The '
Economy of
Singapore' is a highly developed and successful
free market economy in which the state plays a minimal role. 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.
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
Hong Kong and
Shanghai. 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
importing 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%.
[1]
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 |
|---|
| 1980 | 25,117 | 2.14 Singapore Dollars |
| 1985 | 39,036 | 2.20 Singapore Dollars |
| 1990 | 66,778 | 1.81 Singapore Dollars |
| 1995 | 119,470 | 1.41 Singapore Dollars |
| 2000 | 159,840 | 1.72 Singapore Dollars |
| 2005 | 194,360 | 1.64 Singapore Dollars |
| 2007 | 224,412 | 1.51 Singapore Dollars |
For purchasing power parity comparisons, the US Dollar is exchanged at 1.56 Singapore Dollars only.
The government promotes high levels of savings and investment through a mandatory savings scheme known as the
Central Provident Fund, and large portions of its
budget are expended extensively in education and technology, with the former having a current rate as of 2005 21%, compared to the current budget as of 2005 in the
United States of 4%. 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.
Singapore's strategic location on major sea lanes and industrious population have given the country an economic importance in Southeast Asia disproportionate to its small size. Upon independence 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.
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 pursued cost-cutting measures, including wage and rent reductions, to lower the cost of doing business in Singapore.
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
paediatric vaccines, its first such facility in Asia.
[2]. Pharmaceuticals now account for more than 16% of the country's manufacturing production.
Trade, investment, and aid
Singapore's total trade in 2000 amounted to S$373
billion, an increase of 21% from 1999. Despite its small size, Singapore is the tenth-largest trading partner of the United States. In 2000, Singapore's imports totalled $135 billion, and exports totalled $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, 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, textile yarns/fabrics.
Singapore continues to attract investment funds on a large-scale despite its 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 President and Secretary of State have been discussing opening bilateral trade.
| Year | Total trade | Imports | Exports | % Change |
|---|
| 2000 | $373 | $135 | $138 | 21% |
| 2001 | | | | -9.4% |
| 2002 | $432 | | | 1.5% |
| 2003 | $474 | | | 9.6% |
| 2004 | $580 | | | 22.4% |
| 2005 | $716 | | | 14% |
All figures in billions of Singapore dollars.
International trade agreements
Labor
In 2000, Singapore had a work force of about 2.2 million. The
National Trades Union Congress (NTUC), the sole trade union federation, comprises almost 99% of total organized labour. Extensive legislation covers general labour and trade union matters. 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.
[3]
[4]
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.
Facts & figures
'Percentage of economic growth in Year 2006:'
7.9%
'Industrial production growth rate:'
9.5% (2005 est.)
'Electricity - production:'
36.8 billion kWh (2004)
'Electricity - production by source:'
''fossil fuel:''
100%
''hydro:''
0%
''nuclear:''
0%
''other:''
0% (1998)
'Electricity - consumption:'
33.2 billion kWh (2004)
'Electricity - exports:'
0 kWh (2004)
'Electricity - imports:'
0 kWh (2004)
'Agriculture - products:'
rubber,
copra, fruit, vegetables; poultry, eggs, fish,
orchids, ornamental fish
'Currency:'
1 Singapore dollar (S$ or
SGD) = 100 cents
'Exchange rates:'
Singapore dollars (S$ or
SGD) per US$1 - 1.6622 (
20 December 1995), 1.4100 (1996), 1.4848 (1997), 1.6736 (1998), 1.6950 (1999), 1.6733 (January 2000), 1.6255 (January 2006), 1.59 (October 2006), 1.5153 (May 2007)
References
1. Singapore's economy grows by 7.7% in 2006 By Dominique Loh.
2. Reuters newsfeed
3. "Latest Data (1 February 2006) - ''Singapore Department of Statistics''. URL accessed on 2 February 2006.
4. Singapore's employment hits all-time high of 2.3 m in 2005 By May Wong.
See also
★
Four Asian Tigers
★
5 C's of Singapore
★
Biopolis
★
Dual economy
★
Immigrant workers in Singapore
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