Economy of Singapore

Economy of Singapore

Skyline of Singapore's CBD
Currency	Singapore dollar (SGD/S$)
Fiscal year	1 April – 31 March
Trade organisations	WTO, APEC, IOR-ARC, ASEAN
Statistics
GDP	US$349.7 billion (nominal; 2018 est.)[1] US$554.9 billion (PPP; 2018 est.)[1]
GDP rank	37th (nominal) 39th (PPP)
GDP growth	3.6% (2017)[2][3]
GDP per capita	US$61,766 (nominal; 2018 est.)[1] US$98,014 (PPP; 2018 est.)[1]
GDP per capita rank	9th (nominal) 3rd (PPP)
GDP by sector	Agriculture: 0% Industry: 26.6% Services: 73.4% (2016 est.)
Inflation (CPI)	0.4% (August 2017)
Population below poverty line	N/A
Gini coefficient	46.4 (2014)
Labour force	3.661 million (2016 est.)[4]
Labour force by occupation	Agriculture: 0.96% Industry: 15.5% Services: 83.5% (2016 est)
Unemployment	2.1% (December 2017)
Main industries	Electronics chemicals financial services oil drilling equipment petroleum refining rubber food and beverages ship repair offshore construction life sciences re-exportation
Ease-of-doing-business rank	2nd (2018)[5]
External
Exports	US$329.7 billion (2016)[6]
Export goods	Machinery and Equipment Electronics and Telecommunications Pharmaceuticals and Other Chemicals Refined Petroleum Products
Main export partners	China 13%  Hong Kong 13%  Malaysia 11%  European Union 9%  Indonesia 8% Other 47%[6]
Imports	US$282.9 billion (2016)[6]
Import goods	Machinery and Equipment Mineral Fuels Chemicals Foodstuffs Consumer Goods
Main import partners	China 14%  European Union 14%  Malaysia 11%  United States 11%  Taiwan 8% Other 42%[6]
FDI stock	Inward: US$1.096 trillion Outward: US$682.4 billion (2016)[7]
Current account	US$61.172 billion (2015 est.) [8]
Gross external debt	US$1.32 trillion (30 June 2017)[9]
Net international investment position	S$738.811 billion (Q1 2015) [10]
Public finances
Public debt	110.5% of GDP (2016 est.)
Revenues	S$69.45 billion (2017 est.)[11]
Expenses	S$75.07 billion (2017 est.) [11]
Economic aid	None
Credit rating	Standard & Poor's:[12] AAA (Domestic) AAA (Foreign) AAA (T&C Assessment) Outlook: Stable[13] Moody's:[13] Aaa Outlook: Stable Fitch:[13] AAA Outlook: Stable
Foreign reserves	US$279 billion (October 2017)[14]
Main data source: CIA World Fact Book All values, unless otherwise stated, are in US dollars.

The economy of Singapore is a highly developed free-market economy.^[15][16] Singapore's economy has been ranked as the most open in the world,^[17] 7th least corrupt,^[18] most pro-business,^[19] with low tax rates (14.2% of Gross Domestic Product, GDP)^[20] and has the third highest per-capita GDP in the world in terms of Purchasing Power Parity (PPP). APEC is headquartered in Singapore.

Government-linked companies play a substantial role in Singapore's economy. Sovereign wealth fund Temasek Holdings holds majority stakes in several of the nation's largest companies, such as Singapore Airlines, SingTel, ST Engineering and MediaCorp. The Singaporean economy is a major Foreign Direct Investment (FDI) outflow financier in the world. Singapore has also benefited from the inward flow of FDI from global investors and institutions due to its highly attractive investment climate and a stable political environment.^[21]

Exports, particularly in electronics, chemicals and services including Singapore's position as the regional hub for wealth management^[22][23][24] provide the main source of revenue for the economy, which allows it to purchase natural resources and raw goods which it lacks. Moreover, water is scarce in Singapore^[25] therefore it is defined as a precious resource along with the scarcity of land to be treated with land fill of Pulau Semakau. Singapore has limited arable land,^[26] meaning that Singapore has to rely on the agrotechnology park^[27] for agricultural production and consumption. Human resources is another vital issue for the health of the Singaporean economy.^[28] The economy of Singapore ranks 2nd overall in the Scientific American Biotechnology ranking in 2014,^[29] with the featuring of Biopolis.

Singapore could thus be said to rely on an extended concept of intermediary trade to entrepôt 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. Singapore's trade to GDP ratio is among the highest in the world, averaging around 400% during 2008–11.^[30][31] The Port of Singapore is the second-busiest in the world by cargo tonnage.

To preserve its international standing and further its economic prosperity in the 21st century, Singapore has taken measures to promote innovation, encourage entrepreneurship and re-train its workforce. ^[32] The Ministry of Manpower (Singapore) (MoM) is primarily responsible for setting, adjusting, and enforcing foreign worker immigration rules. There are approximately 243,000 Foreign Domestic Workers (FDWs) in Singapore.^[33]

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Economy statistics

Economic history

Upon independence from Malaysia in 1965, Singapore faced a small domestic market, and high levels of unemployment and poverty. 70 percent of Singapore's households lived in badly overcrowded conditions, and a third of its people squatted in slums on the city fringes. Unemployment averaged 14 percent, GDP per capita was US$516, and half of the population was illiterate.^[50][51]

In response, the Singapore government established the Economic Development Board to spearhead an investment drive, and make Singapore an attractive destination for foreign investment.^[51] FDI inflows increased greatly over the following decades, and by 2001 foreign companies accounted for 75% of manufactured output and 85% of manufactured exports. Meanwhile, Singapore's savings and investment rates rose among the highest levels in the world, while household consumption and wage shares of GDP fell among the lowest.^[52][53][54]

As a result of this investment drive, Singapore's capital stock increased 33 times by 1992, and achieved a tenfold increase in the capital-labour ratio.^[55] Living standards steadily rose, with more families moving from a lower-income status to middle-income security with increased household incomes. During a National Day Rally speech in 1987, Lee Kuan-Yew claimed that (based on the home ownership criterion) 80% of Singaporeans could now be considered to be members of the middle-class. However, much unlike the economic policies of Greece and the rest of Europe, Singapore followed a policy of individualising the social safety net. This led to a higher than average savings rate and a very sustainable economy in the long run. Without a burdensome welfare state or its likeliness, Singapore has developed a very self-reliant and skilled workforce well versed for a global economy.^[56]

Singapore's economic strategy produced real growth averaging 8.0% from 1960 to 1999. The economy picked up in 1999 after the regional financial crisis, with a growth rate of 5.4%, followed by 9.9% for 2000. However, the economic slowdown in the United States, Japan and the European Union, as well as the worldwide electronics slump, had reduced the estimated economic growth in 2001 to a negative 2.0%.

The economy expanded by 2.2% the following year, and by 1.1% in 2003 when Singapore was affected by the SARS outbreak. Subsequently, a major turnaround occurred in 2004 allowed it to make a significant recovery of 8.3% growth in Singapore, although the actual growth fell short of the target growth for the year more than half with only 2.5%. In 2005, economic growth was 6.4%; and in 2006, 7.9%.

As of 8 June 2013, Singapore's unemployment rate is around 1.9% and the country's economy has a lowered growth rate, with a rate of 1.8% on a quarter-by-quarter basis—compared to 14.8% in 2010.

State enterprise and investment

Singapore's State Owned Enterprises as a percent of GDP

The public sector is used both as an investor and as a catalyst for economic development and innovation. The government of Singapore has two sovereign wealth funds, Temasek Holdings and GIC Private Limited, which are used to manage the country's reserves.^[57] Initially the state's role was oriented more toward managing industries for economic development, but in recent decades the objectives of Singapore's sovereign wealth funds have shifted to a commercial basis.^[58]

Government-linked corporations play a substantial role in Singapore's domestic economy. As of November 2011, the top six Singapore-listed GLCs accounted for about 17 percent of total capitalization of the Singapore Exchange (SGX). These fully and partially state-owned enterprises operate on a commercial basis and are granted no competitive advantage over privately owned enterprises. State ownership is prominent in strategic sectors of the economy, including telecommunications, media, public transportation, defence, port, airport operations as well as banking, shipping, airline, infrastructure and real estate.^[58]

As of 2014, Temasek holds S$69 billion of assets in Singapore, accounting for 7% of the total capitalization of Singapore-listed companies.^[59][60]

Sectors

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 up to foreign service providers and greater competition. The government has also attempted some measures including wage restraint measures and release of unused buildings in an effort to control rising commercial rents with the view to lowering the cost of doing business in Singapore when central business district office rents tripled in 2006.

Trade, investment and aid

Singaporean exports in 2006

Singapore's total trade in 2014 amounted to S$982 billion. Despite its small size, Singapore is currently the fifteenth-largest trading partner of the United States.^[69] In 2014, Singapore's imports totalled $464 billion, and exports totalled $519 billion. Malaysia was Singapore's main import source, as well as its largest export market, absorbing 18% of Singapore's exports, with the United States close behind.

Malaysia is Singapore's biggest trading partner, with bilateral trade totalling roughly 91 billion US dollars in 2012, accounting for over a fifth of total trade within ASEAN. Singapore’s trade with major trading partners such as Malaysia, China, Indonesia and South Korea increased in 2012, while trade with EU27, United States, Hong Kong and Japan decreased in 2012. Since 2009, the value of exports exceeds imports for Singapore’s trade with China. In comparison, the value of imports exceeds exports for Singapore’s trade with the US since 2006.^[70][71]

Re-exports accounted for 43% of Singapore's total sales to other countries in 2000. Singapore's principal exports are petroleum products, food/beverages, chemicals, textile/garments, electronic components, telecommunication apparatus, and transport equipment. Singapore's main imports are aircraft, crude oil and petroleum products, electronic components, radio and television receivers/parts, motor vehicles, chemicals, food/beverages, iron/steel, and textile yarns/fabrics.

Trade in Singapore has benefited from the extensive network of trade agreements Singapore has passed. According to Healy Consultants, Singapore has free trade access to the entirety of the ASEAN network, with import duty reduced when dealing with Indonesia, Malaysia, the Philippines, Thailand, Brunei, Burma, Cambodia, Laos and Vietnam.

The Singapore Economic Development Board (EDB) continues to attract investment funds on a large-scale for the country despite the city's relatively high-cost operating environment. The US leads in foreign investment, accounting for 40% of new commitments to the manufacturing sector in 2000. As of 1999, cumulative investment for manufacturing and services by American companies in Singapore reached approximately $20 billion (total assets). The bulk of US investment is in electronics manufacturing, oil refining and storage, and the chemical industry. More than 1,500 US firms operate in Singapore.

Singapore's largely corruption-free government, skilled workforce, and advanced and efficient infrastructure have attracted investments from more than 3,000 multinational corporations (MNCs) from the United States, Japan, and Europe. Foreign firms are found in almost all sectors of the economy. MNCs account for more than two-thirds of manufacturing output and direct export sales, although certain services sectors remain dominated by government-linked corporations.

The government also has encouraged firms to invest outside Singapore, with the country's total direct investments abroad reaching $39 billion by the end of 1998. The People's Republic of China was the top destination, accounting for 14% of total overseas investments, followed by Malaysia (10%), Hong Kong (9%), Indonesia (8%) and US (4%). The rapidly growing economy of India, especially the high technology sector, is becoming an expanding source of foreign investment for Singapore. The United States provides no bilateral aid to Singapore, but the US appears keen to improve bilateral trade and signed the US-Singapore Free Trade Agreement. Singapore corporate tax is 17 per cent.

All figures in billions of Singapore dollars.

Singapore workforce

In 2000, Singapore had a workforce of about 2.2 million. The country has the largest proficiency of English language speakers in Asia, making it an attractive place for multinational corporations.^[73] The National Trades Union Congress (NTUC), the sole trade union federation which has a symbiotic relationship with the ruling party, comprises almost 99% of total organised labour. Government policy and pro-activity rather than labour legislation controls general labour and trade union matters.

The Employment Act offers little protection to white-collar workers due to an income threshold. The Industrial Arbitration Court handles labour-management disputes that cannot be resolved informally through the Ministry of Manpower. The Singapore Government has stressed the importance of co-operation 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 an economic slump, the unemployment rate rose to 4.0% by the end of 2001, from 2.4% early in the year. Unemployment has since declined and as of 2012 the unemployment rate stands at 1.9%.^[74]

While the Singapore government has taken a stance against minimum wage and unemployment benefit schemes, in 2007 the government introduced a Workfare Income Supplement (WIS) scheme to supplement wages of low-skilled workers.^[75] In order to support employers in hiring older Singaporean workers, Special Employment Credit (SEC) was introduced in 2011. It was first enhanced in 2012 to provide employers with support in hiring older Singaporean workers and Persons with Disabilities (PWDs). It helped the employers to cope with costs associated with the increase in Central Provident Fund (CPF) contribution rates for older workers. The 5 year SEC scheme was further extended to additional 3 years, up to 2019 to encourage employers to voluntarily re-employ older workers aged 65 and above.^[76]

The Singapore Government and the NTUC have tried a range of programs to increase lagging productivity and boost the labour force participation rates of women and older workers. However, labour shortages persist in the service sector and in many low-skilled positions in the construction and electronics industries. Foreign workers help make up this shortfall. In 2000, there were about 600,000 foreign workers in Singapore, constituting 27% of the total work force. As a result, wages are relatively suppressed or do not rise for all workers. To have some controls, the government imposes a foreign worker levy payable by employers for low end workers like domestic help and construction workers.^[77] In 2012, the Ministry of Trade and Industry (MTI) reported that Singapore should continue to fine-tune the calibration of its inflow of foreigners as the country continues to face an ageing population and a shrinking workforce. Singapore Parliament accepted the recommendations by its Economic Strategies Committee (ESC) for the optimal ratio of the level of immigration and foreign manpower for both high and low skilled workers.^[78] The Government recognises that the current overall foreign workforce should complement the local resident workforce and not replace the Singaporean Core concept, and helps companies greatly as they raise productivity through business restructuring and workforce retraining; raise resident labour force participation rate.^[79][80]

Poverty and wealth inequality

Singapore is one of the world’s wealthiest countries per capita, but its Gini coefficient (a standardized measure of inequality) is unusually high among developed countries. Singapore is also unusual in spending comparatively little on social programs, although subsidized public housing is nearly universally enjoyed among citizens.

Based on Oxfam's Commitment to Reducing Inequality Index 2018, Singapore is ranked 149 out of 157 countries, suggesting the government's lack of effort in tackling the gap between the rich and the poor.^[81] Oxfam said Singapore came in bottom ten because of practices which facilitate tax dodging and that Singapore has no universal minimum wage and did poorly on labor rights.^[82]

The government has not set an official poverty line, and official poverty-related statistics are limited. Despite the absence of official statistics, there is ample anecdotal and indirect statistical evidence that poverty is a serious problem in Singapore. Limited official statistics on the number of households receiving ComCare assistance are available^[83]. (ComCare provides a small amount of income support to profoundly poor citizen households in Singapore.)

Public finance

Government spending in Singapore has risen since the start of the global financial crisis, from around 15% of GDP in 2008 to 17% in 2012. The government's total expenditure as a percentage of GDP ranks among the lowest internationally and allows for a competitive tax regime.^[84][85] Singapore is required under its constitution to keep a balanced budget over each term of government. Singapore government debt is issued for investment purposes, not to fund expenditure.^[86][87][88]

Personal income taxes in Singapore range from 0% to 22% for incomes above S$320,000.^[89] There are no capital gains or inheritance taxes in Singapore.^[90][91] Singapore's corporate tax rate is 17% with exemptions and incentives for smaller businesses. Singapore has a single-tier corporate income tax system, which means there is no double-taxation for shareholders.^[92]

Singapore introduced Goods and Services Tax (GST) with an initial rate of 3% on 1 April 1994, increasing government's revenue by S$1.6 billion (US$1b, €800m) and establishing government finances.^[93] The taxable GST was increased to 4% in 2003, to 5% in 2004, and to 7% in 2007.^[94]

The Singapore government owns two investment companies, GIC Private Limited and Temasek Holdings, which manage Singapore's reserves. Both operate as commercial investment holding companies independently of the Singapore government, but Prime Minister Lee Hsien Loong and his wife Ho Ching serve as chairman and CEO of these corporations respectively.^[95][96][97] While GIC invests abroad, Temasek holds 31% of its portfolio in Singapore, holding majority stakes in several of the nation's largest companies, such as Singapore Airlines, SingTel, ST Engineering and MediaCorp.^[59] As of 2014, Temasek holds S$69 billion of assets in Singapore, accounting for 7% of the total capitalisation of Singapore-listed companies.^[59][60]

In April 2013, the country was recognised as an increasingly popular tax haven for the wealthy due to the low tax rate on personal income, a full tax exemption on income that is generated outside of Singapore and 69 double taxation treaties^[62] that can minimise both withholding tax and capital gains tax. Australian millionaire retailer Brett Blundy, with an estimated personal wealth worth AU$835 million, and multi-billionaire Facebook co-founder Eduardo Saverin are two examples of wealthy individuals who have settled in Singapore (Blundy in 2013 and Saverin in 2012). Additionally, Australian mining magnate Gina Rinehart owns property in Singapore^[98] and American investor Jim Rogers moved to Singapore in 2007—Rogers has identified the 21st century as an era in which Asia will dominate and wishes for his two daughters to learn Mandarin as a key outcome of the relocation.^[99][100] Chinese Media TV celebrities Jet Li and Gong Li have also taken up naturalised Singapore citizenship.^[101][102]

Monetary policy

The Monetary Authority of Singapore is Singapore's central bank and financial regulatory authority. It administers the various statutes pertaining to money, banking, insurance, securities and the financial sector in general, as well as currency issuance. The MAS has been given powers to act as a banker to and financial agent of the Government. It has also been entrusted to promote monetary stability, and credit and exchange policies conducive to the growth of the economy.

Unlike many other central banks such as Federal Reserve System or Bank of England, MAS does not regulate the monetary system via interest rates to influence the liquidity in the system. Instead, it chooses to do it via the foreign exchange mechanism. It does so by intervening in the SGD market.^[103]

Mergers and acquisitions

16,156 M&A deals have been conducted in Singapore so far which cumulated to a total value of 850. bil. USD. Since 1985 there has been a constant upward trend, only shortly disrupted in 2002 and 2009^[104]. The most active year in terms of numbers (926) and value (78. bil. USD) has been 2017, so there is currently an all time high. In general inbound and outbound deals in Singapore are nearly equaly distributed.

Here is a list of the top 10 deals with Singaporean participation inbound or outbound:

Facts & figures

Percentage of economic growth: 1.7% (2016)^[105]

Industrial production growth rate: 1% (2016 est.)

Electricity – production by source:
fossil fuel: 95.3%
hydro: 0%
nuclear: 0%
other: 3.9% (2014 est.)

Electricity – consumption: 47.5 TWh (2016)

Electricity – exports: 0 kWh (2007)

Electricity – imports: 0 kWh (2007)

Agriculture – products: rubber, copra, fruit, vegetables; poultry, eggs, fish, orchids, ornamental fish

Currency: 1 Singapore dollar (S$ or SGD) = 100 cents

Exchange rates: ^[106]

International rankings

See also

• Four Asian Tigers
• 5 C's of Singapore
• Biopolis
• Dual economy
• Bamboo network
• Immigrant workers in Singapore
• Singapore Workplace Safety and Health Conference

References

External links

Wikimedia Commons has media related to Economy of Singapore.

• Statistics Singapore
• Singapore Department of Statistics
• Monetary Authority of Singapore