the preferred destination: Singapore is among those that combine high efficiency and high quality. In resolving a standard commercial dispute it takes only 21 procedures and 150 days and costs 25.8% of the value of the claim. And not surprisingly, the judicial system follows several internationally recognized good practices, such as having a separate commercial court, providing arbitration, making judgments available to the public, using case management and allowing plaintiffs to file their initial complaint electronically. Further Singapore has launched a new electronic litigation system that streamlines litigation proceeding making it easier to enforce contracts. Consequently over 5,000 world-class multinational companies have established operations in Singapore and a number of them have outsourced their regional logistics operations to both the home-grown and foreign logistics specialists.
- Skilled Workforce: Singapore accelerated the development of a pool of high quality trained and experienced local transport and logistics professionals to attract foreign investment. To develop the skill manpower government launched the Strategic Manpower Development Program for enhanced access to local talents while streamlining the global talents on board as well.
- Warehouse and Distribution Facilities: Singapore provides world class warehousing and distribution services. These include Keppel Distripark, which has 14mts height ceiling to support high rack automated storage and retrieval system and Jurong Logistics Hub a modern 1,18,000 sq. m multi storey warehouse where any 45 foot container truck can reach the door step of any tenant in any weather condition.
- IT Infrastructure and Linkages: Singapore was one of the world’s first country to deploy National Single Window for Trade called TradeNet in the world. With the help of platforms like CITOS (Computer Integrated Terminal Operators System ) and PORTNET it has been to simplify and synchronize millions of process for customers in moving their cargo through Singapore. Apart from this GPS enabled vessel and other cargo get tracked ensuring safety and security of the goods movement across Singapore.
So there lies a significant amount of learning for the other South Asian Countries which they can adapt and implement to boost their logistics sector.
Country Wise Key Shortcomings,Learning & Way Forward
- Malaysia’s logistics performance is fairs well in comparison to other South Asian countries however it need to improvise on certain areas to be the next logistics hub after Singapore. The country lacks innovation capabilities and business sophistication as procedural delays acquire a lot of time. The inadequate quality of education coupled with insufficient research & development has in turn led to lower labour productivity in the country. However the positives like higher rank in ease of doing business restores hope for future developments as well. With due support from the government Malaysia is poised for revamp with simplifying and streamlining of regulations. To enhance trade facilitation mechanism there is a wide spread need to build freight infrastructure with due emphasis on efficiency and capacity. The deployment of technology in logistics chain hold the key with strengthening human capital in the country.
- The world’s largest archipelago- Indonesia has the weakness of politically unstable environment and corruption. Enforcement of regulation has been inconsistent and unpredictable coupled with general favoritism for domestic companies. Apart from this security concerns and weak legal system makes it less attractive for growing businesses. Also there has been an increased restriction on foreign investment in the country further restricting foreign players participation in the country. However the hopes have revived following the ambitious plan of the new government to fund new transport and infrastructure investments and attract private investors and operators in the country. The low hanging fruits which Indonesia to improve logistics performance include customs reform, encouraging adoption of the a national single window and easing the process of setting up a business in the country.
- Philippines has the problem of higher business risk due to problems of bureaucracy, corruption, lack of transport rules and codes of business. It becomes even worse with murky legal system. Thus streamlining these processes and removing potential obstacles that hurt businesses will help in growing the logistics demand and thereby enabling trade. However the role of Government comes as focal point for addressing all these issues.
- Vietnam has unclear government decision making process. The environment is not pro business while the legal system is also weak. The inadequacy of infrastructure coupled with lengthy customs procedure hampers the growth of business. The country should focus on in providing a pro business environment by removal of structural and procedural delays along with the development of adequate infrastructure in the country.
- Thailand needs to overcome key logistics challenges with modal shift from road to rail and waterways. Regional connectivity needs to be enhanced with the opening of economic corridors. Gateway improvements with the development of ports, airports, internal network development in rail, rail and inland waterways. Higher cost of logistics needs to be offset and also the private sector investment in logistic should be encouraged with implementation of adequate policy framework.
Moving ahead there lies tremendous opportunity in improving the logistics sector for the countries as mentioned above. Further with the establishment of ASEAN Economic community in 2015, there lies prospects for enhanced regional cooperation and integration in terms of improving domestic inter connectivity infrastructure in Indonesia, Philippines, Malaysia, Singapore, Thailand and Vietnam. However how far these ambitious developments will be able to reap benefits can only the answered in the due course of time as per the evolving developments in respective country.