Chapter 3. Factor Conditions and Global Linkages at Play in Singapore’s
3.2 Education and capacity building: a crucial factor condition
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Chapter 3. Factor Conditions and Global Linkages at Play in Singapore’s Financial Cluster
3.1 Introductory remarks
This section aims at further developing factor conditions presented in the previous chapter, and at researching on current global linkages at play in Singapore’s financial cluster.
Education and capacity building has been a crucial aspect in Singapore’s phenomenal economic rise. The city-state at the time of its independence could only rely on its workforce to achieve economic growth. Specific educational policies targeting the financial and banking manpower have proved pivotal in building Singapore’s financial cluster. They are consequently worth reviewing independently in this chapter, as they have given birth to Singapore’s main factor condition alongside the Asian Dollar Market, and banking secrecy.
When studying clusters Grabher focused on “global linkage” (1993), and Bathelt, Malmberg and Maskell outlined the “global pipeline” effect (2004). So, present clusters are seen as entangled into the forces released by globalization. Thus the simultaneous rise of Islamic finance and of the Renminbi as an international currency deserves a special focus in this thesis.
All in all, education and capacity building, Islamic finance and the internationalization of the Renminbi are three forces that could potentially reshape Singapore’s financial cluster as we know it today.
3.2 Education and capacity building: a crucial factor condition
In order to become number one in all sectors that compose a true financial cluster, the education level of banks'’ and financial institutions’ employees needs to be the best possible. As previously seen, Singapore since its independence has always compensated its lack of natural resources with investments in education, life-long learning and skills upgrading schemes.
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3.2.1 Educational offer aimed at the banking and financial sector
While the local financial cluster was able to solve its lack of skilled FX experts in the 1970’s through a MAS-sponsored training program, it currently lacks experts in most of the other specialties needed to run the financial and banking sector.
This means that the 3,000 university graduates trained in finance every year are not enough. The Singapore Government should either promote more this study path in Singaporean high schools, or make its universities more attractive to international students, maybe by lowering its tuition fees for overseas students (Jin, 2003, p. 11).
This situation is not specific to Singapore, and it actually fares better than all ASEAN, plus Japan, Hong Kong, China, and Taiwan in terms of “availability of finance skills domestically” in the “World competitiveness yearbook: 2001” (as cited in Jin, 2003, p. 12). In the whole Asia there is a shortage of experts, and the competition to attract finance literate manpower is fierce.
Local universities are now known to provide top-level education, but do not design enough industry specific programs in finance and banking. With the National University of Singapore, and Nanyang Technological University in the “QS World University Rankings® : 2013”29, both respectively ranking as 24th and 31st in the world out of 700, Singapore at first seems to perform well with two outstanding institutions. However, it lacks mid-level universities, as no other Singaporean universities appear in the top 700 higher-education institutions. In comparison, Hong Kong has seven universities in the top 700, and Switzerland has eight (Quacquarelli Symonds, 2014).
In more industry specific rankings, Singapore has a few noteworthy programs, in the “Masters in Finance Pre-experience 2013” ranking by the Financial Times no Singaporean per-se universities appear. However, the ESSEC (É cole Supérieure des Sciences É conomiques et Commerciales) Business School and the Grenoble Graduate School of Business, two French Business schools, are ranked and offer their awarded programs in their overseas campuses in Singapore (Financial Times, 2013b). In the
“Masters in Finance Post-experience 2013” ranking by the Financial Times,
29 The “QS World University Rankings®” is one of the world’s most influential ranking of top universities published by Quacquarelli Symonds (QS) a company specialized in education surveys. The score of each university is based on five variables: academic peer review, faculty student ratio, citations per faculty, recruiter review, and international orientation.
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Singapore Management University is ranked number two in the world with its “MSc in Wealth Management” (Financial Times, 2013a). The INSEAD (Institut Européen d'Administration des Affaires), another French business school with a campus in Singapore, provides one of the best Masters in Finance as well as executive education programs, and MBAs (Master of Business Administration) (Economist, 2009). All those overseas campuses aim at filling the gap between the needs of the banking industry and workforce capabilities, and are fiercely coveted by the Singaporean government.
Banks, such as UBS and Credit Suisse, two world’s leading Swiss banks, have also opened their own in-house training centers in Singapore. These banking institutions therefore show their willingness to invest in Singapore in the long run as they take part in the enhancement of the local workforce’s skills (Crooke, 2009, p.
121). Opening such centers may also help them keep their qualifications as QFB, as previously mentioned they need to show their “commitment to contributing to Singapore’s development as an international financial centre” (International Law Office, 1999).
3.2.1.1 Impact of the Institute of Banking and Finance, of the Financial Industry Competency Standards, and of the Wealth Management Institute
The MAS and the Singapore Workforce Development Agency created the Institute of Banking and Finance (IBF) in 1974. It works as the “national accreditation and certification agency” (Institute of Banking & Finance, 2013a), in line with the implementation of the Financial Industry Competency Standards (FICS), which aim at improving the professional skills of the finance workforce. The MAS launched the FICS in 2005, and since then the latter has been praised for its efficiency.
Therefore, to benefit from the FICS’ accreditation, candidates need to show their abilities through the passing of various exams and skills-assessing tests, such as the simulation of real-life professional problems, or case studies (Institute of Banking
& Finance, 2013b). What’s more, candidates to be certified need to provide recommendation letters form their current or former boss (Crooke, 2009, p. 123).
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Until today the IBF has accredited more than 180,000 participants. (Institute of Banking & Finance, 2013a).
The Singaporean government also sponsored the creation of the “Wealth Management Institute” that started to operate in 2003. This has especially appealed to private banks, which have found ready-to-employ manpower.
All in all, the IBF and the Wealth Management Institute have been praised in recent years for having largely helped increase the number of local talents, and reduce labor shortage (Crooke, 2009, p. 121).
3.2.2 Scholarships programs
In order to withstand the brutal competition among financial centers, since 1999 the MAS has been providing Singaporeans with scholarships. Those who wish to specialize in expert-scarce sectors, such as in quantitative finance, and risk management, can get funding through the Financial Sector Development Fund (FSDF), (Monetary Authority of Singapore, 2013a, p. 35; Monetary Authority of Singapore, 2014).
While the recipients of the scholarships have the choice to study abroad under this scholarship, they have the obligation to go back to Singapore after graduation.
Some recipients of this scholarship, who studied in the USA, often say that they work as they study, and then save the money earned abroad while living on the scholarship.
They prefer to pay back the entire scholarship and stay abroad to work. That shows limitations to Singapore’s scholarship program.
3.2.3 The issue of skilled labor immigration in light with the performance of the local workforce in the banking and financial sector
Singaporeans represent only 63.8% of those employed as managers in the financial cluster, skilled immigrants or Foreign Talents (FTs) fill other positions. This situation is alarming as international managers are seen as more performing.
This issue was outlined in the “World competitiveness Yearbook: 2001”, Singaporean managers were ranked as less performing than those from Hong Kong and the Philippines (as cited in Jin, 2003, p. 13). The bleak situation presented in the
“World competitiveness yearbook: 2001”, however, seems to have improved since
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then, as the “Deloitte wealth management centre ranking 2013” in its ranking of educational systems and financial education ranked Singapore as the 2nd best in the world behind only to Switzerland, and better than in Hong Kong or in the UK.
Singapore’s strength was in the number of Chartered Financial Analysts, which ranked 2nd only behind Hong Kong. This strong performance is to put to the credit of the MAS and the FICS (Deloitte, 2013, p. 16).
Singapore has long been relying on FTs, and the government restated it in January 2013 in the “Population white paper” through its willingness to reach a total population of 6.3-6.9 million by 2030, compared to 5.4 million in 2013 (National Population and Talent Division, 2013, p. 6). While this is necessary for the economy and especially the financial cluster, this would further strain on local infrastructures.
Even worse are the reactions that provoked that report. Many Singaporeans have interpreted this possible population surge as increased competition on the labor market, making it harder for domestic employees to gain top positions, as they would have to compete with the world’s top FTs. Resentment towards FTs is rampant nowadays, and any misbehavior on the side of foreigners tends to be seen as how FTs take Singapore for granted and denature the city-state.
Xenophobic sentiments climaxed after the scandal provoked by Anton Casey, a British employee of Crossinvest Asia (an investment company) in January 2014.
Derogatory comments towards local Singaporeans that he wrote on his Facebook page were made public. There, he mocked so-called “poor people” in the MRT, or “retard”
taxi drivers. Though he had lived in Singapore for 12 years and married a local Singaporean woman, he had no other choice than leaving the island after he had received death threats and losing his job (Tadeo, 2014). While his behavior was for the least abject and disdainful, it sparked rants from locals on non-state controlled websites such as “The real Singapore” where locals freely express their opinions.
This event shows that if the government wants to keep the situation peaceful between FTs and locals it has to ensure that locals are able to obtain top executive jobs. Local authorities need to foster the rise of a large pool of skilled locals, that way showing the inherent competitive advantage of the island.
A reform of Singapore’s immigration policy would also be welcomed. FTs especially coming from the West may find it hard to integrate into a country, which is quintessentially Asian with deep Chinese roots. However, citizens from neighboring countries where living standards are lower than in Singapore and the labor force
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plentiful could be favored to gain citizenship. Singapore could for instance set a naturalization scheme favoring ASEAN citizens, and at the same time it would strengthen community building in the region.