Singapore May Need to Embrace A Shifting Economic Landscape as COVID-19 Impact the Worldwide Economy

Singapore Economy

Singapore Prime Minister, Lee Hsien Loong, has warned that COVID-19 will pose a considerable effect on the country’s economy. The outbreak has caused a marked decrease in Chinese tourism in the country and a dramatic reduction in air cargo from China. Singapore is also expecting potentially even slower economic growth in 2020.

Although the pandemic brings challenging economic times to the country, its more widespread, lasting impact may facilitate shifts in the economic landscape that the country needs to accommodate. And because of the economic impact of COVID-19 outbreaks, Singapore may have to embrace a shifting economic landscape.

 

China Conundrum In Singapore

Similar to other countries in the Southeast Asian region, Singapore is dealing with China conundrum. Over the last few years, investments of Singaporeans in China have been growing steadily. However, they are now exposed to rising levels of risk.

Since the 2003 SARS outbreak, China’s economy has grown from around 4% of global GDP to around 20%. Currently, China is Singapore’s biggest non-oil export location, which contributes to approximately 17.3% of Singapore’s overall exports. Besides, China’s large consumer market and its competitive dominance as an assembly and manufacturing centre mean it will remain as Singapore’s significant trading partner well into the foreseeable future.

However, the pandemic threatens to create more damage to a rising vulnerable Chinese economy which is already hurt by the ongoing US-China trade war, as well as the adverse consequences of increasing systemic rivalry with the West, particularly in the technology industry.

Hence, Singapore must handle its existing trading relationship with China, while at the same time, adjusting to the realities of global value chains’ reconstructing and decoupling. This effort may turn into diversified and well-balanced global strategies.

 

Diversification And Decoupling Of Supply Chains

For over ten years, multinational and Chinese agencies have been finding ways to manage the increasing labour expenses in China by moving business activities to new locations in the Southeast Asia region and beyond. Recently, the threat of increasing export and tariffs controls have resulted in further decoupling from China-focus supply chains, leading to the establishment of new manufacturing and assembly amenities in countries like Malaysia, Thailand, Vietnam, and even Mexico. COVID-19 outbreaks further accelerate these trends. As the pandemic forces businesses to double down on decoupling and value-chain relocation, tech startups based in Singapore, financial, Singapore accounting services providers, professional services agency, and logistic companies may be forced to set up new operations outside China.

 

Implementation Of Automated Robotics And Factories

COVID-19 outbreak has highlighted the worldwide economy’s vulnerabilities to pandemics and diseases. Intelligent supply chains and automated factories might be capable of reducing the risks and allow more diversified and well-coordinated supply chains.

Amazon, the leading e-commerce company in the United States, for instance, uses the combination of cognitive AI with data analytics and robotics to handle highly automated and intelligent supply chains across the globe. On the other hand, the infamous Japanese company, Canon, has implemented complete automation, end-to-end camera production operation.

Additionally, there is a high demand in the industry for next-gen, tech-allowed value chains. The Singapore Government, which has allocated SGD 19 billion to the RIE 2020 Plan, is an excellent place for participation in the advanced engineering and manufacturing areas. This strategy enables Singapore to become the main location for leading international companies that seek an edge in these particular areas.

In the meantime, since human capital is still significant, world-class universities in Singapore, fast-growing ecosystem of startups, funding initiatives, and business incubators will reinforce renewed drive for automated factory technology.

 

Obtaining Good Economic Value Through Proactive Governance

Singapore has become a regional centre for various global’s top companies due to its capability to facilitate truth, transparency, trust, talent, and technology. These abilities allow Singapore to maintain its reputation as a good governance champion.

Additionally, the country is a participant of two highly progressive Free Trade Agreements, including the CPTPP and the EUSFTA. Both agreements are based on the deep-rules structure, which has standards that address data privacy, labour ethics, environmental sustainability, and other key values. All of these values are crucial for the progress of the current world’s new trading ecosystems in Asia and beyond.

 

Conclusion

COVID-19 may bring more economic challenges to Singapore shortly. However, the country will most definitely be able to meet and overcome these challenges through a proactive government, implementation of automated factories and robotics, and diversification and decoupling of supply chains.

Posted in Accounting.