Introduction

1         A major contributing factor to the success of the Asian Newly Industrialised Economies (ANIEs) of South Korea, Taiwan, Singapore, Hong Kong and Malaysia has been their robust export performance. Much of the export growth is underpinned by a significant expansion of manufactured exports, reflecting the rapid industrialisation of these economies.

2         This paper employs the technique of shift-share analysis to assess the comparative export performance of ANIEs in the major markets of the US, the EU and Japan over 1991-96. When applied to the study of export competition, the technique of shift-share analysis compares a home country's exports to third-country markets with like exports from some selected reference competing economies. A country is said to have experienced positive net shifts in exports to a market if its exports exceed that implied by the average export growth of the reference competing economies with the same export structure, and conversely for negative net shifts.

Export Structures and Markets of the ANIEs

3         Export competition can be expected to be intense if the economies overlap significantly in both the commodity and market composition of their exports. The ANIEs' exports were dominated by manufactured goods (SITC 5-8), particularly machinery and transport equipment (SITC 7) which comprises mainly electronics. The ANIEs also exhibited similar patterns in terms of export markets. The US, EU and Japan are the main destinations for the ANIEs' manufactured exports.

Overall Assessment

4         The results of shift-share analysis show that, between 1991 and 1996, Malaysia emerged as the top export competitor among the ANIEs in the combined markets of the US, the EU and Japan. Over the period, it recorded the largest positive net shifts in manufactured exports of $17.4 billion. Singapore came in a close second with positive net shifts of $14.8 billion, while Hong Kong, Taiwan and South Korea all recorded substantial negative net shifts in manufactured exports. Countries experiencing positive net shifts in exports gain market shares at the expense of those experiencing negative net shifts. Thus, between 1991 and 1996, Malaysia and Singapore had gained market shares at the expense of Hong Kong, South Korea and Taiwan.

Export Performance by Broad Commodity Section

5         Singapore's robust export performance to the US, the EU and Japan was skewed towards the transport & machinery equipment (SITC 7) category, which comprised largely electronics. Indeed, SITC 7 exports accounted for a significant 78% of Singapore's positive net shifts in manufactured exports to the three markets combined. However, Malaysia's export performance was comparatively more balanced, with SITC 6, 7 and 8 exports contributing the major share of the net shifts.

6         The Northeast Asian NIEs of Hong Kong, South Korea and Taiwan, on the other hand, recorded substantial negative net shifts in SITC 7 exports in most of the major markets. Only South Korea experienced significant positive net shifts in SITC 7 exports to the EU, due largely to exports of cars rather than of electronics.

Export Competition in Machinery & Transport Equipment

7         Given the importance of machinery & transport equipment (SITC 7) in Singapore's total exports, we examined in detail Singapore's export competitiveness in this product category vis-`-vis the other ANIEs. Singapore performed better than average in all three major markets of the US, EU and Japan, as reflected by the positive net shifts.

8         Besides Singapore, Malaysia is the only other economy with positive net shifts in all three markets. In contrast, Korea experienced a loss in market shares in its exports to both the US and Japan, but a gain in market share in the EU. Taiwan and Hong Kong performed worse than average in all three markets.

9         Analysis at the levels of 2- and 3-digit SITC products shows that Singapore's strong export performance in all three markets was invariably dominated by office & data machines (SITC 75) comprising primarily disk drives (SITC 752). Its exports of electrical machinery (SITC 77), comprising largely semiconductors (SITC 776), also performed comparatively well, particularly in the EU and Japanese markets

10        Malaysia also performed strongly in its exports of office and data machines (SITC 75) to the US and EU markets, and of electrical machinery (SITC 77) and telecommunications apparatus (SITC 76) to all three markets. These trends reflect Malaysia's increasing importance as a direct competitor to Singapore in electronics exports. However, the fact that Malaysia has also become a more important export market to Singapore in these same commodities over the period suggests some degree of complementarity between the two economies. The rapid expansion of the electronics industry in Malaysia over the last few years has led to increased sourcing of electronic parts and components from Singapore.

11        The sources of divergence in SITC 7 export performance among the ANIEs could be attributed to the industry mix effect (IME), the competitive effect (CE) and the interaction effect (IE), thus:

 

Net Shifts in Exports = Industry Mix Effect + Competitive Effect + Interaction Effect

Several key observations can be made. First, Singapore's favourable export performance in machinery & transport equipment (SITC 7) could be largely attributed to its favourable export mix or structural advantage. Second, Singapore's exports of office & data machines (SITC 75) to the US and EU grew faster than for the ANIEs as a whole. The same is true of Singapore's exports of electrical machinery (SITC 77) to Japan and the EU. These exports are said to enjoy a competitive advantage. Third, the structural and competitive advantages of Singapore's exports to the US and EU also combined to give rise to a positive interaction effect. Singapore is said to enjoy a revealed comparative advantage vis-`-vis the other ANIEs in SITC 75 exports in the US and EU markets.

12        By comparison, Malaysia's positive net shifts in SITC 7 exports, the next largest after Singapore's, were largely derived from its faster than average growth or competitive advantage. Active promotion of the industry by policy makers in recent years has led to such exports growing faster than the reference economies. In due course, it is likely that Malaysia will also gain a major foothold in this industry, and hence compete with Singapore head on.

Regional Economic Crisis and Export Competition

13        In light of the current Asian economic crisis, we updated the analysis on export performance of the ANIEs. Between 1996 and 1997, Taiwan was the only economy among the ANIEs experiencing significant positive net shifts in manufactured exports (SITC 5-8) to the US. Hong Kong's export position was relatively unchanged. Korea, Malaysia and Singapore, on the hand, registered negative net shifts as their manufactured exports to the US grew at a relatively slower rate or even contracted.

14        Similarly, Japanese import statistics show that Singapore's exports to Japan did not perform well, recording a negative net shift between 1996 and 1997. In contrast, Malaysia and South Korea enjoyed positive export net shifts in 1997, which raised their relative market shares.

15        The relatively poor performance of Singapore's manufactured exports in the US reflected its loss of competitiveness in the two key electronics exports, namely, data processing machines and semiconductors. Singapore's exports of disk drives were also affected by the problem of over-supply in the industry. The impact on Singapore was the most severe as it exports much more data processing machines than the other ANIEs. Similarly, the problem of overcapacity in the semiconductor industry and the subsequent decline in chip prices were partly responsible for the lacklustre performance of Singapore's exports of electronics valves.

Conclusions and Implications

16        Notwithstanding Singapore's impressive export performance in 1991-96, the regional economic crisis has had an adverse impact on Singapore's competitiveness in the US and Japanese markets. The loss in market shares reflects the intense competition posed by producers from crisis-hit economies following the substantial depreciation of their currencies, although this may have been partially offset by the credit crunch faced by manufacturers in these economies.

17        In the face of rising competition from the ANIEs as well as emerging economies, Singapore manufacturers would have to sharpen their competitive edge to maintain their market share. First, they would have to boost their competitiveness by raising labour productivity through greater emphasis on skills development and training. This would help reduce unit labour costs, and moderate the upward cost pressures precipitated by Singapore's shortage of land and labour.

18        Second, Singapore's manufacturers must continue to move up the value-added chain and be ahead of competitors in exporting new and high-tech products. This calls for the rapid development of Singapore's hi-tech industry in order to make up for the export losses due to the traditional industries' moving offshore and also to improve Singapore's overall export competitiveness.

19        Finally, Singapore should further diversify its export destinations and explore new markets to gain the "first-mover advantage". With increasing intensity of export competition in the industrial markets, Singapore's exporters must have a keener eye for opportunities available in fast-growing markets of the developing economies.