Key Content:
Economic impact on countries, companies and individuals
economic growth and downturn for countries
higher profits/ market share and lower profits / market share for companies
higher income/ greater employment opportunities and loss of income and employment for individuals
Responses to economic impacts
cooperation and competition among countries
innovation and adaptation by companies
acquisition of knowledge and skills by individuals
Globalisation has allowed Singapore to seize opportunities available in the global economy to strengthen trading relationships between Singapore and other countries o More tax revenue - improve infrastructure and standard of living o Increase in trade and businesses, greater variety of goods & services for consumption
Singapore taps on global economy for trade = sustain economic growth through
Foreign Direct Investment (investments in a SG company by a foreign company)
Through Foreign Direct Investment (FDI), Singapore is able to attract foreign investors to invest is because of our ability to enable businesses to enhance and strengthen their important activities here and leverage on economic opportunities we provide.
In doing so, foreign companies can expand their businesses in Asia and the rest of the world. In 2013 for example, FDI in Singapore amounted to about $800 billion, the greatest of which comes from the USA (about 114 billion)
With more investments and greater trade, more tax revenue is generated.
With more tax revenue earned, Singapore can improve its infrastructure. There are also more job opportunities for Singaporeans. o Singapore also benefits from a greater variety of goods and services available for consumption. o Thus, participating in the global economy has led to Singapore enjoying economic growth which contributed to the increase in our standards of living. ➢ Free Trade Agreements are treaties between countries to establish a free trade area where the exchange of goods & services can be conducted across borders. – increased trading for Singapore
In an interconnected world through globalisation, the rise and fall of economies is closely tied due to trade and investments between countries.
For example, Singapore was affected by the Global Financial Crisis in 2008 which started with the economic decline in the USA.
This economic slowdown led to reduction in demand for goods and services worldwide. People only buy what is necessary as they have less money to spend. As a result, Singapore’s exports were affected badly.
The collapse of the American investment bank Lehman Brothers in September 2008 led to the banking crisis in the United States (US) and its ripple effects had greatly stressed the Singapore economy, causing it to be the first country in East Asia to succumb to recession.
Many Singaporeans who had poured their life savings in financial products such as Lehman’s Minibonds, DBS High Notes 5 and Merrill Lynch Jubilee Series 3 Link Earner Notes became angry when their investments soured and the company went bankrupt.
Its impacts are felt in the tourism sector. Visitor arrivals dropped tremendously, especially from big markets such as China, India and Europe, causing a decline in tourism activities in Singapore.
During economic downturns, Singaporeans can be affected greatly due to the loss of jobs resulting from retrenchments.
Many small firms in Singapore suffered as they may not be able to finance their operations and had to close down.
Besides job losses, some employees went through pay cuts as their company may not be doing well due to loss of profits or losses.
MNCs set up their companies in different locations- access to new markets abroad, lower labour costs and cheaper resources (lower production costs)
Many Singapore companies gained higher profits by going global. Singapore government offers assistance such as loans, grants & tax incentives.
Some MNCs obtain components from one location but assemble them in different parts of the world where production cost would be cheaper
Some Singapore companies that gained higher profits by going global: CapitaLand
Limited – ‘in order to be successful globally, companies need to be open to change, be nimble and embrace innovation. ‘
Globalisation has led to greater interconnections and interdependence between different parties. Hence many countries are able to widen their market reach by expanding their production and sale of goods in many parts of the world.
However, with so many companies vying for the same market, it is becoming harder for companies to compete for a share of the profits from the global economy.
Especially so if they do not constantly innovate and reinvent themselves.
In 2012, French hypermarket chain, Carrefour, closed its only branch in Singapore after 15 years.
Due to competition from other companies offering similar products in Singapore.
The economic impact of globalisation can be detrimental to companies which are unable to anticipate changing markets
Companies may not be able to ensure that their products and services remain relevant and competitive and as a result, face lowered profits
Some may end up having to close down and stop their operations in the country, some may even be in debt
In order to overcome this trade-off, companies have to constantly introduce new features to its products and services, ensuring they remain relevant.
Challenges SMEs face in Singapore: small domestic market, shortage of expertise & labor- unable to earn enough profits
Government provide incentives e.g. Financial assistance, facilitating partnership between SMEs and larger corporations, aids in SMEs efforts to venture abroad
Easier for individuals to look for jobs overseas due to ease of movement as globalization has facilitated mobility.
Other countries may offer higher pay for a specific set of skills the individual possess a Better job prospects and higher income working overseas (higher pay that executives enjoy working abroad compares to their counterparts back home)
With developed communications technologies, it is easy to stay in touch with family and friends back home. Travelling to another country is also convenient
Some individuals may benefit as overseas companies may want to employ them due to their skills.
This translates to a higher revenue for the country as individuals have greater purchasing power generating sales of products which brings in the profits for the country
Globalisation increases the mobility of workers and jobs; some workers may be adversely affected.
Jobs may be lost when global companies close down their operations to shift to another location offering lower labour costs or when workers are unable to equip themselves with the skills required for those jobs.
Increased competition- companies get more access to foreign markets offering lower labour costs o e.g. Japanese fashion chain Uniqlo, first started product operations in china because of the low labour cost. However, as China’s manufacturing and labour cost rose, Uniqlo moved out of China into Vietnam where labour costs were half that of China’s.
The economic impact of globalisation can be detrimental to individuals as they may find themselves out of jobs when other markets are able to offer lower labour costs or when they are not equipped with the right skills.
Individuals will lose their personal income when they do not have jobs and this would affect their standard of living as they may not be able to meet their basic needs.
Loss of jobs when global companies close down, or when workers unable to equip themselves with relevant skills
MOM came up with a Continuing Education Training masterplan to support Singaporeans.
The Workfare Training Support scheme allows older lower-wage workers to upgrade their skills. Skills Future courses enable people to learn more skills and be more relevant/keep up with the times.
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