Singapore’s Prime Minister Lawrence Wong.
Vincent Thian | Afp | Getty Images
SINGAPORE — Singapore Prime Minister Lawrence Wong pushed back against the idea of weakening the Singapore dollar to boost competitiveness, saying the city-state must instead rely on its economic strengths even as a strong currency adds to costs for businesses.
Wong said Singapore could continue to expect a strong and stable currency if its economy performs well, emphasizing its role in containing imported inflation.
“You’re surely not suggesting that we depress our exchange rate in order to be more competitive,” Wong said in a lighthearted exchange with DBS CEO Tan Su Shan at the bank’s Asia Future Forward Conference in Singapore on Monday.
His remarks came after Tan highlighted Singapore’s reputation as a safe haven, which has helped attract capital and support the local currency, while acknowledging that the city-state remains a relatively expensive place to do business.
“The MAS will exercise monetary policy independently. The Singapore dollar will reflect our economic fundamentals, and if the economy does well, then we can continue to expect a strong, stable Sing dollar that is anchored on fundamentals and will also help keep imported inflation down,” Wong said.
Unlike most major central banks, which primarily use interest rates to manage monetary conditions, the Monetary Authority of Singapore conducts policy through the exchange rate.
It manages the Singapore dollar against a basket of currencies belonging to the country’s major trading partners, allowing the exchange rate to fluctuate within an undisclosed policy band.
The approach reflects Singapore’s heavy dependence on international trade and imports, making currency movements particularly important for domestic prices.
A stronger Singapore dollar helps cushion the cost of imported goods and services, particularly during periods of elevated global inflation. But it can also make Singapore-produced goods and services more expensive for overseas buyers, adding pressure on exporters.
The Singapore dollar has strengthened almost 0.4% against the greenback since the start of the year.
Wong acknowledged those trade-offs, saying businesses would have to account for currency strength alongside Singapore’s other operating costs.
“Companies that seek to export will have to factor that into the cost of doing business, together with the other costs that they experience in Singapore, as we all know, we are certainly not the cheapest location in Southeast Asia,” he said.
Singapore strategy
Still, Wong argued that competing on price alone was not a viable strategy for Singapore, which must instead differentiate itself through its capabilities, stability and predictability.
“Companies are not looking for the cheapest locations,” he said. “They are looking for capabilities. They are looking for stability. They are looking for predictability.”
Wong also said Singapore could not compete on cost alone, and was instead developing broader industrial ecosystems linking multinational corporations, domestic suppliers, research capabilities and skilled workers.
Singapore’s competitiveness ultimately depended on the value it offered businesses rather than its relative cost advantage, he added.
“We have to again play to our strengths and compete on the basis of the value we bring to the table,” he said.
