Chapter 2

Sustaining Economic Development In A Globalising World

Learning Outcomes

What is globalisation? Key driving forces of globalisation

1. Developments in transportation and

communications

2. Transnational corporations

What does “globalisation” means to you?

What does “globalisation” means to other people?

Bill Gates:

Globalisation is about the world united by the Web

A student:

Globalisation means being able to attend lectures conducted by foreign lecturers and making friends with foreign students

GlobalisationDefinition of globalisation: Integration or interconnection of ideas and

activities Such activities range from political,

economic, cultural and educational. The world has ‘shrunk’ as people, goods and

information can be moved easily and at a faster rate around the world

Globalization right in Jurong Point Sonystyle Stalford Learning Centre Aussino Fox G2000 Levi’s Starbucks MacDonald’s Thai Express Lai Lai Kushinbo

MacDonald’s in USA

Key driving forces of globalisation

1. Developments in transportation and communications

2. Transnational corporations

3.Key Driving Forces of Globalisation Improvements in Transportation and

Communications systems were important factors for encouraging globalisation.

The speed of moving people, goods and services from seller to buyer is vital.

Transportation system Improvements in transportation

technology such as

-Steam engine in 19th C

-Use of commercial jet aircraft, large ocean going vessels and containerisation.

Lead to increased mobility as more goods and people are able to move faster.

Transportation system Importance of having an efficient

transportation national infrastructure to facilitate this movement of goods and people.

Singapore Airlines (61 cities in 34 countries)

Communications system Improvements in

technology has made communications among countries more efficient.

Widespread use of Internet Use of video- conferencing Allowed for greater

coordination and control of worldwide activities

3.2 Transnational Corporations (TNCs) The second driving force of globalisation is

improvement in the operations of TNCs. TNCS are large global firms that operate in

a number of countries and have production lines outside their country of origin.

The aim is to lower cost of production by sourcing for cheaper labour and raw materials.

Examples of TNCs

Transnational Corporation Singapore has many such

TNCs dealing with petro-chemical, pharmaceuticals, electronics and IT-related products.

http://www.edb.gov.sg/etc/medialib/downloads/media_release_2005.Par.0046.File.tmp/GSK_PressRelease.pdf

Learning Outcomes

Impact of globalisation

4.Impact of Globalisation Globalisation has brought benefits and

challenges to many different countries all over the world.

Different groups of people feel the effects of globalisation differently.

4.1 Economic ImpactImprovement in standard of living Increased income as countries earned more

revenue from increased trading and foreign investments.

Government can then use this revenue for national projects like education and health aimed at improving the lives of the people.

Consumers have more choices in terms of products from other countries > better lifestyle

4.1 Economic ImpactIncreased competition among nations TNCs seek to lower the cost of production This lead to countries competing to attract

these TNCs to invest in their countries. Read about the city of Dalian in your

textbook and note the advantages that it offers in attracting TNCs.

Many countries benefited from the development of infrastructure in their countries.

However, some countries are trapped in the poverty cycle as they are unable to attract investors.

Due to political instability and poor infrastructure

Talent With globalisation people

who are highly skilled can find better employment in other countries.

The move from various countries in search for specialised skilled personnel.

This led to a brain drain in some countries.

BrainstormingWhat are some reasons that have led to the

brain drain in Singapore?

What are the ‘push’ and ‘pull’ factors?

What can be done to retain these talents?

Widening income gap between the rich and poor International trade lead to rapid development in

some countries but contributed to spread of poverty for some.

The investment from TNCs helped many countries by bringing in much needed capital for development. Income will increase in these countries.

In some developing countries without TNCs’ support, they lag behind as they are not able to produce high quality goods. This restricts their earnings.

Loss of local culture Local cultures may be

eroded as newer cultures dominated the society.

Viewed as a negative influence as the youths lost interest in the local culture.

Examples of these new cultures are rap music and Hollywood movies.

4.2 Social ImpactIncreased awareness of foreign culture People gained more awareness and

knowledge of different cultures Through the widespread improvement in

communications i.e Internet and watching foreign movies.

4.3 Environmental Impact Many have argued that globalisation brings

about environmental destruction. TNCs often used up natural resources such as

timber, oil and metals at a rapid rate. Governments in developing countries lack the

resources to enforce environmental regulations and were also eager to attract TNCS.

The natural environment suffers at the expense of globalisation.

Environmental degradation Deforestation and related problems. Cutting down of rainforests to make way for

development of infrastructure- clear roads and building of factories.

Deforestation is a source of grave harm that gives rise to ozone depletion and global warming.

Haze Burning of the rainforests is

one of the fastest way to clear it for development.

The resulting haze pollution caused many countries in the region to suffer losses

In terms of tourism and also the health of the people.

Global warming Development in transportation (one of the

driving forces of globalisation) resulted in the worsening of global warming.

Aeroplanes, ships and factories produce large quantities of greenhouse gases such as carbon dioxide.

These greenhouse gases lead to an increase in the average global temperature.

Environmental management Environmental problems lead to greater

awareness that sustainable development is important for further growth.

Many countries are putting in effort to preserve the environment.

Development of alternatives sources of sustainable energy.

Conservation is one method but it is not enough.

Singapore’s Strategies

Singapore does not exist by itself.

Singapore

What does this mean?

- Due to globalisation, Singapore is easily affected by challenges internationally as well as locally

Disease Outbreak

Ageing Population

Transnational Terrorism

International Economic Slowdown

What strategies do we adopt to best prepare ourselves?

1. Diversifying the Economy

2. Nurturing Growth of SME

3. Venturing Abroad

4. Expanding market reach through Economic Cooperation

5. Managing Resources efficiently

1. Diversifying Economy

What does it mean?

- Our economy developing different areas instead of just focusing on one

Not Diversified…

Diversifying…

How does Singapore diversify its Economy?- Invest in technology-intensive, high-value

add activities (eg pharmaceuticals)- Research & Development (eg in

Biomedical)- Encouraging TNCs (eg Seagate’s

manufacturing facilities)- Education – leading universities setting up

campus here (eg Stanford University)- Tourism (Integrated resorts)

Why is it important to diversify?‘Do not put all your eggs in one basket’

Eg Bali Bombings

- Bomb went off in Bali, our neighbouring country- People were afraid to travel to the region- Our tourism industry was hit- Singapore still can depend on its other industries to contribute to our growth

2. Nuturing growth of SMEs

SME – Small and Medium Enterprises

What are they?- Businesses that are not as big as TNCs - Do not employ as many workers or make

as much money as TNCs

Why are SMEs necessary?- They provide support for TNCs by

supplying them with components - They are a local support structure for TNCs- Allows Singaporeans to exhibit their

entrepreneurial skills

eg. Producing resistors for bigger Japanese electronics company

Problems SMEs face- SMEs generally cannot compete with the

larger companies (do not have as much resources)

- SMEs generally do not use the most advanced technology

- SMEs generally have a shortage of skilled professionals

But…

As these SMEs are important to Singapore’s economic development, Singapore government assists them

Association of Small and Medium Entreprises

ASME looks out for the interests of SMEs in Singapore eg tax exemptions and organising seminars and workshops

3. Venturing Abroad

Why is it necessary?

- Singapore has limited land and labour resources

- We need to look abroad for resources

Eg Suzhou Industrial Park

-Established in 1994

-Chinese delegates looking to learn from Singapore’s success

-Singaporeans looking for ways to internationalise

How are Singapore’s needs met?

Needs: Land & Labour

Has: Expertise & Capital Has: Land & Labour

Needs: Expertise & Capital

Other Examples…International Tech Park, Bangalore, India

-Has a big pool of IT professionals

-Accessible to other major cities in India

-Government encourages foreign investment

Why is Venturing Abroad important?

- Singapore spreads its investments over many overseas markets eg Australia, Africa etc

- If one country or region is weakened, Singapore can still rely on the other investments to support our economic growth

What is one possible negative effect of Singaporeans venturing abroad?

4. Expanding market reach through Economic Cooperation

Why is it needed?- Singapore has a small market, therefore not

many consumers for the products that Singaporean companies produce

- Establish ties with other countries in order to expand the market

How do we expand our market reach?

2 waysFree Trade Agreements

(FTAs)

Special Economic Zones (SEZs)

Free Trade Agreements- 2 or more countries in a legally binding

agreement to collaborate- Examples of advantages are removal of

taxes of other countries’ products, increase in market for sales of goods

- Examples of countries that have FTAs with Singapore: USA, ASEAN, Japan etc

Special Economic Zones- A geographical area in a country that has

less stringent economic laws than in other parts of the country

- Allows for the smoother flow of goods- Business procedures are simplified, making

investing easy- Authorities will provide help for investors

when needed

For an example, read page 72 of your textbook

Since we lack resources and have limited number of people, we have to manage what we do have carefully

5. Managing resources efficiently

Developing People

Attracting Foreign Talent

Managing Environment

Developing People- Promoting local entrepreneurship and

technopreneurshipWhy is it needed? - With globalisation, more businesses will be competing against each other - Singapore will need more local entrepreneurs to take business risks to compete with products from foreign companies

- Singapore government has amended bankruptcy laws to allows businessmen who have failed to set up businesses, to try again

- Promote continuous learning among the workforce

Why is it needed?- With globalisation, some jobs may become obsolete and replaced by new jobs

Eg Jobs in Manufacturing line may be replaced by machines (assembly line)

- Singapore Workforce Development Agency created ‘Employability Skills System’ to equip the workforce with relevant skills to remain competitive

Attracting Foreign TalentWhy is it needed?- Singapore has a declining birth-rate and needs new

skills in a knowledge-based economy- Therefore, needs foreign talent to meet manpower

needs

What is needed?- Bringing in foreign talent will create more business

opportunities as they may bring overseas business contacts

- Bringing in specialised skills that may not be readily available in Singapore

- Managing the EnvironmentWhy is it needed?

- With globalisation, comes the consequence of environmental degradation (remember previous section)

How is it managed?- Careful land use and planning is important.- Land needs to be planned for housing, transportation,

recreation, commerce etc

Eg Downtown at Marina Bay

- Serves recreational, financial and housing Purposes

- Land has been carefully planned out by government

Also, need to preserve nature sites. This is a challenge as we have limited land to allocate. Chek Jawa

Sungei Buloh

Bukit Timah Nature Reserve

- Cooperating with regional and international organisations- Singapore cooperating with countries to help

solve regional and international environmental problems

Example: Haze in Indonesia

-Singapore has worked with ASEAN to help Indonesia detect forest fires and haze via satellites

-Singapore hosted the ASEAN Ministerial Meeting on Haze

- Public Education

- For long-term results for environmental protection, we must be educated about and adopt environmental-friendly ways

- Education for the general public as well as in schools

Recycling projects in schoolsClean and Green Week

National Environment Agency & Singapore

Environment Councils’ ‘Bring Your Own Bag’

programme

In Conclusion…Globalisation is a phenomena that is growing

everyday.- With it, comes economic, social and

environmental effects (both good and bad)- We all have to learn to manage the effects

of globalisation in order to benefit from it- Singapore adopts different approaches to

prepare itself for globalisation as well as to prosper through it