A Research on “The Belt and Road Initiative”：New Growth Points for Singapore？

WANG JUN

Abstract： This paper explores “The Belt and Road Initiative”（BRI） put forward by China and its impact on Singapore with its very important strategic position in this initiative. Both the pros and cons are analyzed.

Key words： BRI； China； Singapore

1 Introduction

Facing a soft labor market and a stuttering economic growth in recent years， Singapore government has the incentive to seize and push every possible economic growth point so that high-tech f0reign investment can be constantly attracted and life can be improved. Apart from the frequently talked-about topic including innovation， workforce education and training， we cannot ignore the newly emerged potential economic driver， BRI.

2 Significance of BRI

Initiated and pushed by China， this project aims to enhance links between Asia， Europe and Africa by building roads， railway and other infrastructure in a network of projects covering more than 60 countries. Its benefits have been recognized by many countries in the respect of international economic strategy.

Investment in infrastructure has a strong economic spill in other economic sectors and creates numerous employment opportunities， but the investment risk in some chaotic areas like Middle East is very high， and the improvement of infrastructure is demanding. They both prevent the inflow of capital， a market failure. The BRI does not create its own supply and demand， but to facilitate them by affecting the trade cost. Its essentially a form of private-public partnership. However， with the cross-national collaboration， it presents even stronger power in cost cutting than ordinary PPP cooperation.

One of the main benefits lies in the decrease of unit business cost （UBC） of city or port along the trade route. The relatively isolated and inland geographic location and the under-developed infrastructureshas led to high transport cost. High business cost in turn impedes the growth of trade volume in these areas. With BRI， transport cost index is lowered， so UBC becomescheaper. As a result， business volume and activated project can be elevated to an unprecedented level.

3 New growth points for Singapore

Singapore was ranked at the 7th on the 2017 Global Innovation Index （GII）， remains top 1 among Asian nations. Upon traditional infrastructure construction and manufacturing， BRI definitely needs some new and high-level quality of growth. Tremendous economic opportunity is offered to Singapore because it becomes one of the best places to deliver the knowledge and technology to capture the potential of the New Silk Road， in a sustainable way. No other countries in Southeast Asia is competitive enough compared to Singapore in this aspect. Other competitive advantages include highly educated workforce， low investment risk， efficient government， persistent rule of law， and its good reputation as a world-renowned financial center and port. High-quality investment and techniques will flow in from both East and West thanks to the strategic geographic location for trade connectivity. New jobs would be created to boost the labor market.

Singapore is able to play the important role as a connector to promote regional and multi-party cooperation. The BRI initiative can be regarded as a new expanded economic growth ladder that China has placed in the backyard of Singapore： the territory of the ASEAN countries， through which this country is able to climb higher if it seizes the chance.

4 Opposite View

Some peopleholds a skeptical view and regards this as a win-lose activity. They even believe that Singapore might be the biggest loser from BRI given that its trade routes can be bypassed， a threat to its location as a global shipping hub. Even though Singapore has been an active proponent of Chinas growth and was among the earliest supporters of Asian Infrastructure Investment Bank， it might not belong to the core strategic part of the project.

Although the land transportation and the establishment of tax-free zone greatly save business cost for Singapore， especially with European countries， this advantage is not exclusive. Cities like Bangkok and KL can also enjoy the identical arrangement and build on their own strengths. Singapore still has to endeavor to surpass them in respect of UBC to maintain the trade volume with European countries and attract high-tech foreign investment. Also， lower UBC allow wages to rise higher， but the country can be competitive at the same time.

Singapore is never the sole beneficiary， nor is it the biggest winner in this game. After all， China is anticipating returns on the investment of time and effort， let alone trillions of dollars invested. We are willing to see sphere of economic influence expand in the economic and trade cooperation zones and expect new and bigger oversea markets for commodities and services. The overcapacity problem may also be curbed to some extent.

5 Conclusions

When talking about the target above， Singapore is no longer the best candidate solution. The existing infrastructure， including roads， bridges， electricity， telecommunications and industrial estates， are well developed. There is not much room for large-scale construction. The domestic market is also more saturated compared with the isolated Central Asian nations. Once those host countries who take in investment become better off， the main beneficiary is not Singapore， either.

Some young companies may be willing to have a finger in the pie， make investment， and accept the potential risks there regarding the business return. But still， they are not the main gainers. Nor is China the main destination where Singapore wants to attract high-tech investment from. Therefore， we really have to analyze both pros and cons of it.

References：

[1]Liu，J.Y.，Wang，M.，Jun-Feng，L.I.，and Wang，W.Z..Literature review of agglomeration on producer services[J]. Journal of Chongqing University of Technology.2014，2.

[2]SHEN Yuming， WU Kang， REN Wangbing.Research progress of the spatial agglomeration on producer services[J].Geographical Research，2009，28（6），1494-1507.

[3]Chaoxun， S.H.E.N.G.. The Economic Performance of Large Retailers Dominating Industrial Chain——An Empirical Analysis Based on Retailer and Manufacturer Interaction[J].Journal of Business Economics， 2011， 12，003.

About the author：Wang Jun （1995.11-）， MSc Applied Economics of Nanyang Technological University，Singapore.Research Interest： Growth and Development， Spatial Economics.