TRADE IN SINGAPORE
Located on the strategic Strait of Malacca, Singapore is a major trading hub and home to the world’s busiest port. The nation’s prosperity has been built on a pro-free trade policy. In May 2006, the director general of the World Trade Organization observed that Singapore, with its strong tradition of open markets, benefits from bilateral as well as global trade agreements, unlike most small countries that relinquish their interests in bilateral negotiations with larger and more powerful trading partners.
Singapore is reliant on trade for economic prosperity and growth. It is a major air transhipment hub as well as a shipping transhipment center. It wants to be an economic hub for Southeast Asia. Singapore is arguably the world’s most trade-intensive economy and globalized nation. In the early 2000s, its total trade was valued at 341.5 percent of its GDP, more than 13 times higher that the proportion in the United States.
Trade Balance: Singapore maintains a favorable balance of trade. In 2005 exports totaled US$241.9 billion, exceeding imports of US$210.7 billion. Balance of Payments: Singapore’s current account balance was US$35.1 billion for 2005. External Debt: The U.S. government estimated that Singapore had US$24.7 billion of external debt in 2005. [Source: Library of Congress, 2006]
Singapore has low tariffs. One of its goals has been to reduce tariffs on goods that it exports. Singapore has pursued free trade agreements with Australia, New Zealand, Chile, Japan, and Mexico. Singapore has traditionally been willing to make free-trade deals with all comers, a policy that has been criticized by some of its neighbors. On the matter, Singapore trade official said, “In seeking free-trade agreements, Singapore has been called promiscuous, but in this case promiscuity is a virtue.”
Singapore is a major global and logistics hub. In 2007 it ranked first in a World Bank survey of countries' capacity to ship goods. “Connecting to Compete: Trade Logistics in the Global Economy,'' a study based on a world survey of freight forwarders and express carriers, indicates that making it easier to connect firms, suppliers and consumers is crucial in a world where predictability and reliability are becoming more important than costs, the bank said. ``Being able to connect to global markets is fast becoming a key aspect of a country's ability to compete, grow, attract investments, create jobs and reduce poverty,'' said Danny Leipziger, the bank's vice president for poverty reduction and economic management. Among the seven most industrialized nations in the survey, Germany was third, Japan sixth, Britain ninth, Canada 10th, the United States 14th , France 18th and Italy 22nd out of a total of 150 countries covered. [Source: Agencies, November 6, 2007]
In 1966 Singapore became a member of the International Monetary Fund ( IMF), the World Bank, and the Asian Development Bank. Two years later, Singapore joined the International Finance Corporation, an affiliate of the World Bank. Singapore's loans from the World Bank and the Asian Development Bank had been used to finance development projects relating to water supply, electric power generation and distribution, sewerage, telephone services, educational services, and environmental control. A total of fourteen loans were secured from the World Bank between 1963 and 1975 and fourteen from the Asian Development Bank between 1969 and 1980. There were no further loans in the 1980s. Singapore's estimated outstanding borrowings from the World Bank and the Asian Development Bank in late 1988 totalled US$35.1 billion and US$45.4 million, respectively. Its 1988 quota of IMF special drawing rights (SDR)--related to its national income, monetary reserves, trade balance and other economic indicators--was SDR 92.4 million. [Source: Library of Congress, 1989 *]
Trade Development Board
Changes in world trade patterns and in what the government viewed as an increasingly protectionist international trade environment prompted the establishment of the Trade Development Board in 1983 as a national trade promotion agency. Based on the recommendations of specialists, the board formulated policies reflecting the needs of traders in general, as well as the specific needs of particular trade sectors. Initial areas of focus were trade facilitation of electronics, printing and publishing, textiles, and timber products. The Trade Development Board reviewed existing marketing policies, strategies, and techniques and explored new opportunities in both traditional and nontraditional markets. The board assisted both local and foreign companies interested in using Singapore as a base for such trading activities as warehousing and distribution. The Trade Development Board also helped Singapore companies market their products by assisting them in improving their product designs. [Source: Library of Congress, 1989 *]
Trade in goods and services was Singapore's life blood as truly in 1989 as it was in the early twentieth century or a century earlier when the British East India Company first began business there. Trade, along with domestic savings and foreign investment, remained key to the country's growth. Singapore traditionally had a merchandise-trade balance deficit (in part at least because food was imported), which it customarily offset with a surplus on the services account. It was one of the world's few countries where total international trade (domestic exports and reexports plus imports) was greater than total GDP. In 1988 trade (S$167.3 billion) was more than three times GDP (S$48 billion), and two-thirds of the goods and services Singapore produced were exported. *
Singapore, however, was more than simply a trade and manufacturing center in the late 1980s. Trade and manufacturing were closely tied to the country's expanding business services and international financial market; each enhanced the other. In addition to the more than 650 multinational companies that had set up manufacturing plants and technical support facilities, several thousand international financial institutions, service companies, and trading firms also maintained a presence in Singapore. The increasing internationalization of the economy and the continuing centrality of external trade meant that world trade fluctuations and the state of the global economy were significant factors-- largely out of the country's direct control--in what happened to Singapore's trade and wider economy. *
As a British colony in the nineteenth and early twentieth centuries, Singapore was an entrepôt for the exchange of raw materials from Southeast Asia--mainly present-day Indonesia and Malaysia--for European merchandise. Newly independent Singapore's decision in 1965 to emphasize industrial development and the growing success of that plan gradually resulted in a significant change in the nature of trade. By the mid-1970s, the proportion of reexports and domestic exports had been roughly reversed, with reexports accounting for less than 41 percent. *
Growth of Trade in Singapore in the 1980s
In the 1980s, the somewhat diminished entrepôt trade remained important, and Singapore continued to act as a regional processing and distribution center. Reexports' share of total exports averaged 35 percent from 1980 to 1987. Although primary commodities (crude rubber, nonferrous metals, and to a lesser extent palm and coconut oil) were still a factor in trading activities, machinery and transportation equipment dominated. Singapore also served as a back door to trade with Asian communist countries for third countries, such as Indonesia. [Source: Library of Congress, 1989 *]
Between 1980 and 1984, total exports grew an average of 5.5 percent per year. The strongest impetus came from the newer electrical and electronics industries. The trade deficit declined steadily after 1982, reflecting lower commodity prices paid to foreign producers, greater levels of internal efficiency, and industrial upgrading. In 1985, however, total exports decreased by 2.26 percent. Higher value-added exports declined, both as a function of weaker demand and a worldwide saturation in many areas, such as computer peripherals. Petroleum exports, still a major sector, virtually stagnated. *
Trade, along with the rest of the economy, reasserted itself by 1987, resulting partly from government economic decisions and partly as a reflection of rising world commodity prices. In 1988 Singapore's total trade amounted to about S$167.3 billion (US$80.8 billion), with a global trade deficit of about S$8.18 billion. Singapore's GDP grew by 10.8 percent in 1988, the best growth rate in fifteen years. Disk drives were the largest non-oil item exported, worth S$4.89 billion. Other major exports were integrated circuits, data processing equipment and parts, telecommunications equipment, radio receivers, clothing, and plastics. *
By early 1989, signs of slowing down and leveling off had appeared with the first export declines in eighteen months. Analysts agreed the weak external demand for electronics and computer parts resulted, in part, from an oversupply on the world market of disk drives, semiconductors, and related items. Imports surged, however, widening the trade deficit sharply. *
Although their volume was not large, food products were a significant aspect of Singapore's trade. The urban nation produced only a small proportion of its own food, requiring it to import large quantities. Some food products, such as soy sauce and juices, were processed in Singapore for export, and Singapore continued its historical role as the regional center for the spice trade.
Shipping in Singapore
Singapore is the second busiest port in the world. A ship arrives and departs about seven minutes. Around 300,000 ships travel from or throogh Singapore each year to the United States. The container terminals run by the Port of Singapore Authority (PSA) were the largest in the world in the late 1990s and early 2000s. They handled 1.5 million 20-foot-equivalent units in 1998.
Freight handled by seaports in 2008 (number of containers): 1) Singapore (29.92 million); 2) Shanghai (27.98 million); 3) Hong Kong (24.25 million); 4) Shenzhen (21.41million); 5) Pusan (13.43 million); 24) Japanese (4.27 million); 29) Yokohama (3.49 million); 35) Nagoya (2.9 million); 44) Kobe (2.47 million).
Neptune Orient Lines the biggest shipping line in Singapore. It is 53.5 percent owned by Temasek, the state holding company.
Shipping was one of the first industries to use the Internet and computer networking. In the late 1980s a computer network linking shippers, supplies and freight forwarders at the Singapore Port Authority that reduced the time spent on custom declarations from three days to three minutes. Tradenet as it was called became a Harvard Business School case study.
One of Singapore's goals is to become the major transportation hub and transhipment center for the entire Asia-Pacific region. It's port and port authority have been consistently rated as the best in Asia. Busiest container ports in 1996: 1) Hong Kong (13.2 TEUs, 20-foot equivalent units); 2) Singapore (12.9 TEUs); 3) Kaohsiung, Taiwan (5.1 TEUs); 4) Rotterdam (5 million).
PSA is cooperating wth the United States Customs Service to work out ways to prevent terrorists from slipping weapons of mass destruction or some other devise into a cargo ship, freighter or container ship.
In recent years Malaysia as emerged as a major competitor. The Danish company Maersk Sealand, the world’s large shipping group, and Taiwan-based Evergreen Marine, the owner of the world’s second largest container fleet, have moved their operations from Singapore to Tanjung Pelepas port in Malaysia. In September 2003, Cosco Pacific, the port arm of China’s largest shipping company, bought a 49 percent stake in a terminal owned by PSA in part to head off competition from Malaysia.
See Ports and Boats Under Transportation
Singapore’s Imports and Exports
GDP growth linked closely with export growth. Singapore exports large amounts of petrochemicals and pharmaceuticals and is a center for oil storage blending. Computer disk drives, semiconductors, and other electronic components made up 68 percent of Singapore 's exports in the early 2000s but now electronics make up a much smaller share of exports than they once did.
Exports: $408.4 billion (2012 est.), country comparison to the world: 14; $409.2 billion (2011 est.) Exports - commodities: machinery and equipment (including electronics and telecommunications), pharmaceuticals and other chemicals, refined petroleum products, Exports - partners: Malaysia 12.2 percent, Hong Kong 11 percent, Indonesia 10.4 percent, China 10.4 percent, US 5.5 percent, Japan 4.5 percent (2011) [Source: CIA World Factbook =]
Singapore’s exports totaled US$241.9 billion in 2005. The major exports are machinery and equipment (especially electronic components and parts), consumer goods, chemicals, and mineral fuels and petroleum products (processed for re-export). The major export partners in 2005 were Malaysia (13.2 percent), the European Union (12.0 percent), the United States (10.2 percent), Hong Kong (9.4 percent), China (8.6 percent), Japan (5.5 percent), Thailand (4.1 percent), Taiwan (3.9 percent), and South Korea (3.5 percent). [Source: Library of Congress, 2006]
Imports: $379.7 billion (2012 est.), country comparison to the world: 14; $365.4 billion (2011 est.). Products: machinery and equipment, mineral fuels, chemicals, foodstuffs, consumer goods Imports - partners: US 10.8 percent, Malaysia 10.7 percent, China 10.4 percent, Japan 7.2 percent, South Korea 5.9 percent, Indonesia 5.3 percent, Saudi Arabia 4.8 percent (2011). [Source: CIA World Factbook =]
Singapore’s imports totaled around US$210.7 billion in 2005. Machinery and equipment, mineral fuels, chemicals, and foodstuffs are Singapore’s major import commodities. The major import partners in 2005 were Malaysia (13.7 percent), the European Union (11.6 percent), the United States (11.6 percent), China (10.3 percent), Japan (9.6 percent), Taiwan (5.9 percent), Indonesia (5.2 percent), Saudi Arabia (4.5 percent), South Korea (4.3 percent), and Thailand (3.8 percent). [Source: Library of Congress, 2006]
Changes in Singapore’s Trading Partners
Along with the changes in the composition of trade that had taken place since independence, there also were changes in direction. The preeminence of Britain as supplier of manufactures declined after independence, and by the early 1970s the United States and Japan had become Singapore's two leading sources of industrial products. Malaysia and Indonesia remained the principal sources of such primary imports as crude rubber, vegetable oils, and spices and an important destination for manufactured exports, including both the products of Singapore and of the entrepôt trade. *
Singapore did not report trade with Indonesia. The omission dated from the period of the Indonesian Confrontation in the mid1960s and continued, according to some observers, because Singapore was afraid that if the Indonesian government knew the volume of the trade, it might try to curtail it. Estimates were difficult because a substantial part of the trade was viewed by Indonesia as smuggling and was, therefore, unlisted, although in Singapore's open export market it was legal. Nevertheless, trade with Indonesia could be presumed, based partly on Indonesian trade figures, to have assumed a gradually larger role starting in the mid-1970s. *
As Singapore became more export oriented, its trading patterns became increasingly complex and interdependent. By the late 1980s, Singapore's trade links were strongest with the countries of the Organisation for Economic Co-operation and Development ( OECD), especially the United States, Japan, and the countries of the European Economic Community ( EEC) or of the Association of Southeast Asian Nations ( ASEAN). Singapore's drive to industrialization had drawn it increasingly towards the OECD countries for foreign investment, technology, and markets. To a large extent, this shift had meant decreasing reliance on its ASEAN neighbors, particularly for markets and supplies. The other Asian NIEs, Hong Kong, Korea, and Taiwan, were sometimes viewed as Singapore's competitors. On the other hand, Singapore engaged in considerable and growing trade with them, particularly with Taiwan, and all three were a source of skilled labor.
Non-oil trade with the various EEC countries, which had been steady during the early 1980s, strengthened in 1987 and 1988. Nearly three-quarters of this increase was in exports of disk drives and integrated circuits, particularly to the Federal Republic of Germany (West Germany), Great Britain and the Netherlands. Overall, however, Singapore had a small trade deficit with Western Europe in 1988. *
A large amount of the trade between India and Pakistan takes place via Dubai, Singapore, and Turkmenistan-Afghanistan.
Trade with the United States
Singapore is more reliant on United States demand for its good that it is on demand from its Southeast Asian neighbors. In the early 2000s, Singapore was is one of the U.S.'s largest trading partners in Asia, and 11th overall. American businesses at that time employed 95,000 Singaporeans, about one-sixth of the work fork and 9,000 Americans lived in Singapore. In May 2003 the United States and Singapore signed a free trade agreement that has been in force since January 1, 2004.
By the 1980s, the United States had become Singapore's most important trading partner and, as such, crucial to the country's welfare. Singaporean officials often stated that a 1 percent drop in the United States economy had a 1.4 percent effect on Singapore's gross national product ( GNP). Consequently, in the 1980s Singapore was critically concerned about protectionist policies and budget deficits in the United States. In 1988 Singapore's total exports to the United States amounted to S$18.8 billion, up 28 percent over the previous year, and accounted for 24 percent of the nation's total exports. Of that total, about 80 percent were Singaporean manufactures, including disk drives, integrated circuits, semiconductors, parts for data processing machines, television sets, radios and radio cassette players, and clothing. Reexports to the United States also were an important part of the trade. Singapore's exports to the United States outstripped its imports from there, although the United States was, after Japan, Singapore's second largest supplier. [Source: Library of Congress, 1989 *]
Until 1989 Singapore and the three other NIEs enjoyed trade preferences with the United States under the United States Generalized System of Preferences ( GSP). This system was originally instituted to aid developing economies, but in 1989, the four Asian NIEs were removed from the program because of what some observers have seen as their major advances in economic development and improvements in trade competitiveness. The United States had been trying for some time to wrest trade and currency concessions from all four countries (but primarily South Korea), which had not been forthcoming. Although Washington presented the decision more as an economic graduation ceremony, observers noted that the move reflected United States frustration over its continuing trade deficit despite considerable devaluation in the United States dollar. *
The removal of the GSP affected less than 15 percent of Singapore's exports to the United States, among them telephones, office machines, wood furniture, and medical instruments, which faced duties of 5 to 10 percent. Ironically, United States firms based in Singapore were among the hardest hit. More than 50 percent of Singapore's exports to the United States came from American firms with operations there, such as ATandT, Digital Equipment, Hewlett-Packard, Rockwell International, and Travenol Laboratories. Singaporean companies, as well as Japanese and European firms with operations in Singapore, were also affected by the removal of the GSP. In early 1988, some 4,000 NTUC members gathered outside the United States Embassy in Singapore to protest the decision, and the Singaporean government expressed regret. *
Singapore’s Trade with ASEAN States
The Association of Southeastern Asian Nations (ASEAN) was founded in 1967 primarily as a forum for discussing issues of mutual concern among neighboring Southeast Asian countries rather than as a trading union similar to the EEC. In part, this orientation was because, other than Singapore, most of the ASEAN countries had similar products, tending to make them more competitive than cooperative. Although trade relations among the ASEAN countries remained largely bilateral, there was some informal economic cooperation, including joint representations to foreign governments on economic issues of common concern. In 1989 the possibility of a more formalized economic entity was at least being considered by the ASEAN members. [Source: Library of Congress, 1989 *]
In 1988 Malaysia was Singapore's largest ASEAN trading partner and third largest overall trading partner, after the United States and Japan. The Malaysian market was the single largest ASEAN destination for Singapore's exports and its second largest export market overall. In the late 1980s, Singapore established increasingly close economic and industrial ties with Malaysia's Johor state, which had served as Singapore's hinterland in colonial times. To alleviate its land shortage as well as its labor shortage and high labor costs, Singapore, began to transfer labor-intensive industries to sites across the causeway connecting it to Malaysia's southernmost state. Johor, in turn, hoped "economic twinning" with Singapore would boost its long-term development. By early 1987, there were 217 Singaporean companies or Singapore-based multinationals in Malaysia, having total investments of slightly more than S$200 million. *
Singapore's much smaller markets with the other ASEAN countries also were growing. In 1989 Singapore recorded its highest growth in bilateral ASEAN trade with Thailand, which replaced Taiwan as its fifth largest trading partner. Intra-ASEAN trade generally might have been underestimated, partly because of the volume of informal trade, including smuggling, and partly because so much of it was controlled by the Chinese community in each country. Keeping business within the family, clan, or dialect group was a central Chinese business practice that persisted across national boundaries. *
Singapore’s Trade with China and Japan
In the 1980s, Japan's place in Singapore's business picture was underscored by the fact that, in the 1980s, Japanese were the largest resident expatriate community in the city. Japan was the country's single largest supplier, accounting in 1987 for 25.3 percent of total imports, and Singapore's largest trade deficit was with Japan. Buyback arrangements for products manufactured by Japanese firms in Singapore also accounted for a significant part of the trade. Oil accounted for 40 percent of Singapore's exports to Japan in 1988. Singaporean observers noted by 1989 a significant difference in the market orientation between Japanese firms and United States-owned multinationals. Japanese firms in Singapore were producing primarily for the United States and other third-country markets, rather than for the Japanese home market. The United Statescontrolled multinationals, on the other hand, produced mainly for their own home market. Many of these same observers, both official and unofficial, also expressed the sentiment that the world export market in the 1990s, would "belong to Japan." [Source: Library of Congress, 1989 *]
Beginning in the mid-1980s, Singapore—which for two decades had sharply curtailed many forms of contact with China— began promoting itself as an alternative to Hong Kong as a "Gateway to China." In 1989 Singapore was estimated to be the fourth-largest foreign investor in the special economic zones of southern China and that country's fifth-largest trading partner; Singapore's companies were estimated to have about S$1 billion directly invested in China. Since most such investments were made in conjunction with Hong Kong-based companies, the real extent of Singapore's exposure to China may have been considerably higher. [Source: Library of Congress, 1989]
Exports to China rose 53.2 percent between 2001 and 2003. Imports from China rose 103.9 percent during the same time period. Singapore has invested heavily in the Shanghai real estate market.
See China, Foreign Investment, Temasek
European Union and Singapore Agree on Free Trade Agreement
In December 2012, t he European Union and Singapore have successfully completed talks on a free-trade pact, in a deal which is slated to make it easier for European auto makers and financial institutions to do business with and in the city state. Natasha Brereton-Fukui wrote in the Wall Street Journal, “Singapore's trade ministry described the agreement as "broad-based" and "comprehensive," encompassing tariff-free access for goods, greater access to services markets, intellectual property, competition policy, technical barriers to trade, government procurement and sustainable development.” [Source: Natasha Brereton-Fukui, Wall Street Journal, December 16, 2012 <+>]
“EU Trade Commissioner Karel De Gucht, who held discussions with Minister of Trade and Industry Lim Hng Kiang in the Asian city state, said he hoped the pact would open the way to similar agreements with other countries in the 10-member Association of Southeast Asian Nations—the EU's third-largest trading partner outside of Europe. "Singapore is a dynamic market for EU companies and is a vital hub for doing business across Southeast Asia. This agreement is key to unlocking the gateway to the region and can be a catalyst for growth for EU exporters," Mr. De Gucht said in a statement. <+>
“The EU said that Singapore had agreed to tackle technical barriers in sectors including cars, electronics and renewable-energy equipment, which would make it easier for European goods to be sold in Singapore. Under the agreement, the EU will remove tariffs on all imports from Singapore over five years, while Singapore will immediately allow duty-free access for all imports from the EU, Singapore's trade ministry said. The EU is the top destination for Singapore's exports. <+>
The EU and Singapore will extensively guarantee access to each others' services markets, including in the fields of environmental services, computer and related services, professional and business services, financial services and maritime-transport services, it added. In the area of financial services, the EU said it obtained commitments which were "at least on a par" with the U.S.'s free trade agreement with Singapore. "Singapore is confident that the [trade pact] will further enhance our bilateral economic relations, and pave the way for a region-to-region trade deal between the EU and Asean," Mr. Lim said in a statement. <+>
“A key sticking point in the intellectual-property talks was the protection of "geographical indications." While the EU had insisted that producers should have exclusive rights to use those distinctive place names, Singapore—like many countries—reserves its strongest protections for trademark holders, even if they have no ties to the location touted by the product's name. In an apparent partial concession by the Asian city state, Singapore will create a register for regionally specific and recognized foodstuffs, wines and spirits, offering "a high level of protection to the EU's most valuable geographical indications on the Singaporean market, such as Bordeaux wine or Parma ham," the EU said. The pact will also result in the elimination of several nontariff measures, improving access for exporters of pharmaceuticals and electronics, and increase access to government procurement opportunities, Singapore's trade ministry said. Singaporean exporters of electronics, pharmaceuticals, chemicals and processed food products will particularly benefit from the removal of EU import tariffs, it added. <+>
Foreign Investment and Foreign Companies in Singapore
Foreign investment accounts for 80 percent of Singapore's industrial base investments. In the early 2000s, tiny Singapore drew more foreign investments than even India and Indonesia. Although Singapore has a GDP only about a tenth of that of Italy, it receives approximately the same amount of foreign direct investment inflows.
Stock of direct foreign investment - at home: $454.9 billion (31 December 2012 est.), country comparison to the world: 15; $517.5 billion (31 December 2011 est.). Stock of direct foreign investment - abroad: $300.3 billion (31 December 2012 est.), country comparison to the world: 19; $331 billion (31 December 2011 est.). Investment (gross fixed): 24.7 percent of GDP (2012 est.), country comparison to the world: 55. [Source: CIA World Factbook =]
Foreign direct investment (FDI) in Singapore totaled US$15.36 billion in 2005. The cumulative value of FDI was US$155 billion at the end of 2003. Most investment is concentrated in manufacturing, financial services, and commerce and comes primarily from the United Kingdom (16.1 percent), the United States (15.4 percent), and Japan (13.5 percent). Singapore was the No. 4 recipient of U.S. foreign investment in 2001. The amount of American money invested increased from $5.6 billion in 1990 to $8.6 billion in 2001.
IBM, Hewlett-Packard, Motorola, Philips, Shell, and Microsoft large presences in Singapore. Caltex has a headquarters here. In the mid 1990s, American businesses employed 65,000 Singaporeans, nearly a third of the total Singaporean workforce. Matsushita (Panasonic) makes DVDs, mini-component stereos, microchips, electric motors and others in Singapore. It also has a research and development center here. Other Japanese companies also have a strong presence in Singapore.
Singapore has been a big investor in Myanmar. See Myanmar factsanddetails.com
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.
© 2008 Jeffrey Hays
Last updated June 2015