Ch 2: Sustaining Economic Development in a Globalising World
What is Globalisation?
Process by which people, their ideas and their activities in different parts of the world become interconnected or integrated
Key Driving Forces of Globalisation
Developments in Transportation and Communications
TRANSPORTATION
*In 19th century: widespread use of steam engines
*In 20th century: ocean-going vessels, commercial jet aircrafts, containerism
Significance: greatly increased the movement of goods and people from one
place to another
*Efficient and integrated transportation infrastructure to facilitate movement:
airports, seaports, railways, highways
COMMUNICATION
*Faster and more convenient communication via: telephone, electronic mail,
fax, video conferencing
*Satellite technology: allows for simultaneous transmitting and receiving of information
*Optical Fibre systems: transmit large capacity of information at very high speed
*Internet: consumers can access information more conveniently and efficiently
Significance of advances in communication technology: Transnational Corporations (TNCs) can easily coordinate and control their worldwide activities
Transnational Corporations (TNCs)
* large global firms
*operate in a number of countries
*have production of service facilities outside their country of origin
Why do TNCs set up their operations in different locations around the world?
source for new markets
lower cost of production
How are worldwide operations controlled and coordinated? By the HQ in the
country of origin
Process to arrive at the final product?
source for component from around the world
assemble final product in another country
Significance: economies around the world become more integrated
Impact of Globalisation
1. Economic Impact
Globalisation has led to:
Improvement in Standard of Living
increase in income levels
more revenue earned due to increased investments in a country
Revenue earned used for: education, housing, health, defence and transportation
Increase in lifestyle choices (ie: instead of buying local products, now have the choice to buy the same product made in other countries)
Significance: people enjoy benefits, have a higher standard of living and a better quality of life
Increased Competition among Nations
Investment and Market
TNCs: With globalization, countries face intense competition as governments compete with one another to attract the TNCs
Eg: Singapore’s port faces competition from Malaysia’s port at Tanjong Pelepas
Investors invest in a country:
where productions costs are low
incentives are offered to foreign investors
Result: The country ends up having well-developed industrial infrastructure
The country poses a strong challenge to other countries in the region
When will investors not want to invest in a country?
poor infrastructure
political instability
Talent
The workforce has had more opportunities to find employment in a nother country due to globalisation
c. Widening Income Gap between the Rich and the Poor
Globalisation has brought about: rapid development in many countries as well as led to spread of poverty in other countries
Developed countries: own manufacturing activities so = rapid income growth
The rich in these countries continue to prosper because of better opportunities
TNCs: draw investments, skilled people, resources away from poor areas and relocate them in other regions that benefit them
Developing countries: face trade barriers from developed countries
Unable to produce higher quality goods
The poor and lowly-skilled workers in these countries: face economic uncertainties such as retrenchment
Result: increasing tension between rich and poor
2. Social Impact
Increased Awareness of Foreign Culture
People have become aware of different cultures
HOW? Surfing the Internet, traveling, watching foreign movies
Loss of Local Culture
Global brands dominate consumer market in developing countries
TNCs: have created a homogenous culture across the world
Globalisation: led to spread of pop culture
Result: influenced the youths, resulting in loss of local culture
Reaction to Globalisation: people are uncomfortable with advancement of foreign culture as it is seen as the foreign culture beliefs, cultures and languages is being forced upon the rest of the world
3. Environmental Impact
Natural Resources in developing countries as timber, oil and metals used up quickly
Developing countries more concerned with profits and markets
Result: Takes a toll on the natural environment
Problem with developing countries? Unable to implement and enforce environmental regulations
Environmental Degradation
Deforestation and Related Problems
Deforestation:
* taking place at a rapid rate
* to make way for development of industries, agriculture, housing and
transportation
*for economic activities such as forestry, mining and cattle ranching
*to plant cash crops, build factories, transport facilities (Indonesia)
Problems:
* soil erosion
*extinction of flora and fauna
* increase in flooding
*haze (a result of burning forest fast as it is the cheapest and easiest way)
Effect of haze: not only caused environmental but also health problems and losses in terms of tourism
Global Warming
*Causes of global warming? Movement of goods via aeroplanes and ships, other modes of transportation
How? Production of large quantities of greenhouse gases (fumes) such as carbon dioxide and nitrogen oxides leads to an increase in the average global temperature
c. Environmental Management
*increased awareness of environmental management
*with a well-preserved environment future generation are able to use the resources to
generate income
Result: ability to continue to enjoy high standards of living
*Energy use will increase by more than half over the next 25 years
*China and India: will take up much of the energy increase due to rapid development
and large-scale industrialization
How to ensure a sustainable source of energy supply?
*Conservation
*Alternative energy soures: wind, solar, geothermal
But alternative sources of energy are costly to arrive at.
Singapore’s Strategies to Maximize Opportunities and Overcome Challenges in a Globalizing World
How are the strategies carried out?
a. Diversifying the Economy
Areas?
*Research and Development
Manufacturing Hub
Education Hub
Tourism Hub
Singapore’s goal: centre for technology-intensive, high-value added manufacturing
Activities egs: chemical engineering, pharmaceuticals
Singapore’s direction? Life Sciences, attract TNCs (high value-added manufacturing)
Life Sciences: How to ensure development? *Need for Research and Development,
so set up A*STAR
*Research institutes set up
TNCs:
*generates jobs
*affirms S’pore’s position as a manufacturing hub
Education:
*International Universities have set up branches in S’pore
Significance? Singapore will be able to create a strong university sector that attracts
Talent
Tourism: (Service Industry)
*need to keep up with competition in the region
*Tourist destination – building of IRs: Significance: Singapore will become a choice tourist destination in SEA and generate economic benefits
b. Nurturing Growth of Small and Medium Enterprises (SMEs)
SMEs: *important providers of jobs
*Supplies TNCs with components in the manufacturing industries
Result: enhances Singapore’s attractiveness as
a. regional manufacturing hub
b. service hub
Problems with SMEs: a. unable to cooperate with big corporations which have more
resources
b. lack expertise in using advanced technology to keep
operations up-to-date
c. shortage of skilled professionals to manage the company
(because family-run)
d. lack capital to venture into overseas markets
(because small domestic market)
Solution: *Loan schemes where banks provide assistance
*Training: regular seminars and workshops organized for members to
enhance their capacity
*Tax Exemption for new companies
c. Venturing Abroad
Regionalisation: invest in countries with abundant land and lower labour costs and
new markets
Country that is investing provides capital and expertise to develop
Industrial parks in host countries
Benefit: promotes development in the region
Eg: Suzhou Industrial Park
International Tech Park in Bangalore, India
SingTel Groups: ventured abroad (in the region)
Expanded into overseas markets
Investments in over 20 countries
Benefit; Ensures Singapore’s long-term growth
Singapore has International Investments as well
Overall Benefit: ensures Singapore’s economic growth is maintained
Possible Negative Impact?
With Singaporeans relocating overseas, studying abroad and choosing to live
there and work there, may result in Singaporeans becoming less emotionally
rooted to Singapore
d. Expanding Market Reach Through Economic Cooperation
*Singapore’s domestic market is small
*local companies have to sell their goods to a larger market to establish trade ties
How to expand market reach?
1. sign Free Trade Agreements (FTA) with other countries
Benefit: brings closer economic collaboration by legally binding countries
2. setting up Special Economic Zones (SEZ)
Benefits: *less stringent economic laws than those in other parts of the country
* uses tax and business incentives to attract foreign investments
e. Managing Resources Efficiently
*Singapore lacks natural resources
*Have to take care of natural environment so future generations can continue to
enjoy clean and green environment
How to manage resources efficiently?
Developing People
HOW?
Promoting local Entrepreneurship and Technopreneurship
*Local entrepreneurs should take risks in their business ventures and come up with
new products to compete with foreign countries
How to promote entrepreneurship?
Amend bankruptcy laws: Why? entrepreneurs who have failed can start a business again
Recognising local entrepreneurs who have struggled and succeeded
Promoting Continuous Learning Among the Workforce
*Singapore Workforce Development Agency (WDA) ensures that workforce remains competitive
*Skills upgrading provided for workers by WDA: for new job demands and changing
work environment
*Skills Development Fund (SFD) provides financial assistance to employers to train
and upgrade skills of their workers
Attracting Foreign Talent
Why? *to meet manpower needs
*knowledge-based economy
*brings with it overseas business contacts
*creates more business opportunities and jobs in Singapore
*make up for the lack of local expertise who have specialized skilled
(craftsmen, artists)
Managing the Environment
*Environmental preservation is crucial to sustainable development
Managing Limited Land Resources
*to allow for high standard facilities for housing, transportation, recreation, commerce, defence and education
Benefit: *Singapore enjoys a good quality of life
*Ensures Singapore’s sustained growth in globalising world
*Land reserved to preserve natural sites
*Land allocated for waste disposal
Cooperation with Regional and International Organisations
Regional Level:
*Singapore cooperated with ASEAN on haze issue: Singapore hosted the ASEAN
Ministerial Meeting on Haze in 1997 to discuss matters to combat the problems
International Level:
Singapore worked with other countries to work on global environmental problems
Eg: signed agreement to phase out use of ozone-depleting substances like CFCs
Public Education
* people must be educated on understanding environmental protection
*adopt environmental friendly ways
*have a sense of responsibility
*take personal interest in keeping surroundings clean
*students encouraged in taking part in recycling and waste minimization programmes
*shoppers encouraged: reduce excessive use of plastic bags eg: BYOBD programme
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