Total exports in 2016 accounted for 114 per cent of Singapore's GDP. Where exports exceed a country's GDP, this is a sign that the country's economy is either export driven or an import-reliant one, or both1. Non-oil domestic exports, a better reflection of Singapore's domestic manufacturing sector, were 39 per cent of its GDP2.
Infrastructure and related services are key in supporting the growth of trade. For trade to flourish, an economy must encourage and facilitate an efficient flow of people, goods and investment.
The Singapore government has recognized that for the country to stay competitive on all fronts, it needs an integrated and efficient network for sea, rail, land transport. This is clearly demonstrated in the push to improve and upgrade the island's infrastructure through projects like the North South Corridor and the Tuas Terminal Port.
Infrastructure investment naturally leads to the rise in demand for goodsand services for infrastructure and the related investment equipment required by businesses to boost production. The North South Corridor is one such example of how trade will be stimulated through investment on infrastructure.
The trade needs of the North South Corridor
The North South Corridor is an integrated transport passageway that encompasses bus, cycling and pedestrian lanes. Much of the corridor will run underground at its southern end as it approaches and enters the city centre.
It will span over 21 km and the construction process is likely to be complicated by tunnelling works which will have to take place close to existing infrastructure such as schools, train lines and residential and commercial districts.
This requires very specific machinery that supports such tunnelling like tunneling jumbos, roadheaders, bolters, drilling and cutting tools, hydraulic breakers, loading and hauling equipment. The procurement of such equipment through domestic and international supply chains could possibly further stimulate trade.
The technology transfer of trade will be a boon for Singapore exports
This demand for specialised equipment (and subsequent increase in trading activity) comes hand in hand with knowledge transfers because it stands to reason that you need to teach people how to use this technology.
This transfer of expertise and knowledge has historically been the trigger for many industries emerging in-country. Petrochemicals is a great example of this and it's all because of roads.
Singapore boasts of having a world-class road system, which is the result of 40 years of investing in infrastructure. At the start of its road-building venture, Singapore imported the asphalt and bitumen for paving.
Over time, this trade has evolved with both materials being manufactured in Singapore. Singapore has also become a regional player in the refining of oil and petrochemicals used in the manufacturing of bitumen.
In a major role reversal, Singapore is now a supplier of paving materials to neighbouring countries for their own infrastructure needs.
It isn't inconceivable that the current round of infrastructure work will precipitate the advancement of further technical exploration and the development of new industries.
Infrastructure Supports Singapore as a Financial Trade Hub
Projects like the North South Corridor can also contribute to Singapore thriving as a financial trade hub. Singapore is ranked second behind London as the best financial hub in the world3. Superior technology, low taxes and efficient transport and infrastructure systems helped Singapore to overtake New York and move one notch higher in the rankings since the earlier PwC survey in 2014.
Singapore's growing business clout has been driven in part by an expanding financial and insurance industry, which makes up about 13 per cent4 of the economy.
The increase in infrastructure projects has brought in new local and regional players. Corporates intent on eliminating financial friction in the supply chain are increasingly looking to banks that can provide a streamlined and holistic service that covers trade finance, liquidity management and working capital solutions across a broad range of geographies and products.
The key is connectivity. Supply chains today are exponentially more complex than they were even five years ago. The resources that go into building the North South Corridor are likely to come from many different countries. Therein lies the opportunity for financial trade services to grow.
Venturing down new roads takes vision. The vision here is to create physical infrastructure that in turn leads to the development of financial initiatives and policy conditions that will facilitate cross-border trade and international co-operation.
Let's trade on this vision.