NDR 2022: Changes in global economic conditions have led to new era of rising costs, says PM Lee

For Singapore and its people to be better off in real terms, efforts must be made on several fronts, Prime Minister Lee Hsien Loong said. ST PHOTO: KEVIN LIM

SINGAPORE - International economic conditions have fundamentally changed and the end of an exceptional period has meant rising costs and inflation globally - a situation which Singapore has little influence over, said Prime Minister Lee Hsien Loong in his National Day Rally (NDR) speech on Sunday (Aug 21).

But it is also within Singapore's power to become more productive and competitive so that workers can earn more, and more than make up for the higher prices of food, fuel and other imports.

"That way, we can all become better off, in real terms," said PM Lee at the Institute of Technical Education headquarters in Ang Mo Kio, where the NDR was held.

In his speech, PM Lee touched on the economic challenges Singapore faces in the current global environment, including the disruption of imported supplies such as food into the Republic.

Aside from the Covid-19 pandemic and the war in Ukraine, new realities such as rising protectionism between trade partners, China's slowing growth and exports, countries relooking their supply chains, and companies changing their production strategies have contributed to higher inflation everywhere.

PM Lee noted that in recent decades, globalisation was in full swing, international trade grew rapidly and China had exported more goods at highly competitive prices. This brought down the cost of many products, and kept prices worldwide very stable, he added.

“This era is now over,” he said.

For Singapore and its people to be better off in real terms, efforts must be made on several fronts, PM Lee said.

"This requires us to press on with economic upgrading and restructuring, redouble our transformation efforts, and encourage workers to upgrade their skills at every opportunity. And indeed, that is exactly what we have been doing," he added.

Besides prices rising, the flow of physical supplies into Singapore has also been disrupted in recent times, PM Lee said, citing Malaysia's export ban on chickens, Indonesia's palm oil export halt and India's ban on wheat exports.

"Under pressure, faced with food shortages and rising prices, governments will put their domestic needs first, and so we must expect more arbitrary actions like these, which will impact us," he warned.

This is because Singapore, being a small and open economy, is heavily dependent on imports, including that of essential goods.

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Yet, the Republic is not helpless, PM Lee said, highlighting how it has been actively diversifying its import sources.

This has been through means such as building up adequate stockpiles of food and medical essentials, investing in agri-tech to make local farms more efficient and productive, and pushing ahead with efforts to produce about a third of the country's nutritional needs locally by 2030.

PM Lee noted that it costs money to make Singapore's supplies more resilient.

"Buying from diversified sources means that we don't just buy from the cheapest or the most convenient producer, and maintaining stockpiles requires space and incurs costs... But we must think of it as paying for insurance," he said.

He recounted an incident early in the Covid-19 pandemic when Singapore raised its Disease Outbreak Response System Condition (Dorscon) level from yellow to orange on the same evening he was hosting his annual Chap Goh Mei dinner at the Istana. 

The raising of the alert level had triggered “a small scramble” and panic-buying.

PM Lee reassured his guests, who were receiving and sharing pictures of empty supermarket shelves, that then-Trade and Industry Minister Chan Chun Sing was on top of the situation: “I promise you, you won’t have to eat combat rations!” 

This faith was underpinned by the fact that Singapore had enough stocks in warehouses and logistics centres, and was able to restock the supermarkets quickly and restore confidence, he said. 

PM Lee also cited the period when live chickens stopped arriving from Malaysia following an export ban in June as an example of how Singapore's efforts to make its food supplies more resilient has paid off.

"We didn't flap. We could draw on our ample stocks of frozen chicken from Brazil, the (United States), and other places. And we soon brought in more chilled chicken from Australia, New Zealand and Thailand, and now Indonesia."

As a result, "the chicken rice stalls are back in business again", he added.

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People take Singapore's resilience for granted, but a lot of work goes behind the scenes to ensure that it is prepared when issues arise, PM Lee said.

"Nothing happens by itself, not even in Singapore. It is only possible because we always plan forward, to give ourselves options and solutions during crises, and that's how we must continue to prepare ourselves for the future."

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