Views From The Top : Up Or Down?

Source : The Business Times, 03 Sep 2007

Have you been getting any indications, whether within your organisation or elsewhere in the industry, that the Singapore economy is entering a slowdown phase? How would a US economic slowdown affect Singapore and the region?

No signs of slowdown

Deb Dutta
Vice-President, Asia Pacific & Japan,
BROCADE

BULL and bear markets will always be part of macroeconomic cycles. What will be interesting to note would be whether the gap between the peaks and troughs will narrow over time as markets become more elastic due to a new set of parameters that are not necessarily related to the US and western Europe. The current sub-prime crisis in the US spread rapidly to Europe but thankfully did not significantly impact Asia, other than a few very jittery weeks.

While the rebound is not yet here, Asian financial markets have largely stabilised. Net-net, we should be happy that with the emergence of the financial muscle of China and India, the relative stability of Japan and the maturity of Singapore and Hong Kong, Asia now seems able to sustain macroeconomic shocks without buckling under. I am confident that this position will further strengthen over time.

The Asia Pacific and Japan tech sector has been robust through 2007. IDC forecasts technology spending in Asia Pacific to reach an estimated US$1.48 trillion by 2010. As organisations set up shop and expand and as business requirements continue to grow in size, spread and criticality, organisations will continue to invest in technology just to stay relevant in the 21st business world. The winners will have to do even better!

Eugene Wong
Managing Director,
Sirius Venture Consulting

OUR economy is now much more robust than it was during the Asian crisis as Singapore has a growing SME base, which is less dependent on export but has direct business dealings in China, India and the rest of Asia in addition to export to the US. So, any global slowdown would not affect Singapore SMEs much. In my area of business, which is in venture consulting and investments, any healthy correction or slowdown is good for us as it means that entrepreneurs’ expectations are back to realistic levels.

Tom Cheong
Managing Director, Singapore and Brunei,
Cisco

IN HIS comments following the recent announcement of Cisco’s Q4 and FY07 earnings, chairman and CEO John Chambers said that the quarter was the strongest one that the company has seen from a balanced product, geographic and customer segment perspective for many years. Elaborating, he said that growth was taking place throughout the world, unlike in previous boom years, when growth wasn’t so geographically balanced. The economic fundamentals in Singapore remain strong and with major projects such as the Next-Generation National Broadband Network and the integrated resorts, the future looks assured. The ICT build-out under iN2015 and Infocomm Development Authority of Singapore’s (IDA) leadership is going to be particularly crucial.

Globally, we are seeing what Cisco calls the second phase of Internet development, where Web 2.0 technologies and other collaboration tools are generating dramatic innovation and productivity increases.

Douglas Miller
Chairman,
The American Chamber of Commerce in Singapore

AMCHAM Singapore has not received any indications from its members that the Singapore economy is entering a slowdown phase. Many firms report very positively on their businesses’ growth in 2007.

If a US economic slowdown were to occur, while it would have some impact on Singapore and the region, it would be less than in previous years, given the much stronger economic and trade relationship among Asean, China, and India.

Liu Chunlin
Managing Director,
K&C Protective Technologies Pte Ltd

AS WE are dealing with the real estate and construction industry, we are not seeing a slowdown yet as there is a time lag between decision-making and the launch of a prospect. And there are quite a number of projects already on-stream.

A US slowdown would affect sentiment and there may be fewer projects after the current wave of building which is expected to last until the opening of the integrated resorts at end 2009 and early 2010.

For our business, which is in the security protective area, we are optimistic of continuing growth as there is demand both from new build and retrofit projects.

Erman Tan
CEO,
Asia Polyurethane Mfg

THE Singapore economy is currently facing fierce competition from other Asian countries that offer lower labour, operational and business costs. Undoubtedly, the US economy has a huge impact on Singapore’s economic performance. Being a small and open economy, Singapore’s growth is highly dependent on many factors such as the performance of the US and Asian economies, as well as global economic development.

Singapore has already developed new engines of growth, by establishing extensive business and trade links with other countries, such as the Middle East, China and India. The Free Trade Agreements (FTA) that Singapore has already established with countries such as India, the US, Japan and South Korea, have greatly facilitated the flow of trade and investment between Singapore and our trading partners.

This has, in turn, brought about closer economic cooperation between Singapore and our FTA trading partners. Last but not least, FTAs have also helped buffer Singapore’s economy from volatility in the global economy. I am generally upbeat about Singapore’s long-term economic growth. As such, I don’t see a slowdown for the Singapore economy, which should remain buoyant and robust in the next few years.

Tan Ser Giam
Chairman,
Eastern Navigation

THE marine, oil and gas industry does not appear to be heading for any significant slowdown. Orders for ships are still buoyant and the demand for offshore support vessels for the oil industry appears strong. In America, signs of a weakening economy and expected slower demand for Asian goods will see Singapore’s industrial exports decreasing.

But the momentum set by the integrated resorts and property upswing will continue to move the Singapore economy forward and will mitigate the expected slowdown and possible recession in the US. Singapore will see slower growth due to US problems but it is now less reliant on the US economy. As long as the Chinese, Indian and Vietnamese economies continue to grow, Singapore should be buffered against any dramatic slowdown and will remain positive.

Ross Wilson
Managing Director, Consumer Products
and Services, Apac region,
Trend Micro (Singapore)

I HAVEN’T personally witnessed any slowdown. A US slowdown would certainly affect a global hub like Singapore but, fortunately, Singapore has other markets in addition to the US to do business with. There is a lot of discussion as to why the sub-prime fiasco, the credit squeeze, rising oil prices and a hundred other things will affect us. They are all part and parcel of doing business. By all means take them into account when planning the future direction of your company’s growth, but don’t use them as an excuse for not trying!

Expect minimal impact

Derek Goh
Executive Chairman/Group CEO,
Serial System Ltd

THE official government forecast for the year remains rosy despite the recent US financial turbulence. The Singapore economy is fast diversifying and seems steady for the rest of 2007. Thus, there are no noticeable trends on the horizon to indicate any imminent slowdown. Nevertheless, we should not be resting on our laurels. The US economy may go on a roller-coaster again by year’s end.

Any major US slowdown will have an impact on Singapore and our Asian neighbours. Our exports to the US market will be affected. This will slow our manufacturing sector which employs a large segment of the workforce. Any outflow of capital will also slow the growth of our financial market.

Next year will be a year to watch as the US heads for its Presidential elections in November while China hosts the Beijing Olympics in August.

Wee Piew
CEO,
HG Metal Manufacturing

While confidence may be affected by the recent slide in global stock markets, I believe the fundamentals of the Singapore economy remain intact. Prime Minister Lee Hsien Loong, in his recent National Day rally speech, has raised the country’s long-term growth rates. There will be a temporary dent in investors’ confidence but the re-inventing of Singapore will continue. The construction of the integrated resorts is not stopping just because of a down swing in the stock markets. The development of Singapore as a wealth management hub and a magnet for high net worth individuals will also be unaffected by recent developments.Â

For the steel industry, demand for steel remains strong. There is no sign of developers and construction companies delaying their projects. Shipyards are still getting new contracts to build ships. In fact, prices for steel products are holding up or even rising, indicating the strong underlying demand for steel products.

Even if the US economy does actually slow down, I believe it will not affect Singapore and the region as badly as it did in the past. This is because Singapore’s economy is now more connected to the booming Asian economies like China and India and less reliant on the US economy alone.Â

Goh Chong Theng
General manager, Singapore,
Rabobank International

OUR clients in the energy, commodities, telecommunications and marine/logistics sectors tell us that their industries are still doing well. So I don’t think that the Singapore economy is entering a slowdown phase. In fact, I think some of these sectors are booming!

Many of the sectors in Singapore and the region are booming because of two very powerful, intertwined economic dynamos in Asia, namely, China and India. Their rapid industrialisation and the growing global market for their exports have increased demand for metals, fossil fuels and other materials.

Due to globalisation, raw materials and manufactured exports must be shipped between many countries. This has created numerous business opportunities for marine and logistics firms, and has thus increased demand for heavy engineering projects, ships, oil rigs, aeroplanes and other forms of capex.

Having said that, the US is still Singapore’s largest trading partner and it is also a substantial consumer of Chinese and Indian exports. As such, a slowdown in the US will lead to an economic downturn throughout Asia. However, the impact on Singapore and the region can be greatly limited if the European and Japanese economies remain healthy, and if China and India dip into their vast forex reserves for sustenance while the US economy recovers.

Downturn cannot be ruled out

Richard Chua
Managing Director,
Yusen Air @ Sea Service (S)

THE main markets for our company are the electronics/OA equipment industry and the automotive industry. Since the beginning of this year, the world electronics industry has slowed down drastically, as evidenced in the Singapore non-oil export of electronics products. The volume of such products handled by our company has dropped by over 15 per cent compared to a year ago, and the industry has not seen any recovery so far.

Pockets of opportunities arise, like the Rugby Australian Cup at the end of this year, while the Beijing Olympic 2008 will definitely stimulate consumer consumption and expand the economy further. However, a slowdown in the US or a dent in consumer sentiment, coupled with the financial market down cycle, would definitely pull down Singapore’s economy at this juncture.

Lim Soon Hock
Managing Director,
Plan-B Icag Pte Ltd

DESPITE the problems of the sub-prime market in the US, the Singapore economy appears to be on course and not entering a slowdown, as yet. This could be due to the momentum generated in the earlier quarters.

The problems of the sub-prime market will hit our shores. Financial markets today are complex and interconnected and I would not rule out other financial institutions, such as hedge funds and asset management companies, facing some problems arising from the non-performing collaterised debt obligations.

The economic slowdown in the US is already happening and the momentum which Singapore currently enjoys, in all probability, will not last for more than two quarters. Singapore and the region will likely experience an economic downturn in 2008, with the manufacturing and services sectors more severely hit. This won’t be due to a lack of strong economic fundamentals, which Singapore has, but more to an imminent deterioration of global economic health. Companies will do well to brace themselves for this eventuality.

Poh Mui Hoon
CEO,
NETS

DESPITE the recent market correction and the repercussions from the US sub-prime mortgage crisis, fundamentals for the Singapore economy remain sound, as acknowledged by various market watchers. While an imminent economic slowdown here is not impossible, it is unlikely to be prolonged as the introduction of Formula One racing and the two integrated resorts over the next few years will be an impetus to growth.

A US economic slowdown, on the other hand, will inevitably affect export-driven industries in Singapore and in the region, though the government’s move to reduce Singapore’s reliance on the electronics sector will lessen the impact here.

Under the NETS group’s regionalisation strategy, we have factored in such economic developments in our expansion plans at home and abroad. These will, however, have minimal impact on NETS’ long-term vision to be the integrated payment gateway of Asia.

We will weather the storm

Wong Teek Son
Executive Chairman and CEO,
Riverstone Holdings Ltd

THE US continues to be the largest economy in the world and has an impact for most businesses wanting to have a piece of the economic action. This is especially so for the electronics sector.

Riverstone, Asia’s leading manufacturer of high tech cleanroom gloves, produces a component that is needed at the electronics manufacturing chain. Since early this year, the hard disk drive and the semiconductor sector in the US and the rest of the world did show signs of weakness. But as we head towards the end of the year, we believe upstream and downstream players in the electronics industry will enjoy a more positive outlook, with the US economy aiding this upturn.

Annie Yap
CEO,
The GMP Group

WITH insight into recruitment trends from various industries, GMP has an indirect but unique vantage point of the health of the economy. Recruitment, especially for permanent placements and long-term contracts, reflects a broader sense of healthy activity because of its function as an expansionary investment. As a general overview, the talent squeeze and the consistent hiring indicate companies are not cutting back despite the recent turbulence from the west.

The current US crisis is undoubtedly making waves in our region, as stocks and shares continue to take a beating. However, in his National Day Rally speech, Prime Minister Lee Hsien Loong relayed a positive projection. He highlighted that the underlying fundamentals and infrastructure supporting the economy are strong and intact. In the same tone, I believe that with our eggs in many baskets, Singapore will be resilient enough to weather this slight setback.

Benjamin Low
Managing Director, SE Asia, India,
Secure Computing

SECURE computing has seen tremendous growth in Asia over the past year and we do not foresee a decline happening anytime soon. We have forged long-term relationships with our customers and are viewed as strategic partners, versus a mere security solutions supplier.

While the US market is currently experiencing some hiccups with their subprime loans, I believe it will be able to bounce back quickly. The advantage of being an open economy such as the US is its ability to correct itself and weed out the weak companies quickly.

On the Singapore front, I believe our strong financial sector will be able to weather the storm caused by the US subprime woes, without much disruption.

The US import-centric market will take a dip if their economic slowdown persists. Asian countries, such as Singapore, who are heavily dependent on exports, may be affected. However, Asian countries have been working towards better financial transparency and stronger corporate governance in the region. This, coupled with our ability to be interdependent, through the promotion of cross trade and strengthening bilateral ties during the economic boom, will help keep us afloat during the uncertain times ahead.

Lindsay Mann
Regional head, Asia,
First State Investments

Singapore’s macro environment appears healthy and the government’s long-term master plan is unlikely to be derailed by current events in global financial markets. However, the global credit crisis sees us in uncharted waters. Things may get worse before they get better, impacting some of the drivers of Singapore’s growth, particularly the financial services sector. This could affect employment with flow on effects on office and residential rents.

What’s encouraging is that Singaporeans are not highly leveraged and corporations have strong balance sheets. We are confident that the Singapore economy will weather this storm and continue to achieve strong growth. Our own Singapore business continues to achieve profit growth on the back of continuing growth in savings by Singapore investors. Despite the recent market volatility, Singaporeans continue to add to their investments, taking advantage of drops in the market to buy assets at cheaper prices.

Watch out

Ng Kong Yeam
Group Executive Chairman,
Sino-America Tours Corporation

IN THE travel business, it is true that the pace did flag in Q2 this year. However, heading into Q3, revenues for the sector are still positive and healthy. I do not think that is just a blip.

The tremendous rise in the price of properties is more a peak of the property sector than the general economy. With the new focus on making Singapore a financial and tourist centre, the economy will continue to grow at no less than 7-8 per cent. Singapore, despite its size, is the 10th largest trading partner of the US. Hence, any slowdown there will definitely affect our growth. It is perhaps time to increase trade with Europe, China and India to ensure that our economic growth continues.

Seamus O’brien
President & CEO,
World Sport Group

YOU would have to be living on Mars not to have read about the jitters emanating from the US housing sector. It is often too easy for business leaders (and even governments) to overlook how important housing is to a successful society and a successful economy. It could be argued that one of the pillars of Singapore’s success was establishing good housing for its citizens many decades ago.

Turning to the current day, I doubt there is a business manager in Singapore that has not had at least one member of staff come into their office extremely distressed about the current housing market in Singapore and how they can no longer afford the rental demands of landlords and are struggling to make ends meet.

This is a real problem and in my view perhaps the single biggest issue affecting Singapore’s burgeoning service sector. The result is that wages have to go up so that staff can simply afford to live. The end result of that is that Singapore becomes less competitive in the global economy.

I am all for free trade and letting market forces set a natural market price. However, what has gone on in the Singapore housing market over the past 12 months, perhaps the key supplier to the burgeoning service industry, is not natural. Singapore simply cannot sustain 100 per cent rent increases (as I have regularly seeen my staff suffer in recent months), let alone a 50 per cent rise. The time has probably come where this needs to be regulated otherwise we risk losing the unique competitive advantage that Singapore has.

A US economic slowdown triggered in the housing industry would obviously affect Singapore. However, a self-induced slowdown triggered by your own housing industry would be far worse.

Find alternative ways to grow

Lars Ronning
President, Asia Pacific (excluding China and Japan),
TANDBERG

FROM TANDBERG’s point of view, our business in Singapore is growing. Even as the market in Singapore becomes more mature, we see promising growth for video-based telecommunication solutions and great opportunity for players in this field.

On a broader front, however, Singapore has an open and relatively export-reliant economy that leaves us vulnerable to external factors such as how well other economies are faring.

With the anticipated downturn of the US economy and the threat of an economic slowdown, businesses have to be prepared to face weakened demand for exports, which will subsequently impact their bottom-line and profit margins. To minimise the impact, Asian enterprises should explore alternative ways of improving their bottom lines such as growing domestic demand and implementing cost-saving measures to keep operating costs down.

Charles Reed
CEO,
interTouch

SINGAPORE and the Asia Pacific region have built a strong economic foundation and I am confident that it will overcome any possible slowdown quickly.

However, to reduce the impact of any slowdown, businesses must recognise that momentary economic downturns do not necessarily mean red ink or downsizing. A long-term view is necessary. At interTouch, for instance, our plans for growth and expansion worldwide are carefully developed to minimise the impact of economic volatility. In fact, our global footprint of operations in 45 countries allows us to create a natural hedge.

Companies should also possess the ability to constantly reassess their business models, strategies and products in order to adapt to changing economic trends. I believe the role of management is to create a flexible approach to ensure that the business keeps to its strategy.

Any US slowdown would have minimal impact on the region’s economies and companies can continue to forge ahead if they can uphold these two core business principles.