When Hewlett-Packard Co. (HPQ ) wanted to open a 10-employee center to manage licensing of its intellectual property to Asian tech companies, putting it in Singapore was a no-brainer. First, the Singapore Economic Development Board (EDB) hired two dozen local engineers itself, then it footed the bill for their training at HP labs in the U.S. Only when HP opened the center in April did the U.S. company have to decide if it wanted to hire these engineers or not.
When it comes to competing for multinational investment, few communities on earth roll out the red carpet like Singapore Inc. Generous tax breaks and affordable land are just the starting points. The EDB, the city-state's superagency for snaring investment, also often kicks in staff-training costs, research grants, and equity capital, if it's desired. The EDB's staff of 450 even hires consultants and interviews executives to anticipate the needs far in the future of prized tenants such as HP, which has been in Singapore for 30 years and has made the island its global base for laser printers.
The approach has paid off handsomely. In June, German silicon wafer manufacturer Siltronics picked Singapore for its new $1 billion plant to make 300mm silicon wafers, even though key client Samsung Electronics Co. originally preferred South Korea. Other recent trophies include an animation studio by Lucasfilm, a Matsushita plant to make 42-inch-plus plasma TVs, a number of Asian computer game companies, a Rolls-Royce fuel-cell development venture, and a BMW auto design studio -- the last being quite a coup, considering Singapore has no domestic car industry. For Denmark's Vestas Wind Systems, which recently announced a 150-engineer R&D facility, the clinchers included the chance to collaborate with local universities, which will team up with the EDB to cover almost all of Vestas' research costs. The Danes even got permission to install prototype windmills in Singapore. "The EDB offered us almost everything we wanted and more," says Vestas Asia President Thorbjorn Rasmussen.
The result is a remarkably diverse economy for a nation of 4.5 million. Singapore is posting strong growth in everything from banking and logistical services to pharmaceutical and oil-rig manufacturing. China may be the world's workshop, but manufacturing still makes up more than a fourth of Singapore GDP.
Singapore's approach is to try to think far ahead about how industries and individual companies will evolve. "If we know what Motorola (MOT ) or HP is going to do over the next three to five years globally, we can shape our policies so that we have everything they need in place to quickly implement their plans," says EDB Chairman Teo Ming Kian. For example, the EDB is working with Seagate Technology (STX ) on the company's next generation of hard drives. The Singaporeans are involved in everything from design to developing prototypes to building the first global manufacturing facility for the new drives.
Singapore also backs its visions with big money. Often that means becoming a financial partner with multinationals. In the late '90s, Singapore became a chip player by taking equity stakes in silicon wafer foundries with companies like HP, Micron Technology (MU ), Canon (CAJ ), Royal Philips Electronics (PHG ), and Taiwan Semiconductor Manufacturing. When aircraft engine maker Rolls-Royce wanted to set up an R&D center for fuel cells last year, the EDB lined up research grants and a consortium of local companies to form a $110 million joint venture. "Every country in Asia is chasing the same multinationals," says Dominic Barton, Asia Pacific chairman of consultancy McKinsey & Co. "But Singapore has the clearest strategy on what it wants and is very focused at getting it."
By Assif Shameen