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I.

Characteristics:
1) General stats:
- Singapore has a highly developed trade-oriented market economy.
Singapore's economy has been ranked as the most open in the world, 7th
least corrupt, most pro-business, with low tax rates (14.2% of Gross
Domestic Product, GDP) and has the third highest per-capita GDP in the
world in terms of Purchasing Power Parity (PPP). APEC is headquartered in
Singapore.

2) Model of the economy:

- The economy of Singapore is best described as a mixed economy. Although


the country strongly advocates free-market policies and practices,
government intervention is also evident in macroeconomic management and
major factors of production such as land, labour and capital resources.
- Government-linked companies play a substantial role in Singapore's
economy, which are owned through the sovereign wealth fund Temasek
Holdings, which holds majority stakes in several of the nation's largest
companies, such as Singapore Airlines, SingTel, ST Engineering and
MediaCorp.
- This innovative and highly successful economic system where both the
market and the state have equally strong roles in the government is
dubbed as the Singapore Model.
- To date, the Singapore Model or Singapore Inc. has proven to be extremely
successful. Globally and regionally, the Singapore economy has
demonstrated astounding resilience to financial crises such as the 1997
Asian Financial Crisis or the 2008 Global Financial Crisis.

3) Main economic activities:


- The Singapore Model was born out of necessity. Singapore has a relatively
small domestic market, and thus has to open its economy to external
markets in order for the economy to thrive. Downsides: dependence on other
economies. Solutions: enact policies to protect the economy from the
perturbations of the global market// Develop other industries to respond to
the needs of the global market
- Exports, particularly in electronics, chemicals and services including
Singapore's position as the regional hub for wealth management provide the
main source of revenue for the economy, which allows it to purchase natural
resources and raw goods which it lacks.
- Singapore could thus be said to rely on an extended concept of intermediary
trade to Entrept trade, by purchasing raw goods and refining them for re-
export, such as in the wafer fabrication industry and oil refining. Singapore
also has a strategic port which makes it more competitive than many of its
neighbours in carrying out such entrepot activities.
- To maintain its competitive position despite rising wages, the government
seeks to promote higher value-added activities in the manufacturing and
services sectors including banking, biotech and energy and infrastructure. It
also has opened, or is in the process of opening, the financial services,
telecommunications, and power generation and retailing sectors up to
foreign service providers and greater competition.

II. Long-term growth:


- Before 2008:
- The 1985 recession was a significant milestone in Singapores development
history. It led to a fundamental review of the policies and strategies that
prevailed at the time. The most important outcomes from that period of
review which continued into the 1990s were the structural reforms to:
enhance wage flexibility in the labour market;
tap more decisively into regional markets for trade and

outward investment;
step up the pace of industrial upgrading;
promote innovation, enterprise, and entrepreneurship in

the economy; and


liberalise various services sectors such as finance,

telecommunications, and utilities.


- In fact, the key story post-1985 recession up till the Global Financial Crisis of

2008 was the rise of modern services as a twin engine of growth alongside

manufacturing.
The share of modern services in GDP increased steadily,

from 16% in 1965 to 24% in 1985 and 28% in 2010.


- Financial services. Singapore was already a thriving regional financial centre

since the 1970s. In the late 1990s and early 2000s, the insurance and

securities industries were completely liberalised and progressive steps were

taken to open up the domestic banking industry to foreign competition


- Business services. A broad range of business activities accounting, law,

advertising, and consultancy grew in importance, playing an important role

in cementing Singapores status as a regional hub.


- Info-communications services. The government embarked on a plan to

computerise the civil service in the early 1980s. This helped to kick-start the

info-communication services industry, one of the mainstays of the economy

ever since.
- Entertainment services. In 2005, the government decided to allow two

casinos to operate within integrated resorts that also included leisure

facilities, business and convention zones, and high-end retail outlets. This

sparked the growth of a thriving entertainment services industry over the

next few decades, attracting the burgeoning Asian middle class.


- In order to raise the living standard, the education policy was geared towards
training in skills that were needed for the emerging industries. The Housing
Development Board (HDB) was set up in 1960 to provide adequate public
housing at subsidized rates. The Economic Development Board (EDB) was set
up in 1960 to spearhead the industrialization drive.

- 2008 - 2017:
- The dominant theme in the third phase of Singapores economic history was
the overcoming of resource constraints through a significant restructuring of
the economy. While Singapore had always been short of land and labour,
these constraints came to a head in the 2010s.
- By 2011, annual growth in the total working age population had declined to
less than 3%, and continued to fall steadily over the decade.
- Foreign labour, which had driven Singapores labour force growth since the
late 1970s, was already one-third of the total workforce.
- It was neither economically efficient nor socially desirable to allow the
foreign workforce to expand much faster than the local workforce.
- By 2020, average total labour force growth was down to 1% per annum.

- The central thrust of economic strategies in the 2010s and early 2020s was

therefore to shift to a productivity-driven growth model. The aim was to

increase productivity growth to at least 2% per annum, from the 1.4%

averaged during the 2000s.


- While the manufacturing sector had continually undergone restructuring and

moved up the value chain in the preceding five decades, this was the first

time the entire economy was undergoing such a transition.


It proved particularly challenging for many traditional

domestically-oriented services like retail, hospitality, construction,

real estate, and social services, which had come to be heavily

dependent on cheap labour over the decades.


While many firms in these sectors successfully upgraded

themselves and became more efficient, there was a substantial

reduction in the size of these sectors by the early 2020s.


- But the decisive turnaround in the quest for productivity came when services

industries with a traditionally domestic orientation, like education and

healthcare, re-positioned themselves by scaling up, investing in technology

and talent, and exporting their services.


- Similarly, the healthcare sector was opened up.
By 2025, Singapore had become a multi-faceted medical

hub hosting the worlds top medical professionals and multi-

national healthcare companies.


This led to a vibrant ecosystem that created jobs in areas

from research and training to conventions for medical

professionals both locally and abroad, in addition to the large and

diverse number of good jobs in hospitals.

This third phase of Singapores economic history marked the most significant

step-down in Singapores economic growth, with real GDP growing by 3.6%

per annum. However, it also marked the painful but successful economic

transition towards productivity-led growth. By 2025, the economy had

matured, with productivity growth accounting for virtually all of economic

growth.
III. Short-term stability:

o Illustrated with a business cycle diagram


-
1) During the World Economic Crisis 2008:
- Singapore's economy, which is heavily dependent on exports to the
developed world, is one of the first in Asia to be hit by a global economic
slowdown. This clearly showed the vulnerability of the trade-dependent
Singaporean economy.
- Impacts on Singapore Economy:
- The manufacturing sector was hit particularly hard due to falling demand
induced by the overall deterioration of economic conditions in the U.S. and
Europe (key export destinations which account for nearly 33% of the total
Singapores non-oil exports over the last few years)
- Even though damage to the banking sector was limited, Singapore still
suffered a huge loss of wealth as the stock market plummeted from a high of
3500 points in December 2007 to 1700 points in the last quarter of 2008.
- Measures taken:
- The Monetary Authority of Singapore (MAS) guaranteed bank deposits and fl
ushed the money market with enough liquidity to restore market con fi
dence.
- To assist local, small- and mediumsized companies in obtaining access to
credit, the Singaporean government established a US$1.56 billion (S$2.3
billion) loan facility and launched a risk-sharing initiative which took on signi
fi cant shares of bank-lending risks in November 2008. The key objective was
to help Singaporeans keep their jobs and thus increase overall con fi dence.
- Measures included strategic industrial support in order to drive down
business costs and avoid corporate failures as well as income tax rebates to
ensure household fl exibility without locking down rates (Kesavapany 2010 ).
In addition, Singapores government spent heavily on big investment projects
in the construction sector such as the construction of two integrated resorts
- In many ways, Singapore is well positioned to ride out what is likely to be
aprolonged global recession. The economy grew in resilience, rebounding
sharply and emerging stronger after the economic shock.
2) From 2010 until now:
- The GDP per capita growth rate has slowed down. For the last few decades,
Singapores incredible GDP per capita growth rate was due to capital
accumulation and labor inputs.
- Nevertheless, Singapore needs to drive its economic growth through improving productivity now,
rather than increasing the labour force, given that the local workforce is heading for negligible or
even stagnant growth in the next decade.
- Although, broad strategy to restructure the economy and upgrade workers is already in place, it
takes time for the economy to recover its growth rate.

Links:

Employment:
- https://www.singstat.gov.sg/docs/default-source/default-document-
library/publications/publications_and_papers/GHS/general_household_survey_release1/chap3.
pdf

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