Download SINGAPORE case study in international trade

SINGAPORE - TRADE SINCE 1960
FACTFILE:
Area: 618 square km
Location: An island in the South China Sea, just north of the Equator between Malaysia
and Indonesia
Natural Resources: almost none – 14% of land used for farming, the remainder is urban
Population: 4.43 million
GDP per capita: $23,700
Language: Chinese, Malay, Tamil, English
Capital: Singapore (a city-state)
Government: Parliamentary republic
Monetary Unit: Singapore dollar
Imports: Machinery and equipment, mineral fuels, chemicals, foodstuffs
Exports: Machinery and equipment (including electronics), chemicals, mineral fuels,
consumer goods.
DEVELOPMENT AND GROWTH:
In 1959 Singapore achieved self-government, and it separated from Malaysia in 1965. At
that time poverty was widespread and unemployment was high, so the government opted
for import substitution industrialization as a means of economic development, later
switching to export-orientated industrialization, and turned towards encouraging foreign
investment by Trans National Companies (TNC’s).
Today Singapore is a newly industrialized country (NIC), i.e. it is one of the developing
countries that has undergone rapid industrialization since the 1960’s. Some NIC’s are in
South America, but by far the most are in eastern and southeastern Asia, where they were
encouraged by Japan’s success at improving its standard of living. They achieved rapid
industrialization and economic growth by:
1. encouraging the processing of primary products, as this added value to their
exports.
2. investing in manufacturing industry, initially by developing heavy industries such
as steel and shipbuilding, and later by concentrating on high-tech products.
3. encouraging transnational firms to locate within their boundaries (many countries
now have their own TNC’s).
4. grouping together to form ASEAN (Asian Free Trade Area, including Brunei,
Indonesia, Malaysia, Philippines, Singapore, Thailand and Vietnam) to promote,
among other aims, economic growth.
5. having a dedicated workforce that was reliable and initially, prepared to work
long hours for relatively little pay.
6. long-term industrial planning.
The term “tiger economies” was first given to Hong Kong, Singapore, South Korea and
Taiwan because of their ferocious growth after 1970. This growth continued during the
1980’s at a time when economic growth in the developed world was slowing down. Since
the 1980’s, Malaysia, Thailand and, to a lesser extent, Indonesia and the Philippines, have
emerged as the newest NIC’s. The latest, potentially the largest and at an increasingly
faster rate, is China.
The economies of the Asian NIC’s continued to grow until the late 1990’s when an
economic crisis, beginning in Indonesia and the Philippines, spread throughout the whole
region, and with effects that were to be felt word-wide. There are signs, however, of a
slow recovery.
Singapore has been a trading hub for centuries, positioned as it is as the gateway to the
Far East. When it started to industrialise in the 1960’s, it traded primarily in labourintensive industries, but moved rapidly into more capital-intensive electronics, and since
then has moved towards new areas like the biomedical, chemical and shipbuilding
industries.
A network of Free Trade Agreements (FTA’s) has removed barriers to trade and
investment, and Singapore now has the most extensive FTA network in Asia. It has
signed FTA’s with the USA, Japan, Australia, New Zealand, members of the European
Free Trade Association (Switzerland, Iceland, Liechtenstein and Norway), Jordan, China,
South Korea and India. Negotiations are well under way for new FTA’s with countries
across the Middle East and South Asia.
Singapore is a global leader in a number of industrial sectors. In biomedical sciences, it is
home to six of the world’s top ten pharmaceutical companies’ manufacturing facilities.
Singapore is one of the top three oil-refining centers and oil-trading hubs in the world,
and number one for marine coatings for ship repair and maintenance.
On founding the modern port of Singapore in 1819, Sir Stamford Raffles decreed that it
was open to all maritime nations. By 1998, over 800 shipping lines had taken advantage
of that decree, and Singapore has been, since 1986, the world’s busiest port in terms of
shipping tonnage, and its major bunkering port. At any given time, over 800 ships are
likely to be in port, with one arriving or weighing anchor every 6 minutes. It takes less
than 1 second to handle 1 tonne of cargo, and cargo is handled during every second of the
year. Warehouses are automated and computerized. Vessels vary from modern
supertankers and container ships to the more traditional bumboats and junks. In 1998, the
port handled over 15 million TEU’s of containers. To save docking time, harbour pilots
now fly out to incoming vessels by helicopter.
Singapore is a free port, open to all countries, with seven free trade zones (six for
seaborne cargo and one at nearby Changi International Airport). In these zones, goods
can be made or assembled without payment of import or export duties, and profits can be
sent back to the parent company without being taxed. Many high-tech firms assemble
their products here and sell them at very competitive prices. (A visiting Japanese student
was surprised to find his own country’s brand names selling more cheaply in Singapore
than in Japan.) Singapore is the world’s largest manufacturer and exporter of disks.
However, the port’s largest money-earner is oil, a resource which the country does not
possess. This is because Singapore imports crude oil from the Middle East, Indonesia and
Malaysia, refines it within the free port, and then exports a range of oil products. It is the
world’s third-largest oil-refining center, with five major oil companies.
The country’s strengths are based on highly skilled, trained and innovative human capital,
a high degree of co-operation between the government, business and the workforce, and
its determination in striving to stay globally competitive. It is ahead of its neighbours in
terms of advancement and management, and is looked upon as the regional leader in the
security of its banks, the variety of its shops, the reliability of its insurance, the efficiency
of its ports, the value of its property, the quality of its health care and the comparative
maturity of its financial industry.