Singapore Economy

Introduction

Yes, I agree that part of Singapore’s success has been built on Singapore government’s ability to ensure macroeconomics stability as well as build long-term economic growth. Macroeconomics stability acts as a buffer against currency and interest fluctuations in the global market. In order to ensure this, fiscal policy, the use of federal budget to achieve full employment, sustained economic growth, and price stability and monetary policy, which is the changing of interest and inflation rates. Both these polices have to be implement by the government.

In order to have long-term economic growth, there must be an increase in real GDP growth. The two sources that contribute to the growth are aggregate hours and labour productivity. Aggregate hours are the total number of hours worked by all the people employed in the country. Labour productivity is the quantity of real GDP produced by an hour of labour, the growth of labour productivity depends on physical capital growth, human capital growth and technological advances.

Singapore Economy

Since independence, Singapore’s economy has had an experience which was not common among other former colonies such as: sustained economic growth, reliance on foreign corporation, low inflation and high saving rates. (Siddiqui, Kalim, 2010). 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. (World Bank, 2009).

Singapore had already advanced ahead of its neighbours, with a higher level of income, during the British colonial rule. This is due to the face that Singapore was the major port for regional trade in Southeast Asia. Singapore’s economic head start was brought by the British during their rule. An extensive infrastructure system was developed, ranging from ship yards and warehouses, to facilities like hospitals, schools. By the time Singapore was declared of independence, a sizeable group of capable professionals, educated by the British system, was ready to take over the reins of governance (Anwar, S., Catley, B. & Zhange, M. 2004).

Now today, from what Singapore used to be in 1965 to a bustling cosmopolitan city. It is largely due to the efforts of the government. Singapore ranks first in the region and second in the world for the fourth consecutive year, owing to an outstanding and stable performance across all the dimensions of the GCI. Again this year, Singapore is the only economy to feature in the top three in seven out of the 12 pillars used to measure competitiveness. Singapore tops the goods market efficiency pillar and ranks second in the labour market efficiency and financial market development pillars. It boasts one of the world’s best institutional frameworks and world-class infrastructure, with excellent roads, ports and air transport facilities. (World Economic Forum,2015).

Fiscal Policies

After independence, the fiscal policy was immediately used to stimulate economic growth, some of the most important fundamental policies that the Singapore government used to boost macroeconomic stability happened after Singapore gained independence. The main objective of the government was therefore to create jobs by intensive industrialization. The Singapore Economic Development Board (EDB) was set up in August 1961 to launch an investment program to bring in labour-intensive industries. (Tompson S H Teo and James S K Ang. 2001)

Over the past few decades, one of the major challenges faced by the Singapore government was reducing the unemployment rate. Being a small and young country with limited resources, Singapore had to create capital and expertise from within. The Housing and Development Board (HDB) was set up in 1968 to create industry estates and Jurong Town Corporation (JTC) was set up in the same year to acquire and take over EDB’s function to develop and manage development sites. The development of both HDB and JTC has allowed the maximised use of land space in Singapore.

Singapore is a small country in the region and with no natural resources, limited land. With the development of EDB, JTC and HBD and with a competent, well-organised and uncorrupted government, Singapore has been a success in attracting foreign direct invesetmenets (FDI). With the aid of Singapore’s fiscal policies, multinational companies (MNCs) started to locate its regional headquarters to Singapore. Having MNCs to move to Singapore, it has greatly increased the employment rates over the years.

Central Provident Fund (CPF) was created by the Singapore government under the British during 1955. This was created as a compulsory saving scheme for Singaporean and permanent residents to assist them in their retirement with the government to have extensive and costly old age pension. Over the years, the CPF has undergone many significant changes since its implementation in 1955. Some of these changes include the creation of the Special Account (1977) and Medisave Account (1984), as well as the liberalisation of the usage of CPF funds for other purposes such as housing (1981) and investments (1986). (Reutens & lee, 2000). The government has constantly