Oral reply to PQ on the impact of the external environment on Singapore's economy

Questions

Mr Saktiandi Supaat: To ask the Minister for Trade and Industry (a) how will the US-China Phase I Trade Deal impact Singapore's economy; and (b) how can local manufacturers that export parts for US goods leverage on the new agreement to boost their businesses.

Mr Saktiandi Supaat: To ask the Minister for Trade and Industry in light of local exports declining in the past nine months (a) how many businesses and employees have been affected in the past year; (b) whether outreach has been made to businesses to assess the impact and assistance they may require to stay afloat; and (c) what progress has been made on efforts to expand our export market in the past year.

Oral Answer by Minister for Trade & Industry Mr Chan Chun Sing

1.      Mr Speaker, may I have your permission to take Questions 1 and 2together please.

2.      I will group the answers into two parts: first, global developments and their potential impact on Singapore's economy; second, the Government's strategies to grow Singapore's economy and create good jobs for Singaporeans.

Global Developments and Potential Impact on Singapore

3.      2019 was a volatile year for the global economy. The IMF downgraded the 2019 global growth forecast five successive times – in each of its quarterly reports since October 18 – to 3.0%, down from the 3.6% achieved in 2018. Fortunately, the global economy avoided several worse scenarios including an all-out trade war between the US and China, but downside risks remain. As a small, open economy, Singapore was affected by these macroeconomic conditions. Our non-oil domestic exports declined by 10.1% on a year-on-year basis between January and November 2019. Advance estimates show that Singapore’s economy grew by 0.7% in 2019, slower than the 3.1% recorded in 2018.

4.      Looking ahead, MTI expects Singapore’s GDP growth to pick up modestly to between “0.5% to 2.5%” on the back of a slight uptick in global economic growth and a gradual recovery in the global electronics cycle. Even though we are cautiously optimistic, there remain several uncertainties in the global economy.

5.      The biggest uncertainty is the relationship between the US and China. This is the most important bilateral relationship for both countries, and indeed the entire world. We welcome the announcement of the Phase 1 trade deal, especially the cancellation of further tariff hikes in December 2019. Averting further trade tensions is positive news for all countries. We hope that this is the first step towards putting the relationship back on a stronger footing. We look forward to learning about the details of the Phase 1 deal on 15 of January 2020, and working with both countries to grow our economies.

6.     Another uncertainty pertains to Brexit, for the UK and the European Union are collectively our third largest trading partner in goods, and our biggest trading partner in services. Mr Seah Kian Peng had filed a PQ for the next sitting on the implications of Brexit on Singapore and Singaporean companies. I would like to take this opportunity to address Mr Seah's question as well. Based on the terms of the draft Withdrawal Agreement, the immediate impact of Brexit is likely to be limited. This is because, until 31 Dec 2020 at the least, the UK will functionally be treated as an EU Member State and remain a party to the EU’s international agreements – including the EU-Singapore Free Trade Agreement (EUSFTA) which has just came into force. However, this may change depending on what the UK Parliament decides in these coming weeks. In addition, what happens after 2020 has not yet been determined. Singapore is therefore working with the UK on an economic agreement to maintain continuity in our economic relations after the EUSFTA no longer applies to the UK.

7.     I wish to remind Members that these uncertainties are not unrelated. What is happening between the US and China, the UK and the EU, and other economies like India, Chile and Hong Kong, are manifestations of a deeper unhappiness over the inequitable distribution of gains from globalisation, and a concern that tomorrow will not be better than today. That is why the multilateral trading system – which has underpinned decades of economic integration and free trade – is itself under significant stress. Since 11 December 2019, the WTO’s Appellate Body has been non-functional because there are not enough appellate judges to meet the quorum. The WTO’s appellate function is an existential one for the multilateral trading system, because it ensures the robust enforcement of multilateral trade rules. Without this binding and neutral mechanism to resolve trade disputes, the risk of a fragmented trading system will grow. There will be severe consequences for all WTO members – including Singapore – should trade, talent, and data flows become disrupted. The strategic question confronting the world is whether it continue to turn inward and become less open, or it finds a new balance that enables economies to remain open and connected, while ensuring that our people benefit equitably from such integration.

8.     Apart from these challenges, there are also unanticipated issues that affect the global economy such as the situation between the US and Iran. Any escalation between the two countries may portend further instability in the Middle East, which could have negative implications on the global economy including Singapore.

9.      I should add that it is not just doom and gloom for the world. There are also many exciting opportunities to harness. For example, the digital economy is a major opportunity for us in Singapore. Digitalisation enables small countries like Singapore to transcend size and geography, and help our enterprises to penetrate new regional and global markets. Within Southeast Asia alone, the digital market is estimated to exceed US$300 billion by 2025[1] – almost the same size as the current Singapore economy, and right at our doorsteps! And although the IMF has downgraded its global growth forecasts, Asia remains a bright spot with growth estimated at 5.1%.

Government’s Economic Strategies

10.      In sum, there will be both uncertainties and opportunities in the year ahead. It is incumbent on us to ensure our ship is seaworthy, set our sails to catch the wind. The Government will help Singapore businesses navigate the challenges and seize the opportunities. This includes helping Singaporean companies to expand into overseas markets, as well as providing customised support for companies to press on with productivity improvements, innovation and the training of our workers.

11.     Singapore has to adopt a long-term perspective in its economic strategies, even as we tackle the short-term headwinds. Allow me to elaborate on three strategies that the Government has taken to grow our economy and create good jobs for Singaporeans.

12. First, we are strengthening Singapore's fundamental to distinguish ourselves amidst the uncertainties.
a.     In July last year, I shared with Members some of the factors that have enabled Singapore to stand out from the competition.          

i. Our stable political environment and united leadership empower us with the capacity to plan for the long term;           

ii. The rule of law and pro-innovation regulatory environment provide certainty for businesses to thrive;              

iii. Our superior connectivity with the rest of the world allows us to look to the world for opportunities;          

iv. Our strong tripartite partnership and a skilled workforce that continually upgrades and generates new ideas, acquire new skills and knowledge that redefine what is possible for a country with no natural hinterland.

b.     The international community recognises these strengths. That is why the EDB has attracted more than $8 billion of investment commitments in 2019, despite the global economic uncertainties. These investments are in high value-added sectors such as electronics, aerospace and pharmaceuticals. I have not included investments from other sectors in the above figure, such as the $9 billion expansion of the two integrated resorts. These investments will create many good jobs for Singaporeans, and they reflect the global business community's confidence in our future.

c.     Moving forward, we will continue to deepen our linkages with key markets, and transcend our geographical boundaries by pushing into new dimensions of connectivity that include the flows of data, talent, ideas, and technology.

13.     Second, we are helping Singapore companies and workers to internationalise, and turn the world into our hinterland. The preconditions are in place, thanks to our excellent connectivity and our extensive network of 25 FTAs with 64 trading partners, which collectively account for more than 85% of global GDP and more than 90% of Singapore's trade.

     a.     Last year, as of September 2019, we gave about 800 companies grant support for their foray into overseas markets through the Market Readiness Assistance (MRA) scheme. In the same period, about 1700 companies were supported in growing their businesses both domestically and overseas through the Enterprise Development Grant (EDG) programme in the areas of capability development, market access, manpower development for internationalisation.

     b.     These transformation efforts have translated into higher pay and better career progression opportunities for our workers. As businesses grow, they will create more good jobs for Singaporeans. To further strengthen the linkage between enterprise transformation and benefits to our workers, we will include commitment to worker outcomes as a mandatory condition for companies that apply for EDG funding from 1st April 2020. These outcomes may include wage increases, job creation, job-redesign, or hiring of older workers. It will reinforce our message to building an economy that is both pro-enterprise and pro-worker.

     c.     Besides the EDG, there are also employee-specific schemes like the Professional Conversion Programme (PCP) to help mid-career PMETs reskill and embark on new careers, and the Global Ready Talent (GRT) programme to equip workers with skills relating to internationalisation. Through these programmes, we hope to prepare more Singaporeans to compete and succeed across the region and in the world.

     d.     The Government will announce further initiatives to help our businesses transform and build stronger capabilities at this year’s Budget.

14.      Third, we are pursuing new growth opportunities.

      a.     Through the work of the Future Economy Council (FEC) and the Industry Transformation Maps (ITMs), we are developing new industry niches in areas such as additive manufacturing, robotics and sensors. These build on our existing strengths in sectors such as electronics and precision engineering, and will enhance Singapore’s position in the global value chain.

     b. We are also partnering industry players to develop new capabilities in promising growth areas such as agri-food, urban mobility and precision medicine. For example, we will be establishing the Agri-Food Innovation Park (AFIP) in Sungei Kadut, to bring together high-tech farming and R&D activities in areas such as urban agriculture and aquaculture. Through this, we hope to create new career opportunities and grow a new generation of technopreneur farmers.

    c.     To capture opportunities in the digital economy, Singapore is co-leading the WTO Joint Statement Initiative on E-Commerce (JSI). The JSI will establish multilateral rules to help companies navigate the complex e-commerce landscape. We are exploring deeper collaborations with key economic partners like Chile, Australia and New Zealand, through a new generation of "digital economy agreements" to open up more opportunities for our companies.

Conclusion

15.      Mr Deputy Speaker, Sir, as a small country, Singapore cannot completely insulate ourselves from ups and downs in the external environment. But there are steps we can take to strengthen our economic competitiveness and build stronger capabilities in our enterprises and workers. Our success has always been predicated on our will to make the best of what we have, and our resolve to turn adversity into opportunity. If we continue to stay united and work together as one people, we can all look forward to a better tomorrow for us all.