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Modelling a Systemic Industrial Policy Ecosystem: A Case Analysis of Singapore - Page 6

The Singapore Experience

Singapore , which attained independence from the United Kingdom on 9 August 1965, only started industrialisation around the mid-sixties. Due to the absence of a sizeable domestic market, the country focused on an economic strategy of export substitution to boost up productive outputs beyond domestic demand, and hopefully, accelerate economic growth. However, without indigenous firms capable of producing exports, Singapore faced enormous pressure to import productive capacity (Goh, 2004a; Chew and Goh, 1993; Choy, 1983). As a small nation without a hinterland, Singapore could only achieve this economic strategy by positioning itself as an off-shore manufacturing hub for multinational corporations (Bloch and Tang, 2000; Rosenberg and Birzell, 1986; Rugman, 1983). The government hence concentrated largely on the manufacturing sector and the development of international services as part of its overall industrialisation efforts. Right until the late 1990s, Singapore's economic performance has been widely hailed as "remarkable" by the international community, achieving an average annual economic growth rate of about 8 percent over a four-decade period. This was largely attributed to effective industrial policy-making, on the part of government, which continually upgraded industrial development that transformed the nation from an entrepôt into a diversified economy. Table I provides a glimpse of Singapore’s current state of economy as summarised by macro-economic indicators.

Table 1: Macro-Economic Indicators of Singapore

INDICATOR

IN US$

Gross Domestic Producta (GDP)

84.9 billion

GDP Per Capita

21,814

Real GDP Growthb

5.35%

Real Growth in Industrial Productionc

8.8%

Export of Goods

114.6 billion

Growth in Export of Goodsd

4.28%

Direct Investment Flows Inward

7.22 billion

Overall Productivity Growth

4.448%

R&D Expenditure Per Capita

384.8

a: The figure is estimated at prices and exchange rates in 2000.
b: The percentage change is computed on a local currency at constant price basis.
c: The figure is estimated based on average annual percentage rate of growth from 1990 to 2000.
d: The figure is computed based on percentage change of export values in US$.

(Source: Adapted from The World Competitiveness Year Book)

In summary, as shown in the figures of Table II, for the decade between 1960 and 1970, Singapore’s per capita income doubled and then more than trebled for the decade from 1970 to 1980. Subsequently, in the following decade from 1980 to 1990, the country’s per capita income went on to increase by four-fold to almost US$25,000. In fact, by the late 1990s, Singapore's real per capita income level has already matched that of most EU countries. Also, it is widely reported that Singapore hopes, in 30 to 40 years’ time, to be a first league developed country. Moreover, based on current growth projection and economic estimates, Singapore’s GNP per capita would match the Netherlands by 2020 and the United States by 2030. While it may be far from certain whether the country would be able to tackle all the new challenges of industrial development in future to attain its economic goals, it is clear that Singapore’s earlier efforts and achievements are of relevance to developing countries.

Table 2: Economic Growth In Singapore 1960 to 2000

 

1960-1970

1970-1980

1980-1990

1990-2000

GDP Average Annual Real Growth (%)

8.7

9.4

7.5

8.4

 

1960

1970

1980

1990

GNP Per Capita (current prices in S$)

1,330

2,825

9,941

42,212

(Source: Yearbook of Statistics Singapore)

On the whole, policy researchers and industry analysts are of the opinion that Singapore has managed, over the past four decades, to weather tough economic challenges through relatively sound industrial policies (Goh, 20004b; Huff, 1995; Lee, 1992). To draw insights from Singapore’s case of industrial policy-making whose support for reforms has been significant, the thinking behind its enacted industrial polices is highlighted vis-à-vis the earlier-mentioned analytical framework. To establish a strong foundation for the industrial policy debate, the institutionalised initiative-based approach to an industrial policy ecosystem is employed for discussion to illustrate how the Singapore’s government has acted with pragmatism in an attempt to achieve effective and yet workable industrial policies. In addition, the socio-economic circumstances, under which the government’s policy initiatives were shaped, in terms of the country’s endeavour in industrial policy-making, are discussed in turn.

Creating a Haven for Industrial Development

Upon attaining independence, as Singapore had to survive both politically and economically, it urgently needed an enabling environment to embark on industrialisation immediately. However, unlike countries such as Indonesia, Malaysia, Thailand and the Philippines, Singapore was, and still is devoid of significant minerals or agricultural resources. Being dependent on entrepôt trade, whose trading activities were unable to create sufficient jobs, it was critical then that industrial policy supporting economic development must lead to employment opportunities for its populace. Industrial policies were thus aimed at creating a haven for industrial development as a pragmatic means of job creation (Goh, 2002; Liao and Chew, 2000; Tan, 1995; Wong, 1995). Policy objectives were targeted at making Singapore a choice business location, compared to neighbouring countries, for multinational corporations (MNCs). The island republic thus deliberately positioned itself as an ideal business venue for MNCs by virtue of its strategic trading location in the middle of the Malay Archipelago, large deep water seaport, harmonious industrial relations climate, well-equipped physical infrastructure and a relatively skilled workforce coupled with political stability [2]. With MNCs supporting the nation’s industrialisation efforts, the country enjoyed robust economic growth and a vibrant manufacturing sector was quickly formed. But increasingly, with neighbouring countries able to offer lower operating costs, abundant manpower, industrial land and natural resources, and immense potential for market expansion, Singapore’s industrial policy is now targeted at differentiating itself in terms of total value-added industrial output for goods and services (Goh, 2004b; Tan, 1995; Lee, 1992). Furthermore, the country now prides itself with efficient communications and information infrastructures, a cosmopolitan city of highly-quality human capital and well-trained bureaucracy to provide a conducive industrial environment that encourages technology-based knowledge transfer to add value to all business activities (Goh, 2004a; Hamilton-Hart, 2000; Young, 1992).

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