Singapore must stay united, diversify economy: DPM Heng
TOKYO: Singapore needs to stay united and focused to tackle the challenges arising from global uncertainties, said Deputy Prime Minister Heng Swee Keat on Friday (May 31).
The country also needs to diversify its economy and deepen engagements with different regions of the world.
Mr Heng was addressing the Singapore media at the end of his three-day visit to Japan, where he spoke at the 25th Nikkei Future of Asia Conference.
Mr Heng said the world is “going through a period of chaos … with a great deal of uncertainty” due to the trade tensions between the United States and China, and other developments like Brexit.
However, he is confident that Singapore can weather these risks, as long as it doubles up on its economic transformation and further engages with like-minded countries such as those in ASEAN and the Regional Comprehensive Economic Partnership (RCEP).
“Maintaining ASEAN centrality and pursuing many useful projects within the 10 member states, is by itself, going to be a very important part of our work,” he said.
“I think we should also then enlarge this circle of engagement to include all the countries in the RCEP: China, Japan, South Korea, India, Australia and New Zealand. That is why the RCEP has a significant impact, not just for Singapore, but for all the countries involved.”
Mr Heng added that this would be an important way to keep up the support for a rules-based multilateral trading system.
This ensures that the world does not fragment into two blocs which will disrupt supply chains and have adverse effects on the global economy.
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Mr Heng said this multilateral system will be high on the priority list during the upcoming G20 Summit in Osaka next month.
Mr Heng had earlier in his trip urged Asia to redouble its efforts in strengthening the rules-based, multilateral trading system that underpins its growth.
This can be done through trade agreements like the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and RCEP, which are crucial initiatives that bring the region closer – part of Asia taking on greater responsibility in shaping the global order, he said.
Mr Heng said it is not possible to decide or set an arbitrary date for RCEP to be concluded but he is encouraged by the support given by many of RCEP’s key members and from ASEAN countries.
“We should aim high, aim for as many areas of agreement as we can and implement it early, but as to when an eventual perfect agreement can be reached, I think trade agreements are always a work in progress,” he said.
“I think that the environment today is ripe for this because it is important for us to be able to make a positive contribution in this kind of uncertainty.”
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Other areas Singapore can work on, according to Mr Heng, is to continue to place emphasis on technology and innovation, as well as to develop its people, since the competitiveness of a country and its companies depend on it.
Mr Heng also touched on the strong bilateral ties between Singapore and Japan, and the new areas of cooperation for both countries like infrastructure development and the digital economy.
Singapore Deputy Prime Minister Heng Swee Keat speaks to delegates at the 25th Nikkei Future of Asia Conference dinner in Tokyo on May 30, 2019. (Photo: MCI)
Mr Heng had met Japanese Prime Minister Shinzo Abe on Thursday, where he commended the leadership role played by Prime Minister Abe and Japan in steering the CPTPP to fruition after the US pulled out, adding that he looked forward to Japan exercising the same leadership for the RCEP.
NOT IN SINGAPORE’S INTEREST TO MANIPULATE CURRENCY
In Mr Heng’s first comments on the United States placing Singapore on its currency watchlist with eight other countries including China and Japan, he said Singapore is not a currency manipulator.
“It is not in our short-term nor long-term interests to manipulate the currency. We are very unique in having our monetary policy centred on the exchange rate … (which) has a far bigger impact on our inflation and on our economic conditions than interest rates,” he said.
“So almost every other central bank in the world uses interest rates as a monetary policy tool, but in the case of Singapore, our only policy tool is the exchange rate.”
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That means the Monetary Authority of Singapore manages an exchange-rate based monetary policy whereby the Singapore dollar is pegged to a basket of currencies, of which the US dollar is also a primary component.
Mr Heng added that Singapore’s monetary policy seeks to achieve price stability that is compatible with growth, and as such Singapore does not hold it deliberately low because that will cause hyperinflation, while keeping it artificially high will result in severe deflation.
“We don’t try to use the exchange rate to achieve an advantage. Because there’s no advantage, you may get a short-term boost but you will end up with longer-term problems. So we have used our monetary and fiscal policy mainly for stabilisation purposes,” he said.
But for Singapore’s long-term growth, Mr Heng stressed that the country must focus on structural policies – for instance, through the industry transformation maps.
“If we manipulate our exchange rate for some short-term gains, we will set ourselves further behind,” he said.