US Recession Could Knock 1-2 Points Off Growth: SM

Source : The Business Times, February 25, 2008

S'pore can depend on growth in China, India to sustain its economy, he says

A US recession could knock 'maybe one or two percentage points' off the growth of small, open economies like Korea or Singapore, but if a country gets the basics right, it can cope, Senior Minister Goh Chok Tong said during a televised interview while visiting Korea.

'Have a good budget, have a good economy and strong fundamentals,' said Mr Goh. 'If our basics are right, we can cope with it. We have the surpluses to see the people through a very bad patch.'

Further, Singapore will be able to depend on Chinese and Indian growth to sustain its economy, he said.

'Without China growing or without India growing, I think we will be very badly hit. But because we have prepared ourselves for this, we can now seek some comfort in the growth of China and India', said Mr Goh.

Korea, which will see its newest President-elect Lee Myung Bak take office next week, should set itself the goal of being an open economy, in order to compete, he said.

Asked whether the incoming government might succeed in pushing through an Free Trade Agreement (FTA) between Korea and the US, Mr Goh - who helped negotiate the Singapore-US FTA in 2003 - said the key is to reach out to stakeholders who might be affected.

In Korea's case, the agricultural sector would be very much against the FTA, he said. 'You have to reach out to them to tell them that maybe they may suffer some loss of income through competition, but there are other ways to help them.'

Further, 'you've got to reach out to the wider economic community to tell them that the benefits to the whole economy outweigh the losses in some areas', he said. Another issue would be American concern over exports of Korean automotives to the US.

'If you can solve the beef and automotive problems, I think you can get the Congressmen in the US and the National Assembly members here to support the FTA. It is very important for Korea to have an open market in the US, where the tariffs would be much lower than they are now for your exports,' said Mr Goh.

As for Korea-Singapore relations, Korean investors could use Singapore as a springboard not only for South-east Asia, but also to the Middle East or Europe; conversely, Singapore firms could use Korea as a launch pad to the US, China and Japan, said Mr Goh.

'We can be your port in South-east Asia and you can use our port for transhipment. If Korea has an open skies policy, you can be the hub for North-east Asia. We have an open skies policy. We can be a hub for Korea, if Korean Airlines flies to Singapore and beyond. These are possibilities,' he said.

Another potential area for cooperation is joint-investment in third countries, like in the Middle East, while on the flipside, Koreans and Singaporeans could work together with the Arabs to invest in Korea or elsewhere, he said.