Global economic shifts, highlighted by the current economic crisis, have seen a severe fall in demand from the Western hemisphere with Asia playing a more central role. As the US and European countries recover, with their demand for Asian exports taking a much longer time than expected to return to normalcy, export-oriented Singapore will have to look at newer markets to correct its falling trade balances and fuel aggregate demand. Here, newer markets in Asia, Latin America and Middle East will have to be developed through a more creative trade policy. Bilateral and multilateral engagements within the region, such as ASEAN, may allow Singapore to develop the hinterland as its market so as to supplement a small domestic economy.
The rise of China and India provide economic potential for Singapore exports and businesses as they are large markets that may help compensate the drop in demand in the US. While they provide opportunities, the ascendancy of these countries, particularly China, may also compete with Singapore for resources and investments for similar industries. Given that China primarily engages in more labour-intensive lower-end manufacturing activities, nevertheless a large domestic market and cheaper labour provides China with a comparative advantage that Singapore may find difficult to compete with over time. Moreover, the rising costs of fuel have made transport costs no longer negligible and may reverse the trend of transnational production networks. If production networks become more vertically integrated, then China may be well-placed to capture more stages of the production process, creating adverse impact for other manufacturing-intensive countries in the region.
Given that Singapore could concede this competition and continue to move up the value-chain of economic activities, this in itself has implications for the economy. Singapore has been quick to move up the value-chain and phase out industries that are lower in the rung. While this is strategic in utilizing the comparative advantage we have in technology, knowledge and capital, it has led to rising costs of doing business here, which has disadvantaged our Small and Medium Enterprises (SMEs).
The rise of China and India provide economic potential for Singapore exports and businesses as they are large markets that may help compensate the drop in demand in the US. While they provide opportunities, the ascendancy of these countries, particularly China, may also compete with Singapore for resources and investments for similar industries. Given that China primarily engages in more labour-intensive lower-end manufacturing activities, nevertheless a large domestic market and cheaper labour provides China with a comparative advantage that Singapore may find difficult to compete with over time. Moreover, the rising costs of fuel have made transport costs no longer negligible and may reverse the trend of transnational production networks. If production networks become more vertically integrated, then China may be well-placed to capture more stages of the production process, creating adverse impact for other manufacturing-intensive countries in the region.
Given that Singapore could concede this competition and continue to move up the value-chain of economic activities, this in itself has implications for the economy. Singapore has been quick to move up the value-chain and phase out industries that are lower in the rung. While this is strategic in utilizing the comparative advantage we have in technology, knowledge and capital, it has led to rising costs of doing business here, which has disadvantaged our Small and Medium Enterprises (SMEs).
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