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7. Expanding Singapore’s Economic Space: Building Highways, Forging Links
- ISEAS–Yusof Ishak Institute
- Chapter
- Additional Information
70 Minn Naing Oo 7 Expanding Singapore’s Economic Space: Building Highways, Forging Links Minn Naing Oo INTRODUCTION Trade and Singapore have long been synonymous. In the nineteenth century, poised at the tip of the Malay Peninsula and strategically sited at the crossroads of the China–India spice route, Singapore was a booming port-of-call for entrepôt trade. Today, as a small and open economy dependent on external demand, Singapore has pursued a proactive trade policy in order to make it a strategic hub and key interlocutor in global trade flows. Given its small size, expansion of its economic space is an issue that Singapore has to grapple with as it develops. This chapter examines how Singapore has done this through its bilateral trade agreements. It also examines new ways in which Singapore is forging links with its economic partners, such as through sharing of public sector expertise and private-public partnerships which manifest in Special Economic Zones (SEZs). The cornerstone of Singapore’s trade policy has always been the World Trade Organization’s (WTO) multilateral, rules-based system. In addition, Singapore is active in efforts undertaken at regional fora such as Asia-Pacific Economic Cooperation (APEC), Asia-Europe Meeting (ASEM) and 07 RUS_ASEAN Relations Ch 7 10/10/07, 12:13 PM 70 Expanding Singapore’s Economic Space 71 By: ROS Size: 6" x 9" J/No: 07-13501 Fonts: AGara, Aurora & Helv. Association of Southeast Asian Nations (ASEAN), as well as in bilateral Free Trade Agreements (FTAs). It believes that these efforts can accelerate the momentum of trade liberalization and in the process, also strengthen the multilateral trading system. This chapter postulates how an arterial network of FTAs, if WTO-consistent and WTO-plus, can be beneficial to all levels of trade flows. To better understand Singapore’s delicate position that necessitated an active trade strategy, one must first trace the kinetics of world affairs. The turn of the century ushered in a phase of globalization. This meant an exponential increase in the inter-connectedness of global sectors and industries, and a simultaneous rise in gains made from free trade. More importantly, the past two decades have witnessed the two Asian giants — China and India. With a strong foundation of engineering capabilities built through its network of educational institutions, and honed through undertaking outsourcing contracts for multinational corporations (MNCs), India has emerge as a global IT powerhouse. Bangalore has emerged as possibly the next “centre of universe” for computer software development and IT-enabled services. China, shaking off decades of being a planned economy, has posted meteoric growth, and is now the premier location for foreign direct investment (FDI). Indeed, it is generally agreed that today, the economic ascendancy of China forms a powerful stimulus for many countries’ trade policies.1 We have also seen that around the world, regional blocs have been widening and deepening as countries seek to enlarge their markets, increase their attractiveness to FDI, present viable competition to economic behemoths like China, India and the EU, and counter the threat of U.S. hegemony. Juxtaposed against this fluid global situation, Singapore has to ensure its continued relevance and pre-eminence in global trade flows. As an island city-state, it is in Singapore’s interest to see bona fide trade liberalization at bilateral, regional and multilateral levels. THE LINK BETWEEN TRADE AND ECONOMIC GROWTH Before delving further into Singapore’s FTA strategy, it might first be essential to outline the channels between trade and economic growth, As Pascal Lamy, director-general of the WTO asserts, “Trade can be a powerful tool for development and has been instrumental in lifting hundreds of millions of people out of poverty in countries like China, India, South Korea and Malaysia.”2 Theoretical literature on the relationship between trade and economic growth has changed drastically in the last two decades. Whilst “import substitution” used to be the accepted model for trade policy for development, 07 RUS_ASEAN Relations Ch 7 10/12/07, 11:44 AM 71 [3.231.217.209] Project MUSE (2024-03-29 05:42 GMT) 72 Minn Naing Oo this is currently not the case. As Krueger (1997)3 points out, “It is now widely accepted that growth prospects for developing countries are greatly enhanced through an outer-oriented trade regime and fairly uniform incentives.”4 The shift in literature can be attributed to the failure of import substitution policies in the 1980s and 1990s which led to the collapse of some economies, for example...