1) Uncertain Global Financial Situation Ahead – The Economy
Singapore, as a small nation, has to overcome many challenges in order to maintain our lead and ensure long term survivability. On the economic front, we have just overcome the 2008 global economic recession, sparked by the failure of major banks in the United States, with fortunately minimal injuries. This episode has demonstrated the resilience of Singaporeans and the resolve of the government in solving tenacious issues faced by Singapore. Our economy, guided by the sound policies of the government has rebounded and is growing strong. Our GDP grew by a sterling 14.5% last year, and by 5.9% on a year-on-year basis in the third quarter of 2011. Total employment grew by 24,800 in second quarter of 2011 and unemployment rate is at 2.1%. By all measurements, our economy is healthy and our people employed.
The world is threatened with a repeat of the 2008 financial meltdown, but on an even more cataclysmic scale. Just as we thought that the United States’ economy is showing initial signs of a recovery, their debt situation appears to be spiraling out of control. In Aug 2011, major credit rating agencies downgraded the US’s rating to AA+. Europe is still deep in recession and the financial storm engulfing Europe is far from over. The worrying signs of “Japanisation” of the American and European economies have sent ripples across the globe and many Eurozone governments are still struggling to find solutions to their economic and social problems. The profligacy of PIIGS (namely Portugal, Italy, Ireland, Greece and Spain) is one root cause of the financial woes faced by the Euro zone. As one sagacious Eurocrat told the Economist: “We are speleologists (scientific explorers of caves) trapped in a tunnel. We cannot go backwards; we can only go forward.” What lies ahead though is far from certain.
While Singapore has been relatively insulated from these problems, we must remember that we are an open economy. When the world economy falters, our economy will falter too. It is important, that we in Singapore must always be alert and ready for a global economic recession in the near future. We must be ready to put through the necessary policies for Singapore to pull through tumultuous times. We must continually look to equip Singaporeans with the right skills to enable them to survive in this competitive globalized world.
2) Stiff Competition from Region and Worldwide
Singapore is one of the most open and freest economies in the world. As a small economy, Singapore has no other choice but to embrace globalisation, open up its markets, and foster competition. It is in Singapore’s vital interest to advance the global trade and investment liberalisation agenda and to ensure a strong rules-based multilateral trading system. Singapore has been a consistent champion of liberalisation on the multilateral, regional and bilateral fronts. To date we have signed 18 FTAs with major economies and regions around the globe. These FTAs have positively contributed to Singapore’s growth in recent years.
Moving forward, we need to focus our attention on these FTAs and ensure that they are optimally utilized to the benefit of our economy. Let us ensure that all Singapore companies, be it SMEs or larger companies, know and can leverage on these agreements. This will allow our companies to stay competitive globally and help strengthen our economy.
With the ongoing financial woes in the United States and Europe, the Asia-Pacific region seems to have emerged as the epicentre of world economic growth in the near and medium term. We need to be cognisant that our fortunes are tied to external developments. As a small economy, Singapore can never seek to determine these developments nor can we insulate ourselves completely from these developments. Rather, we need to sharpen our responses to adapt, adjust, restructure, and transform ourselves to make the best of these developments. The pressure has been heightened due to globalisation and competition from lower-cost manufacturing locations.
These are exciting yet treacherous times ahead in Asia. We must stay strong, cohesive and alert. To maintain our competitive position despite rising wages and overall costs of business, the government must continue to promote higher value-added activities in the manufacturing and services sectors, and to raise productivity. We need to stay ahead of the power curve and remain competitive against our regional and worldwide competitors.
We must not cease to think out of the box and explore new ideas and innovations to strengthen our competitiveness. We have injected new life to the tourism sector, by bringing in the most coveted SingTel Formula 1 Singapore Grand Prix Night race which has earned the accolade of being F1’s black gemstone. In addition, the government has also taken the bold decision in 2005 to develop the 2 integrated resorts which opened their doors last year with much fanfare and success. Moving forward, we must explore creative ways to ensure that our economy remains ahead of our competitors.