Supply and Demand
Supply shocks
- 2017 Qatar diplomatic crisis when countries in Middle East like Saudi Arabia and UAE cut off ties with Qatar caused oil supply shock and oil prices to rise by 1.6%
- May affect UCOP in Singapore, as 5.5% of Singapore's total oil imports come from Qatar
- However, Singapore has diversified sources eg 11.3% from Saudi Arabia, 10.9% from UAE
Market Failure
Negative externalities
- UK tax on sweet drinks (2017)
- Combat diabetes, obesity and tooth decay
- Expected to raise $1b in tax revenue
Macroeconomics
Fiscal policy
- South Korea launched a US$10b fiscal stimulus package in 2017
- 7 trillion won on welfare for elderly, working mothers and low-income households
- Create 110,000 jobs
Supply side policies
- Japan's Society 5.0 drive increases innovation in areas like AI
International Economics
Comparative advantage
- Singapore high-end goods and services
- eg medical tourism: cutting edge technology, medical expertise
- $1.1b in 2012
- However, losing out to low-cost competitors eg Bangkok, Malaysia
- Nevertheless, Singapore differentiates itself and enhances its non-price competitiveness by providing premium service
- eg Farrer Park Hospital offers patients shopping and delivery service via wireless tablets, and serves food from the adjoining One Farrer Hotel and Spa
Trade and investment policies
- China's Belt and Road Initiative (BRI)
- China's Regional Comprehensive Economic Partnership (RCEP)
- Singapore signed a MOU with the Myanmar Investment Commission (MIC) in 2017 to make it easier for Singapore firms to invest and expand in Myanmar.
- eg Singaporean firm BreadTalk partnered with Myanmar conglomerate Shwe Taung and opened its first outlet in Yangon in 2017
- eg Singaporean firm Bok Seng Logistics partnered with Myanmar conglomerate Ayeyar Hinthar to provide logistics at Pathein Industrial City in Myanmar in 2017
Advantages of globalisation
Disadvantages of globalisation
- FDI
- eg Japanese electronics firm Minebea set up a facility in Cambodia in 2012, hiring 20,000 Cambodian workers, who received training and knowledge transfer to do more value-added processes like making precision parts for smartphones, rather than low-value added processes like packaging and assembly. This allows Cambodia to move up the value chain from manufacturing low-cost garments to more advanced electronics.
Disadvantages of globalisation
- Brain drain
- eg Taiwan suffers from highest talent deficit of -1.4, as locals migrate to Mainland China, Singapore etc
- eg in the EU, people migrate from less economically-prosperous regions like Greece, Spain, Portugal, Romania and Bulgaria, to more economically-prosperous regions like Germany
Firms and Decisions
Economies of scale
- Tunglok invested in high-tech machinery to improve productivity. In 2013, it installed 3 automated woks called Artificial Intelligence Cooking (AIC) machines in its central kitchen, which can cook 3x faster than human chefs, and reduce energy consumption by up to 30%.
Product differentiation
eg telco industry
Starhub launched DataShare plan that allows users to share 3G data (2017)
Oligopoly mutual interdependence
- eg following Singtel's MobileShare Supplementary Plan, Starhub launched its DataShare Plan in 2017
- eg following Grab's GrabFamily service that offers Grab-and-Go seats for children, Uber launched its Uber Car Seat service in 2017
Infant milk formula in Singapore
- Oligopoly by 6 brands
- High prices (more than doubled over past nine years)
- Extensive non-price competition eg advertising, R&D
- eg premium formulas with special ingredients (eg DHA)
- eg hospital sponsorships and milk rotation programmes
- Total marketing expenditure increased by 42% from 2010 to 2014
- Imperfect information eg mothers unaware that formula milk can be stopped after child turns one year old, perceive that more expensive formulas are of higher quality
- Introduce more competition eg Australia's Own Food, Singapore brand Einmilk
- Government intervention
- eg CCS launched a task force to oversee and regulate prices of infant milk formula
- eg HPB launched public education campaign such as providing nutritional information of milk formula, weaning at supermarkets
- eg $1.5m scheme that provides milk formula vouchers for low-income families launched in 2017 will benefit 7500 children
Mergers and acquisitions
eg container shipping industry
- Hamburg Sud was acquired by Maersk Line, the world's biggest shipping firm, to hold 18% of global market share (2017)
- China Ocean Shipping Group and China Shipping Group merged to form China Cosco Shipping Corp. , helping them to increase market share to 8% (2015)
- Japan's "Big Three" shipping giants Kawasaki Kisen Kaisha, Mitsui OSK Lines and Nippon Yusen Kabushiki Kaisha set up a joint venture named Ocean Venture Express, helping them to increase market share to 7% (2017)
Government intervention
- EU fined Google $2.7b for antitrust practices in 2017
Singapore Statistics
- Unemployment 2% in 2017
- Inflation 1.1% in 2017
- Imports 149.6% of GDP in 2015
- Exports 176.5% of GDP in 2015
- Trade 326.1% of GDP in 2015
- Main trading partners
- Export to
- China (12.6%)
- Malaysia (12%)
- HK (11%)
- Indonesia (9.4%)
- US (5.9%)
- Import from
- China (12.1%)
- Malaysia (10.7%)
- US (10.3%)
- South Korea (5.9%)
- Japan (5.5%)
- Main exports
- Electronic integrated circuits (20.5%)
- Petroleum oil (16.1%)
- Data processing machines (2.5%)
- Semi-conductors (1.9%)
- FDI was 334.2% of GDP in 2015
- Bilateral Investment Treaties (BITs) with 46 countries
- Maximum 17% corporate tax
- Maximum 20% income tax
