The development path of Singapore since 1965; from an absurdity to a matured economy

Abstract

This paper examines the development path of Singapore since 1965, the year when Singapore gained its independence. This study is a non – extensive literature review using data from the World Bank, the International Monetary Fund, the Department of Statistics and the Monetary Authority of Singapore and information from other scholars’ studies. The objects of this paper are to study the development path of Singapore through the theoretical view of the New Development Paradigm (NDP) (Dunning and Fortanier, 2007). Using these theoretical lens, the development of Singapore is examined through an economic and an extra-economic developing path; that is also relating to Singapore’s commitment to the 2030 United Nations’ Agenda for Sustainable Development and to the Sustainable Development Goals.

Key words: Singapore, New Development Paradigm, literature review, economic development, extra – economic development

1. Introduction

Singapore is a city – state; that is an independent city which has sovereignty over its peripheral territory. Its population is estimated to 5,709,000 people, the majority of which is Chinese (74.4%), and the rest consists of Malay (13.4%), Indian (9.0%) and other (3.2%) (Winstedt, 2022). Despite its ethnic heterogeneity – which was one of the reasons of its secession from Malaysia – Singapore nowadays is one of the most competitive economies worldwide, following a rapid development to become a high – income state, with one of the world’s stably highest Gross Domestic Product (GDP), at an average of 7.7% (The World Bank, 2019; see also Figure I).

Due to its focal position, Singapore is the largest and most prosperous port in Southeast Asia and one of the most important in the world. Taking into consideration the relatively young age of the country, the rapid growth of its economy and its position as one of the East Asia’s Tiger Economies – along with Hong Kong, South Korea, and Taiwan – its development path is worth studying. From a predominantly agrarian economy to one of the largest foreign trading markets, with a population one – quarter of 1% of China’s and a GDP per capita to be US$56,000 in 2015 (The World Bank, n.d.) – equivalent to Germany’s and USA’s – Singapore’s booming economy “has pushed development economics towards a new ’empirical’ phase” (Huff, 1995, p. 735).

Taking into consideration the new indicators being added by the New Development Paradigm’s theoretical lens, Singapore ranks as “the best country in the world in human capital development” (The World Bank, 2019), which means that productivity of every child born will reach 88%, having the best education and health services provided. After all, the government is spending more than US$1 billion every year on continuing education; a quite attractive indicator for the future of Singapore’s citizens.

But how does Singapore has come to this point of prosperity? The present paper has one single research question; to examine the development path of Singapore since its independence in 1965 until today, using the theoretical lens of the New Development Paradigm (Dunning and Fortanier, 2007). The paper is structured in three further sections. The next section provides a detailed examination of the methodology and the theoretical perspective used for this study. Section three cites the results of the literature review and an analysis of the country’s development path. A conclusion and some discussion questions are listed in the fourth and final section. An appendix in the end of the paper includes all the figures that support the present analysis.

2. Methodology

This paper is a non – extensive, literature review study, which means that the research is built on already existing secondary data from the World Bank, the International Monetary Fund, the Department of Statistics and the Monetary Authority of Singapore and information from other scholars’ papers. The same indicators are used during the whole analysis so as the study to be valid and consistent and the reader to be able to recognize the development path of Singapore in a clear and sufficient way. For that reason the indicators being used in the present study are the following:

For the economic development:

• the GDP’s percentage change (constant prices) (Figure I)
• the GDP change in US$ billion (current prices) (Figure II)
• the volume of imports and exports of goods and services (Figure III and Table I)
• the unemployment rate, in percentage, of the total labor force (Figure IV)
• the inflation’s percentage change, in average consumer prices (Figure V)

For the extra – economic development:
the 2030, United Nations’ Agenda for Sustainable Development and the Sustainable Development Goals (SDGs) (Figure VI and Table II)

Regarding the theoretical framework, I derive from the work of Dunning and Fortanier (2007) on the New Development Paradigm. According to this theory, development is not considered one – dimensional anymore, but multi – dimensional, taking into account the extra – economic activities as developmental indicators.

3. Literature review – Results

3.1. 1965-1984: From an absurdity to a newly – industrialized economy

After seceded from the British Crown in 1963 and gaining independence from Malaysia in 1965, Singapore was at the lowest development point. With a population of approximately 3 million people, most of them being unemployed and living on the city’s fringe, a great lack of natural resources, of proper infrastructure and adequate water supply, Singapore was a “political, economic, and geographical absurdity” (Menon, 2015). With Yusof bin Ishak serving as its first president and Lee Kuan Yew as its prime minister, the government decided to create an exported – oriented, industrialized country by attracting global multinational corporations to achieve a rapid growth.

As it is visible in Table I and Figure V, in 1965 Singapore exported goods worthing US$1.20 billion and in just five years this number was doubled. The first two decades from its independence Singapore made a jump to exporting goods of US$29.16 billion worth, while some factories had been growing their roots, since the 1960s, mainly producing items such as matches, mosquito coils and fish hooks. By the 1970s these small, labor – intensive industries declined, just to be replaced by factories that produced higher value-added electronics, component and precision engineering and petrochemicals, placing Singapore in the first positions worldwide as a leading economy on producing hard disk drives (Menon, 2015).

These first years of independence were crucial for the country’s future. The decision to turn towards globalization and attract global investors, forced the government to create a politically stable and safe environment – unlike its neighbors’ unpredictable political climate – with low taxation and free from corruption. In order to achieve this goal, the government adapted draconian laws that punished intensive corruption with the death penalty. Nevertheless, these strict measures were business – friendly and, in addition to country’s “advantageous location and established port system”, Singapore transformed into an appealing environment for international investments (Zhou, 2019). After 1978, Singapore developed to a global financial center due to the increasing development of services in three sectors: “transport and communications; financial and business services; and public administration, community, social and personal services” (Huff, 1995, p. 739).

Moreover, the government gave emphasis on the education of the population so as to be able to work in the newly industrialized economy. That was a remarkable decision that led to full employment by 1973. Since then there is non – existed poverty (Huff, 1995).

3.2. 1985-2010: From the 1985 recession to a First World economy

The period 1985 to 2010 brought to the Singapore’s economy five major crises: the recession in 1985, “the Asian Financial Crisis in 1998; the collapse of the global IT industry in 2001; the spread of the deadly SARS virus in 2003; and the Global Financial Crisis in 2008” (Menon, 2015). The year 1985 was an important milestone for the country because it had to deal with a domestic recession while the global economy was thriving. This event led to a fall of Singapore’s GDP (Figure I and II) and to the volume of imports and exports of goods and services (Figure III). The unemployment rate had a dramatic, but short, movement upwards (Figure IV while the inflation had a change of around 1%, in comparison to 1983 (Figure V).

An enhancement of “wage flexibility in the labour market; a more decisively dive into regional markets for trade and outward investment; a step up of the pace of industrial upgrading; a promotion innovation, enterprise, and entrepreneurship in the economy; and a liberalization of various services sectors such as finance, telecommunications, and utilities” (Menon, 2015) helped the country get back on its feet by the 1990s. By the 2000s, Singapore had already been liberalized enough, so as to open its gates to foreign banking competition. In 2005, two casinos with integrated resorts inaugurated, expanding the country’s growth to the entertainment services, attracting over 10 million visitors annually. Even though the crises that followed had an impact on Singapore’s economy as it is depicted in the Figures I, III and IV, the country had built a solid foundation to transcend any development obstacle and rise from a Third World to a First World economy.

3.3. 2011 – today: A matured economy

From 2011 until today, Singapore has a stable, constant development. As it is depicted in the Figure II, IV and V the GDP is rising, the unemployment rate remains, in average, below 3% and the inflation rate is constantly low. Even though the economy had a global challenge to overcome in 2021, the COVID-19 pandemic, it didn’t quail. The central point in the government’s development plan during this decade was to turn Singapore to a productivity – driven growth economy. This aim was achieved by lowering the percentage of the low – skilled, foreign labour force and rising the local labour force. Capital deepening and new technological solutions were adopted by the industries, while educational programs developed in order to help the local labour force master new technological skills. Moreover, “many traditional domestically-oriented services like retail, hospitality, construction, real estate, and social services” (Menon, 2015) had to face an internal reconstruction which led to an efficient reduction.

“But the decisive turnaround in the quest for productivity came when services industries with a traditionally domestic orientation, like education and healthcare, re-positioned themselves by scaling up, investing in technology and talent, and exporting their services. The idea of Singapore as a Global School House was not new… Singapore positioned itself as a choice location for quality education for a growing Asian middle class.” (Menon, 2015)

Since its independence, Singapore has adopted a Whole – of – Government approach (WOG) towards a sustainable development, in accordance to the 2030 UN Agenda (Figure VI). This approach promotes inter – governmental transparency and information sharing. The challenges and the opportunities are approached in an intersectional perspective, in an attempt to cover all the effects and implications of policy actions of each plan. A Voluntary National Review was formed in order to keep a reliable track of the progress of Singapore regarding its commitment to the Sustainable Development Goals (SDGs) (Ministry of Foreign Affairs, 2018). Some of Singapore’s progress can be found on Table II.

4. Conclusion and discussion points

As a conclusion Singapore seems to be a culture of innovation, resilience and cohesion. Despite its highly controversial model on sacrificing freedom for business and imposing strict public policies, its effectiveness and rapid growth is undeniable. The goal of a sustainable development is an ongoing path, in which Singapore has made a significant progress.

Can other countries adopt its development plan and gain the same levels of development? That is a tricky question. Singapore is a city – state, which means that its territorial area and its population is kind of small. Could that be an important and crucial element that helped Singapore develop so fast? Is it the same level of difficulty to manage a city – state and a country of the size of China or Brazil? Could Singapore have the same development path, if the government hadn’t adopted strict policies from the very beginning of the country as an independent state? Finally, how Singapore managed to increase the local labour force and decrease the foreign, cheap labour? Having all these questions in mind, a new discussion and deeper research can be conducted on the development path of Singapore.

Bibliography

Dunning, J.H. and Fortanier, F. (2007). Multinational Enterprises and the New Development Paradigm: Consequences for Host Country Development. Multinational Business Review, 15(1), pp.25–46. doi:10.1108/1525383×200700002.

Huff, W.G. (1995). What is the Singapore model of economic development? Cambridge Journal of Economics, [online] 19(6), pp.735–759. Available at: https://www.jstor.org/stable/23600207

IMF. (n.d.). Report for Selected Countries and Subjects. [online] Available at: https://www.imf.org/en/Publications/WEO/weo-database/2021/October/weo-report?c=576 [Accessed 3 May 2022].

Menon, R. (2015). An Economic History of Singapore: 1965-2065. [online] Monetary Authority of Singapore. Available at: https://www.mas.gov.sg/news/speeches/2015/an-economic-history-of-singapore [Accessed 4 May 2022].

Ministry of Foreign Affairs (2018). A SUSTAINABLE AND RESILIENT SINGAPORE TOWARDS Singapore’s Voluntary National Review Report to the 2018 UN High- Level Political Forum on Sustainable Development. [online] Ministry of Foreign Affairs. Available at: https://sustainabledevelopment.un.org/content/documents/19439Singapores_Voluntary_National_Review_Report_v2.pdf [Accessed 5 May 2022].

The World Bank (2019). Overview. [online] World Bank. Available at: https://www.worldbank.org/en/country/singapore/overview#1 [Accessed 3 May 2022].

The World Bank. (n.d.). Singapore | Data. [online] Available at: https://data.worldbank.org/country/SG [Accessed 3 May 2022].

Winstedt, R.O. (2022). Singapore – The people | Britannica. In: Encyclopædia Britannica. [online] Available at: https://www.britannica.com/place/Singapore/The-people [Accessed 3 May 2022].

Zhou, P. (2019). How Did Singapore Become a Leader in Global Commerce? [online] ThoughtCo. Available at: https://www.thoughtco.com/singapores-economic-development-1434565 [Accessed 4 May 2022].

Appendix

Singapore Exports – Historical Data
Year	Billions of US $	% of GDP
2020	$599.22B	176.24%
2019	$658.52B	175.89%
2018	$665.72B	177.06%
2017	$587.41B	171.09%
2016	$525.15B	164.74%
2015	$549.43B	178.38%
2014	$604.37B	191.95%
2013	$600.01B	195.08%
2012	$580.49B	196.72%
2011	$568.00B	203.33%
2010	$474.82B	198.00%
2000	$180.96B	188.35%
1995	$159.04B	181.12%
1990	$64.05B	177.19%
1985	$29.16B	152.22%
1980	$24.03B	202.01%
1975	$7.72B	137.12%
1970	$2.42B	126.03%
1965	$1.20B	123.24%
1960	$1.15B	162.83%

Progress	Target
✓	SDG 2.1: By 2030, end hunger and ensure access by all people, in particular the poor and people in vulnerable situations, including infants, to safe, nutritious and sufficient food all year round.
✓	SDG 3.1: By 2030, reduce the global maternal mortality ratio to less than 70 per 100 000 live births
✓	SDG 3.2: By 2030, end preventable deaths of newborns and children under five years of age, with all countries aiming to reduce neonatal mortality to at least as low as 12 per 1000 live births and under-5 mortality to at least as low as 25 per 1000 live births.
*	SDG 3.3: By 2030, end the epidemics of AIDS, tuberculosis, malaria and neglected tropical diseases and combat hepatitis, water-borne diseases and other communicable diseases.
✓	SDG 4.1: By 2030, ensure that all girls and boys complete free, equitable and quality primary and secondary education leading to relevant and effective learning outcomes.
*	SDG 5.1: End all forms of discrimination against all women and girls everywhere
✓	SDG 7.1: By 2030, ensure universal access to affordable, reliable and modern energy services.
*	SDG 9.4: By 2030, upgrade infrastructure and retrofit industries to make them sustainable, with increased resource-use efficiency and greater adoption of clean and environmentally sound technologies and industrial processes, with all countries taking action in accordance with their respective capabilities.
*	SDG 12.8: By 2030, ensure that people everywhere have the relevant information and awareness for sustainable development and lifestyles in harmony with nature.
NA	SDG 15.3: By 2030, combat desertification, restore degraded land and soil, including land affected by desertification, drought and floods, and strive to achieve a land degradation-neutral world.
✓	SDG 17.6: Enhance North-South, South-South and triangular regional and international cooperation on and access to science, technology and innovation and enhance knowledge-sharing on mutually agreed terms, including through improved coordination among existing mechanisms, in particular at the UN level, and through a global technology facilitation mechanism.
Legend: ✓ Target Achieved * Target In Progress NA Target Indicator Not Applicable/Proxy Data Used