Growth strategy 'robust'

Source: Straits Times Aug 6, 2009

IT'S a misperception that the Singapore economy is driven largely by foreign MNCs, which have crowded out smaller, local companies catering to domestic demand, said Senior Minister of State for Trade and Industry S. Iswaran on Thursday.

He maintained that there is a healthy mix of companies, with no particular corporate model being dominant.

'Over the last few years, SMEs share of the total value-add produced in our economy has been steadily increasing to just under 50 per cent. Small companies therefore account for about half of Singapore's value-added,' said the minister in his address to the Singapore Economic Review conference on Thursday morning.

' If you were to split total value-added along the lines of foreign versus local companies, you would find that each accounts for about half of the total value-added of the economy.'

On questions raised by some economists that Singapore has become too reliant on external demand, Mr Iswaran sought to explain that if it did not have an export-led growth model, the economy would not have grown as fast in the past decade.

External demand accounts for three-quarters of Singapore's total demand. Between 2000 and 2008, average annual real growth in total demand was 8 per cent - with external demand contributing 7 percentage points while domestic demand contributed just 1 percentage point.

'For a small economy like Singapore, the reality is that external demand will always be a key driver if we want to raise living standards for our people,' said Mr Iswaran, adding: 'If Singapore did not have an export-led growth model, we would not have grown as fast in the past decade. And we would not have been able to build up the resources that have helped to cushion the impact of this current recession.'

He told the conference that Singapore's approach to economic development and growth remains robust strategies have been constantly reviewed to match the economic conditions and the goals set.

The tenet is a simple one: to capture growth opportunities when prospects are good, to ensure that it will have enough resources to ride through lean times.

But in the wake of the current economic crisis, which is expected to lead to significant shifts in the patterns of global demand and growth, Mr Iswaran said it is imperative that Singapore be well prepared for the choices, and poised for the opportunities that lie ahead.

a blog on: Financial Planning Advice - Christopher Pua