Economic Development in Singapore

Introduction

Today, Singapore has changed in many ways, and one of the most significant features of its development is economy. 50 years ago, Singapore was a rather undeveloped state, and its GDP per capita was only 300 dollars. However, since that time Singapore grew in population, size, and prosperity.

Today, it has an incredible GDP level, and it has risen up to unimaginable 60,000 dollars that makes it the sixth highest in the world. Hence Singapore’s ascension is really remarkable, taking into consideration its territory and natural resources, this is a breakthrough for Singapore on the international economic arena. Furthermore, due to its bold steps, Singapore became a leader in global commerce.

The country has embraced globalization, strict paradigm policies, and free market capitalism and all these measures resulted in the economical profits for Singapore. Moreover, the country has been able to overcome its territorial disadvantages, and from the economical point of view, it is a real achievement. However, this paper is dedicated to the economic development of Singapore, and it considers such points as the economic situation during colonial times, policies that led to the economic development, Singapore nowadays, etc.

Economic Situation during Colonial Times

Initially the United Kingdom considered Singapore only as a trading port for shipping goods from British Islands to China as well as India; however, the government of UK rapidly assessed the importance of Singapore’s location in the gulf. At the same time, on the Malay Peninsula British merchants took the leading positions (Abeysinghe & Jayawickrama, 2007). The key figure of that time was Sir Thomas Stamford Raffels. To some extent, it is his merit that Singapore stepped on the path of a great economic development. In 1819, Raffles signed a treaty with the Sultan of Johor in order to establish the British trading post on the island. In 1824, Singapore officially became a possession of the British Crown. Raffels has given a shape to many Singapore’s centers, and managed its economy (“Raffles's vision: The importance of Singapore in the British Empire,” n.d.). The colonial authorities declared Singapore a free port, and it has made a contribution into the economic development of the country. Chinese and Indian workers went through the city in Malaysia, and some of them settled on the island. From 1850 to 1860, the population of the country increased by 2 times, and reached the number of 82 million people, of whom 61 percent were Chinese. By 1891, 182 thousand people lived in Singapore. This factor made its own contribution to the development of the country’s infrastructure. However, in the colonial period, the economy of the country was primarily dependent on entrepot trade. Such policy offered a little prospect for further economic development of Singapore. However, everything changed with the withdrawal of British troops. Nevertheless, it is doubtless that United Kingdom gave Singapore a world-class port and a modern city.

The Post-Independence Period and Brief Economic History of Singapore

Singapore was under the British control for over a hundred years. However, during the World War II the British government failed to protect the island from the Japanese troops. As a result, nationalistic and anti-colonial movements have risen throughout the country. After a period of time, they got their independence. In 1963, Singapore separated from the British Crown.

The post-independence period was unfavorable for the economy of the country. Moreover, the country faced deterioration of the economic situation. Hence, there was a tough unemployment situation in the country, requiring the creation of new jobs (Huff, 2002).

Another inhibition of Singapore’s economy was mergence with Malaysia. Singapore merged with Malaysia, and together they formed the Federation of Malaysia. However, there was still some social strife in both countries, although Singapore was no longer under British control. What is more, two ethnical groups struggled to assimilate one another. Violence on the streets became very common for both countries. Chinese population outnumbered Malaysians; the Malaysian government feared that they would lose their identity, heritage, and political ideology, because the Chinese population was growing throughout the island and peninsula. As a result, the Malaysian parliament voted to expel Singapore from Malaysia. Another reason was that the Malaysian government wanted to phase out communist sentiments in the country. In 1965, Singapore gained its formal independence (Huff, 2002).

At that time, Singapore lacked sanitation natural resources, and proper infrastructure. Therefore, in order to stimulate further development, the government requested international assistance. Singapore received a recommendation from the United Nations, and in accordance with this statement, the most feasible decision for Singapore was a comprehensive industrialization program. Nevertheless, industrialization was a relatively new phenomenon for the country, because historically Singapore was active in commercial and trading activities. However, the government found a solution to this issue, and prepared numerous measures that made a way to today’s Singapore.

Policies that led to economic development

Soon it became clear that to achieve success in the industrialization effort, the government should give active encouragement and support to this process.

In 1961, Economic Development Board (EDB) was set up with a budget of 100 million dollars to implement the program. According to this program the task of EDB was a rapid industrialization and creation of new jobs in order to promote economic development. EDB has replaced the Singapore Industrial Promotion Board (SIPB), and its revolving fund was 1 million dollars. Besides, the SIPB only consisted of a confidential secretary and a manager. However, the SIPB was too small for promotion of growth and industrialization. The EDB has initially received extensive power, and entrusted to ensure the development of industrial estates.

However, when industrialization gained momentum, the functions of the EDB grew in complexity. In 1968, it was decided to focus its functions on the investment promotion (“History of EDB”, 2013). Nevertheless, in June 1968, there were formed two public liability companies, the Jurong Town Corporation (JTC) and the Development Bank of Singapore. They respectively took some EDB’s functions over the industrial estate development and the industrial financing.

However, the EDB is responsible for promotion of the investments, and further economic success of Singapore. In 2006, the EDB has contributed to more than 40 percent of Singapore’s GDP. On the one hand, the EDB has achieved 8.8 billion dollars commitments in the new production investments. And on the other hand, service companies made 2.8 billion dollars commitments in new business spending. Moreover, the EDB works closely with the Ministry of Industry and Trade in order to provide long-term planning and strategic directions to the industrialization program in terms of specific industrial trends and industrial sectors. The goal of the EDB is to promote Singapore as able to meet the competition hub for investment and business. Its objective is to create sustainable GDP growth, business opportunities and new jobs for people (“History of EDB”, 2013).

Globalization and Industrialization in Singapore

As it was mentioned above, during colonial times, economy of Singapore was based on entrepot trade. It was not prospective for the country. However, through industrialization, and a focus on labor-intensive industries, Singapore gained momentum. The country experienced their traits in the required field. Moreover, the country had no support from neighbors and a hinterland that could trade with Singapore. Therefore, the only way out was to look for the opportunities beyond its borders in order to hit stride in the industrial development (Watkins, n.d.).

The leaders of Singapore were pressured to find work for their citizens, so that is why they started to experiment with globalization. The tactic of Singapore was to overcome its neighbors, who boycotted them, and trade with developed countries such as America and European nation-states. The decision was made by the government of Singapore to connect with developed countries and persuade their multinational corporations to manufacture in Singapore. To achieve this aim, Singapore had to create auspicious conditions such as corruption-free, unimpeded by various unions, and low in taxation environment. To make it possible, the citizens of Singapore had to back down to autocratic government. The government provided radical measures such as death penalties for intensive corruption or narcotic trade. Moreover, all independent labor unions were depressed by Lee’s People Action Party (PAP). The remains of unions were consolidated in a single union called National Trade Union Congress (NTUC). Furthermore, NTUC was directly controlled by PAP. Many people who threatened to political, national, and corporate unity were rapidly imprisoned without due proceeding (Watkins, n.d.). Such radical measures were rather business-friendly, and they became very attractive for foreign investors. Moreover, the political and economic climate of Singapore’s neighbors was unpredictable, that is why Singapore seemed to be more advantageous for foreign investments. Singapore was an ideal place for manufacture, because of its location and established port system.

In 1975, only ten years after it gained the official independence, a quarter of the country’s firms were either foreign investors, or joint-venture companies. The major investors were the U.S. and Japan. As a result of stable political and economic climate, auspicious investment conditions the country’s GDP growth with annual double-digit speed (Abeysinghe & Jayawickram, 2007).

When the globalization gained momentum, Singapore started working on development of its human resources. The government set up many technical schools and paid to the foreign corporations to train their unskilled work force. The workers were trained in different fields, such as petrochemicals, information technology, electronics, etc. Those people, who could not get industrial jobs, were enrolled by the government in the fields of tourism, transportations, etc. Besides, the country has received dividends for having multinationals educate their workers. In the 1970s, the country essentially supplied the world with garments, basic electronics, and textiles. However, by the 1990s, Singapore took part in wafer fabrication, biotech research, aerospace engineering, pharmaceuticals, etc. It is doubtless that Singapore sacrificed freedom for the sake of economic development, and this issue is rather controversial. However, from the economical point of view such strategy is effective and undeniable.

Singapore Today

Today, Singapore is a highly industrialized country, and entrepot trade continues to play a key role in the economy of the country. The port of Singapore is one of the busiest in the world. Besides, in terms of total goods tonnage, the port of Singapore is on the second place after the Port of Shanghai. In fact, in 2013, Singapore was recognized as a country with low taxation rate.

Moreover, today, Singapore has well developed tourism industry. More than 10 million people visit Singapore annually. The city-state has many entertainments for visitors including night safari, zoo, etc. Furthermore, the country’s culinary tourism and medical tourism industries are also thriving due to cultural heritage and modern medical technologies. In recent years, banking has grown significantly, and assets formerly held in Switzerland have been moved to Singapore. Such measures were taken due to new taxes imposed by Swiss government (Abeysinghe & Jayawickrama, 2007).

In spite of its small sizes, Singapore is the 15th largest trading partner of the USA. Moreover, the country has established a strong trade agreement with numerous countries in Europe, Asia, and South Africa. There are approximately 3.000 multinational corporations in Singapore. Despite a small work force of 2.9 million people, the country produces a GDP more than 300 billion dollars annually, and it is higher than three-quarters of the world. Singapore is one of the best places to live on earth, however, of course not considering its strict rules.

As it was mentioned above, the country sacrificed freedom of its citizens, but it received a great economical profit. Singapore has made remarkable economic progress since the 1960s; however, it is an evidence of successful more autocratic policy, because in spite of its territorial inferiority, it gained momentum (Watkins, n.d.).

Conclusion

To sum up, Singapore has a long and interesting history from the economic point of view. Fifty years ago the country was pretty undeveloped; however, today Singapore has risen up its GDP level. Moreover, there are many factors that predetermine its success. For instance, it is hard to speak about the country’s inferiority, because its small size is compensated by its geographical location. Nevertheless, globalization and industrialization have positive influence on the economy of Singapore. Due to the proficient govern, the country reached today’s level of development. Besides, the success of the Singapore’s economic development and prosperity depends on its labor force; more specifically it is a training of its labor force. Singapore has created technical skills that are not available elsewhere in the Third World. However, the economic development of the country did not come easy for Singapore, and the progressive development of the economy is a continuous struggle against adversities. Even when there were too many barriers on the path to economic success, Singapore emerged to be victorious.

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