“But we can still find the right niches to operate in and carve out a space for ourselves,” said Wong, who is the deputy prime minister and finance minister.

Singapore to ‘avoid outright contraction’, PM says

Wong, 50, was addressing the National Trades Union Congress (NTUC), an umbrella group of the country’s trade unions that is closely linked with the long-dominant People’s Action Party (PAP).

In his address, Wong noted how geopolitics was rechannelling the flow of foreign direct investment – with countries putting factories and critical supplies closer to them or in friendly partner nations. Even as governments prepared to implement the 15 per cent global minimum corporate tax agreed in 2021, major economies were rolling out huge subsidies for key projects and investments, Wong said.

He noted the irony of the subsidies – given that many of the countries that backed the global minimum corporate tax had previously lamented how governments around the world were undercutting one another with competing tax incentives.

“Now, if you think about this – tax incentives and subsidies are all public funds … What’s the logic? Unfortunately, we are now in a world where rules are shaped, not by logic or principles, but by geopolitics and security imperatives,” said Wong.

He cited the example of Germany, which is currently negotiating with Intel to establish a large semiconductor plant in the country’s east.

The deal would involve some S$10 billion (US$7.5 billion) in financing support – “almost double” what Singapore’s Ministry of Trade and Industry was forecast to spend in 2023 to grow the city state’s entire economy, Wong said.

“Can we afford to outbid the big boys, not just the Germans, but also the Europeans, Americans, the Chinese, the Japanese – outbid all of them for the investments we want?” Wong asked rhetorically. He also took aim at domestic political rivals who he suggested were playing down the grave challenge the city state’s economy was facing.

Despite these challenges, the government’s management of the pandemic had “enhanced” the republic’s reputation as a “reliable and trusted hub for business” and so it must see this as a “window of opportunity to make ourselves more competitive and relevant to the world”, Wong said.

He cited the example of VF Corporation – which counts The North Face and Timberland as among its brands – which now manages some 70 per cent of its global supply out of Singapore.

On the semiconductor front, the Taiwanese chip maker UMC United Microelectronics was building a new fabrication plant in Singapore, he said. The semiconductor industry accounts for some 7 per cent of Singapore’s gross domestic product.

In his over 40-minute speech, Wong also addressed concerns about public housing affordability and availability – a major talking point in the country as the private property market remains red-hot amid recent inflows of wealth and talent from mainland China, Hong Kong and elsewhere.

The government has said a supply crunch in the public housing sector was largely due to disruption to construction during the Covid-19 pandemic. Wong in his speech reiterated that the government was “steadily catching up on the backlog”.

“Despite these efforts, I know some still worry about the affordability of HDB [Housing Development Board] flats,” said Wong, referring to flats built by the state agency. He urged Singaporeans not to “just look at the headline price of the BTO flat” – a built-to-order apartment available to mainly first-home buyers – but also take into account factors including wages and the proportion of income needed to service a home.

“Now, we are continuing to provide affordable and quality public housing to Singaporeans and as long as the PAP remains in charge, we will ensure quality public housing that is affordable and accessible for our children and future generations,” he said.