Resilience of Singapore's Economy and Supply Chain

4 Ms Tin Pei Ling asked the Minister for Trade and Industry how resilient is Singapore's economy and supply chain in the face of crises such as the COVID-19 outbreak.

5 Mr Leon Perera asked the Minister for Trade and Industry whether, as part of economic defence, the Government has considered nurturing a certain amount of domestic manufacturing capacity for critical necessities in product categories like medical disposables.

The Senior Minister of State for Trade and Industry (Mr Chee Hong Tat) (for the Minister for Trade and Industry): Mr Speaker, may I have your permission to take Question Nos 4 and 5 together?

Mr Speaker: Yes, please.

Mr Chee Hong Tat: Thank you, Sir. The COVID-19 outbreak has adversely affected Singapore's economy. It has led to a sharp fall in tourist arrivals and a decline in domestic consumption, which have in turn badly affected our tourism, transport, retail and F&B sectors. The disruption in economic activities in China is also expected to negatively affect export-oriented sectors such as manufacturing and wholesale trade.

Singapore is a small and open economy. The COVID-19 outbreak is a reminder of how unexpected external shocks can have a significant economic impact on us. To improve our resilience to such shocks, a key strategy that the Government pursues is economic diversification. This entails the diversification of our economic structure, our markets and our supply sources.

First, we have diversified our economic structure across different sectors. For example, we kept the manufacturing sector at 20% of the economy and developed a range of clusters within the sector. We have also kept our services sector diversified, growing modern services like information and communications, alongside trade-related ones like wholesale trade.

Hence, even though the COVID-19 outbreak is expected to significantly affect the tourism and transport sectors, other sectors such as construction, and information and communications are projected to continue to grow and support our overall economy.

Second, we have diversified our export markets to enhance our resilience to market-specific shocks and downturns. We have expanded our network of free trade agreements to give our companies access to a wide range of markets. In this way, we are plugged into growth markets, without being overly reliant on any single market for our exports. No single economy accounted for more than 15% of our domestic exports in 2019.

Third, our economic agencies work closely with companies to diversify the sources of supply for materials, manpower and food.

Our companies’ supply chains have been put to the test in recent weeks due to disruptions in China’s industrial activity. While the impact varies from business to business, companies have indicated that they are generally able to cope with the disruptions because they have existing inventories or alternative suppliers. Most companies have also been able to manage the manpower disruptions arising from the travel restrictions and quarantine measures implemented in China and Singapore to contain the spread of the virus.

As for food supplies, we have not seen significant disruptions arising from the situation in China, due to our effort to buy from different sources over the years. The Government also retains some domestic supply of critical necessities to mitigate any overseas supply disruptions. For instance, we stockpile rice, personal protective equipment and pharmaceuticals during peacetime, and we also have local manufacturing capabilities for other items such as noodles and masks.

Overall, our strategy of economic diversification has helped to enhance the resilience of our economy in times of crises, such as right now, during the current COVID-19 outbreak. MTI will continue to work with our businesses to improve the resilience of our supply chains by buying our inputs and essential supplies from different countries, and building up local production capacity where possible and where it makes economic sense.

Mr Speaker: Ms Tin Pei Ling.

Ms Tin Pei Ling (MacPherson): Sir, I thank the Senior Minister of State. I have two questions. Firstly, in the nearer term, we see the COVID-19 expected to be on a more prolonged basis and we see other countries also experiencing runs on some of the essential supplies for their populations. So, even though for now, we are able to cope with the supplies such as groceries, but with the other countries also experiencing it, how will this affect our current supplies?

The second question is that in the longer term, we are looking at diversifying our economy, reducing our dependence on a single-source country – I would think that in this case, it is China – but for many of the products that may have many layers of processing, other countries are still highly dependent on this single-source country. So, as we diversify, how likely are we able to succeed in this endeavour, given that it also depends on the other countries and their responses as well?

Mr Chee Hong Tat: Sir, Ms Tin's first question on supplies, we are looking at all the key essential supplies, making sure that we have sufficient diversity in our supply sources. That is the best way to deal with this situation. We cannot quite control what is happening in other countries.

There is no global shortage of food supplies, for example. There is still enough. In certain places, they do have panic buying that have resulted in some of the situations that the Member has described. But we are confident that if we look at our overall situation – a combination of stockpile of essential items plus diversified supply sources – I think we will be okay.

The main thing is that for our situation domestically, we must also keep calm and do not have panic buying. Because no matter how much you stockpile and how diversified your supply sources are, if there is panic buying, no amount of stockpile will be enough. So, that is one of the key things to be able to deal with this situation. It is to stay calm, buy what you need, but do not panic and there will be enough for everybody.

The second thing we need to do is to make sure that in certain critical areas, we are able to also advise people on the proper usage of the various supplies, for example, masks. Like other countries, WHO, the US, the UK and recently, France as well, the governments and health authorities have advised the population that you only need to wear masks if you are unwell. Otherwise, personal hygiene, especially hand hygiene, is still the most important.

Therefore, by doing this, you are able to prioritise the use of mask for healthcare workers, for patients, for frontline workers, the people who need it most. This is the best way to keep the whole community safe, collectively. So, that is what we have been doing in Singapore as well; consistent with the practices, as advised by WHO and by many of these other jurisdictions.

Ms Tin's second question is about supply chain, and I think if I understand the Member correctly, she is saying that a lot of countries today are linked to certain supply sources like China. So, whether it is directly or indirectly, the supply chains are interconnected.

This is definitely true because we are in a global economy, and no country can be totally isolated when it comes to its supply chains, its market. But it is an issue of to what degree is your exposure. For example, we take tourists. For Singapore, 20% of our tourists come from China. Yes, it is a sizeable group, it is our largest group of tourists. But we are, compared to some other countries, still better off because some of them have 50%, 60% or even higher. So, it is a matter of degree.

I do not think it is possible to be completely delinked from any major economy in the current environment. So, definitely when something happens in one of the major economies – could be China, could be somebody else – there will definitely be an impact on Singapore. But it is how we manage it by having a sufficiently diversified set of supply sources and markets, that will help us to be able to ride through these ups and downs in a more robust and resilient manner.

Mr Dennis Tan Lip Fong (Non-Constituency Member): Mr Speaker, Sir, I am not sure I have heard the Senior Minister of State answering Question No 5. Could I ask him to answer Question No 5 again?

Mr Chee Hong Tat: Sir, I have answered Question No 5.

Mr Speaker: Mr Seah Kian Peng. Oh, Mr Dennis Tan, would you like to follow-up?

Mr Dennis Tan Lip Fong: Could I clarify with the Senior Minister of State, is the Government going to consider nurturing a certain amount of domestic manufacturing capacity for critical necessities in products like medical disposables?

Mr Chee Hong Tat: Sir, as I said, I have answered Question No 5 earlier. I think if Mr Dennis Tan had listened carefully, I did talk about the domestic production capacity for essential items and also stockpile.

Mr Speaker: Mr Seah Kian Peng.

Mr Seah Kian Peng (Marine Parade): Mr Speaker, I will just like ask the Senior Minister of State, whether given the current COVID-19 situation, we recognise that indeed food supplies is something that is very important and very critical. We have our plans for 30-30. I think that is ambitious plan, but given what has happened, my question to the Senior Minister of State is whether the Government should review this 30-30 plan, that maybe it should be a 30-25 plan, for example. In fact, 30-30 is already very ambitious, but in the current COVID-19 situation, as it has borne out, I think the importance of building up some local supplies become even more critical. So, perhaps we should do a review and see in what way we could accelerate the bringing forward of the timeline.

Mr Chee Hong Tat: Sir, I thank Mr Seah for his question. As he correctly pointed out, 30-30 is already a very ambitious vision. It is a stretch target. And we certainly want to work towards that; not so much because we are focused on one number but it is really about resilience. It is really about having diversified sources of supplies, including local production. But I think, Mr Seah being in the retail business would be very familiar, that it is not possible for us to be self-sufficient in many items.

So, in addition to local production, which is one of the strategies, the other important strategy is to be able to diversify our import markets so that we are able to import from a wide range of countries, a wide range of different suppliers.

Mr Speaker: Order. End of Question Time.

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