SINGAPORE: Singapore, being a small country with no natural resources, has to embrace globalisation to survive and inking free trade agreements (FTAs) is one way of doing so, said Health Minister Ong Ye Kung in Parliament on Tuesday (Jul 6).
Mr Ong, a former trade negotiator, was delivering a ministerial statement aimed at explaining the importance of trade pacts for Singapore and dispelling “false allegations” about the Singapore-India Comprehensive Economic Cooperation Agreement (CECA).
Today, Singapore has 26 free trade agreements including CECA, which has again come under fire on social media and by the opposition.
Mr Ong said with Singapore being too small to survive on its own, tapping into global markets to earn a living and be self-reliant is fundamental to the country’s economic survival.
But while the country does not have any natural resources, it has its geographical location, which is “one precious natural endowment”.
This allowed Singapore to capture the trade flows through the Straits of Malacca and Singapore, enabling home-grown port operator PSA to become the largest container transhipment port in the world. The port plays a key role in the growth of the local maritime industry, responsible for about 160,000 jobs.
It also helped Singapore to become an “aviation node” with one of the busiest airports in the world, with the aviation-related industry supporting 190,000 jobs prior to the pandemic.
With these good connections to the world, Singapore built up its manufacturing and services sectors. It is also becoming a centre for technology, research and development, with many global technology firms making Singapore their regional or global innovation centres.
There are about 50,000 international companies operating out of Singapore, with 750 of them making Singapore their regional headquarters, said Mr Ong.
None of these would have happened without a clear strategy implemented well, he added.
“It was a long and painstaking process, part of the story of our island-nation. Clean government, rule of law, safety (where) you can walk on the streets at any time of the day, political stability, good infrastructure, high standards of education, openness to the world,” he said.
“All this, and more, come together to make us a good place to invest and created many jobs.”
READ: FTAs don't give 'unfettered access' to Singapore's labour market; policies must benefit Singaporeans: Tan See Leng
THE NEED TO PURSUE FTAS
Mr Ong said it is in Singapore’s interest to pursue FTAs – a strategy that started in the late 1990s and has given the country benefits such as an early mover advantage and a boost to exports.
The country’s network of FTAs is also “a major selling point” for investors looking to do business in Singapore, he added.
In addition, FTAs are “especially important” to small and medium-sized enterprises because they free them from the constraints of Singapore’s small domestic market and give them access to world markets.
FTAs have spurred local companies to venture abroad, said the minister, noting how Singapore’s investments overseas have increased nearly five times from S$200 billion in 2005 to more than S$930 billion in 2019.
Meanwhile, the FTAs’ requirement for countries to remove or lower tariffs on all trade between partners is “of tremendous benefit to Singapore”.
“Because while other countries customarily impose tariffs on thousands of items, we are already very open, imposing duties on only three alcohol products – beer, stout and samsu. Hence, any FTA that substantially removes tariffs imposed by both parties is inherently beneficial to Singapore,” said Mr Ong.
FTAs also require governments to protect foreign investments and ensure that regulations are imposed fairly and equally on both local and foreign firms.
They also set standards on intellectual property protection, which are “important assurance” for local companies that expand overseas and create their own products.
Newer FTAs also set certain environmental and labour standards. While not every country supports such disciplines, Singapore believes that they “reflect contemporary concerns relating to free trade”, said Mr Ong.
Specifically on CECA, Mr Ong said the bilateral trade agreement with India, which was signed in 2005, has benefited Singapore “in many ways”.
It gave Singapore a strategic first-mover advantage in India just when the country was taking off to be an economic powerhouse.
It also reduced tariff barriers, allowing Singapore goods to be more competitive in the Indian market. As part of that, bilateral trade between Singapore and India has grown by more than 80 per cent, from S$20 billion in 2005 to S$38 billion in 2019.
Similarly, Singapore’s direct investment abroad in India grew by nearly 50 times from S$1.3 billion to S$61 billion during the same period.
About 660 companies from Singapore have investments in India as of 2019 – almost double from a decade ago. As these firms grew regionally, they hired more people back home and in 2019, this amounted to 97,000 locals.
Mr Ong said: “If we accept this basic reality that Singapore needs the world to earn a living, then we would realise the fundamental importance of all our FTAs.
“They are a keystone of the economic super-structure we have built. We could not have advanced the welfare of Singaporeans to the degree we have without FTAs.”
He added that Singapore cannot take this for granted, given its recent fall to the fifth spot in an annual ranking of the world’s most competitive economies. Prior to this, Singapore held the top spot for two years in the yearly ranking by the Switzerland-based Institute for Management Development (IMD).
Mr Ong noted that while Singapore continues to do well in areas such as government efficiency and economic competitiveness, it lost ground in terms of its openness towards global trade and talent.
“I hope this is temporary due to the effects of COVID-19,” he said, noting that Singapore is still “holding (its) own” in terms of foreign investments overall.
Last year even as 45 companies ceased operating their regional or global headquarters in Singapore, more than 130 companies set up such headquarters, the minister added.
Mr Ong said: “When you attack FTAs and worse if your attacks succeed, you are undermining the fundamentals of our existence, of the way we earn a living, of all the sectors that FTAs support, and the hundreds and thousands of Singaporean jobs created in these sectors.”