Singapore Economy

 

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SINGAPORE
GDP (2009 PPP): $237 billion.

Per capita GNP (2008--purchasing power parity): $51,500.
Natural resources: None.

Budget: Income .............. $29.25Billion
Expenditure ... $28.68Billion

Main Crops:
Rubber, copra, fruit, vegetables; poultry .

Natural Resources:
Fish, deepwater ports.

Major Industries:
Electronics, financial services, oil drilling equipment, petroleum refining, rubber processing and rubber products, processed food and beverages, ship repair, entrepot trade, biotechnology .

NATIONAL GNP

Singapore's strategic location on major sea lanes and industrious population have given the country an economic importance in Southeast Asia disproportionate to its small size. Upon independence in 1965, Singapore was faced with a lack of physical resources and a small domestic market. In response, the Singapore Government adopted a pro-business, pro-foreign investment, export-oriented economic policy framework, combined with state-directed investments in strategic government-owned corporations. Singapore's economic strategy proved a success, producing real growth that averaged 8.0% from 1960 to 1999. The economy picked up after the 1997 regional financial crisis, with a growth rate of 9.4% for 2000, but then fell back in tandem with the economic slowdown in the United States, Japan, and the European Union (EU), as well as the worldwide electronics slump, so that GDP fell by 2.4% in 2001. The economy rebounded in 2002, up 2.2%, but declined to 1.1% growth in 2003, due to the effect of severe acute respiratory syndrome (SARS) in the first half of the year. The economy is expected to expand by 8%-9% in 2004, driven by the growth in world electronics demand and in the economies of its major trading partners, the U.S., EU, China, and Japan.

Singapore's largely corruption-free government, skilled work force, and advanced and efficient infrastructure have attracted investments from more than 7,000 multinational corporations from the United States, Japan, and Europe. Foreign firms are found in almost all sectors of the economy. Multinational corporations account for more than two-thirds of manufacturing output and direct export sales, although certain services sectors remain dominated by government-linked corporations.

Manufacturing and services are the twin engines of the Singapore economy and accounted for 24% and 64%, respectively, of Singapore's gross domestic product in 2002. The electronics industry leads Singapore's manufacturing sector, accounting for 42% of Singapore's total industrial output, but the government also is prioritizing the development of the chemicals and biomedical/pharmaceutical industries.

To maintain its competitive position despite rising wages, the government seeks to promote higher value-added activities in the manufacturing and services sectors. It also has opened, or is in the process of opening, the financial services, telecommunications, and power generation and retailing sectors to foreign service providers and greater competition. The government also has pursued cost-cutting measures, including tax cuts and wage and rent reductions, to lower the cost of doing business in Singapore. The government also is actively negotiating free trade agreements with key trading partners, and has concluded one with the United States.

Trade, Investment, and Aid
Singapore's total trade in 2003 amounted to $279 billion, an increase of 10% from 2002. Despite its small size, Singapore is the 14th-largest trading partner of the United States. In 2003, Singapore's imports totaled $131 billion, and exports totaled $148 billion. Malaysia was Singapore's main import source, as well as its largest export market, absorbing 16% of Singapore's exports, with the United States falling behind to 13%, from 15% in 2002. Re-exports accounted for 45% of Singapore's total sales to other countries in 2003. Singapore's principal exports are petroleum products, food and beverages, chemicals, textile and garments, electronic components, telecommunication apparatus, and transport equipment. Singapore's main imports are aircraft, crude oil and petroleum products, electronic components, consumer electronics, microelectronics manufacturing equipment, motor vehicles, chemicals, food and beverages, iron and steel, and textile yarns and fabrics.

Singapore continues to attract investment funds on a large scale despite its relatively high-cost operating environment. The United States leads in foreign investment, accounting for 39% of new commitments to the manufacturing sector in 2003. As of 2003, the stock of investment by U.S. companies in the manufacturing and services sectors in Singapore reached about $61.4 billion (total assets). The bulk of U.S. investment is in electronics manufacturing, oil refining and storage, and the chemical industry. More than 1,300 U.S. firms operate in Singapore.

The government also has encouraged firms to invest outside Singapore, with the country's total direct investments abroad reaching $85 billion by the end of 2002. China was the top destination, accounting for 11% of total overseas investments, followed by Hong Kong (8%), Malaysia (8%), Indonesia (6%), and the United States (6%).

The United States provides no bilateral aid to Singapore.

Labor
In June 2004, Singapore had a total labor force of about 2.16 million. The National Trades Union Congress (NTUC), the sole trade union federation, comprises almost 99% of total organized labor. Extensive legislation covers general labor and trade union matters. The Industrial Arbitration Court handles labor-management disputes that cannot be resolved informally through the Ministry of Labor. The Singapore Government has stressed the importance of cooperation between unions, management, and government ("tripartism"), as well as the early resolution of disputes. There has been only one strike in the past 15 years.

Singapore has enjoyed virtually full employment for long periods of time. Amid slower economic growth, unemployment rose to 5.9% in September 2003. As of end-June 2004, the rate of unemployment dropped to 4.5%. Much of the unemployment is structural, as low-skill manufacturing operations move overseas. From 1990 to 1997, the number of foreign workers in Singapore increased rapidly to cope with labor shortages. Foreign workers comprise 27% of the labor force; the great majority of these are unskilled workers.