Singapore´s Economy: Growth and Structural Change

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Evolution of Singapore's Economy Singapore has always thrived on international trade and in the past had adjusted to the vicissitudes of the global economy chiefly by the instrument of migration. Boom times attracted immigrants. Correspondingly, severe recessions saw emigration back to the respective countries of origin. During the Great Depression of the 1930s for example, substantial emigration took place and this helped the colony to survive the period. In late 1959, the colony achieved self-government and the present People's Action Party (PAP) government, led by Mr Lee Kuan Yew, came to power. The immediate and critical task was to create jobs. With a high population growth (3.2 per cent) and a 0.7 per cent net annual immigration, unemployment was serious at 13.5 per cent. It was estimated by the United Nations Industrial Survey Mission that 214,000 jobs would need to be created in the decade of the sixties. This represented nearly 48 per cent of the total employment in 1960 (Table 1). Of the new jobs to be created, 98,000 would have to be found in manufacturing. The task seemed daunting. The economy was stagnating at 0 per cent GDP (gross domestic product) growth and manufacturing employment then totalled 27,000, or 7.5 per cent of total employment. The economy depended heavily on entrep?t trade: direct entrep?t earnings amounted to 18 per cent of GDP. Indirectly, there was also dependence on finance, transport, communications and manufacturing (processing). By 1960, most countries in the region were increasingly trading direcdy with the industrialized countries and had begun to process their own raw materials as well as to develop simple manufactures. The newly-elected government in Singapore saw its main task as the creation of a sizeable manufacturing sector to be the new engine of growth. Four disadvantages were identified: the free port status, which was deemed to be disadvantageous to industrialization; lack of free access to the market of the then Federation of Malaya; inadequate numbers of technical personnel, managerial staff, foremen and skilled workers; and the trading, speculative mentality of entrepreneurs. However, against these disadvantages, the ruling party recognized four positive factors: a hardworking, resourceful and enterprising, largely immigrant people; a strategic geographical position and excellent sea communications; a substantial amount of capital accumulated by local firms and public authorities; and potential markets in the region. In terms of markets, the key target at that stage was the Federation of Malaya. Politically, therefore, the government worked hard to achieve merger in a larger Federation of Malaysia in order to create viability and a larger market. In terms of industrial policy, the government had a multi-pronged strategy: