Why Singapore businesses need to put Asia first

Before long Asia will shed its role as a low cost production source and mature into a lucrative market.

Singapore leaders should thus redouble efforts in capturing this emerging demand hotspot, even going as far as "locating the entire spectrum of activities in Asia to be close to market," said S Iswaran, Singapore minister for home affairs and trade & industry.

"The Asian growth story has so far been substantially premised on Asia’s attractiveness as a low-cost manufacturing centre for global markets and, in particular, developed economies. However, this value proposition may not be durable. As Asian wages increase, energy prices rise, and Western currencies weaken in relative terms, it may make less business sense to produce goods in Asia merely to ship them for sale in European and American markets," Minister Iswaran said in a speech during the YPO Global Leadership Summit 2012.

"Indeed, of late, there have been cases of multi-national corporations re-locating activities back to the west, due to rising costs. Dutch electronics giant Phillips is a case in point. Last month, it announced that it was bringing home the production of electric shavers, citing rising manpower costs in China as a key reason behind the decision," he said.

"Such examples do not, however, herald an attenuation of the Asian growth story. Rather, it marks, in my opinion, the transition to the next phase where the value proposition is underpinned not by low input costs but by a new dynamic – the emergence of Asia as an important market, a key source of final demand, in its own right," he added.

"Asia presents significant growth opportunities for businesses. But the value proposition is changing, and will change further, as the region evolves from being a low cost manufacturing base into an important destination market in its own right. To seize this opportunity, businesses should seriously consider locating the entire spectrum of activities in Asia to be close to market. It is equally important that businesses be aware of some the societal changes being wrought by globalization. Your individual decisions as leaders of your respective organisations will have a significant collective impact on Asia as we move into the next phase of growth. Governments and businesses must be partners in addressing these issues to ensure that the path of growth remains sustainable and inclusive," he said further.