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paid to the local labour by industrial transna- emerging regions. While labour in Malaysia
tional corporations). In Asia, such zones or China had extremely low wages, they were
began to emerge in Malaysia, Indonesia, not highly educated or able to undertake
Thailand and even, since 1979, in communist complex industrial tasks. The Singapore gov-
China (see Felker, 2003). Even India and ernment invested heavily in tertiary technical
Vietnam, countries that were heavily protec- education, especially in the industrial sec-
tionist or communist, were opening up to FDI. tors. The aim was to attract industrial
The consequence of the rapid adoption of transnational corporations with high value
FDI-oriented development strategies in Asia added activities to come to Singapore to
was that the competition for FDI intensified establish operations, or to encourage existing
significantly. Singapore – a beneficiary of the enterprises to upgrade their operations. In the
‘first’ wave of FDI in Asia – was unable to 1980s, the Singapore government built new
compete with the new industrial regions of polytechnics and established an engineering-
Asia, which included parts of China, oriented university (Nanyang Technological
Malaysia, Indonesia and Thailand. Put University), in addition to expanding the
another way, Singapore’s initial ‘competitive engineering faculty at the existing National
advantage’ was not sustainable. Labour costs University of Singapore. With these moves,
in Singapore, which were slowly rising Singapore’s highly educated workers were
because of continued economic growth generally ‘cheaper’ than their peers in the
between 1965 and 1980, became uncompeti- USA or Europe. At the same time, this heavy
tive when compared to labour less than state investment in human resources meant
20 kilometres north and south of the island, that Singapore had a ‘differential advantage’
in Malaysia and Indonesia respectively. Land over its neighbours, who were offering
costs were increasing as well, because of the low cost but mainly unskilled labour. This
island’s limited space. In the emerging indus- eventually led to a new wave of transnational
trial regions of Indonesia and Malaysia, investments within Singapore, mostly in
factory and land rents were reportedly only the semiconductor, petrochemical and preci-
10% of those in Singapore (see Kumar and sion engineering sectors (see McKendrick
Lee, 1991). Thus, not only was Singapore et al., 2000).
unable to attract new FDI, but industrial
transnational corporations that had stationed
their operations in Singapore since 1965 Cooperation
were beginning to move out to the emerging
industrial regions in Asia. This was poten- At the beginning of the 1990s, the Singapore
tially devastating to the Singapore economy, government was worried about the possible
which was heavily reliant on foreign capital negative consequences of inter-state compe-
for both economic growth as well as sustain- tition for FDI. While it had been able to move
ing employment since foreign industrial ahead of the competition successfully, the
enterprises contributed to over 75 percent Singapore government realized that this was
of Singapore’s output while employing perhaps only a short-term solution. It would
80% of the workforce during the 1980s (see only be a matter of time before developing
Huff, 1994). nations such as India and China began to
In response to the increasing competition, compete for high technology FDI, mainly
the Singapore government became more because these countries were also rapidly
innovative with its FDI-oriented strategy. improving the quality of their human
It realized that Singapore could not compete resources. In addition to offering investors
solely on the basis of low wages for cheaper high quality human resources, coun-
industrial labour. It tried to differentiate tries such as India and China could also offer
Singapore’s labour force from those in the transnational corporations a massive consumer