Page 17 - AEI Insights 2018 Vol 4 Issue 1

AEI Insights, Vol 4, Issue 1, 2018

Singapore’s exports to China are positively related to its economic development, while its
exports to the EU are not.

The above findings are consistent with Singapore’s export practices since 2005, whereby a
stagnation of its exports to the EU was concurrently replaced by its exports to China. As
demonstrated earlier in Figure 1, Singapore’s exports to the EU did not substantially increase
after the EU economic crisis in the mid-2000s. On the other hand, Singapore’s exports to China
increased sharply during the same period.

The current study has two main policy implications. First, due attention should be given to the
Chinese market to maximise the economic effects of exports to China on Singapore. Meeting
the needs of Chinese consumers is a significant factor which can stimulate Singapore’s
economic growth. Traditionally also, the country has played the role of regional hub for
Chinese products in ASEAN. Thus it may heighten its efforts to strengthen this regional
position and increase further its total exports to China in the future. One such effort could be
the setting up of a special free trade zone through the CSFTA to attract more foreign
investments from China. Second, Singapore should also take account of the fact that there is a
neutral relationship between exports to the EU and its economic development. Although the
EU was a dominant trading partner for Singapore for two decades (1970s to 1990s), exports to
the EU have not contributed significantly to its economic growth. This has been worsened by
a stagnation of its exports to the EU since the 1990s. However, this situation may be a
temporary, short-term trend since some EU countries, such as Germany, have recorded very
high growth in the 2010s. With the signing of the EUSFTA in 2015, strategies should be
developed by Singapore to ensure that future exports to the EU could produce more positive
effects on its economic development.

This study has two main limitations and recommendations for future research. First, there is a
lack of sufficiently long dataset on ASEAN exports and GDP. Further research in this area will
benefit from a longer set of data. Second, econometrics as a method for data analysis is still
undergoing improvements. With some advancement in recent years, more sophisticated
methods such as unit root test with structural break or Fourier approximation could be
employed in latter studies. This may offer a better insight on the relationship between exports
and economic development, both for ASEAN and beyond.

References

Dent, C.M. (2004). The Asia-Europe Meeting and inter-regionalism: Toward a theory of
multilateral utility. Asian Survey, 44:213–236.
Dickey, D.A., & Fuller, W.A. (1979). Distribution of the estimators for autoregressive time
series with a unit root. Journal of the American Statistical Association, 74, 427–431.
Engle, R.F. & Granger, C.W.J. (1987). Cointegration and error correction: Representation,
estimation and testing. Econometrica, 55, 251–276.
European Commission (2017). Countries and Regions: Association of South East Asian
Nations (ASEAN) < http://ec.europa.eu/trade/policy/countries-and-regions/regions/asean>
[Accessed on 21 August 2017].
Granger, C.W.J. (1969). Investigating causal relations by econometric models and cross-
spectral methods. Econometrica, 37, 424–438.

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