Given the rise in anti-globalisation sentiments globally, assess the measures Singapore can adopt to stay globally competitive.
In recent years, growing anti-globalisation sentiments have questioned the widely accepted belief in the advantages of global economic integration. As trade tensions escalate between major economies, both policymakers and the public are increasingly confronted with the challenges of a world that is becoming more inward-looking.
b. Given the rise in anti-globalisation sentiments globally, assess the measures Singapore can adopt to stay globally competitive. [15]
Introduction
In recent years, the rise in anti-globalisation sentiments—driven by trade wars, nationalism, and public discontent over widening inequality—has disrupted the traditional model of global economic integration. For an open and trade-dependent economy like Singapore, which has long thrived on global connectivity and free trade, this shift presents a serious challenge. To remain competitive in this new global landscape, Singapore must adopt a combination of fiscal and supply-side strategies to strengthen its economic foundations, attract investments, and equip its workforce for a more uncertain and inward-looking world.
Fiscal Policy
One approach Singapore can adopt is the strategic use of fiscal policy through the lowering of corporate and personal income taxes.
a. Corporate Income Tax Reduction
Lowering corporate income taxes would enhance Singapore’s attractiveness as a base for Foreign Direct Investment (FDI). Multinational corporations are sensitive to tax rates when choosing regional headquarters or manufacturing bases. By lowering tax burdens, Singapore can retain and attract companies in advanced industries like electric vehicles, semiconductors, and fintech. Increased FDI contributes to higher investment (I), shifting Aggregate Demand (AD) rightward and also enhancing Long-Run Aggregate Supply (LRAS) through capital accumulation and technology transfers.
b. Personal Income Tax Reduction
To attract foreign talent, especially in sectors like biotechnology, AI, and green tech, Singapore could also reduce personal income taxes for high-skilled professionals. This policy would improve Singapore's human capital base, thereby reinforcing its competitiveness in knowledge-intensive industries.
Limitation: However, lowering taxes may result in revenue loss for the government, creating a trade-off with social spending. Furthermore, if the inflow of workers and investment leads to overheating, the economy may experience demand-pull inflation—a particularly delicate issue in a tight labour market.
Supply-Side Policies
To secure long-term competitiveness, supply-side reforms will be essential. These aim to boost the productive potential of the economy and ensure the workforce remains adaptable in a volatile world.
a. Skills Development and Workforce Upskilling
The government should continue investing in SkillsFuture, TechSkills Accelerator, and industry-specific programmes that enable workers to transition into high-growth sectors. With rapid technological disruption and reshoring of manufacturing in some countries, Singapore must ensure its workers are equipped to add value in advanced manufacturing and services. Enhanced productivity raises LRAS, helping to offset inflationary pressures and support sustainable growth.
Limitation: These policies require time and sustained investment, and there is no guarantee of uptake, especially among mid-career or older workers. Mismatch between training and market demand could also reduce effectiveness.
b. Digital and Green Transformation Incentives
To stay relevant in a post-globalisation era, Singapore must lead in digitalisation and sustainability. Grants and subsidies for automation, AI adoption, clean energy technologies, and green infrastructure will enable local firms to increase efficiency, reduce dependence on foreign labour, and meet global ESG standards—an important consideration for trade and investment in the modern economy.
Free Trade Agreements
Singapore must also diversify trade and investment partnerships. Bilateral and regional agreements such as RCEP and CPTPP enable Singapore to hedge against rising protectionism in traditional Western markets. Deepening ties with ASEAN, India, and emerging economies will reduce overdependence on any single partner and improve export resilience.
Conclusion
In a world marked by increasing protectionism and inward-looking policies, Singapore’s continued success depends on its ability to stay nimble and forward-looking. Lowering taxes can provide short-term gains by attracting capital and talent, while supply-side policies build long-term resilience through productivity and innovation. However, each comes with limitations—whether in terms of inflationary pressures, fiscal cost, or uncertain outcomes.
To stay globally competitive, Singapore must balance tax incentives with strong investments in human capital, innovation, and infrastructure, while actively diversifying its economic and diplomatic relationships.
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