• Good morning.
• This session’s theme – “Asia in the post-pandemic era: What a new normal could look like” – is broad.
• To catalyse our conversation, I will suggest we look slightly beyond the pandemic, at three sets of issues:
o First, three challenges facing the world;
o Second, three responses the global community can undertake; and
o Third, how Singapore is positioning ourselves to overcome these challenges and seize opportunities to emerge stronger.
Three Challenges Facing the World
• COVID-19 has been raging for a year now. But the deeper challenges facing the global economy go far beyond the pandemic.
• First challenge. The proper functioning of the global economy is at risk of becoming increasingly distorted by geopolitics.
o Trade tensions as well as politically induced reordering of the global production and supply chains are all detrimental to the proper functioning of our global economic system.
o The paralysis of the WTO system threatens the international rules-based trading system which has benefitted countries, both large and small.
o The challenges brought about by the pandemic have accentuated protectionist tendencies in many places, in the name of protecting local interests, but at the expense of global output and connectivity.
o Instead of achieving more optimal global outcomes through greater interdependence, we risk moving towards fragmentation.
• Second challenge. The pandemic has aggravated the fiscal strain on many countries, risking the increasing use of beggar-thy-neighbour exchange rate policies, as well as unsustainable fiscal and monetary policies.
o The global competition for fiscal revenue has intensified greatly.
o To protect domestic revenues, some governments around the world are aggressively pursuing mercantilist policies, including pressurising companies to reshore.
o International tax policy developments such as Base Erosion & Profit Shifting (BEPS) 2.0 will also impact the way countries compete, where investments go and affect how corporate profits are allocated and taxed.
o Digital trade barriers are another example of such policies, as governments erect walls to keep data and its benefits, including monetary ones, within the country.
• Third challenge. Widening economic disparities both within and between countries.
o New technologies and disruptive business models will accentuate the gap between the disruptors and the disrupted. Many new technology sectors are facing a winner-takes-all situation.
o As countries, companies and workers experience unequal effects from the geo-economic disruptions, the dispersion of growth, corporate earnings and wages will grow.
o A fragmented global economy will exacerbate the inequality of opportunities between the haves and the haves-nots. It will be much less capable of providing opportunities to uplift millions from poverty or allowing millions to break out of the middle-income trap.
o Widening disparities have spillover effects. Protectionist tendencies will grow, as people question the benefits of globalisation. Innovation and growth will slow, as wealth and development becomes concentrated in an ever-shrinking group of companies and countries.
Global Community Responses
• However, the challenges above will not define the global economy. Our responses will.
o Like-minded countries and companies must come together to resist the fragmentation of the world economy, and join hands in developing solutions that will improve outcomes for all in the long run.
• The first thing that countries can do, is to resist the siren call of anti-globalisation policies, and band together to commit to uphold and strengthen the global trading system.
o Many major powers are facing significant domestic challenges, and can expectedly be more circumspect about shouldering global responsibilities for integration.
o But for those of us who have reaped the fruits of economic integration, we too have a responsibility to contribute towards reinforcing the international rules-based trading system.
o At the most basic level, this would mean resisting protectionist measures – avoiding the erection of more tariff and non-tariff barriers that artificially distort commercial decisions.
o Beyond that, we must also pursue connectivity and streamline trade rules to enable businesses to move efficiently across borders.
• Second, we must work together to break new grounds and update the rules for the global trading system.
o Data and the digital domain will fuel the next lap of economic growth.
o The greater and safer the global digital commons, the better our chances to leverage data and digital services to propel our next wave of growth.
o We need to pursue and improve cross-border digital integration.
o These include economic agreements in forward-looking areas such as data, finance and technology.
o For businesses, improved digital connectivity will allow them to transcend their size and to source from and sell to global markets, vastly expanding their reach.
o Deeper cross-border inter-company linkages will also help to reinforce the reality that economic integration is key for global recovery.
• Finally, and this is something that the pandemic has made eminently clear: the world needs to work together to overcome challenges of a global scale.
o The COVID-19 pandemic has laid bare the futility of trying to go it alone. Even if a country’s efforts at containing the pandemic were successful, it would mean little if trade and travel remain impossible while other countries are ravaged by the pandemic.
o Countries’ vaccine distribution efforts seem to be domestically focused, but they actually form a concerted global effort to help the world recover together, and to allow international borders to reopen.
o This cannot happen if countries hoard or refuse to share medical research, manufacturing facilities or raw materials for the vaccines.
o No one is safe until everyone is safe. No economy can recover faster unless everyone recovers in tandem.
• Here in Singapore, we have a vested interest in ensuring that the rest of the world steps up to manage these challenges. As an open and connected economy, our progress is ultimately linked to the success of the global economy.
• We have put in place policies to help Singapore navigate the fractious global trading environment.
o Our starting assumption is that we are not going back to a pre-COVID world.
o Instead of looking backwards, we are looking forwards, to the opportunities in a COVID and post-COVID world.
• First, we are doubling down on efforts to reinforce our position as a global business hub.
o COVID has changed the world in which businesses connect, and many more coordinating activities can now be conducted virtually. But we believe there is still a role for trusted hubs where businesses can aggregate talent, mobilise capital and protect intellectual property.
o While the world economy faces increasing fragmentation, we believe we can remain globally relevant by adding value to different businesses, and helping them to serve a multitude of markets.
o The world knows that it can trust Singapore to be a reliable, neutral hub; a safe harbour for capital, talent and IP.
o To reinforce our position as a business hub, we are working closely with like-minded international partners to improve our physical and digital connectivity.
Examples of our efforts include DEAs, such as those signed with Australia, and Chile and New Zealand, as well as MOUs to improve access to trade financing, such as that signed with the US.
• We are taking a practical approach to tackling the pandemic, taking consistent, sustainable steps to adjust and recalibrate our policies along the way.
o In Singapore, we have taken a “risk management” rather than a “risk elimination” approach. Shutting ourselves off fully is not an option, which is why we worked with like-minded countries to enable essential business travel early on.
o More recently, we saw the opening of the Connect@Changi facility under the Connect@Singapore programme, which allows business travellers from around the world to meet safely in a dedicated facility.
o We are also constantly re-evaluating business models to find new solutions for the post-COVID world. Industries reliant on mass events for instance, like the MICE industry, will need to digitalise rapidly, and find new ways to meet customer needs.
• This leads me to my final point, which is about helping our local businesses and workers prepare for the changed economy.
o I spoke about widening disparities earlier. Without targeted support, such disparities will only worsen post-COVID.
o We are focused on helping our local enterprises pivot and remain competitive. Businesses will need to think about improving their supply chain resilience, diversifying sources of goods and labour, and developing digital capabilities.
o We have put in place support schemes for businesses at all stages of development, from helping smaller companies develop their online presence, to mentorship programmes to develop the next generation of business leaders.
o We are also working hard to upgrade and upskill workers, so that they will not be left behind. Besides ensuring fair competition locally, we are also focused on enabling our people to compete on a global scale.
• For Singapore, with the world as our hinterland and market, we are a price-taker.
• And as a price-taker, we do not have the luxury to sit back and consider whether we are facing good times or bad times. We just have to make the best of times. And that’s precisely what we are focused on.
• By doing the right things and doing things right, we are confident that we can seize the opportunities and emerge stronger from this crisis.
• Thank you.