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World > Asia > Singapore > Economy (Notes)

Singapore - Economy (Notes)


ECONOMY
Singapore's strategic location on major sea lanes and its industrious population have given the country an economic importance in Southeast Asia disproportionate to its small size. Upon independence in 1965, Singapore was faced with a lack of physical resources and a small domestic market. In response, the Singapore Government adopted a pro-business, pro-foreign investment, export-oriented economic policy framework, combined with state-directed investments in strategic government-owned corporations. Singapore's economic strategy proved a success, producing real growth that averaged 8.0% from 1960 to 1999. The economy picked up after the 1997 regional financial crisis, with a growth rate of 9.4% for 2000, but then fell back in tandem with the economic slowdown in the United States, Japan, and the European Union (EU), as well as the worldwide electronics slump, so that GDP shrank by 2.4% in 2001. The economy rebounded in 2002, expanding 4.0%; but it posted a slower 2.9% growth in 2003, due to the effect of severe acute respiratory syndrome (SARS) in the first half of the year. From 2004 to 2006, the economy expanded by 8.8%, 6.6%, and 7.9%, respectively, driven by the growth in world demand for electronics, pharmaceuticals, other manufactured goods and financial services, and in the economies of its major trading partners--the United States, EU, Japan, and China, as well as expanding emerging markets such as India.

Singapore's largely corruption-free government, skilled work force, and advanced and efficient infrastructure have attracted investments from more than 7,000 multinational corporations from the United States, Japan, and Europe. Foreign firms are found in almost all sectors of the economy. Multinational corporations account for more than two-thirds of manufacturing output and direct export sales, although certain services sectors remain dominated by government-linked companies.

Manufacturing and services are the twin engines of the Singapore economy and accounted for 26.9% and 63.2%, respectively, of Singapore's gross domestic product in 2006. The electronics and chemicals industries lead Singapore's manufacturing sector, accounting for 32.4% and 32.5%, respectively, of Singapore's manufacturing output in 2006. To inject new life to the tourism sector, which faced a 20% fall in receipts between 1993-2000, and a declining share of East Asia Pacific tourism receipts from 8.2% to 5.8%, the government in April 2005 approved the development of two casinos that should result in investments of more than U.S. $5 billion.

To maintain its competitive position despite rising wages, the government seeks to promote higher value-added activities in the manufacturing and services sectors. It also has opened, or is in the process of opening, the financial services, telecommunications, and power generation and retailing sectors to foreign service providers and greater competition. The government also has pursued cost-cutting measures, including tax cuts and wage and rent reductions, to lower the cost of doing business in Singapore. The government is actively negotiating free trade agreements (FTAs) with 16 key trading partners and has already concluded 11 FTAs, including one with the United States that came into force January 1, 2004.

Trade, Investment, and Aid
Singapore's total trade in 2006 amounted to $510 billion, an increase of 13.2% from 2005. In 2006, Singapore's imports totaled $239 billion, and exports totaled $271 billion. Malaysia was Singapore's main import source, as well as its largest export market, absorbing 13.1% of Singapore's exports, with the United States falling behind to 9.9%, from 10.2% in 2005. Singapore was the 15th-largest trading partner of the United States. Re-exports accounted for 47.3% of Singapore's total sales to other countries in 2006. Singapore's principal exports are petroleum products, food and beverages, chemicals, textile and garments, electronic components, telecommunication apparatus, and transport equipment. Singapore's main imports are aircraft, crude oil and petroleum products, electronic components, consumer electronics, microelectronics manufacturing equipment, motor vehicles, chemicals, food and beverages, iron and steel, and textile yarns and fabrics.

Singapore continues to attract investment funds on a large scale despite its relatively high-cost operating environment. The United States leads in foreign investment, accounting for 24% of new commitments to the manufacturing sector in 2005. As of 2005, the stock of investment by U.S. companies in the manufacturing and services sectors in Singapore reached about $48.1 billion (total assets). The bulk of U.S. investment is in electronics manufacturing, oil refining and storage, and the chemical industry. About 1,500 U.S. firms operate in Singapore.

The government also has encouraged firms to invest outside Singapore, with the country's total direct investments abroad reaching $104 billion by the end of 2004. China was the top destination, accounting for 12% of total overseas investments, followed by Malaysia (8%), Hong Kong (7%), Indonesia (7%), and the United States (5%).

The United States provides no bilateral aid to Singapore.

Labor
In December 2006, Singapore had a total labor force of about 2.5 million. The National Trades Union Congress (NTUC), the sole trade union federation, comprises almost 99% of total organized labor. Extensive legislation covers general labor and trade union matters. The Industrial Arbitration Court handles labor-management disputes that cannot be resolved informally through the Ministry of Labor. The Singapore Government has stressed the importance of cooperation between unions, management, and government ('tripartism'), as well as the early resolution of disputes. There has been only one strike in the past 15 years.

Singapore has enjoyed virtually full employment for long periods of time. Amid slower economic growth in 2003, unemployment rose to 4.6%. As of end-December 2006, the rate of unemployment dropped to 2.7%. Much of the unemployment is structural, as low-skill manufacturing operations move overseas. Since 1990, the number of foreign workers in Singapore has increased rapidly to cope with labor shortages. Foreign workers comprise 30% of the labor force; the great majority of these are unskilled workers.

Transportation and Communications
Situated at the crossroads of international shipping and air routes, Singapore is a center for transportation and communication in Southeast Asia. Singapore's Changi International Airport is a regional aviation hub served by 83 airlines. A third terminal is slated to open in 2008, and a dedicated low-cost terminal for budget airlines was completed in 2006. The Port of Singapore is among the world's busiest and ranks second globally as a center for containerized transshipment traffic, after Hong Kong. The country also is linked by road and rail to Malaysia and Thailand.

Telecommunications and Internet facilities are state-of-the-art, providing high-quality communications with the rest of the world. Radio and television stations are all ultimately government-owned or government-linked. The print media is dominated by a company with close ties to the government. Daily newspapers are published in English, Chinese, Malay, and Tamil.


Facts at a Glance: Geography - People - Government - Economy - Communications - Transportation - Military - Climate - Current Time - Ranking Positions - Singapore Dollar Exchange Rates
Notes and Commentary: People - Economy - Government and Political Conditions - Historical Highlights - Foreign Relations - Relations with U.S.



Facts at a Glance
Geography
People
Government
Economy
Communications
Transportation
Military
Climate
Current Time
Ranking Positions
Singapore Dollar Exchange Rates


Notes and Commentary
People
Economy
Government and Political Conditions
Historical Highlights
Foreign Relations
Relations with U.S.





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