SINGAPOREPath to Development

Singapore Today• Population – 4.5 million– Fertility rate of 1.07 children (3rd lowest in world)– Gov’t planning growth to 6.5 million by 2020

• Size – 270 sq. miles (704 km2)– World’s second most dense country

• Ethnic background of population– Chinese (75%), Malay (14%), Indians (9%)

• Official languages– English, Mandarin, Malay, Tamil

Early History

• Second Century AD – First evidence of human settlement

• Became an important trading post– Sumatran Srivijaya empire 1000-1400– Called “Temasek”

• Declined after 1400• Sacked in 1613 by Portuguese• Reverted to a fishing village with few inhabitants

until 1819

History from 1819

• 1819 – Britain established a trading post on Singapore Island– Sir Thomas Raffles, East India Company – Free port (no tariffs) – largely entrepôt port– Spices, rubber, palm oil; goods from China,

Indonesia, Malaya• Quickly become an important trading port

in SE Asia– Principal British presence in SE Asia

Raffles Plan for Singapore (1822)

World War II

• British believed in “Fortress Singapore”• Japanese invaded Malaysia on 8-Dec-41– Leap-frogged down Malay Penisula– Light tanks and bicycle infantry

• Singapore surrendered on 14-Feb-42– Harsh 3½ year Japanese occupation– 5-25,000 Chinese Singaporean’s executed

• Japanese surrendered on 15-Aug-45– British returned to Singapore on 9-Sep-45

Post-WWII Events• 1955 – Partial internal self-government

– Increasing social unrest, anti-colonial feelings– Hock Lee bus works strike and riots (1955)– Chinese Middle School riots (1956)

• 1959 – Full internal self-government– People’s Action Party (PAP) sweeps elections to

Legislative Assembly (41 of 53 seats)– Lee Kwan Yew becomes Prime Minister

PAP (People’s Action Party) Initiatives (early 1960’s)

• Trade unions consolidated into one– National Trades Union Congress (NTUC)– Strong government oversight

• Education system revamped– Create a skilled workforce– English chosen as language of instruction

• High-rise low-cost housing blocks– 25,000 apartments in first 2 years

Economic Strategy 1960-80’s

• 1960’s – Focus on low-cost manufacturing• 1970’s – Focus on labor skills & technology– Machine tools, petrochemicals, electronics, and precision

work

• 1980’s – Capital intensive high tech– Computers & peripherals; electronic medical instruments;

automotive components; specialty chemicals & pharmaceuticals; optical & photocopying equipment

Economic Strategy 1990’s

• Manufacturing and Services• Transformation from a production-driven to

innovation-driven economy • Focus on education and human resources • Film, media, and publishing, arts and entertainment,

textile, fashion and design sectors • Outsourcing of manufacturing to low-wage sites in

Indonesia and Malaysia

Economic Strategy 2007• Global Hub for business and finance, logistics &

distribution, communications and information– Key economic activities increasingly concentrated in a few

strategic centers – Hub services extended “hinterland”

• Heavily investing in humans & infrastructure– Education, training, and industrial relations– Airport, seaport, telecommunications network, biotech,

financial and industrial facilities• Regional investment– Malaysia, Indonesia, China, India, Vietnam

THE ASIAN FINANCIAL CRISIS (1997-1998)

Exposed The WEAKNESS of

Singapore Fundamental Economics

Forced the GOVERNMENT to

Restructure, Liberalize and ReformTheir Economics

In the early 1990s, flood of foreign capital flows into Asia. Short-term foreign currency-denominated loans were used to finance longer-term infrastructural projects. When current account deficits ballooned, MASSIVE CAPITAL FLIGHT force Asian currencies to devaluate while stock markets plummeted.

THE ASIAN FINANCIAL CRISIS

THE ECONOMIC REVIEW COMMITTEE

DECEMBER, 2001

CHAIRMAN : DEPUTY PRIME MINISTER (FINANCE MINISTER)

MEMBERS :-The Chairman of the Economic Development Board,-The Secretary-General of the National Trade Union Congress,-The Chairman of the Singapore National Employers Federation,-Prominent CEO from Private Sectors

THE ERCREPORT

Singapore’s successful growth model of the past twenty years WASN’T GOING TO BE SUFFICIENT for the future growth.

RECOMMENDATIONS(Short-Term and Long-Term)

Improve the relative COST POSITION OF COMPANIES OPERATING IN SINGAPORE

Expanding ECONOMIC TIES WITH COUNTRIES IN THE WIDER REGION (India, China, Japan and Australia) to enhance Singapore’s economic growth.

Singapore signed FREE TRADE AGREEMENT with various countries (United States and other countries)

Singaporean Government-Linked Companies (GLCs), including TEMASEK HOLDINGS, became more active investing abroad

Established WORKFORCE DEVELOPMENT AGENCY to lead efforts to upgrade worker’s skills and THE SKILLS REDEVELOPMENT PROGRAM (SRP) tp subsidized employer’s cost of sending their workers for training.

Launched NATIONAL RESEARCH FOUNDATION to further develop the country’s IT infrastructure and the use of e-services by government.

GOVERNMENT ACTIONS (1)

The Ministry of Information, Communications and the Arts (MICA) mounted a plan to transform Singapore into a “VIBRANT GLOBAL CITY FOR INFORMATION AND THE ARTS”.

Turn entire downtown MARINA BAY AREA into an exciting environment and became one of the most visible symbols of the economic transformation

Employers contribution to CPF cut to 9%-13%; monthly salary cap for computing contribution reduced from $6.000 to $4.500; Income tax rate reduced from 26% to 21%; Tax were shifted to a goods and services (VAT), from 3% to 7%; corporate tax was reduced to 20%; etc

GOVERNMENT ACTIONS (2)

IMPACT : SINGAPORE (2008) Average real GDP was positive Labor productivity grew at compound average rate 1,5% Trade grew to $338 billion in exports

(increase 88% relative in 2004) Inward FDI flows reached $22,7 billion in 2008

(up 13,3% from 2004)

Singapore Malaysia Indonesia Thailand South Korea Hong Kong -

12,500

25,000

37,500

50,000 47,940

13,740

3,830 5,990

28,120

43,960 GNI Per Capita, 2008 .

SINGAPORE NEXT STRATEGY

Singaporean economy consisted of a PORTOFOLIO OF CLUSTERS that had evolved over time.

Traditional strengths were in areas like : 1. Petrochemicals, 2. Transportation and logistics, 3. Finance,4. Information Technology.

Singapore Government develop new clusters : 5. Tourism, 6. Education,7. Biopharmaceuticals

PETROCHEMICALS

The Chemical Process Technology Centre (CPTC) and the Institute of Chemical and Engineering Sciences (ICES), had been set up to provide staff training and research expertise in petrochemical.

The petrochemical cluster had been a major part of the Singapore economy (top three oil refining centres in the world) since Sheel built the country’s first oil refinery in Jurong Island in 1961 and accounted for 10,3% of Singaporean industrial output and third largest manufacturing sector in Singapore

FINANCIAL SERVICE

The Financial Industry Competency Standards (FICS), Sept 2005 and June 2006, To increase the supply of skilled workers in the Financial Service Industry by scholarship programs.

The Financial Service Industry accounted for 13% to Singapore’s GDP in 2008 but have had increasingly short supply for skilled workers.

TRANSPORTATION & LOGISTICS

The NOL, majority owned by Temasek Holdings, was among the largest shipping lines in the world (market share 3,6% in 2007), Changi airport rangked close to the top twenty by passanger volume.

INFORMATION TECHNOLOGY

The Infocomm Development Authority (IDA), regulating telecommunications and promotin ICT usage and The Media Development Authority (MDA), supporting content development across different media platforms, promoted investments in digital media and animation courses.

Information technology services and electronics manufacturing accounted for 8,9% of GDP.

NEW CLUSTER DEVELOPMENT

Biopharmaceuticals, had begun in Singapore in the 1970s. The EDB worked with multinationals to develop a 10-years roadmap for development, including the contruction of an Academic Centre of Excellene for Discovery Research

In Tourism, $100 million had been committed in 2003 to enhance infrastructure and market, by the campaign the “Uniquely Singapore”

Become a global education hub. In 2004, the Singapore Education Service Centre was set up as a one-stop centre for foreign students in Singapore.

Established THE ECONOMIC STRATEGIES COMMITTEE (ESC), chaired by Minister of Finance and comprised of 25 members drawn from government, unions and companies.

The OBJECTIVE was to provide recommendations on how to support sustainable future growth

Singapore was the first Asian country to enter a recession as the result of global financial crisis.

THE GLOBAL FINANCIAL CRISIS (2008)