Amid recent disruptions from the COVID-19 pandemic and geopolitical tensions, there has been a growing interest in supply chain management. In the first of three lectures at the Institute of Policy Studies’ (IPS) 14th IPS-Nathan Lecture Series on “Exploring Global Trade and Singapore’s Place as a World Connector”, Mr Tan Chong Meng, former Group CEO of PSA International sought to explore the recent changes in global trade.

Using the metaphor of “escape velocity”, he likened the challenge of economies breaking out of poverty to achieving acceleration in space missions, emphasising the need for significant efforts to navigate global trade dynamics effectively.

Personal Encounters with Globalisation

Mr Tan discussed the evolution of global trade by tracing the transformation of supermarkets over the past century. He highlighted the shift from speciality food shops to the emergence of the first modern supermarket, featuring self-service and a wider range of products. Mr Tan illustrated how modern supermarkets reflect the impact of global trade, with diverse products sourced from distant locations. Additionally, he noted the contemporary trend of online supermarkets, enabled by seamless globalisation and trade integration that showcase the rapid changes in consumer shopping experiences within just one century.

Early Trade Drivers — Maritime Expeditions, Enabling Early Trade, the Exchange of Goods

Delving into the early catalysts of trade and globalisation, Mr Tan underscored the pivotal role of transportation revolutions and maritime expeditions. The Age of Discovery, marked by European explorers, further expanded global trade that led to the formation of trading companies such as the Dutch and British East India Companies, which played key roles in the exchange of goods across continents.

Big Picture Trade Drivers — Industrialisation and Globalisation

Mr Tan described the significant drivers of global trade and globalisation, focusing first on industrialisation. He likened industrialisation to a second-stage booster in a metaphorical rocket, emphasising its role in enhancing mobility, technology and manufacturing efficiency, thereby enabling the formation of global supply chains and accelerating trade.

The discussion then turned to globalisation, with reference to the perspectives of Thomas Friedman and Klaus Schwab. Friedman’s The World is Flat highlights how technology has levelled the playing field for global collaboration and competition, while Schwab’s analysis emphasises the evolution of trade openness and the emergence of new global value chains across different eras of globalisation. Mr Tan illustrated these concepts with historical GDP trajectories of key countries and regions, showcasing the impact of trade and industrialisation on economic growth. Additionally, he introduced the concept of “four primary mobilities” — people, goods, information and global finance — as fundamental elements shaping globalisation and trade, with a focus on advancements in air travel and communication technologies.

World Shrank as Communication Technologies Improved

Mr Tan tracked the evolution of communication, from ancient times to the present, highlighting its role in accelerating global connectivity. Postal networks in the 17th century improved long-distance communication, while the launch of the first communications satellite, Sputnik 1, led to the development of GPS and mobile phones. The advent of the World Wide Web and social media networks further revolutionised communication, facilitating instantaneous global interaction and the rise of e-commerce, and reshaping modern globalisation.

The revolutionary impact of the shipping container on global trade and logistics has also transformed the movement of goods — from cumbersome parcels to standardised, intermodal containers, drastically improving speed, efficiency and affordability. With transportation costs reduced by over 90 per cent between the 1960s and today, containerisation has become a cornerstone of the world economy, facilitating approximately 80 per cent of international trade volume. The widespread adoption of containerised shipping has reshaped global logistics; enabled the creation of multi-layered, multi-location factory systems; and contributed to the development of global value chains. This innovation underscores the importance of countries establishing their roles and claims within the framework of global trade.

Rostow’s Model and Industrialisation

Introducing Rostow’s model of economic development, Mr Tan referred to its three phases of industrialisation: the potential to grow, the take-off period, and the mature market phase. In the initial phase, countries have lower wages and focus on meeting local needs. As investment and infrastructure develop, they transition to exporting goods, experiencing increased wages and economic growth. Finally, in the mature market phase, countries focus on innovation and consumption-driven growth. Despite similar conditions, countries may achieve different outcomes, with Singapore’s economic transformation exemplified in From Third World to First by founding Prime Minister Mr Lee Kuan Yew, reflecting the country’s journey towards industrialisation and economic development.

What Does It Mean for Singapore?

For Singapore, Mr Tan emphasised that trade has long been a cornerstone of economic growth, consistently being three to four times GDP levels and driving increases in GDP per capita. However, the nation faces new challenges amidst evolving global trade dynamics, including technological changes, geopolitical tensions, and climate concerns. Initiatives like SGTraDex reflect Singapore’s proactive approach to addressing these challenges, while its remarkable transformation from scarcity to prosperity underscores the importance of adaptability in maintaining economic success.

Countries Compete for Share of Global Value Chains

Countries vie for positions in global value chains, seeking higher integration for prosperity. China’s entry to the World Trade Organization in 2001 marked its rise as “the world’s factory”, emphasising the importance of intermediaries and export of finished products. Mature economies aim to move up the value chain, evident in balanced import-export ratios. While trade in intermediate goods has surged, its role in GDP growth has waned due to the rise of non-physical sectors’ which include non-manufacturing related activities like services. China’s trade expansion has reshaped global routes, notably in fostering intra-Asia trade. Singapore adapts, leveraging its ports to navigate evolving trade patterns and sustain prosperity.

Port of Singapore — Where It All Began

Singapore began its container port journey in 1966 with Tanjong Pagar Terminal, offering Southeast Asia’s first port for third-generation container vessels by 1972. Despite initial uncertainties, strategic additions like Keppel Terminal and Pasir Panjang Terminal propelled Singapore’s port to handle 39 million TEUs in cargo capacity annually. Its success stems from superior connectivity, strong partnerships and forward-looking technology investments. As a transhipment port, Singapore’s significance transcends its small hinterland, offering vital services globally.

Types of Transhipment

Mr Tan explained Singapore’s transhipment operations, which employs two key models: hub-and-spoke and relay. Traditionally, the hub-and-spoke model centralised distribution, with Singapore as a pivotal hub. Subsequently, the relay model emerged to address longer distances between regions. In this model, global ports act as relay points along major trade routes. PSA, managing the most transhipment locations globally, facilitates this efficiently. Singapore’s connectivity to 600 ports worldwide enables daily servicing to major ports, handling approximately 100,000 TEUs daily, pointing to its vital role in global trade.

Singapore’s Value Proposition

Singapore’s value proposition in the maritime industry extends beyond operational excellence and connectivity. Mr Tan said it includes scalability, reliability, ecosystem stability, adherence to the rule of law, effective governance, robust R&D, comprehensive financial services, expertise in ship technology and shipping law, and advanced digital services. These factors have established Singapore as a top international maritime centre with a diverse and sustainable ecosystem.

Three Generations of Singapore Port Terminals

Singapore’s terminals have evolved through three generations to meet changing industry demands. The first involved manually operated city terminals like Tanjong Pagar and Keppel Brani. The second brought forth the Pasir Panjang terminals, with flexibility and automation. The newest — Tuas Terminal, will be the world’s largest automated transhipment facility. Singapore’s approach ensures continuous improvement and future-readiness, with Tuas designed for sustainability and adjacent to a technology-enabled logistic zone.

Question-and-Answer Session

Discussions centred on Singapore’s role in global trade, with a focus on the impact of digitalisation and globalisation. Mr Tan highlighted the opportunities and challenges posed by these shifts, emphasising the importance of technology-enabled trade systems and infrastructure like SGTraDex. Concerns were raised about Singapore’s competitiveness amidst geopolitical changes and infrastructure developments like the potential Kra Isthmus Canal. Questions also addressed PSA’s strategies in response to evolving trade dynamics, including supply chain consultancy and flow-through logistics, as well as competition and collaboration with regional ports. Looking ahead, the key ingredients for Singapore’s continued success were seen as knowledge creation from data and leveraging emerging technologies like AI.

This event summary was partially generated with the use of AI.