Economic Growth of Singapore - Research Paper Example

? Singapore submitted) Introduction Singapore is the country found between the parts of Malaysia and the sea of South China on the Asian continent. It was colonized by Great Britain in 1965 and currently consists of about 5 million people with an estimated growth rate of 3.54% (Gerber, 2007, p. 88). It is known to be the densest country in the whole world with around 6500 people per square kilometer. This is majorly caused by the high rate of immigration with low death rate. The economy of Singapore is among the fastest growing economies in Asia with its GDP growing by 8% between the year 2004 and 2007 on average. At the end of that period, the economy expound by 7.7%, reducing the level of unemployment to 2.1% and the level of employment being 235,000 (World Trade Organization, 2008, p. 112). The level of inflation, on the other hand, reduced from 4.9% to 3.5% this year. Singapore is one of the richest nations in the world. This has been facilitated by the removal of trade barriers, letting over 99% of the rest of the world to visit the country for trade without imposing a tax on them. This means that it is easy to import and export goods from and to other countries of the world and shows how open the country is. The currency used in Singapore is the Singapore dollar denoted as SD. It is almost equivalent to the US dollar with the exchange rate being 1USD =1.23 SD meaning that it is weaker than the US dollar by 0.23 (Huff, 1997, p. 44). Trade (expressed in billions of USD): Singapore Exports Imports 1975 5.375 8.133 1980 19.376 24.007 1985 22.812 26.285 1990 52.752 60.899 1995 118.268 124.507 1998 109.895 104.719 (International Monetary Fund, 1999) Trade is one the major factors that facilitate the growth of an economy since it earns the country foreign exchange that can be used to develop other sectors of that economy. It involves one country exporting goods that it produces more to avoid wastages and also importing goods that it lacks to avoid shortages. In this, it ensures resources are used appropriately and fully. Singapore’s current export stands at 41,538,700 showing a decrease by about 1,028,330.7 as compared to the previous period (Gerber, 2007, p. 94). Its major exports include: Aircraft and its parts Singapore is ranked number one among the many countries that provide aerospace design, manufacturing services and maintenance. It has all the required equipment to facilitate this, and this has also enabled it to capture a large market in Asia. It has created employment opportunities to the citizens, having over 18,000 employees in this sector. Oil and Gas Singapore is in the top three major traders of oil, and it has become the most important center for shipping in Asia. Oil is being used all over the world, and this is a major source of revenue for the government for different countries (Huff, 1997, p. 64). Since all the countries use oil and gas to run their daily activities, means that they have to purchase it. Singapore being one of the major exporters of oil and gas, it earns a lot, and this helps to improve its economic performance. Computers Computers are very essential in raising the total productivity and in transformation of business processes. Many of the citizens in Singapore have access to computers, and this has greatly contributed to its economy. Some of the computers produced are exported to the other part of the world, earning the country foreign exchange while others are used locally to facilitate or ease production of other products. The total trade value it obtains from export of computers and printers is about 12.5 billion (World Trade Organization, 2008, p. 119). Telecommunication Equipment Internet is very useful in the modern world. Many businesses advertise their products online as it is cheap and attracts many customers all over the world. With networking, it is easy to get more ideas on how you can compete globally through improving the quality of your products. Singapore provides the best network in the world and is in the process of building the fastest fiber optic broadband. It supplies its network to the US, China, Japan and India (Huff, 1997, p. 162). Though the country is one of the richest in the world, it cannot sustain itself without the assistance of other countries. These countries provide market for its products and also provide it with raw materials that it needs for production. The major imports for Singapore are: Agricultural Products The weather condition and the nature of soil in Singapore are not favorable for growing crops. Also, many parts of the country are under construction and, therefore, no space for farming. Due to this, livestock cannot survive in this country or enough cannot be kept to cater for the whole population. Therefore, the only way is to import both the livestock products like meat and milk and agricultural products like vegetables and the raw materials used for production. The vegetables come from Malaysia while meat and milk come from Australia. Current account balance refers to the difference between a country’s net exports and net imports. When the net exports of a country are greater than its net import then we have a surplus balance of trade, but if the net imports are greater than the net exports then we have a deficit balance of trade. Singapore is the 15th largest importer and the 14th largest exporter in the whole world. In March 2013, the Statistics in Singapore showed that it had a trade surplus of 4630800 which shows a very good performance economically (Gerber, 2007, p. 312). The United States signed a Free Trade Agreement with Singapore in 6th May, 2006 which was implemented on 1st Jan 2004 (Union of International Associations, 2005). This facilitated the movement of goods and services and also people between the two countries. It is also one of the largest trading partners in the Association of South-East Nations. The major trade partners with Singapore are the European Union, United States, Hong Kong, China, Japan, South Korea, Indonesia and Malaysia. Trade Policies in Singapore The major objective for trade policies in Singapore is to provide an environment which aims at promoting trade. Rules set by the countries engaged in trading has provided security and brought a greater predictability to conduct trade among the countries. It has engaged in with the markets which are emerging beyond the region. Such markets include China, India and the Middle East. In the year 2007, the country opened trade offices in Abu Dhabi and Jeddah to monitor trade activities in the region and to facilitate competition with other countries (World Trade Organization, 2008, p. 144). Trade Barriers in Singapore Singapore is one of the friendliest economies in the world and complaints regarding business with other part of the world are not that complicated. Most of the goods enter and leaves the country untaxed. It is a transparent process, and all the companies in the country have learnt to cope with the restrictions imposed. The only problem is that some companies especially small ones are neglected since some goods are allowed to enter the country yet they are being produced locally, though in small amounts. Singapore majorly imports food, and this is subject to certain restrictions. It is very difficult to change the restrictions once it is in place and this makes it difficult to import certain types of food especially meat from Europe. This is because the European plant producing the type of food has to obtain a license from the Agri-Food & Veterinary Authority of Singapore which is time consuming and a very expensive process (Union of International Associations, 2005, p. 89). If the company that wants to export the food to Singapore is small, it will not be in a position to fulfill the requirements, and this implies a barrier to them. Also, the food products have to be tested twice, that is, where they are manufactured and where they are exported (Singapore) for quality purposes. This may lead to a reduction in the actual shelf life of the products which may make the consumers reject them. Lastly, Singapore imposes tax on tax importation of alcohol with the aim of reducing its consumption in the country. The local producers of beer are untaxed, and this is a disadvantage to the importers since they will be forced to raise the price of their goods to maintain a certain level of profit. Since the price of the local beer is cheaper, many citizens will consume it making the imported beer not to survive in the market. Challenges Facing Singapore in International Trade The country is densely populated, and the limited land had to be planned for various uses such as industries, construction of houses, water catchment areas and farming. This has brought about congestion in the country and expansion of businesses is very difficult. Another challenge is that the country has low skilled labor, and this forced it to encourage both the male and female to take up technical training in the year 1969 in order to enhance the level of skills that existed before (International Monetary Fund, 1999, p. 56). This left many who did not have proper skills to lose their employment since they were being replaced with those who had proper training. The country had a weak industrial base and these encouraged foreign investors to set up factories in it. Lastly, it had a high level of unemployment that forced it to set up labor manufacturing industries that provided jobs for a large number of workers. Successes of Singapore It has organized a seminar to be held this year in Ghana for giving more advice to the country on how it can grow economically. The aim of the seminar is also to act as a gate away for companies that want to invest in the country. The country also sent some of its delegates from the major companies to explore the business opportunities in Myanmar. They achieved what they wanted, and this has now put Singapore in the fourth place among the trading partners of Myanmar (World Trade Organization, 2008, p. 201). Asia-Pacific Economic Cooperation ensures the member countries grow economically and assures them of their prosperity through trade and investment liberalization. Therefore, Singapore should pursue this for its continuous prosperity in the market. Conclusion Trade has really facilitated economic growth and countries that do not actively participate in trade should start to do it. Apart from economic growth, it has provided a wider variety of goods for consumers to choose on that satisfies them. Without trade, no country would have been where it is today. It is essential for countries to remove trade barriers in order to facilitate the exchange of goods between the countries but with rules and regulations set. References Gerber, J. (2007). International economics. New York: Addison Wesley. Huff, W. G. (1997). The economic growth of Singapore: Trade and development in the twentieth century. Cambridge: Cambridge University Press. International Monetary Fund. (1999). International financial statistics yearbook. Washington, D.C.: International Monetary Fund. Union of International Associations. (2005). Yearbook of international organizations 2005/2006: 2 Parts. Berlin: K. G. Saur Verlag GmbH. World Trade Organization. (2008). Trade policy review: Singapore. Lanham: Bernan Press. Read More