09 Nov 2012

Prepared by: Kyaw Soe Hein (A0103612Y)

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In what ways is the Singapore economy now globalized? How can the government

and people respond to its new challenges?

Emerging of Singapore’s economy

Presently, Singapore, the vivid city-state country is considered as the world first class

country due to its strong GDP growth, fluent economic activity, and the high living standard of

its dwellers. It is notably considered as the one of the best place to live and work by many

people around the globe. As a matter of fact, it possesses highly-skilled labour force by

upgrading education level of its citizens and as well as, drawing high-flyers from foreign lands.

Thus, the national economy is contributed by a number of Multinational Corporations as well as

national corporations. The well-established infrastructure and efficient communication systems

that connects the South-East Asia with the rest of the world in turn optimizes its economic

activity through international markets, so called financial hub of S.E.A. Politically, the

Government is always adaptable to new Economy & Social challenges imposed by World’s

Economy Uncertainty by setting yearly goal and planning long term targets. New directions of

development are also given by the Ministries of respective areas. Hence, Singapore as a vibrant

city, its economy is fully globalized and the Small Red Dot is regarded as one of the world’s best

country with numerous business opportunities.

Thus, it would be worth-taking look at the history of this small state country so that one

could learn in which way Singapore Economy is globalized along the way. In the early 19th

century, Singapore served as a free port for trading in Malay Archipelago with the rest of South

East Asia as far as European, Arabs, India and China under the rule of British Colonial office. In

1819, Singapore is founded by British colonial officer Stamford Raffles and under his directive

vision Singapore served as free port trading region, thus slowly became major exporter of world

markets of tin, rubber, rice, timber, petroleum and other commodities. The process of

becoming major financial player in the region is trusted by trading with neighboring countries

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such as Malay Peninsula, present-day known as Indonesia, Brunei-Borneo as well as China and

India from far distance. As British acquired the Singapore Land to home their Banks, merchants

and perform key financial activities, Singapore inherited those culture from them and dealing

with labour movement, goods inflow-outflow, managing finances are not new to Singapore. All

those inheritances inspired Singapore Economy to be mature and became globalized in late 20th

Century. Therefore, the key prominent areas of development which enabled the Singapore

Economy to be fully globalized will be well-discussed as this could in turn give the overview of

today’s Singapore itself.

It is suitable to analyze how Singapore Economy is globalized in terms of economy

activities as well as political aspects of Singapore as the government planning is the one of the

major driven factors of economy booming. In 1960s and 1970s, Singapore Authority State

shaped the Economy to world’s economy from regional hub. At first, as early as 1930s, the

Great Depression of world, Second World War and the Japanese Occupation of the 1940s,

regional conflicts and the uprising communist power in China, North Korea and North Vietnam

halted the economic activity of Singapore with South East Asia Countries and the rest of the

world.

Thereafter, Singapore political turmoil and labour unrest, the low GDP and high

employment rate, shaken the national economy as the politically stable state is desired by any

foreign investors so that the property and profit can be assured. However, by 1959, The

People’s Action Party (PAP) gained internal self-government from British and it is acknowledged

that the Singapore started to see its right track of economy by then. Initially, the PAP’s had

foreseen importance of Singapore as a commercial and financial hub for “Malaysian Common

Market” as industrialization in Malaysia was setting off. However, the proposal of united

Singapore-Malaysia deemed unpractical as PAP’s tried to promote the rights of Chinese in

Malay Peninsula. Therefore, Malay State Government and Singapore’s PAP government had

denounced their unification plan in 1965 after two years of union of two states, State of

Malaysia and Singapore.

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However, miracle favored those who fought well and strived to thrive. The separation

from Malaysia had forced the PAP government to define new area of strategy as the natural

resources are scared, and the nation is tiny. Nevertheless, Singapore had historically benefited

a free trade and good capital flows with neighboring countries. In fact, it had substantial

domestic surplus labour. Those in turn turned to be the factors to be considered by the PAP

government such that a new strategy of labour-intensive export manufacturing for world

markets became realistic. Additionally, this strategy embraced Hong Kong, Taiwan and Korea in

positive ways in terms of delivering GDP growth and jobs for citizens which set as example to

Singapore. Thus, Singapore changed its economic to be fully globalized by global multinationals

corporations, especially in Electronics Sector where Developed countries like U.S. and Japan

outsource labour-intensive assembly to labour-abundant countries like Singapore.

It is the strategy of globalization that enables export manufacturing integrated into

Singapore and in turns offshore supply chains of foreign multinational Corporations for global

markets. The government policies on national development were also played major role in

turning Singapore national economy to globally connected economy. Building physical

Infrastructure is key role in hosting talents pools. Roads, utilities, industrial estates, the port and

airport offered suitable place for investors to implement their money-generating business in

Singapore, and assured that their business activity will be at the world’s pace while

communicate with the world efficiently.

In terms of attracting foreign investors, the government lowered tax and arrange

subsidies for foreign investors. Large sum of money were spent on education system and

produced technical know-how skilled workers to provide MNCs. The government also managed

to cheap land, efficient infrastructure, and high productivity of the working population.

Together with fair adjustment of industrial relations legislation, restrictive labour rights,

political, legal and media controls, Singapore became a nation of stable politics which granted

MNCs to base their regional HQs for Asia. In addition, the “second industrial revolution” was

imposed by levitating salaries and wages between 1980 and 1982. This turned out to be

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motivation for upgrading industrial and capital-labour substitution in the export manufacturing

sector. However, high-wage policy was controlled by CPF (Central Provident Fund)

contribution, where global recession was hit, the government could tackled the severity of

impact by lowering CPF contribution rate by employers so as to cover their losses. Hence, this

served to attract more foreign investments.

By turning the regional economy to global, Singapore had benefitted in many different

ways. Noticeably, the change of economic activity is reversed in turns of becoming a net

exporter from a net importer in 1985. The domestic savings in both private and public sectors

resulted in huge external surpluses. Surprisingly, the ratio of official foreign reserves to GDP

was increased, 102 per cent in 2004, and to 165 per cent in 2006. The surpluses and wealth of

foreign exchange reserves was arguably world’s largest foreign exchange reserves.

Therefore, it is crystal clear that Singapore’s economy was fruitful result of directive

authoritarian state government’s effort. Needless to say, this honor goes to Singaporeans’ hard

work and contributions to changing society and economy .In parallel, as there is always

disadvantage, the rise of the nation imposed costs on the local citizenry in terms of property

rights, political liberties and human rights. However, one may conclude this is as a necessary

sacrifice as political diversion and social unrest is the most threatening factor to consider for

business plan and development.

New Challenges for Singapore

Today’s Singapore enjoys the fruits of the 20th Century developments; nevertheless,

there must be new plans and fresh goals for 21st Century Singapore. This era is much more

dynamic and awake of other Asia powers is at its peak, thus resulting in tight economic

competition. Now, war-torn or politically unstable countries in Asia were started opening up

recently and this could challenge Singapore in terms of cheap land and abundant labour force.

These years Singapore suffered from its developments’ shadows, increased housing Price, and

competitive job places, migration of foreign talents into its tiny land. It could be easily seen that

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everyone in Singapore is struggling to keep up with the increase price for high living standard.

This is inevitable story of modern state with scarce lands. However, it is believed that Singapore

will be able to maintain its standing as world first class country. This will not be easy as one

might think to solve the challenges. Therefore, it would be much interesting to discuss how

these challenges are to be answered.

One could be so optimistic of Singapore future although there are some uncertainties at

a turning point. In the process of Globalization, the Great china has risen along with other South

East Asia Countries like Thailand, Indonesia, and Malaysia. These countries offer more

competitive price for manufacturing with cheaper labour and affordable land The Asian

Financial Crisis in 1997 is also contributing factor that shaped the economy nature of Singapore.

However, the challenges ultimately present many new opportunities for those who could use

the advantage of efficiency, time and cash flow management. These preparation policies are

currently led by Singapore Government in preparing its citizens for tighter economic challenges.

The way forward of the Singapore should embrace new and more challenging strategy.

As Singapore has good foundation as a financial center, Singapore should thrive for staying as

top financial city in Asia. To bring about this result, Singapore should keep its society and

economy open, flexible and adaptable while promoting for excellence, reliability and honesty.

One of the best advantages for financial hub is keeping the currency stable and the success in

keeping the inflation rate as one of the lowest rates in the world. In addition, the Government

and Judiciary are transparent and trustworthy and Investors could assure their property as well

as intellectual property (IP).At the same time, Singapore should encourage the

entrepreneurship of SMEs as this can inspire new businesses and acquired new paths to

success. It can as well develop capital to fuel promising future business trend. In the mean time,

new ideas of development should be inspired by promoting knowledge of its citizens as well as

attracting foreign talents. By means of stated ways, Singapore could be arguably maintaining its

status of leading financial city despite of economy uncertainty.

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The diversity of business, as in engineering, manufacturing and value added service such

as hotel & tourism and education, also should be focused. The challenges posed by parallel-

developing countries could be answered by having variety of businesses so that it attract

investors and work force as it is not only one directed. However, major transformation of low-

tech manufacturing to high-tech R&D capabilities should be seen. The scarce land is not suitable

for huge plants for manufacturing rather developing new technology will be advantageous to

small country like Singapore. Present Multinational Corporation (MNCs) should also be

maintained their standing ground by providing what they asked for, high-skilled workers and

lower government tax on them. In terms of service, Singapore could be Asia’s leading provider

of world-class services as trading and logistics management is well-handled. Additionally, new

Casinos and many recreational places like Singapore Universal Studio had developed and its

Success is proved. Hence, tourism could be one of the main ways to earn money for Singapore

as well as creating a lot of jobs for its citizens. Education services are also worth to discuss as

Singapore currently home over-sea campuses of prestigious Universities around the world as

well as its world-rank standing local universities. Income from its educational services could be

maximized if they could reach out students from developing countries as knowledge became

power in those countries. The students around the Asia Region would highly consider Singapore

Education as it is well recognized by the world and studying in Singapore could expose them

with international society. Therefore, the services will co-exist with knowledge-intensive

manufacturing, this in turn assure the challenges are coped at the best for Singapore.

Most important of all, role of the people is ultimate in preparing challenges for the

future of Singapore. The competitive work force present is a must for Singapore to handle new

strategy of development. Singapore must continue to invest heavily in education; the necessary

skills and readiness for a knowledge economy will become advantageous for any challenges to

full potential. In other words, Singapore should encourage a various talents not only technical

but also financial services as they are its main engines for the country. Unfortunately, until

recent, Singapore Birth-rate is still low although government’s measurements were done to

bring up. More and more, people who are well-educated and those who have capability to

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venture in new businesses are relocating to more developed countries in search of green

pasture. This social issue is delicate in a sense, but Government should set more sensible policy

to maintain its own talents within the country. Government could be more highly supportive in

having a family by providing citizens with Affordable Housing Plans and secure job places. The

Continuing work place training should be placed in order to assist them with upcoming

challenges. Most importantly, Government could promote “SOUL OF SINGAPORE” by showing

their willingness to help its citizens in times of difficulty. In this way, it is believed that there will

always be loyal and efficient labour that will answer the challenges of globalized economy.

However, Singapore should not disclose its doors to foreign talents as new ideas and strategies

can be benefitted from them, but via managed channels, not to the extent of foreigners hinder

job vacancies of its citizens. Notably, the practice of meritocracy will continue to benefit and

the integration of foreign workers with locals should be focused as in this way, Singapore could

be a similar example of U.S. accumulating talents from all over the world.

All in all, the challenges imposed by globalized economy can be diminished if the

Government of Singapore and its people are well prepared, setting new policies and upgrading

their skills to adapt fresh situations. One might find that it sounds easy. However, in reality, this

transition will not be as smooth as expected. Certain people will still suffer from uncertain

economy status of today. Positively thinking, Singapore Government has certain plans for years

ahead to reduce the negative impact of globalized economy. In fact, its economy grew 1.7% in

the first half of 2012 and on the track of 1.5-2.5% growth for the year. Currently, new

programmes are introduced to help the population in terms of housing, education and medical.

To stay ahead of the economy, the government review their policies more broadly, especially

social and education policies as well as core values such as meritocracy, multi-racialism and

financial prudence. It is undeniable that this will in turn bring about success for a shining red

dot twenty years from now, according to Singapore Premier Lee Hsein Loong. Therefore, it is

believed that Singapore can be readily to face and cope with the challenges of globalized

economy. With many thoughts, Singapore is a place for better future and a place to be called a

“home with Hope and Heart”.

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References

Singapore: From place to nations, second edition by Dr. Lee Soo Ann

Report of the economic Review Committee February 2003, by Ministry of Trade

and Industry, Republic of Singapore

Globalizing State, Disappearing Nation: The Impact of Foreign Participation in the

Singapore Economy by Linda Lim and Lee Soo Ann

http://asean.fta.govt.nz/singapore-economic-situation

http://www.channelnewsasia.com/annex/ND2012_PMLEE_ENGTEXT.pdf

http://www.pmo.gov.sg/content/pmosite/mediacentre/speechesninterviews/

primeminister/2012/August/national_day_message2012english.html

Kyaw Soe Hein(A0103612Y)