Singapore Mitigating Effects of Global Crisis

Sources: Forbes.com: Singapore struggles, waiting for West to rebound; worldtrademag.com: Using the Financial Storm to Prosper

Singapore has fallen into the deepest recession it has seen since 1965 when it split from a brief federation with Malaysia. The island is home to 4.8 million people on 683 kilometers of land. The density of the population, as well as the lack of resources, has left it vulnerable to the changing tides of the global market.

With 185 percent of its gross domestic product in exports, the Southeast Asian city-state is more dependent on trade than any other Asian economy. Now that its leading customers—the U.S., Europe, and Japan—are bogged down in the global crisis, Singapore is feeling the effects of the financial shockwave. The IMF has forecasted that the GDP will contract more than any other Asian economy at 10 percent in 2009.

To weather the crisis, the government is working diligently to limit its impact. In an effort to retain container traffic in the port, Singapore is cutting port dues for smaller harbor vessels by 20 percent, and 10 percent for bigger, seafaring ships docking for less than 10 days in the port. These rate reductions will last for one year. To facilitate new business development in spite of the downturn, the government will also provide a 40 percent tax rebate in 2009 for industrial and commercial properties. Furthermore, Singapore has stricken goods and services taxes for certain shippers constructing new facilities for container cargo.

Boasting over $170 billion in foreign exchange reserves, the government is using the economic slump to make fresh investments. It also created the largest economic stimulus package of any Southeast Asian nation at $14 billion.

Despite the economic downturn, Singapore achieved record tonnage in 2008, having shipped some 1.6 billion gross tons. Moreover, 2008 saw a growth in retainer traffic in the port. Still, the large developed economies must pull from the current crisis for Singapore to realize a return of the booming growth it previously enjoyed. While 2009 will be difficult, the Southeast Asian city-state will most probably see traffic recover significantly in 2010.

Discussion Questions:
1) Does Singapore's heavy reliance on trade leave it entirely subject to the caprices of demand in global markets?
2) If the financial crisis is slow to pass, what additional measures might the Singapore government take to encourage investment and maintain traffic?