Painting a picture of a grim economic landscape, DPM Lawrence Wong said it has become harder for Singapore to earn a living. - ST PHOTO: GIN TAY
SINGAPORE, May 1 (The Straits Times/ANN): Singapore will find it harder to grow its economy and create jobs in an increasingly dangerous and troubled world, said Deputy Prime Minister Lawrence Wong on Monday.
He noted that trade rules are changing, geopolitics is shifting investment flows and advanced economies are rolling out massive subsidies to boost their strategic industries, which means competition to attract investments will be much tougher.
But with ingenuity and innovation, as well as “guts and gumption”, the country will prevail even when the odds are stacked against it, he added in his speech at the May Day Rally.
Wong said Singapore has overcome grave challenges in the past - developing NEWater when there was not enough water, becoming an energy hub when Singapore has no natural resources, and reclaiming land when there was a land crunch - and it will continue to do so.
“Each time we were pushed to the limit, we did not fold and crumble. Instead, we gritted our teeth, worked even harder to defy the odds, bounced back stronger,” said Wong, who is also Finance Minister.
“That’s how we built today’s Singapore, and that’s how we will keep on making it better.”
Painting a grim economic landscape as he addressed unionists and workers at Suntec Singapore Convention & Exhibition Centre, Mr Wong said it has become harder for Singapore to earn a living.
First, countries no longer work towards a win-win cooperation in trade. Some are wary of becoming over-reliant on others and some see trade as a battleground, he said.
With trade making up more than three times of Singapore’s gross domestic product, they country will be hurt if more countries become protectionist and flout trade rules, he added.
Second, geopolitics has shifted investment flows.
Singapore has built its economy around the flow of foreign direct investments, but countries are moving towards “near-shoring” or “friend-shoring” - putting their factories and critical supplies closer to home, or in friendly countries they trust, said Mr Wong.
As a result, global investment flows will slow down and become more concentrated among countries that are geopolitically aligned, he added.
Third, advanced economies are rolling out large subsidies to build up domestic production capabilities in strategic industries like semi-conductors and clean energy.
This is ironic, given that the same countries were complaining not so long ago about governments around the world undercutting one another with generous tax incentives, said Wong.
He noted that these countries had pushed for the Base Erosion Profit Sharing (BEPS) global agreement to stop harmful tax competition. But before it could be implemented, the United States, European Union and China, among other major economies, are already rolling out huge subsidies for key projects and investments, he added.
“If you think about this, tax incentives and subsidies are all public funds. So it’s highly inconsistent to say ‘tax incentives cannot do’, but subsidies ‘yes, lets do more’,” he said.
“Unfortunately, we are now in a world where rules are shaped not by logic or principles, but by geopolitics and security imperatives. And Singapore is already feeling the impact.”
Mr Wong said multinational corporations here are already asking what Singapore can offer to keep them when effective corporate tax rates are raised to 15 per cent globally under BEPS.
The country cannot afford to outbid the “big boys” like the Europeans, Americans, Chinese and Japanese for investments, he said, citing how Germany is negotiating with Intel to establish a large semiconductor plant in Eastern Germany, in a deal that involves S$10 billion in financing support.
That subsidy for one project is almost double what the Ministry of Trade and Industry will spend this year to grow Singapore’s entire economy, he said.
He urged union leaders to explain this to workers, adding: “Some politicians go around telling Singaporeans ‘don’t worry, raise corporate tax rates to 15 per cent (and) you will have lots of revenue, and anyway we also have lots of reserves, so we can merrily spend more’.
“Unfortunately, they don’t understand the magnitude of the challenges we face.”
Mr Wong noted, however, that the Covid-19 pandemic has further enhanced Singapore’s international reputation as a reliable and trusted hub for business.
The country must seize this window of opportunity to make itself more competitive and relevant to the world, he said.
One strategy is to continue investing in connectivity infrastructure such as the Changi Terminal 5 and Tuas Port projects, which will boost Singapore’s status as a business and logistics hub, he added.
Such moves have prompted multinational corporations such as VF Corporation, the global apparel and footwear company behind The North Face and Timberland, and global logistics firm UPS to boost their presence and investments here, he SAID.
Another strategy is to deepen Singapore’s capabilities for innovation, which is why the Government is continuing to invest heavily in research and development.
It has worked with leading global companies such as Procter & Gamble to grow the company’s innovation centre into one of Singapore’s largest corporate research facilities, and United Microelectronics Company to build a new fabrication plant here, he said.
And this is happening across all sectors of the economy, he added.
As long as Singapore continues to focus on its strengths and capabilities, and find ways to provide value to the world, the country will be able to earn a good living, prosper and thrive, he said.
“And that’s why despite the dark clouds around us, I say: never fear, and never lose hear. Singapore may be small, but this little red dot is shining brighter than ever,” he added.
“But we must continue to be able to work harder and work smarter than others. We must always have that something special that convinces the world we are a better bet than most, and Singapore can always be relied upon to deliver.” - The Straits Times/ANN
