Economic Society of Singapore

Singapore Economic Policy Forum 2011

The Department of Economics’ Singapore Centre for Applied and Policy Economics (SCAPE) co-organized, with the Economic Society of Singapore (ESS), the Singapore Economic Policy Forum 2011 on Oct 21 this year at the Grand Hyatt Hotel. About 130 individuals, from ministries, statutory boards, the private sector, academic institutions, and the media attended the Forum.

http://www.ess.org.sg/PhotoGallery/41/3/PICT0013.jpg Opening Remarks by Professor Euston Quah President, Economic Society of Singapore

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We were privileged to have Mr Inderjit Singh, Member of Parliament for Ang Mo Kio GRC and CEO and founder of a number of prominent enterprises in Singapore and abroad, to deliver the first speech, on the key subject of ‘ High-Technology Industry in Singapore: Where do we stand, and where do we go from here?’. Mr Singh began by reviewing Singapore’s policy initiatives in the area of high-technology industry, which ranged from attracting multinationals, providing greater incentives for R&D, attracting foreign talent and grooming local talent, to establishing research centres and providing venture capital funding. Successes have been achieved, such as development of a biomedical research hub, and the formation and growth of a number of successful local start-ups.
http://www.ess.org.sg/PhotoGallery/41/3/PICT0017.jpg Mr Inderjit Singh

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http://www.ess.org.sg/PhotoGallery/41/3/PICT0022.jpg Question and Answer moderated by Professor Kapur Basant from Dept of Economics, National University of Singapore
However, in his view, the future competitive environment, regionally and beyond, will become more challenging, and an intensified focus thus becomes necessary. There is a continuing need for ‘patience capital’ he said: ‘We need to plant the seeds of success and let the firms grow over time. It may take decades and not three or four years’. He adds, ‘ A 2-pronged approach should have been used to develop startups for them to be ready for smart money first’. He advocated a deepening of partnership between research institutions and local enterprises, including making intellectual property developed by research institutions available to entrepreneurs at nominal sums in the current stage of our development, the fostering of a more entrepreneurial mindset at research institutes, with greater emphasis on the commercialization of research, and e ncouraging local companies to co-innovate with foreign companies and develop global solutions.

We were also privileged to have Mr Manu Bhaskaran, Partner and Board Member, Centennial Group, and a noted commentator on key economic issues facing Singapore and the region, to deliver the second speech, on ‘Structural Challenges facing the Singapore Economy’. Mr Bhaskaran began by reviewing key global issues and trends. With the US, Europe, and Japan facing continuing economic difficulties and stresses, and China slowing down somewhat, he forecast slower global growth, and greater volatility. Other important developments include the likelihood of a sustained increase in oil prices, impacting transportation costs, the growing economic role of China in the global economy, the rise of Asian middle classes, and increased impetus to various forms of regional integration.

He found that poorer health was associated with a lower intention to re-enter the labor force, perceived income inadequacy was associated with greater likelihood of re-entry, and, somewhat unexpectedly, variables that predicted retirement (such as education) were not always predictive of intention to re-enter. In terms of policy implications, he said that health status may matter substantially in older workers’ labor force participation decisions, and hence that special consideration should be given to poor older adults who are in poorer health. He also suggested that investment in public health can have positive long-term economic effects. As he pointed out, there is considerable scope for further research in this important area, from multidisciplinary angles.
http://www.ess.org.sg/PhotoGallery/41/2/PICT0014.jpg Mr. Manu Bhaskaran

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http://www.ess.org.sg/PhotoGallery/41/2/PICT0017.jpg Question and Answer moderated by Dr. Thia Jang Ping from Ministry of Trade and Industry
Singapore will have to adjust to the ‘new growth norm’, featuring ‘lower growth and new markets’. Singapore’s economic resilience and policy flexibility remain high, but various challenges have to be responded to. These include the need to raise productivity growth, to ensure that high or widening income inequality are adequately offset through policy interventions, and to strengthen social safety nets. In addition, Singapore needs to further foster, actively, its ‘inherent capacity’. This is ‘the critical software or blueprints held by the indigenous workers and companies of a country, (and includes) financial capital, local skills, intellectual property, accumulated, intangible experience..knowledge of markets’. ‘(I)n terms of getting this inherent capacity up, we still have a long way to go’, he said.

The third speaker was Assoc Prof Albert Hu of NUS’ Department of Economics, an expert on the economics of technological change and growth and development issues, who spoke on ‘ China’s Intellectual Property Rights (IPR) Regime: Lessons for Foreign Investors’. Referring to a study by Keith Maskus showing that the relationship between the strength of IPR protection and national GDP per capita is U-shaped, Prof Hu pointed out that China’s per capita income places it clearly on the ‘rising arm’ of the U-shape, and it recognizes the importance of IPR protection. For example, China has enacted three major amendments to its patent law over the last two decades, and is currently a member of or signatory to major IPR-related international institutions such as the WIPO, Berne Convention, Paris Convention, and Patent Cooperation Treaty.

http://www.ess.org.sg/PhotoGallery/41/1/PICT0004.jpg Associate Professor Albert Hu

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http://www.ess.org.sg/PhotoGallery/41/1/PICT0008.jpg Question and Answer moderated by Professor Jun Yu from Singapore Management University
He also noted that China is experiencing a ‘patent explosion’, due to its huge market potential, increasing competition, greater awareness of the strategic value of patents, and considerable increase in resources devoted to R&D . Associated with these has been an increase in patent litigation, both between Chinese parties and between Chinese and foreign parties, and both domestic and foreign parties have won cases in Chinese courts. He concluded that it is important for foreign investors to build up a ‘Chinese IPR portfolio’, on account of China’s rapidly growing domestic market, and the increasing technological sophistication of Chinese firms, which enhances their ability to both imitate and innovate.

Asst Prof Nattavudh (Nick) Powdthavee of the Department of Economics, Nanyang Technological University, presented an entertaining and insightful discussion of ‘Happiness and Public Policy: Future Directions for Singapore’. He began by pointing out that social scientists are increasingly studying mental well-being, in the process drawing closer to Psychology and Medicine. They are seeking to understand what influences the psychological well-being of individuals as well as nations. Studies have shown that happier people tend to be healthier and live longer, clearly a finding of interest to economists and policy-makers in general.

http://www.ess.org.sg/PhotoGallery/41/1/PICT0013.jpg Dr. Nick Powdthavee

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http://www.ess.org.sg/PhotoGallery/41/1/PICT0015.jpg Question and Answer was moderated by Mr. Donald Low from Economic Society of Singapore
Some significant determinants of well-being have been found to be unemployment, marriage, divorce, bereavement, health, and friendship networks. A typical individual’s happiness over the course of his life tends to be U-shaped, with the low point during his 40’s. One fairly robust finding (the ‘Easterlin paradox’) is that cross-sectionally richer people tend to be happier than poorer, but over time as a country develops its overall happiness level tends to remain fairly constant. This is partly because people care about relative income and ‘positional goods’. Suicide rates are often higher in countries where the average level of happiness is high, and social comparisons may be an explanation for this. Depression and anxiety have increased over time, partly due to increased job stress. He concluded by offering three policy suggestions: (1) since in well-off countries the competition for social status can lead to undesirable social outcomes, there is an urgent need for policies on work-life balance for all, (2) we should measure the effects of both income and non-market goods (such as health care, the environment) on happiness, and (3) in measuring a country’s progress, information regarding citizen’s happiness should be considered along with economic indicators.

Asst Prof Young Kyung Do, of the Program in Health Services and Systems Research, Duke – NUS Graduate Medical School, spoke on ‘ Health and Labor Force Participation Among Older Singaporeans’, written jointly with Dr Treena Wu. Singapore’s population is ageing, and the old-age dependency ratio (the ratio of persons aged 65 and above to those aged 15-64) is accordingly increasing. If more employment opportunities were available to, and availed by, older Singaporeans, individual, familial, and societal benefits will be reaped. Like other advanced economies, Singapore is encouraging increased employment of older workers through various measures, including the enactment of the Retirement and Re-employment Act, to be fully implemented in 2012. With these considerations in mind, Dr Do posed the question, ‘What is the role of health in the intention to re-enter the labor force among older retired Singaporean men?’ He examined this by studying data from the Ministry of Community Development, Youth and Sports’ Social Isolation, Health, and Lifestyle Survey (2009), using both subjective (self-reported) and objective health measures as independent variables, and the intention to re-enter and retirement as dependent variables. Probit models were employed with sample selection estimated, and various control variables, such as age, education, marital status, perceived income inadequacy, transfers from children, employed.

http://www.ess.org.sg/PhotoGallery/41/4/PICT0006.jpg Asst Prof Young Kyung Do

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http://www.ess.org.sg/PhotoGallery/41/4/PICT0007.jpg Question and Answer was moderated by Assoc Prof Tilak Abeysinghe from Dept of Economics, National University of Singapore
He found that poorer health was associated with a lower intention to re-enter the labor force, perceived income inadequacy was associated with greater likelihood of re-entry, and, somewhat unexpectedly, variables that predicted retirement (such as education) were not always predictive of intention to re-enter. In terms of policy implications, he said that health status may matter substantially in older workers’ labor force participation decisions, and hence that special consideration should be given to poor older adults who are in poorer health. He also suggested that investment in public health can have positive long-term economic effects. As he pointed out, there is considerable scope for further research in this important area, from multidisciplinary angles.

The final speaker was Professor Chow Hwee Kwan of the School of Economics, Singapore Management University, who provided a revealing econometric analysis of the topic, ‘Is East Asia a Yuan Bloc?’. With China’s growing economic prominence, it was of interest to examine whether movements in the regional currencies have become strongly influenced by renminbi fluctuations. The US dollar is still the ‘pre-eminent international currency’, but its role is likely to, or may have, weakened on account of persistent payments deficits and huge foreign debt. Accordingly, she extended a 1994 study by Jeffrey Frankel and Wei Shang-Jin, who developed a method for uncovering the implicit weights assigned to major international currencies in individual countries’ currency baskets. Applying this method in the pre-Asian crisis period, Frankel and Wei had found that the East Asian region could be characterized as a “dollar bloc” instead of a “yen bloc”, as the weight for US dollar was way above that for the yen. Subsequent studies have found that the yuan is playing a significant role in regional currency movements, but the issue warrants further analysis with updated data sets and methodology.

http://www.ess.org.sg/PhotoGallery/41/4/PICT0014.jpg Professor Chow Hwee Kwan

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http://www.ess.org.sg/PhotoGallery/41/4/PICT0016.jpg Question and Answer was moderated by Prof Low Chan Kee from Nanyang Technological University
In her study, Prof Chow implemented ‘Frankel-Wei-GARCH’ models with weekly exchange rate data, including data from the onset of the global financial crisis (the latter period witnessed higher exchange rate volatility, hence necessitating a GARCH treatment), and found that all seven East Asian currencies she studied (Indonesian Rupiah, Korean Won, Malaysian Ringgit, Phillipine Peso, Singapore Dollar, Thai Baht, New Taiwan Dollar) continue to be significantly influenced by US dollar movements. In addition, the renminbi (when not closely aligned to the US dollar) has a significant effect on 3 currencies (the Won, Ringgit and Peso), and in fact its effect on the Won exceeded that of the US dollar, probably on account of the strong trade links between South Korea and China. She concluded that East Asia is not a yuan bloc currently, but efforts made by the Chinese government to internationalize the renminbi, and growing trade links, could help it gain regional anchor currency status.

Good feedback from the audience was received after the Forum, with one participant, for example, saying ‘ The Singapore Economic Policy Forum 2011 was a resounding success today. The topics covered were very interesting and thought-provoking’, and another commenting ‘Very high and “incisive” in context and issues, insightful as well’. It was reported the following day in the Straits Times Business Times , and Lianhe Zaobao . SCAPE and the ESS would like to thank the speakers and all others who helped to make the Forum a success.