Singapore’s economic development
How has the government’s role and interventionist policies influenced Singapore’s economic development? (Please explore the extent of government intervention in shaping the economy, including industrial policies, investment strategies, and regulatory framework)
The Republic of Singapore is an island country located in Southeast Asia. Despite ranking 176th in terms of land area, this small nation has achieved significant accomplishments when it comes to economic indicators. After declaring its independence on August 9, 1965, the country entered a rapid development process and managed to attract attention. It has also become one of the countries known as the Asian Tigers. This economic development process was achieved through important state policies and numerous government interventions. Like other Asian Tigers, Singapore’s government officials ignited the flame of development. The Singaporean state has tried to fulfill the role of an “entrepreneurial state.” While playing this role, Singapore not only created “winners” but also achieved significant accomplishments in areas such as infrastructure investment, human capital investment, and venture capital investment.
Lee Kuan Yew was the long-standing leader of the Republic of Singapore. His leadership began on April 22, 1955, and lasted until March 23, 2015. Lee Kuan Yew was a highly influential political leader during Singapore’s development period. Together with Lee Kuan Yew, Singapore established a system that combined planned and market economies. The government has direct control over wages and the labor force in Singapore’s development process. This enabled Singapore to attract direct foreign investments to the country and increase imports in the manufacturing sector by multinational companies. Moreover, the increasing number of multinational corporations helped reduce unemployment by providing labor-intensive production. Full employment and Singapore’s increasing labor productivity increased domestic savings. With increased domestic savings, the Singaporean government made significant investments in infrastructure. Compared to other Asian Tiger countries, Singapore has been the country where the most multinational corporations have invested. The most important factors in this are the government’s direct intervention in labor supply and the advantages created by Singapore’s location. In the 1970s, significant electronic companies invested in Singapore, such as Texas Instruments, Hewlett-Packard, and General Electric. Singapore also made important investments in the service sector, establishing Neptune Orient Lines, a shipping company, and Singapore Airlines as the national flag carrier.
Singapore has demonstrated a successful macroeconomic performance since the 1960s. In 1965, its per capita income ranked 33rd globally, but by 1992, it had risen to the 17th position. The Gini coefficient, a measure of income inequality, was 0.46 in the mid-1980s and decreased to 0.36 by 2021. During the period of 1960–1992, Singapore achieved rapid economic growth with consistent annual real GDP increases. Real GDP grew by 5.7% between 1960 and 1966, and by 13.6% from 1966 to 1969. Development Bank of Singapore and Jurong Town Corporation were instrumental in supporting this growth. From 1970 to 1979, Singapore’s real GDP expanded by 8.3%, while from 1980 to 1992, the growth rate was
6.7%. Throughout these years, Singapore maintained a stable inflation rate. Inflation was 1.1% between 1960 and 1966, and 2.4% from 1980 to 1992. Alongside its rapid growth,
Singapore also experienced a significant increase in its savings rate. The savings rate rose from 6.7% in the period of 1960–1966 to 11.5% in 1960–1969. From 1970 to 1979, the savings rate reached 28.8%, and it further increased to 42.9% between 1980 and 1992. The rise in savings was achieved in line with government policies and economic goals. The government’s control over wages facilitated full employment, indirectly leading to an increase in the country’s savings rate. Singapore’s exceptional macroeconomic performance within a short period attracted significant foreign investment. The investment rate was 17.5% between 1960 and 1966, 40.5% from 1970 to 1979, and 41.3% from 1980 to 1992.
Between 1965 and 1984, Singapore’s export-oriented industrialization, driven by multinational corporations, was facilitated by the favorable economic conditions provided by the government to attract foreign investment. Initially faced with challenges such as unemployment and political instability, Singapore made two crucial decisions. The first decision was to pursue an export-oriented industrialization policy, while the second decision was to attract multinational corporations to achieve targeted industrial growth. To facilitate these goals, Singapore established infrastructure facilities, and invested in technical skills for the industry. Singapore, 50 years ago, faced challenges of overcrowded cities, low living conditions, and significant infrastructure deficiencies. However, Singapore successfully overcame these challenges through proper planning and programs. The infrastructure leap was achieved through the efforts of government institutions. Singapore, which first established the Concept Plan in 1971, chose the “Ring Concept” in urbanization. A comprehensive housing redevelopment model was developed, transforming slums into highways and railway connections to the Central Business District. After gaining independence, housing and unemployment were significant concerns, and Singapore addressed the housing issue by implementing mass housing programs and home loans through the Housing and Development Board (HDB) and the Economic Development Board (EDB). The government, in collaboration with HDB and CPF (Central Provident Fund), aimed to provide people with housing through infrastructure facilities such as transportation, healthcare, and education. With this significant public housing project, currently, 86% of Singaporeans live in HDB-built homes, and these homes have also gained financial value for 90% of the residents. Another significant aspect of infrastructure investment was maximizing the use of its geographical location for transportation. The Port Authority of Singapore (PSA) made further investments in its crucial port, which has been significant since colonial times, and has continued to invest regularly from the 1960s until now to establish a port that can meet the growing demand. PSA manages one-fifth of the world’s container transshipment volume. Singapore is connected to 123 countries through 200 shipping lines, with four container terminals and two multipurpose terminals. The infrastructure investments in maritime trade and the logistics sector have turned Singapore into an international logistics hub, providing employment opportunities for around 90,000 people.In the 1970s, Singapore’s Changi area was chosen for its favorable conditions for aviation, and an airport was constructed there. With this airport, the Singaporean government began attracting over a million visitors per week as of 2007. However, physical infrastructure investment alone was not sufficient for Singapore. As a country aspiring to achieve success in new technologies, it made investments in Research and Development (R&D) in this field. For these investments, the National Science and Technology Board (NSTB) was established. In the 1980s, when the importance of communication technologies started to increase, Singapore was among the countries interested in investing in high technology. Singapore charted its own course in terms of information technology infrastructure investments. The National Computer Board was established in 1981 to develop the necessary workforce for the sector. In 1991, the national broadband internet network ‘Singapore ONE’ was initiated to provide high-speed internet and prepare the country for the 21st century. In 1998, the Local Enterprise E-Commerce Program was implemented.
In conclusion, Singapore owes its long-term economic development success, which began in the 1960s and continued until the end of the 1980s, to robust macroeconomic policies and sustained investments.
References
https://www.jstor.org/stable/23600207
https://link.springer.com/article/10.1007/s11138-022-00589-6
https://www.bis.org/review/r150807b.htm
https://en.wikipedia.org/wiki/Lee_Kuan_Yew
https://www.eria.org/uploads/media/Research-Project-Report/RPR_FY2007_2_Chapter_8.pdf
