On Wednesday (22 Jan), the Prime Minister remarked that challenges still persist with regards to resolving the geopolitical competition and confrontation between US and China although the “phase one” trade deal has been inked last week. This was the Prime Minister’s response to the query by the president of the World Economic Forum (WEF), Borge Brende at the 50th WEF in Davos, Switzerland.
Citing the newest WEF which suggests that the trade tensions and geopolitical polarisation will remain a major risk to world economy in the short term, Mr Brende queried the Prime Minister on the remaining challenges.
“We are relentlessly optimistic but not that much so. I do not think it has peaked at all,” the Prime Minister replied to Mr Brende’s query. This “very serious issue” is the way the US is accommodating for the rising China in the global economic sphere.
Graham Allison, a Harvard scholar referred to this as“Thucydides Trap” where a rising power’s overtaking of a rival is seen as a threat and potential conflict. This is shown by how US and China are making accommodations and adjustments for each other in the world economy.
However, with domestic pressures in both nations, it is “not at all obvious that it is easy to do,” Mr Allison commented.
The Prime Minister added that “both sides primarily are calculating the next election or the next domestic political succession, and those domestic pressures do not naturally factor in a global strategic stable balance,”
The trade tensions have yielded results such as uncertainties leading to delayed business decisions and affected investments, as well as reduction in trade due to counter-tariffs.
Technology might also undergo bifurcation in the future.
“Whether it’s on 5G or the whole supply chain, that will cause ‘I don’t trust you therefore you don’t trust me, therefore I cannot rely on your products and you must develop your own supply chain’… It will take a long time for that process to run its course, but it’s a very expensive process which is going to hurt us,” the Prime Minister remarked.
In addition to cost, problems and frictions will continue to arise due to mutual anxieties and suspicions: “I don’t think that’s a better world to be in.”
HOW SINGAPORE NAVIGATES THE WORLD ON THE CUSP OF CHANGE
The Prime Minister highlighted in the 30-minute dialogue session that the world is at a turning point defined by three variables which are the trend of globalisation, US and China. These components which contributed to the country’s growth in the past are now changing.
For example, global security is now a big focus of the US and it wants its allies to bear more financial responsibility in financing the security. Also, the “fundamental shift of stance” in economics took place where concerns are placed on issues such as whether other nations are taking advantage of American workers and the impact on American workers.
China, which has experienced unprecedented growth in recent years, is seeing its role in the world economy changing and how its relation to other countries, particularly the US is becoming more difficult to handle.
Echoing concerns about some uncertainties from the trend of globalisation are its impact of climate as well as on disadvantaged groups.
In the wake of this challenging environment, Singapore will move forward and continue working with China and the US, the Prime Minister stated. The country also hopes for more close cooperation between countries even with the recent problems and pressures.
The country will also need to attract new investments, improve its capabilities and strategy so that it can remain linked to the many centres of vibrancy and prosperity all across the globe. This is a key to prosperity in this “new globalised but troubled environment”.
The Prime Minister stressed that “that means we have to upgrade our companies, upgrade our people, education, skills, and have the environment where we can welcome in very high-quality investments, operations, R&D (research and development) centres, places where high quality people want to live, want to work and want to be… It is not just costs, but it is also the whole environment – safety, security, confidence, opportunities, vibrancy. That is what Singapore needs to be.”
The benefits need to also be made to permeate across all Singaporeans.
The reason being is “so that they are able to take advantage of the jobs we create (and) are able to fend for themselves against global competition…[even] if one industry is declining, which will happen from time to time, the people there are given the help, the support and the time to gain new skills and transfer their employment to another industry, another job and be able to make a living for themselves and not feel that they are fending for themselves on their own and that the system is not on their side,” the Prime Minister added.
To the question by Mr Brende about how the country has taken a toll in slower growth in 2019 due to the prolonged trade tensions, the Prime Minister replied that the deceleration was caused by global electronics sector contraction as well as weaker trading activities.
However, in the coming months, there are expectations that the pace will pick up again and that industry watchers are “reasonably optimistic.”
“What we are not sure this year is where the US economy is going – it does not look like it is going into a recession, but nobody has a very good record predicting when economies go into recession…[but] the key thing is, if you have strategic tensions not being resolved and flaring up again downstream, which can happen, then it is not just an impact on the business cycle…[but] it is an impact on the long-term trajectory of the world,” the Prime Minister concluded.