Singapore's Economy in Brief

March 18, 2010Singaporeby EconomyWatch Content

Singapore Economy

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Singapore’s Economic Structure

Singapore had a population of 5.165 million in 2010. 2.795 million of the population are part of the labour force. In the same year, Singapore had an unemployment rate of 2.2 percent.

Singapore’s unemployment rate is one of the lowest in the world. The majority of the labour force is highly skilled and well educated – with compulsory primary education for all its citizens.

However during the early 1990s, the Singapore government foresaw a possible labour shortage problem in the future. Despite having one of the best mortality rates in the world, Singapore’s birth rate of 8.5 births/1,000 population meant that its population replacement rate was among the lowest in the world. Singapore also has one of the lowest annual population growth rates in the world at 0.817 percent. As a result, the Singapore government began to actively pursue foreign immigrants and expatriates to live and work in the country. Today, foreign workers comprise of 35.8 percent of the labour force. The vast majority of foreign workers are cheap labour from developing Asian countries who occupy jobs that regular Singaporeans shun. A significant, but smaller, percentage of foreign workers are high value talent who are brought in to provide strong labour competition for Singaporeans.

In 2010, 0.1 percent of the labour force worked in agriculture, with a further 30.2 percent in industry and 69.7 percent in services. Although the population is growing at the moment, Singapore faces the problem of a declining population, and by extension a declining labour force, if fertility rates do not improve and the influx of immigrants is stopped. Singapore’s population is also aging rapidly. In 2010, the median age of Singaporeans was 40.1 years – compared to 39.6 years in the previous year.

The labour force is vital if Singapore wishes to continue its present path of economic growth. Despite a relatively small land area of 687 sq km, Singapore aims to be a global and regional hub for multiple activities, particularly trade and finance. Limited land area in Singapore has led to strong government planning and regulation for land use. Singapore is also increasingly turning to land reclamation from the sea in order to meet the nation’s demands.

Singapore has geostrategic importance in Asia. After the British colonised Singapore in 1819, the nation quickly became the centre of the trade route between India and China. Today, Singapore is the busiest port in the world, above Rotterdam and Hong Kong. Many Multi-National Companies (MNCs) have also set up their regional headquarters in Singapore, due to its high degree of globalisation and accessibility to other markets.

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Singapore’s Export, Import & Trade

International trade is highly important for Singapore, as it has virtually no natural resources. A large percentage of trade is conducted to meet domestic demand for energy, food, and other necessities. Singapore also regularly engages in entrepôt trade, whereby industries and businesses in the country import raw materials, before refining them for re-export. 47 percent of Singapore’s exports consist of re-exports.

Singapore is the 14th largest exporter and the 15th largest importer in the world. According to the WTO, Singapore has the highest trade to GDP ratio in the world at 407.9 percent.

As a strong advocate of free trade, Singapore has relatively few trade barriers. Trade partners with Most Favoured Nation (MFN) have zero tariff rates applied to their products apart from six lines for alcoholic beverages. There are however some import restrictions based mainly on environmental, health, and public security concerns. The import of rice also requires import licensing in order to ensure food security and price stability.

In 2010, Singapore’s exports were valued at US$351.2 billion. The primary export partners include Hong Kong (11.6 percent of total exports), Malaysia (11.5 percent), US (11.2 percent), Indonesia (9.7 percent), China (9.7 percent), Japan (4.6 percent). Singapore’s imports were valued at US$310.4 billion. The US was Singapore’s primary source of imports (14.7 percent of total imports) followed by Malaysia (11.6 percent), China (10.5 percent), Japan (7.6 percent), Indonesia (5.8 percent), South Korea (5.7 percent).

Remarkably, despite not having a single drop of proven oil reserves in the country, Singapore is the 18th largest exporter of oil in the world. In 2010, Singapore exported 1.374 million barrels of oil/day.

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Singapore’s Industry Sectors

The petroleum and petrochemicals industry in Singapore is one of the biggest in the world. Singapore imports oil from other countries before refining them for further use to other countries. Singapore has the third largest oil refinery in the world, behind Rotterdam and Houston. The Singapore Petroleum Company (SPC) is also a leading player in the petroleum industry and is engaged in exploration, production, refining and distribution.

Manufacturing is another major industry in Singapore. Although Singapore has specialised in digital and electronics manufacturing for the past forty years, the country has diversified into other forms of manufacturing. Thanks to government initiatives and subsidies, biomedical and pharmaceutical manufacturing are seen to be the future for Singapore industries.

Singapore is also a global leader in services, particularly in finance. Singapore’s banking system is considered to be among the strongest in the world. Singapore has the fourth largest foreign exchange market in the world after London, New York and Tokyo. The Singapore Government Securities is the only Asian market, besides Japan, to be part of the Citigroup World Bond Index. The Singapore Exchange (SGX) was also the first demutualised, integrated securities and derivatives exchange in Asia-Pacific. Singapore is recognised as one of the premier asset management centres in Asia with more than 200 international asset management firms. Finally the Asian Dollar Market in Singapore has become an influential element to the economic development of the whole of Asia with assets of more than US$582 billion recording in 2004.

Apart from finance, tourism is the other major service industry available in Singapore. In 2010, tourist arrivals to Singapore hit a record high of 11.638 million visitors with tourist receipts of more than S$18.8 billion. Thanks to government initiatives, tourism has diversified into niche markets such as medical tourism, the gaming industry and the MICE (Meetings, Incentives, Conferencing and Exhibitions) industry. With the advent of the two new integrated resorts in 2010, tourism expenditure in sightseeing and entertainment grew by an astonishing 1,834 percent in 2010.

Services (72.8 percent) and Industry (27.2) made up the bulk of Singapore’s GDP in 2010. Agriculture’s contribution was virtually irrelevant – statistically it accounted for zero percent of the GDP. After two years of negative industrial production growth due to the global financial crisis, Singapore’s industrial production growth rate for 2010 was the third highest in the world at 25 percent – behind Qatar and Taiwan.

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