Singapore’s general election, on July 10, was another triumph for the People’s Action Party (PAP), which has been in power since 1965. In the shadow of the pandemic, its economy weakened, the City-State faces an uncertain future.
A PAP victory was expected; but what drew the attention of observers was the stellar performance of the main opposition party – The Workers’ Party (WP) which improved its tally of seats from 6-10, and captured 50% of the vote in the seats it contested. PAP’s vote share dropped from nearly 70% (69.9%)in 2015 to around 61% (61.24). While the workers party is supposed to have drawn the support of Singapore’s youth, who are yearning for change, a large percentage of the older population has backed the PAP.
Singapore’s 14th parliament is thus likely to have a strong opposition.
Watch: Singapore’s opposition The Workers’ Party pleased with the vote of confidence
The Economic Challenges
This election was significant, not just because it was sitting PM Lee Hsien Loong’s final election, but because it was held in the midst of the COVID-19 pandemic. Singapore has handled the pandemic reasonably well (the total number of cases is a little less than 50,000), but like other countries it’s economy has taken a significant hit.
While the PAP triumphed in the election, its real challenge, getting the economy of the city-state back on track, is likely to be an onerous task. Soon after the declaration of results, Singaporean PM Lee Hsien Loong stated that:
“I will use this mandate responsibly to deal with Covid-19 and the economic downturn and to take us safely through the crisis and beyond.”
If one were to look at the state of the Singapore economy year-on-year, the ASEAN city state’s GDP, in the second quarter shrank 12% from a year ago, according to figures released by the Ministry of Trade and Industry (MTI). On a quarterly basis, the economy weakened a staggering 41.2 per cent during the April to June quarter.
This result, the biggest quarterly drop, has been attributed to strict lockdown measures, implemented from the 1st week of April till June 1 to slow the spread of covid19, combined with a drop in global demand.
The Impact of the Pandemic on Sectors of the Economy
Manufacturing, services and construction took a beating during the April to June Quarter. Manufacturing dropped over 20% (23.3%), construction by 95.6% and services by 37.7% as a result of the restrictions on airlines, hotels and restaurants during the lockdown.
Steps taken by the PAP government
The Singapore government has set aside a staggering SGD 90 Billion (67 Billion USD) (equivalent to 20% of Singapore’s GDP) with the objective of assisting businesses and households and to prevent layoffs. Yet a massive stimulus package will not be enough to turn around the economy.
How Singapore Has Been Impacted By the Pandemic
Given Singapore’s dependence on the global economy, a lot will depend upon how quickly other economies recover from the pandemic and whether connectivity can be resumed. Malaysia and Singapore have decided to open a green lane for business travel from August 10, 2020 given the close links of the two ASEAN members.
Singapore and China have also initiated a ‘Fast Lane Initiative’, effective June 8, 2020. This initiative will facilitate essential business and official travel from Singapore to 6 Chinese provinces (Chongqing, Guangdong, Jiangsu, Shanghai, Tianjin, and Zhejiang). Travelers will need minimal or no quarantine, though they are required to take a PCR test before undertaking travel.
While travel for essential purposes has been permitted, tourism, which contributes an estimated 4%, is unlikely to resume given Singapore will be cautious and adopt an incremental approach in opening up air connectivity with other countries. As a result, sectors like airlines, hotels and restaurants are unlikely to recover fast.
The other sector hard-hit in Singapore is construction. Singapore’s work force consists of 1.42 million foreign workers — mostly from South Asia. Foreign worker dormitories have been the predominant source of the 50,000 coronavirus cases. The construction sector can only recover when migrant workers are allowed to get back to work. While steps are being taken in this direction, it will likely take time.
Singapore’s challenges do not end with covid19. During the US-China trade wars, which began in 2018, the city state lost out economically. Even now, the increasing geopolitical tensions between China and the US are a cause for concern, as are the disputes between China and Vietnam over the South China Sea. Before the election, Lee Hsien Loong in an article written for Foreign Affairs, stated:
“Asia-Pacific countries do not wish to be forced to choose between the United States and China,”
In the article, Lee Hsien Loong also referred to the tensions between China and Vietnam over the South China Sea Issue. Amidst numerous challenges, some analysts believe that Singapore may attract investors seeking to relocate from Hong Kong after the imposition of the national security law by China.
Singapore has dealt with numerous challenges in the past. The challenges posed by COVID 19 are grave; and the geo-political tumult within Asia can not be ignored. Given Singapore’s interconnectedness with the rest of the world, a lot will depend upon how fast other countries can get back to normal and resume air travel. Apart from this, Singapore would also be wary of geopolitical turmoil in Asia and the escalation of tensions between The US and China.
Watch: “A lot of work to do” – WP’s Pritam Singh
The PAP has won reelection; but it has many challenges to contend with, and many difficult decisions to make.