S'pore still internationally competitive, says Lim Hng Kiang

Minister for Trade and Industry, Lim Hng Kiang says Singapore remains internationally competitive despite the sluggish economic performance. 

Citing the 2012 World Economic Forum's Global Competitiveness Index, he said Singapore maintained its ranking at the second position.

Recent economic estimates showed the Singapore economy had contracted by 1.5% in the third quarter, on a quarter-on-quarter seasonally adjusted annualised basis. 

But the minister said Singapore has not entered into a technical recession. 

He said while the country has avoided two consecutive quarters of decline, economic growth for the first three quarters of 2012 was lacklustre, at 1.7 per cent on a year-on-year basis.

Mr Lim said the muted economic growth was largely due to the challenging global economic conditions, which slowed Singapore's exports growth and caused its current account surplus to decline from $35 billion in the first half of 2011 to $27 billion in the first of this year. 

He pointed out that other Asian economies have also been impacted by the external headwinds. 

For example, for the first half of this year, the three East Asian economies, South Korea, Chinese Taipei and Hong Kong, saw total exports contracting by 0.7 per cent. 

Their current account surplus over the same period also declined by US$147 million, compared to the first half of 2011. 

Given the weak economic environment, Mr Lim said the government has calibrated the pace of economic restructuring to a rate at which businesses can adjust. 

For example, the increase in foreign worker levies will be implemented in several phases from 2010 to 2013. 

Companies have also been given up to two years to comply with the new Dependency Ratio Ceiling requirements, which came into effect on 1 July 2012. 

Mr Lim also said measures have been put in place to provide support to companies, especially SMEs, to raise their productivity to cope with the tighter manpower situation. 

These include tax credits to encourage productivity and innovation related expenditures, as well as funding support for employee training.

Over the medium term, Mr Lim said the strengthening of the Singapore dollar is a key macro-economic policy tool to keep inflation in check. 

But the exchange rate cannot be used as a tool to manage Singapore's export competitiveness. 

Mr Lim said competitiveness can only be achieved over the long term, through higher productivity and through innovation such as creating new products that the market demands. 

It keeps inflation low and stable, which helps to preserve the purchasing power of Singaporeans' income and savings. It also provides a stable and conducive environment for businesses to undertake long-term investments, thus enhancing competitiveness and providing the basis for sustained quality economic growth for Singapore.

"The trend appreciation of the Singapore dollar exchange rate is in line with our economic fundamentals. It keeps inflation low and stable, which helps to preserve the purchasing power of Singaporeans' income and savings. It also provides a stable and conducive environment for businesses to undertake long-term investments, thus enhancing competitiveness and providing the basis for sustained economic growth. Given that Singapore's labour market remains healthy, with strong employment creation and a low unemployment rate, there is no immediate need for the government to step in with measures to cushion the economy from the slowdown in external demand."