Singapore - Overview of economy

Manufacturing and services are the 2 main features of the modern Singaporean economy, but the economy's main economic engine is its seaport, one of the world's busiest. Singapore also has one of the largest commercial shipping registers in the world.

In 1819, when the British East India Company leased this territory from the Sultan of Johore to establish a trade and communication post, it was a small settlement in a swampy area. However, the British administration quickly cleared jungles, reclaimed marshes, and established a merchant seaport. This port expanded into a major regional trading post due to its strategic and convenient location along the main sea route connecting the Far East to British India and to Europe. The rise of Singapore as a communication hub would prove a foundation for its future prosperity.

As a free port and a major British naval base in East Asia, Singapore enjoyed a special status within the British protectorate for a long time. In 1959, Singapore achieved full self-governance, and in 1963, it joined the Federation of Malaysia. However, sharp political disagreements arose with the federal government, and in 1965, Singapore left the Federation and became an independent state. Having a small territory and no natural resources, the government staked everything on the transformation of the country's economic base from a trade mediator and regional transport hub to a manufacturing center, specializing in capital-intensive industries, high technologies, and financial services. Singapore's government promoted a free-market economy and export oriented industrialization (EOI), combined with a measure of state intervention, subsidized credits to selected industries, and high public investment in applied research and certain export targets. Export to the international market promoted efficient use of resources and generated hard currency , which was necessary for catching up with further development of technologies and industrial innovation. This policy brought unprecedented economic expansion, with an annual average growth rate of 6.4 percent from the 1960s through the 1980s. This development transformed Singapore into one of the "economic tigers" of Asia.

There are different interpretations about the causes of this high performance. A World Bank report argued that this success was because of a mix of private investors and available human resources. Others argue that state initiatives and government economic policies were important. In Singapore's transformation, the Economic Development Board, which is the government agency responsible for the formulation and implementation of economic and industrial development strategies established in 1961, played a crucial role.

The country's major export products are electronic goods, machinery, and equipment produced by major multinational corporations . Tourism is important. In 1996, Singapore hosted 4,795 international and regional conventions and received more than 7 million tourists, providing revenues of about 9 percent of gross domestic product (GDP). Finance and business services are other important sectors of the economy, accounting for almost 30 percent of GDP in 1996. Transport and communications contributed an estimated 10 percent of GDP in 1996.

The Singapore government is persistent in the promotion of initiatives to keep the country competitive in the international arena. One of these initiatives is IT2000, which depends on a vision of Singapore as an "Intellectual Island" where information technologies penetrate all aspects of life. Another initiative is Jurong Town Corporation, which offers ready-built factories and manages 33 industrial parks housing 7,000 companies. The government supported the selected sectors in manufacturing and other industries through different means. It owns the Government-Linked Companies (GLCs) that operate as commercial entities. Singapore has the second highest number of state-controlled firms (45 percent) in the world, higher than Korea or Japan.

One of the important features of the Singaporean economy is that the financial sector has been guided by conservative fiscal policies . In 1998, in response to the 1997 Asian financial crisis, the Singapore government announced financial reforms to improve the country's international competitiveness, which included further liberalization of the financial sector and tax initiatives.

High economic performance and development kept unemployment at a low level during the last decades of the 20th century in all sectors of the economy including manufacturing, tourism, and finance. In 1999 unemployment was just 3.2 percent (by comparison, unemployment in the United States was 4.2 percent in the same year). Because of the speed of its economic expansion, Singapore began to experience shortages of skilled labor in the late 1990s and early 2000s.

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Yap Wen Sze
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Jul 31, 2012 @ 5:05 am
So what are the benefits of Singapore being a transport and communications hub besides the fact that our economy has grown?

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