The
economy of Singapore
is a highly developed state capitalist mixed economy. While government
intervention in the market is kept at a minimum, the state controls
and owns firms that comprise at least 60% of the GDP through
government entities such as the
sovereign wealth fund Temasek. It has an open business
environment, relatively corruption-free and transparent, stable
prices, and one of the highest per capita
gross domestic products (GDP) in the
world. Its innovative yet steadfast form of economics that combines
economic planning with
free-market has given it the nickname the
Singapore Model.
Exports,
particularly in
electronics and
chemicals, and
services provide the main source of
revenue for the economy, which allows it to purchase
natural resources and
raw goods which it does not have. Singapore
could thus be said to rely on an extended concept of
entrepot trade, by purchasing raw goods and
refining them for re-export, such as in the
wafer fabrication industry and
oil refining. Singapore also has a strategic
port which makes it more competitive than many
of its neighbours to carry out such entrepot activities.
The
Port of
Singapore
is the
busiest in the world, surpassing Rotterdam and Hong Kong
. In addition, Singapore's port
infrastructure and
skilled workforce, which is due to the success of
the country's
education
policy in producing skilled workers, is also fundamental in
this aspect as they provide easier access to markets for both
import and exporting, and also
provide the skill(s) needed to
refine imports
into exports.
On 14 February 2007, the Singapore government announced that
economic growth for the whole year of 2006 was 7.9%, higher than
the originally expected 7.7%.Singapore's Unemployment rate is
around 2.2% as on 20th Feb, 2009.
Macro-economic trend
This is a chart of trend of gross domestic product of Singapore at
market prices
estimated by the International Monetary Fund.
| Year |
Gross Domestic Product
($ millions) |
US Dollar Exchange |
Per Capita Income
(as % of USA) |
| 1980 |
25,117 |
2.14 Singapore Dollars |
39.65 |
| 1985 |
39,036 |
2.20 Singapore Dollars |
36.63 |
| 1990 |
66,778 |
1.81 Singapore Dollars |
52.09 |
| 1995 |
119,470 |
1.41 Singapore Dollars |
86.14 |
| 2000 |
159,840 |
1.72 Singapore Dollars |
66.19 |
| 2005 |
194,360 |
1.64 Singapore Dollars |
67.54 |
| 2007 |
224,412 |
1.42 Singapore Dollars |
|
| 2008 |
235,632 |
1.37 Singapore Dollars |
|
The
government promotes high levels of savings and investment through a
mandatory retirement savings scheme known as the Central Provident Fund, and large
portions of its budget are expended in
education and technology, with the former having a current rate as
of 21% in 2001 compared to spending in the United States
of 4%. However, the figures may be
misleading as the majority of US education funding comes from the
state level, not federal. It also owns
Temasek-linked companies (TLCs,
companies that are linked to the government's
investment arm) - particularly in
manufacturing - that operate as
commercial entities and account for 60% of GDP. As
Singapore looks to a future increasingly marked by
globalization, the country is positioning
itself as the region's financial and high-tech centre in
competition with other East Asian cities.
Singapore's strategic location on major sea lanes and industrious
population have given the country an economic importance in
South-east Asia disproportionate to its small size. Upon separation
from Malaysia in 1965, Singapore was faced with a lack of physical
resources and a small domestic market. In response, the Singapore
Government adopted a pro-business, pro-
foreign investment, export-oriented
economic policy combined with state-directed investments in
strategic government-owned corporations. Whilst nominally socialist
in the 1960s, the ruling party increasingly became openly
capitalist but self-described itself as 'pragmatic', a euphemism
for capitalism with authoritarian social controls. Singapore's
government moved towards guiding the economy and investing in
medicine and infrastructure.
Singapore's economic strategy proved a success, producing real
growth that averaged 8.0% from 1960 to 1999. The economy picked up
in 1999 after the regional financial crisis, with a growth rate of
5.4%, followed by 9.9% for 2000.
However, the economic slowdown in the
United
States, Japan
and the
European Union, as well as the
worldwide electronics slump, had reduced the estimated economic
growth in 2001 to a negative 2.0%. The economy expanded by
2.2% the following year, and by 1.1% in 2003 when Singapore was
affected by the
SARS outbreak. Subsequently, a
major turnaround occurred in 2004 allowed it to make a significant
recovery of 8.3% growth in Singapore, although the actual growth
fell short of the target growth for the year more than half with
only 2.5%. In 2005, economic growth was 6.4% while there was 7.9%
growth in Year 2006.
Singapore's largely corruption-free government, skilled
workforce, and advanced and efficient infrastructure have attracted
investments from more than 3,000 multinational corporations (MNCs)
from the United
States, Japan, and
Europe. Foreign firms are found in
almost all sectors of the economy. MNCs account for more than
two-thirds of manufacturing output and direct export sales,
although certain services sectors remain dominated by
government-linked corporations.
Manufacturing and financial business services are the twin engines
of the Singapore economy and accounted for 26% and 22%,
respectively, of Singapore's gross domestic product in 2000. The
electronics industry leads Singapore's manufacturing sector,
accounting for 48% of Singapore's total industrial output, but the
government also is prioritising development of the chemicals and
biotechnology industries.
To maintain its competitive position despite rising wages, the
government seeks to promote higher value-added activities in the
manufacturing and services sectors. It also has opened, or is in
the process of opening, the financial services,
telecommunications, and power generation
and retailing sectors to foreign service providers and greater
competition. The government has also attempted some measures
including wage restraint measures and release of unused buildings
in an effort to control rising commercial rents with the view to
lowering the cost of doing business in Singapore when central
business district office rents tripled in 2006.
Biotechnology
Singapore is aggressively promoting and developing its
biotechnology industry. Hundred of millions of
dollars were invested into the sector to build up infrastructure,
fund research and development and to recruit top international
scientists to Singapore. Leading drug makers, such as
GlaxoSmithKline (GSK),
Pfizer and
Merck &
Co., have set up plants in Singapore. On 8 June 2006, GSK
announced that it is investing another S$300 million to build
another plant to produce
pediatric
vaccines, its first such facility in Asia.
Pharmaceuticals now account for more than 16% of the country's
manufacturing production.
High tech
Whilst praise has been given to efforts to promote the Singaporean
biotechnology sector, the traditional
tech
sector remains larger and could benefit from similar
public-private sector efforts to promote Singaporean high-tech
companies. Whilst the government will not consider a "Buy
Singaporean Tech" campaign, the spending power of the government
and government-linked companies alone could impact sales and
company value of Singaporean high-tech companies. Some believe more
tax holidays for high-tech hardware companies and government loans
for the more innovative ones will lead Singapore to surpass other
tech centres in East Asia, although competing with inventors and
product designers in Japan and South Korea may prove difficult due
to Singapore's small base.
This line of thinking suggests that the
nation needs skilled foreign tech talent and should make it easier
for those with the latest tech skills to come to Singapore from
China
and South Asia as well as from Japan, South Korea
and Western
countries.
Trade, investment and aid
Singaporean exports in 2006
Singapore's total trade in 2000 amounted to S$373
billion, an increase of 21% from 1999.
Despite its small size, Singapore is currently the
fifteenth-largest trading partner of the United States. In 2000,
Singapore's imports totaled $135 billion, and exports totaled $138
billion. Malaysia was Singapore's main import source, as well as
its largest export market, absorbing 18% of Singapore's exports,
with the United States close behind. Re-exports accounted for 43%
of Singapore's total sales to other countries in 2000. Singapore's
principal exports are petroleum products, food/beverages,
chemicals, textile/garments, electronic components,
telecommunication apparatus, and transport equipment. Singapore's
main imports are aircraft, crude oil and petroleum products,
electronic components, radio and television receivers/parts, motor
vehicles, chemicals, food/beverages, iron/steel, and textile
yarns/fabrics.
The Singapore Economic Development Board (EDB) continues to attract
investment funds on a large-scale for the country despite the
city's relatively high-cost operating environment. The U.S. leads
in foreign investment, accounting for 40% of new commitments to the
manufacturing sector in 2000. As of 1999, cumulative investment for
manufacturing and services by American companies in Singapore
reached approximately $20 billion (total assets). The bulk of U.S.
investment is in electronics manufacturing, oil refining and
storage, and the chemical industry. More than 1,500 U.S. firms
operate in Singapore.
The government also has encouraged firms to invest outside
Singapore, with the country's total direct investments abroad
reaching $39 billion by the end of 1998.
The People's
Republic of China was the top destination, accounting for 14% of
total overseas investments, followed by Malaysia
(10%),
Hong
Kong
(8.9%), Indonesia
(8.0%) and U.S. (4.0%). The rapidly growing
economy of India, especially the high technology sector, is
becoming an expanding source of foreign investment for Singapore.
The United States provides no
bilateral
aid to Singapore, but the U.S. appears keen to improve
bilateral trade and signed the U.S.-Singapore Free Trade
Agreement.
| Year |
Total trade |
Imports |
Exports |
% Change |
| 2000 |
$273 |
$135 |
$138 |
21% |
| 2001 |
|
|
|
-9.4% |
| 2002 |
$432 |
|
|
1.5% |
| 2003 |
$516 |
$237 |
$279 |
9.6% |
| 2004 |
$629 |
$293 |
$336 |
21.9% |
| 2005 |
$716 |
$333 |
$383 |
14% |
| 2006 |
$810 |
$379 |
$431 |
13.2% |
All figures in billions of Singapore dollars.
International trade agreements
Singapore workforce and dependence on foreign workers
In 2000, Singapore had a workforce of about 2.2 million. The
National Trades Union
Congress (NTUC), the sole
trade
union federation which has a symbiotic relationship with the
ruling party, comprises almost 99% of total organized labour.
Government policy and pro-activity rather than labour legislation
controls general labour and trade union matters. The Employment Act
offers little protection to white collar workers due to an income
threshold. The
Industrial
Arbitration Court handles labour-management disputes that
cannot be resolved informally through the Ministry of Labour. The
Singapore Government has stressed the importance of cooperation
between unions, management and government (
tripartism), as well as the early resolution of
disputes. There has been only one strike in the past 15
years.
Singapore has enjoyed virtually full employment for long periods of
time. Amid an economic slump, the unemployment rate rose to 4.0% by
the end of 2001, from 2.4% early in the year. Unemployment has
since declined and in 2005, the unemployment rate is 2.7% in 2006,
the lowest in the last four years, with 2.3 million people being
employed.
The Singapore Government and the NTUC have tried a range of
programs to increase lagging productivity and boost the labour
force participation rates of women and older workers. But labour
shortages persist in the service sector and in many low-skilled
positions in the construction and electronics industries. Foreign
workers help make up this shortfall. In 2000, there were about
600,000 foreign workers in Singapore, constituting 27% of the total
work force. As a result, wages are relatively suppressed or do not
rise for all workers. In order to have some controls, the
government imposes a foreign worker levy payable by employers for
low end workers like domestic help and construction workers.
Facts & figures
Percentage of economic growth in Year
2007:7.4%
Industrial production growth rate:6.8% (2007
est.)
Electricity - production:41.137.7 billion kWh
(2007)
Electricity - production by source:
fossil fuel:
100%
hydro:
0%
nuclear:
0%
other:
0% (1998)
Electricity - consumption:37.420.3 billion kWh
(2007)
Electricity - exports:0 kWh (2007)
Electricity - imports:0 kWh (2007)
Agriculture - products:rubber,
copra, fruit,
vegetables; poultry, eggs, fish,
orchids,
ornamental fish
Currency:1 Singapore dollar (S$ or
SGD) = 100 cents
Exchange rates:
| Year |
Singapore Dollars per US$1 |
| 1981 |
2.0530 |
| 1985 |
2.1213 |
| 1990 |
1.7275 |
| 1995 |
1.4148 |
| 2000 |
1.7361 |
| 2005 |
1.6738 |
| 2008 (April) |
1.3643 |
| 2009 (March) |
1.5123 |
References
- CountryRisk Maintaining Singapore's
Miracle
-
http://cje.oxfordjournals.org/cgi/content/abstract/19/6/735
- Singapore Banks on Its Port - International Herald
Tribune
- By Dominique Loh.
- Pharmaceutical-Technology.com
- FTD - Top Trading Partners
- " Latest Data (1 February 2006) - Singapore Department of
Statistics. URL accessed on 2 February 2009.
- By May Wong.
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