As one of the Asian tigers, Singapore is expected to experience a growth rate of 2.5% to 3.5% this year. This small country with a population of 5.3 million is also one of the richest in the world as it ranks 12th, with a GDP per capita of US$55,182. In 2013, its GDP was US$297,941 million, which ensures Singapore a place in the world top 40 in terms of GDP. This parliamentary democracy is also a member of the Commonwealth and is known for its political stability.
Even though Singapore’s landscape is quite favourable for the development of agriculture, the primary sector only employed 0.1% of the country’s workforce in 2012 whereas the secondary sector, with its petrochemical industry, accounted for 28%. Therefore, it is the service sector that creates most of the jobs and contributes the most to GDP with a rate of 70%. With an economic architecture similar to that of Europe and North America, it seems obvious that Singapore is a highly-developed country. In particular, trade and shipping are the leading strengths of the country and the Port of Singapore is one of the biggest hubs in the world. In addition, high-end manufacturing is also an important component of Singapore’s industry.
Singapore’s Asian partners and the importance of refined petroleum
Hence, Singapore is in favour of free trade and has signed many Free Trade Agreements with many partners such as the ASEAN (Association of Southeast Asian Nations) and multilateral and bilateral agreements as well. As a member of the Most Favoured Nation (MFN), Singapore only protects its alcohol with tariffs when trading with their MFN partners. The few import restrictions imposed aim to protect some sectors such as the environment and the health sector from excessive competition.
When looking at the commodities market, more than 50% of Singapore’s commodities exports are designated for an Asian or Pacific country, with China being its main partner. In terms of commodities imports, although about 37% of Singapore’s commodities imports also come from China, the US appears in the top 5 with a contribution of 7.1%. The top product exported by Singapore (28% of total exports) is also the top imported product (23% of total imports): refined petroleum.
A growing financial sector
Over the last 3 decades, Singapore’s financial sector has grown into one of the main hubs for the Asian Pacific region. The sector has achieved the highest levels worldwide in terms of FDI, surpassing other financial centers such as Dubai and Hong Kong. The sector not only attracts foreign capital, but it is also one of the main sources of FDI in the Asian Pacific region.
Singapore also has an energetic banking sector. It is home to more than 2880 (in 2011) financial institutions and more than 120 banks such as HSBC, ABN-AMRO and BNP Paribas. Private banks as well as local retail banks, provide various financial services to domestic and international customers such as banking, insurance, investment banking and treasury services. The city-state is also recognized as one of the main providers of asset management in Asia, with a total of $1.4 trillion in assets (2013), many of which are Chinese, under management. The city is thus catching up with the largest offshore wealth hub in the world, Switzerland, which has more than $2.8 trillion (2013) in assets under management.
Given the development of a booming financial sector, it is therefore not surprising that many experts believe that Singapore may overtake (together with its Asian competitor Hong Kong) Switzerland as a financial hub by 2015.
The challenges facing Singapore
Singapore’s economy is facing three main challenges: sustaining long term growth, providing enough high-income jobs and coping with an ageing population. As mentioned above, the country’s main economic partners are Asian countries which, however, are facing a noticeable slowdown in terms of economic growth, which could influence Singapore’s growth as well if trade with those partners declines. The “10-year economic restructuring plan” is an attempt to tackle this issue from a different perspective. The aim is for every worker to become more productive, so that even if growth declines, they will still provide more value. Moreover, most people in Singapore are highly educated and have high-status jobs. Therefore, the government needs to ensure a certain income which should increase until 2020. Nevertheless, the “lowstatus” jobs should not be neglected as the Gini coefficient increased from 2003 to 2012. The last issue the government needs to tackle is typical for a developed country: an ageing population. A decline in the birth rate and rarger life expectancy, due to better healthcare have led to a high dependency burden. Thus, contributions to pensions have been raised and the pension of each person limited in order to guarantee a certain pension security for as long as possible.
Featured image: https://www.flickr.com/photos/nlann/4456318373/in/photolist-7MMNcp-e3qtWG-nW3r1Q-8BWJj9-dDw4Zq-7xhvzK-e4CArZ-q7N9Ta-hHXmwy-4sjAmw-mMD2tR-8yNSK2-o9TZi6-nq8PtQ-4vXc2a-7Pzj8z-8Dz8xD-ghz6JD-gXyxGZ-hWRzr-rQi47-ghyQrU-wR4HYP-hvwtqA-dChD6Z-rbqRM5-rF4QJJ-8BnyWp-9aj21T-cDBnCy-cDBnXW-vR6cfR-4xcPGF-vKaeo7-rTrV8C-d2FjNb-gFajzC-2xybFV-9kEjZy-ghz9dN-vNydvQ-NYUCE-jgbnGD-qvr1Ce-37wxZr-vnkmJa-vsrgMp-2iQ9Dq-wpJ3qs-atS8FA