What lies ahead for the Singapore economy in 2004?

Producer: Valarie Tan
First broadcast: 30 April 04, Radio Singapore International

Singapore s Prime Minister Goh Chok Tong has paid tribute to the nation s workers in his May Day message.

He commended Singaporeans for their undaunted spirit in riding out rough economic times.

The Ministry of Trade and Industry has assessed Singapore s growth range to exceed the current forecast of 3.5 to 5.5 percent this year.

In his speech, Mr Goh was confident that Singapore will top 5 percent, barring unforeseen events.

And what are the reasons behind his optimism?

A question Valarie Tan asked Joseph Tan, an economist with Standard Chartered Bank in Singapore.

JT: Already we ve seen Q1 coming in very strongly at 7.3 percent. And we do expect Q2 number to come in a lot better than that because of the fact that we have had a very low base in the previous year due to SARS. Just taking on board the 2 quarters, we would find that about 2 and half to 3 percent of growth for the whole year is already in the bag. So essentially, 5 percent is a very conservative estimate I would say that the Prime Minister has given.

What kind of impact will this have on Singapore s job market?

JT: Essentially we re getting an external-driven recovery for the economy. We re not really seeing the domestic sectors picking up quite as strongly yet. So what we re finding is that the hiring sector is still a little bit sluggish at this point in time. So some might call it a jobless recovery, but I won t say the jobs are not forthcoming. I think it will take a while more. I think we re probably going to see a pick-up in jobs possibly by the end of Q2.

PM Goh said the main reason for his optimism is Singaporean s commendable strength in facing challenges. Do you agree?

JT: I think Singaporeans in general have gone through a very tough period. We ve gone through shock after shock, most of it external of course, with SARS, Sept 11, the collapse of Enron as well. I think the economy has in that sense, gone through quite a bad patch. But we are looking at stronger signs of growth at this point in time, because of the fact that we ve got a rather good recovery taking place in the US, as well as the pick-up in the regional economies. So in that sense, a bit of this is cyclical upturn, and as well, we re seeing some structural improvements to the underlying fundamentals of economy.

The prime minister called PSA, SIA and Changi Airport Singapore s economic icons. What s your personal assessment on how these 3 icons performed?

JT: Well I ll say they ve performed quite well in terms of keeping to world-class standards. But I think that they were a little bit sluggish when it comes to reacting to changes in the market place, in terms of competitiveness - we have seen that occurring with PSA with several major shipping lines being lost to neighbouring Malaysia s PTP. We ve seen SIA as well, being slow in reacting to the sort of challenges being posed by Budget carriers. So whilst they ve performed in terms of service delivery standards being kept, but I think they ve been sluggish in terms of responding to changes in the market place.

In light of globalisation and competition, these economic icons will have to devise new strategies to survive, according to PM Goh. And what will these new strategies entail?

JT: I think what we need to take on board is that the environment nowadays is very competitive, and its constantly changing. We re talking about very dynamic environment and that companies can no longer rest on their laurels, thinking that they re always world-class or world-best. They ve to re-examine their competitive strategy more frequently, I think that s we need to do. In terms of some of the new strategies that need to come out, we need to look at how the other business models are functioning out there in the market place. In the case of SIA for example, you have to look at how the Budget carriers have been able to create quite a strong market presence within Asia. So I think there s a need to again relook at oneself and one s business strategy and then ask ourselves Do our business models still apply? and What sort of changes need to be done?

And one business strategy that keeps popping up is outsourcing. Do you think that s a good strategy to take?

JT: Well I think certain functions definitely can be outsourced. I mean we ve seen call centres being outsourced, we ve seen administrative functions being outsourced in other countries simply because it makes a lot of sense. But I think that quite a fair bit of jobs have to be kept curtailing on shore still. It depends on the roles and the functions that needs to be done. I think that maybe parts of businesses can be outsourced, but no the entire block of it.

The role of unions has come into the limelight lately, being the pivotal party between workers and the government. What kind of role specifically, do you see the unions taking from now?

JT: One of the commendable thing about Singapore is the fact that we ve got a union that works with the businesses and I think that s very important. And I think not against the businesses. We ve seen how overseas unions such as IG Metall in Germany creating a lot of problems in terms of industrial relations. But one thing that s very commendable is that our unions have always been very pro-business. And I think that s essential because for us that s a very small and open economy we need the presence of MNCs we need overseas businesses to have investment within Singapore and I see what s very essential is that it has to be very pro-business and this will help anchor the jobs in the economy.