Singapore: The Thrust of the Economy

2006

Eugene K B Tan

Singapore's economy continues to impress even as risks to economic growth lurks. Barring any major global economic dislocation in 2006, Singapore looks set to achieve its medium term growth potential. The strategic impetus to broaden Singapore's economic reach continues. The New Year will also see continued expressions of renewed confidence as well as strong motivations to persist in Singapore's endeavours in remaking itself, particularly in the economic realm.

New optimism in non-traditional regions and countries such as the Middle East, Vietnam and Russia will result in foreseeable closer economic cooperation. For instance, Singapore has agreed to help Russia develop one or two Special Economic Zones. In the Middle East, where the Gulf States will be the focus, Singapore is seeking to capitalize on the oil-producing states' wealth while enhancing its own financial hub ambitions by adding Islamic finance services to Singapore's suite of financial services. Although it is not trying to compete with Malaysia as an Islamic financial centre, Singapore's strategy will be to offer investors a level of knowledge arbitrage as well as products that will appeal to them. A major announcement on Singapore's plans to attract funds from the Middle East is expected at the September 2006 joint meeting of the World Bank and the IMF in Singapore. Economics aside, geopolitics are also a key consideration - positive dealings with the Middle East region can have a significant impact on Singapore's minority Muslims and on Singapore's aspirations to be a cultural and knowledge broker and interpreter of global challenges such as political Islam.

The WTO's latest failure to bridge the significant divide among member states will underscore Singapore's aggressive reliance on bilateral free-trade area agreements and economic cooperation. Singapore is also concerned with ASEAN's perceived lack of pro-activeness in dealing with globalization and trans-border challenges, as well as its apparent lack of steady progress with open regionalization and closer integration. Singapore has been increasingly vocal in its advocacy of a catalytic '2+x' approach towards economic integration: ASEAN members which are ready to liberalise their economies should do so bilaterally with a like-minded member, with the others joining in later when they are ready. In this regard, it is seeking to work with like-minded member states such as Brunei and Thailand in forging 'pathfinder' bilateral initiatives that it believes will encourage greater regional collaboration. Singapore is also keen to define East and Southeast Asia in a flexible manner in order to embrace the benefits of 'pooling sovereignties'; and to capture the renaissance of China and India with its evolving economic patterns and trade flows. In this connection, a former Prime Minister of Singapore has recently declared that 'Australia is in Asia.'

Although manufacturing will remain a core component of Singapore's economy, efforts in ramping up Singapore's position as a hub of knowledge, creativity and ideas will take centre-stage in 2006. Singapore is emphasizing research and development as the springboard to a resilient economy. Stem-cell-related research will receive a significant boost when plans are implemented to consolidate all stem-cell research in Singapore. The consortium approach will plug infrastructure gaps, optimally utilize generous research grants, create multi-disciplinary and integrated research platforms, all of which can enhance the prospects of biomedical and life sciences as the economy's much-vaunted new driver. At a systemic level, a National Research Foundation and a Research, Innovation and Enterprise Council will provide coherent, strategic thrusts in the transformation of the research and innovation landscape. Medical and legal services will also be promoted through the SingaporeMedicine and the SingaporeLaw initiatives, which aim to promote Singapore as a medical hub for international patients; and to increase the international profile of Singapore law and to promote Singapore as a centre for dispute resolution.

WATCHPOINT: The economy's impressive performance will give the ruling party persuasive bragging rights, with general elections expected in the first half of 2006. Even as the benefits of economic growth seem to trickle down inchoately to the masses, the watchwords will be continuity, stability, and reliability in an age of uncertainty.

 

About our company:

AFG Venture Group is an Asia and Australia based corporate advisory and consulting firm with over 20 years experience in creating alliances, relationships and transactions in Australia, South East Asia and India; including a 15 year history of corporate and equities advisory in Australia, undertaking merger, acquisition, divestment, fund raising and consulting for private and public companies.

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