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COMMENTARY

How small, open economies can ensure future prosperity

MANY small countries do well in the world. Singapore and The Netherlands, notably, are thriving nations, economically as well as in the immaterial aspects of life. Their economic strategies are historically connected through the Dutch economist Albert Winsemius who was chief economic adviser to Singapore from 1961 to 1984. Having learnt from Dutch experience, he saw clearly that the very nature of small economies and small markets implies that you have to embrace international trade in practically all respects in order to be prosperous. But now that we're reaching the end of "easy globalisation", the big question is whether small countries can continue their success of openness as a business model. The combination of strong geopolitics by some very big nations and technological changes that favour "winner takes it all" outcomes form tectonic shifts that could crush the success models of small open economies.

A small domestic market and a strong regional location, for example in the main Delta of Europe, foster societal adaptability to change and working with other cultures. The right strategy is to build on these natural characteristics. But will that be sufficient for prosperity in the future?

ATTRACTING INVESTMENT, HUMAN TALENT

There are at least three courses of actions that small and prosperous countries should take.

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First of all, especially small countries should never concede to populistic nationalism that is so popular these days. Our markets and resources are simply too small. Thinking from an international perspective, countries such as ours ultimately have only two effective ways to preserve our prosperity. The first is to offer the best possible investment climate in the region. The second is to offer the best possible living climate for human talent. All national policies should directly relate to one of these two strategies. Investments in infrastructure for international connectivity and education, knowledge and lifelong learning are certainly priority fields. But cultural openness and inclusiveness also rank high in determining the national living and investment climate. A glance at the national budgets of Singapore and the Netherlands illustrates that both countries develop the same policy patterns, although in Europe the public budget is far more expanded by social welfare expenditure.

Secondly, whereas the natural markets and resources are too small to have any impact on the real big players, small countries such as Singapore and The Netherlands should gain leverage via regional partnerships such as Asean and the EU (with a population of some 622 million, Asean has about 100 million more inhabitants than EU). The conditions of entry to these big markets should be used to promote open trade relations. But also region- to- region trade agreements - such as between Japan and the EU - should be used more deliberately to counteract protectionist and unfair trade practices.

Thirdly, on the global level regional partnerships should cooperate more actively to invigorate multilateral institutions and open and fair trade. Even if in opposite locations on the globe, small and prosperous societies should cooperate more to learn from each other's successes and to join forces to keep the big nations from their collision course.

  • The writer is president of the Confederation of Dutch Business and Industry VNO-NCW of the Netherlands.
    This is part of his keynote speech at the Alfred Winsemius Awards in Singapore on May 30, 2019.