Global trade is changing – and Singapore does not have a solution to the new paradigm

By: Eugene Tavano

Recently we read of an assurance from Lee Hsien Loong that Singapore’s economy is not in crisis. There was also a report on Tommy Koh’s response to a news commentary about Singapore being the new sick man of Asia.

On a much much more humble level, in the last 2 months I made a few posts and comments about China intensifying its investments in Malaysia n in other Asian countries in relation to its unprecedentedly ambitious One Belt One Road (OBOR) initiative.

I had stated that the investments in ports and a railway network connecting ports on the West and East coasts of Peninsula Malaysia have the potential to upend Singapore’s pre-eminence as a port that has been unassailable and unsurpassed for 200 years.

But now, new technologies open up possibilities to challenge the status quo. And China has announced it is harnessing all the expertise available and providing the capital to do so, in the process offering a whole swathe of under developed countries the opportunities to uplift their economies and the standards of living of their peoples.

I had further opined that all the projects that China intends to build in countries across the Asian mainland as part of the OBOR project represents an existential threat to Singapore as a port and centre of trade; Singapore’s trade is 3.5 times its GDP.

What used to be an advantage can – with OBOR – become Singapore’s big disadvantage. Because it’s situation at the southern most tip of the Asian land mass is too far away from the main linkages between Asia and Europe.  Modern technology makes it possible for overland transit between the 2 in much less time than by the traditional sea route around Singapore.

I will now venture so far as to say that Singapore can become the Sole loser of OBOR! Because all countries East of Singapore has the option to reduce their dependence on sea borne carriage and avail themselves to the overland alternative on the mainland thru the trans continental rail net work to the final destinations.

S Korea obviously will gain from it, especially if N Korea can be convinced to allowing a rail connection through it. Japan, Taiwan & Philpppines can choose to transship to China ports. And their exports may get a great boost from a shorter transit time and lower cost.

Purely for illustration, relatively fresh Japanese Wagyu beef may become more affordable in Europe. Similarly, agricultural n perishable goods may not have to be shipped by air with huge cost savings!

Indonesia can also skip Singapore, instead shipping to Bangkok, Hong Kong, China, or even a Malaysia, port. Even Australia and New Zealand may do the same!

The development of the OBOR infrastructure will take time and will be accomplished in phases. Its capacity will be modest relative to those of sea borne carriage. To put it into perspective, the largest container ship now can carry >20k TEUs.

Using 18k, it will require a train 7 miles long if the containers are stacked 3 abreast by width (8.5ft) and 3 high. So sea carriage is still indispensable. But this will be handled thru more ports under the OBOR project and ships may not have to call at Singapore.

The factors cited to assure us that there is no crisis or the economy is not sick may be valid for now. But there is no doubt that Singapore is under Siege.

And this is something that cannot be solved with propaganda or even with money spent on improving infrastructure or facilities which risk becoming redundant capacities.

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