How China’s belt and road can show Singapore the route to greater prosperity
Feng Da Hsuan and Liang Hai Ming say setting up diaspora finance and green supply chain systems, plus focusing on the China market, are how Singapore can become an irreplaceable part of the Belt and Road Initiative
At the recent Business China Awards in Singapore, Prime Minister Lee Hsien Loong emphasised that the Belt and Road Initiative welcomes participation and planning from all nations. As an important belt and road node, he said, Singapore can and will benefit from it.
Indeed, Singapore’s political, business and academic communities seem collectively convinced that, by participating in the initiative, the city state can increase its future connectivity in the real-world, digital, financial and people-to-people spheres.
No doubt, Singapore can benefit by engaging in these arenas. Yet, in the long run, sustainability could be an issue, especially since Singapore faces competition.
Thus, in order for Singapore to receive the greatest benefits and dividends in its belt and road effort, it needs new moves and mindsets, with the aim of becoming irreplaceable. To reach this goal, we suggest the following.
First, Singapore should establish an unprecedented belt and road financial centre for the global diaspora; that is, all the people working away from their home country.
There are currently some 230 million such people, who earn around US$2.6 trillion annually. Reports indicate that host country taxation as well as consumption by this diaspora accounts for a big chunk of their earnings. Even so, assuming that their savings rate is as low as 20 per cent, that still equates to some US$500 billion. In 2013, they sent back some US$404 billion to their home countries.
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There is an immediate opportunity to leverage these assets and assist Singapore’s development. To this end, a government agency could set up a bonds and securities scheme for diaspora finance, with financial institutions developing products with 3 to 4 per cent returns. Singapore would make it clear that funding derived in this manner would strictly be utilised for belt and road projects, which should be attractive to the diaspora, as it would offer interest at rates higher than any bank. Further, belt and road projects would often be in the diaspora’s home countries.
If Singapore could fully utilise such funds, not only would it solidify and establish its position as a global financial centre with international influence, it could also assist the belt and road plan in establishing a new modus operandi for its infrastructure construction financing programmes.
Second, Singapore should create a green supply chain system, with the aim of becoming a hub of the environmental protection industry. Today, the world increasingly needs green development, which is part of the belt and road mission.
Yet, for China and nations along the belt and road, green production industries, technology and services are in a fledgling state. Singapore is well ahead of the game; it can leverage its already mature sustainable mindset and technologies to design and optimise production and consumption chains, and create a green supply chain system.
Such a system can help nations along the belt and road tackle their resource and environmental problems, lower environmental costs, and find the best balance between using resources and protecting the environment. It could also transform the brutal economic development model of “pollute first, treat the problem later”.
Thus, it should be possible to produce green industries, green products, and establish international-standard green brands. In short, this can reduce the barriers for green commerce.
By doing so, Singapore would be well placed to not only establish the rules of the game for such industries, but also derive significant economic benefit from it.
Third, Singapore must pay attention to the China market.
A by-product of China’s rapid rise has been the growth of its middle- and high-income classes. In 2016, there were some 1.5 million Chinese who were individually able to invest 10 million yuan (HK$11.7 million), nine times more than the previous year. There is enormous demand in China today for expertise in asset allocation and asset management. With some 200 million middle class, this market is growing rapidly.
With this change, China’s manufacturing demographic dividend of the past decades is coming to an end. In its place, the financial, service and consumption demographic dividends are just starting up.
At this point, China is the only country which has such astronomical business opportunities. As one of the key Asian fund management centres, Singapore must focus on the development opportunities of nations along the belt and road. Also, it cannot ignore Chinese opportunities and new dividends.
For Singapore to become one of the belt and road leaders, it needs to grasp the opportunities that come its way.
Singapore needs to carefully transform its traditional strengths and develop new and innovative ones. There is no doubt that the belt and road has launched a new era – Singapore must be ready to create new mindsets.
With transformation, one moves forward; with innovation, one becomes stronger. By transforming and innovating, one wins.
Feng Da Hsuan, University of Macau director of global affairs and special advisor to the rector, is a senior fellow at the Institute of Advanced Studies, Nanyang Technological University, Singapore. Liang Hai Ming is chairman and chief economist at the China Silk Road iValley Research Institute and also a senior fellow at Nanyang Technological University’s Institute of Advanced Studies