Singapore’s Response to Global Crisis: Business as Usual
By: Brian Brivarti
Russia’s war on Ukraine has had a profound political impact in Singapore and across Southeast Asia. There has been a spectrum of responses to the war, from outright condemnation from Singapore’s PM Lee Hsein Loong to silent “neutrality” from Vietnam’s government.
The crisis has illustrated the extent to which there is an important separation of powers in this region: the separation of business and politics. As far as possible it is business as usual even between countries with diametrically opposing views on Putin’s war of aggression and that bodes well for what is, outside China, the economic future of the growth center of the world economy.
Speaking recently at the Council for Foreign Relations, the Prime Minister of Singapore, Lee Hsien Loong, outlined the many layers of impact that the war in Ukraine is having on the international system in general and on Southeast Asia specifically. He stressed that different countries in the region have reacted differently to the crisis but that: “You no longer have a framework in which opponents, rivals, competitors work together and maybe disagree with one another but there is a way in which we can do win-win cooperation. Now it’s win-lose. You want the other guy to be down, fix him, crash his economy. So how then do most of the countries, if possible, hang together and cooperate with one another, and not fall into disorder, autarky, or anarchy? That’s the big worry for us in Singapore, because we depend on globalization to make a living.”
This point about Singapore’s dependency on global trade flows was further reinforced by a recent analysis by the Financial Times of regional economic data. This showed that the region will escape stagflation in four of the six biggest ASEAN countries. Vietnam, Malaysia, Indonesia, and the Philippines are bouncing back, although Singapore and Thailand are facing a greater challenge.
Ultimately, the impact of the war in Ukraine has been even greater on Singapore because of the importance of the shipping industry to the economy of Singapore: an overall drop in trade flows impacts directly on supply chains.
However, there are two main economic reasons why these geopolitical differences will not cause deeper divisions in the region that might slow the pace of economic growth and development. The first is the high level of interdependency between these economies and the second is the pace of innovation.
Some companies have already recognized the importance of these two things in responding to the current situation. For example, Riau Capital is a Singapore-based bespoke investment group that helps to facilitate multi-sector investment in Southeast Asia. Bambang Sugeng, the CEO of Riau Capital, is a strategic investment expert with experience across multiple global markets – particularly in the region. Sugeng recently commented that “Cooperation between countries in the region and deeper political and economic integration is helping the region remain attractive and competitive to global capital flows. Governments already recognize the importance that cross-border collaboration has for attracting investment – but they must not be complacent.”
Indeed, the war in Ukraine has caused divisions between the countries of Southeast Asia in their responses and has challenged any complacency. Singapore has been vocal in its condemnation of Russian aggression, in part because it fears its large neighbor, China, has designs on Taiwan. In contrast, Vietnam abstained on key UN votes condemning Russia. But economic integration continues despite these differences in response.
An example of the interconnectedness of states in the region is the cross-investment between Singapore and Vietnam. They may be on different sides in the war but their economic cooperation is driving growth. So for example, Infrastructure Asia, a Singaporean government office set up in 2018 to channel funding to infrastructure projects on the continent, is working with the YCH Group, a Singapore-based supply chain solutions company to build a state-of-the-art logistics center in Vietnam. Dubbed a “Superport” when completed: “it will be the “first of its kind” multimodal logistics hub with an integrated dry port and advanced supply chain nerve center based on 4 pillars – connectivity, sustainability, scalability, and agility.”
As one of the world’s largest shipping hubs Singapore has a vested interest in greater geopolitical stability and its position in global supply chains makes it of vital strategic importance to the West. Singaporean shipping companies such as Pacific International Lines, the second largest container shipping company in the world, are responding to global uncertainty in part by technological innovation. PIL is working with PSA International and IBM Singapore to develop an innovatory blockchain system for the certification of cargoes. This will form part of the new Smart Port of Singapore, a USD14 billion investment to create the world’s largest automated port by 2040.
In another recent example of innovation and interconnectedness, Singapore-based Eastern Pacific Shipping (EPS) used its ship Greenway to make the world’s first duel fuel delivery of an LNG cargo to Malaysia. Proving that greener shipping can be economical in the spot trading markets.
The response of governments across Southeast Asia to Putin’s war on Ukraine may vary but the response of the private sector, at least where Singapore is concerned, seems to be consistent. A collaborative cross-border approach to economic development that can help to support further growth in the region underlies the reality that politics and economics are further separated in Southeast Asia than in any other region of the world.