SINGAPORE'S COMPETITIVE ADVANTAGE AS A REGIONAL FINANCIAL CENTRE

Abstract

To take part in a severe contest between intelligence, which presses forward, and an unworthy, timid, ignorance obstructing our progress. (The Economist, September 1843) This thesis sheds light on the topical issue of the competitive advantage of nations and firms. In particular, this thesis will examine the competitive advantage of Singapore as a Regional Financial Centre. There exist two main motivations for this thesis. First, it renders a comparative standing of Singapore as a Regional Financial Centre relative to the premiere financial centre in Hong Kong, and Thailand. Second, competitiveness, the two aspiring centres in Malaysia and it also tackles the complicated issues of and the arduous task of measuring competitiveness of the financial services industry. This research will add to the limited literature on the comparative standing of Asian financial centres by examining the size and maturity of four segments of the financial services industry, i.e., Asian Dollar Market, equity market, foreign exchange market and the financial futures market. More originally, it will use the Diamond Model to explain for the comparative standing obtained; whilst Porter (1990) has employed the Diamond Model on competitive developed and competitive newly industrialising countries, we will use the model to examine competitive developing countries. Essentially, this thesis will examine factors that fall under the four attributes of the Diamond as well as the potential role for chance events and government. Not surprising, this research discovers that both Hong Kong and Singapore are premiere financial centres in Asia, whilst Malaysia and Thailand are aspiring to become regional financial centres. In particular, based on our examination of the four segments of the financial services industry, we find Singapore to be a better developed financial centre followed by Hong Kong, Thailand and Malaysia respectively. However, more importantly, we discover that both Malaysia and Thailand have made considerable in-roads, particularly in the equity market, while Thailand has enjoyed healthy growth in its Asian Dollar Market. Hence, both Hong Kong and Singapore will require continuous innovation to maintain their positions. Most importantly, the application of the Diamond Model to evaluate the factors and their dynamics that have led to the comparative positions of the four financial centres, leads us to the other main conclusion: prosperity of firms and nations are closely interwoven. In order for a nation to create and sustain competitive advantage in the financial services industry, it will have to built up a diamond and over time upgrade and innovate on this foundation to continue to attract quality firms. As for firms, to create and sustain competitive advantage, they will have to identify and exploit the strengths and weaknesses of the national diamond and through continuous innovation and competition become successful. Ultimately, for a nation to succeed in a specific industry, it will have to attract quality firms with its national diamond and more importantly to nurture these firms into internationally successful global firms.