Economic Policy and Global Environment - Assignment Example

? Economic policy and global environment Contents Contents 2 Answer 3 Answer 2 6 References 9 Answer Productivity should be considered as the central driver of economic growth. The most sustainable way of increasing value-addition is to increase productivity and to raise the level of income of an economy. It is the responsibility of the government of a country to focus on assisting business enterprises operating in the particular economy and allow workers to pick up their productivity. To attain this end the government might provide support to these firms and organizations in a routine way by sponsoring various programmes or schemes. Over the span of the last decade, Singapore’s economy has shown growth at an average rate of 5 percent per annum (Ministry Of Manpower, 2013). Average growth rate of real GDP has been maintained at 8.6 percent between the years 2004 and 2007. Although the growth slackened in 2009 as an influence of the financial that hit almost all countries in the world, the economy rebounded by a growth rate of 14.8 percent in 2010 (CIA, 2013). At present the country’s GDP is $325.1 billion (2012 estimate) (CIA, 2013). This growth has been achieved through increase in productivity in the different sectors in the economy; particularly the financial services sector has depicted significant improvement. Average productivity growth has been nearly 1 percent per annum. The growth rate has matched pace with the productivity growth rate found in other developed nations. The broad range of the citizens of Singapore also enjoyed the benefits of increasing real wage rate. This has in effect led to an increase their standard of living. The government must play an active role in developing a pulsating style of life for the average Singaporean and transform the country into a distinctly recognizable global city and “a leading cultural capital” (Ministry of Finance, n.d.), containing such good attributes as, openness, integrity and diversity (NPTD, 2013). Growth in productivity allows the country to make it the most excellent place to live and grow, “a home that provides an outstanding quality of life” (MOF, n.d.) for the people. Utilization of sound financial system: vast public expenditures The remarkable growth in productivity in the economy has been possible through strategic participation of the government sector in the growth process along with the private sector. The government of Singapore has a sound finance system. Unlike those other governments, Singapore does not face the threat of deep slashes in public expenditure or rising tax rates as an aftermath of financial crisis. Therefore, the Government can make vast expenditures in the field of quality education, research and development, development of infrastructure and communication. A total budget of US $10.6 billion was allocated to the Ministry Of Education Government for FY2012, The major proportion of which has been dedicated to the development of special education schools, poly technique colleges and technical education institutes. This creates a self-directed learner and an active contributor to the state, which enhances productivity (MOF, 2012a). 3.4 percent of the total expenditure mentioned in the budget for the FY2012 has been dedicated to the National Research Fund with the objective of making Singapore a R&D hub and a competitive and innovative economy (MOF, 2012b). In 2011 this expenditure accounted for 2.3 percent of GDP of the country, and in 2010 this proportion was 2.1 percent of the GDP (MOF, 2012b). This shows that the country has focused on improving on the productivity via innovation and knowledge-base. A sum of $458.4 million had been allocated for promoting communication technology in FY2012. The strategies were to encourage demand for Infocomm Technology (ICT), create innovative services and establishing policies regulations to sustain new ICT developments (MOF, 2012c). Economic restructuring The Government plays a dominant role in catalysing economic restructuring. Increasing productivity, A more competent utilization of the available labour resource, land as well as energy is central to increasing productivity. Such progress requires economic restructuring. It is not desirable for the government to prescribe which sectors must grow and discriminate against the companies operate in the sectors that are projected by the government as less progressive. It should instead provide the right price signals (e.g. foreign worker levies) and hence the government allows the market forces to allocate the “scarce resources to where they can be most productively used” (MOF, n.d., p. 10). Sharing fruits of development and assisting the lower strata of society The government also ensures that growth process is inclusive, i.e., it benefits each member of the society equitably, despite “encouraging a spirit of self-reliance” (MOF, n.d., p. 10). The government has handled the challenge of keeping the employment level stable for the lower-skilled workers and simultaneously perk up their wage rate. As mentioned above the government has provided strong support for these workers to improve their skill base and lift their aspirations by investing in different educational channels and launching various programmes. Low-income families have also received aids form the government to ensure that their children can access full education beyond school education. It ensures that the fruits of development are shared with all citizens at all strata of the society, which ultimately strengthens the way to sustained economic progress. In this context it has to be noted that while government increases its expenditures, it must take care that the overall tax burden on the individuals and business enterprises remain low. The success of the programmes and the extent to which the objectives of the government are achieved ultimately relies on the capabilities and drive of the people and businesses of the country. While the government can provided advisory and financial aids, it cannot substitute the dynamism achieved through the exploitation of skills, true talent, ingenuity of workforce, and innovative zeal of entrepreneurs that would create new products and identify fresh market niches. Answer 2 In order to reduce unemployment, the government has employed expansionary fiscal policy. Government spending has been raised to support households and businesses. The government’s budget allocation on technology and innovation has helped businesses to leap forward. Increased spending on such as development of road network and increase efficient utilization of energy by industries ensures their profitability since scale economies and benefits of externalities accrue to the firms. Companies can operate at lower per unit production cost thereby increasing their profit levels. To help the households, government has provided 20 percent rebate on personal income tax (to a maximum amount of $2000) so as to increase disposable income of households (IRAS, 2013). It has also taken the initiative of providing the Workfare Income Supplement (WIS) Special Payment (Chan and Ngok, 2012). This special payment is made particularly to the low income workers or the ones that do not have regular employment. As a result of these programmes, purchasing power of the households rises consequently raising the overall consumption level or aggregate demand in the economy. Since supply cannot be altered in the very short run producers cut down the level of inventory stocks. In the long run they attempt to increase production in order to raise inventory stocks to the desired level. Therefore firms hire fresh workers leading to rise in employment level in the economy. It reduces cyclical unemployment. Over the period of 2010 to 2012 the government has created in total 18000 public sector jobs, in fields like public service, healthcare professions, hospital administration, teaching and teaching supporting (Das, 2010). The government has also made huge amount of investment on increasing availability of capital goods in the economy and training programmes. The Skills Programme for Upgrading and Resilience (SPUR) has been launched to fund these courses (up to 90 percent) and also compensate the company for absenteeism by the employee while they attend the training programme (Sng and Chia, 2011; Benson and Zhu, 2011). This allows the worker to retain their job while upgrading their skill set or might seek re-employment after completion of the training programme (Das, 2010). This helps to reduce cyclical unemployment. Frictional unemployment is reduced as the employees do not spend a period of time as unemployed while they search for new jobs. The government’s endeavour to educate the workforce also helps in alleviating structural unemployment. Since employees can attain new skills and update themselves keeping pace with the advances in modern technology, if the employees leave one job to go for skill acquisition and search for new jobs after some time, chances of any disparity between the skills of the worker and the fresh job requirements are reduced greatly. Retraining also improves productivity of the workers by imparting them training on modern production methods. Their efficiency increases and per unit output of labour rises. This also leverages the quantity of labour used in the production process thereby making more units of labour available for other production units or other sectors. The government has played an important role in the development process of Singapore’s economy. The country has high per capita GDP and productivity level is high in the economy. Economic progress has been supported by heavy dependence in exports of consumer durables, pharmaceuticals and products related to information technology. The government has put sincere efforts to bring ‘inclusive growth’ in the economy, which has been achieved by increasing productivity and alleviating unemployment (Kang and Leong, 2012). Various government initiated programmes have been successful in lifting the employment level in the country and increase consumption rate. Productivity driven growth has reduced reliance on foreign workers and also create fresh employment opportunities. References Benson, J. and Zhu, Y., 2011. The Dynamics of Asian Labour Markets: Balancing Control and Flexibility. New York: Taylor & Francis. Chan, C. K. and Ngok, K., 2012. Welfare Reform in East Asia: Towards Workfare. Oxon: Routledge. CIA, 2013. The World Factbook. [online] Available at: [Accessed 24 May 2013]. Das, S. B., 2010. Road to Recovery: Singapore's Journey through the Global Crisis. Pasir Pajang: Institute of Southeast Asian. IRAS, 2013. Income tax rates. [online] Available at: [Accessed 24 May 2013]. Kang, S. H. and Leong, C., 2012. Singapore Perpectives 2012: Singapore Inclusive: Bridging Divides. London: World Scientific. Ministry of Finance, n.d. Report of the economic strategies committee. [online] Available at: [Accessed 24 May 2013]. MOF, 2012a. Expenditure Overview. [online] Available at: [Accessed 24 May 2013]. MOF, 2012b. Expenditure Overview. [online] Available at: [Accessed 24 May 2013]. MOF, 2012c. Expenditure Overview. [online] Available at: [Accessed 24 May 2013]. MOF, 2013. What is productivity? [online] Available at: [Accessed 24 May 2013]. NPTD, 2013. A sustainable population for a dynamic Singapore. [online] Available at: [Accessed 24 May 2013]. Sng, H. Y. and Chia, W. M., 2011. Crisis Management and Public Policy: Singapore's Approach to Economic Resilience. London: World Scientific. Read More