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On Apr. 19, Prime Minister Lee Hsien Loong gave a stark warning of the precarious geopolitical situation, and its potentially devastating impact on Singapore and our economy.

While Singapore experienced recent success in areas of cooperation with our neighbours, tensions between the U.S. and China, Russia's invasion of Ukraine and growing protectionist sentiment around the world threatens our long-term outlook.

Many storms

Speaking during the debate on President Halimah Yacob's opening address to Parliament, PM Lee said that the global situation has "turned much more troubling, even dangerous".

Singaporeans, PM Lee said, needed to realise the "gravity of the external situation", where Singapore faced not one storm, but several.

He spoke on three immediate issues, that of Ukraine, United States - China relations, and trade.

Russian invasion of Ukraine

The Russian invasion of Ukraine had reached a stalemate, with neither side able to back down or bring about victory; always with the danger of the conflict escalation.

But even without the worst case scenario, the impact of the war on global energy and food supplies meant that Singaporeans would continue to feel higher prices.

PM Lee noted that the relationship between Russia and NATO nations has completely broken down. Meanwhile, the invasion has made it different for China and Europe to improve its relationship even if both sides would like to do so, and complicates the already troubled relations with the U.S.

U.S. - China Relations

PM Lee said that on his recent visit to China, or in his meetings with U.S. visitors, U.S.-China relations was "on everyone's minds".

There is a "deep mutual suspicion" and "fundamental mistrust" between the two countries.

U.S. views on China

In the U.S. where both sides of its political spectrum disagree on everything, they were united only on China. The prevailing view in the U.S. is that efforts to work out a cooperative relationship with China have failed, and China's growing strength and assertiveness is a grave threat to the U.S.

Thus the U.S. must enact "extreme competition" to maintain "as large a lead as possible" on technologies like semiconductors and artificial intelligence.

This distrust also extended to the population, where 80 per cent had an unfavourable view of China, with 40 per cent calling the country an "enemy" rather than a competitor.

China views on U.S.

In China, public perception of the U.S. has similarly deteriorated, with China's leaders convinced that the U.S. wants to "contain, encircle, and suppress" it, as China's president Xi Jinping had said.

"They believe that Washington wants to hold back China’s growth and weaken the Communist Party of China’s hold on power.

They say the East is rising and the West is declining, and they think the time has come for China to take its rightful place in the world."

China also considers issues like Hong Kong, Xinjiang, and Tibet as domestic matters vitally affecting security and integrity, without room for discussion or compromise.

Taiwan

But PM Lee said the most "dangerous flashpoint" was Taiwan.

"Singapore is good friends with China, and we are also old friends of Taiwan," he said. Singapore rigorously upholds the "One China" policy, and continues to support the peaceful development of cross-strait relations.

China considers Taiwan as the most important issue; with the "One China" principle being the "reddest of its red lines".

But in the West, an alternative narrative is gaining currency, namely that the problem in cross-strait relations is a broader ideological issue of democracy versus autocracy".

This is so even though most countries, including most Western ones, have officially adopted "One China" policies. PM Lee described the difference of views on this as "very worrying".

Tensions over Taiwan are very high at the moment, as all sides continued to make moves in response to each other.

Move and countermove

After Taiwan's president Tsai Ing-Wen met U.S. House Speaker Kevin McCarthy during her stopover in the U.S., China launched three days of extensive military exercises all around Taiwan.

PM Lee said that a CCTV report described the exercises as "comprehensive and precise simulated attacks on key targets in the island and surrounding waters".

PM Lee warned that the risks of miscalculation or mishap are growing, and U.S. - China relations will not improve anytime soon."

Even if both countries avoid a direct conflict, the "enduring enmity and bad relations" would be very costly for both, and would mean "big trouble" for the rest of the world.

It was a very worrying outlook, and PM Lee hoped that relations between the two would not get worse, and that they would keep lines of communications open, and with time gradually repair their relationship "on the basis of mutual respect and trust".

Global multilateral trading system under siege

The third big issue that PM Lee highlighted is that the global multilateral trading system is "under siege", with rising protectionist sentiments.

For small, open economies like Singapore, this holds serious implications.

Singapore cannot survive as anything other than an open economy, as it relies on the global free flow of trade and investments, as well as a common set of rules applied to all countries regardless of size.

The decades-long international consensus supporting globalisation saw lowering tariffs, rule harmonisation, and countries seeking "win-win cooperation". But now countries no longer talk about trade as "win-win", seeking to restrict imports or exports; going their own way by "on-shoring" or "friend-shoring" supply chains.

The world is once again heading towards protectionism, where trade rules were secondary, similar to the time between the world wars of the 20th century.

Economic cost to the world and Singapore

PM Lee warned that the economic cost to the world would be very high. The International Monetary Fund warned that the fragmentation of the global economy could reduce global GDP by up to 7 per cent, cumulatively.

But PM Lee said that he thought the estimate to be conservative and that "the reality is probably worse".

The impact would go beyond trade in goods and service, also impacting the exchange of ideas and innovation, as well as capital flows and cross-border financing.

Singapore has survived difficult periods before, such as the Cold War, multiple financial crises, and public health crises like SARS and Covid-19. But the current situation is unprecedented.

" These three simultaneous crises will set in train a whole series of changes and shocks that will severely disrupt the world, our region, and Singapore."

Singapore's good relations with immediate neighbours

Despite the stormy global picture, there was good news closer to home.

PM Lee spoke about relations with Singapore's immediate neighbours, Indonesia and Malaysia, which he said "thankfully" were "stable and positive".

Indonesia

PM Lee spoke about the "major progress" that had been made with Indonesia, especially with the three bilateral agreements signed under an Expanded Framework covering airspace, military training, and extradition.

These issues have been long-standing and sensitive issues for both countries, and if unresolved, PM Lee said they could have soured the relationship.

But now both governments have signed and ratified the agreements, once the Flight Information Region agreement was approved by the International Civil Aviation Organisation, all three could come into force simulataneously.

With these issues put to rest, both countries could move forward with greater confidence and trust, focusing on collaboration, such as on areas like the digital economy, sustainability, and renewable energy.

Malaysia

PM Lee said there was also a broad cooperation agenda with Malaysia, which spanned many different areas, such as trade and connectivity.

But there remain significant bilateral issues such as Singapore's development works at Pedra Branca, maritime boundaries, water, and airspace.

PM Lee said that it was important to both countries that these issues be managed, and that no single issue be allowed to disrupt the overall relationship.

He also emphasised the frequent exchanges at all levels with Malaysia.

PM Lee met Malaysian PM Anwar Ibrahim when he visited in January, and again in Hainan, China recently.

President Halimah visited the Malaysian Agong (king) in March where she was "very warmly received".

Construction on the Johor-Singapore Rapid Transit System Link was progressing steadily, and the next milestone was the connection of the marine viaduct; which PM Lee said he looked forward to witnessing with PM Anwar.

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Top image via Lee Hsien Loong/Facebook