Non-stop flights to emerging markets would boost Singapore economy: MTI report

[SINGAPORE] Stronger connections by air to developing markets could add a healthy tailwind to the Singapore economy, simulations by government economists have shown.

Introducing non-stop flights to regions such as Latin America, Africa and Central Asia is expected to benefit the Republic by boosting investment and trade access, a report released by the Ministry of Trade and Industry on Tuesday (Aug 11) indicated.

Besides increasing direct investment inflows and outflows, better air connectivity also improves a city’s status as a hub – with higher economic activity from serving more passenger and cargo transfers, and an improved volume of flight operations for airlines.

Singapore could thus benefit by serving as a key stop for goods and travellers on routes between emerging markets and South-east Asia and Oceania, the authors of the report said.

They noted that Changi Airport – which aims to connect to 200 cities by the mid-2030s, up from 170 now – already has links to many advanced economies, but added that stronger links with “less well-connected and growing regions” may have significant economic payoff.

They calculated that Singapore could gain an annual increase of S$200 million in foreign direct investment, and an added S$520 million in direct investment abroad, just from axing a stopover to a similar-sized economy located within 7,500 km.

World maps show that distance extends from Singapore to much of Asia, Oceania and the Middle East, while also encompassing large swathes of Russia and the eastern coast of Africa.

Besides yielding an extra S$225 million in annual economic value added, overall economic gains could also lead to wider effects such as higher productivity, employment and wages. Industries such as accommodation and retail and logistics could also benefit, the report showed.

Shorter flight connections to cities that are more than 7,500 km away would generate more modest improvements in investment flows and visitor arrivals.

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Senior economists Ryan Kor and Ngoh Jia Hui said: “The stronger response for geographically closer cities could be because these cities are likely to be linked through regional production networks and existing trade and investment relationships.”

Still, adding direct flights to “selected cities in North America and Europe” would yield “significant economic gains”, the report’s authors added, without naming destinations.

But their report warned that actually setting up these new air links would depend on factors such as the availability of aircraft and air traffic rights, and commercial viability for airlines.