Singapore: The Future Is Still Bright
Singapore may be the only Asian economy currently in recession, but there is no reason to believe that its future is not bright. In fact, having just spent last week there, I concluded that the present recession should be a blip in the grand scheme of things.
Singapore has many positive attributes that lead me to anticipate a bright future:
• It is a modern, clean, and relatively uncongested city. Taxi rides are cheap, as is the Mass Rapid Transit (MRT) metro railway, which takes you almost everywhere and is being significantly expanded. Singapore’s top-notch infrastructure is a major plus point.
• English is one of four official languages, and the language of administration. This automatically makes Singapore an easier place for foreigners to conduct business than Tokyo, Seoul, or Shanghai.
• Singapore is the highest-scoring country in Business Monitor International (BMI)’s business environment ratings system, which assesses an economy’s institutions, infrastructure, and market orientation.
• Singapore’s ideal location along the main East-West sea route will continue to underpin its status as a regional hub. Singapore is well placed as an Islamic financing centre, due to its adjacency to Indonesia and Malaysia, and its relative proximity to the Middle East (compared to Shanghai, London, and New York). Its port is one of the busiest in the world, and Singapore’s Changi Airport is a major air transportation node.
• Singapore feels like a global city. Although the majority of its population is ethnically Chinese (77% in the 2000 census), there are significant populations of Malays (14%), Indians (8%), and various Southeast Asian nationalities, as well as Westerners. Furthermore, non-permanent residents make up 25% of the city-state’s population.
• Although Singapore’s economy is heavily geared towards international trade, it is a major regional banking and finance hub (some call it the ‘Switzerland of Asia’); it retains a significant high-tech manufacturing capability; and it continues to boost research and development (R&D) in several key fields, such as pharmaceuticals and biotechnology.
• Although Singapore was more expensive compared with my previous visit there a year ago, this largely reflected the pound’s weakness against the Sing dollar. Overall, many things are still cheaper in Singapore than in other developed countries.
Some Weaknesses Too…
However, in case I sound like a fully-paid agent of Singapore’s investment agency or tourism board, let me identify a few weaknesses of the city-state:
• Singapore, as a de facto one-party state, lacks political diversity, and this threatens to stifle competition. The government still censors the arts and media.
• Singapore is often described by critics as being sterile, or dull. This is somewhat unfair, but the reputation sticks, and could limit tourists seeking more ‘adventurous’ places in Asia (e.g., Thailand, Vietnam, etc.).
• Taken together, the two above factors are often blamed for stifling innovation in Singapore. The government is trying to loosen things up, but this is easier said than done. Innovation will remain a key challenge going forward.
• Singapore’s population is ageing rapidly. This means that Singapore will have to import workers, most probably from other Southeast Asian countries, but this will risk changing the character of the society, and could generate unrest, if socioeconomic divisions become synonymous with ethnic divisions. Current plans to boost the population from 4.8 million to 6.5 million over the coming decades threaten to increase crowding.
Overall, though, Singapore’s present economic difficulties are inevitable in such an open economy, which is one of its key strengths. Yes, Singapore’s tourism arrivals are falling, property prices are coming down, and business sentiment has been shaken. However, recessions come and go, and the structural factors boosting Singapore have not changed. Therefore, it’s quite possible that six months from now, Singapore property could become an excellent medium-term investment.