Buy it in Singapore
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A traveller loads his luggages on a trolley at the transit hall of Changi International Airport terminal in Singapore on January 14. (Photo by Roslan RAHMAN / AFP)
Asitha had a technical problem with the display of his laptop computer. As he is from Maharagama, he knew that he must take it to a place like Liberty Plaza or Unity Plaza in Colombo for repairs. If he was from outside the Western Province, then the repair work may not be as easy as in Colombo. Asitha took it to one of the technicians he knew in Colombo, and I too joined him.
The technician opened the device, carried out testing for some time. Then he told Asitha: “This display unit has to be replaced, because this part seems to have been burned out.”
Asitha replied, thinking that he can get it fixed immediately and take it back home: “We’ll do it; how long does it take?”
The technician answered: “We have to bring the unit from Singapore so that it might take about two-three weeks”.
Wait for few weeks
This is not an unfamiliar answer to many of us Sri Lankans – individuals, companies, and organisations – they all must have had similar answers from their customer service suppliers, repair workshops or technicians regarding such electronic devices. Quite often they must wait for weeks or months until the parts and components are brought down from places like Singapore and Bangkok.
Asitha was disappointed and distressed by the reply; and I knew why. By profession, he is a commercial graphic designer and thus all his on-going projects must be in that laptop. He must put them all on hold now, until he gets his laptop fixed.
With a sad-looking face, he said: “How can I postpone all my work for two-three weeks? And how can I face my clients?”
I turned to the technician to see if there is way out: “Why do we have to wait until it’s brought down from Singapore? Isn’t it available anywhere here in Colombo?”
“No”, he answered with a firm tone: “Nobody imports these parts and keeps stocks here, because there is not that much business here. Parts also get outdated and we will have to lose our money too.”
The problem was very clear to me, but I continued my discussion with him: “Singapore is a very small place; right? But do you mean that there is still more business there in Singapore than here in Sri Lanka?”
“Singapore means business, and everyone is in business! People from all over the world go there for business! How many planes come to the Singapore Airport every five minutes, and how many ships come to the Singapore Port every five minutes?”
Global market
Well, he said a handful in a few words of his language. Let us elaborate his point further with more facts and figures. According to Changi Airport data for 2019, Singapore Airport reported over 1000 commercial aircraft movements each day; it has served 68 million air travel passengers in that year – more than 10 times its entire population. According to the Maritime and Port Authority of Singapore, at any given time, there are about 1,000 vessels in the Singapore Port; every 2-3 minutes, a ship arrives or leaves the Singapore Port. For all these business-related movements, what matters is the size of the market, and not the size of the country.
Singapore is a “small” country by the size of its land and population both. At that time, many viewed that it was “too small to survive”, when it was forced to get its independence from Malaya. Yet Singapore surprised the world by becoming Asia’s richest nation! Having seeing it, now they say that it’s a “small country” and “easier to manage”.
The point is that Singapore’s market was the “world” so that its “smallness” of the domestic market did not hinder the country’s economic progress. Well, every country in the world, including every “big” country, is “too small” to form a large domestic market for themselves. Size of the market is definitely a “binding constraint” for progress.
Singapore is a “global market for business” where capital and labour gather and where suppliers and buyers gather; they all gather for business. The domestic investor class is “too small” to generate sufficient investment so Singapore has relied on foreign investment; over the past 10 years Singapore has received over US$ 670 billion foreign direct investment, while in 2019 alone the country received $92 billion.
Current population in Singapore is 5.8 million, out of which 40 per cent is foreign-born. While economic progress requires human resources, Singapore not only produces world-class professionals but also recruits such professionals by adopting an open “foreign talent” policy. Therefore, no business opportunity is hindered by the insufficient supply of world-class professionals.
Why market size?
The main question in issue is thus, what’s the big deal about the market size; actually, it is the “big deal” in economics that guarantees economic progress and prosperity of a nation. The countries which adopt policies and regulations to expand their market horizons beyond their domestic market boundaries will grow.
There are a couple of economic reasons to justify the point: The first is that business activities will grow because the market size does not impose constraints. Instead of producing and supplying only “in hundreds and thousands”, the firms can produce and supply “in millions and billions” to the customers in a bigger market. As a result, the businesses in a country as such will generate more incomes and more jobs, ensuring economic progress.
The second is that, when the firms are catering to a bigger market in supplying millions and billions, then the “unit cost” is lower due to economies of scale. This is the reason why some producers supplying to a smaller domestic market in hundreds and thousands always seek protection; their “unit cost” is higher due to diseconomies of scale. The prosperity of a firm as such is not necessarily the prosperity of the nation. When the unit cost is lower due to large-scale production, then such supplies become “price competitive” in a larger market.
The third point is that, the larger markets are naturally “competitive” because there are many producers and suppliers, who have to compete among themselves. They compete on both price and quality resulting in better products so that the competitive markets lead to inventions and innovations.
In such markets, business activities are multiple and bigger so that both suppliers and buyers gather too. The suppliers have a bigger share of a bigger market. The customers also have a bigger range of choices at competitive prices. For the benefit of the customers, the sub-standard products may not survive in such markets due to competition.
Two and a half centuries ago
If the market is too small, business opportunities are limited. Investment for businesses is limited and human resources to put into businesses are limited. Customers do not find the best products at competitive prices, when they want to buy. But we all know that they are available in business enclaves like Singapore, because they have established a bigger market!
About two and a half centuries ago, when the economists were just discovering the “power of the market” by witnessing economic progress in England, renowned economist Adam Smith wrote: “As by means of water-carriage a more extensive market is opened to every sort of industry than what land-carriage alone can afford it, so it is upon the sea-coast, and along the banks of navigable rivers, that industry of every kind naturally begins to subdivide and improve itself, and it is frequently not till a long time after that those improvements extend themselves to the inland parts of the country.”
And after repeated evidence over the centuries all around the world, some nations are still sceptical about the power of the market.
(The writer is a Professor of Economics at the University of Colombo and can be reached at sirimal@econ.cmb.ac.lk and follow on Twitter @SirimalAshoka).