Assessing Singapore´ s Export Competitiveness through Dynamic Shift‑ Share Analysis

Abstract

I. Introduction Singapore has enjoyed robust trade growth over the past two decades, with domestic exports (1) expanding by an average of 8 per cent per annum between 1985 and 2001. However, the external landscape has changed significantly over this period as globalization of the world economy has led to intense competition and significant changes in export competitiveness in the East Asian region. (2) Against the backdrop of these changes, this paper uses dynamic shift-share analysis to reassess Singapore's export performance in electronics and chemicals to the United Sates, the European Union (EU), and Japan in relation to a group of reference economies: China, Hong Kong, Korea, Malaysia, and Taiwan, which are close competitors in these markets. In the absence of easily obtainable and internationally comparable trade data at a more disaggregated level, previous studies on the East and Southeast Asian economies have tended to be restricted to the one- or two-digit SITC level. Whilst this gives us the general picture within very broad categories, this needs to be supplemented by further decomposition to narrow down the range of product categories, which constitute a significant proportion of each country's exports as well as for the group as a whole, and to allow sufficient disaggregation within those categories to capture areas of specialization and unwrap the pattern of concentration or diversification within the product groups themselves. For example, SITC category 75, which covers office and data processing machines, incorporates a wide range of electronics and related items, not all of which will be relevant to all competitors. By contrast, the present paper looks at 5 three-digit level electronics categories, as well as total electronics and chemicals. This is especially pertinent for identifying Singapore's current and future export strengths and weaknesses since electronics now accounts for a substantial proportion of Singapore's exports and, in more recent years, chemical exports have gained in importance in line with the rise in pharmaceutical exports and new growth strategies introduced to encourage the development of the life sciences. We begin with some background on Singapore's export performance since the mid-1980s. This is followed by a discussion of the shift-share methodology used in this paper and our empirical results. We complete the analysis with some concluding remarks and qualifications. II. Export Growth in Singapore 1985-2001 Figure 1 shows three phases in the growth profile of Singapore's domestic exports between 1985 and 2001. The post-recession years of 1987-90 saw domestic exports expanding at double-digit rates, coinciding with a surge in Japanese foreign direct investment (FDI) into Singapore. Singapore's domestic exports also enjoyed fairly decent growth between 1991 and 1995 (averaging 10 per cent), helped by an increase in trade flows within ASEAN following the formation of the ASEAN Free Trade Area (AFTA) in 1992. (3) Export growth slowed dramatically in the most recent phase (1996-2001) to an annual average of 3.6 per cent on the back of three external shocks. Exports of electronics moderated sharply in 1996 due to a serious supply glut in the global electronics industry. Before the economy could fully recover, trade was further disrupted by the Asian financial crisis of 1997-98. After a year of exuberant growth in the information technology sector and the world economy in 2000, Singapore was again hard hit by a major correction in the global information technology market, precipitated by a synchronized slowdown in the United States, the EU, and Japan. [FIGURE 1 OMITTED] A striking feature of Singapore's exports is the change in product-mix over the years due, in part, to the changing composition of the manufacturing sector, especially after the economic recession of 1985-86. In 1985, mineral fuels accounted for almost half of Singapore's domestic exports mirroring the country's status as a major oil-refining centre (Table 1). …