Friday 6 September 2013

Singapore is world's 2nd most competitive economy: Global Competitiveness Report 2013-2014

By Fiona Chan, The Straits Times, 5 Sep 2013

FOR the third year running, Singapore has held on to its ranking as the world's second-most competitive economy, behind only Switzerland.

The Republic kept No.2 spot by continuing to have more efficient markets, stronger institutions, a sounder financial market, and better infrastructure and education than other economies, according to the latest rankings by the World Economic Forum (WEF).

But while Singapore's strong points persisted, so did its weaknesses: It fell three spots to 17th place in business sophistication - the quality of a country's business networks and its firms' operations and strategies - and one spot to 9th in innovation.

"Although we kept the overall No.2 rank, Singapore actually did worse in the one area that has always been our Achilles heel - innovation and sophistication," said Barclays economist Joey Chew.

In the category of "capacity for innovation", Singapore ranked 18th, up two spots from last year but still behind Malaysia.

Also, for the first time in at least six years, the biggest obstacle to doing business here was seen to be restrictive labour regulations, not inflation, she said.

"Labour restrictions are really starting to bite more companies," she added. "While I support the Government's decision to support local talent, I think we need to be careful not to swing too much in the other extreme. To be a global city, our very small city-state needs to be very open to international talent flows."

Singapore International Chamber of Commerce chief Phillip Overmyer said while Singapore has "done a good job" in moving to higher value-added activities, it should upgrade and retrain those with lower-end skills and find useful jobs for older workers.

The WEF rankings are the most comprehensive of their kind, with a record 148 economies assessed this year. Other Asian financial centres also did well, with Hong Kong rising two spots to seventh and Japan up one to ninth.

Singapore outperformed in many categories, making seven appearances in the top three spots across 12 index "pillars".

The Republic beat the rest of the world in the efficiency of both its goods and labour markets, and came in second for infrastructure, health and primary education, financial market development, and higher education and training.

But there were some misses, too. Singapore's institutions slipped to third place, after five straight years in the top spot.

Its macroeconomic environment ranked 18th, down one from last year, but the WEF praised the Government's fiscal management, with a Budget surplus last year.

And although Singapore's overall infrastructure continued to rank highly, the country's road and railroad quality dipped relative to other economies.

"It's not a huge surprise that the quality of infrastructure has slipped a bit, but upgrading works should help lift that ranking," said CIMB economist Song Seng Wun.

He said the Government's "huge efforts" to engage businesses make it difficult for Singapore to slip in the overall rankings.

But with high business costs and less foreign labour making things tough for firms here, Singapore must make sure its ongoing productivity drive pays off.

"If not, it might be tough even to hang on to the No. 2 spot," said Mr Song.

Singapore overtakes Japan as Asia’s biggest forex hub
TODAY, 6 Sep 2013

The Republic has overtaken Japan as Asia’s biggest foreign-exchange centre for the first time as trading surged in the past three years, the Monetary Authority of Singapore said yesterday, citing a survey by the Bank for International Settlements.

Singapore’s average daily foreign-exchange volume increased 44 per cent to US$383 billion (S$490.4 billion) as of April from US$266 billion in the same month in 2010, the MAS said. The average interest-rate derivatives volume climbed 6 per cent to US$37 billion over the same period, the highest in the region after Japan, it said.

“Singapore has definitely established itself as a hub for foreign-exchange trading. Part of this emergence is due to the increasing importance of Asian currencies, and Singapore’s time zone is well-suited for that,” said Mr Khoon Goh, a senior currency strategist at ANZ Bank in Singapore.

The rise in ranking puts Singapore behind just the United Kingdom and United States in the US$6.67 trillion global currencies trading market, according to the Bank for International Settlements (BIS).

Singapore’s foreign-exchange market expanded as the Government offered incentives to boost its financial markets, which also led to a surge in the nation’s fund management industry, where more than 500 asset managers oversee about US$1.1 trillion.

“Our growing strength in foreign exchange is a key complement to the development of capital market and asset management activities,” said Ms Jacqueline Loh, Deputy Managing Director at the Monetary Authority of Singapore.

“It will also better position our financial centre to serve the investment and risk management needs of financial institutions and corporates throughout Asia.”

Currencies trading in Singapore is still one-seventh the size of the UK and less than a third of the US. The UK has 41 per cent of the global market, followed by the US with 19 per cent, according to the BIS, the record-keeper of the world’s central banks. Singapore has a 5.7 per cent share, followed by Japan’s 5.6 per cent and Hong Kong’s 4.1 per cent, it said.

“Foreign exchange market activity has become ever more concentrated in a handful of global financial centres,” the Switzerland-based BIS said yesterday. “The vast majority of global FX trading in 2013 has occurred via the intermediation of dealers’ sales desks in five jurisdictions.”

The Singapore dollar has fallen 2.2 per cent against the US currency in the past three months, the smallest drop among key South-east Asian nations as investors withdrew funds from developing countries.

About US$44 billion has been pulled out of emerging-market stock and bond funds globally since the end of May, data provider EPFR Global said on Aug 23. “The Government has also been encouraging more and more large financial institutions to set operations here,” said ANZ’s Mr Goh.

The Swiss central bank said it set up a new Singapore office two months ago to ease the round-the-clock management of its exchange rate cap, end the need for the Zurich trading desk’s night shift and manage its investments in Asia. Singapore’s position as a regional bond-trading centre led to the choice of the city as the location of the first foreign branch in the Swiss National Bank’s 106-year history, said President Thomas Jordan.


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