Economy of Singapore - Case Study Example

Running Head: Economy of Singapore Economy of Singapore Client Inserts His/her Name Client Inserts Grade Course Client Inserts Tutor’s Name Introduction Singapore is officially referred to as the republic of Singapore. It is an island Country found in the southeast part of the Asian continent and it is located about one hundred and thirty seven kilometers north of the equator. The Country is composed of 63 small islands. It borders Malaysia to the north separated by straits of Johor and borders Indonesia to the south separated by the Singapore Straits (Rau, 2004). Singapore is a city state that is highly urbanized, majority of the people in Singapore stay in the cities. Although in the recent past the government has embarked on land reclamation, therefore trying to create more land to be used in development (Rau, 2004). Singapore is among the four Asian Tigers; the others are South Korea, Hong Kong and Taiwan. Since independence from the British in I963 and separating from Malaysia two years later, the country has grown in lips and bounds to be the world’s 4th financial center according to the Global Financial Centers Index 2012. The top 10 financial centers are shown by the below table. Top 10 Financial Centers Rank Centre Rating 1 London 785 2 New York City 765 3 Hong Kong 733 4 Singapore 725 5 Zurich 691 6 Seoul 685 7 Tokyo 684 8 Chicago 683 9 Geneva 682 10 Toronto 681 Singapore GPD per capita Singapore port is among the five top busiest ports in the World; the port is able to serve large consignments of imports and exports through the year without any delays (Rajan & Thangavelu, 2009). The economy of Singapore depends mainly on exports and imports of refined goods in the manufacturing area, the manufacturing area constitutes of about 27% of the GDP as the year 2010. Unemployment in Singapore Unemployment refers to the labor force without jobs; they are actively looking for a job as a percentage of the labor force. It is measured in percentage. As at June 2012 the unemployment rate in Singapore was 2%. The table below shows the unemployment rate in Singapore according to the ministry of manpower of Singapore (MOM) Year 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Overall Unemployment Rate (%) Annual Average 2.7 3.6 4.0 3.4 3.1 2.7 2.1 2.2 3.0 2.2 2.0 n/a Seasonally Adjusted as at March 1.9 3.6 3.7 3.7 3.2 2.4 2.7 1.9 3.2 2.3 1.9 2.1 June 2.2 3.4 3.6 3.6 3.3 2.7 2.3 2.2 3.2 2.2 2.1 2.0 September 2.9 3.6 4.8 3.0 3.3 2.8 1.7 2.2 3.3 2.1 2.0 n/a December 3.7 3.7 3.9 3.2 2.7 2.8 1.7 2.7 2.3 2.2 2.0 n/a In the above table and chart it can be noted that unemployment rate was high in the year 2003 compared to any other year from the year 2001 to the year 2011. A rate of 4.0% is the highest and it indicates that four per cent of the available labor force had no work to do. Inflation in Singapore Inflation refers to a persistent rise in the general price levels of goods and services. Creeping inflation is the common type of inflation and occurs where the price levels rises between 1 and 6 per cent. According to the department of Statistics of Singapore, inflation was at its highest in the year 2008 at 6.6% (Rajan & Thangavelu, 2009). The table below shows the consumer price index (CPI) and the annual inflation rate of Singapore from the year 2000 to 2011. Year Consumer Price Index Annual inflation rate 2000 87.6 1.3 2001 88.4 1.0 2002 88.1 -0.4 2003 88.5 0.5 2004 90.0 1.7 2005 90.4 0.5 2006 91.3 1.0 2007 93.2 2.1 2008 99.4 6.6 2009 100 0.6 2010 102.8 2.8 2011 108.2 5.2 Historically since Singapore became independent, inflation rate has averaged 2.82% but the highest ever experienced was in March 1974 of 34% and the lowest was in September 1976 of -3.10%. Over the years especially from the year 2000 to 2011 inflation rates has not been consistent, it has shifted from the lowest of -0.4% in the year 2002 to a highest of 6.6% in the year 2008 (Rajan & Thangavelu, 2009).This indicates that the economy was much affected in the year 2008 than any other year starting the year 2000 to 2011. Foreign Investments in Singapore Foreign investment or the foreign direct investment in Singapore refers to a situation whereby a foreign investor owns 10% of paid up capital in Singapore affiliates. The IMF Balance of payments manual fifth edition highly recommends the 10 per cent rule (Rajan & Thangavelu, 2009). There are a number of foreign countries, who are the major investors in Singapore; USA ($65 billion), The Netherlands ($61 billion), Japan ($54 billion) and the United Kingdom ($50 billion). According to the department of Statistics of Singapore at the end of the year 2009 there was a rise of 7.9% from $573.3 billion to $618.6 billion as at end-2010 of the stock of foreign direct investment. There are various reasons why Singapore attracts foreign investments; firstly, the Country is strategically located. It is located at the main crossroads of the world. Singapore also has an excellent reputation; it has good network and infrastructure as well as a world class banking system. The other things that have given Singapore a competitive edge compared to other Asia countries are attractive and friendly tax policies and strong legal framework. Lastly, some of the positive factors that attract foreign investment in Singapore are; the labor force is available and the people are of high integrity, reliable and very hard working. Singapore is an excellent place to live and work (Rajan & Thangavelu, 2009). Population The population of Singapore is slightly above 5 million people of whom the majorities are Chinese, Malays and Indians are the minority. The country has the highest per capita income in the world in terms of purchasing power parity (Oon, 2008). The main aspects of Singaporean economy are; manufacturing and trade, tourism and the airline and aerospace industry. Manufacturing and Trade in Singapore The manufacturing sector in Singapore is a major composition of the Country’s gross domestic product. It compost of 26.6% of the Country’s GDP according to the department of statistics of Singapore. The economy of Singapore depends heavily on exports and refining imported goods. The manufacturing sectors are mainly composed of electronic sector, chemical industries, petroleum refining, Mechanical engineering and the biomedical sciences (Rajan & Thangavelu, 2009). Over the years Singapore has been the favorite in export-led countries in Asia. According to the Ministry of trade and industry of Singapore the upturn in the manufacturing sector has led to the improved growth in the economy. The sector expanded by a rate of 19.8% in the 1st quarter of 2012 and this improvement was due to the fact that there was an increase in production across all major manufacturing clusters; these are electronics and precision engineering (Rajan & Thangavelu, 2009). Singapore has proved to be a major attraction destination for trade and commerce. The government has over the years provided investors with attractive tax and nontax incentives. The workforce in Singapore is well educated, with high integrity and very productive. The government also allows for a broad freedom of commercial activity. The political and social society is very stable and very conducive for business operated by foreign investors (Usa, I. & International Business Publication, 2009). The Singaporean government also formulates very interesting policy of industrialization that encourages an export oriented strategy. The strategy works well for foreign investors who highly invest in the manufacturing and financial sectors. This is because the regulations are kept at the minimum by the government. Capital and profit movement freely within and outside Singapore is allowed by the government, therefore maintaining foreign investment. Foreign investors can either import capital or raise funds locally (Oon, 2008). Tourism in Singapore Tourism is also a major economic activity in Singapore; it contributes to a significant percentage of the economy. Information from the Singapore tourism board indicates that around 13 million tourists visited the country in 2011. This number of tourists is twice the population of Singapore. The major tourist attraction areas in Singapore are the cultural aspect, the natural resources, the ancient history of Singapore, entertainment industry and the Beach (Oon, 2008). The table below shows the number of tourist who visited Singapore in 2009, 2010 and 2011 Year Tourism Arrival 2009 9,682,690 2010 11,641,700 2011 13,171,303 Singapore has four official languages, but English language stand out to be the major dominant of the four. This has enabled a smooth mode of communication between the locals and visiting tourists. The most attractive place in Singapore that is much visited is the Orchard Road district, the district is dominated by multi-storey shopping malls and hotels. Tourist like doing shopping in Singapore due to the low prices of goods, the too enjoy the delicious local foods prepared by the local chefs (Teo, & Chang, 1998). Singapore Zoo and Night safari is the other tourist attraction activity, tourist are encouraged to visit these zoos at night to physically experience Asian habitat and the wild animals that inhabit the areas. Jurong Bird Park is also a very important tourist attraction cite in Singapore, the zoological garden has various types of birds from around the world and tourists have a great opportunity to watch all these birds at the garden (Teo, & Chang, 1998). In 2011 the tourist island of Sentosa attracted around 19 million visitors; the island is located in the southern part of Singapore. There are about 25 landmarks in the island, the major once are fort siloso built after defeating the Japanese in the 2nd world war as well as the gun they used during the war. Tiger Sky Tower is also found in the island and it is used by the visitors to view the whole of Sentosa (Teo, & Chang, 1998). The Singaporean government though the Singapore Tourism Board has been in the forefront in promoting events that attract tourists. Some of the events are Singapore Arts Festival, Singapore Garden Festivals, Chingay Paradise and the Singapore food festival which is usually held July of the year (Teo, & Chang, 1998). Airline and Aerospace Industry in Singapore In many years Singapore airlines have throughout performed compared with the competitors in a dynamic environment. The airlines have achieved outstanding performance because they adopt a dual strategy. This has been done through excellent services particularly customer service, innovation, and cost reduction strategy by acquisition of Jets that consume little fuel. Singapore aviation industry is very important in its economy because it is the transport center of the region. The airport in Singapore, Singapore Changi Airport is among the busiest airport in air passenger and air cargo. The biggest airline company in Singapore is the Tiger airways that began commercial operation on 15 September 2004 (Usa, I. & International Business Publication, 2009). The aviation industry in Singapore is also very important as it is the center for aerospace maintenance, aeroplane repairs and it is an overhaul center (MRO) and it dominates the Singapore aerospace industry. Singapore contributes $4.6 billion to the Asian Aerospace industry representing 21%; this is according to the association of Aerospace industries of Singapore. The government is focusing on the Aerospace industry as a pillar for the growth in the economy by attracting investment from major industry player like Rolls-Royce Trent Engine Plant, Pratt and Whitney MRO campus and GE Aviation Services operations. The government has assisted small and medium enterprises to complete capacity development programme and complete the bilateral aviation safety agreement. The government has been able to promote Singapore as Aerospace hub by organizing Singapore Air shows and Aerospace supplier conferences. It also plans to develop engineering talent pool by training and graduating around 1000 aerospace professionals each year. Lastly the government of Singapore has built a tailored infrastructure-Seletar Aerospace Park around the airport (Usa, I. & International Business Publication, 2009). Conclusion Singapore economy has mostly been boosted by the manufacturing and trade sector, the tourism sector and airline and aerospace industry. The county has experienced both economic growth and development, therefore getting the following benefits; Economic growth contributes to a higher standard of living. Provides economic growth results in a higher real income per capita, this should imply that a greater quantity of better quality commodities is made available to each person to consume. Has helped in poverty reduction, economic growth has provided a greater access to commodities not only basic need but also others. Economic growth has redistributed income in Singapore without making anyone worse off. It has been possible to change the distribution of income so as to achieve greater equity without making anyone worse off. References Oon, H. (2008). Singapore, London: New Holland Publishers. Rajan, R.S. & Thangavelu, S. (2009). Singapore: Trade, Investment and Economic Performance, New Jersey: World Scientific. Rau, D.M. (2004). Singapore Discovering Cultures, Singapore: Marshall Cavendish. Teo, P. & Chang, T.C. (1998). Critical issues in a critical era: Tourism in Southeast Asia. Singapore Journal of Tropical Geography, 19(2), 100-39. Usa, I. & International Business Publication. (2009). Singapore Recent Economic and political Development Yearbook, Chicago: Int'l Business Publications. Read More