singapore economy
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Disclaimer: Opinions expressed below belong solely to the author.

During the recent National Day Rally speech, Prime Minister Lee Hsien Loong mentioned several key challenges facing our country — among them were international pressures, and trends in government policies in the rest of the world. 

He is right to be worried. Progress is not guaranteed, and Singapore is not exempt from the vicissitudes and tumultuous changes that occur elsewhere in the world. 

The clearest indication of the changing times is China’s growth — a country that has managed close to double digit growth year-on-year, has been steadily on the decline.

But China’s slowing growth is not the only signal that times are changing. Mercantilist policies are being instituted everywhere in the world — barriers to trade are being put up in Europe and the US, capital controls are being instituted, and countries are raising interest rates in a bid to both control inflation and reduce capital flight.

In a world that is increasingly unfriendly to openness and trade, can Singapore survive the coming storm? And if not, what measures can be taken to ensure that Singapore is not left in the dustbin of history?

Will Singapore still maintain its wealth?

As a small maritime nation, Singapore has few, if any, natural resources to speak of. Unlike countries like Kuwait that have oil supplies to export, or the US and Russia, with vast oil reserves to tap on, Singapore’s primary claim to relevance is our location. 

Singapore is located on the important Strait of Malacca, one of the world’s busiest shipping lanes and a key route for connecting East and West.

As such, trade has been a key part of Singapore’s economy — we rely on foreign markets to consume what we cannot, and on foreign products to supply what we cannot produce. Thus far, we have maintained a positive balance of trade and a positive balance of payments.

Singapore's balance of payments
Singapore’s balance of payments / Image Credit: CEIC

But this may soon change.

Protectionism in other countries means that the cost of our goods rise and become less price competitive, allowing domestic suppliers in these countries to gain market share at our expense. 

On top of this, the Monetary Authority of Singapore (MAS) has recently allowed the value of the Singapore dollar to rise. While consumers may be rejoicing at the good exchange rates that we are getting when travelling overseas, we should also be careful that travelling overseas is a form of imports for Singapore — we buy foreign goods with money that would have otherwise been spent locally.

In the long run, a highly valued Singapore dollar will erode the positive balance of trade that Singapore has. With time, this will mean depleting our currency reserves, and losing the ability to fund social programs.

Infrastructure projects, development, and other plans for economic development cannot proceed without funding to pay for the raw materials, technical experts, and more. 

These may seem like esoteric concerns, but they affect every Singaporean. No social spending means no more GST rebates, no more MediShield, no more vaccinations and screening subsidies for children, no more bursaries for children from economically disadvantaged families, and much more. 

Will this really be a Singapore that we enjoy living in? It will be a Singapore without working infrastructure, where the lottery of life plays a much bigger role in deciding the fate of each and every one of us.

It will be a Singapore where we are held hostage to foreign events, and have no control of our own future.

Trade isn’t the way forward, self-sufficiency is

Fortunately, we are not there yet, and there is still time to ensure that this bleak possibility does not come to pass, and this means searching for greater self-sufficiency for Singapore.

Singapore currently relies heavily on imports, and this needs to change. Top imports for Singapore include refined petroleum and crude petroleum. We also currently import over 90 per cent of the food consumed locally. 

These commodities are vital for us — oil is needed for us to maintain our public transport system, and food is needed for survival. 

For instance, Malaysia’s chicken export ban caused some panic several months back, and this was just one commodity. 

While the Singapore government has been far-sighted enough to secure reserves of these commodities, even the best laid plans can fail. As such, Singapore needs to develop substitutes for its imports, to ensure that it is not overly reliant on imports to survive. 

The Malaysian chicken export ban may be over, but it is certainly not going to be the last time that external shocks cause panic in Singapore. The need to import these commodities is a weakness that needs to be addressed. 

The development of renewable energy, and the electrification of transport, will go a long way in cutting down our need to import fossil fuels. At the same time, the local production of food will also help to alleviate our dependence on foreign imports.

Fortunately, there are already initiatives underway to encourage adoption of electric vehicles (EVs), and for local agriculture.

The government has announced the Singapore Green Plan 2030 in order to support EV infrastructure construction and encourage its adoption. In terms of agriculture, the government has announced the ‘30 by 30’ goal, in order to build up Singapore’s agri-food industry capacity and produce 30 per cent of Singapore’s consumption needs by 2030.

And in developing substitutes for these imports, startups, entrepreneurs, and the likes will be crucial for Singapore. 

While Singapore does not have enough space for large-scale agriculture, agritech startups are moving into high-tech farming, and making use of underutilised spaces for agricultural production

Energy production, however, remains insufficient. Over the years, the amount of fossil fuels that Singapore uses has increased: 

singapore electricity production
Image Credit: Wikipedia

This represents an increasing dependence on foreign imports, since Singapore has no fossil fuel reserves of its own.

Innovations in developing substitutes for these fossil fuels, or even ways to reduce the usage of them, would be a step in the right direction towards greater self-sufficiency for Singapore. 

In other words, Singapore should ensure — to the greatest extent possible — that it does not have to trade. Trade is good and beneficial, but must be optional rather than existential.

What does this mean for trade overall?

Of course, being self-sufficient does not mean that Singapore cuts itself out from trade. On the contrary, it may mean doubling down on trade in some aspects, especially in terms of exports. 

Trade grows fastest when a country produces a good that others want to consume, but cannot produce themselves. If Singapore holds monopolies on goods, it will mean that overlooking Singapore as a source of imports will be much more difficult.

A strong export base therefore means continued demand for Singapore’s products, and continued revenue for spending — on further research and development of new products for export, on social spending for Singaporeans, and shoring up our foreign reserves.

pm lee ndr 2022
Image Credit: Prime Minister’s Office

When PM Lee stated that Singapore cannot consume all that we produce, he was right. We must continually find new markets and compete for customers or be overtaken and relegated to irrelevance. 

But in order to ensure a continual supply of new markets, we need a continual supply of new products, which must be developed by startups, entrepreneurs, and businesses.

These will function as Singapore’s primary engine of growth and serve to future-proof Singapore’s economy. To that end, Singapore must ensure that we have the resources and stability needed to attract, support, and nurture these talents. 

While the competition for consumers rages on, we must also remain conscious of this competition that is running in parallel: the one for talent. Other countries are already trying to lure top talents from Singapore away — the UK, for one, has introduced a new visa scheme to lure graduates to their own shores

This is one competition that Singapore cannot afford to lose. Singapore must not only attract talent from overseas, but also keep our local talents. 

When Jan Peterson Coen set up the Dutch Colony of Batavia in the Dutch East Indies, he sent back a letter to Holland that bore the words: “Trade in Asia must be maintained under the protection of our own weapons; and they have to be paid for from the profits of trade. We cannot trade without war, nor make war without trade.”

While there is certainly no war that Singapore is involved in today, at least, not in the sense that Coen was referring to, the sentiment is still very much relevant. The marketplace is a battlefield, and any army that fails to account for its own supplies will inevitably be defeated. 

In modern terms, these supplies are talents, innovation, and products for export.

The war that Singapore is currently facing is one that is economic, and it is one that Singapore must either win or become irrelevant.

Featured Image Credit: Suhaimi Abdullah via Getty Images

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Vulcan Post aims to be the knowledge hub of Singapore and Malaysia.

© 2021 GRVTY Media Pte. Ltd.
(UEN 201431998C.)