Oral reply to PQ on the state of Singapore economy

Questions

Mr Liang Eng Hwa: To ask the Minister for Trade and Industry what is the current state of Singapore’s economy and growth risks ahead and where does the Government intend to pivot to given this period of great external uncertainty.

Mr Saktiandi Supaat: To ask the Minister for Trade and Industry (a) whether he can provide an update on the likely impact that Singapore may face from the US-China trade war and the widening reach of US export controls on emerging and foundational technologies; and (b) what measures and policies can be introduced to ensure headwinds from the escalating US-China trade war, disruptions to the global supply chain and global slowdown will not affect our economy significantly.

Mr Seah Kian Peng: To ask the Minister for Trade and Industry (a) how will the ongoing trade war between China and USA impact Singapore; (b) whether the Ministry can name the top three things that the man in the street should be prepared for; and (c) how will the Government cushion the impact.

Mr Ang Wei Neng: To ask the Minister for Trade and Industry (a) what are the implications of the trade dispute between US and China on Singapore's economy; and (b) what are the measures that the Government is prepared to implement should our economy slow down significantly.

Mr Pritam Singh: To ask the Minister for Trade and Industry (a) what is the Government's assessment of the impact of the US-China trade war on the Singapore economy and which sectors are envisaged to be worst-hit or particularly vulnerable; and (b) what measures will the Government institute to support Singaporean workers in these sectors.

Ms Sylvia Lim: To ask the Minister for Trade and Industry whether he can (i) give an assessment of the risk of a global trade war and (ii) elaborate on the strategies that Singapore is deploying to manage that risk.

Oral Answer (to be attributed to Minister for Trade & Industry Mr Chan Chun Sing)

1. Mr Speaker, may I have your permission to answer questions 2858, 2860, 2866, 2892, 2895 and 2899 together.

2. I will group the answers into three parts:

a. The state of Singapore’s economy,
b. Our medium term outlook, and
c. Our strategies to manage the challenges and seize new opportunities

State of Singapore Economy

 3. The global economic environment has weakened.  The IMF has lowered its forecast for global GDP growth this year by 0.2%-points, from 3.5% to 3.3%. Key uncertainties remain and these include: 

a. The US-China trade dispute, which has gone beyond retaliatory tariffs to other areas, including restrictions on technology access and sales.
b. The uncertainty and the risk of a disorderly Brexit.
c. The political uncertainties of some regional economies.

4. All these have dampened consumer and business confidence. Lower demand in our key export markets has in turn affected our outward-oriented sectors such as electronics, precision engineering and wholesale trade, whose performance remain weak. Although EDB is on track to achieving its Foreign Investments targets for this year, we are watching businesses’ investment decisions very closely.

5. However, there are pockets of strength in our economy. The information & communications sector is expected to grow given firms’ robust demands in IT and digital solutions. The education, health, and social services sectors are similarly expected to remain resilient. The construction sector has also turned around after three years of contraction. Our labour market remains resilient – employment continued to increase in the first quarter of the year, while unemployment remains low at 2.2%.

6. In May, MTI projected that our economy would grow between 1.5-2.5% this year. MTI will review our forecast in August, taking into account the full set of economic data for the second quarter, as well as the latest external economic conditions. 

2nd part of answer and the Medium Term Outlook 

7. The medium-term outlook for the Singapore economy will be determined by the following factors. 

a. First, how the US-China trade conflict develops

  i. Further tariffs will impact more goods, and bring about even greater reorganisation the of global supply chains.
ii. The IMF had estimated that the US-China tariffs could cut global economic output by 0.5%-points in 2020. 
iii. Both countries’ agreement to resume trade negotiations is welcome news, but there are fundamental differences and disagreements between them and those will take time to resolve. Prolonged US-China tensions will further undermine global business and consumer confidence.

b. Second, our medium term outlook will depend on how our major export markets perform. 

i. Southeast Asia remains a bright spark, and the US economy is holding up well.
ii. However, China’s economy could slow down more sharply than expected due to the trade conflict with the US; and this would further dampen its import demand from our region.
iii. And Europe needs a decisive resolution on Brexit.

8. While we must weather these immediate challenges. At the same time, we must more importantly navigate more fundamental shifts in the global economy that will shape our medium- to long-term prospects.

a. One is the future of the multilateral trading system.

  i. Over the past 40 years, Singapore has benefited from increased economic integration and free trade, underpinned by international rules that apply to countries big and small, and anchored by the World Trade Organisation (WTO).
ii. Unfortunately, the multilateral trading system is currently under stress. The risks of economic balkanisation, where markets are fragmented and bifurcated; and where trade, talent and data flows are disrupted, have grown. 
iii. An increasingly protectionist global environment would reduce our access to markets. 
iv. When we are all reduced to competing for a slice of a shrinking economic pie, no one wins.

b. Second, the emergence of global rules that may affect our status as a global hub.

i. For instance, ongoing discussions to introduce minimum effective tax rates across countries will affect our competitiveness, and carbon caps will constrain our growth potential.
ii. We must navigate all thesevery carefully to preserve our economic space.  

c. Third is our ability to harness new technologies and create new opportunities, especially in the digital economy.

  i. I will elaborate on this shortly.

Our Strategies

9. Let me now talk about our strategies.

10. To overcome these challenges and seize the opportunities, we will focus our economic strategy on three prongs:

a. First, strengthen our fundamentals to distinguish ourselves from the competition
b. Second, create opportunities by constantly refreshing our offerings to business and investors
c. Third, promote a conducive global and regional business environment with likeminded countries and companies.  

Let me elaborate.

Strengthening our fundamentals to distinguish ourselves amidst the uncertainty

11. Our fundamentals that have put us in good stead include:

a. A stable political environment with a competent and united leadership.
b. A pro-business environment, including rule of law, a pro-innovation regulatory environment, and a safe harbour for talent and ideas. 
c. Superior connectivity in supply chains and distribution networks, spanning physical dimensions of air, land and sea; and including non-physical dimensions such as finance and data, talent and rules .
d. A skilled workforce that continues to upgrade itself through training and retraining.
e. A progressive tripartite relationship that enables the Government, businesses and labour to overcome challenges together. 

12. Each of this attribute enhances our competitiveness. Collectively, they enable Singapore to be much more than the sum of its individual parts. That is why the IMD recently ranked Singapore the world’s most competitive economy. We must however not rest on our laurels, and seek to extend our lead, by continuing to build on these fundamentals and seizing new opportunities.

Seizing New Opportunities

13. The second prong of our economic strategy is to constantly refresh our offerings to business and investors, in order to seize new opportunities. As a small, open economy, Singapore must always adapt to changing external circumstances, and harness the power of our people and technology.

14. We are making encouraging progress transforming our industries through the work of the Future Economy Council (FEC) and the Industry Transformation Maps (ITMs). For instance, 

a. In Advanced Manufacturing, we are

i. Creating new niche areas such as additive manufacturing and advanced materials.  Our strong manufacturing sector will allow us to plug into global supply chains to meet demand from emerging adjacent industries, such as Electric Vehicles.
ii. We will build next-generation estates such as the Jurong Innovation District (JID) and Punggol Digital District. 
iii. We will also redevelop entire tracts at Sungei Kadut and Kranji for new industries.

b. To enrich our tourism offerings, we are 

i. Rejuvenating the two Integrated Resorts, transforming Orchard Road and exploring a new tourism site at Jurong Lake District
ii. We will also be developing Mandai and the Greater Southern Waterfront
iii. These initiatives will enhance our position as a global city for business and leisure.

15. Beyond transforming existing sectors and industries, we are also developing brand new sectors. 

a. For example, we are establishing a new Agri-Food Innovation Park in Sungei Kadut to realise our agri-tech ambitions. 

i. The Innovation Park will bring together high-tech farming and R&D activities, including indoor plant factories, insect farms, and animal feed production facilities.
ii. This will create a completely new range of jobs in agri-tech, and give a new generation of young technopreneur farmers the platform to commercialise their ideas.

b. Another new area we are focusing on is Precision Medicine

i. This uses each patient’s biological data to more precisely predict, diagnose and treat diseases. 
ii. EDB is working hard to bring to Singapore various biotech firms, medical technology firms, and digital health players 
iii. I just opened Glaxo Smith Kline (GSK)’s two new manufacturing facilities last week. GSK is investing more than $100 million in Singapore to produce new medicines faster and with a lower carbon footprint. 
iv. GSK’s investment reflects their continued confidence in Singapore’s future.

16. Besides transforming entire sectors, we will also support our companies to better  harness regional and global opportunities.

a. We already have a vibrant startup sector atBlock 71 at one-north..
b. We are doing  a better job helping companies scale up and grow. Enterprise Singapore will therefore launch the “Scale-up SG” programme on Wednesday to provide customised assistance to high-potential companies to grow and internationalise.
c. We must also continue to work hard  to translate our R&D capabilities into new business opportunities with our companies.

17. There is no lack of possibilities for Singapore. We are only constrained by our imagination.

Promoting a Conducive External Environment

18. To realise all these plans, we will continue to do our part to promote a conducive global and regional business environment with likeminded countries and companies.   This is the third prong of our economic strategy.

19. Digital trade is one such example. It is a key driver of our future economic growth. We will continue to advocate for an integrated, global digital economy. 

a. This includes our efforts to co-develop international trade rules for the digital economy. 
b. This is the reason why we are co-convenors of the Joint Statement Initiative on E-Commerce (JSI) at the WTO, which has since attracted participation from 78 countries. 
c. We are also pursuing a pathfinder Digital Economy Partnership Agreement with Chile and New Zealand, and are working with Australia on digital economy initiatives, which will all provide opportunities for our Singapore businesses in an increasingly digitalised future. 

20. We will also continue to deepen and diversify our trade links.

a. We will forge new partnerships through ongoing negotiations in Regional Comprehensive Economic Partnership (RCEP) and the Pacific Alliance Free Trade Agreement (FTA). Once concluded, the RCEP will be the world’s largest free trade area, bringing together economies accounting for a third of global GDP and almost half the world’s population. The potential for Singapore businesses will be enormous.

b. At the same time, we will review and upgrade our current partnerships, including the China-Singapore FTA, and the Comprehensive Economic Cooperation Agreement (CECA) with India. These upgrades will increase the benefits that Singapore companies already gain from the existing FTAs. Today more than 90% of our trade is covered by FTAs. 

21. These efforts will ensure that our external linkages remain strong whatever happens elsewhere in the world. And collectively they will give team Singapore the best chance for success. 

Conclusion

22. As Members can see, we are closely monitoring economic developments. While there are clouds looming, we believe we have the fundamentals to weather the storm. Our economic fundamentals are sound, we are in a strong fiscal position, and we are making good progress in restructuring our economy. The Government also stands ready to step up our support for companies and workers in sustaining our core capabilities, enhancing our competitiveness to seize new opportunities. So let us work together, plant the seeds for tomorrow’s growth, till the land, and we should have a good harvest.