Southeast Asia's economic prosperity will continue to hinge on export-driven policies despite changes forced by globalization, Singapore deputy leader Lee Hsien-loong said yesterday.
Although the region was criticized during the 1997-1998 financial crisis for being over-reliant on exports and foreign investment, Lee said there was no alternative for the 10-member Association of Southeast Asian Nations (ASEAN).
"For small Asian economies, and Singapore in particular, the idea of relying on tiny domestic markets to stimulate growth and enterprise is inherently implausible," he said in a keynote speech to an Asian investors forum.
"Larger economies may make more of their domestic markets, and indeed the ASEAN countries as a group need to integrate their markets in the ASEAN Free Trade Area to make themselves more attractive to foreign investments.
"But no single domestic market can substitute for the world market, an age where economies of scale are global, whether in industries like electronics and pharmaceuticals, or services like banking and telecommunications."
Under the ASEAN Free Trade Area (AFTA), duty free privileges are given to products traded among member countries and which have at least 40 percent local content.
Tariffs on a wide range of products in the key economies have been brought down to between zero and five percent under the AFTA.
ASEAN leaders have agreed to completely eliminate all import duties in the region beginning in 2010.
Citing Singapore as an example, Lee said the trade-dependent Southeast Asian state will stick with an export-oriented mindset where economic policies are concerned even if it meant pain for parts of the economy.
"We will continue to push for free trade, welcome investments, and integrate into the global economy, even as we promote entrepreneurship and seek to build Singapore firms into regional players," he said.
"The pressures of globalization can be uncomfortable, and the changes they force upon us can be painful. But globalization has helped us to build a stronger, more resilient economy."
According to Lee, globalization has made the Singapore economy "one better prepared to hold our own against formidable competitors, and deliver a high and rising standard of living for our population."