Question 1
Refer to the website of Singapore Department of Statistics, external trade section at http://www.singstat.gov.sg/statistics/browse-by-theme/trade
Search for the report on the products that Singapore export to and import from other countries over the period 2011 to in 2014 and analyse the report. Based on your understanding of the Singapore economy and international trade theories, answer the following questions
(a) Explain comparative advantage and determine the products for which Singapore has comparative advantage and comparative disadvantage from the relevant statistical tables in 2014.
(b) Discuss and analyse the relevance of Heckscher-Ohlin theory in explaining the trade pattern between Singapore and the rest of the world in 2014.
(c) What do you understand by re-export in Singapore? What contributes to Singapore's role as a re-export market? Explain.
Question 2
The ASEAN Free Trade Area (AFTA) comprises 10 countries, Singapore, Malaysia, Thailand, Indonesia, Philippines, Brunei, Vietnam, Laos, Cambodia and Myanmar. With the free trade area formed, the member can impose different tariff rates to products originated from outside ASEAN. But for goods originated within ASEAN, the members have to apply a common effective preferential tariff of between 0 to 5% on all products except for some general exceptions.
(a) Explain and analyse the possible benefits of the formation of ASEAN Free Trade Area.
(b) Explain and analyse the possible negative effects of the formation of ASEAN Free Trade Area.
Question 3
Refer to the website of Singapore Department of Statistics, balance of payments at http://www.singstat.gov.sg/statistics/browse-by-theme/international-accounts
Search for the report on the balance of payments of Singapore in 2014. Go through the report and answer the following questions.
(a) Discuss the current account balance, capital account balance and the overall balance of the Singapore's balance of payments in 2014.
(b) Explain the health of the Singapore economy based on your analysis of its balance of payments.
Question 4
Singapore dollar (S$) has been appreciating against Malaysian Ringgit (MR) in 2015, from the exchange rate of S$1 to about MR2.5 in January 2015 to the exchange rate of S$1 to more than MR3 in August 2015. Two incidents have contributed to the weakening of Malaysia Ringgit. One is the steep drop in the oil price and Malaysia is a large oil exporting country. The second incident is the increasing pessimism in the economic prospects of the Malaysia economy, leading to investors pulling out their funds from shares, properties and other financial instruments to invest elsewhere.
(a) Consider the foreign exchange market between Singapore dollar and Malaysia Ringgit. Define exchange rate as number of Malaysian Ringgit to one Singapore dollar. Use suitable foreign exchange market diagrams to discuss the equilibrium in the market and analyse the changes in the foreign exchange market between Singapore dollar and Malaysian Ringgit.
(b) What do you think will happen to the current account, financial account and the overall balance of payments of Malaysia? If Malaysia were to operate under a fixed exchange rate system (with US dollars), discuss how the system operates and explain how a fixed exchange rate will affect its foreign reserves.