Singapore always had to adapt to the world, Deputy Prime Minister and Finance Minister Lawrence Wong said at the Milken Institute Asia Summit on Sep. 13.

"That has always been the Singapore story since the beginning," he added.

"From the start, we've always had to adapt to the world and to look at ways to turn our vulnerabilities into strengths."

Grave challenges globally

Addressing the room during his session at the Milken Institute Asia Summit, Wong first commented that the world is facing "grave challenges globally".

This includes war in Ukraine and escalating tensions in U.S.-China relations, which affect businesses around the world.

"For the last 30 years, there was a remarkable global consensus around free trade," Wong commented, adding that countries did not have to be friends to conduct business with one another.

"In fact, we promoted interdependence as a way for peace and stability."

However, Wong noted that such consensus is now over.

While this does not equate to deglobalisation, the change will create a different kind of globalisation as major countries seek to strengthen their economic vigour.

"We see the outlines of a new paradigm emerging for the global order," Wong said.

"One where business is increasingly going to be organised, not just by economic logic, but also by geopolitical orientation and national security."

Turning vulnerabilities into strength

From Singapore's perspective, these are unfavourable changes denoting a "less benign environment", especially for smaller states.

"But we have to adapt to the world as it is and not as we would like it to be," Wong said.

He added that turning "vulnerabilities into strengths" has always been a part of Singapore's story since the beginning, citing how the country recycled water to counter water shortage and reclaimed land to tackle land scarcity.

Entering into the new era, Wong noted that Singapore will have to continue adapting, innovating, and building on its strengths.

Wong suggested that Singapore is better prepared now to tackle current challenges as there are "many things going for us (Singapore) compared to the past".

"We have more resources, we are in a strong competitive position across many sectors of the economy, whether in finance and transport and logistics in advanced manufacturing, and we are continuing to transform our economy through new digital innovations," Wong said.

This new digital innovation is part of the reasons why the country has been pushing for digital economic agreements with other countries, as it sees "tremendous potential" in generative Artificial Intelligence (AI).

Digital economy agreements would mean establishing common standards with like-minded partners, enabling the country to have more cross-border data flows.

"So these are our strategies to adapt to this new world we know that it will not be easy, the journey ahead will not be easy. But I have always believed that the crucibles and the challenges in our journey can only make us better and stronger," Wong said as he concluded his introductory speech.

On U.S. and China

Richard Ditizio, the Chief Executive Officer (CEO) of the Milken Institute asked Wong during the panel discussion: "What role do you think Asean and Singapore in particular can play in providing some stability in an increasingly fractious world?"

Wong said all countries in Southeast Asia are friends with China and the U.S. and would not want to be placed in a position where they would have to choose one over the other.

He added that Asean operates in a framework that is "open and inclusive", engaging all major powers in the world including European Union (EU), India, Japan, and many others.

"We reject dominance by any single power," Wong asserted. "We avoid exclusive commitments with any single party. We just want to be friends with everyone."

Asean, Wong added, has a very strong convening power that was able to bring key parties and key partners together, striving to "build common ground" and "advance cooperation for peace and stability" in the region.

"To do that, Asean itself needs to be strong and united, and we are doing everything we can to better integrate our economies in Southeast Asia," he said.

What Singapore is doing to compete on the global stage

Observing that the U.S.-China tension has created an environment of "tremendous competition" for "resources" and "leadership", Ditizio questioned how Singapore was able to compete on the global stage to attract key investments to the country.

In particular, key investment in semiconductors.

"We do whatever we can to provide a conducive environment," Wong said.

Not only does Singapore offer some incentives within a certain framework, but the country also possesses strong capabilities, a skilled workforce, excellent connectivity, reliability, and a stable business environment.

Wong acknowledged that Singapore does not have the kind of capabilities to make 7nm or 5nm, referring semiconductor manufacturing where transistors are measured in nanometers, but the country can compete in areas like speciality chips.

He said: "Specialty chips for cars for smartphones — that we can do, and we can be competitive in this in that area."

On Sep. 12, GlobalFoundaries, the world's third-largest contract chipmaker, opened a US$4 billion (S$5.4 billion) semiconductor fabrication plant in Singapore.

Its advanced manufacturing facilities (FAB) in Singapore are capable of creating a 28nm speciality chip production capable of powering new smartphones and electric vehicles.

Increased volatility in the external environment

Social compact

"So let's talk about what's working," Ditizio said.

Ditizio commented that his experience working with Singapore, in particular with the Singapore Economic Development Board (EDB), has been a "pleasure" and that "it just works".

He noted that this is due to the social compact "that makes that work".

Ditizio proceeded to ask what some of the risks Singapore might face to its social compact in the future which might disrupt that.

High level of trust and a strong sense of solidarity

Wong pointed out that some of Singapore's strengths lie in its "high level of trust" and "strong sense of solidarity" in its society.

To Wong, these are key strengths that Singapore has to maintain.

In order to do that, there are two key priorities that Singapore has to uphold, he said.

Firstly, Singapore has to ensure that the broad middle of the society continues to enjoy real income growth and improvements in their standards of living over time.

Secondly, Singapore has to comprehensively tackle the challenges of inequality and mobility.

These are areas that Singapore has been focusing on together with partner unions.

"This is continuing to be a work in progress because there will be new challenges," Wong said.

However, Wong noted that there is increased volatility in the external environment that might create disruptions and increased churn in the country's economy, which will impact Singaporeans.

This is part of the reasons why Singapore is embarking on a major exercise to "strengthen our comeback" and "support workers", as well as offering help to those who are unemployed and displaced.

"It will entail more government spending, more investments in workers in our human capital, but I think it will be spending well worth — making investments well worth in order to keep our society strong and united and to continue to get sustained support for our economic model," he added.

Milken Institute Asia Summit

Milken Institute is a nonprofit think tank focused on "accelerating measurable progress on the path to a meaningful life".

It operates out of six offices in the world, including one in Singapore.

This year marks the institute's 10th Asia Summit.

Top image via Milken Institute.