Speakers
Professor Tan Kong Yam
Division of Economics
School of Humanities and Social Sciences
College of Humanities, Arts and Social Sciences
Nanyang Technological University
and
Co-Director
Asia Competitiveness Institute
Lee Kuan Yew School of Public Policy
National University of Singapore
Professor Linda Lim
Professor of Strategy
Stephen M. Ross School of Business
University of Michigan
Chairperson
Dr Lee Soo Ann
Senior Research Fellow
Lee Kuan Yew School of Public Policy &
Department of Economics
Faculty of Arts and Social Sciences
National University of Singapore
“Global City” is the title of the second session of Singapore Perspectives 2015, where Professors Tan Yam Kong and Linda Lim appraised Singapore’s established global city model and explored the possible evolution of this model to meet the economic demands and challenges of an ever-changing global and domestic milieu.
Prof. Tan began by examining the discontent arising from the phenomenon of globalisation. Central to the problem is a stagnating real wage for the low-income population, which he said is not unique to Singapore. He also debunked the common perception that immigrants are at fault, citing evidence from South Korea’s income data, which shows that income inequality has been trending upwards despite the country’s traditionally low intake of immigrants.
In Prof. Tan’s view, while globalisation is unavoidable and necessary for Singapore’s long-term economic vibrancy, it is important to have best management strategies in place to maintain long-term social stability and support the base of Singapore’s economy, i.e., the “mothership”, he said. One of his suggestions was to have the relative winners compensate the relative losers. He also described Singapore’s economy as a “balloon bobbing in the turbulent ocean”, and said that the government could expand its role as a collective risk insurer and diversifier to stabilise the economy and society. For example, more government subsidies on education, health, and housing for the vulnerable are critical in ensuring social stability and mobility. Responding to an audience member during the Q&A session, he used public housing to further explain the role of the government as a risk diversifier, saying that HDB could absorb demand spikes by building in excess as long as the financial cost is not an overburden, because this ultimately reduces the aggregate volatility and uncertainty to society. He compared this example of risk diversifier to the unprecedented resilience budget package introduced in 2009 to counter the effects of the 2008 financial crisis.
Prof. Tan also suggested having foreigners who benefit financially from what he coined as the “Singapore Premium” — the value-add of Singapore’s goods and services due to the soundness of its institutions, infrastructures and society — to make contributions that can be redistributed equitably to the local population.
Speaking to the audience, Professor Linda Lim recalled how Singapore had to jettison its initial plan of import substitution for export promotion when it separated from Malaysia, which was supposed to be the hinterland of Singapore’s economy. Singapore’s economic achievements since then are nothing short of a miracle. But the global landscape today has changed: the pace of globalisation is slowing down; comparative advantages between countries are shifting rapidly; disruptive forces from technologies are expanding; and manufacturing’s share of value-add in the production of physical products is shrinking.
These global trends indicate a need for Singapore to transform beyond the global city paradigm, especially as more global cities emerge across the globe and in the region. Nonetheless, Singapore could benefit from being in the core of Southeast Asia, a large emerging market region that is attracting huge investments. Singapore could differentiate itself from other global cities by playing a role in the regional value chain catering to the burgeoning middle class of the region.
Said Prof. Lim, “[Singapore] should return to our ancestral commercial roots of multilingual, multicultural entrepreneurs and intermediaries, and provide services to our own dynamic regional markets.” By increasing regional relevance while retaining the global content and context of the city’s economy, Singapore could become a unique regional leading city that stands out from other global cities.
During the Q&A session, an audience member asked about the crucial elements needed to balance between protecting the “mothership” and engaging successfully in a globalised world. Prof. Tan responded that there is no easy balance, and cautioned that unless the base of Singapore’s economy is properly maintained, all good jobs in Singapore will be threatened. He felt that Singapore has to strengthen its strategic infrastructures of transportation — such as the airport and seaport — to solidify its status as a regional hub in order to safeguard the “mothership”. Another area of consideration is to encourage companies to take on a long-term strategic view over short-term profitability fixation when deciding whether to remain in Singapore.
Responding to the question on how Singapore can leverage on the region to remain competitive, Prof. Lim advised that the focus of Singaporeans should shift decisively to the region. Given the scarce resources Singapore possesses, it would be increasingly confronted with the dilemma of choosing global or regional. Its past pursuit of a growth strategy that was reliant on the global market meant that great emphasis was given to mastering Western languages and familiarising itself with Western cultures. As Singapore now looks within the region for its future growth, it has to promote a mindset shift in Singaporeans to embrace regional languages and cultures. It is this cultural knowledge and similarity, Prof. Lim reckoned, that will be the differentiating factor enabling Singapore to stand out from other global cities.
One of the audience members said that while he agreed with the need to tap on the new opportunities arising from regional emerging economies, Singapore should not give up its aspiration to become a global hub. Prof. Lim explained that the issue is not about wanting to be global or regional, but about allocating scarce resources. She said that this does not mean turning away from the global market, but placing more emphasis on regional market opportunities, adding that “to be a global city we need to know more about the region.”
Another interesting question that surfaced during the Q&A session was the role of government-linked companies (GLCs) in this new global milieu. Prof. Tan said, unlike the private sector whose primary motivation is to maximise profits or shareholders’ value, the survival of GLCs is predicated on long-term competitiveness and the viability of their “mothership”. Hence, they are more inclined to incorporate local societal considerations into their business plans. His view was echoed by an audience member who cited Keppel Corp as an example of a GLC that takes into consideration the interest of Singapore’s economy and population in their market expansion plans. This is reflected in its decision to retain most of its high-value work, like research and development and logistics management within the country.
A light-hearted but meaningful comment made by another audience member sums up the attitude Singapore must embrace to overcome the future challenges confronting it: “Singapore must think of what it can do that other cities cannot do to be ahead of the curve. Even as we strengthen the mothership, think of where we can boldly go where no man has gone before.”
Chang Zhi Yang is a research assistant with the Economics and Business cluster at IPS. He also helped with the conceptualisation of Singapore Perspectives 2015.