Singapore has rightly earned the reputation as the world’s best-performing economy. The country has become an important center for global finance and a leading destination for expatriates and immigrants. Singapore’s combination of a small population (relatively small to all other countries) and a high level of personal freedom (high taxation levels and an efficient social security system) have made it an attractive destination for foreign investors.
Singapore’s story is not all about the bright lights and sparkling buildings. Singapore has always remained a society where people were treated fairly and without discrimination of any kind. The basic advantage of Singapore as an economic destination is the country’s ability to maintain stable political and economic balances despite the fluctuations in national resources (especially oil). Singapore has been described as the world’s most successful growth story.
The Singapore economy is underpinned by robust economic growth. Real estate developments are helping the economy to sustain growth. However, the government has exerted considerable effort to ensure that this positive trend continues. “I would say that Singapore is well positioned to deal with either the global economic crisis or the domestic one,” the prime minister, Lee Hsian Lo, told reporters recently. Singapore is also stepping up efforts to enhance its global profile. “Singapore has an excellent track record when it comes to globalization,” said John E. Ellis, the Singapore-based head of research at the Asian Development Institute in Singapore.
Singapore is among the rapidly developing countries that have implemented many of the approaches to economic development that are popular around the world. In particular, Singapore has adopted a flexible exchange rate policy, allowing Singaporean currency to be bought and sold anywhere in the world. This policy has promoted Singaporean exports. Singaporean companies have also begun to invest in international businesses, which helped solidify Singapore’s place as a regional leader in trading.
A key element in Singapore’s economic development has been the adoption of a comprehensive free trade policy that has encouraged inward investment by multinational corporations. The Per Capita Formula, which is the name of the formula implemented in Singapore in order to facilitate the entry of multinational companies, has had significant impacts on the country’s economy. The formula essentially provides the necessary infrastructure for companies to be able to set up shop in Singapore without having to increase prices for goods and services produced in Singapore. This has helped Singapore to increase its per capita GDP and reduce poverty in the country.
Singapore’s total trade with the rest of the world last year was approximately S$125 billion. Most of this commerce is conducted through Singapore’s six major commercial airports. The main economic drivers of Singapore are its strong manufacturing sector and its liberal trade policy. Both of these sectors have helped the economy to sustain growth, albeit at a slower pace than some of its neighbors. The slowdown in global economic activity over the past two years has not dampened Singapore’s economic outlook.
Ahead of the presidential elections scheduled to take place in January, Singapore will face a difficult choice between economic prosperity and continuity with its traditional alliance with China. With polls indicating that the ruling party will have to pick a new course on economic policy, it is uncertain whether Singapore will choose to deepen its economic partnership with China. If Singapore does decide to deepen its ties with China, the effects on the economy of Singapore will be felt in the short term. However, if the two countries want to maintain a free trade scenario, they will have to make a conscious effort to ensure that the economy of Singapore grows robustly over the long term.
Looking towards the future, Singapore’s future economic growth path will depend on whether the incoming Obama administration and the incoming Trump administration in the United States keep their respective promises regarding economic assistance to Singapore. On one hand, both Obama and Trump promised a number of billions of dollars in assistance to Singapore. On the other hand, no clear plan for how this money will be spent has been announced. No doubt, Singapore’s slow growth rate will continue, but it is possible that after a few more years Singapore will start to enjoy higher growth rates.