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Singapore 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 7.8% from 1965 to 2009.

The worldwide electronics slump in 2001 and the outbreak of severe acute respiratory syndrome (SARS) in 2003 dealt blows to the economy, but growth bounced back each time, driven by world demand for electronics, pharmaceuticals, other manufactured goods, and financial services, particularly in the economies of its major trading partners: the United States, the European Union, Japan, and China, as well as expanding emerging markets such as India. The global financial crisis of 2008 and 2009 dealt a blow to Singapore's open, trade-oriented economy. Singapore saw its worst two quarters of contraction in late 2008 and early 2009, but quickly recovered with strong performance in later quarters. The official growth forecast for 2010 is between 4.5% and 6.5%.

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. Also present are 1,500 companies from China and another 1,500 from India. 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 (including construction) and services are the twin engines of the Singapore economy and accounted for 26% and 69.3%, respectively, of Singapore's gross domestic product in 2009. The electronics and chemicals (including petroleum products) industries lead Singapore's manufacturing sector, accounting for 31.5% and 27%, respectively, of Singapore's manufacturing output in 2009. To inject new life to the tourism sector, the government in April 2005 approved the development of two casinos that resulted in investments of more than U.S. $5 billion. Las Vegas Sands' Marina Bay Sands Resort is scheduled to open in April 2010, while Genting International's Resort World Sentosa opened its doors in February 2010.

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 eight free trade agreements (FTAs) with emerging economic partners and has already concluded 18 FTAs with many of its key trade partners, including one with the United States that came into force January 1, 2004. As a member of the Association of Southeast Asian Nations (ASEAN), Singapore is part of the ASEAN Free Trade Area (AFTA), and is signatory to ASEAN FTAs with China, Korea, Japan, India, and a joint agreement with New Zealand and Australia. Singapore is also a party to the Transpacific Strategic Economic Partnership Agreement, which includes Brunei, Chile, and New Zealand.

Trade, Investment, and Aid
Singapore's total trade in 2009 amounted to $513.9 billion, a dip of 11.5% from 2008. In 2009, Singapore's imports totaled $245 billion, and exports totaled $269 billion. Malaysia was Singapore's main import source country, as well as its second-largest export market, absorbing 11.5% of Singapore's exports, after Hong Kong (11.6%). Other major export markets include the United States (11.2%), China (9.7%), and Indonesia (9.7%). Singapore was the 13th-largest trading partner of the United States in 2009. Re-exports accounted for 48.9% of Singapore's total sales to other countries in 2009. Singapore's principal exports are petroleum products, food and beverages, chemicals, pharmaceuticals, electronic components, telecommunication apparatus, and transport equipment. Singapore's main imports are aircraft, crude oil and petroleum products, electronic components, consumer electronics, industrial machinery and equipment, motor vehicles, chemicals, food and beverages, electricity generators, and iron and steel.

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 63% of new commitments to the manufacturing sector in 2008. As of 2008, the stock of investment by U.S. companies in the manufacturing and services sectors in Singapore reached about $106.5 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 $206.5 billion by the end of 2007. China was the top destination, accounting for 13.2% of total overseas investments, followed by Malaysia (7.1%), Indonesia (6.1%), United Kingdom (10.5%), Hong Kong (5.9%), Thailand (5.2%), Australia (5.3%), and the United States (4.5%).

Labor
As of December 2009, Singapore had a total labor force of about 2.99 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 have been no strikes since 1986.

Singapore has enjoyed virtually full employment for long periods of time. Amid slower economic growth in 2003, unemployment rose to 4.0%. As of the end of June 2008, the unemployment rate was 2.2%. In tandem with the global economic crisis and the economy’s contraction, unemployment as of end-September 2009 rose to 3.4% and resident unemployment reached 5.0%. However, the overall and resident unemployment rate dipped to 2.1% and 3.0%, respectively, in December 2009 in view of the Singapore Government’s job saving measures and the gradually improving global economy. Overall, some of Singapore’s unemployment is attributable to structural changes in the economy, as low-skill manufacturing operations have moved overseas. Since 1990, the number of foreign workers in Singapore has increased rapidly to cope with labor shortages. Foreign workers comprise 35% of the labor force; the great majority of these are unskilled workers.

GDP (2009 nominal prices):
$177.1 billion.

Annual real growth rate:
8.7% (2006), 8.2% (2007), 1.4% (2008), -2% (2009)

Per capita GDP (2009):
$35,515.

Natural resources:
None.

Agriculture (under 0.5% of GDP):
Products-poultry, orchids, vegetables, fruits, ornamental fish.

Manufacturing (18.2% of real GDP): Types-electronic and electrical products and components, petroleum products, machinery and metal products, chemical and pharmaceutical products, transport equipment (mainly aircraft repairs/maintenance, shipbuilding/repair and oil rigs), food and beverages, printing and publishing, optical and photographic equipment, plastic products/modules, instrumentation equipment.

Trade :

Exports-$268.9 billion: petroleum products, food/beverages, chemicals, pharmaceuticals, industrial machinery and equipment, electronic components, telecommunication apparatus, transport equipment. Major markets-Malaysia (11.5%), Indonesia (9.7%), Hong Kong (11.6%), Germany/France (2.9%), China (9.7%), United States (11.2%), and Japan (4.6%).

Imports-$245 billion: aircraft, crude oil and petroleum products, electronic components, radio and television receivers/parts, motor vehicles, chemicals, food/beverages, iron/steel, electricity generators. Major suppliers-Germany/France (6.6%), Malaysia (11.6%), United States (14.7%), China (10.5%), and Japan (7.6%).

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