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(15) Economic and Industrial Development Issues of Singapore

(15) Economic and Industrial Development Issues of...

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Unformatted text preview: ENGINEERS AND SOCIETY ECONOMIC AND INDUSTRIAL DEVELOPMENT ISSUES OF SINGAPORE 1 MILESTONES OF SINGAPORE’S ECONOMIC DEVELOPMENT 1960s: Economic survival as a ThirdWorld country 1970s: Fulfillment of basic needs of the population 1990s: Industrialised nation 2010: First-World nation 2 INDICATORS OF SINGAPORE’S ECONOMIC PROGRESS Foreign Reserves: – – – 1965: $0.1 billion 1998: $135 billion 2005: $170 billion GNP per capita – – – – 1960: $1,330 1979: $9,300 1998: $38,500 2005: $43,500 No foreign debt (one of the very few countries in the world) 3 ECONOMIC PHILOSOPHY OF SINGAPORE Capitalist approach of free market and outward orientation Underpinned by stable macroeconomic environment of low inflation, managed-float exchange rates, etc Liberal trade and investment policies 4 SINGAPORE’S ECONOMIC DEVELOPMENT STRATEGIES Stage 1: Import substitution (1959-65) Stage 2: Export orientation (1966-78) Stage 3: Industrial restructuring (1979-84) Stage 4: Economic diversification (1985-92) Stage 5: Further restructuring (1993-99) Stage 6: Knowledge-based economy/KBE (>2000) 5 STAGE 1: IMPORT SUBSTITUTION (1959-65) Self-government to a federal state Create a lot of activity in your country by growing your own, rearing your own duck, etc. to provide employment for your people. Don’t buy from other people. Links with Malaysia (a bigger Being part of Malaysia provided this kind of market for Singapore for survival. They had hinterland) the demand and economies of scale. Entreport to industrialisation Mechanisation provided for more jobs through manufacture, assembly, make the products ourselves. Don’t buy finished products from other people. Open-door policy to attract foreign investment Open-door means allow free flow of imports of raw materials but more importantly you allow people to buy from you. Impartation of technology – stands on two legs - trade (import- allow people to come in and export) and 6 13% unemployment in 1959 Pioneer status for labor-intensive industries Setting up of EDB in 1961 to promote industrializationEDB = Economic Development Board of Singapore Protectionist policies using tariffs to shield local industries from foreign competition Unemployment still >10% by 1965 7 STAGE 2: EXPORT ORIENTATION (1966-78) Since independence in 1965 Import substitution failed due to small domestic market (no more hinterland) & no economy of scale British withdrawal compounded problem of unemployment (loss of 50,000 jobs) Adopted export-orientation approach through industrialization Tariffs removed, exports grew, balance of payment improved, unemployment reduced 8 Full employment by early 1970s Still a low-wage producer, attractive to MNCs as a low-cost production base EDB granted investment incentives Low-wage, labor-intensive industries threatened by regional competitors (resource-rich neighbors) Restructuring began in late 70s for hi-tech, highvalue industry 9 STAGE 3: INDUSTRIAL RESTRUCTURING (1979-84) Take-off to hi-tech, skill-intensive industries (higher value-added per worker, predecessor of knowledge worker today) To computerize, automate & mechanize operation, using capital-intensive equipment and technology-based processes EDB-MNC Training Centre established for skilling the workforce (e.g. GSI, FSI, JSI, etc.) 10 Increased emphasis on R&D High-wage producer, levy on unskilled foreign workers Develop high value-added services Wage increases >> productivity growth 11 STAGE 4: ECONOMIC DIVERSIFICATION (1985-92) First economic recession in Singapore in 1985 Economic Committee chaired by BG Lee A more broad-based economic profile targeted towards more diversified growth Series of cost-cutting measures (including CPF cuts) implemented Economy recovered in 1986 (V-shaped growth) 12 EDB promoted total business concept with support services of R&D, design, product development, technical servicing, marketing, distribution and fund management to complement hi-tech manufacturing “Not to put all eggs in same basket” Upgrading of local firms through partnering with MNCs Growth triangle of Singapore-Batam-Johor in 1989 Unemployment fell to record low of 1.7% in 1990 By 1990, Singapore became an NIE (Newly Industrialized Economy, with HK, S. Korea & Taiwan) 13 STAGE 5: FURTHER RESTRUCTURING (1993-99) Restructuring domestic sectors Relocating low value-added industries overseas Promoting new economic activities to become an international business hub Emphasized capital market development and VC (Venture Capital) industry 14 Regionalization & globalization Government-linked companies (GLCs) taking lead (into China, India & ASEAN) Grooming promising local companies (PLCs) to become regional MNCs (those with annual turnover > $100m) Fears of hollowing-out, compounded with Asian financial crisis 15 STAGE 6: KNOWLEDGE-BASED ECONOMY (>2000) Into the borderless world of knowledge-based economy (KBE) Globalization (WTO) & hyper-competition Liberalizing telecoms, banking & services industries (healthcare, education, tourism etc.) Develop manufacturing & services clusters 16 Enlarge external economy Further diversify FDI destinations to nontraditional countries like Middle East, Latin America, Eastern Europe, (South) Africa etc Integrate domestic & external economies for bigger GNP (M&As by GIC, Temasek, SingTel, PSA, DBS, CapitaLand etc) Continue to attract foreign talents in IT, lifesciences, environment technology, electronics, digital media and other knowledge industries Maintain economic resilience, spearhead economic redevelopment & reduce vulnerability 17 ECONOMIC INDICATORS OF SINGAPORE 2009 2010 GDP (S$ billion) 267 304 Per Capita GNI (S$) 52,177 Economic Growth Rate (%) 14.5 57,603 -9.0 Foreign Reserves (S$ billion) 289 264 Total External Trade (S$ billion) 747 18 902 COMPARATIVE ECONOMIC INDICATORS (2008) GDP Growth (%) (US$) Singapore Australia 1.1 Hong Kong Japan U.K. -0.1 U.S. -0.4 Per Capita GNI 1.5 37,419 47.898 2.4 32,375 -1.2 39,664 44,187 46,236 19 Because of the global financial crisis, Singapore suffered a major recession in 2009, with GDP growth at -9%. Economy recovered in 2010, with growth of 14.5% for the full year. 20 STRUCTURE OF THE SPORE ECONOMY BY SECTORS (2010) Sector (1) (2) (3) (4) (5) (6) (7) Contributions to Singapore’s Economy (%) Manufacturing 22 Commerce 18 Business Service 14 Financial Services Transport & Comm. Construction Others17 12 11 6 21 OUTPUT OF MANUFACTURING SECTOR (2010) Cluster of Manuf Sector Added a) b) c) d) e) f) g) Electronics Chemicals Transport equipment Machinery & Equipment Fabricated products Petroleum products Others % of Total Value 38 17 9 6 5 4 21 22 Within the manufacturing sector, the electronics production cluster accounts for almost 40% of total value added. The main electronics products produced are semiconductors, computers and disk drives The chemicals cluster includes the petrochemical and the up and rising pharmaceutical products Events in the IT world will have significant impacts on the Spore economy given its heavy reliance on electronics production 23 THE ELECTRONICS PRODUCTION CLUSTER This cluster accounts for 42% of total manufacturing output. Electronics has strong spillovers to supporting domestic manufacturing clusters such as fabricated products, machinery and equipment, etc. Some raw materials required in electronics is purchased from sectors in Singapore. In terms of employment generation, the electronics cluster and its support clusters account for 30% and 37% of total manufacturing employment respectively. 24 THE CHEMICALS CLUSTER The main activity is the production of pharmaceutical products, which is still a small segment of the cluster and accounts for only 8% of total manufacturing output. Employment generation by the segment is also limited, given its highly capital intensive nature. This segment accounts for only 0.6% of total manufacturing employment. 99% of the pharmaceutical products are exported to markets in US and UK and does not contribute to further downstream activity in Singapore. 25 STRUCTURE OF THE SPORE ECONOMY: EXPORTS BY COUNTRY (2010) Countries % of Spore’s exports North America 24 EU 18 ASEAN 18 Japan 10 Newly Industrializing Economies 15 Others 15 26 KEY NATIONAL DRIVERS OF SINGAPORE’S ECONOMIC GROWTH Economic Development Board (EDB) International Enterprise Singapore (IES) Jurong Town Corporation (JTC) SPRING Singapore 27 KEY ISSUES AND CHALLENGES TO SINGAPORE’S ECONOMIC FUTURE “Structural unemployment “ Ageing workforce which is mainly unskilled Limitations in water and natural resources Limited land availability Heavy reliance on multi-national companies 28 Relatively weak entrepreneurial sector Development of technological capabilities Expansion of external economy to increase GNP Heavy reliance on foreign workers in certain sectors 29 KEY RESPONSES - Raising productivity - Making foreign worker policies flexible - Raising retirement age to 65 years - Providing continual education and training for workers 30 Long term: – Intensify internationalization of S’pore companies – Promote entrepreneurship – Pursue innovation – Continual restructuring of the economy – Enhance human capital 31 CHARACTERISTICS OF FUTURE ECONOMY OF SINGAPORE A globalized economy, a key node in global network, linked to all major economies & emerging regions. A creative & entrepreneurial nation, taking risk to start new businesses. A diversified economy, powered by twin engines of manufacturing & services. Singapore companies complement MNCs, new startups co-existing with traditional businesses, exploiting new and innovative ideas. 32 ROLES OF ENGINEERS/PROFESSIONALS IN SINGAPORE’S ECONOMIC DEVELOPMENT Infrastructure development Hi-tech, value-added manufacturing & services Support services to MNCs Techno-entrepreneurs & SMEs R&D & innovations International ventures 33 ...
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