Introduction
Singapore made structural changes in its economy. The country focused on 3 sectors namely its labor force, investments and innovations. After its Independence, the country focused on its labor force and tried to adapt notable changes to its approach to labor force. The country reformed the labor sector through creating more jobs so that unemployment would be lessened. Singapore also pushed for lower wages so that it can compete in the international market. In terms of its Investments Singapore’s policy on labor helped in a creating a commendable labor market thus in turn helped the country maintain its economic status. The investments of Singapore created increase in its accumulation which resulted to rapid growth in production. Due to the growth of its innovation capabilities Singapore had the chance to prove its worth in the global competition. Due to the growth of innovation opportunities, capital became difficult to acquire this resulted to diminishing returns if the capital investments would not be accompanied by needed improvements. Singapore’s innovation driven growth created a phase wherein the country was driven by sudden improvements in the use of resources. In a way this contributed to the rise in productivity and the attainment of goals. Moreover Singapore’s innovation driven growth affected productivity and this caused outputs to increase without the need for additional inputs. This created other opportunities for the country. This paper will give other ideas on what Singapore has done to improve its economic stature. This paper will discuss the challenges to Singapore, its government and its economic status.
Singapore and its economy
An essential feature of macroeconomic management in any country involves the adoption of appropriate labor market policies. This is because the labor market can affect both the cause and the outcome of major economic problems. For instance, unsound economic policies can lead to a loss of competitiveness, which will in turn lead to a higher unemployment rate. At the same time, because unsound labor market policies can cause workers to become choosy over jobs, giving rise to high reservation wages, this will also erode the competitiveness of the country. One country that managed well its economy is Singapore. Singapore, a nation of immigrants, obtained self-government from Britain in 1959 (Liou 2002). The country had no banking or industrial experience, and its economy relied on entrepot trade. At that time, labor unrest was quite prevalent, causing high unemployment and engendering living conditions that were very poor. Today, Singapore is regarded as one of Asia’s newly industrializing economies, and it has sustained a rate of economic growth of about 8 percent annually over the past three decades. Interest in management of the Singapore economy has increased, for among all the Asian countries it has been least affected by the recent currency turmoil in the region (Liou 2002). Singapore’s economy depends heavily on exports refining imported goods, especially in manufacturing. The manufacturing industry is well-diversified into electronics, petroleum refining, chemicals and others. Singapore has been rated as the most business-friendly economy in the world with thousands of foreign expatriates working in multi-national corporations.
The challenges to Singapore
Foreign direct investment (FDI) has played an integral part in Southeast Asia’s contemporary economic development experience. The industrialization of many of the region’s states has depended to a significant degree on the investment of foreign multinational enterprises (MNEs) in their economies. The Export- and FDI-led growth processes have been prime drivers behind Southeast Asia’s impressive techno-industrial transformation over recent decades which allowed the region’s constituent economies to ‘overcome the constraints of small domestic markets and narrow resource bases; exploit comparative advantage and scale economies; access foreign capital, technology and marketing and managerial expertise (Bartels & Freeman, 2004). Southeast Asia’s success in attracting FDI could be generally attributed to a combination of political, economic and social factors, including the supportive developmental policies of the region’s governments, favorable macroeconomic conditions and factor endowments , and rapidly expanding domestic markets. Singapore continues to be a strong advocate of FDI, in accordance with its general embrace of globalization (Bartels & Freeman, 2004).
Singapore has developed the most effective and sophisticated FDI policy that has combined openness with selective sectoral promotion. Indeed, FDI has been central to the city-state’s development strategy since independence, based consistently on targeting higher-tech sectors for FDI-based development. Singapore’s Economic Development Board (EDB) has played the pilot agency role of the developmental state, working in an adaptive partnership with transnational capital, in response to challenges posed by globalization (Bartels & Freeman, 2004). Globalization and the information and communications revolution, and their effects on Singapore and the city-state’s responses to them, dominate discussions on the country’s economic future (Da Cunha 2002). They are the key external challenges. Singapore is a tiny economy. By its very nature it cannot rely heavily on domestic demand as a sustainable engine of growth, unlike its larger neighbors in the Association of Southeast Asian Nations (ASEAN). Singapore thus operates a very open economic system to allow it to benefit from global trade and services. It is a trend-taker rather than trendsetter in the global economy. A key element of its economic strategy must be to identify larger global trends early and position itself to best benefit from them (Da Cunha 2002).
Significantly for Singapore, the Asian crisis has not led to greater protection of national capital markets. Given that investors are less discerning than the Singapore authorities may wish, and given its position as a regional financial hub, any retreat into economic nationalism by countries in Southeast Asia would have adversely affected it, as foreign capital might have shun the region as a whole. Instead, crisis economies under IMF supervision have opted for further liberalization of their domestic capital markets. The larger trend towards financial liberalization in Asia remains intact and, in fact, has been accelerated in the aftermath of the crisis. With that, Singapore should and has, indeed, seized the opportunity of the present lull in regional financial services competition to position its financial sector for the next wave of regional growth. In doing so, it has sought to reposition itself not as a regional centre but as an international financial centre in the global capital markets network. . To this end, Singapore has sought to put strategic distance between itself and its regional competitors, by improving disclosure standards, boosting the fund management industry, deepening the local bond market, and relaxing restrictions on the use of the Singapore dollar by non-residents (Bunnell, Drummond & Ho 2002).
The challenges to Singapore include the domestic issues, globalization, relationship with the external environment and sustained economic growth. Singapore needs to solve some of the domestic issues particularly on population management, racial harmony, and social divide. The domestic issues hamper the further growth of Singapore and could cause other problems. Singapore needs to be fully adaptable to globalization and its effect to the state. It needs to have the full cooperation of its citizens so that the country can withstand any unfavorable effect of globalization. Singapore’s challenge is to maintain its relation with external entities. Singapore needs to develop relationships that focus beyond political dialogue & economic cooperation. It needs to have a deeper relationship with other countries so that they can be assisted in times of need. Lastly a challenge for Singapore is to maintain its financial status even if there are global economic problems. Singapore has to plan and eventually use strategies that would maintain their financial/economic standing.
Industries being developed by Singapore
One industry being developed by Singapore is its tourism Industry. Singapore is known as a popular travel destination this makes Singapore’s tourism as one of its largest industries. The Orchard Road shopping district has a reputation of being one of Singapore’s most well-known tourist attractions. The government passed laws to legalize gambling and to allow two casino resorts; this was done to attract more tourists in the country. Aside from scenic spots, the government used diverse food products as a way to attract potential travelers. Singapore wants to be considered as a as a medical tourism destination. This came from reports that foreigners seek medical care in the country each year. Singapore medical services aim to serve more foreign patients and through it acquire commendable revenue. The government expects that through medical tourism, the country could give new jobs to its citizens. Moreover Singapore aims to develop its port/shipping industries. Singapore has strategic port infrastructures. These structures are more competitive than their neighbors. The Port of Singapore is considered to be one of the busiest in the world. It has surpassed the feats of Hong Kong and Shanghai. It caters to various shipping businesses. Lastly Singapore aims to develop its Bio Technology sector. Singapore has used all means developing its biotechnology industry. The biotechnology sector is considered a huge investment thus Hundred of millions of dollars were put into the sector to create infrastructures; fund researches; and to try to recruit top international scientists. The biotechnology industry and business within it account for a good part of the country’s manufacturing production.
What does the government do for it to be competitive?
Singapore politics is not in a transient phase, evolving towards a future, more liberal form. Rather, the current formally democratic yet illiberal political style, whatever tension it may breed in parts of the populace, is likely to prove fairly resistant to change. Singapore resents comparisons with Western models. Indeed, at a time when the Western political vision has itself become clouded by alienation and uncertainty, and many people in those countries are engaged in a search for new political forms and values to revitalize existing structures, the Singapore government would presumably argue that its version of imposed communitarianism has managed, by whatever means it was done, and however tenuous the result, to strengthen weak civic bonds in a plural society and to instill a sense of belonging to the majority of the population (Blondel, Inoguchi & Marsh 1999) Furthermore, for a country pursuing a competing nation strategy in the global economy, the Singapore government’s willingness to spell out and to successfully impose on everyone a common view of how people should live together, achieves a sense of cohesion, of trust within society, and of an intrinsic civic justice, which helps oil the wheels of business and commerce (Blondel, Inoguchi & Marsh 1999)
The Singapore government’s management of multinational companies played a key role in shaping the policies of the political leadership, and in nurturing large state-owned companies run by the civil service bureaucracy. These state companies together with multinational enterprises provided the main thrust for the economic development that was the leadership’s primary objective. The foundations of a much-expanded role for multinational investment in the domestic economy were laid by the labor legislation shifted the balance of power between employers and employees (Bell 2000). In particular, the Industrial Relations Ordinance set out the prerogatives of management and removed a range of contentious issues from labor-management negotiations. The managers of multinational enterprises, though not part of the governing elite, found themselves playing a more significant role in government policy formulation, through their links with government statutory boards and state-owned companies, than they might have expected to play in most other countries (Bell 2000). To be competitive Singapore manages its monetary and finance policy wherein sudden problems caused by the financial and monetary procedures are fixed and adjusted. The finance and monetary procedures are changed occasionally to meet the changing needs of the environment. Singapore also makes sure that its taxation policies will be fully implemented so that the benefits of the policies would be felt by every member of the organization. The taxation policies are well studied to ensure that nobody would be taking advantage of such policies. Moreover the government of Singapore takes good care of the private businesses so that they can attract more private firms to invest in their country. Lastly the government of Singapore makes sure that it has a stable political environment so that business people would have no fear in undergoing their business in the country. If there is unrest in the political sector, the government tries to find abrupt solution before it creates more issues.
References
Bartels, FL & Freeman, NJ (eds.) 2004, The future of
foreign investment in Southeast Asia, Routledge Curzon, New
York.
Bell, DA 2000, East meets West: Human rights and democracy
in East Asia, Princeton University Press, Princeton, NJ.
Blondel, J, Inoguchi, T & Marsh, I (eds.) 1999, Democracy,
governance, and economic performance: East and Southeast
Asia, United Nations University Press, New York.
Bunnell, T, Drummond, LB & Ho, KC (eds.) 2002, Critical
Reflections on cities in Southeast Asia, Brill, Boston.
Da Cunha, D (ed.) 2002, Singapore in the new millennium:
Challenges facing the city-state, Institute of Southeast
Asian Studies, Singapore
Liou, T (ed.) 2002, Managing economic development in Asia:
From economic miracle to financial crisis, Praeger,
Westport, CT.
Credit:ivythesis.typepad.com
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