Trade
Singapore’s road to recovery
Author: Faizal Bin Yahya, NUS
COVID-19 has severely impacted Singapore’s trade and economy. But the virus is also proving to be a catalyst for exploring alternate development pathways and for motivating Singapore’s greater integration into the ASEAN region.
Singapore’s business activities have been curbed due to social distancing measures that have adversely impacted the profit margins of firms. Hard lessons were learnt along the way when infection rates spiked among the 320,000 foreign workers living in dormitories. This required quarantine measures with the government assisting in paying wages, waiving levies and providing the costs of their care. The rate of infection in foreign worker dormitories continues to concern authorities.
There are also foreign workers living outside of the dormitories. Approximately 100,000 foreign workers from Malaysia’s southern Johor state crossed over into Singapore daily before the border closures were implemented on 18 March 2020. The Singapore government provided some funds at the beginning to assist companies to maintain their Malaysian foreign workers. Singapore’s dependency on foreign workers has been exposed as a key vulnerability by the pandemic.
Singapore’s second vulnerability is its relative exposure to supply chain disruptions. Singapore was forced to trade face masks for bed frames with Indonesia to establish care facilities for COVID-19 patients. This highlighted the need for Singapore to work more closely with its immediate neighbours for mutual benefit and to strengthen its free trade agreement network to increase diversification of source materials, including food supplies.
For Singapore to facilitate recovery, economic development strategies need to pivot in new directions by leveraging internally on Industry 4.0 initiatives and externally by accelerating earlier initiatives such as regionalisation through high-tech parks.
Mitigating the more adverse impacts of COVID-19 on businesses and workers to boost economic recovery requires three things. First, the economic transformation through Industry 4.0 pathways that began in 2015 needs to be accelerated. Companies already on Industry 4.0 transformation journeys are reaping the rewards of digitalisation — remote work arrangements and contactless processes have enabled business continuity. The manufacturing sector comprises about 20 per cent of the Singapore economy but locals are reluctant to work in this sector. There is a need to create smart factories in Singapore, coupled with the utilisation of regional high-tech parks to manufacture components at larger scales.
Singapore has already developed several high-tech industrial parks in surrounding countries, including Indonesia, China, India and Vietnam. Small and medium enterprises (SMEs) represent the majority of investors in these tech parks. For example, in 2016 Singaporean SMEs had invested cumulatively S$9.4 billion (US$6.9 billion) in the Suzhou Industrial Park. The redesign of business models and workflow processes by using these high-tech industrial parks will not only enhance revenue streams for the companies involved but also enables them to create employment opportunities in Singapore and reduce overall business costs.
Second, the pandemic has highlighted the need for diversifying Singapore’s supply chain networks, the importance of ‘near shoring’ and a ‘China Plus One’ strategy. This would involve utilising more ‘near shore’ high-tech industrial parks and developing new ones, like those already appearing in Indonesia. For example, the Batam Industrial Park was established in 1989. The manufacturing outputs from Batam are usually transported to Singapore ports to be exported overseas. The concept of industrial parks has endured and evolved into digital parks like the Nongsa Digital Park in Batam.
Third is human resources, innovation and ecosystems. It is critical to accelerate reskilling, especially in popular local sectors. The professional, manager, engineer and technician (PMET) category comprises 57 per cent of Singapore’s total labour force. This employment category will be the most disrupted during transformation and comprises a large number of mid-career and mature workers.
Fortunately, the innovation start-up scene is expanding in Singapore and collaborating with regional start-up hubs such as Nongsa. In their journeys to maturity, Singapore start-ups also require industry and professional experience. The PMET category can provide this. The blend of youthful start-up developers and mature PMETs provides…
Trade
Self-Reliance and Openness: Core Principles of China’s Third Plenary Session
The Third Plenum communique from the CCP indicates a prioritization of stability and compromise in response to China’s economic challenges. It highlights the concept of Chinese-style modernization and establishes political guidelines for balancing regulation and market forces.
The CCP’s Third Plenum communique signals a focus on stability and compromise in the face of China’s economic challenges. It emphasises Chinese-style modernisation and sets political directions for balancing regulation and market forces. While not as groundbreaking as previous plenums, it acknowledges the importance of market mechanisms and technological self-reliance, aiming to address issues like high youth unemployment and private sector uncertainty. The communique seeks to navigate the complexities of global competition and domestic innovation, potentially reshaping global supply chains and trade dynamics. Overall, it presents a pragmatic blueprint for China’s economic future.
Source : Self-reliance and openness central pillars of China’s Third Plenum | East Asia Forum
Trade
Trade Prevails Over Political Persuasions in China-Germany Relations
China and Germany maintain a strong bilateral relationship, rooted in economic cooperation despite ideological differences. Recent visits and agreements focus on expanding trade and addressing mutual concerns, navigating challenges while nurturing ties.
Evolving Bilateral Ties
China and Germany share a strong bilateral relationship, rooted in history since 1972. This connection has seen moments of cooperation intertwined with periods of tension. German Chancellor Olaf Scholz’s April 2024 visit underscores Germany’s commitment to fostering this partnership, reflecting a mutual interest in maintaining economic ties despite ideological differences.
Economic Pragmatism
As the second and third largest global economies, China and Germany’s economic interdependence is crucial. Germany emerged as China’s primary trading partner in 2023, with trade values reaching €254.4 billion (US$280 billion). In response to global scrutiny, Germany has taken a balanced approach, emphasizing economic stability over political discord. This was evident during Scholz’s prior visit in November 2022, where his diplomatic tone contrasted with broader EU sentiments.
Facing Challenges Together
Despite increasing public skepticism in Germany regarding China’s global influence and human rights issues, both nations continue to seek common ground. Their October 2023 Joint Statement highlights intentions to pursue cooperation in areas like carbon neutrality and open markets. To navigate these complex terrains, Germany can utilize its institutional frameworks to enhance dialogue, while also considering supply chain diversification to reduce dependency on China. The intertwining nature of their economies suggests that, despite challenges, both countries will continue to prioritize their substantial trade relations.
Source : Trade trumps political persuasions in China–Germany relations
Trade
Fixing fragmentation in the settlement of international trade disputes
Fragmentation in global trade due to the lack of development in multilateral trade rules at the WTO has led to an increase in FTAs. The Appellate Body impasse has further exacerbated fragmentation, requiring a multilateral approach for reform.
Fragmentation in Global Trade
Fragmentation in global trade is not new. With the slow development of multilateral trade rules at the World Trade Organization (WTO), governments have turned to free trade agreements (FTAs). As of 2023, almost 600 bilateral and regional trade agreements have been notified to the WTO, leading to growing fragmentation in trade rules, business activities, and international relations. But until recently, trade dispute settlements have predominantly remained within the WTO.
Challenges with WTO Dispute Settlement
The demise of the Appellate Body increased fragmentation in both the interpretation and enforcement of trade law. A small number of WTO Members created the Multi-Party Interim Appeal Arbitration Arrangement (MPIA) as a temporary solution, but in its current form, it cannot properly address fragmentation. Since its creation in 2020, the MPIA has only attracted 26 parties, and its rulings have not been consistent with previous decisions made by the Appellate Body, rendering WTO case law increasingly fragmented.
The Path Forward for Global Trade
Maintaining the integrity and predictability of the global trading system while reducing fragmentation requires restoring the WTO’s authority. At the 12th WTO Ministerial Conference in 2022, governments agreed to re-establish a functional dispute settlement system by 2024. Reaching a consensus will be difficult, and negotiations will take time. A critical mass-based, open plurilateral approach provides a viable alternative way to reform the appellate mechanism, as WTO Members are committed to reforming the dispute settlement system.
Source : Fixing fragmentation in the settlement of international trade disputes
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