Singapore was one of the original "Newly Industrialised Countries" (NICs) alongside Hong Kong, South Korea and Taiwan. Between the 1960s to the 1980s, the manufacturing industry, in particular, was able to attract numerous Multi-National Companies (MNCs) and Foreign Direct Investment (FDIs) into the country. This became the foundation for Singapore to grow into one of the most advanced and technologically driven economies in the world.
In 2010, Singapore was the third fastest growing economy in the world behind Qatar and Paraguay – with a real GDP growth rate (constant prices, national currency) of 14.471 percent.
The economy of Singapore is best described as a mixed economy. Although the country strongly advocates free-market policies and practices, government intervention is also evident in macroeconomic management and major factors of production such as land, labour and capital resources. This innovative and highly successful economic system – where both the market and the state have equally strong roles in the government – is dubbed as the Singapore Model.
The Singapore Model was born out of necessity. Singapore has a relatively small domestic market, and thus has to open its economy to external markets in order for the economy to thrive. However, the inherent vulnerability in depending on external markets compelled the government to enact economic policies that would safeguard the country from perturbations in the global market. Apart from these policies, the government has also actively encouraged new industries to develop in Singapore so as to respond to the needs of the global market.
The underlying influence of the government can also be felt in other various facets of the society – from education, to transportation, to housing and to the media. However, many social policies that have been implemented are often seen to be supplementary for the economy. As such, many people have labelled the country as “Singapore Inc.” – where the country appears to be run more like a corporation than a nation.
To date however, the Singapore Model or “Singapore Inc.” has proven to be extremely successful. Globally and regionally, the Singapore economy has demonstrated astounding resilience to financial crises such as the 1997 Asian Financial Crisis or the 2008 Global Financial Crisis. Singapore is also the only Asian country to have AAA credit ratings from all three major credit rating agencies – Standard & Poor’s, Moody’s and Fitch. According to the 2011 Index of Economic Freedom, Singapore is the 2nd freest economy in the world. Singapore’s business freedom score is exceptionally high – it takes three days to start a business in Singapore compared to the world’s average of thirty-four days. Apart from strong business and regulatory policies, other factors such as the country’s strategic geographic position, a vast natural seaport, a highly skilled workforce and a favourable tax regime, have created a conducive business environment for companies and industries.
Need more featured reports? Check out Economy Watch's research Store