SINGAPORE, Aug 11 — The nature of trade and business has changed “irrevocably” since Covid-19, and that will stay true even after the global economy recovers, Trade and Industry Minister Chan Chun Sing said today.
From rising geopolitical tensions to the way multinational companies are reorganising their supply chains, Covid-19 has shown itself to be different from past financial crises, he said.
“I know that some are still hoping for a quick recovery, and a return to the familiarity of the ‘old normal’,” he said.
“The painful truth is this: We are not returning to a pre-Covid-19 world.”
Chan was speaking at a press briefing following the announcement of Singapore’s economic figures for the second quarter.
The nation’s gross domestic product (GDP) shrunk 13.2 per cent compared to the same quarter last year, leading the country to narrow its growth forecast to a range of -5 to -7 per cent.
He outlined four areas affecting the global economy that has changed and which Singapore must adapt to.
Geopolitical tensions
The geopolitical environment which has allowed Singapore to thrive in the past 50 years has changed.
Tensions between major powers are increasing, he said, with such tensions permeating not just politics but also trade, technology and security.
He gave the example of the United States and China restricting use of messaging apps in each other’s countries.
“If we do business in China, we communicate with our Chinese counterparts by WeChat. They can’t access Whatsapp. If we do business in the US, we use Whatsapp. WeChat may not even be available in the US in the future. Frictions like these will be inevitable in a more complicated world,” he pointed out.
Singapore, he said, must avoid being caught in between the conflicts of the major powers, or be stranded in a fragmenting world of trade relations and technological standards.
Companies diversifying supply chains, employees working remotely
The nature of trade has also changed as companies start to review the need for regional headquarters and the way they organise their production to serve different markets.
Manufacturers are also assessing where their factories are sited.
Many manufacturers are no longer just building factories in places they can be efficient, but considering diversifying their supply chains so they are not dependent on any one site, said Chan.
For example, some manufacturers are thinking of a “China plus one” strategy and are actively looking at South-east Asia, he said.
For Singapore, which is the sole manufacturing site for some multinational companies (MNCs), this presents an opportunity to gain new investments but also a chance it could lose some businesses that choose to diversify away from Singapore.
“We must do everything we can to defend our capabilities and capacities, while winning new ones,” he said.
“We must also harness our competitive advantages of legal certainty, intellectual property protection, connectivity, policy consistency and coherence to overcome our constraints in land and labour.”
He added that countries such as the US are going through tax overhauls, and this will affect companies’ investment decisions overseas, including in Singapore.
Many countries, he said, are spending more than they are bringing in and there is pressure from them to collect more tax from their MNCs and to pressure such companies to do more in their home countries rather than overseas.
The Covid-19 pandemic has also made real the potential of working remotely.
This could affect many PMETs (professionals, managers, executives and technicians) in Singapore, he said, because while it means there will be more global job opportunities, it could also mean that workers in other countries can do their jobs remotely.
Effect on social fabric
Chan also warned that as the economic pie diminishes, society can expect to see more frictions and tensions between the rich and the poor, as well as between foreign and local residents.
He said there will be calls for greater protection, self-interests and more redistribution worldwide including in Singapore.
More will have to be done to take better care of those affected by job and business losses, and continuing to do so in a way that affirms the dignity of work and strengthens the social fabric.
“These tensions, unless well managed, can divide our society,” he said.
“This is not the Asian Financial Crisis or Global Financial Crisis where if we hunker down and things will improve in a few months,” he said. “If we wait it out, we will likely be in worse shape than we are now.” — TODAY
