Lion City blaming Y2K for slowing export pace

STORY: SINGAPORE'S non-oil domestic exports rose by a less-than-expected 7.6 per cent last month, year-on-year.

The January figure compared with a 25-per-cent, year-on-year increase in December.

Total non-oil exports in January were S$7.66 billion (HK$35.18 billion), compared with S$9.67 billion in December, the Trade Development Board said.

Economists blamed the lower figure on a drop-off in orders for electronic products due to a trouble-free transition into the new millennium.

Spending on computer-related products - a major export for Singapore - was higher a year ago as companies and individual upgraded their systems as a defence against the dreaded Y2K bug.

Tan Tzu Ping, economist at J P Morgan, said while the low export figure is likely to be a one-time event, it nevertheless underscores the fragility of the economic recovery.

It was the first drop since August, as worries over the year-end Y2K computer bug curbed orders of computers and disk drives.

The island's non-oil domestic exports fell a worse-than-expected 20.6 per cent month-on-month to S$7.7 billion in January, the board said.

From a year earlier, non-oil domestic exports increased 7.6 per cent.

``Overall, the headline non-oil domestic exports numbers were a tad disappointing,'' said Song Seng Wun, an economist at G K Goh Research. Still, the January number was probably a one-off, ``so do not panic'' he said.

The disappointing trade numbers kick off a week of key economic figures which analysts tip to show growth is spreading beyond electronics and chemicals to other industries. On Thursday, the government will release figures on gross domestic product, with fourth-quarter GDP expected to show 7.9 per cent on-year growth, quickening from the 6.7 per cent expansion in the previous three months.

The benchmark Straits Times Index fell about 1.5 percentage points after the government released the numbers at noon. The index recently traded at 2,123 points, down 2.5 per cent for the day. The Singapore dollar was down as much as 0.2 of a per cent on the day to trade recently at 1.7096 to the US dollar.

January's new year festivities and a holiday for the end of the Muslim fasting month also disrupted trade, contributing in part to the drop in shipments. Exports posted record levels in the months of October to December.

Electronics, which account for about two-thirds of total overseas shipments, increased 2.3 per cent from a year earlier.

Disk drives exports, which account for about a quarter of Singapore's electronics exports, dropped 23.2 per cent on year to S$1 billion in January. That's more than their 17 per cent drop in December and November.

Such shipments have slumped in the past few months following a decision by some disk drive makers such as Western Digital Corp to shift operations to Malaysia to cut costs.

Disk drives account for about a quarter of the tally.

Shipments of PCs also dropped 22.5 per cent to S$241 million. Semiconductor shipments, though, jumped 55 per cent on year to S$1.3 billion.

Some analysts blamed the fall in exports of some electronics products to the computer bug associated with the year 2000. The Y2K bug was expected to result in some computers reading the date change as 1900, disrupting operations.

``It is the impact of the Y2K, which was the biggest event in the computer history - everyone who needed to upgrade their PCs would have done it before'' January 1, said Adrian Foster, an economist with Nomura Singapore.

Chemicals exports, which generated 22.3 per cent of the country's total manufacturing output in 1999, rose 5 per cent on year to S$770 million.

Exports to Singapore's biggest market, the United States, dropped 5 per cent on year to S$1.95 billion.

Exports also fell 17 per cent to the European Union, Singapore's second- biggest market, to S$1.42 billion.

Singapore's share of the US high-end electronics imports, excluding consumer electronics goods, has been falling for months, in part because the island's relatively strong currency has made exports more expensive.

Exports to the rest of region increased for the most part, reflecting the economic recovery across Asia.

Shipments to Malaysia, the third- biggest market, rose 31 per cent to S$990 million, while shipments to Japan rose 36 per cent to S$657 million.

Exports to Taiwan rose 57.5 per cent on year to S$441 million, while those to South Korea gained 55.7 per cent to S$285 million. January's non-oil imports - one indication of future demand for more exports - rose 13.3 per cent to S$13.8 billion. - Agencies

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-- Martin Thompson (mthom1927@aol.com), February 22, 2000