Singapore's Export Research Articles

Tourism and Exports: The Case of Singapore

In this article, we examine the relationship between inbound tourism and exports in Singapore. We address whether there is a long-run relationship between exports and tourism and the direction of causality between these two variables. Our findings suggest a long-run relation between Singapore's exports and inbound tourism and that the causation is bidirectional. This implies that inbound tourism in Singapore results in a higher demand for its domestic products. This increased demand for Singaporean products, in turn, acting as a positive advertising campaign in favor of Singapore, promotes inbound tourism to this country. The policy implication of these findings is twofold. First, inbound tourism in Singapore not only contributes directly to GDP, employment, and the current account via tourism revenues but also by stimulating exports it improves further the current account of Singapore. Secondly, the stimulation of exports induced by inbound tourism creates favorable sustainability conditions for the entire tourism sector. however, one should be cautious that this effect is taking more than 9 months to materialize and that inbound tourism may initially have a negative impact effect on Singapore's exports as the overtime effect of tourism on exports exhibits a J-curve behavior.

Singapore's Export Elasticities: A Disaggregated Look into the Role of Global Value Chains and Economic Complexity

Singapore is one of the world’s most open economies, with the size of its trade reaching about 350 percent of its GDP. With the rise of highly diversified cross-border production networks, Singapore has come to play an integral role in the global supply chain with heavy reliance on foreign contents in its exports and production. It has also successfully moved up the value chain, exporting goods with high sophistication and economic complexity. Against this backdrop, in this paper, using disaggregate industry/product level trade data, we revisit Singapore’s export elasticities and find that growing participation in global production chains and rising export complexity are important determinants.

Singapore's Export Elasticities: A Disaggregated Look into the Role of Global Value Chains and Economic Complexity

Singapore's Export Elasticities: A Disaggregated Look into the Role of Global Value Chains and Economic Complexity

Singapore in its Worst Recession for Years. The Effects of the Current Economic Crisis on the City-State's Economy

Due to the current economic downturn, Singapore has experienced one of its most severe recessions since independence. The financial crisis, which caused a fall in prices at most of the world's leading stock exchanges and a sharp decline in industrial production, has also had a negative impact on the city-state's export-dependent economy. The analysis outlines the economic downturn and the decline of Singapore's export economy since the beginning of the crisis in late 2008. Central to the analysis are questions regarding the social consequences of the current economic crisis and the amount of losses Singapore's state-owned holding companies, Temasek and GIC, experienced when some of the world's biggest investment banks, such as Merrill Lynch, went into bankruptcy.

Facing the challenge of rising China: Singapore's responses

Singapore economy stumbled after the outbreak of 1997 Asian financial crisis. Competition is largely from globalization and the rising of Chinese economy, which hit the region in two-fold by taking away much of the share of export market and FDI. Recent development however shows a good signal for Singapore's exports to China's market. This paper examines the trade and investment relationship between Singapore and China, and reviews the policies that Singapore had taken to cope with the changing world. The strategy of moving toward a knowledge-based economy becomes Singapore's must choice. However, the smooth engagement in the transition with developed economy and the dynamic Chinese economy could be a challenge to Singapore.

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

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). …

Impact of the Asian Crisis on Singapore's Export Competitiveness

Despite its robust economic fundamentals relative to other members of the Association of Southeast Asian Nations (ASEAN), Singapore did not escape from the Asian Crisis that spread through Asia-Pacific and engulfed the global economy. First, this study uses two approaches to calculate real exchange rates and its misalignment to examine the Singapore dollar misalignment and its export competitiveness. Second, the relationship between Singapore's real exchange rate and its export growth is investigated using an error-correction model. The results do not support a substantial Singapore dollar overvaluation on the eve of the crisis. Based on purchasing power parity measures of misalignment, we detected only a modest overvaluation prior to the crisis. However, the real depreciation of the Singapore dollar as a result of the crisis, led to an external competitiveness gain and higher export growth.

The Interplay of Wage and Exchange Rate Policies in Singapore: A Case of Collective Bargaining in Macroeconomic Management

This article analyzes an optimization model of the policy game between Singapore's National Wage Council and the Monetary Authority of Singapore and further simulates the model over policy rules (Nash game versus non‐Nash game), economic scenarios, and the game players' preference and bargaining power. The results indicate that the exchange rate appreciation and wage growth act as substitutes under the Nash rule of policy responses, whereas they act as complements under the non‐Nash rule. Under the Nash rule, the exchange rate appreciation tends to be procyclical and wage growth countercyclical; union workers' bargaining power relative to employers' strengthens the procyclical appreciation uniformly but reinforces the countercyclical wage growth only when the economy undergoes a downturn. Both the Nash and non‐Nash rules call for more moderate appreciation and more flexible wage adjustments than their actual movements. (JEL E64, E61, F41)

U.S.–Singapore Free Trade Agreement:: Implications for ASEAN

The signing of the U.S.-Singapore Free Trade Agreement (USSFTA) by the President of the United States and the Prime Minister of Singapore on 8 May 2003 is one of the culminations of Singapore's overall trade initiatives and economic strategy, which involves forging free trade agreements (FTAs) with other countries outside the ASEAN region. The first one was with New Zealand, which was later followed with Australia, while other FTAs are still under negotiations. This particular FTA, however, has caught much attention and has been hailed in the Singapore press as a historic and momentous event because it is the first FTA for the United States with an Asian country. On the other hand, for Singapore FTA means, apart from political considerations, much more in economic terms because of the huge market potential the United States can offer. With a population of 287.7 million and a per capita income of US$36,273, the United States can provide a strong economic stimulus which is badly needed during these times of sluggish regional growth and uncertainties. In fact, the United States has already been the largest export market and the largest source of foreign direct investments for Singapore. However, from the U.S. perspective, Singapore is not as important, as the bulk of U.S. trade is with its neighbouring developed countries such as Canada and Western Europe. This means, however, that there is a large scope for greater flow of exports from Singapore to the U.S. market. The recent FTA can certainly offer economic opportunities for trade-dependent Singapore, but what this means for the ASEAN countries as well as for ASEAN economic integration is not quite straightforward and more difficult to settle. Singapore's pursuit of extra-ASEAN FTAs has long been criticized by some fellow ASEAN members since the start of Singapore's bilateral free trade negotiations. Apart from the criticism that the other ASEAN countries were not adequately consulted by Singapore, these arrangements were seen by some as undermining ASEAN as a preferential trading arrangement. Specifically, it is claimed that these free trade arrangements could be providing Singapore's FTA partners with a back-door entry into the ASEAN Free Trade Area (AFTA). Before addressing these concerns raised by other ASEAN countries, there is a need to explore whether there are direct and indirect benefits that can be derived by other ASEAN countries from the newly signed USSFTA. It has been argued that there could be beneficial spillover effects of Singapore's extra-ASEAN FTAs in terms of local and foreign investments for the ASEAN region. This argument is quite convincing if we recognize that Singapore does not have an unlimited capacity to absorb all of the investments that can result from the USSFTA. It is logical to infer that U.S. investors in Singapore tend to engage in third country investment projects, using Singapore as a springboard for further investments in neighbouring countries. It has to be qualified, however, that the spillover effects can only be realized if conditions in the ASEAN countries are conducive for the investors. Further, under the Integrated Sourcing Initiative (ISI) of the Agreement, which allows Singapore to source out some of its information and communications technology (ICT) and medical components from outside Singapore and still qualifies Singapore for the preferential entry into the U.S. market, there is an incentive for local and foreign firms to locate some of their production facilities in the neighbouring ASEAN countries. The USSFTA will certainly provide greater access for Singapore's exports to the U.S. market as goods originating from Singapore are guaranteed duty-free access with no quantitative restrictions or prohibitions, provided the rules of origin are met. It has been estimated that there would be a tariff saving of US$200 million a year from this agreement, which only accounts for less than 1 per cent of Singapore's GDP and a processing fee saving of S$51 million annually. …

Declining global market share of Singapore's electronics exports: Is it a concern?

AbstractIn contrast with the steadily rising shares of other regional exporters, Singapore's export shares in the global electronics market have been faltering in recent years. This has given rise to concerns about its export competitiveness. The drop in Singapore's global ranking can be attributed to shrinking exports of end products and low‐end electronics parts, as manufacturers relocate such assembly production out of Singapore to the regional economies. Fortunately, Singapore remains competitive in the export of high‐end intermediate electronics components, which are characterized by capability, technology, and automation‐intensive processes. While Singapore is progressing in the right direction, the climb up the high‐tech value chain needs to be further accelerated in order to maintain a technology gap with regional exporters. Besides accelerating its own industrial upgrading, Singapore needs to actively pursue measures that would help create a more integrated and competitive production platform for ASEAN, as well as to seek opportunities to service the rapidly enlarging consumer market in China. © 2003 Wiley Periodicals, Inc.

Singapore and the Asian Economic Crisis: An Assessment of Policy Responses

Singapore seems to have weathered the financial storm of East Asia better than most in the region. Yet it was not spared from contagion. Economic growth slowed from 7.8 per cent in 1997 to 1.5 per cent in 1998. The declining regional demand for Singapore's exports due to contraction in the crisis economies and loss of competitiveness in the face of competitive devaluations posed new challenges for Singapore which had to adopt policies to combat the crisis. This article examines the effects of proposed policies using a computable general equilibrium model. We find that the wage reduction and devaluation policies are more promising than domestic demand stimulation. I. Introduction Singapore seems to have weathered the financial storm of East Asia better than most in the region. Yet it was not spared from contagion. Economic growth slowed from 7.8 per cent in 1997 to 1.5 per cent in 1998. The crisis impacted different sectors unevenly. Sectors such as commerce, transport, tourism, and financial services, which have large regional exposures, were badly hit. The declining regional demand for exports and the challenge of maintaining international competitiveness despite competitive devaluations mean that Singapore had to adopt effective policy responses. This paper uses a computable general equilibrium (CGE) model to simulate the effects of policies adopted by Singapore. Section II is a brief discussion of the Asian crisis and its implications for Singapore. Section III reviews Singapore's policy responses to the crisis. Section IV presents the results. Section V concludes. II. The Asian Crisis and Its Implications for Singapore The Asian crisis began as an exchange rate crisis in Thailand and spread quickly to the Philippines and Indonesia, and then to Malaysia. This led to financial crises which, in turn, produced severe downturns in real economic activity in these, and other, countries. While a full discussion of the causes, propagation channels, and effects are beyond our scope,1 some points need to be made to show how, and to what extent, Singapore was caught up in the crisis. We focus on Thailand, the first domino. An overvalued exchange rate pegged to the US$,2 declining exports,3 and a growing current account deficit made Thailand vulnerable to a speculative exchange rate attack. The falling yen and an effective depreciation of about 10 per cent of the yuan4 contributed to reduced export competitiveness. The resulting devaluation triggered a financial crisis. Substantial capital inflows, about 6 per cent of GDP, had fuelled price bubbles in real estate and the stock market. Although these bubbles peaked at the end of 1993, by the end of 1997 share prices fell to about 29 per cent of their 1995 levels while the property company share index fell to 10 per cent of its 1995 level (Edison, Luangaram and Miller 1998, p. 4). In addition, relatively high domestic interest rates and the pegged exchange rate led to increases in foreign short-term borrowing5 that was largely unhedged. As the exchange rate fell, financial institutions suffered large capital losses as the value of their foreign denominated debt increased. These losses were magnified since most bank lending was backed by collateral, particularly real estate. Financial system solvency, already impaired, was further damaged as the value of the banks' collateral collapsed6 and non-performing loans increased. New domestic credit dried up, as did foreign credit with capital outflows of about 2 per cent of GDP. Otherwise viable firms were unable to finance working capital and new investment, leading to widespread bankruptcies and sharp declines in aggregate demand and real output.7 Financial system weaknesses (including implicit government guarantees against risk, inadequate monitoring, and supervision) prevented the devaluation from stimulating the economy as exporting firms were unable to take advantage of their increased price competitiveness (Montes and Popov 1999). …

A General Equilibrium Explanation of the Growth in Singapore's Exports: A Paradoxical Outcome?

Singapore's recent trade record has some paradoxical results. Exports have increased when the Singapore dollar has appreciated by a significant margin, arguably due to real exchange rate (RER) misalignment. This article offers explanations for this unusual outcome by simulating a computable general equilibrium (CGE) model of the Singapore economy to identify factors that may have influenced RER misalignment. Among the factors examined we find that overseas demand plays a pivotal role in the growth of Singapore's exports. This finding has important implications for Singapore in the light of growing economic uncertainty in the Southeast Asian economies. Research for this study was completed before the full impact of the 1997 financial crisis; follow-on research may illuminate the effects of the crisis on the results presented here.

Exchange rate appreciation and export competitiveness. The case of Singapore

Policy prescriptions have generally assumed that exchange rate depreciation would stimulate exports and curtail imports, while exchange rate appreciation would be detrimental to exports and encourage imports. This prediction has, however, often neglected to consider the existence of the import content of exports, as well as the dynamic effects of productivity improvements. Our paper seeks to show empirically, the significance of these two factors in affecting the competitiveness of Singapore's exports. Specifically, the paper shows that in the presence of high import content, exports are not adversely affected by currency appreciation because the lower import prices due to appreciation reduce the cost of export production. In the case of Singapore, this cushioning effect outweighs that of the effect of productivity gains on export competitiveness. The service exports, however, with a very low import content tend to suffer from currency appreciation.

Exchange Rate Policy and Market Power: A General Equilibrium Analysis for Singapore

A computable general equilibrium (CGE) model of the Singapore economy is simulated to project the impact of the appreciation of the Singapore dollar under different export demand elasticity scenarios. The macroeconomic and sectoral results are not very sensitive to variations in the export demand elasticities over the elastic range. A significant change in the projections is apparent when highly inelastic export demand curves are adopted. These results are consistent with the economic performance of Singapore over recent years under the strong currency regime. The analysis thus supports the belief that Singapore is coming to enjoy some degree of market power in the world trade of manufactures. 1 Introduction The Singapore dollar has appreciated since 1980 against all other main currencies. This is an outcome of a deliberate policy that has been aimed at insulating domestic prices from imported inflation. Prior to the 1985 recession, the burden of the anti-inflation policy was placed on wage restraint under the National Wage Council guidelines. However, this wage policy became unsustainable due to the tight labour market situation and the growing significance of a relatively labourintensive service sector in the national economy. While the Singapore Government has recognized the causal link between real wage costs and international competitiveness, it has accepted its limited ability to influence money wages as an anti-inflationary instrument as the economy tends to mature. It is in the light of this setting that the exchange rate has become an intermediate target of monetary policy and the domestic price stability as its final target. The monetary authorities of Singapore aim to keep inflation low and stable, which means at less than 3 per cent. In setting this target, the current and projected inflation pressures are taken into consideration. In the case of the latter, the medium-term outlook for both foreign inflation and domestic unit labour costs play a significant role. If these factors are likely to accelerate the inflation to unacceptable levels, the exchange rate is allowed to appreciate sufficiently to reduce imported inflation. The appreciation is also expected to dampen domestic demand pressure in order to maintain domestic price stability (Bercuson 1995). The precise impact of this exchange rate movement on reducing domestic inflation and the country's performance in external trade are dependent to a large extent upon Singapore's market power in world markets. Given the fact that Singapore's exports, mainly manufactures, account for about 1.5 per cent of the world exports' and retained imports represent 1.7 per cent of world imports, the small country assumption seems applicable to its international trade. However, there is uncertainty over export demand elasticities associated with manufacturing exports because accurate estimates of such elasticities are very scanty for a country like Singapore (Athukorala and Riedel 1991).2 In this article we attempt to use a computable general equilibrium (CGE) model of the Singapore economy (Siriwardana 1991; 1997) to simulate the impact of the appreciation of the Singapore dollar by adopting different values of export demand elasticities. The CGE methodology is a useful technique to gauge the sensitivity of the exchange rate policy to different export demand scenarios, especially when the magnitude of the relevant elasticity parameters is uncertain. It is observed that the model projections are not very sensitive to variations in the export demand elasticities over the elastic range. When extremely low values are adopted (that is inelastic export demand curves), there is a significant change in the projections. The article is organized as follows: section 2 provides a brief outline of the main structural features of the Singapore economy. In section 3, a description of the CGE model of the Singapore economy is presented. …