Singapore's Economy Transformation

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INTRODUCTION

In 1994 the World Bank described Singapore as the most successful economy in the world and moved Singapore from a third World country to a First World nation within a generation.

From the Singapore Department of Statistics, Singapore’s gross domestic product (GDP) has grown approximately 7% annually from 1965 to 2009. This was accompanied by a low inflation rate of averaging about 2.1% yearly. Singapore’s 2009 per capita income of US$36,537.00 is the second highest in Asia after Japan and about 78% of the level of the United States (US). According to 2010 Global Competitiveness Report by the World Economic Forum, Singapore’s economy is now ranked third in the world ahead of the United States, hosting to over 7000 multinational companies (MNCs).

Table 1 provides a summary of Singapore’s economic and social progress over the past 44 years.

|1965 |1970 |1975 |1980 |1985 |1990 |1995 |2000 |2005 |2009 | |GDP (S$ Million) |8,891 |16,207 |25,259 |37,959 |51,702 |77,299 |118,963 |162,379 |180,496 |265,057 | |GDP Growth (%) |7.5 |13.7 |4.1 |9.7 |-1.4 |9.0 |8.0 |9.6 |8.4 |-1.3 | |Inflation (%) |0.3 |0.4 |2.6 |8.5 |0.5 |3.4 |1.7 |1.3 |1.7 |0.6 | |Per capital GDP (US$) |512 |914 |2,505 |4,854 |6,466 |12,110 |23,806 |23,043 |25,191 |36,537 | |Gross Domestic Savings (% of GDP) |10 |18 |29 |38 |41 |43 |50 |48 |47 |44 | |Total Population (Million) |1,887 |2,075 |2,263 |2,414 |2,736 |3,047 |3,526 |4,018 |4,250 |4,987 | |Unemployment Rate (%) |9.2 |8.2 |4.5 |3.5 |4.1 |1.7 |2.7 |4.4 |5.3 |3.2 | |Literacy Rate (% above 15 yrs old) |73 |78 |83 |86 |89 |91 |93 |94 |95 |96.3 | |Life Expectancy (years) |66 |68 |70 |71 |73 |74 |76 |78 |79 |81 | | Table 1. Singapore’s Economic and Social Progress, 1965 – 2009

Sources: World Bank Development Indicators, 2010, The World Bank; Singapore Department of Statistics and Ministry of Health, Singapore.

Since independence, Singapore had enjoyed an impressive economic growth record. This essay aims to analyze the contributing factors towards the successful transformation of the Singapore economy by adopting the Trinity development model. The Trinity development model includes the EGOIN theory, the Triple C theory and the S-curve. This model seeks to provide a common principle for development through functional solutions to ease poverty and supports economic growth.

CATEGORIZATION OF THE SINGAPORE ECONOMY (THE S‐CURVE)

The S-Curve classifies the global economy into three groups: turtle (low income, slow growth), horse (middle income, rapid growth), and elephant (high income, slow growth). The growth rate of the per capita income is shown by the slope of the S-Curve, the steeper the slope will correspond to higher growth rate. According to Lim Choon Yah, in terms of per capita income growth rate on a yearly basis, elephant economies normally grow at less than 3-4%, whereas horse economies grow at more than 4%. Turtle economies, like elephants, will grow at 3-4% at best.

In 1965, Singapore was categorized as a mature turtle economy afflicted by low savings and foreign investments, poor infrastructure and massive unemployment. Since then, Singapore experienced a spectacular economic transformation and has moved into the Horse economy. Nowadays, Singapore is between the Horse and Elephant economy as it has an ageing population, but still has high savings and high investment rates.

The common characteristics of the high growth the Horse economies are:

1.Control population growth
2.High saving function
3.Export-oriented industrializing policy
4.High investment in economic infrastructure
5.High investment in human resource development
6. Priority on economic achievements
7.Emphasis on market-forces as an engine of growth

Singapore has all this characteristics established by the government to enable her to enjoy superlative growth rates. Remove any of this characteristics, the growth engine will slow down. As stated earlier, Singapore has ageing population...
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