Taylor Swift’s widely popular Eras Tour in Asia that ended in Singapore last month has become the talk of the town in Southeast Asia and globally. What went viral were not only Singlish memes, but also news of Singapore’s exclusive deal with Swift to make the city-state her only stop in the Southeast Asia region.

The controversial deal has boosted tourism spending in Singapore, as overseas Swifties spent thousands of dollars on air tickets and paid steep prices for hotels. Swiftonomics is expected to bring in an additional SGD 300-400 million, or about 0.2 percentage point of Singapore’s GDP, in the first quarter of 2024.

While the immediate economic benefits to Singapore are clear, the strategy to provide grants in exchange for exclusive hosting of the Eras Tour in the country has been viewed by some neighbors as a beggar-thy-neighbor policy, stirring much envy and even some Bad Blood.

The Anti-Hero

Government grants and subsidies to support an industry are nothing new. These are strategically backed by a state-guided industry development plan, usually known as “industrial policy”.

Industrial policy was a buzzword during the early 1990s, when it was regarded as a catapult for East Asia’s growth miracle. However, it fell out of fashion after the Asian financial crisis in the late 1990s.

Industrial policy can be defined as government efforts to shape the economy by targeting specific industries, firms, or economic activities deemed strategically important. These efforts can come in various forms, such as subsidies, tax incentives, infrastructure development, protective regulations, and research and development support.

After several decades of being labeled a taboo in the glorious days of globalization, industrial policy has made a comeback. This time round, it has become much more sophisticated and intensified, especially after the US-China trade war and geopolitical conflicts in many parts of the world with prevailing “China plus one” strategy.

While the original purpose of industrial policy was largely for economic development and to address market failures or in some cases, national security, it is now also used as a tit-for-tat measure. The dividing line is beginning to blur, as demonstrated by recent cases such as the US CHIPS and Science Act, EU Green Deal Industrial Plan, and Made in China 2025 initiative.

Globally, there has been an increasing use of industrial policies both in advanced and emerging market economies, especially in the forms of subsidies, export incentives, and import tariffs.

The International Monetary Fund’s latest data suggests that the focus of industrial policy has shifted toward military-civilian dual use, low carbon technology, and other advanced technology such as medical products and semiconductors.

Is Singapore’s Swift deal another form of industrial policy?

Industrial policy is usually associated with manufacturing industries. Among the most common ones are semiconductors, electric vehicles, and chemicals.

Moreover, industrial policy is mainly structural in nature, rather than short-term, as it takes a few years from policy design to implementation. It may also take several years for investments to be realized, factories to be set up and run, and talents to be hired/ workers to be trained.

If well-planned, industrial policy can provide long-lasting positive impact on employment, productivity, and technological transfer.

For the services sector, grants and tax incentives also exist, but are not generally labelled as industrial policy. Dani Rodrik, a professor at Harvard University, advocates that the focus of industrial policy should be broadened to services sectors and small and medium-sized enterprises, as long as they can create good-jobs externalities that provide societal benefits.

After all, every country is different. For some countries like Singapore, the services sector accounts for a large share of value added to GDP at more than 70 percent. Hence, it is not surprising to see Singapore attract event-based tourism using grants and financial incentives, as authorities see the long-term benefits of creating jobs and boosting the economy.

Such a move also allows Singapore to showcase and leverage its excellent infrastructure, namely its well-connected transportation system and state-of-the-art concert venues. From this perspective, Singapore brokering a deal with Swift can be as a form of industrial policy to promote Singapore as a regional hub for hosting mega concerts and other events.

Whether Singapore meant the exclusive deal with Swift to be a one-time measure, or a more enduring industrial policy, the move did not seem to go well with some of its neighbors. Despite economics and politics intertwining to create diplomatic tension, regional neighbors can be more forgiving and Shake it Off from the industrial policy perspective.