Singapore

1
Singapores Economic Development

• Reasons for Industrial Development (post-war
  years)

2
Singapore (1960-64)

• Developmental Strategies
• Import substitution strategy
• To solve unemployment
• Diversify away from dependence of entrepot trade
• Establish economic agencies to spearhead
  development
• EDB 1961 (search for a global market)
• Jurong Industrial Estate - 1961

replacement of agricultural or industrial imports
to encourage local production for local
consumption, rather than producing for export
markets ? meant to generate employment and make
the country self-reliant in critical areas such
as food, defense, and advanced technology.
3
Singapore (1960-64)

• Achievements
• GDP growth averaged 5.3 p.a. between 1960-64
• Manufacturing sectors share of GDP grew from 12
  in 1960 to 14 in 1964
• Ministry of Trade and Industry
• http//www.mti.gov.sg/public/MTI/frm_MTI_Default.a
  sp?sid8

4
Singapore (1965-79)

• Challenges
• Separation from Malaysia
• Aborted import-substitution strategy
• Confrontasi threatened our role as a major
  trading post for the region
• Planned withdrawal of British bases within 5
  years (employed 40,000 workers)

5
Singapore (1965-79)

• Developmental Strategies
• Export-oriented strategy
• Attract foreign investors to Singapore to develop
  the manufacturing and financial sectors
• Enacting the Employment Act to improve labour
  climate investment environment
• NTUC NWC 1972
• Promote better labour-management relations
• Investment in key infrastructure JTC
• Nationalised companies where private sector
  lacked expertise (NOL, SIA, DBS, Sembawang
  Shipyard)

6
Singapore (1965-79)

• Achievements
• Growth averaged 10 p.a. over 1965-79
• Unemployment rate fell to 3.3 in 1979
• Manufacturing sectors share of GDP grew from 15
  in 1965 to 27 by 1979

7
Singapore (1979-85)

• Challenges
• Tight labour market, upward pressures on wages
• Emergence of other lower cost developing
  countries in the region contenders for MNC
  investments
• Need to restructure the economy towards higher
  value added activities

8
Economic IndustrialRestructuring Restructurin
g

• Changes to economic and service sectors
• Transport
• Automation of SBS buses in 1970s
• Hotel
• Food and beverages
• Retail

• Focuses on changes in the industries

9
Singapore (1979-85)

• Developmental Strategies
• Industrial Restructuring
• encouraged automation, mechanisation and
  computerisation
• higher value-add
• skills intensive
• investment promotion policy
• Renewed emphasis on manpower development through
  education and training
• 3-year wage correction policy to reflect the
  tight labour market and induce efficient use of
  labour

10
Reasons for Industrial Restructuring

• Increasing competition from rapidly
  industrialising countries with labour-surplus
• Compete with Indonesia Thailand
• What is our comparative advantage?
• Protectionism in developed countries
• Generalised System of Preferences for developing
  countries
• Unsatisfactory productivity growth rate per
  worker
• Lower than Korea, HK or Taiwan
• High reliance on foreign labour
• Limited land area does not allow for inflow of
  foreign workers
• Raising productivity through wage increase
• NWC ? wage increase to force hesitant employers
  to mechanise and rationalise the use of labour

11
Other Factors?

• Besides industrial restructuring
• Role of Government
• Centralised political organisation
• Foresight forward planning
• Political stability
• Physical size
• Effective communication
• Support facilities easily integrated

12
Singapore (1979-85)

• Achievements
• Economic growth averaged 6.8 p.a. over 1979-85
• Nominal value-added per manufacturing worker grew
  by 6.9 p.a. during this period
• Proportion of skilled labour rose from 11 to 22
  of total labour force

13
Singapore (1986-98)

• Challenges
• A more matured economy with slower growth rate
• Resource constraints more binding and faster
  rising costs
• More intense competition both developed and
  developing countries http//www.worldbank.org/data
  /wdi2002/tables/table1-6.pdf
• Relatively low technology base on a global basis

14
Singapore (1986-98)

• Developmental Strategies
• Knowledge-intensive Industries (KBE)
• Deepen technology base committed 2 billion
  from 1991-95 under National Technology Plan and
  4 billion under National Science and Technology
  Plan from 1996-2000
• Cluster Development leverage on synergies at
  the firm and industry levels mutually
  supporting industries were identified and
  developed to entrench entire clusters niche
  areas (electronic, petrochemical
  http//www.jurongisland.com)

15
Singapore (1986-98)

• Developmental Strategies
• Promoting manufacturing and services as Twin
  Pillars of the economy to diversify sectoral
  and market dependency, reduce vulnerability,
  promote broader based economy (pioneer status,
  investment allowances were extended to
  investments in service sectors)
• Regionalisation encouraged leveraging on the
  potential of the Asian markets to overcome local
  resource / market constraints

16
Singapore (1986-98)

• Achievements
• GDP growth averaged 8.4 p.a.
• Share of financial and business services sectors
  in total GDP grew from 20 to 26
• Between 1987-98, the number of research
  scientists and engineers grew by 13 to reach
  12,655
• Value of high-tech domestic exports expanded from
  24 billion in 1990 to 62 billion in 1998
• Stock of direct overseas investments increased by
  19 p.a. from 1990 to 1998

17
Singapore (1998 onwards)

• Challenges
• July 1997 Devaluation of Thai baht regional
  crisis
• After picking up in 1999-2000, hit by another
  recession 2001.
• September 11
• Outbreak of SARS

18
Singapore (1998 onwards)

• Our Response a series of cost cutting measures
• June 1998 - 2 billion off-budget package
• Nov 1998 10.5 billion
• 2001 another 2 off-budget packages to help
  businesses and workers to tide over the sharp
  downturn
• July - 2.2 b
• 11.3 b

19
Singapore (1998 onwards)

• Looking beyond the crisis
• Singapore to upgrade, transform and revitalise
  the economy
• Economic Review Committee (Dec 2001) to review
  and formulate a blueprint to restructure the
  economy
• Government policies
• Entrepreneurship innovation
• Internationalisation of Singapore companies
• Raise productivity
• Preparing workers to adapt to changes

20
Knowledge-based Economy

• Talent and Education
• Innovation and Entrepreneurship
• Re-inventing businesses and industries in the
  face of global competition
• Life-long learning
• Upgrading to higher end manufacturing operations
  and innovative services
• A conducive fiscal, regulatory framework to
  encourage innovation and competition

21
Contributions by Foreign Companies

• Provide jobs for Singaporeans
• By setting up labour-intensive industries
• Establish markets which Singapore lacks
• Not inhibited by Singapores small market
• Export to their home market established markets
• Skills and technology which Singapore needs
• New generation of Singaporeans acquire
  technological and managerial skills required to
  operate maintain sophisticated process
• Capital
• investment

22
Recap - Account for the following

• Singapores economy has grown at a growth rate
  of 8.5 from 1960-95, except for the years
  1964,1975, 1985 86, when the economy grew at
  more than 5 annually.
• From the Statistical Singapore Newsletter, Vol
  18, No. 4 April 1996

23
What are the more important factors ensuring
economic development?

• List the various factors under each category
• Political
• Social
• Economic
• Internal
• External