MCA Economic SeminarBY HONG BOON HOW AND P.W. THONG
ASIAN export growth, led by China, is set to slow down this year regardless of whether the severe acute respiratory syndrome (SARS) outbreak is contained or not, said BNP Paribas Peregrine Securities chief economist Chan Kok Peng.
In his paper on the regional economic outlook at the MCA economic seminar, Chan said China's export growth was expected to slow down as demand in its two biggest export destinations, the US and Europe, weakened.
This will in turn drag down other smaller Asian economies that are currently net exporters to China.
“Once the Chinese economy slows, the trade surplus which many Asian countries are now enjoying, will narrow. And this impact is set to take place irrespective of whether the SARS outbreak will be contained. The key issue now is who will be the best of the lot,'' he said, adding that the SARS epidemic only served to expedite the export slowdown.
Chan said the declining trend was already observed in its BNP Paribas' leading export indicator, which predicted actual exports six months ahead. Compounding the export slowdown in Asia was the synchronised economic slowdown in the US, Japan and Europe.
“The last time Asian exports fell was in 1995, when all three major economy groups US, Japan and Europe registered a synchronised downturn,'' he said.
On concerns over declining FDIs to Asean resulting from more FDIs going to China, Chan said Asean should realise that it did not need a huge inflow of FDIs to become industrialised.
“One must ask if a government is willing to be seen as FDI junkies. In fact, by becoming less dependent on FDIs, an economy can promote the development of local entrepreneurship.''
Citing examples of South Korea, he said FDI inflows only accounted for 0.8% of that country's GDP in 2001. By comparison, Singapore's FDIs accounted for more than 10% in 2001.
Chan said Singapore had depended too much on FDIs to the extent that the republic was not able to build up home grown world-class entrepreneurs or companies of its own.
“South Korea, which did not receive huge amounts of FDIs, was able to develop its own local world-class companies such as Samsung and Hyundai,” he said.