Usually when the World Economic Forum comes to town in Davos, Switzerland; there will be a lot of talk about how well the world economy is and that it will go from strength to strength. Not this year!
On the first day of the Davos forum, both the Chinese and Russian leaders (Wen Jiabao and Vladimir Putin) gave a gloomy assessment on the global economy and blamed the United States directly for causing the global economic crisis in the first place.
This criticism of the U.S leads me to think of one of the biggest problem I have with the recent Singapore budget. As everyone in Singapore knows, the Singapore economy is tied to the health of the U.S economy. Over 70% of Singapore’s exports go to the U.S and I saw nothing in the new Singapore budget that will change this. Even though new U.S President Barack Obama has already went to work to revive the U.S economy with an 825 billion dollar stimulus package, there’s no guarantee that the stimulus package will be successful. Even if it is successful, there will still be a lot of pessimism over the U.S economy.
America has a record debt that is growing by the day; involved in 2 ongoing wars and it’s in its worst recession since the Great Depression. With all these challenges facing the U.S, I question whether it’s in Singapore’s interest to continually tag our economy to the U.S. It’s no secret that Singapore is suffering more than our neighbors in this crisis because of our closeness of our economy to the U.S and I think there’s no need for me to remind everyone what happened to our country’s investment in Merrill Lynch. As there is no end in sight to the problems in the U.S, I think Singapore should encourage Singapore companies (including government-linked companies) to invest in countries other than the U.S.
Annual budgets are more of a plan for the year than a blueprint, and plans can change. With odds that the financial crisis will get worse before it get better, I think it’s better that Singapore spread the risk around. I suggest that the Singapore Finance Ministry make a small change and look at tax incentives and grants to Singapore companies that move their investments from the U.S to other countries.
A small change like that I think might make the economy recover faster.