Seasteading & the ocean economy: Untapped drivers for Singapore’s economic growth
Singapore is well-positioned to capitalise on the growth of the ocean economy and emerge as a prime mover in the sector by embracing the frontier market represented by the convergence of seasteading and the growing ocean economy.
Seasteading — the concept of creating permanent, autonomous communities dwelling at sea — can best be understood as floating charter cities administered by a third-party guarantor government, with the free movement of people, capital and goods. Advocated by Paul Romer, the former chief economist of the World Bank, such cities can serve as engines of economic growth in developing countries.
In a 2009 TED Talk, Romer argued that by creating an environment with better rules and institutions, this could create a virtuous cycle and set emerging markets on a better growth trajectory. Romer’s model saw a host country turning responsibility for a charter city over to a trustee nation for a leased period, permitting new governance rules to emerge.
This concept would see people “vote with their feet” for or against these rules. However, it has also raised concerns over neo-colonialism, with the sovereignty of emerging market jurisdictions compromised in exchange for economic prosperity.
Rather than pursue this, charter cities melded with the concept of the ocean economy in the form of floating charter cities could could create substantial economic opportunity.The Organisation for Economic Cooperation and Development (OECD) estimated in a 2016 report that, as of 2010, the ocean’s economic contribution amounted to US$1.5 trillion in value added to the global economy. By 2030, this is forecast to reach US$3 trillion.
Currently, factors such as population growth, increasing urbanisation, the growth of the global middle class — especially in the Indo-Asia Pacific — and technology trends are driving greater dependence on the sea.
Singapore, a commercial hub for the Indo-Asia Pacific (Indo-APAC) region, has many of the key elements needed to capitalise on these shifts and grow its external economy. Moreover, its experience developing industrial parks in China, India and Vietnam and its offshore engineering capacities could be translated to developing floating charter cities.
Singapore’s potential
Singapore, with an estimated 5.6 million citizens and foreigners living in an increasingly dense urban environment, might first wish to explore the possibilities offered by floating real estate and capitalising on an estimated 700 sq km of territorial waters sheltered by the Indonesian islands to its south.
A 2013 population white paper released by the government, “A Sustainable Population for a Dynamic Singapore”, calls for development aimed at sustaining a population of 6.9 million by 2030. In 2015, Dr Liu Thai Ker, Singapore’s former master planner of Singapore, who also serves as the Chairman of the Centre for Liveable Cities, argued that Singapore can support a population of 10 million with proper planning.
With 721.5 square kilometres of land, it might be time for Singapore to tap on its sea space, through the use of VLFS (Very Large Floating Structure) technology. The city-state’s maritime and offshore engineering cluster possess the technology, infrastructure and expertise to build, launch, join and maintain VLFSs, each capable of providing huge platforms with service life exceeding 50 years. .
It is one of the world’s major offshore rig builders and is ranked as a leading maritime hub by the Norwegian consultancy Menon Economics, alongside the likes of Rotterdam, Oslo and Shanghai. Its status as an international financial centre, coupled with its maritime and talent infrastructure, means the city-state has many of the key elements required to establish itself as a vital node in the ocean economy.
In a January 2015 opinion piece in Today, “No more land? Build floating real estate”, by Lim Soon Heng, the President of the Society of Floating Solutions (Singapore), Lim estimated that the cost of VLFSs constructed of steel or concrete, could range from about S$300 to S$600 per square metre, with a service life of 50 years.
He revisited this in depth in March 2016 with another feature, “Floating a novel idea for the future East Coast Park” in The Straits Times. Using publicly available data on the Marina Bay floating stadium, which used 520kg of steel per sqm of deck space, Lim estimated that floats would cost $750 per sqm to fabricate if made of steel, with concrete costing $550 per square metre. He concluded that building a replacement for East Coast Park using VLFS would cost $1,200 per sq m, including various costs such as mooring and landscaping.
Concerns over the potential impact of VLFS development of shipping, a crucial part of Singapore’s economy, are arguably overstated. Shipping lanes require substantial sea space, but the consolidation of container port infrastructure at a 65-million TEU capacity megaport in Tuas from Keppel and Pasir Panjang frees up significant sea space along the south and southwestern coasts of the island.
In addition, the rise of autonomous ships will change the contours of the industry globally. In early December 2018, the world’s first autonomous ferry was launched in Finland. Named Falco, it is operated by Finferries and uses Rolls-Royce ship technologies, detecting objects using sensor fusion and artificial intelligence (AI). Its autonomous navigation system allows it to automatically alter course and speed as it approaches its destination.
Meanwhile, 2019 is set to see Norwegian chemical firm Yara International ASA launch Yara Birkeland, an autonomous container ship that is expected to be operating autonomously by 2020 following trials with a small crew on board.
However, full commercial operations integrating such autonomous vessels are many years off, much like autonomous cars. There are multiple advantages to autonomous vessels, including reductions in accidents, costs, greater efficiency in the use of sea space and fuel, as well as reductions in manpower. In the context of Singapore, that means as this technology matures, more sea space will be freed up for alternative uses.
The city-state has a robust pool of naval architects and marine engineers that can design and develop internationally accredited marine offshore structures worldwide, as well as different types of offshore accommodation. Moreover, Singapore is also home to very large dry docks. This translates to a cluster of offshore engineering resources that can be readily deployed to provide the engineering and construction of floating assets.
Socioeconomic zones at sea
Highlighted in “Floating the idea of cities and economic zones at sea” in The Straits Times in December 2018, floating charter cities are fundamentally maritime properties with a significant need for property, marine engineering and infrastructure expertise to support, which Singapore has in abundance.
Being a global maritime centre and financial hub with significant expertise and infrastructure, floating charter cities could be designed, developed and deployed along the world’s sea lanes from the city-state.
With infrastructure the primary cost of charter cities — such projects need to be financially viable to attract investment — it is also home to large investors with deep experience in property, maritime and infrastructure ventures like Temasek Holdings and GIC.
The city-state has consistently pursued a policy of partnering with governments in emerging markets to developing business parks and industrial. This could easily be translated to developing floating charter cities girdling the shipping lines of the the world.
Such projects have built out Singapore’s external economy and drive local development, with a history of such projects being completed in China, India, Indonesia and Vietnam. One high-visibility project that has emerged from these efforts is the China-Singapore Suzhou Industrial Park, which has a mixed record of successes and failures. A more recent example is the Sino-Singapore Tianjin Eco-City, which entered its second major phase in July 2018.
Such experiences can be applied to developing and operating floating charter cities, with Singapore as a guarantor government and investor. The Singapore brand represents a pro-trade, politically neutral business partner with the transparent agenda of seeking a profit. Few other countries possess the ability to enter new markets with a minimum of political friction.
However, such a move is not without risks. A study by Yeoh, C., & Wong, S. Y. called “Extending Economic Boundaries and Exporting Expertise: New Evidence on Singapore’s Gambit in Indonesia, Vietnam and India”, which was published in 2006 in the Journal of the Asia Pacific Economy, observes that this was part of Singapore’s regionalisation strategy.
The research concluded that while “location-specific merits abound”, this did not translate into direct benefit for the city-state. This was attributed to “socio-political problems” in the host jurisdiction.
In “A proposal for a Singaporean ‘charter city’ in Australia”, published in January 2017 in The Straits Times by Dr Benjamin Gussen, an Australian law lecturer, one proposal saw a charter city structured as a public-private partnership. This model would see floating charter cities operated as special administrative zones leased to guarantor governments, with the host nation and guarantor governments holding equity stakes alongside the private sector.
The model that Gussen formulated saw the host and guarantor governments holding equity in the project and jointly formulating laws, while the private sector would gain equity in exchange for the rights to utilise the land and infrastructure. This resolves the issue of sovereignty, given the financial and legislative stakes that the host nation would have in the project.
Funded by a combination of debt instruments and the sale of new shares — perhaps through a public float on the Singapore Exchange (SGX) — such a city could generate profits through a blend of city-backed corporates and tax revenue, with its shareholders sharing the profits and dividends.
Despite intense competition with regional peers and global rivals like the Hong Kong Exchange (HKEx), it has arguably forged a niche and excels in both the debt capital markets and derivatives space. This highlights its strength in secondary fundraising, with its current deficits in primary listings being attributed more to structural and macroeconomic issues.
According to Chew Sutat, SGX’s head of equities and fixed income, it raised some S$480 billion in the financial year ended June 30, 2018. He said, “This is far larger than any single country but because it is not IPO, people pay less attention to it. We provide diversified capital raising options. That helps our business in SGX and also makes Singapore as a financial centre relevant — in fact, larger than HK in that regard.”
With its economic traditions of real estate development and maritime services, the city-state has the potential to forge itself as a key enabler in the ocean economy, as a hub where floating infrastructure can be designed, developed and deployed.
However, where Singapore’s technocracy suffers from at times is a gap in strategic imagination, coupled with a conservatism to new domains, that limits its ability to be a first-mover in such a frontier space.
Possessed of the infrastructure and expertise across the multiple sectors necessary to capitalise on this untapped opportunity, it will either require a driven policy entrepreneur or a compelling public-private partnership to make it a reality and secure buy-in from city-state’s authorities.
