Economy of Singapore

Economy of Singapore
Notes of the Singapore dollar
Currency	Singapore dollar (SGD)
Fiscal year	1 April - 31 March
Trade organisations	WTO, APEC
Statistics
GDP	$235.7 billion (2009 est.)
GDP growth	17.9% (first half of 2010 est.)[1]
GDP per capita	$50,300 (2009 est.)
GDP by sector	agriculture: 0%; industry: 26.8%; services: 73.2% (2009 est.)
Inflation (CPI)	0.2% (2009 est.)
Population below poverty line	N/A
Gini index	48.1 (2008)
Labour force	3.03 million (2009 est.)
Labour force by occupation	manufacturing 18%, construction 6%, transportation and communication 11%, financial, business, and other services 39%, other 26% (2003)
Unemployment	3% (2009 est.)
Main industries	electronics, chemicals, financial services, oil drilling equipment, petroleum refining, rubber processing and rubber products, processed food and beverages, ship repair, offshore platform construction, life sciences, entrepot trade
Ease of Doing Business Rank	1st[2]
External
Exports	$268.9 billion (2009 est.)
Export goods	machinery and equipment (including electronics), consumer goods, pharmaceuticals and other chemicals, mineral fuels
Main export partners	Hong Kong 11.6%, Malaysia 11.5%, United States 11.2%, Indonesia 9.7%, China 9.7%, Japan 4.6% (2009 est.)
Imports	$245 billion (2009 est.)
Import goods	machinery and equipment, mineral fuels, chemicals, foodstuffs, consumer goods
Main import partners	United States 14.7%, Malaysia 11.6%, China 10.5%, Japan 7.6%, Indonesia 5.8%, South Korea 5.7% (2009 est.)
FDI stock	$264.1 billion (31 December 2009 est.)
Gross external debt	$19.2 billion (31 December 2009 est.)
Public finances
Public debt	117.6% of GDP (2009 est.)
Revenues	$21.29 billion (2009 est.)
Expenses	$24.14 billion (2009 est.)
Economic aid	none
Foreign reserves	$187.8 billion (31 December 2009 est.)
Main data source: CIA World Fact Book All values, unless otherwise stated, are in US dollars

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The economy of Singapore is a developed country and highly developed state capitalist market 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.^[3] 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^[4] 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.^[5] 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%. Singapore's unemployment rate is around 2.2% as on 20th Feb, 2009.^[6]

Macro-economic trend

This is a chart of trend of gross domestic product of Singapore at market prices estimated by the International Monetary Fund.

2009 1.50 SINGAPORE DOLLARS

2010 1.39-1.41 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.^[7] 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.^[8] 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. Singapore corporate tax is 18[1]%.

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.^{[9] [10]}

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:

International rankings

References

See also

• Four Asian Tigers
• 5 C's of Singapore
• Biopolis
• Dual economy
• Immigrant workers in Singapore

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