The blue economy and seasteading: A key growth driver for Singapore

With infrastructure the primary cost of floating charter cities, the city-state is home to major investors with deep experience in property, maritime and infrastructure ventures.

SINGAPORE is well-positioned to capitalise on the convergence of the growing blue economy and the emergence of seasteading, with the potential to become a prime mover in the development of floating cities.

The city-state, a commercial hub for the Indo-Asia Pacific (Indo-APAC) region, has the key elements needed to capitalise on this opportunity and grow its external economy in the process. Moreover, its experience developing industrial parks in China, India and Vietnam, as well as its offshore engineering capacities, can be translated to the development and administration of floating cities.

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.

Melded with the concept of the blue economy - the World Bank defines this as the "sustainable use of ocean resources for economic growth, improved livelihoods and jobs while preserving the health of ocean ecosystem" - seastead development could leverage Singapore's strengths in infrastructure development, maritime services and offshore engineering.

The opportunity is immense, with the Organisation for Economic Cooperation and Development estimating in 2016 that in 2010, the ocean's economic contribution amounted to US$1.5 trillion in value added to the global economy. By 2030, this will grow to reach US$3 trillion. Meanwhile, the World Wildlife Fund estimates the oceans' assets are worth over US$24 trillion.

Sectors that offer robust opportunities for growth include aquaculture, renewable energy, biotechnology, maritime transport, waste management and tourism, with the ocean economy's growth driven by factors such as the rise of the global middle class, population growth and climate change.

This growth will be driven by factors such as population growth, increasing urbanisation, the infrastructure and energy needs of Indo-APAC countries, with many technology trends driving greater dependence on the oceans.

SINGAPORE'S POTENTIAL

With an estimated 5.6 million citizens and foreigners living in an increasingly dense urban environment, Singapore will increasingly be pressured to tap the estimated 700 sq km of territorial waters. These are sheltered by Indonesian islands to its south.

A 2013 population White Paper released by the government, A Sustainable Population for a Dynamic Singapore, called for development aimed at sustaining a population of 6.9 million by 2030. In 2015, Liu Thai Ker, Singapore's former master planner, who also serves as the chairman of the Centre for Liveable Cities, argued that Singapore could support a population of 10 million with proper planning.

With 721.5 square kilometres of land, Singapore can tap these territorial waters using very large floating structure (VLFS) technology. Its maritime and offshore engineering cluster possesses the technology, infrastructure and expertise to build, launch, join and maintain VLFSs with service lives exceeding 50 years. A major offshore rig builder, it is also a leading maritime hub, comparable to the likes of Oslo, Rotterdam and Shanghai.

Lim Soon Heng, the president of the Society of Floating Solutions (Singapore), estimates that VLFSs built of steel or concrete could range in cost from about S$300 to S$600 per square metre with a service life of 50 years.

In an opinion piece for The Straits Times in March 2016, Floating a novel idea for the future East Coast Park, using information on the Marina Bay floating stadium, which used 520kg of steel per sq m of deck space, Mr Lim estimated that such floats would cost S$750 per sq m to fabricate if made of steel and S$550 per sq m if made of concrete. He concluded that building a replacement for East Coast Park using VLFS would cost S$1,200 per sq m, including various costs such as mooring and landscaping.

While such VLFS development could impact shipping, the eventual impact of autonomous ships, as well as the consolidation of container port infrastructure at a 65-million TEU capacity megaport in Tuas from Keppel and Pasir Panjang, opens up significant sea space.

The city-state has a robust pool of naval architects and marine engineers who can design and develop internationally accredited marine offshore structures worldwide, as well as different types of offshore accommodation. Moreover, it is home to some of the largest dry docks globally. These translate to an offshore engineering infrastructure that can support the design, development and maintenance of floating assets.

Singapore's capital markets can also support such an initiative due to its role as an international financial centre. The Boston Consulting Group estimates the city will emerge as the largest cross-border financial centre by 2028, while Deloitte Monitor ranked it the second most competitive international wealth management centre after Switzerland in 2018.

With the growth of green bonds in Asia, a debt instrument to finance ecologically sustainable climate and environmental projects, there is similar space to tap the growth of blue bonds. These are similar to green bonds and finance marine projects with positive environmental, economic and climate benefits.

Floating charter cities are fundamentally maritime properties with a significant need for property, marine engineering and infrastructure expertise to support their operations. Developers of such cities can leverage Singapore's capacity as a global maritime centre and financial hub to drive this development.

Floating charter cities can 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 - the island-nation is also home to major investors with deep experience in property, maritime and infrastructure ventures like Temasek Holdings and GIC.

Moreover, in the past, it has pursued a policy of partnering governments in emerging market jurisdictions such as China, India, Indonesia and Vietnam to build up industrial estates and business parks. This can be extended and applied to the development and operation of floating charter cities.

The Singapore brand also represents a pro-trade, politically neutral business partner. Few other countries possess the ability to enter new markets with a minimum of political friction, emphasised in its ability to host the US-North Korea summit in June 2018.

In A proposal for a Singaporean "charter city" in Australia, published in January 2017 in The Straits Times by Benjamin Gussen, an Australian law lecturer, a proposed model saw 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.

ECONOMIC BENEFITS

This model sees the host and guarantor governments holding equity stakes and jointly formulating laws, while private sector players gain equity in exchange for the rights to utilise the real estate and infrastructure. This harmonises the interests and potential compromises on sovereignty, given the financial and legislative stakes all parties have.

Funded by a combination of debt instruments and the sale of new shares, such a city could generate profits through a blend of city-backed corporates and tax revenue, with shareholders sharing the profits and dividends.

With its economic tradition of property and infrastructure development, as well as its strength in maritime services, Singapore has the potential to emerge as a global ocean economy hub amid its current push to restructure its economy along innovation lines.

Floating charter cities represent a convergence of the blue economy and traditional infrastructure that offers significant economic potential. With US$90 trillion of investments in climate solutions estimated over the next 15 years by the Global Commission on the Economy and Climate, coupled with rising sea levels and other climate hazards, the financial and maritime infrastructure of Singapore puts it in a prime position to reap the dividends from such developments.

As increasing regional competition puts pressure on Singapore, the city-state may have to look to its maritime roots, leveraging its existing innovation and enterprise infrastructure, as well as the strategic imagination of its technocrats, to capitalise on the opportunities existing at the frontiers of the untapped ocean economy.

  • The writers are a partner of Silvercliff Capital Advisers, and co-founder of Drift Global Industries, which designs and develops very large floating structures as a space solution, and co-founder of Blue Frontiers, which develops artificial floating islands and author of Seasteading, respectively.