Oral reply to PQ on Singapore's economic resilience in the face of COVID-19

Questions

Ms Tin Pei Ling: To ask the Minister for Trade and Industry how resilient is Singapore’s economy and supply chain in the face of crises such as the COVID-19 outbreak.

Mr Leon Perera: To ask the Minister for Trade and Industry whether, as part of economic defence, the Government has considered nurturing a certain amount of domestic manufacturing capacity for critical necessities in product categories like medical disposables.

Oral Answer by Senior Minister of State for Trade and Industry Mr Chee Hong Tat

1. Sir, the COVID-19 outbreak has adversely affected the Singapore economy. It has led to a sharp fall in tourist arrivals and a decline in domestic consumption, which have in turn badly affected our tourism, transport, retail and F&B sectors. The disruption in economic activities in China is also expected to negatively affect export-oriented sectors such as manufacturing and wholesale trade.

2. Singapore is a small and open economy, the COVID-19 outbreak is a reminder of how unexpected external shocks can have a significant economic impact on us. To improve our resilience to such shocks, a key strategy that the Government pursues is economic diversification. This entails the diversification of our economic structure, our markets and our supply sources.

3. First, we have diversified our economic structure across different sectors.

a. For example, we kept the manufacturing sector at 20 per cent of the economy, and developed a range of clusters within the sector. We have also kept our services sector diversified, growing modern services like information & communications alongside trade-related ones like wholesale trade.

b. Hence, even though the COVID-19 outbreak is expected to significantly affect the tourism and transport sectors, other sectors such as construction and information & communications are projected to continue to grow and support our overall economy.

4. Second, we have diversified our export markets to enhance our resilience to market-specific shocks and downturns. We have expanded our network of free trade agreements to give our companies access to a wide range of markets. In this way, we are plugged into growth markets, without being overly reliant on any single market for our exports. No single economy accounted for more than 15 per cent of our domestic exports in 2019.

5. Third, our economic agencies work closely with companies to diversify the sources of supply for materials, manpower and food.

a. Our companies’ supply chains have been put to the test in recent weeks due to disruptions in China’s industrial activity. While the impact varies from business to business, companies have indicated that they are generally able to cope with the disruptions because they have existing inventories or alternative suppliers. Most companies have also been able to manage the manpower disruptions arising from the travel restrictions and quarantine measures implemented in China and Singapore to contain the spread of the virus.

b. As for food supplies, we have not seen significant disruptions arising from the situation in China, due to our efforts to buy from different sources over the years.

c. The Government also retains some domestic supply of critical necessities to mitigate any overseas supply disruptions. For instance, we stockpile rice, personal protective equipment (PPE) and pharmaceuticals during peacetime, and we also have local manufacturing capabilities for other items such as noodles and masks.

6. Overall, our strategy of economic diversification has helped to enhance the resilience of our economy in times of crises, such as – right now – during the current COVID-19 outbreak. MTI will continue to work with our businesses to improve the resilience of our supply chains by buying our inputs and essential supplies from different countries, and building up local production capacity, where possible, and where it makes economic sense.