Economics Development in Singapore
In the discussion of Economic Development in Singapore, it is imperative to examine the underlying challenges of Singapore and understand the significance of these issues. Such an examination allows us to prioritise differing problems so that Singapore’s economic policies can directly tackle them with accuracy.
The current era calls for rising neighbouring competitiveness as countries surrounding Singapore pick up their respective economic development and pushes for fast-paced growth. Competitive growth like these undermines Singapore as the economic leader in ASEAN because they capture more economic stakes in the global markets.
Additionally, increasing trade protectionism in the globe has served to implicate Singapore’s economic development by raising the tariffs on Singapore’s exports. Facing higher prices of Singapore exports in the global markets, there is a natural fall in demand for such exports which in turn, causes significant decreasing GDP due to Singapore’s high trade-to-GDP ratio.
Furthermore, the cost of production has also risen in terms of wages and rents. This is largely driven by a growing ageing population as well as rising land constraints respectively. Consequently, higher production costs erode Singapore’s comparative advantage in trade and shy away investment opportunities from the global markets.
What can Singapore do to resolve these global economic challenges
In combating rising neighbouring competitiveness, Singapore embarks on its Exchange Rate Management through a neutral monetary policy with gradual appreciation. Not only does the policy neuter rising import costs due to increasing demand of raw materials from ASEAN countries, it solidifies Singapore’s reputation as a global financial hub and provides currency stability.
Despite rising trade protectionism from prominent countries such as USA, Singapore continues to push forward for Free Trade Agreements (FTAs) to ensure the cutting of trade tariffs, thereby maintaining high trade volume with significant economies. For example, in March 2018, Singapore became one of the 11 signatories in the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), ensuring trade competitiveness across the Asia-Pacific region despite the withdrawal of USA from the pact. On the other hand, Singapore has also led ASEAN in the negotiation of the Regional Comprehensive Economic Partnership (RCEP), forging trade networks covering almost half the world’s population.
In light of the rising production costs, Singapore has also commenced with infrastructural and manpower development aimed at raising labour productivity. On the macro scale, the Singapore government has launched an initiative to set up a digital district in Punggol North, serving as a mini silicon valley of Singapore. The district will open up 28,000 digital economy jobs and raise the technological expertise in Singapore, thereby complementing rising wages with higher labour productivity. On the micro scale, Singapore introduced the SkillsFuture Credit scheme which incentivises individuals to upgrade their employment skills. This scheme allows Singaporeans to learn new skills and enhance their productivity at work, therefore building towards a highly skilled working population to match rising cost of production.
To constantly lead the global market as a strong and independent economy, Singapore has also poured immense capital into the Research and Development (R&D) sector to shape new industries and spearhead existing ones. Its $19b Research, Innovation and Enterprise (RIE) 2020 Plan are cornerstones of Singapore’s national strategy to develop a knowledge-based, innovation-driven economy and society, aiming to grow industry R&D capabilities, nurture innovative enterprises, and meet its national needs. These R&D investments in research, innovation and enterprise will raise potential capacity of Singapore’s capacity and help cultivate economic sustainability as Singapore hedges against the uncertainty and volatility of future economic challenges.