Singapore’s long-term economic competitiveness cannot be secured through domestic reforms alone and the city-state must deepen its integration with its Asean neighbours on everything from green energy to industrial parks, said the Singapore Institute of International Affairs (SIIA) on Monday.
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In its new report, Tested Through Turmoil: Advancing Singapore’s Competitiveness with Asean, launched at the 18th Asean and Asia Forum, the think tank outlined the case for a more competitive, resilient Asean (Association of Southeast Asian Nations) as being ultimately good for Singapore, giving the city-state more room to operate as a trusted regional hub even as artificial intelligence, rising energy costs and geopolitical shocks reshape the operating environment for multinational companies.
“A stronger Asean is good for Singapore… As Asean becomes more competitive, Singapore benefits, and we can also contribute to strengthening the region,” said SIIA chairman Simon Tay at the forum.
The report draws on closed-door roundtables and interviews with representatives from multinational corporations, business leaders and policymakers on how Singapore can strengthen its competitiveness amid global uncertainty.
At the forum, speakers also emphasised that Asean’s future competitiveness will depend on its ability to remain open, resilient, and adaptable while strengthening regional cooperation.
One recurring theme was the region’s existential energy-security challenge. Singapore’s Minister for Transport and Second Minister for Finance, Jeffrey Siow, noted during a keynote dialogue that “the biggest constraint for us going forward will be energy”. Even if solar panels covered the entire island, he noted, they would meet less than 10 per cent of Singapore’s total energy needs.
This scarcity is creating a need for “new dependencies, new collaborations and new networks”, including initiatives such as the Asean power grid and a common regional framework for renewable energy, said Siow.
A test from the Gulf
The SIIA report notes that, despite the conflict in the Middle East and the closure of the Strait of Hormuz – as well as previous shocks including the 1997 Asian Financial Crisis, the 2008 Global Financial Crisis and the Covid-19 pandemic – Singapore has repeatedly emerged from crises stronger. It has done so by combining sound domestic institutions with international connections in finance, shipping and supply chains.
That resilience is now being felt directly by companies operating in Singapore. Claus Rettig, Asia-Pacific president at Evonik Southeast Asia, one of the report’s supporters, said the disruption in the Strait of Hormuz had reinforced the value of Singapore’s manufacturing base to customers around the world.
“The latest Middle East conflict interrupted again value chains and our production hub in Singapore demonstrated its reliability for our customers in Asia. Reliability is becoming more and more important as a competitive edge,” Rettig said at the forum.
The report also warned that the energy shock carries environmental risks, noting that some import-dependent Asian economies have turned back to coal in response to higher oil and gas prices, undermining efforts to phase down fossil fuel use, while a push towards biodiesel mandates could increase pressure on plantations and the risk of deforestation and transboundary haze if not matched by circular sourcing of feedstock.
SIIA had previously sounded the alarm of a high risk of a severe transboundary haze event affecting Singapore, Malaysia, Indonesia and Brunei this year amid a possible return of El Niño, a natural climate occurence marked by the warming of sea surface temperatures in the central and eastern tropical Pacific Ocean.
Twelve recommendations
The report sets out 12 recommendations for Singapore’s domestic competitiveness and its regional engagement. It calls for deeper public-private engagement with multi-nationals on artificial intelligence (AI) adoption, new regulatory frameworks for AI governance and data sovereignty, industry roadmaps for job redesign, among others.
It also urged Singapore to remain agile on its carbon tax, which is set to rise to between S$50 (US$39) and S$80 (US$62.4) per tonne of carbon dioxide equivalent by 2030, to ensure that Singapore businesses remain competitive in comparison to counterparts in jurisdictions with low or no carbon prices.
On the regional front, the report calls on Singapore-based investors to build deeper understanding of neighbouring countries’ green and digital economy policies, and to treat national and regional competitiveness as mutually reinforcing rather than competing goals.
It identified opportunities for renewable energy projects, AI data centres and higher-value manufacturing in the Johor-Singapore Special Economic Zone, Indonesia’s Batam-Bintan-Karimun region and Sumatra, as Asean economies move up the value chain.
Singapore’s Coordinating Minister for Public Services and Minister for Defence Chan Chun Sing said at the forum that in a more contested global environment, Singapore and Asean can retain their competitive advantage by “staying out of trouble”, remaining consistent in policymaking and execution, keeping open and connected, and being a relevant and resilient partner.
Singapore and Asean must offer value propositions based on our core interests and capabilities that others can treasure and depend on, he added. “If we work on three commanding heights of the new economy — namely energy, finance, and data — then it will provide us a basis to actually propel the rest of the economic activities.”
Kirida Bhaopichitr, Thailand’s vice minister of commerce, who also spoke at the forum, emphasised how Asean can preserve agency and economic relevance in a weaker rules-based environment through practical cooperation in areas such as trade facilitation, digital trade, green trade, and supply-chain resilience.
“The current weak rule-based and fragmented global trade environment calls for greater trade and investment cooperation among Asean member countries,” said Kirida. “Practical cooperation in trade facilitation, food security arrangements, digital trade, green trade and supply-chain resilience will raise not only intra-regional trade, but also trade with the world which will strengthen the economic security and resilience of Asean.”
