J2: Globalisation (2)
TYS 2019 6a
Globalisation has been a major influence on Singapore’s economic performance. The uncertainty and instability happening around the world in recent years could threaten the economic benefits that globalisation brings.
a) Explain two different factors that have enabled globalisation to occur. [10]
Introduction
Globalisation refers to the increasing interconnectedness and integration of economies through the flow of goods and services (trade), labour, and capital across national borders. It is driven by factors that reduce barriers to international exchange and promote interdependence among nations. Two key factors that have enabled globalisation are comparative advantage and technological improvement, both of which have expanded global trade, labour mobility, and capital flows.
R1: Comparative Advantage
One key factor that has enabled globalisation is comparative advantage, which refers to the ability to produce a good or service at a lower opportunity cost than trading partners. When countries specialise based on comparative advantage, they can trade to achieve mutual gains, leading to greater international trade flows. For example, Singapore has a comparative advantage in financial services, logistics, and pharmaceuticals due to its skilled workforce and advanced infrastructure, while neighbouring countries like Malaysia and Indonesia have advantages in resource-based industries such as palm oil and natural gas. By specialising and trading, all countries benefit from higher total output and efficiency. Hence, trade flow has increased.
This process also encourages foreign direct investment (FDI) as firms seek to locate production in countries where they can operate most efficiently. For instance, multinational corporations like Pfizer and Dyson have invested in Singapore to access its comparative advantage in advanced manufacturing, contributing to increased capital flow. At the same time, specialisation in global value chains promotes cross-border labour movement, as workers with specific skills are drawn to sectors or regions where productivity is higher. Thus, comparative advantage leads to increased trade, investment, and labour mobility, forming the foundation of globalisation.
R2: Technology Improvement
Another major factor that has enabled globalisation is technological improvement, which reduces the cost, time, and distance of cross-border transactions. Advances in transportation, communication, and digital technology have made it easier for goods, capital, and people to move across countries. For instance, containerisation, air freight, and digital logistics systems have significantly lowered transportation costs, enabling firms to establish global supply chains. Singapore’s Port of Singapore, one of the world’s busiest transshipment hubs, exemplifies how improved transport and logistics infrastructure facilitate higher trade flows.
In addition, digital communication technologies such as the internet, e-commerce platforms, and fintech systems have accelerated the flow of capital and services across borders. Instant global transactions and remote business operations have become possible, strengthening financial and investment linkages.Technological advancements have also improved labour mobility, as digital connectivity and remote work allow professionals to collaborate internationally. Singapore’s Smart Nation initiative and emphasis on high-tech industries attract global talent, further boosting both labour and capital flows.
Conclusion
In summary, comparative advantage enables countries to specialise and trade efficiently, while technological improvement facilitates faster and cheaper cross-border movement of goods, labour, and capital. Together, these factors have been the key drivers of globalisation, expanding international interdependence and enhancing global economic integration.
