Economic History of Singapore

• Ahm97sic

  30 Oct 08, 13:50

  Economic History

  *   1960 - 1964

  *   1965 - 1978

  *   1986 - 1997

  *   1998 onwards

  1960 - 1964
  
  

  Challenges Small country with no natural resources. Small population of 1.6 million in 1960, but growing rapidly. Highly dependent on entrepot trade and the provision of services to British military bases here. Small manufacturing base. Little industrial know-how and domestic capital. Developmental Strategies Industrialised through an import substitution strategy, to solve the unemployment problem and diversify away from dependence on entrepot trade. Established various economic agencies to spearhead our economic development. Economic Development Board (EDB) was established in 1961, while Singapore Tourism Promotion Board (STPB) was formed in 1964. Development of Jurong Industrial Estate also began in 1961. Achievements GDP growth averaged 5.1 % p.a. during this period. Manufacturing sector's share of GDP grew from 11 % in 1960 to 14 % in 1964.

  1965 - 1978
  
  

  Challenges Separation from Malaysia caused the import-substitution strategy to be aborted. Confrontation with Indonesia threatened our traditional role as a major trading post for the region. Planned withdrawal of British bases, which employed around 40,000 workers, within 5 years. High unemployment rate, estimated at about 10 %. Developmental Strategies Industrialised through an export-oriented strategy, by attracting foreign investors to Singapore to develop the manufacturing and financial sectors. Improved labour climate and investment environment by enacting the Employment Act to lay down standards of employment to help resolve industrial disputes. In addition, the National Trades Union Congress (NTUC) and National Wage Council (NWC) also helped to promote better labour-management relations. Invested in key infrastructure, including the establishment of the Jurong Town Corporation. Nationalised companies in areas where the private sector lacked capital or expertise, like Singapore Airlines, Neptune Orient Lines, Development Bank of Singapore and Sembawang Shipyard.  Achievements Growth averaged 10 % p.a. during this period. Unemployment rate fell to 3.6 % in 1978. Manufacturing sector's share of GDP grew from 14 % in 1965 to 24 % by 1978.

  1979 - 1985
  
  

  Challenges Tight labour market, with upward pressures on wages. Emergence of other lower cost developing countries in the region, which had become strong contenders for MNC investments. Need to restructure the economy towards higher value added activities. Developmental Strategies A three-year wage correction policy to reflect the tight labour market and induce efficient use of labour. Renewed emphasis on manpower development through education and training. Encouraged automation, mechanisation and computerisation. Shifted towards higher value-add and skills intensive investment promotion policy. Achievements Economic growth averaged 7.3 % p.a. during this period. Nominal value-added per manufacturing worker grew from $18,400 in 1979 to $27,000 in 1985. Skilled employed as a share of total employment doubled from 11 % in 1979 to 22 % in 1985.

  1986 - 1997
  
  

  Challenges A more mature economy with slower growth. Resource constraints more binding and faster rising costs. More intense competition, from both developed and developing countries. Relatively low technology base on a global basis. Developmental Strategies Deepen Technology Base The Government took the lead in catalysing the development of technology. We committed $2 billion from 1991 to 1995 under the National Technology Plan and another $4 billion under the National Science and Technology Plan from 1996 to 2000. Cluster Development Industrial strategy was refined to leverage on synergies at the firm and industry levels. Mutually supporting industries were identified and developed to entrench entire clusters niche areas, e.g. electronics, petrochemical and engineering. By competing on the basis of clusters, we could formulate cluster development plans with emphasis on core capabilities that were common to industries within the cluster. Promoting Manufacturing and Services as Twin Pillars of the Economy To diversify our sectoral and market dependency, reduce vulnerability, and promote a broader base for the economy, services were promoted together with manufacturing as twin pillars of the economy. For this purpose, many incentives offered for manufacturing investments, e.g. pioneer status, investment allowances, were also extended to investments in service sectors. Regionalisation The Government encouraged leveraging on the potential of the Asian markets in order to overcome local resource/market constraints and complement our established links to the OECD countries. Achievements GDP growth averaged 8.6 % p.a. during this period. Share of financial and business services sectors in total GDP grew from 21 % in 1986 to 26 % in 1997. The number of research scientists and engineers grew from 3,361 in 1987 to reach 11,302 in 1997. Stock of direct investments abroad increased from $16.9 billion in 1990 to reach $75.8 billion in 1997.

  1998 onwards
  
  

  Challenges The Singapore economy was hit by the regional crisis that started with the devaluation of the Thai Baht in July 1997. Although our financial and economic fundamentals were sound, the rapidly deteriorating external environment adversely affected Singapore due to our close linkages with the regional economies. The Singapore economy contracted 1.4 % in 1998, after achieving 8.3 % growth in 1997. After picking up in 1999-2000, Singapore was hit by another recession in 2001. The synchronised downturns in the major developed economies as well as the global electronics industry led to a sharp deceleration in global growth. The terrorist attacks in the US on 11 September further aggravated the slowdown. As a result, the Singapore economy fell by 2.4 %, down from 10 % growth in 2000. The rise of large new players like China and India brings both challenges and opportunities. Developmental Strategies Singapore aims to become a globalised, entrepreneurial and diversified economy, with economic growth of 4-6 % p.a. over the medium term. The key strategies are : Expanding external ties - embracing globalisation through the multilateral trading framework of the WTO, regional co-operation as well as bilateral Free Trade Agreements. Maintaining competitiveness and flexibility - keeping the burden of taxes and the Central Provident Fund on the economy as low as possible, reviewing the labour market and wage system to make them more flexible, and pricing factors of production competitively. Promoting entrepreneurship and domestic companies - encouraging people to be innovative and improving the ability of firms to develop new ideas and businesses, tap new export markets and broaden the economic base. Growing manufacturing and services - upgrading these sectors by improving cost competitiveness, equipping the labour force with relevant skills, and developing new capabilities and industries. Developing human capital - investing in education, helping workers train and upgrade, and welcoming global talent to augment the indigenous talent pool.