S’pore must deepen ASEAN links as business costs rise: report

Cross-border power grid and logistics links seen as key to regional competitiveness.

Singapore should deepen its economic links with ASEAN as higher labour, energy, and carbon costs influence where multinational companies locate jobs and investments, according to the Singapore Institute of International Affairs (SIIA).

SIIA proposed a regional operating model under which headquarters, research and development, and parts of advanced manufacturing remain in Singapore, whilst broader manufacturing and other operations expand into neighbouring ASEAN markets.

It also called for continued support for the Johor-Singapore Special Economic Zone and deeper cooperation with Indonesia’s Batam-Bintan-Karimun region and Sumatra.

However, the institute cautioned that earlier cross-border initiatives encountered problems involving customs, immigration clearance and transport links.

“There should be a careful balance between preserving functions in Singapore whilst enabling activities to expand across the border, particularly in new high-value sectors,” SIIA said in its Tested Through Turmoil report.

In Indonesia, the institute identified opportunities in data centres, sustainable fuels, carbon markets and digital infrastructure. It said data-centre operations in Batam were already complementing Singapore’s capabilities as a digital hub.

SIIA also recommended greater investment in the ASEAN Power Grid and cross-border electricity projects to meet rising energy demand from industrial growth and digitalisation.

The recommendations come as rising costs influence business decisions on where to locate jobs and investments, with the pressure particularly pronounced in energy-intensive industries such as data centres, manufacturing, and refinery operations.

The report said Singapore’s electricity prices remain relatively high, whilst its carbon tax is scheduled to increase from $45 per tonne of carbon dioxide equivalent to between $50 and $80 by 2030.

Labour costs could also affect the distribution of jobs. SIIA said multinationals may continue to place mid- and senior-level roles in Singapore whilst locating more entry-level positions in lower-cost cities.

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