ASIA FOCUS : FOCUS

Government support for the up and coming

Manufacturing companies in Southeast Asia have enjoyed a cost advantage for decades. But this advantage has begun to erode steadily with the recent surge of emerging economies, including those of China and India, and increasingly fierce competition among companies in Southeast, South and North Asia.

To survive, companies in countries such as Singapore and Malaysia have begun to build new capabilities and are positioning themselves as sources of design, product development and innovation rather than sources of cheap production.

In their bid to stay competitive, these companies have found support from their governments and from manufacturing associations.

In Singapore, for instance, the government has supported the move by local manufacturing companies up the industry value chain in a number of ways.

The Singapore government has provided financial assistance to local small and medium-sized enterprises seeking to invest in infrastructure and upgrade employees' skills.

For example, the Product and Process Development Assistance Scheme is a grant from the Singapore Economic Development Board to help local companies build capabilities in design and development of new products or processes.

Another programme, called the Local Enterprise Technical Assistance Scheme, provides a government grant to companies that wish to hire external consultants to improve management and operations. Government grants have also funded the mechanisation and automation of manufacturing companies in Singapore.

In addition, Singapore-based businesses have benefited from the government's drive to attract multinational companies to set up regional headquarters in the city-state.

Multinationals bring with them investment and opportunities for local companies to increase their efficiency, capabilities and international competitiveness.

Government initiatives such as the Local Industry Upgrading Programme aim to develop partnerships between the multinationals and local SME suppliers of technologies and services. Local manufacturers, some of whom were interviewed in an INSEAD survey, have tapped these ties to upgrade their capabilities and enhance managerial expertise, but also to diversify their service portfolios and enter new markets.

Other Asian governments have put in place similar initiatives to encourage local companies to build new competence. The Human Resource Development Fund in Malaysia offers financial assistance to SMEs seeking to upgrade their employees' skills.

Local companies have also enjoyed access to government grants that finance improvements and innovation in products and processes, adoption of information and communication technologies, acquisition of new technologies, and commercialisation of R&D output.

Other initiatives from the Malaysian government aim to link SMEs with large local companies and multinationals. In Malaysia as in Singapore, such supplier-customer partnerships have enabled local suppliers to learn from the expertise of large multinationals.

Government initiatives in Malaysia also encourage local companies to build marketing expertise and venture into new markets abroad.

The move by manufacturing companies up the value chain in Southeast Asia has both drawn from and contributed to changes in the mindsets in these countries.

These economies are increasingly focused on generating knowledge, encouraging creativity and pursuing innovation in product development, processes and marketing.

Governments in Southeast Asia are encouraging this trend as part of their efforts to sustain the competitiveness of local companies.

Bangkok Post
Sunday February 11, 2007