Analyzing Regional Conflict and its Impact on Singapore's Biotechnology Industry
Team Leader: Mary Peplinski
Author: Adam Lencz
The biotechnology industry in Singapore has much promise for investors, but two key situations in Southeast Asia may be worrying and could impact the industry. The possibility of war in Korea and the dispute over the South China Sea could both draw away investment into the industry from Singapore’s government. Ultimately, however, the likelihood of this occurring is low.
Summary of Regional Conflict Risks
The threat of a major conflict in Southeast Asia has increased significantly in recent months, with the main threat being a war on the Korean Peninsula. United States President Donald Trump and North Korean dictator Kim Jong-un have engaged in increasingly hostile rhetoric, and North Korea has continued to test and improve its nuclear weapons program despite international condemnation. Tensions between North Korea and the U.S. have increased to perhaps the highest levels since the early 1950’s, and so the threat of a new war in Korea is rising. If the North and South were to go to war again, the United States, NATO, and much of the world would side with South Korea and likely join the fighting in what would be a large and destructive conflict. China’s role in the potential conflict is uncertain. China is North Korea’s main ally, and they have stated that if North Korea is pre-emptively attacked China will back them in a war, although they also stated that if North Korea starts a war China will not back them. Ultimately it is unlikely that China would want to be drawn into a major conflict with the United States, and would likely try to stay out of the fighting. Singapore is firmly in support of South Korea against the North, and recently suspended all trade ties with North Korea. If war broke out, Singapore would likely commit a number of troops to the fighting as it has in the Middle East, but the threat of any fighting or possible nuclear fallout coming close to the city-state is highly unlikely. As long as China stays out of the conflict, the risk of the conflict damaging Singapore’s economy would be low.
The other conflict that may involve Singapore in the region is the South China Sea dispute. China and the Philippines have argued over who controls the region, and the United States has typically sided with the Philippines. Singapore has also publically supported the Philippines and has significantly damaged relations with China as a result. China is Singapore’s largest trading partner, so if relations were to deteriorate to a level where trade between the two countries is suspended, there could be significant damage done to Singapore’s economy. This is highly unlikely
How Could a Conflict Impact the Biotechnology Industry?
Currently, the biotechnology industry in Singapore is heavily supported through government investments into industry companies. This makes it a very attractive place for companies to set up, but if the government withdrew funds it may be far less enticing. If war breaks out in Korea, Singapore would likely send troops, but likely not a large enough amount to significantly impact domestic government investment. However, if a war in Southeast Asia directly impacted Singapore, there would certainly be a large reduction in government investment into biotechnology as the government pays for enhanced military capabilities. If nuclear radiation, in the event nuclear weapons, the city-state would be forced to shift funds towards a cleanup. As stated above, neither scenario is likely, but if one should happen it would be a large problem for investors in any industry in Singapore. Similarly, if China were to end or decrease trade with Singapore, its economy would suffer greatly, which could mean less money coming into the biotechnology industry from the government.
Mitigation Strategies and Conclusions
There are few ways in which investors can mitigate the risk of a war between North and South Korea. Investors should focus on lobbying the government in Singapore to continue to invest in the biotechnology industry regardless of what happens in Korea. Overall, the threat of a regional conflict doing serious damage to the biotechnology industry in Singapore is low. Although the risk of a major conflict on the Korean Peninsula is moderate, Singapore would probably not be deeply involved enough for it to do serious damage to the biotechnology industry. The likelihood of China cutting Singapore off from trade due to the South China Sea dispute is also low, so potential investors should not be scared away by that possibility.
