Singapore: A City Constantly in Transformation
Diminutive in size yet grand in stature, this city-state has both eyes on the horizon of tomorrow.
Issue: Jun 2009
In September 2008 - the month of the Lehman Brothers collapse - private sector economists were expecting Singapore's 2009 GDP growth to be 4.6%. Although not as high as the sparkling 7.8% growth in 2007, it was still a respectable figure for an economy at such an advanced stage of development. As the financial crisis unfolded globally, Singapore's fortunes tumbled rapidly. In the short span of just 7 months, the government has come out to revise its 2009 growth forecast several times, the latest forecast being a shocking -6 to -9%. The dire prediction came on the heels of a -11.5% fall in 1Q09 GDP growth, the sharpest drop since records started in the mid 1970s.
This forecast, if realized, could possibly make Singapore one of the worst performing Asian economies in 2009. Resident unemployment has also doubled from a low of 2.4% in December 2007 to 4.8% in March 2009, and government leaders are preparing the workforce psychologically for more retrenchments to come.
The swift reversal of Singapore's growth should come as no surprise to anyone, as Singapore's future is tied intricately with that of the world. With trade amounting to 3.6 times of GDP, Singapore is fully exposed to the vagaries of global trade and to the fortunes of its key trading partners. The recovery of the Singapore economy will therefore depend crucially on the recovery of the global economy. However, as evidenced by the experience of Singapore's past recessions, the ensuing recovery could be as sharp as the plunge. In fact, many observers see Singapore as a canary in the coal mine, keenly sensitive to changes in the health of the global economy.
The trillion dollar question, obviously, is when will the global economy recover? Much analysis on this topic has been written by numerous analysts and numerous predictions abound. Recessions do not last forever, and the general consensus is that the global economy has seen the worst, and the pace of contraction is slowing. The arrest of this sharp downturn is in large part due to the massive fiscal and monetary stimulus that governments around the world have pumped in since September 2008. Unprecedented in scale, the impact of the coordinated global governmental actions is beginning to be felt. This has also helped to lift consumer and business confidence worldwide from extremely low levels. As the tentative signs of stabilization take root, the global economy could possibly bottom by the later part of 2009 or early 2010. Of course, a lot of downside risks still remain, and more green shoots of recovery need to be seen before we can safely put the global downturn behind us.
Sound Policies to Tide Singapore Through
In the meantime, the government has announced several policies to help cushion the economy from the sudden collapse in demand from major markets globally. These policies centre on helping businesses survive by reducing their operating costs, helping displaced workers retool and upgrade their skill set to improve employability, and bringing forward large scale infrastructure projects to enhance the long-term competitiveness of the economy. Central to these policies is the tenet that the crisis will not last forever, and that Singapore should take this downtime to restructure and enhance its competitiveness, so as to seize the good times when the sun shines again. Rooted also in the policies, is a keen sense of pragmatism, far-sightedness and a rejection of populist policies. For example, calls by several analysts for Singapore to stimulate its domestic demand, although a seductive populist idea, is rejected as being not pragmatic for a small and open economy like Singapore.
Restructuring to position for the good times is not painless. But it is not something new to Singapore either. For a nation with no natural resources, Singapore's economic success had never come easy, and was only achieved as a result of her ability to be highly pragmatic and responsive to change. Throughout the forty odd years since independence, Singapore has had to change her economic strategy repeatedly in order to tackle the economic realities of the times.
The Port of Singapore was integral to our rapid growth in global trade.
In the early 60s, Singapore adopted an import substitution approach to industrialisation. After independence in 1965 and losing access to the Malayan Common market, Singapore switched to an export-led industrialisation policy to tap into the global markets. By the late 70s Singapore went through a round of industrial restructuring, to bring in jobs with a higher value adding component. When other Asian economies joined in the game of attracting MNCs in the 80s, Singapore set its sights on capability building and diversification to deepen its technological capabilities and expand ties with global export markets. Following the 1997 Asian Financial Crisis, the Singapore government also set up successive high level committees comprising the public and private sector to reassess the nation's economic strategies.
Seizing Opportunities In the Knowledge Economy
Singapore highly rated for shopping, nightlife and fine dining.
The economy is currently on track towards becoming a knowledge-based economy, driven by creativity, innovation and enterprise. Singapore is also in the process of upgrading its "software", to enhance its livability and attractiveness as a destination for global talents. This effort to shake off Singapore's staid image is beginning to bear fruit. According to Futurebrand's latest 2008 country brand index, Singapore was ranked amongst the top spots globally for shopping (3rd), nightlife(7th), and fine dining (4th). Singapore was also ranked by human resource consultancy Mercer as Asia's most livable city and the 26th most livable city globally, above Paris and all the US cities. Unsurprisingly, Singapore is becoming a magnet for global talent, attracted not only by the vibrant economic opportunities, but also by the high quality of life. As a testament to its attractiveness, investment guru Jim Rogers and international movie star Jet Li decided to set up home in Singapore. Movie star Gong Li also took up citizenship in Singapore last year.
The Singapore Story is one of constant metamorphosis. Change is embraced with fervor and the economy has always managed to reinvent itself to seize new opportunities and prosper throughout the years. Although the ongoing global financial crisis is proving to be one of the toughest challenges for Singapore since independence, its sterling track record should see the nation emerging from the crisis in an even better position than before. With such a reputation, it is easy to wager that Singapore will remain an irresistible location for work, life and play in the years to come. Contributed by Andre Lim and Serene Lim of the CapitaLand Economics Unit.