An Introduction to the Singaporean Economy
Singapore is a heavy hitter when it comes to the global economic marketplace. Having remained relatively stable in both the 1997 and 2008 global financial crises through its export focused economy its little wonder that the country is ranked by the Heritage Foundation’s Index of Economic Freedom as the second most open in the world. With high government revenue, a consistently positive surplus, and no foreign debt the domestic market is also incredibly strong and stable. The Singapore economy stands testament to the fact that size and natural resources aren’t everything with an economy based on solid foundations of exports in electronics manufacturing and machinery, tourism, financial services, and the biggest cargo seaport in the world.
Between 20-30% of Singapore’s GDP is derived from the manufacturing sector. The major industries in this sector are electronics, pharmaceutical chemicals, ship building and construction. Although the sector demonstrated resilience through demand from the pharmaceutical and bio medical sector in 2011, dampened demand for electronics from traditional export markets like Europe and the US slowed down output growth. Despite this, services sector industries (wholesale, retail, tourism, financial and business services) are still predicted to maintain strong growth.
The country’s financial services industry plays a crucial role in the strength of Singapore’s economy. The Singapore government is actively business supportive and this combined with the political stability of the country has attracted many investment and banking firms from around the world. The domestic market has benefitted from the knowledge, technology, and skills which these MNC’s have bought with them. Almost every international bank operating in Asia has headquarters in Singapore, whose only real competition when it comes to attracting multinationals is Hong Kong.
There are a few other industries which are making significant contributions to the economy. These include health care, education, media, infocommunications and casinos.
There is a saying in Singapore that the country’s true natural resource is its people, whose skills and drive have played a fundamental role in the country’s economic success. However, with a land area that is smaller than New York, Singapore has no notable natural resources. Despite this, Singapore operates the world’s third largest oil refinery using raw materials from resource rich countries like Saudi Arabia.
During the colonial era, Singapore was a major commercial and military seaport with well-established infrastructure. The post-colonial government has worked to upgrade and extend the existing transport, communications, industrial and housing systems to world standard.
On the road, Singapore has an efficient and safe transport system with 3,297 kilometres of paved highway and 138.2 km of rail.
Changi International Airport has flights to 182 different cities and 57 countries around the world and manages some 4.000 passenger and cargo flights a week.
Port of Singapore (PSA Corporation) offers 200 shipping lines and access to 600 ports in 123 countries. Singapore has the busiest container port in the world with as many as 1,000 ships docked there at any one time.
Singapore is a country which has fully embraced the mobile revolution with 1,225 mobile phone subscribers per 1,000 of the population. 99% of the population is also online, thanks to the government’s commitment to driving internet usage and increasing accessibility. There is also a free national Wi-Fi service (Wireless@SG) available in various hotspots around the city.
Singapore has many business premises available for industrial and commercial operations. With 7,000 hectares of industrial land and 4 million square meters of strategically located industrial space, The Jurong Town Corporation (JTC) is able to accommodate the needs of virtually any business type. In the CBD and the surrounding areas, there are a plethora of world class high and low rise offices available.
In 2014, Singapore’s GDP was USD$309 billion. Growth was affected in part by China’s slowdown and was down substantially from previous years at 2.9%. In 2015, the economy continued to suffer the effects of China’s slowdown but managed to bounce back in the final quarter expanding 1.9%. Despite these setbacks, the country is projected to turnover 339.37 billion USD by 2020.
Singapore is one of the few developed economies in the world with zero foreign debt since 1995. Outstanding government borrowing for treasury bills, bonds, and Singapore government securities was at S$417.7 billion in January 2016. This money was borrowed for the purposes of investment rather than spending and the ROI is sufficient to meet this debt figure. In 2014, Singapore recorded a Government Debt to GDP of 99.30%. This is down from an all-time high of 106.20% in 2012. On the whole, Singapore has a strong balance sheet and is set to continue it’s strong economic performance.
The Singapore government gains most of it’s revenue from income and property tax, excise duties, customs duties and its GST. Other sources of revenue include licenses, permits, property rental both locally and overseas, fines and forfeitures, and capital receipts from the sale of capital goods.
Although Singapore’s currency has always been traditionally strong, it slumped to a five year low due to an unexpected change in China’s foreign exchange policy which devalued the yuan. As one of the countries considered to be sensitive to China’s economic decisions, the Singapore dollar also fell. Despite this, the Monetary Authority of Singapore has persisted in it’s policy of “modest and gradual appreciation”. Given the relative turbulence on the foreign exchange markets, Singapore’s currency has still remained remarkably stable with an average of 1.40 SGD per USD in 2015 and is projected to finish at 1.41SGD per USD by the end of 2016.
Export and Import Trade
The main export commodities in Singapore are machinery and equipment, electronics, consumer goods, pharmaceuticals, chemicals and mineral fuels. Exports in 2014 totalled $430 billion US dollars and are projected to hit $ 432 billion USD by the end of 2016. Some of Singapore’s chief export partners include Hong Kong, Malaysia, the US, Indonesia and China. China’s economic slowdown has had an impact on the growth of Singapore’s exports. In 2014, imports reached $362 billion USD and the main imports are machinery, equipment, mineral fuels, chemicals, foodstuffs and consumer goods. Primary import partners include the US, Japan, Malaysia, China, Indonesia and South Korea. In 2014, Singapore was the world’s 12 largest exporter and its 13th largest importer.
Despite recent setbacks, Singapore’s economy continues along a stable, healthy growth path. In 2013, Singapore was ranked the world’s third wealthiest country and continues to attract lucrative investments from around the world.