Govts must drive inclusive, sustainable growth: Wong

Faced with uncertain economic prospects, a rich-poor divide and climate change, governments must relook their approach to drive inclusive and sustainable growth, said Finance Minister Lawrence Wong yesterday.

This means repurposing fiscal policy and the role of the state towards building longer-term capacity and public goods, which can include infrastructure, healthcare and education.

Mr Wong was speaking at the Peterson Institute for International Economics, an independent research organisation, as part of a trip to the United States.

He was also making his first public speech since he was announced as the leader of the ruling People's Action Party's fourth-generation team last week, a move that paves the way for him to be Singapore's next prime minister.

"Economies everywhere have still not fully recovered from the lingering effects of Covid-19, especially in restoring supply chains," he said. "We now face another major challenge, precipitated by the war in Ukraine. We are not out of the frying pan, but already into another fire."

These issues add to the structural challenges of growth, inclusion and sustainability, he added.

Globalisation is heading into a new era of decoupling, with the possibility of a more divided world economically that mirrors a more divided world politically, he added.

Growth has also been less inclusive, Mr Wong pointed out, as technology has contributed to the shrinking of middle-class jobs in some industries and Covid-19 also hit unskilled workers disproportionately.

Meanwhile, the need for meaningful action on climate change grows greater, especially as reliance on fossil fuels is expected to increase in the short term with the Ukraine conflict.

"This may be necessary to cope with the short-term energy shortages, and to keep the lights on. But it also means we must redouble our efforts in the medium and longer term, to set the right price for carbon, regulate emissions and invest in cleaner, low-carbon technologies," he said.

To respond to these challenges, Mr Wong noted that it "is not just about the amount of spending, but how and what we spend on".

Public spending can work better for the common good, through spending on rejuvenating and expanding critical infrastructure, investing in early child development and renewing areas that experienced economic decline, he suggested.

Tackling these issues would also require wider and deeper collaborations between the public and private sectors. In R&D, for instance, both sides could work together to drive technological breakthroughs in areas of pressing need, such as green solutions to tackle climate change, even when the technologies are not yet bankable or investable.

Globally, Mr Wong also suggested strengthening multilateral cooperation on global public goods, which includes supporting countries in building up their national healthcare capacities to tackle new health threats.

International cooperation can also help tackle climate change, he said, which involves creating global standards for disclosures and reporting.

Ultimately, the international system has to be kept open and inclusive, with multilateralism fortified, Mr Wong said.

"Today, the world seems more divided than ever before. The future has never seemed more uncertain. But amidst our differences, we must find enough common ground with one another to solve our collective problems."

He warned: "Failure to cooperate internationally, preserve stability and invest in the global commons will have disastrous long-term consequences for the entire world."