Singapore is poised to benefit significantly from the spate of free trade agreements Southeast Asia is pursuing with the region's major economies, say officials and analysts.
As weak domestic demand and external uncertainties threaten to derail its rebound from last year's recession, free trade agreements (FTAs) offer the prospect of a wider network of markets and investment opportunities for the tiny city-state whose fortunes are heavily dependent on external trade.
"The implication for us is now we have something to look forward to," Prime Minister Goh Chok-tong told reporters at the recent ASEAN summit in Cambodia.
"With the FTAs now on track, we can look forward to a better future in 10 years' time, because the space for Singapore to work with has increased tremendously.
"The message for Singaporeans is that the future is bright for Singapore," he said.
At last week's summit in Cambodia summit, the 10-member ASEAN, which includes Singapore, signed a landmark pact with China to form the world'a largest free market within 10 years, embracing 1.7 billion people and trade worth US$1.2 trillion.
ASEAN also sealed an agreement with Japanese Prime Minister Junichiro Koizumi to work on a framework to develop a free-trade area whose combined economy is worth at least US$4.9 trillion.
The regional grouping then agreed to undertake "concrete cooperation" with India for a free-trade area linking the world's second most populous nation with Southeast Asia.
ASEAN leaders and their counterparts from China, Japan and South Korea also endorsed a report from a think-tank to consider a free-trade zone covering the 13 East Asian countries.
Aware of its reliance on external demand, Singapore has actively pursued bilateral FTAs with its major trading partners well before the tranche of ASEAN agreements.
"The primary driver has been the slow pace of regional agreements and that has driven Singapore to seek ways that would help increase the pace of connectivity of moving more goods," said Song Seng-wun, regional economist at GK Goh brokerage.
"It's probably the lack of progress in the region that has driven them to seek FTAs for the republic ... to create economic activity," he said.
External demand accounts for more than 70 percent of Singapore's economic activity or simply put, the value of the island's exports is about 1.45 times its GDP.
"The point really is that Singapore is a very open economy ... dependent on global trade and services to steer itself forward," said Nizam Idris, a regional economist at research house IDEAglobal.
"In that sense, FTAs are always very useful for Singapore ... because [of] the nature of Singapore's economy, we do not depend on domestic demand," he said.
"That's why FTAs are important. It opens up the market to external demand."
Singapore inked its first FTA with New Zealand which came into effect last year. Since then, the city-state has sewn up similar accords with Japan and most recently with Australia. FTA talks with Canada and Mexico are ongoing.
But the biggest prize would be to seal a deal with the US, the world's largest economy and biggest buyer of Singapore-made goods, economists said.
Key issues including financial and legal services are understood to be blocking the conclusion of the deal but the two sides say the talks are nearing conclusion.
If concluded, the pact will boost Singapore's reputation as a gateway for multinational companies to enter into the lucrative regional economies.
"One of the big things it will do is put Singapore in the limelight in the US as a platform to Southeast Asia," said Nicholas de Boursac, executive director of the American Chamber of Commerce in Singapore.
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