Singapore Must Deepen Asean Ties to Sustain Competitive Edge

The Globalization Dividend Is Fading

Singapore's economic rise since 1965 was built on globalization and industrialization. But the forces that propelled six decades of growth have been reversing over the past five years, and policymakers in the city-state are taking note.

On August 3, the Singapore Institute of International Affairs released a special report arguing that the next phase of competitiveness depends not only on domestic strengths but on deeper integration with Southeast Asia. The report, titled Test Through Turmoil: Advancing Singapore's Competitiveness with Asean, draws on discussions with multinational corporation executives held as part of the Competitiveness Commission, convened in association with the government-led Economic Strategy Review.

Simon Tay, SIIA chairman and director of the report, summarized the core finding: a stronger Asean benefits Singapore. The task now is to build domestic capabilities while forming a competitive regional ecosystem.

Three Pillars: Engagement, Regulation, Connectivity

The report groups its recommendations into three areas. First, strengthened public-private engagement with MNCs. Close dialogue can inform how artificial intelligence is reshaping work, guiding apprenticeship programs and training for younger workers and new graduates. Regular exchanges between policymakers and senior corporate leaders can also attract investments aligned with national priorities.

Second, Singapore should lead on regulation of emerging technologies. The report calls for frameworks governing AI and data, covering legal liability, ethics, and data sovereignty. Domestically, new regulatory structures are needed for fractional employment, allowing employment passes and tax systems to adapt to evolving workforce models. The government should also consider measures to help businesses manage rising carbon taxes.

Third, the report urges Singapore-based investors to deepen their understanding of regional policies and politics to support supply-chain development across Southeast Asia. Connectivity initiatives such as the Johor-Singapore Special Economic Zone and the economic corridor linking Singapore with Indonesia's Riau islands, Batam, Bintan, and Karimun, should be expanded. Singapore should also strengthen its role as a living lab, piloting solutions and aligning regulations so products tested locally can scale internationally.

Four Challenges Driving the Strategy

These recommendations respond to four pressures Singapore now faces. Workforce and training gaps are widening as technology accelerates. Rising costs, including energy, carbon levies, and generally higher operating expenses compared to neighbors, are squeezing margins. Local entrepreneurship and risk-taking remain underdeveloped. And some multinational C-suite executives report difficulties engaging with government agencies on policy matters.

The report was launched at the SIIA's Asean and Asia Forum, where Tay emphasized that regional competitiveness and Singapore's own prospects are intertwined. The city-state's historical advantage as a hub for capital, talent, and logistics now requires a regional dimension to remain relevant.

Regional Integration as Insurance

Singapore has long positioned itself as the gateway to Southeast Asia. But geopolitical friction, climate pressures, and supply-chain reconfiguration are testing that model. The SIIA report argues that doubling down on Asean integration, rather than retreating into unilateral competitiveness, is the path forward.

The recommendations reflect a recognition that Singapore's small domestic market and limited land constrain its ability to grow in isolation. Johor, Riau, and Sumatra offer adjacent capacity for manufacturing, logistics, and energy. Deeper coordination with these neighbors can extend Singapore's economic footprint while supporting regional development.

On regulation, the report positions Singapore not as a rule-taker but as a standard-setter. By establishing governance frameworks for AI, data, and new employment models ahead of regional peers, the city-state can export regulatory architecture alongside financial and professional services.

What Comes Next

The report's recommendations are detailed and will require coordination across government agencies, trade associations, and corporate boards. Some measures, such as regulatory sandboxes for fractional employment or carbon-tax relief schemes, can be implemented domestically. Others, including cross-border supply-chain financing or harmonized data-sovereignty rules, will require multilateral negotiation within Asean.

The challenge is timing. Deglobalization is not a distant risk but a present reality. Trade blocs are hardening, supply chains are fragmenting along geopolitical lines, and capital is increasingly scrutinized for strategic intent. Singapore's window to deepen regional ties and lock in its role as Southeast Asia's integrator may be narrower than it appears.

The SIIA report does not predict the future, but it does outline a bet: that Singapore's competitiveness in the next decade will be measured not by how well it competes alone, but by how effectively it lifts the region around it.