A triple-A rated economy that offers businesses a sound base for regional expansion and investment, Singapore is once again recognised as the world's most change-ready country.
The Republic has just topped KPMG's Change Readiness Index (CRI) for the second consecutive time. The CRI ranks 127 countries for their capacity to anticipate, prepare for and manage change, and cultivate the resulting opportunity. These changes may range from immediate economic and political shocks to long-term trends such as the diffusion of new, disruptive technologies, and emerging market growth and competition.
Singapore is ranked first overall, thanks to an outstanding performance across all dimensions of the CRI. Three of the most important drivers of Singapore's change-readiness are its economic openness and diversity, the Government's capacity for strategic planning and horizon scanning, and the strength of its human capital.
As in previous years, this year's top 10 remain dominated by a number of European countries, with Switzerland, Norway, Denmark, Sweden and Finland confirming their places among the most change-ready countries. Besides Singapore, the other Asian economies that ranked highly were Hong Kong SAR and Japan placing 3rd and 15th. It is worth noting that a majority of the top 10 most change-ready economies share strengths in innovation and a strong institutional framework.
"The CRI reveals a mutually reinforcing relationship between change-readiness and wealth. Having a capacity to manage and drive change brings wealth, but wealth also helps countries build the capacity for change," says Tham Sai Choy, Chairman of KPMG's Asia Pacific region and Managing Partner at KPMG in Singapore.
He adds, "This ability to anticipate and drive change will be increasingly important for Singapore and our region in the face of accelerating changes to come, including vulnerabilities to shocks, and longer term trends such as growing populations expecting higher living standards, shifting wealth distribution, climate change and new technologies. In that light, it is heartening to note the relatively high and improving rankings of countries from the Asia Pacific region."
A good environment for business to thrive
The degree of economic openness (ranked 1st) and diversity (1st) in Singapore is a key driver of its productivity and competitiveness. Exports contribute 190% to GDP, and its extensive trade links provide companies with greater market connectivity through lower tariff and non-tariff barriers. Singapore's export-driven economy allows it to overcome its small domestic market and exploit economies of scale, in turn raising productivity.
Beyond its traditional strengths in chemicals and electronics manufacturing, modern services such as financial and professional services increasingly drive the expansion of the Singapore economy. This broadening of the economic base enables the economy to respond faster to changing global demand and cope better with sector-specific shocks or structural changes.
The sophistication of the Republic's financial sector (2nd) adds to its economic robustness, allowing its enterprises access to investment funds from such sources as loans from a sound banking sector, well-regulated securities exchanges, venture capital, and other financial products.
"KPMG has been operating in Singapore for 74 years and has witnessed the evolution of the Republic from a low-cost manufacturing base to a solid pillar of ASEAN's GDP growth," says Tham Sai Choy. "We see a bright future for Singapore as it establishes itself as a strong multi-dimensional base for companies' regional expansion."
The capacity of the Government for strategic planning and horizon scanning (1st) is a second key driver of Singapore's change-readiness. Indeed, maintaining international competitiveness and sharpening economic resilience – the ability to drive change – are two stated goals of the Government's latest strategic economic plans.
Human capital (4th), long recognised by Singapore as its single most important resource, is a third key driver of the country's change-readiness and competitiveness. Having a workforce with a high standard of competence and industry relevance in training programmes is increasingly valued, as the global economy requires more pools of well-educated, adaptive workers able to perform complex tasks
Yet as Singapore presses ahead with its goal of attaining the status and characteristics of a first league developed country, it has to be careful to ensure more inclusive distribution of growth dividends (25th) and stronger social safety nets (20th). Government social safety nets are needed to aid cohesion and help countries respond to shocks. Conversely, inequality has been found to slow growth and impair countries' ability to change.
Food and energy security, the ability to be resilient against disruptions in critical food and energy supply, is another key risk.
At a glance: Singapore's Change Readiness