Quora Answer: How is Singapore Able to Maintain a Strong Economy When Larger Nations Struggle?

The following is my answer to a Quora question: “How is Singapore, such a small country, able to maintain its strong economy, while other, bigger countries struggle?”

Singapore’s economy is experiencing the challenges of the current trade war between the US and China, and the overall economic uncertainty of events such as the impending Brexit, and tensions in the Middle East.  Singapore is currently amidst an economic slowdown, with the threat of a technical recession, which is two consecutive quarters of contraction.  That being said, Singapore has weathered this far better than neighbouring economies, and comparative nations all over the world.  It is not surprising.

The Singapore government has the habit of planning decades ahead.  It is this ability to focus on the big picture that has made us competitive.  This means pivoting the economy towards growth industries, and secure a strategic lead in areas we can dominate as first movers.  Currently, there is a pivot towards AI, and technology, renewable energy, and water treatment.  A massive amount has been pledged to address the consequences of climate change.

Singapore has invested in excellent infrastructure.  This includes the emphasis on education, national development, and worker training.  There is also a strong finance sector to support growth, and mitigate contraction in the business sector.  This allows the country to remain an attractive place for foreign corporations to be based here.  Singapore has also invested heavily in the region.  There is no point in being the only wealthy nation in a poor neighbourhood.  It creates unnecessary hostility.  It is important to give others a stake in our continued success.  By maintaining ASEAN nations as our major trade partners, by funding infrastructure development, and by giving scholarships to the best and brightest so that these future leaders have a favourable impression of Singapore.  This is all part of extending the economic hinterland, and securing a regional market.

Singapore puts great emphasis on a multilateral economic framework, diligently securing Free Trade Agreements, and initiating regional and international trade pacts.  These include the ASEAN FTA, CECA, and CPTPP.  By working at lowering trade barriers for goods and services through Singapore, it ensures we are always an attractive gateway for many.  As a major financial centre, with a government with a reputation for honesty, Singapore is an attractive place to park capital.  Wealth always gives us options.  It allows us to spend our way out of recession.  The government is strategic in timing the launch infrastructure projects.  This allows businesses to survive downturns, and is a pillar of our economic security.  An example of this, from a policy perspective, is when various Government-Linked Corporations, such as SingTel, recently sold corporate bonds worth several hundred million dollars, at above market coupons.  This is not because they need the capital, but to prevent capital flight.  It was a strategic decision.

Finally, the nation has been diligent in building up its financial reserves.  There are stringent safeguards in place to prevent a possible future, profligate government, from plundering it for short-term political capital.  Singapore also has three entities to manage the nation’s assets: Temasek Holdings, Government Investment Corporation, and MAS itself, which manages our foreign currency reserves.