ECONOMICS IN SINGAPORE: STATISTICS, MACROECONOMICS AND GOVERNMENT POLICY

ECONOMICS IN SINGAPORE:

Even though it has only 5.5 million people Singapore is Southeast Asia’s forth largest economy and the wealthiest country in Asia after Japan in terms of gross national income per capita. Singapore has virtually no few natural resources. There isn’t even much water. The government relies on a skilled workforce and trade for growth. Singapore emerged from being a tropical backwater to one of Asia's wealthiest nations in little more than 30 years. Gross domestic product per capita climbed to $50,123 in 2011 from $516 in 1965. The per capita income in 2011 was or 48 times the level it was in 1960, according to government statistics. [Source: Eveline Danubrata, Reuters, February 17, 2013]

Singapore has a highly developed and successful free-trade economy. Maintaining a free and open multilateral trading system is essential for Singapore’s national well-being, and Singapore trades with any other state when it is to their mutual benefit. Singapore enjoys an open and corruption-free environment with stable prices and a high standard of living. The economy depends heavily on the export trade, particularly in consumer electronics, information technology products, pharmaceuticals, and on a growing financial services sector. Because of solid economic policies and practices, Singapore recovered more quickly from the 1997–98 economic crisis than other Southeast Asian nations. [Source: CIA World Factbook =]

Real GDP growth averaged 8.6 percent between 2004 and 2007. The economy contracted 0.8 percent in 2009 as a result of the global financial crisis, but rebounded 14.8 percent in 2010, on the strength of renewed exports, before slowing to 5.2 percent in 2011 and 1.3 percent in 2012, largely a result of soft demand for exports during the second European recession. Over the longer term, the government hopes to establish a new growth path that focuses on raising productivity, which has sunk to an average of about 1.0 percent in the last decade. Singapore has attracted major investments in pharmaceuticals and medical technology production and will continue efforts to establish Singapore as Southeast Asia''s financial and high-tech hub.

Economic Statistics for Singapore

GDP (purchasing power parity): $325.1 billion (2012 est.), country comparison to the world: 41, $321 billion (2011 est.), $305.1 billion (2010 est.); GDP (official exchange rate): $276.5 billion (2012 est.). The country’s GDP for 2005 was US$116.8 billion, an 8.6 percent increase over 2004. Using purchasing power parity, GDP in 2005 was estimated as US$132.3 billion, or US$29,900 per capita. [Source: data in 2012 US dollars, CIA World Factbook =, Library of Congress, 2006 **]

GDP - real growth rate:1.3 percent (2012 est.), country comparison to the world: 149, 5.2 percent (2011 est.), 14.8 percent (2010 est.).= Singapore had a stunning growth rate of 8.5 percent between 1970 and 1995. Growth between 1991 and 1995: 8.6 percent. The growth rate was 6.5 percent in 1996, 8.8 percent in 1995, 10 percent in both 1993 and 1994.

GDP - per capita (PPP): $60,900 (2012 est.), country comparison to the world: 7, $60,700 (2011 est.), $58,900 (2010 est.). = Singapore topped the world in 2010 with a GDP per capita of US$56,532. Per capita GDP in 2005 was US$26,833 up from US$427 in 1960 and US$4,859 in 1980. GNI per capita for 2005 was US$26,706, up from US$434 in 1960 and US$4,662 in 1980. ** Per capita GNP in 1996: $12,070. fifth highest in Asia after Hong Kong, Japan, Singapore and Brunei. Per Capita income adjusted for purchasing power (1995): $23,855.

GDP - composition by sector: agriculture: 0 percent, industry: 26.8 percent, services: 73.2 percent (2012 est.). =

Unemployment rate: 2 percent (2012 est.), country comparison to the world: 12; 2 percent (2011 est.). =

Inflation rate (consumer prices): 4.4 percent (2012 est.), country comparison to the world: 121 5.2 percent (2011 est.). = The inflation rate in Singapore was 1 percent according to 2005 estimates.

Current account balance: $51.44 billion (2012 est.), country comparison to the world: 11 $65.32 billion (2011 est.). Reserves of foreign exchange and gold: $259.3 billion (31 December 2012 est.), country comparison to the world: 12; $237.9 billion (31 December 2011 est.). Debt - external: $24.64 billion (31 December 2012 est.), country comparison to the world: 74 $23.62 billion (31 December 2011 est.) Commercial bank prime lending rate: 5.38 percent (31 December 2012 est.), country comparison to the world: 154, 5.38 percent (31 December 2011 est.). =

Fiscal Year: April 1 to March 31, which the government refers to as the financial year.

Money of Singapore

Singapore’s currency is the Singapore dollar (S$). The interbank exchange rate on July 10, 2006, was US$1 = S$1.57538. The Singapore dollar is made up of 100 cents. Coins are minted in denominations of S$0.05, S$0.10, S$0.20, S$0.50, and S$1. Coins of $S0.01 are in circulation but no longer minted. Banknotes are issued in denominations of S$2, S$5, S$10, S$50, S$100, S$1,000, and S$10,000.

Singaporean money has an iridescent image on both sides designed to making forgery impossible.

Exchange rates: Singapore dollars (SGD) per US dollar: 1.25 (2012 est.); 1.26 (2011 est.) 1.36 (2010 est.); 1.45 (2009); 1.42 (2008).

Singapore Has the World's Second Most Competitive Economy in 2012

Singapore maintained its position as the world's second most competitive economy in 2012, finishing behind Switzerland which kept the title for the fourth year running, the World Economic Forum (WEF) said. Reuters reported: The study by the WEF, best known for running the annual meeting of world business leaders at the ski resort of Davos, ranks 144 countries by examining 113 indicators culled from official data sources and a poll of 15,000 executives who opine on the country where they do business. [Source: Reuters, September 5, 2012]

Switzerland pipped Singapore to the top spot thanks to strong scores in areas such as innovation, labour market effiency and effective public institutions. The United States fell from fifth spot to seventh because of political and economic problems that detracted from its status as a global powerhouse of innovation, the study said. "We see this development as a result of the growing macroeconomic imbalances in the country but also due to the political deadlock that has been augmenting the problem of macroeconomic imbalances," said Ms Margareta Drzeniek, a senior economist at the Geneva-based organisation. [Ibid]

Economic competitiveness top ten (1999): 1) Singapore; 2) the United States; 3) Hong Kong; 4) Taiwan; 5) Canada; 6) Switzerland; 7) Luxembourg; 8) Britain; 9) the Netherlands; 10) Ireland. [Source: World Economic Forum, based on statistical measures and subjective opinions of businessmen who travel a lot overseas].

Economic competitiveness top ten (2000) 1) the United States; 2) Singapore; 3) Finland; 4) the Netherlands; 5) Switzerland; 6) Luxembourg; 7) Ireland; 8) Germany; 9) Sweden; 10) Iceland. [Source: Institute of Management Development

Singapore, the Richest Country in the World in 2010

In August 2012, Deborah Choo wrote in Yahoo News,“Singapore topped the charts for highest GDP per capita in 2010 at close to S$70,000 (US$56,532), according to a study. In the Wealth Report 2012 published by Knight Frank and Citi Private Bank, Singapore is also expected to continue to be the global leader in 2050. GDP per capita refers to the total output of a country divided by the population. Trailing closely behind Singapore is Norway at about S$63,000 (US$51,226), then the US at about S$56,200 (US$45,511), followed by Hong Kong at almost S$56,000 (US $45,301). [Source: Deborah Choo, Yahoo News, August 14, 2012] <>

“The report also forecasts that Singapore’s GDP per capita will more than double to about S$170,000 (US$137,710). Hong Kong is expected to take over Norway’s position as number two in 2050, followed by Taiwan and South Korea – two countries that failed to make the list in 2010. The US is expected to drop from third place in 2010 to the fifth in 2050. <>

Gráinne Gilmore, head of UK residential research at Knight Frank LLP who is also the author of the economic and wealth trends article said, "Other countries may have bigger GDP growth 2010 – 2050, but in most cases, they are starting from a much lower base on economic terms. Singapore is a developed economy, and is expected to achieve a rate of growth which enables it to remain one of the wealthiest countries in the world." <>

"Some of the factors contributing to Singapore’s forecast performance are its ‘human capital’ – a skilled and educated labour force (which is likely to lead to better long-term prospects for a country’s economic growth), the dynamic business environment (with legislation to match), openness to trade, capital mobility and foreign direct investment. Also, it is worth noting that there is a global eastwardsshift in economic activity – Singapore is perfectly positioned to take advantage of this," Gilmore added. <>

Macroeconomics in Singapore

Singapore’s control of economy by the government is referred to as Singapore Inc. Although Singapore is clearly a capitalist country. Many important economic decisions are made by bureaucrats and the government owns a large chunk of Singapore’s most important companies. Singapore has no hinterland or natural resources. It relies on its geography, infrastructure, business-freindly policies and trade to keep its economy going.

Singapore has high labor and real estate costs. It has been said that Singapore is living proof of the statement: “Only the paranoid survive.” The city-state is not just content producing heathy growth figures and keeping unemployment down it is obsessed with finding ways to outwit competitors so its prospect for the future remain relatively bright.

The economy in the 1980s rested on five major sectors: the regional entrepôt trade; export-oriented manufacturing; petroleum refining and shipping; production of goods and services for the domestic economy; and the provision of specialized services for the international market, such as banking and finance, telecommunications, and tourism. The spectacular growth of manufacturing in the 1970s and 1980s had a major impact on the economy and the society, but tended to obscure what carried over from the economic structure of the past. Singapore's economy always depended on international trade and on the sale of services. An entrepôt was essentially a provider of services such as wholesaling, warehousing, sorting and processing, credit, currency exchange, risk management, ship repair and provisioning, business information, and the adjudication of commercial disputes. In this perspective, which focused on exchange and processing, the 1980s assembly of electronic components and manufacture of precision optical instruments were evolutionary steps from the nineteenthcentury sorting and grading of pepper and rubber. Both processes used the skills of Singaporeans to add value to commodities that were produced elsewhere and destined for consumption outside the city-state. [Source: Library of Congress, 1989 *]

The dependence on external markets and suppliers pushed Singapore toward economic openness, free trade, and free markets. In the 1980s, Singapore was a free port with only a few revenue tariffs and a small set of protective tariffs scheduled for abolition in the 1990s. It had no foreign exchange controls or domestic price controls. There were no controls on private enterprise or investment, nor any limitations on profit remittance or repatriation of capital. Foreign corporations were welcome, foreign investment was solicited, and fully 70 percent of the investment in manufacturing was foreign. The government provided foreign and domestic enterprises with a high-quality infrastructure, efficient and graft-free administration, and a sympathetic concern for the problems of businesses. *

“The vulnerability inherent in heavy dependence on outside markets impelled Singapore's leaders to buffer their country's response to perturbations in world markets and to take advantage of their country's ability to respond to changing economic conditions. Unable to control so much that affected their nation's prosperity, they concentrated on those domestic institutions that could be controlled. The consequence was an economy characterized by a seemingly paradoxical adherence to free trade and free markets in combination with a dominant government role in macroeconomic management and government control of major factors of production such as land, labor, and capital. The extraordinarily high domestic savings rate provided reserves to weather such economic storms as trade recessions and generated a pool of domestically controlled capital that could be invested to serve the long-term interests of Singapore rather than of foreign corporations. The high savings rate, however, was the result of carefully formulated government programs, which included a compulsory contribution of up to 25 percent of all salaries to a government-controlled pension fund. The government held about 75 percent of the country's land, was the largest single employer, controlled the level of wages, and housed about 88 percent of the population in largely self-owned apartments. It also operated a set of wholly-owned government enterprises and held stock in additional domestic and foreign firms. Government leaders, deeply aware of Singapore's need to sell its services in a competitive international market, continually stressed the necessity for the citizens to master high levels of skills and to subordinate their personal wishes to the good of the community. The combination of devotion to free-market principles and the need for internal control and discipline in order to adapt to the demands of markets reminded observers of many family firms, and residents of the country commonly referred to it as Singapore Inc. *

Secrets to Singapore’s Success

David Lamb wrote in Smithsonian magazine, “The pint-size country needs to stay competitive to survive, whether it's to cash in on the region's booming tourism market or to nurture an atmosphere in which creativity takes root. The bottom line for the government in most policy decisions is money—not money for greed's sake but money to provide the foundation for a stable, prosperous middle class that holds together an ethnically and religiously diverse population. [Source: David Lamb, Smithsonian magazine, September 2007 ~]

“Singapore’s “port is the world's busiest as measured by tonnage. Its national carrier, Singapore Airlines, is the world's most profitable and has been voted by readers of Condé Nast Traveler the best airline in the world 18 of the past 19 years. The airline has 9 new aircraft and 88 more on order, and will pay cash for every one of them. Singapore's homeowner rate (90 percent) is among the highest in the world, as is its literacy rate and penetration of broadband. In various annual surveys, Singapore is regularly at or near the top on the list of countries that are the most business friendly, most transparent, least corrupt, most economically free, most globalized and least enmeshed in bureaucracy and red tape. ~

“All of which raises an obvious question: How did Singapore accomplish so much with so little while many other developing countries loaded with natural resources and plentiful land failed? The answer is good governance and a widely held belief that being second best isn't good enough. Instead of cronyism, Singapore embraced meritocracy. Salaries in the public sector—it's not uncommon for senior public servants to earn $500,000 a year—are competitive with those in the private sector, enabling the government and the military to recruit the best and brightest. "We have used meritocracy and pragmatism more ruthlessly than any government," says Kishore Mahbubani, dean of the Lee Kuan Yew School of Public Policy. "And ours is the least ideological government in the world. It doesn't care if a principle is capitalistic or socialist. If it works, we use it." ~

“At independence, instead of tearing down the overt symbols of colonialism in a burst of ultranationalism, Singapore accepted the reality of the past. English was made the language of business, schools and government, and streets with names like Queen Elizabeth Walk and Raffles Boulevard are reminders that Singapore's history didn't begin in 1965. Rather than playing ethnic groups off against each other, as some governments did, Singapore gave top priority to creating an integrated, racially harmonious society where everyone shared the fruits of prosperity. Quota systems, for instance, ensure that all public housing has a representative mix of Chinese, Indians and Malays. ~

Singaporean Government and Economy

Singapore operates under a system that locals call state-guided capitalism. The Singaporean government is famous for central planning, micromanaging and enforcing tight controls and encouraging multinational corporations to come to Singapore. Many important economic decisions are made by the powerful Economic Review Committee.

American economist Paul Krugman sarcastically referred to Singapore as the "economic twin of Stalin's Soviet Union." He claimed that Singapore achieved its stunning growth rates not through greater productivity and efficiency but rather through multi-billion infrastructure projects and additional investments and labor that helped Singapore grow "through the mobilization of resources that would have done Stalin proud."

Planners and leaders in Singapore take criticism to heart, examine feedback from citizens and have even started management training courses and franchising plans for the street hawkers In recent years the government has put an emphasis on rewarding creativity to generate new products and overhauling an education system which has traditionally been dominated by rote learning.

Singapore had achieved economic success with an economy that was heavily managed by the government. The state owned, controlled, or regulated the allocation of capital, labor, and land. It controlled many of the market prices on which investors based their investment decisions and was the exclusive provider of social services and infrastructure. The 1985- 86 recession, however, stimulated discussion of impediments to economic performance and of dysfunctional aspects of the government's role in the economy. A 1987 report by the governmentappointed Private Sector Divestment Committee recommended that the state dispose of most of its interest in private companies over a ten-year period. It recommended privatizing forty-one of ninetynine government-controlled companies and investing the proceeds in high-technology companies. [Source: Library of Congress, 1989 *]

Throughout the 1970s and 1980s, the government controlled wages through the annual wage guidelines set by the National Wages Council, a body in which representatives of employers, trade unions (which were controlled by the PAP), and the government reached a consensus on wage levels for the coming year. The council's wage guidelines were in the form of macroeconomic projections and were applied across the board in all sectors of the economy. In December 1986, the cabinet approved a National Wages Council report calling for a revised wage system that permitted greater flexibility, (the flexi-wage policy) with more use of bonuses and wage increases linked to increases in productivity. It was, however, not clear how the productivity of white-collar workers and civil servants, who constituted an increasing proportion of the work force, was to be measured. The call for wages to reflect the productivity and profitability of particular industries and firms implied more bargaining between workers and employers and a diminished role for the government, which could not impose a single rate on hundreds of distinct firms. *

Although there was general agreement on the need for changed economic policies and modes of administration, significant tensions remained between those who favored greater flexibility and liberalization and those who wanted government direction of the economy. For Singapore's leaders, the challenge was to devise more sophisticated means of ensuring overall control while permitting greater autonomy and flexibility at lower levels. *

of political opposition. The PAP mind-set has been traced to its battle for political preeminence with its communist rivals in the 1950s and 1960s. In the late 1980s, Singapore had one of Asia's highest standards of living and was not regarded as fertile ground for a communist insurrection. The PAP maintained that Singapore was too small for a two-party system to work effectively and did not anticipate sharing power. It stymied the development of a legitimate opposition by a range of political tactics, such as using the provision of public services to induce citizens to vote for PAP candidates. Critics also charged that the party controlled the press, preventing the free flow of ideas. Although there was no direct censorship of the press, newspapers were closely monitored and radio and television stations were owned by the government. *

Limits of Government Control on the Singaporean Economy

The highly ordered quality of life in Singapore itself became a political issue. Many citizens felt that they were overregulated , governed by too many laws that were too easy to break. Singapore's leaders attributed the cause of the assumed decline of Western societies to the excessive individualism fostered by Western culture and warned that Singapore would suffer a similar fate unless saved by a national ideology. [Source: Library of Congress, 1989 *]

The perceived need for an ideology was a phenomenon of the 1980s. Previously, Singapore's leaders had been concerned with physical survival more than cultural survival and had dismissed official ideologies as contrary to Singapore's status as an open port unfettered by conventional wisdom or fashionable orthodoxies. In the 1980s, as peace prevailed in the region, the government shifted its focus to the cultural sphere. Cultural preservation replaced physical survival as the major concern of leaders who feared being overrun by foreign cultures. *

Looking ahead, senior leaders identified two major dangers to the nation: the failure of the nation to reproduce itself and the loss of national identity. The first threat was manifested in steadily falling birth rates, particularly among the nation's best educated citizens, many of whom failed even to marry. The second threat, loss of identity, it was feared, would lead to loss of cohesion and hence to the destruction of the nation. *

Singapore's leaders addressed these problems by proposing a series of policies intended to encourage citizens to marry and reproduce and to create a distinct Singaporean identity. The programs addressing the population problem included extensive publicity and exhortation, along with material incentives for giving birth to third and fourth children. Women university graduates were singled out for special attention because of their failure, in general, to marry and pass on their supposedly superior genes. The efforts to foster a Singaporean identity involved defending positive traditional Asian values against the perceived threat from Western culture. Both the schools and the society at large emphasized mastering Asian languages, such as Mandarin Chinese, and promoting Confucianism. Such programs, which attempted to modify the personal and intimate behavior of citizens but did not clearly reflect the demands of economic development, aroused a good deal of opposition, especially from younger and better educated citizens. The leadership's paternalistic style and its intolerance of criticism became political issues and were blamed by some observers for the increased vote for opposition candidates in the 1984 and 1988 elections. *

Opponents of programs relating to Singapore identity claimed that the leaders' purpose was to shift support for a national ideology into support for the government and the ruling PAP. Promoting Confucianism, for example, was a convenient means of convincing individuals to subordinate their interests to those of society. Others held that the government's real fear was not that Singapore would lose its culture or values but that continued Westernization of the society would mean more pressure for real democracy, more opposition candidates, and the possibility of a change in government. *

The electoral vote for the PAP dropped considerably, going from 75.6 percent in 1980 to 62.9 percent in 1984 and by a lesser amount to 61.8 percent in 1988. In 1988 the PAP campaign slogan was "More Good Years" and the opposition had no solid issues with which to attract support. The election resulted in another landslide victory for the PAP and the winning of eighty out of eighty-one parliamentary seats. *

Budgeting and Planning by the Singaporean Government

Although Singapore billed itself as a free-enterprise economy, the economic role of government was pervasive. As governing body for both the nation and the city, the government was responsible for planning and budgeting for everything from international finance to trash collection. The government owned, controlled, regulated, or allocated land, labor, and capital resources. It set or influenced many of the prices on which private investors based business calculations and investment decisions. [Source: Library of Congress, 1989 *]

State intervention in the economy had a positive impact not only on private business profitability but also on the general welfare of the population. Beyond the jobs created in the private and public sectors, the government provided subsidized housing, education, and health and recreational services, as well as public transportation. The government also managed the bulk of savings for retirement through the Central Provident Fund and Post Office Savings Bank. It also decided annual wage increments and set minimum fringe benefits in the public and private sectors. State responsibility for workers' welfare won the government the support of the population, thus guaranteeing the political stability that encouraged private investment. In general, state intervention in the economy managed to be probusiness without being antilabor, at least regarding material welfare. *

Budgeting and taxation were frequently used for attaining economic goals. In the postrecession period, budgetary changes primarily benefited business. For example, the fiscal year ( FY) 1988 budget included an overseas investment incentive program, administered by the Economic Development Board, allowing tax write-offs for losses from approved overseas investments. Other concessions such as suspension of taxes on utilities and a 50 percent rebate on property taxes were in effect between 1985 and 1988 to counteract the economic slump. *

Budgeting and taxation also were often used to achieve or reinforce social goals such as population control. Until 1984 the government encouraged limiting of families to two children by levying higher medical and education costs for additional children. In 1986, however, tax rebates were introduced to encourage collegeeducated women to have third and fourth children. *

Economic Boards in Singapore

Under the appropriate government ministries, statutory boards-- a concept carried over from colonial days--were established to manage specific parts of the economy and foster overall and sectoral development. Each worked somewhat autonomously, using a hands-on approach to the problems in the areas in which it operated. [Source: Library of Congress, 1989 *]

The Economic Development Board was established in 1961 to spearhead Singapore's industrialization. Initially its function was to promote industrial investment, develop and manage industrial estates, and provide medium- and long-term industrial financing. The latter function was taken over in 1968 by the newly created Development Bank of Singapore. When the limits of import substitution became evident, given the small domestic market, policy was redirected toward promoting an export-oriented, labor-intensive industrialization program. After 1986 the board's portfolio was enlarged to include the promotion of services in partnership with other government agencies responsible for the various service sectors and the development of local small- and medium-sized enterprises. In the first two decades following independence, the board evolved industrial strategies in response to changes in the international and domestic business environments, as well as negotiating the public-private consensus necessary for implementing them. The board was not an economic tsardom but, rather, a consensus maker among agencies and corporations that commanded larger financing. In 1989 the Economic Development Board focused its attention on attracting investments in manufacturing and other high value-added services, which met the technological skills and employment needs of Singapore's future economic development. *

The National Productivity Board (NPB) was established in 1972 to improve productivity in all sectors of the economy. Increasing individual and company productivity at all levels was a government priority, given Singapore's full employment picture and relatively high wages. Greater worker productivity than the country's neighbors and competitors was viewed by the government as a necessity as well as one of Singapore's major advantages. *

The National Productivity Board followed a "total productivity" approach, which emphasized productivity measurement, product quality, a flexible wage system, worker training, and assistance to small- and medium-sized enterprises. In order to promote productivity in both the public and private sectors, the board used mass media publicity, seminars, conventions, and publications to remind Singaporeans that productivity must be a permanent pillar of the economy. The board sponsored a productivity campaign each year with such slogans as the one for 1988, "Train Up--Be the Best You Can Be." *

The National Productivity Board offered management guidance services to small- and medium-sized enterprises to assist them in improving their productivity and efficiency, as well as referring companies to private management consultancy services available in Singapore. Beginning in the early 1980s, the board also spearheaded campaigns to introduce productivity management techniques used extensively by Japanese business and industry, such as quality control circles. *

State-Owned Enterprises in Singapore

Over time, the statutory boards not only became major actors in the economy but also formed subsidiary companies to add flexibility to their own operations. For example, in 1986 the Singapore Broadcasting Corporation formed a subsidiary to produce commercials on a fee-for-service basis. The government entered other areas of the economy that it considered appropriate, exerting leadership, assuming risk, and not hesitating to withdraw its support or close down unprofitable companies. [Source: Library of Congress, 1989 *]

Numerous state and quasi-state companies were created either directly by ministries or, more often, organized under three wholly owned government holding companies (Temasek Holdings (Private) Limited, MND Holdings, and Sheng-Li Holding Company), which provided a wide range of goods and services. Joint ventures between the government and both domestic and foreign partners produced several industrial products, including steel and refined sugar. In addition, the National Trades Union Congress (NTUC), which was closely tied to the government, ran many cooperative businesses, including supermarkets, taxis, and a travel agency. *

Although these companies collectively contributed significantly to the growth of the economy, neither their total amount of profits nor their rate of return on investment could be documented. In 1983 some 450 such companies, excluding subsidiaries of the statutory boards, employed 58,000 workers, or 5 percent of the labor force. In 1986 there were approximately 500 such companies still active. These different institutional forms permitted versatility. *

Economics and Freedom

: Hong Kong versus Singapore

Hong Kong and Singapore have a rivalry going for the title of mini economic powerhouse. Both are relatively small and generate economic activity that far exceeds their size. Hong Konger were very upset in 1998 when the Heritage Foundation in the United States selected Singapore ahead of Hong Kong for the first time as the World's Freest Economy. Between 1990 and 1995, Hong Kong grew 5.2 percent, compared to 8.5 percent in Singapore.

Comparing Hong Kong to Singapore, Oscar Ho wrote in Newsweek, "Hong Kong is no paradise. For many people, it is a money-grabbing society with aggressive, even obnoxious people who scream instead of talk. The streets are filled with activity and noise, including daily demonstrations protesting against everything. However, it is precisely this intense energy that makes Hong Kong a colorful, pluralistic metropolitan culture."

A student at the National University of Singapore told Newsweek, "Singapore was built on the notion of economic success, and everything else is subordinated to that. That's wrong. We want to be more than economic animals." A student at Nanyang Technological University said, "We are told that political rights will follow economic progress," and then asked, "What GDP would be considered adequate?" [Source: Sunanda K. Datta-Ray, Newsweek, May 17, 1999]

Singapore Aims to Diversify More Economically

During the global economic crisis in 2009, Hopporn Wong-Anan of Reuters wrote” The government has just set up an "Economic Strategies Committee" comprising ministers and business leaders, to fine-tune plans for growth, as it aims to stay a hub for multinationals and trading. Singapore has already been looking to wean itself off manufacturing by developing service industries such as wealth management and tourism, with two casino resorts due by next year. [Source: Hopporn Wong-Anan, Reuters, June 27, 2009 <=>]

“It also hired ex-BHP Billiton ( BBL - news - people ) CEO Chip Goodyear to run state investor Temasek, replacing the prime minister's wife Ho Ching. Goodyear is expected to look at investments in the resource sector, after the fund was burned by high profile investments in Western banks in the past year that created discontent among Singaporeans worried about the state's savings. <=>

“Analysts say the country will continue to diversify into high value sectors such as nanotechnology, biomedical research, and renewable energy. But it is expected to remain dependent on overseas demand given its small 4.6 million population. Among Lee Kuan Yew's favourite topics is urging Singaporeans to have more babies. But this has not had much success, leaving the state looking to foreign labourers from China and other Asian countries, plus Western professionals, risking future social tensions as the population mix changes. Singapore saw deadly race riots in the 1950s and 1960s. <=>

“Analysts say Singapore will have to be more politically open and culturally tolerant to attract rich migrants and to prevent a brain drain of young local talent. "If you want to be a world city, you have to take on some of the characteristics of New York and London, a lot more diversity, a lot more tolerance, and a lot more openness," Scott said. <=>

Forced Savings and Capital Formation in Singapore

The Singapore government mandates savings. Saving is no longer as important as it once was. Spending and consuming is on the rise. Household credit as percent of GDP (2002): 45 percent. Number of credit cards per person (2002): 89.

Singapore's much-vaunted savings rate--and much of the funding for development, particularly public housing--resulted in large measure from mandatory contributions to the Central Provident Fund, as well as voluntary deposits in the Post Office Savings Bank. The Central Provident Fund was set up in 1955 as a compulsory national social security savings plan to ensure the financial security of all workers either retired or no longer able to work. Both worker and employer contributed to the employee's account with the fund. The rate of contribution, which had gradually risen to 50 percent of the employee's gross wage (coming equally from employer and employee), was lowered to 35 percent in 1986. In 1987 new long-term contribution rates were set calling for 40 percent for employees below fifty-five years of age, 25 percent for those fifty-five to fifty-nine, 15 percent for those sixty to sixty-four, and 10 percent for those over sixty-five, with equal contributions coming from employee and employer. A series of transition rates leading to the new long-term rates were first applied in 1988. The contributions were tax-exempt and subject to maximum limits based on a salary ceiling. Beginning in 1986, the government paid a market-based interest rate on Central Provident Fund savings (3.19 percent per year in June 1988). [Source: Library of Congress, *]

Every employed Singaporean or permanent resident was automatically a member of Central Provident Fund, although some self-employed people were not. Membership grew from 180,000 in 1955 to 2.08 million in 1989. At the end of 1988, the 2.06 million members of the Central Provident Fund had S$32.5 billion to their credit. That same year, a total of S$2,776 million was withdrawn to purchase residential properties; S$9.8 million was paid under the Home Protection Insurance Scheme; S$1,059 million was paid under the Approved Investments Scheme; and S$13.7 million was withdrawn for the purchase of nonresidential properties. *

Each member actually held three accounts with the Central Provident Fund: Ordinary, Special, and, since the mid-1980s, Medisave Accounts. The first two were primarily for old age and contingencies such as permanent disability. The Ordinary Account, in addition, could be used at any time to buy residential properties, under various Housing and Development Board programs, and for home protection and dependents' protection insurance. Two further programs were established in 1987: a Minimum Sum Scheme, which established a base amount to be retained in the account against retirement, and a Topping-up Extension under which, as well as adding to their own, members could demonstrate "filial piety" by adding to their parents' accounts. Since the late 1980s, members could use their accounts to buy approved shares, loan stocks, unit trusts, and gold for investment. Part of the rationale for the latter was to allow Singaporeans to diversify their savings and to gain experience in financial decision making. *

Although comparable to social security programs in some Western countries, the Central Provident Fund's concept and administration differed. Rather than having the younger generation pay in while the older generation withdrew, whatever was put into the Central Provident Fund by or for a member was guaranteed returnable to that person with interest. *

Thus, at the individual level, Central Provident Fund savings promoted personal and familial self-reliance and financial protection, an economic attitude constantly encouraged by government leaders. Collectively, the Central Provident Fund savings assured the government of an enormous, relatively cheap "piggy bank" for funding public-sector development; the savings also served as a mechanism for curtailing private consumption, thereby limiting inflation. The result, according to some critics, was that the city-state had become overendowed with buildings, with too few productive businesses to put in them. They also noted that the bloated size of the Central Provident Fund (S$32.5 billion in 1988, equivalent to 82 percent of the GDP) was the most important factor behind the unwieldiness of public savings. Some analysts advised that the fund was beginning to outlive its usefulness and should be dismantled and replaced by private pension funds and health insurance plans. As a result, they stated, savings would be channelled to private businessmen rather than to bureaucrats. *

Metal Theft and Resources in Singapore

Singapore has no oil or natural gas, and virtually no other natural resources of any value other than fish and deepwater ports. The only mining and minerals it has are minor amounts of stone quarrying.

In 2007, Reuters reported: It is considered one of Asia's safest cities, but authorities in Singapore have a theft problem -- spurred by a surge in metals prices. Thefts of drain covers, prayer urns, copper cables and other metal items doubled in Singapore last year, police said today. While the overall crime rate in Singapore dropped 10 percent in 2006, metal-related thefts jumped, with 1092 cases in 2006 compared with 526 cases in the previous year. [Source: Reuters, January 25, 2007]

"Most of the stolen metal items are sold to Karung Guni men," said Tan Puay Kern, the senior assistant commissioner of police, referring to Singapore's rag-and-bone men. He added that thieves had made off with lightning conductors, street signs, and the housings for cable-television equipment. The price of metals such as copper has doubled in the last two years, amid speculative buying by investors who bet on tight supply and rising demand as emerging market economies increase spending on infrastructure. [Ibid]

Agriculture in Singapore

GDP - composition by sector: agriculture: 0 percent; industry: 26.8 percent; services: 73.2 percent (2012 est.). Labor: agriculture: 0.1 percent; industry: 19.6 percent; services: 80.3 percent. Land use: arable land: 0.89 percent; permanent crops: 0.14 percent; other: 98.97 percent (2011) [Source: CIA World Factbook =]

Agriculture and Livestock products: orchids, vegetables; poultry, eggs; fish, ornamental fish. In the early 1980s when the government began closing pig farms as part of a cleanliness campaign.

Only 1.6 percent of the land is arable. In 1967, 25 percent of the land was in agricultural use, but by 1988, despite increases through land reclamation, that percentage had decreased to 8.5 percent and is predicted to shrink to 3.2 percent by 2030. Singapore has no irrigated land, and none of the land is planted to permanent crops. More than 60 percent of the land is devoted to residential, industrial, commercial, institutional, and infrastructure spaces.

Singapore relies on imports for virtually all of its food needs. At times of sharp increases in global commodity prices, especially the local staple rice, the financial burden of Singapore's lower income group is high. Alvin Liew, an economist with Standard Chartered Bank. Told AFP: "And with the wages rising much faster in the higher-income group while food prices remain elevated, the income gap is definitely widening, as food is of much less importance for the high-income group.” During the global food crisis in 2008, government officials said they saw a 20 percent rise in the number of his constituents seeking vouchers to buy groceries at the country's biggest supermarket chain, FairPrice. [Source: Agence France Presse, May 4, 2008]

Orchard Road, now one of Singapore's most up-scale thoroughfares, got its name because it originally was lined with fruit orchards and vegetable gardens. Although contemporary Singapore still maintains a tiny agricultural base, as an economic category, agriculture, forestry, and fishing are not large enough to be reported as a part of the gross domestic product (GDP) but are instead subsumed under industrial production. In 1960 Singapore had 20,000 small farms on 14,000 hectares of land. By 1995 farmland had been severely reduced and was concentrated on 1,500 hectares of agrotechnology parks that housed modern intensive farms. By 2004 Singapore had only 266 farms on 803 hectares of land. [Source: Library of Congress, 2006 **]

In 2000 the government established the Agri-Food and Veterinary Authority of Singapore to oversee the agrotechnology parks (including the current 67 vegetable farms and five egg-laying farms), the development of agrotechnology and agribiotechnology (knowledge of agriculture and molecular biology applied to large-scale, intensive farming), and the promotion of investments in the agri-industry. Singapore’s agricultural products include, in order of value, rubber, copra, fruit, orchids (15 percent of the world market), vegetables, poultry, eggs, and ornamental fish (30 percent of the world market). In 2004 Singapore produced about US$143 million in agricultural products, including livestock and fish, for both domestic consumption and export. Since the 1980s, the government has made a concerted effort to conserve the surviving forest areas of Singapore. The last reported timber harvests were in 1992, when 25,000 cubic meters of sawnwood were produced. Around this time, a mere 100 hectares of forest and 600 hectares of mangrove swamps had survived. Fishing is by capture (36 percent) and aquaculture (64 percent). The total catch in 2004 was 7,579 tons of fish and shellfish.

Agriculture in Singapore in the 1980s

by 1988 urbanization had reduced the land area used for farming to only about 3 percent of the total. Nonetheless, with intensive production, the farming sector met part of the domestic demand for essential fresh farm produce: poultry, eggs, pork, some vegetables, and fish. In 1988 there were 2,075 licensed farms occupying only 2,037 hectares of land, with a total output of some S$362 million worth of farm produce. A decade earlier farm holdings had covered 1,280 hectares. [Source: Library of Congress, 1989 *]

The Primary Production Department, under the Ministry of National Development, ensured an adequate and regular supply of fresh produce and provided support for agro-industries, including research and development aimed at improving commercial and hightechnology farming. The department projected in 1988 that a total of 2,000 hectares of land in ten agro-technology parks would be developed and rented out for long-term farming over the next decade. *

The government began phasing out pig farming in 1984 because of odor and environmental pollution. Some 200 pig farms raising about 500,000 pigs in 1987 were scheduled to be reduced to 22 farms with 300,000 pigs by 1990. Imports from Malaysia, Indonesia, and Thailand would be increased to meet domestic needs. Some 1,000 poultry farms kept a total of about 2.2 million layers, 1.6 million broilers, 245,000 breeders, and 645,000 ducks. Singapore remained free of major animal diseases. *

Singapore grew 5.6 percent of its total supply of 180,000 tons of fresh vegetables in 1988 and imported the rest from Malaysia, Indonesia, China, and Australia. The main crops cultivated locally included vegetables, mushrooms, fruit, orchids, and ornamental plants. About 370 vegetable farms produced an estimated 10,000 tons of vegetables, and mushroom cultivation expanded rapidly after the mid-1980s. The Mushroom Unit of the Primary Production Development conducted research on mushroom cultivation and advised commercial mushroom growers, who produced a variety of mushrooms for the local market. *

Noted for its orchids, Singapore exported flowers worth S$13.8 million in 1988, mainly to Western Europe, Japan, Australia, and the United States. Singapore's 153 orchid farms produced another S$2.2 million worth of flowers for the domestic market. *

Fishing in Singapore

Local fishermen provided about 13 percent of the country's 110,000-ton fresh fish supply in 1988, using three major fishing methods--trawling, gill-netting, and long-lining. There were about 1,170 licensed fishermen operating nearly 400 fishing vessels, most of which were motorized. The Jurong Port and Market Complex was a major fish landing point for both domestic and foreign vessels and handled 84 percent of the total fresh fish supply in 1988. Many foreign vessels brought their catches there for processing and reexport. Fresh fish arrived also by truck from Malaysia and Thailand and by sea and air from other neighboring countries. *

Fish farming was a small but growing field. In 1988 seventyfour licensed marine fish farms raised mainly high-value fish such as grouper and sea bass in a total of forty hectares of coastal waters. Many of the farms had also introduced prawn farming in floating cages. Exports of ornamental fish for aquariums amounted to S$60 million in 1988. Some 400 licensed aquarium fish farms operated in Singapore in 1988, including 36 commercial farms operating in the Tampines Aquarium Fish Farming Estate. *

Image Sources:

Text Sources: New York Times, Washington Post, Los Angeles Times, Times of London, Lonely Planet Guides, Library of Congress, Singapore Tourism Board, Compton’s Encyclopedia, The Guardian, National Geographic, Smithsonian magazine, The New Yorker, Time, Newsweek, Reuters, AP, AFP, Wall Street Journal, The Atlantic Monthly, The Economist, Foreign Policy, Wikipedia, BBC, CNN, and various books, websites and other publications.

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© 2008 Jeffrey Hays

Last updated June 2015

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