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Future50: Singapore and the ASEAN Economic Community

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01 Aug Future50: Singapore and the ASEAN Economic Community

At the end of 2015, the ten ASEAN countries will establish the ASEAN Economic Community. But what will be the impact of establishing a single market in ASEAN, especially on Singapore’s economy? To find out what business leaders and professionals in Singapore think about this upcoming development, the Singapore Institute of International Affairs organised a dialogue on “Singapore and the ASEAN Economic Community” on 1 August 2014, sponsored by Jebsen & Jessen (South East Asia), as part of the institute’s Future 50 series. The series aims to address geo-political, economic, social and environmental issues that will affect Singapore in the next 50 years.

Participants were divided into small discussion groups, and asked what they thought about ASEAN integration and Singapore’s relations with its neighbours.

Does Singapore need ASEAN?

One discussion group took a critical view on whether Singapore needed ASEAN at all, arguing that ASEAN integration might not be in Singapore’s favour. “Singapore might end up subsidising ASEAN integration,” warned one participant, comparing ASEAN to the European Union (EU), where Germany effectively has to pay the grouping’s bills.

Some also expressed concern that a potential freer flow of labour and people across ASEAN borders could contribute to social problems such as overcrowding in Singapore, given the city-state’s limited land size. Foreigners would also compete with locals for limited job opportunities. Such a scenario is similar to how developed European cities, such as London, which have comparatively higher wages, are draws for other EU citizens of developing countries. In the case of London, many British citizens feel displaced and unhappy with the influx of immigrants, and some participants argued that the same might happen among Singaporeans.

It was also pointed out that there should be a distinction between what is good for Singapore as an economy, and what is good for Singaporeans. The Singapore economy might grow as the region integrates further, but ordinary citizens may not see the benefits. An example that was thrown up during discussions was that Singaporeans may need to deal with even higher housing prices and other rising costs of living in the future.

Managing Singapore’s Image in ASEAN

One participant noted that Singapore is well-placed to be a gateway to ASEAN, especially for companies outside the region. Although the Singapore domestic market is small and thus not attractive on its own to foreign firms, companies are keen to seek Singaporean advice or partner with Singapore in order to penetrate the wider ASEAN market. The Singapore brand is strong in the region, and international firms are keen to tap on Singapore’s expertise in dealing with other Southeast Asian countries.

However, others warned that Singapore also needs to be sensitive about how it is perceived by other countries, especially as the region integrates. Several participants observed that local businesses in other ASEAN countries are wary about competition from Singapore, and as a result, these neighbours may be reluctant to open their economies to Singaporean firms, especially if the city-state is seen to be benefiting more from the deal. Therefore, Singapore needs to ensure that it is seen as a good partner and willing to be open to negotiations that may not necessarily benefit the nation but the region. “As we push for more integration…we must be willing to open up ourselves,” said one discussant, citing legal and financial services as two sectors that could see greater liberalisation in the future.

The Real Challenge for Integration

If ASEAN countries are more interested in protecting their national interests than integrating as a region, it is possible that instead of growing closer together, ASEAN economies may pull further apart. Participants agreed that the lack of a widespread sense of a common ASEAN identity stands in the way of greater ASEAN integration. They pointed out that while the region has made progress in building up greater economic integration and infrastructure connectivity, the real challenge for ASEAN is in building up a common culture and voice to support its future goals.

Ultimately, Singapore is an island city-state with finite resources and will always need to rely on other countries to survive, even for basic necessities like food and water. It is for these reasons that Singapore needs to actively encourage regional integration to ensure its own survival. The challenge lies in making sure that closer economic links within ASEAN do benefit all countries within the grouping, as well as all levels of society in Singapore.

About the F50: F50 aims to examine “The 50 Year Future for Singapore in Asia and the World”, addressing international geopolitical, economic, social and environmental developments that will affect Singapore in the years ahead. The SIIA hopes to contribute to meaningful discussion about Singapore’s future, and will release a final F50 publication in conjunction with Singapore’s 50th National Day in 2015.