Chapter 9

Economic Impacts of Globalisation

Globalisation has led to greater exchanges between
people, ideas and activities. Economies of countries
have also become interconnected and interdependent of
one another.
 1.
ECONOMIC IMPACTS ON COUNTRIES
Economic Growth
Economic Downturn
Overview of Singapore’s Economy (1960s – 2000s)

Period Limitations Economic Policies

• Labour intensive industries

• Early years of independence • Focused on providing immediate
1960s • Little resources and expertise jobs for the locals
• High unemployment • Jurong Industrial Estate (garments,
textiles etc)

• Focused on more technology &

• Lower labour costs in other larger
countries
1970s
• Need to remain competitive and
maintain economic growth
information-driven industries
• Investments in electronics
• To develop a highly skilled
workforce
Overview of Singapore’s Economy (1960s – 2000s)

Period Limitations Economic Policies

• To promote knowledge-based
• Competition from other activities such as R&D, computer
countries software services
1980s • Need to upgrade skills of
workers in order to remain • Skills Development Fund to train
competitive people for specialised jobs in
electronics and engineering

• Strengthened focus on industries in

chemicals, electronics & engineering
1990s • Need to diversify our economy in • To develop biomedical science
order to remain competitive industry (pharmaceutical,
biotechnology, medical technology)
Overview of Singapore’s Economy (1960s – 2000s)

Period Limitations Economic Policies

• Need to upgrade skills of
2000s workers to remain competitive
• Maintain economic growth
• Encouraged entrepreneurship
• Expanded R&D
• Focused on developing industries
like interactive/digital media and
energy industries

Challenges
▷ Small population and market size
▷ Needs to tap on global economy for trade to sustain economic growth
2 ways Singapore taps on global economy for trade

1. Foreign Direct Investments (FDI)

• Investments in a Singapore company by a company
from another country
• In 2012, FDI amounted to $747.7 billion
• Major investors: USA, Netherlands, British Virgin
Islands, Japan, UK etc
2 ways Singapore taps on global economy for trade

2. Free Trade Agreements (FTAs)

• Treaties between countries to establish a free trade area
• Exchange of goods and services without tariffs or hindrances
• 2004: US-Singapore Free Trade Agreement (USSFTA)

 Beneficial for trade and investments

 Enhance bilateral relations
2 ways Singapore taps on global economy for trade

FTAs – Is it all Good?

✗ Increased competition due to cheaper products from other
countries
✗ Local producers or businesses’ livelihood and development
would be affected
✗ Little evidence of any substantial transfer of knowledge or
skills from foreign companies to the locals
✗ Limited employment opportunities for the locals
ECONOMIC GROWTH More tax revenue

Generate more good job

opportunities for the people
in the country

Improve its infrastructure

ECONOMIC DOWNTURN
▷ Because economies of various countries are interconnected and
interdependent due to globalisation, one country’s downturn
could therefore affect the economy of another country.

▷ A country may withdraw its investments or reduce its demand

for goods and services from other countries.

▷ This leads to less income and employment for the countries

affected.

▷ Eg, 2008 Global Financial Crisis

Overview of the 2008 Financial Crisis
1 2
Slowdown in US economic
activity leading up to 2008
• Increasing unemployment
• Reduced demand for goods
5 Impact on other countries
• Slowdown in Europe led to further
reduction for goods and services
worldwide
• Manufacturing countries like China
and India were affected
• China: 20m workers lost their jobs in
2008. FDIs dropped 22.5%
India: Foreign investments dropped
from US$20.5b in 2007 to US$11.5b
in 2008
Inability to repay bank loans 3 Unpaid loans and
confiscation of
• Individuals were unable to pay
property
back the loans that they had
borrowed for property and • Banks left with large
business. amounts of unpaid
• Led to a crisis for banks and loans and confiscated
financial institutions in US. property
• No demand to buy the
properties from the
4
banks
• Unpaid loans could not
Impact on Europe
be recovered
• Income of European banks were
based on investments in US.
• Economic slowdown in US
affected these banks which lost
money
• Governments of many banks had to
lend them money to prevent
bankruptcy
ECONOMIC DOWNTURN
ECONOMIC DOWNTURN
How did Singapore respond to the Crisis
For Singaporeans For Businesses

• Help workers who lost their • Financing with reduced

jobs to look for new ones interest rates & increased
subsidies for insurance
• Given opportunities to be premiums for SMEs
retrained with new skills
• New businesses & smaller
• Lower income families companies were granted
given rental rebates further tax exemptions
 2.
ECONOMIC IMPACTS ON
COMPANIES
Higher Profits / Market Share
Lower Profits / Market Share
Higher Profits / Market Share

• MNCs set up operations in different locations

• Lower labour costs

• Cheaper land and raw materials
• Cheaper production costs

• Higher profits / New markets

Small and Medium Enterprises
contribute more than 50 per cent
of economic output and 70 per
cent of employment in
Singapore.

What are some of the challenges

faced by local SMEs?
 Shortage of
Expertise
Shortage of
Labour

Some
Small
domestic
Challenges
market faced by local
SMEs

Competition
from bigger
Insufficient companies
profits
Incentives offered by Singapore Government

• Financial assistance to help at different stages of growth

• Aids in SME’s efforts to venture abroad
• Facilities partnerships between SMEs & larger corporations
• Financial assistance in the form of loans, grants and tax
incentives
Successful Companies

Xiaomi captured 4.4% of the world’s

smartphone market share since 2011.

Goh Joo Hin remains competitive by

offering a wide range of food products.
Companies that lost out in the competition

2012, French hypermarket closed its only

branch in Singapore after 15 years.

At its peak, Nokia controlled 41 per cent of

the handset market. It sold off its device
business to Microsoft in 2014.
 2.
ECONOMIC IMPACTS ON
INDIVIDUALS
Higher Income
Loss of Income
Higher Income

Increased mobility

Able to look for jobs overseas

 

 
better job prospects,
higher income and perks
Lower Income
Increased mobility of people and companies

Increased competition
(not just competing locally but globally)

• Accept lower income or risk losing their jobs

• Lose their jobs as they are unable to equip themselves with new skills
• Lose their jobs as companies relocate to places with lower labour
costs
Eg, In the 1970s, many Americans lost their jobs as labour costs in
China / India were lower.
Eg, Uniqlo moved product operations from China to Vietnam where
Initiatives to help workers stay employable

• SkillsFuture
• Continuing Education and Training (CET)
Masterplan