Singapore International Business - Case Study Example

SINGAPORE INTERNATIONAL BUSINESS By Location Singapore international business Introduction Singapore is a state that is situated in Southeast Asia. Singapore is a member of the original Four Asian Tigers. The other members were South Korea, Hong Kong, and Taiwan. Singapore has developed into a highly recognized trade oriented economy over the past decade. In fact, Singapore’s economy is considered to be one of the most open economies in the world, with the corruption rate in the country considered to be the 7th lowest in the world.The economy of Singapore is believed to be one of the most business friendly countries in the world. The reasons as to why Singapore is considered to be one of the most business friendly and the freest countries in the world will be discussed herein. Singapore is a country that does well in both exportation , making it a great contributor to globalization and international trade. This paper will analyse Singapore’s international trade, with consideration to the manner in which globalization has affected the social and cultural aspects of the people of Singapore, and the factors that encourage and undermine international trade in Singapore. International Trade Singapore is the 15th largest importer and the 14th largest exporter in the world. Looking at the history of the economy of Singapore someone can be able to notice that international trade has been of high influence to their international trade. At the moment WBO suggests that Singapore has the highest trade to GDP ratio in the world (Manova 2008, p. 38). At the moment they have a trade to GDP of 408%. Many of Singapores merchandise export activities are attributed to entrepôt trade. This is a factor that is attributed to the country’s geographical location and highly developed port facilities. 47% of Singapore’s exports usually consists of re-exports. The Singapore government is a strong advocate of trade for economic development. As aresult of this strong advocacy, the country has very few laws and regulations that offer a barrier to international trade.Trade partners with the Most Favoured Nation (MFN) is highly favoured because of the lack tariff rates that apply to products. However, the same does not apply for alcoholic products which are not included in the exemption. There are also some import restrictions that on products that the government deem to have social, environmental, and health concerns to the consumers or the society in general. The government also requires all the importers of rice in the country to be licenced so that they can be able to prevent food shortage in the country and making sure that prices of rice in the country are stabilized. Despite the fact that Singapore is considered to be one of the most open economies in the world, the local domestic market is relatively small. Internationally, it can be said that the country’s priorities lie with the Doha Development Agenda the WTO. Singapore belongs to the regional free trade agreements (FTAs). The FTAs to which Singapore is a member consist of: ASEAN Free Trade Area (AFTA), the ASEAN-China FTA (ACFTA), the ASEAN-Australia-New Zealand FTA (AANZFTA), the ASEAN-India FTA (AIFTA), the ASEAN-Korea FTA (AKFTA), and the ASEAN-Japan Comprehension Economic Partner (AJCEP) (Manova 2013, p. 734). Singapore has also signed a number of multilateral agreements with the aim of enhancing their international trade. The multilateral agreements signed by Singapore include: the Singapore-Europe Free Trade Association FTA (ESFTA – Switzerland, Liechtenstein, Norway and Iceland), the Trans-Pacific Strategic Economic Partnership (TPFTA – Brunei, Chile and New Zealand), and the Gulf Cooperation Council-Singapore FTA (GSFTA – Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the United Arab Emirates) (DHL-US website). The Singapore government has also made sure that they maintain bilateral trade agreements with a number of countries. These bilateral trade deals include: Singapore-Australia FTA, with Australia;Singapore-Jordan FTA, with Jordan; China-Singapore FTA, with China; India-Singapore Comprehensive Economic Cooperation Agreement; Korea-Singapore FTA, with Korea; Japan-Singapore Economic Partnership Agreement, with India; New Agreement between New Zealand and Singapore on a Closer Economic Partnership; Peru-Singapore FTA, with Peru; US-Singapore FTA, with the US; and Panama-Singapore FTA, with Panama. Balance of trade In April 2015, Singapore had a trade surplus of 5911200 Thousand SGD. In between 1964 and 2015 the country had a balance of trade that averaged to 548371.08. Singapore reached an all-time high of 9600000 Thousand SGD in 2003 and it reached a record low of 1985810 Thousand SGD in the year 1993. Singapore’s economy highly depends on buying intermediate products, and exporting highly value added products. The country’s main exports include: equipment and machinery, making 46% of the country’s total exports; fuel, making 32% of the country’s total exports; manufactured products, making 7% of the country’s exports; and chemical products, which accounts for 7% of the country’s total exports. Over the recent past the country has recorded the trade deficits with Malaysia, China, Taiwan, the UK, Indonesia, and the US. Singapore also recorded a trade surplus with Bahrain, Hong Kong, Myanmar, India, and Brazil. In between April 2014 and April 2015 Singaporean trade surplus increased from SGD 4.22 billion to SGD 5.91 billion. During this period there was a general fall in imports, making them lesser that the country’s exports. There was a slight reduction in non-oil exports. The same happened to electronic shipment. There was an increase in the shipment of non-electronic products.However, there was a decline in the total exports of the country that was estimated to be about 9.3%. Trading partners Singapore’s success in international trade is advocated to the good relationship that they have always strived to keep with their trading partners. Singapore’s trade partners include: China, the US, Hong Kong, Malaysia, Indonesia, Japan, Taiwan, South Korea, Thailand, Australia, India, Viet Nam, Panama, the Philippines, and Netherlands. China is the greatest importer of Indonesian products. In the year 2013 China imported products whose worth totalled to US$51,486,798,000. This was more than 12% of Singaporean exports. Malaysia followed with a total import value of $49,055,455,000, which was 11.97% of the total exports made by Singapore. Of all the partners that Singapore did trade within the year 2013, Philippines had the least exports. The Philippines imported products,totalling to $6,869,494,000 in value. This was 1.72% of Singapore’s total exports. In the year 2014 81.9% of the exports from Singapore were imported by the countries that have been discussed herein (Rhee 2012, p. 202). However, there was a significant increase in the exports that were exported to Viet Nam. Viet Nam increased their total imports on Singapore products by 76% from 2010. China also increased their import of products from Singapore by 41%. China came second and was also able to maintain their status as one of the most significant importers of products from Singapore. Globalization There are a number of ways in which globalization has been of effect on Singapore. Economically, globalization can be said to have and an effect through the attraction of talent and capital. The transfer of capital and capital has been one of the main reasons as to why Singapore has been able to experience the economic growth that they have experienced over the last decade. However, the fact that Singapore is highly dependent on other economies implies that they are also vulnerable to any negative occurrences in the global economy. There have concerns on the effect that globalization has on the culture and identity of the people of Singapore. Singapore is considered to be one of the most multi-cultured countries in the world. People from various parts of the world have been able to settle down in Singapore, and all the cultures have been co-existing peacefully. On a positive way, globalization can be said to have given the people of Singapore a chance of appreciating different cultures. However, many of the local people are concerned at the rate at which the local people are picking up foreign practices, beliefs, and lifestyles. As a result, there has been a gradual erosion of the identity of the people of Singapore. SWOT Analysis Strengths One of the strengths of Singapore’s international trade can be said to be as a result of their manufacturing activities. Singapore is famous for the export of value added products and other types of manufactured products. In the year 2013, manufacturing formed 29% of Singapore’s GDP. Someone observing the Singaporean manufacturing industry will n able to notice that it is highly diversified. The most dominant sectors in the manufacturing industry include: petroleum refining, electronics, mechanical engineering, chemical production, and biomedical sciences. These sectors and their diversity mean that Singapore can be able to have a variety of product for a variety of needs and preferences. The other strength of the country comes from the fact that her economy id business friendly. Singapore is considered to be one of the most business friendly economies in the world. They have many bilateral and multilateral trade agreements and FDIs because of their trade policies that encourage such endeavours. This implies that the country is able to attract many economic activities through trade and investment. This is a factor that can be used to explain the fast growth of the Singaporean economy over the past years. Singapore is also a popular tourist destination. Tourism is one of the biggest industries in the country. In the year 2010 more than 10 million tourists visited Singapore (Abshire 2011, p. 126). Being active in tourism implies that the country has been able to earn revenue through the same. Tourism is also a way through which the government can make sure that they are able to reduce the rate of unemployment in the country because the tourism industry in the country employs many of the local people. Weakness One of the weaknesses of Singapore as a growing economy is the population of the country. In the year 2009 the country had a population of 4.99 million. Of the 4.99 million population only 3.73million were Singaporean citizens. This is an indication that the country might not be having a sufficient supply of human resource to their highly developing and growing economy (Hummels 2007, p. 142). Given the fact that human resource is an important factor in any sort of economic activity, it would be said that Singapore is short of one of the most important resources important for economic productivity. This might be and hindering factor to their economic productivity. Another factor that can be considered to be a weakness of Singapore as a country that highly participates in international trade is the fact that it is a multi-lingual country. This is an indication that the country does not have any specific official language. At the moment, the languages that are used in the country include: English, Chinese, Malay, and Timal. The land area of the country can also be a limiting factor to their economic activities. The total land area of Singapore is 704 km2. Given the fact that Singapore’s involvement in international trade highly depends to the manufacturing industry, the shortage of land space can be a hindrance to production. All manufacturing activities need land space, meaning that most of the manufacturers will have to do with limited space. Most of these companies will not be able to increase their physical space. This will surely influence them in their expansion endeavours, thus being unable to increase their production volumes. Opportunity If the Singapore government can be able to settle the land despite between Malaysia and Singapore, then there will be more land that would be used for production, being able to involve themselves in more production activities will imply that the country will be able to produce more product, thus being able to export more. There has been a notable rise in the market for technology and technological products in South America. Given the fact that Singapore has a strong electronics production sector, Singapore can take advantage of this situation and make sure that their products are well marketed in South America so that they can be able to increase the rate at which their electronic products are consumed in South America. Russia introduced a new brand of crude oil in Asia. For the crude oil to be consumed by the Asian countries, Russia will have to find a way through which the crude oil will reach the targeted market. Given their geographical location, Singapore in in a good position to transport and ship the crude oil to various parts of Asia. This is an implication that Singapore stands a high chance of being given the contract if they bid. Threat The sources of water used in Singapore can be highly affected by global warming. This is because they rely on water from rain collected in reservoirs. The rest comes from Malaysia. This is an implication that the country faced a potential threat of water shortage. Given the fact that water is an important factor in manufacturing processes, such shortages will be a blow to the country’s economy. If the country is not careful they will soon be vulnerable to the economic crisis in the US and Europe. This is because of their overreliance of on international trade. Recommendation There are a number of things that can be done to increase the benefits that Singapore get from their involvement in international trade. For instance, the government can take advantage of their geographical location and highly developed ports to seek shipping and transportation deals. It would also be advisable if the country considered getting into the emerging market. Forinstance, they can consider increasing trade activities with South American countries such as Brazil. Given the fact that the land area of the country is limited it would be improper for the government to use population increase programs. Instead, they can consider more investment in technology so that the industries in the country will need less human resource. Bibliography Abshire, JE 2011,The history of Singapore,Greenwood, Santa Barbara, Calif. Hummels, D 2007, “Transportation costs and international trade in the second era of globalization” The Journal of Economic Perspectives, 131-154. Manova, K 2008, “Credit constraints, equity market liberalizations and international trade” Journal of International Economics, 76(1), 33-47. Manova, K 2013, “Credit constraints, heterogeneous firms, and international trade” The Review of Economic Studies, 80(2), 711-744. Rhee, CC 2012,Principles of international trade (import-export): the first step toward globalization,AuthorHouse, Bloomington, IN. DHL-US website Accessed from http://www.dhl-usa.com/en/express/small_business_solutions/country_facts/country_facts_singapore.html Read More