By Jolene Yeo
Labour demand in Singapore’s job market has begun to wane. In face of the global economic slowdown – with major economies such as the United States, Europe and Japan struggling while China’s marginal expansion of its Purchasing Managers’ Index (PMI) raises concerns – Singapore is experiencing a fall in foreign demand for Singapore exports. This is because it is largely reliant on entrepot trade.
Flattening the Singapore dollar policy band
Just last month, the Monetary Authority of Singapore (MAS), Singapore’s central bank, prevented the Singapore dollar from appreciating in order to hedge against the bleak global economic outlook. The surprise shift to a neutral policy stance spurred an Asia-wide currency rout, causing the ringgit, rupiah and the New Zealand dollar to weaken after Singapore announced its zero appreciation stance against its basket of undisclosed currencies.
Although Singapore has previously adopted this neutral stance in the global financial crisis in 2008, experts say that the MAS decision in April marked the first time the S$NEER (Singapore dollar nominal effective exchange rate) band’s slope was flattened in the absence of a recession, the Business Times reported. The MAS emphasised, in its monetary policy statement, that such a move was not to depreciate the domestic currency, but only removes the modest and gradual appreciation path of the S$NEER policy band that was in place.
Hedging against the global economic downturn
It is now more urgent than ever to transform the Singapore economy. Proposed measures in the recently announced 2016 Budget will see an increase in investments into R&D, as well as on the skills upgrading of workers to further equip them, given the changing job landscape.
While there have been multiple calls to provide some form of insurance for those out of work, Prime Minister Lee Hsien Loong’s speech at the May Day rally has clearly turned down such a recommendation. Lee shared his view that government-funded programmes to support workers to make an effort to seek employment are better than welfare packages – which are effectively paid out of other workers’ salary to provide for a person, which may cause some to take advantage of such a system to remain unemployed. NTUC Secretary-general Chan Chun Sing echoes similar views that “it is better to focus instead on helping workers remain employable and relevant to the job market”.
These comments come amid general global consensus of Singapore as a “stingy nanny state”, with a less than robust social safety net. Notably, Deputy Prime Minister Tharman Shanmugaratnam proclaimed in a witty response to BBC’s Stephen Sackur’s question of whether Singapore believes in the concept of a safety net at the 45th St. Gallen Symposium in Switzerland in 2015 that he believes “in the notion of a trampoline”.
Disruptors: A boon or bane to the Singapore economy?
The Singapore shipping industry is currently in deep waters. Port authorities have seen a steady decline in container volumes in 2015, a first since the 2009 global financial crisis. Coupled with the rapid development of other Southeast Asian nations, whose economic development may erode Singapore’s current competitive advantage.
Thailand’s plans of cutting a canal through the Kra isthmus—providing an alternative trade route that would displace the current necessity to pass through Singapore’s ports via the Straits of Malacca – and technological advancement that would break through ice at the Arctic Circle not only reduces travel time from the European continent to China by two to three weeks, but also entirely bypasses Singapore’s ports.
To continue to evolve Singapore’s maritime industries in face of upcoming global challenges, the government has announced that it would set aside $12 million over the next two years to roll out a series of manpower schemes to attract, develop and retain local talent in the maritime industry.
Apart from the trade and shipping industry, disrupters in the service industry are also here to stay. The rise of Taobao, Airbnb, Grabtaxi and Uber have disrupted the existing viability of the retail, hotel and transport industry, but has only introduced much needed competition to benefit consumers.
The Singapore government maintains its stance to encourage innovation, rather than taking an extension intervention into market forces by preventing the rise of these new players that threaten the survival of the incumbent Rather, the government seeks to allow new players to compete fairly with existing ones, as well as to transform existing players to out-compete the new innovations.