Transcript Economic Development Singapore_Overview - IH-2P2-2P4

Singapore’s Economic
Development
Reasons
for Industrial
Development (post-war years)
Singapore (1960-64)
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Developmental Strategies
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Import substitution strategy
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To solve unemployment
Diversify away from dependence of entrepot trade
Establish economic agencies to spearhead
development
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EDB – 1961 (search for a global market)
Jurong Industrial Estate - 1961
replacement of agricultural or industrial imports to encourage local production for local
consumption, rather than producing for export markets  meant to generate employment and
make the country self-reliant in critical areas such as food, defense, and advanced technology.
Singapore (1960-64)
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Achievements
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GDP growth averaged 5.3% p.a. between 196064
Manufacturing sector’s share of GDP grew from
12% in 1960 to 14% in 1964
Ministry of Trade and Industry
http://www.mti.gov.sg/public/MTI/frm_MTI_Default.asp?sid=8
Singapore (1965-79)
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Challenges
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Separation from Malaysia
Aborted import-substitution strategy
Confrontasi – threatened our role as a major
trading post for the region
Planned withdrawal of British bases within 5 years
(employed 40,000 workers)
Singapore (1965-79)
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Developmental Strategies
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Export-oriented strategy
Attract foreign investors to Singapore to develop the
manufacturing and financial sectors
Enacting the Employment Act to improve labour climate &
investment environment
NTUC & NWC – 1972
 Promote better labour-management relations
Investment in key infrastructure – JTC
Nationalised companies where private sector lacked
expertise (NOL, SIA, DBS, Sembawang Shipyard)
Singapore (1965-79)
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Achievements
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Growth averaged 10% p.a. over 1965-79
Unemployment rate fell to 3.3% in 1979
Manufacturing sector’s share of GDP grew from
15% in 1965 to 27% by 1979
Singapore (1979-85)
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Challenges
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Tight labour market, upward pressures on wages
Emergence of other lower cost developing
countries in the region – contenders for MNC
investments
Need to restructure the economy towards higher
value added activities
Economic
Restructuring
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Changes to economic
and service sectors
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Transport
 Automation of SBS
buses in 1970s
Hotel
Food and beverages
Retail
Industrial
Restructuring
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Focuses on changes in
the industries
Singapore (1979-85)
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Developmental Strategies
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Industrial Restructuring
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encouraged automation, mechanisation and
computerisation
higher value-add
skills intensive
investment promotion policy
Renewed emphasis on manpower development
through education and training
3-year wage correction policy to reflect the tight
labour market and induce efficient use of labour
Reasons for Industrial
Restructuring
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Increasing competition from rapidly industrialising
countries with labour-surplus
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Protectionism in developed countries
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Lower than Korea, HK or Taiwan
High reliance on foreign labour
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Generalised System of Preferences for developing
countries
Unsatisfactory productivity growth rate per worker
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Compete with Indonesia & Thailand
What is our comparative advantage?
Limited land area does not allow for inflow of foreign
workers
Raising productivity through wage increase
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NWC  wage increase to force hesitant employers to
mechanise and rationalise the use of labour
Other Factors?
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Besides industrial restructuring
 Role of Government
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Centralised political organisation
Foresight – forward planning
Political stability
Physical size
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Effective communication
Support facilities – easily integrated
Singapore (1979-85)
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Achievements
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Economic growth averaged 6.8% p.a. over 197985
Nominal value-added per manufacturing worker
grew by 6.9% p.a. during this period
Proportion of skilled labour rose from 11% to 22%
of total labour force
Singapore (1986-98)
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Challenges
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A more matured economy with slower growth rate
Resource constraints more binding and faster
rising costs
More intense competition – both developed and
developing countries
http://www.worldbank.org/data/wdi2002/tables/table1-6.pdf
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Relatively low technology base on a global basis
Singapore (1986-98)
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Developmental Strategies
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Knowledge-intensive Industries (KBE)
Deepen technology base – committed $2 billion
from 1991-95 under National Technology Plan
and $4 billion under National Science and
Technology Plan from 1996-2000
Cluster Development – leverage on synergies at
the firm and industry levels – mutually supporting
industries were identified and developed to
entrench entire cluster’s niche areas (electronic,
petrochemical http://www.jurongisland.com)
Singapore (1986-98)
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Developmental Strategies
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Promoting manufacturing and services as Twin
Pillars of the economy – to diversify sectoral and
market dependency, reduce vulnerability, promote
broader based economy (pioneer status,
investment allowances were extended to
investments in service sectors)
Regionalisation – encouraged leveraging on the
potential of the Asian markets to overcome local
resource / market constraints
Singapore (1986-98)
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Achievements
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GDP growth averaged 8.4% p.a.
Share of financial and business services sectors in total
GDP grew from 20% to 26%
Between 1987-98, the number of research scientists and
engineers grew by 13% to reach 12,655
Value of high-tech domestic exports expanded from $24
billion in 1990 to $62 billion in 1998
Stock of direct overseas investments increased by 19%
p.a. from 1990 to 1998
Singapore (1998 onwards)
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Challenges
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July 1997 – Devaluation of Thai baht – regional
crisis
After picking up in 1999-2000, hit by another
recession 2001.
September 11
Outbreak of SARS
Singapore (1998 onwards)
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Our Response – a series of cost cutting
measures
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June 1998 - $2 billion off-budget package
Nov 1998 – $10.5 billion
2001 – another 2 off-budget packages to help
businesses and workers to tide over the sharp
downturn
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July - $2.2 b
$11.3 b
Singapore (1998 onwards)
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Looking beyond the crisis
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Singapore to upgrade, transform and revitalise
the economy
Economic Review Committee (Dec 2001) to
review and formulate a blueprint to restructure the
economy
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Government policies
Entrepreneurship & innovation
Internationalisation of Singapore companies
Raise productivity
Preparing workers to adapt to changes
Knowledge-based Economy
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Talent and Education
Innovation and Entrepreneurship
Re-inventing businesses and industries in the
face of global competition
Life-long learning
Upgrading to higher end manufacturing
operations and innovative services
A conducive fiscal, regulatory framework to
encourage innovation and competition
Contributions by Foreign
Companies
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Provide jobs for Singaporeans
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Establish markets which Singapore lacks
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Not inhibited by Singapore’s small market
Export to their home market & established markets
Skills and technology which Singapore needs
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By setting up labour-intensive industries
New generation of Singaporeans acquire
technological and managerial skills required to operate
& maintain sophisticated process
Capital
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investment
Recap - Account for the
following:
“Singapore’s economy has grown at a
growth rate of 8.5% from 1960-95,
except for the years 1964,1975, 1985
& 86, when the economy grew at
more than 5% annually.”
From the Statistical Singapore Newsletter, Vol 18, No. 4 April 1996
What are the more
important factors ensuring
economic development?
List the various factors under each
category:
Political
Social
Economic
Internal
External