Although there are sometimes criticisms about the staid and reliable nature of Singapore’s operations, frankly I would regard that as great compliment. In Singapore things work – and work well. For a still young nation, they have a lot to teach many more patronising older nations. After all if you turn on a switch the lights come on – there are many areas of the region and the world where that does not happen all the time – including on occasion in my house in London.
Singapore over the past three decades has built up a well deserved reputation for efficiency and success, and so this has continued. However with economic changes competing nations are always snapping at her heels.
The current global situation is just such an issue. Most will now accept that we are in a global economic slowdown and that there will be certain nations that will be going through a period of recession and possible stagflation. The extent and effect of this is still to be seen, but there is the continuing debate as to how infectious such weakness might be. Is this just a gentle decline or will it become more of an economic storm?
For countries such as Singapore this is a crucial question as there are a number of factors which could combine to cause quite an unpleasant economic squall.
As a dynamic small economy it has learnt to duck and weave the economic and political punches swung at her over the years, whether from jealous neighbours or from broader economic changes that could have swept it aside (like the 1970’s oil crisis). Now however there is a combination of issues which its next generation of politicians will have to manage.
Although the majestic hand of the nation’s “eminence grise” Lee Kwan Yu (Harry, as we used to know him) still has a steadying influence over the nation, the new issues will need some careful handling.
Whilst Singapore has never relied on having a cheap currency, the Singapore Dollar has been rising with some vigour against the weakening US Dollar. This obviously affects her competitiveness at a time of falling demand, and thus is not a great situation to be in. This impact is not only on exports but also the important area of tourism where Singapore has developed itself as the stop off and tourist junction for the entire region. As ever, as part of her policy of continuous reinvention, two new casino-related integrated resorts are being developed but they are not on stream as yet.
However, the greater picture of the US economic slowdown is also a concern. Although any dependence on trade with the US has been dissipating for some years, any indirect effect through other nations will also be felt, not least of which is China.
Additionally an issue which is currently affecting most nations has certainly come to the fore - inflation. That unreliable, but nonetheless useful, commentary from local taxi drivers always highlights the most immediate issue in the minds of most citizens – and for Singapore that is the issue of rising prices.
From food to fuel, the rising costs are having an impact. Most recently the government’s budget, which reported another healthy surplus, in fact added to this by raising their sales tax (GST). This, not unsurprisingly, does not seem to be universally popular.
To this some further angst was added when a seemingly celebratory budget was announced by the arch rival in the region, Hong Kong. Slashing taxes on profits and income as well as alcohol, it certainly has the makings of a party, but potentially a further competitive headache for Singapore.
The longer term story though I still think is encouraging, especially in the field of financial services, where the growing reputation for well ordered financial regulation and management is likely to attract others. The old line of the “Switzerland of the East” is a bit worn but nonetheless true as investment money is flowing in from all over the world, including Switzerland.
Singapore’s key issue here will be finding enough of the right staff and management to handle the in-flow, and not price themselves uncompetitively.
And finally……….the last word must go to a Singaporean taxi driver in remarkably unlikely colloquial slang. “I had your old Prime Minister in the back of my cab – I had to ferry her round for three days. Nice tough old bird”. I am sure she was very flattered.
Have a good week,
Justin A. Urquhart Stewart
Director
Seven Investment Management Limited