Chapter 9:
Economic Impacts of
Globalisation
The Global Economy
Increase in economic
activities occurring across
countries
●
●
Economic Interconnections
Economic Interdependence
So What Makes the Global Economy Tick…...?
FTAs
FDI
Free Trade Agreements
Foreign Direct
Investment
Economic Globalization
Foreign Direct Investment (FDI)
● FDI refers to investments in a local Singapore company by foreign
companies and investors.
● FDI helps to drive economic growth in Singapore because more
economic activities will relocate to and occur in Singapore.
● The Government has launched numerous initiatives to attract FDI, e.g.
competitive + relatively low corporate tax rates.
Economic Globalisation
Free Trade Agreements
Treaties between countries to establish a free trade area where
the exchange of goods and services can be conducted.
● Free trade means that tariffs/taxes are non-existent → which
facilitates increased trading volumes between countries that
have signed FTAs.
● Singapore has pursued the signing of numerous FTAs with
countries all over the world in order to boost foreign investment
in Singapore to create jobs and support economic growth.
●
Made in Singapore
Cost Price: $2.00/packet
Import Taxes: $0.00
Total Cost: $2.00/packet
Made in Thailand
Cost Price: $1.50/packet
Import Taxes: $1.00
Total Cost: $2.50/packet
Before
SG/ASEAN FTA
Made in Singapore
Cost Price: $2.00/packet
Import Taxes: $0.00
Total Cost: $2.00/packet
Made in Thailand
Cost Price: $1.50/packet
Import Taxes: $0.00
Total Cost: $1.50/packet
After
SG/ASEAN FTA
However, not everyone is happy with FTAs…...
Economic Globalisation
Protests against Free Trade Agreements
As a result of FTAs, cheaper products
can be obtained from foreign
countries.
● Local products are comparatively
more expensive → local producers and
businesses may face a downturn in
business.
● Local businesses may eventually have
to close down → loss of livelihoods
and employment.
●
Protests against Korea-US FTA
1. After the announcement of the Korea-US FTA, Korean farmers have
launched widespread protests against the introduction of the FTA.
2. Korean farmers fear that US agricultural products will be sold in Korea
for a very cheap price, thereby undercutting their profits.
3. May lead to eventual loss of jobs and collapse of the Korean
agricultural industry.
Economic Globalisation
Small & Medium Enterprises (SMEs)
● SMEs in Singapore are defined based on 2 criterion
1. Annual Sales Turnover < $100m
2. Total No. of Workers < 200
Economic Globalisation
Small & Medium Enterprises (SMEs)
● SMEs in Singapore play an important role in supporting
Singapore’s economy.
1. Contribute approximately 50% of economic output.
2. Contribute 70% of employment in Singapore.
3. Help to bridge Singapore’s economy and foreign economies
Free Trade
Agreements
(Reduced
Taxes/Duties on
Imports)
Task/Scenario:
Perspective Taking
Imagine it is now in the 1970s in Singapore……
McDonald’s is an US fast food company that has become increasing famous
around the world, especially for their yummy burgers. You switch on the TV
to hear that McDonald’s has expressed their interest to open their first branch
in Singapore.
Put yourselves in the shoes of these 4 stakeholders. What do you think would
be their first reaction when they are aware of this developing news?
Task:
4 Perspectives
1.
2.
3.
4.
Ramly Burger Stallholder
McDonald’s
Singaporeans
EDB (SG Government)
Go to padlet posted in Google classroom
Ramly Burger Stallholder
McDonald’s
Singaporeans
Circle of
Viewpoin
ts
Economic Development Board
SG Government
Ramly Burger Stallholder
●
●
Worried about increasing business
competition from McDonald’s.
Will need to innovate and develop new
products to effectively compete against
McDonald’s
McDonald’s
●
View expansion to Singapore as an
opportunity to expand their business and
earn higher profits
Singaporeans
●
●
May welcome the novelty of McDonald’s
(and American Fast Food Culture)
More diverse selection of food options
available in Singapore
Economic Development Board (EDB)
●
●
Will welcome McDonald’s entry to
Singapore (FDI)
McDonald seen to create jobs for
Singaproeans + bring in tax revenue
Task:
Ramly Burger x Pasar Malam
How can Ramly Burger stalls in Singapore continue
to innovate and compete against McDonald’s?
Economic Globalisation
Positive Impacts
Countries
Businesses
Individuals
Economic Globalisation
Positive Impacts
Economic Growth
Countries
1.
Countries (e.g. Singapore) will benefit
from increased trade and business
activities with other countries.
2.
Singapore also actively invests in other
countries to sustain its economic
growth because of its limited domestic
market (due to her small population
size)
Economic Globalisation
Positive Impacts
Higher Profits
1.
Local businesses (e.g. SMEs/MNCs)
can expand overseas to seek new
business opportunities and expand
their businesses.
Reduced Production Costs
1.
Businesses
Businesses can capitalise on lower
production/labour costs in other
countries.
Raffles City Chongqing
China
Capitaland’s Global Operations
● A Singaporean MNC → core business is centered on property management.
● Expanded overseas rapidly to seek out new opportunities and higher profits
in other markets, now owns and manages properties in over 30 countries
(e.g. China, Australia, USA, France).
Economic Globalisation
Positive Impacts
Employment Opportunities
1.
2.
Locals will benefit from increased
employment opportunities when MNCs
set up operations in Singapore.
Locals can migrate overseas to seek
better job prospects and higher income.
More Product Diversity
Individuals
1.
Locals will have more diverse and
affordable products to choose from.
Economic Globalisation
Negative Tensions
Will every single
firm/business
benefit from
globalisation?
What happens if there
is an unfortunate event
in another country?
Will the benefits be
shared equally
amongst countries?
Economic Globalisation
Negative Tensions
Countries
Businesses
Individuals
Economic Globalisation
Negative Tensions
Economic Downturn
1.
2.
Countries
In a global economy, an economic
downturn in one country may have a
domino effect on other countries.
If one country experiences an
economic recession, they will have less
funds
available
for
overseas
investments and the purchase of
overseas products.
Economic Globalisation
Negative Tensions
Economic Downturn
3.
4.
Countries
MNCs in Singapore may relocate or
shut down their operations. In addition,
local businesses will also be affected
as global demand for their goods and
services will be significantly reduced.
Singaporeans will be affected as
wages are cut or they may even lose
their jobs due to the economic
slowdown.
Economic Globalisation
Negative Tensions
Increased Competitiveness
Leading to Lower Profits
1.
Businesses
Local businesses (e.g. SMEs) will face
increased competition from foreign
MNCs and may be affected by reduced
profits and market share.
Economic Globalisation
Negative Tensions
Businesses
Famous Local Streetwear Chain
(16 Outlets Islandwide)
Economic Globalisation
Negative Tensions
Collapse of 77th Street (2016)
●
●
Businesses
Unable to compete with foreign
clothing brands (e.g. H&M + Uniqlo)
Business declined significantly and
was forced to shut its last outlet in
2016.
Economic Globalisation
Negative Tensions
Reduced Employment
Opportunities
1.
2.
Individuals
Singaporean workers will be retrenched
from their jobs when MNCs shift
operations away from Singapore to other
countries with lower costs.
Retrenched workers need to upgrade
their skills to remain relevant and seek
employment in other upcoming sectors
and industries.
Economic Globalisation
Negative Tensions
● Jobs were transferred to Mexico due to
lower wages.
● Up to 600 workers were retrenched at short
notice.
Individuals
Economic Globalisation
Managing Tensions
●
EDB provides interest-free loans and
grants to help SMEs at different stages
of growth.
●
Funds have been earmarked for SMEs
to pursue key areas of development
such as research and innovation, digital
transformation and expansion into
overseas markets.
Economic Globalisation
Managing Tensions
●
The Ministry of Manpower provides
funding and subsidies for workers via
Skillsfuture to upgrade their skills and
to enhance their employability in
upcoming sectors.
●
Even if there are job losses when
foreign MNCs pull out their operations
from Singapore, the impact will be
mitigated as Singaporean workers can
easily find jobs in other relevant
sectors.
Courses are highly
selective and focuses
only on specific areas
with high
employability.
Assertion skill
TB pg 290 - 293