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Singapore Policy Journal

Topic / Development and Economic Growth

Singapore’s Economic Future is Southeast Asia

“If you want to go fast, go alone. If you want to go far, go together.” – African Proverb

Singapore has been the unquestioned economic success in the region. Its economic success has made Singaporeans believe that they are exceptional. In the past half-century, the country has raced ahead of its Southeast Asian neighbours, transitioning swiftly from Third World to First in just fifty years. Southeast Asia’s recent economic history, by contrast, has been less propitious. Structural and political challenges have held back growth in Malaysia, Thailand and the Philippines, while Cambodia, Laos and Myanmar are only now opening up to trade and foreign investment on a larger scale.

This belief that Singapore is exceptional has sparked an unsavoury brand of regional elitism. Many Singaporeans have little interest in or knowledge of Southeast Asia. They know that neighbouring countries like Indonesia and the Philippines are a source of cheap labour, whether foreign domestic helpers or construction workers. They take advantage of the low-cost flights that will bring them to the best beaches in Malaysia and Thailand. But ask most ambitious, globally-minded Singaporeans where their aspirations lie in their careers and businesses, and the answer is unanimous: Australia, the United States, maybe China. In much of the Singaporean consciousness, Southeast Asia remains little more than a backwater; a hinterland.

Yet reality is now running counter to these beliefs. Singapore has started to feel the force of economic headwinds as growth rates bottom out. Immigration, a critical factor propping up the labour force and by extension buoying economic growth, has slowed in response to the 2011 electoral backlash against more foreign labour. As labour stagnates, other factors like productivity improvements are not picking up the slack as rapidly as required. With policymakers hard-pressed to identify the source of the next big economic boost, the government commissioned a committee in 2016 to make recommendations on the country’s longer-term economic strategy.

Meanwhile, the tables are turning, with the opposite true in most Southeast Asian countries. Despite formidable political and structural hurdles to growth (such as the recent coup in Thailand and civil unrest in Myanmar), the economic potential of the region is undeniable. With GDP growth rates averaging a heady 5% in 2017 and a rising middle class of nearly 200 million people, there is huge potential for the region to be both a manufacturing base and a market for consumer goods. An estimated $22.6 trillion in infrastructure investment will be needed to keep up with infrastructure demand in Asia, with the lion’s share required in Southeast Asia.

The region is also fast establishing itself as a driver of the innovation economy. For instance, Ho Chi Minh City and Da Nang in Vietnam have been dubbed “Southeast Asia’s Silicon Valley” because of their large populations of young savvy coders and burgeoning start-ups. The market for e-commerce in Indonesia is projected to be valued at $130 billion by 2020, the third largest in the world after China and India.

Should Singapore feel threatened? After all, some Singaporeans believe that the country’s continued economic success depends on the economic failings of its neighbours—their growth threatens Singapore’s competitive advantage. However, the reality is that Southeast Asia will one day catch up and overtake Singapore economically. Southeast Asian countries have larger market sizes, more abundant human and natural resources, and therefore greater global clout. Myanmar State Counsellor Aung San Suu Kyi flatly declared her expectation that Myanmar “will need to overtake Singapore in 20 years”.

Singapore must therefore turn to Southeast Asia to secure its economic future. Business opportunities in Southeast Asia can no longer be seen to play second-fiddle to those in China and the West.

The Singapore government has acknowledged this fact. The Ministry of Foreign Affairs set up the Singapore Cooperation Program (SCP) to share Singapore’s expertise in governance, economic development, trade and investment, and other sectors with the ASEAN public sector community. Promisingly, the SCP has garnered over 70,000 participants from the region since its inception. In addition, the ASEAN scholarship initiative sponsors students from Southeast Asian countries to study in local institutions, with the aim that they will eventually work in Singapore.

Meanwhile, International Enterprise Singapore (IE Singapore), a statutory board under the Ministry of Trade and Industry, helps Singaporean companies expand into the region and beyond. It has found considerable success—Singapore franchises and brands such as Ya Kun Kaya Toast, CapitaLand and Raffles Medical are easily found in cities like Phnom Penh and Yangon.

Yet, much more can be done to facilitate deeper exchanges between Singaporean and Southeast Asian individuals, business and governments. Singaporean firms are generally more risk-averse when it comes to regional forays in comparison with, say, investments from China. Yet there remains great demand in the region to learn from Singapore. Southeast Asian government officials and businesses alike study closely Singapore’s model of economic development.

This provides Singapore with an opportunity that we should not waste. As chairman of ASEAN this year, Singapore should prioritise pushing for quicker and more substantial progress on the ASEAN Economic Community (AEC) initiative.  The AEC will make it easier for ASEAN businesses to operate in other member countries and streamline trade flows that are currently hampered by trade barriers and customs procedures. The government can also take this chance to set the tone for a regional economic strategy for ASEAN that is based on Singapore’s own development success story—capitalising on the fact that the Singaporean economic model is highly credible and esteemed regionally, given its impressive outcomes.

Relatedly, while numerous individuals from ASEAN countries come to Singapore to study and work under various programs, the same cannot be said of Singaporeans going to other ASEAN countries. Singaporean students and businessmen need to live in and learn from other Southeast Asian countries, building a deeper understanding of and connection with the peoples and cultures in the region. To incentivise students to seek out learning opportunities regionally instead of further afield, the government could subsidise Southeast Asian language courses and student exchange programs to ASEAN universities (as the National University of Singapore is already doing).

The government could also reduce the risk for Singaporean businesses venturing into select regional markets. For example, IE Singapore could underwrite a certain percentage of the losses for local firms willing to set up shop in ASEAN countries, in addition to the grants and market knowledge they already offer. It could also expand public-private ventures with consortia of Singaporean companies, as has been done in places like India.

Singapore must act now. There is a closing window of opportunity to share the country’s economic success with the region and support their growth, and to build a reputation as a credible development partner for other Southeast Asian nations. Today, Singaporean individuals, companies and institutions are welcome in Southeast Asian countries, but the value-add the Singapore brand can offer will likely erode as other Southeast Asian nations catch up economically. To secure Singapore’s long-term future, Singaporean individuals and businesses alike need to collectively seize the moment to deepen their knowledge of and interaction with the ASEAN region.

In the words of Professor Kishore Mahbubani, Dean of the Lee Kuan Yew School of Public Policy at the National University of Singapore, we ignore Southeast Asia at our own peril.

Image Credit: Image (“Bangkok Skytrain Sunset”), Wikimedia Commons 2014. Used without modifications under the GNU Free Documentation License.