By TEH SHI NING

Singapore may need to re-examine its export strategies and seek to tap more into Asian growth, economists at a Singapore Economic Roundtable said last week.

Singapore's high export dependence on the Group of Three (G-3) - the US, Europe and Japan (including, indirectly, via exports to China) - is a source of vulnerability in the 'demand drought' brought on by the global downturn, they said.

As the export-driven Singapore economy stares global recession in the face, more than 40 economists from the private, public and academic sectors gathered last Tuesday for the 10th Singapore Economic Roundtable organised by the Institute of Policy Studies (IPS).

While there was concern over the immediate crisis and what could be done to alleviate its impact on Singapore, discussion also turned to Singapore's longer-term structural issues.

Also, unlike in previous roundtables (which featured discussions on the use of monetary policy), this time debate shifted to the question of effective use of fiscal policy to boost traditionally light domestic demand in the face of plunging external demand.

At the first session, chaired by IPS adjunct senior research fellow Manu Bhaskaran, Monetary Authority of Singapore (MAS) economist Erica Tay set the tone of the forum with a review of recent economic developments in Singapore.

She outlined the various channels via which the financial shock has impacted and will impact Singapore's GDP in the future: an immediate pullback in sentiment-driven financial services, the direct effect of weakened confidence on consumer spending, and the indirect impact of the slowdown in the G-3 economies and weakened regional demand.

Ms Tay also traced Singapore's business cycle from 1976 to the present, noting that the average annualised GDP growth rate during expansions was 9.5 per cent compared to a drop of 1.1 per cent in contractions. Also, the expected duration of an expansion was 15 quarters, while a contraction typically lasted three quarters.

In the floor's discussion of responses to the current crisis, one participant highlighted the severe impact of tightened credit lines on local firms, and suggested that a government-backed credit lending facility to help ease their pain - including a new institution - should be considered.

Others urged a more aggressive fiscal policy to boost domestic demand as Singapore's external demand flags.

But one economist responded that Singapore's fiscal impulse for 2008 has been lifted by measures announced by the government over the year, and is comparable to most OECD countries.

Much of the discussion at the forum, in fact, looked beyond the current crisis to the longer-term structural challenges Singapore faces - a direction set by Citigroup economists Kit Wei Zheng and Sim Moh Siong's presentation of their latest country report on Singapore, which said that 'the current recession will probably bring to surface a number of challenges that have been previously masked by rapid economic growth'.

MAS's Ms Tay too highlighted earlier that there are medium-term structural challenges to be met as the current downturn is but 'a hiatus in the structural growth story'. Given that the ascendance of Asia will resume, Singapore may need to tap deeper into the region's growth, while catering to the G-3, she added.

This was the first post-crisis challenge, the Citigroup economists agreed.

A second challenge, they said, would be dealing with the erosion of cost-competitiveness. 'Tech exports have already been undermined by relocation, and the competitive challenge for Singapore's electronics sector, in particular, will become more stark as China moves rapidly up the value chain,' Mr Kit pointed out.

A third challenge would be maintaining social cohesion as Singapore's income inequality - as measured by the Gini coefficient - continues to rise.

The Citigroup presentation sparked off discussion on the long-term viability of Singapore's economic model.

One economist suggested the possibility of shifting to a more services-based economy, pointing out that services are less prone to growth swings and that there is scope for exports of higher value-added services to China - which could help offset the dependence on exports to the G-3.

Another raised the issue of indigenous firms versus multinationals. He noted that while Taiwan and South Korea had local tech companies which would keep a base of higher value-added operations at home even if they shifted manufacturing offshore, Singapore lacks such anchors.

While most did not think that the basic economic model here would be drastically changed, one participant commented that while 'the economic narrative of Singapore is so deeply embedded', if there was any time for change 'it would have to be now rather than later'.

In the second session chaired by BT's associate editor Vikram Khanna, Ian McEwin, a professor of law at NUS and the chief economist with the Competition Commission of Singapore, pointed out that the emphasis of Singapore's competition law is 'unambiguously economic'.

Economic efficiency and considerations of total welfare, rather than consumer welfare alone, should shape the way competition law is implemented here. Competition law should not focus on consumer protection, which should be done by other means, he said.

This article was first published in The Business Times on December 15, 2008.