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Singapore's Economic Development

Discuss about the Labour Market Effects Of International Trade.

Different countries have developed considerably over the years and emerged as the dominant players in the global economic framework with time. In the recent period, several other countries, mostly Asian countries, have been showing immense positive performance in the economic development and few of these have emerged as the new economic superpowers in the global framework[1]. Singapore is one of the most eminent emerging economic superpowers in the contemporary global scenario.

The country has developed immensely in all aspects and especially in economic domains over the last few decades, much of which can be attributed to the industrial prosperity and the component of technological innovations and adaptations in these industries, the most significant one of which is the manufacturing industry[2].

Keeping this into consideration, the concerned report tries to analyse the significance of the manufacturing industries on the economy of Singapore as a whole. The report also tries to discuss the economic problems and constraints faced by the electronics and precision engineering industries of the country and the policy framework which can be implemented in order to combat such problems by the government of the country.

As discussed above, the economy of Singapore has developed impressively over the last few decades, showing impressive performance in almost all the economic indicators of the country, including GDP, employment, overall price levels and growth of different economic sectors, especially the industrial and the service sectors of the country[3]. The immense economic growth and prosperity of the country has over the years, attracted investors from all part of the world and also contributed in huge immigration from all parts of the globe. Many people migrate to the country from all parts of the globe in search of economic and employment prospects and mainly with the objective of acquiring a higher standard of living[4].

The overall economic prosperity of the country, over the years, can be observed from the Gross Domestic Product of the country and its dynamics over the last two decades, which in turn shows the changes in the total productivity of goods and services within the geographical domain of the country itself, over the years and is seen as follows:

Figure 1: GDP of Singapore (2000-2018)[5]

As is evident from the above figure, the GDP of the country has been showing a highly stable and positive trend over the years, which in turn indicates towards the presence of a robust and growing economy in the country. Much of this economic prosperity of the country, as can be seen from its increasing GDP can be attributed to the different components of the highly prosperous and economic-growth-facilitating industrial sector of the country[6]. The shares of the sectors in the industrial aspect of the country, in the GDP can be seen as follows:

The Significance of the Manufacturing Industry

 

Figure 2: Sector-wise share in the GDP of Singapore[7]

As is evident from the above figure, the manufacturing sector is one of the largest sector, when measured as a percentage of the GDP of the country[8]. This sector has over the years, grew significantly, with increase in the technological and infrastructural aspects of the country and has also been highly facilitated by the increase in the demand for the manufacturing products of the country not only in the country itself, but across the globe. 

Figure 3: Increase in the GDP of Singapore from manufacturing sector[9]

The above figure clearly depicts the more or less consistent positive growth of the contribution of the manufacturing sector in the GDP of the country, barring several non-significant downward fluctuations. This in turn can be considered to be explaining a considerable portion of the increase in the GDP of the country over the years[10].

Apart from the growth of the overall economic prosperity of the country, the manufacturing sector of the country also contributes significantly in raising the overall income level of the workers in the industry, thereby contributing to an overall increased standard of living and better quality of life of the workers in the manufacturing industry of the country, as compared to the overall working population of Singapore, which can be seen from the following figure:

 

Figure 4: Median Gross Monthly Income of the working resident population of Singapore[11]

The manufacturing sector of the country is also one of the major providers of employment in Singapore and the sector employed nearly 510,000 workers in 2015. However, in the last few years the level of employment generation, in the manufacturing sector of Singapore can be seen to have declined to a considerable extent, much of which can be attributed to the sluggish global economic conditions and also a comparatively tighter supply of international skilled workers[12].

Figure 5: Change in employment trends by sector in Singapore[13]

Nevertheless, the manufacturing sector of the country still remains one of the most important and contributing aspects to the economic prosperity of the country over the decades.

The manufacturing sector of the country, in its turn, is comprised of different products and activities, the primary ones and their share in the manufacturing sector of the country, being as follows:

 

Figure 6: Share by industry in the manufacturing sector (In terms of contribution to total output)[14]

Electronic and Precision Engineering Industries in Singapore

From the above figure, it can be stated that of the different industries under the umbrella of the manufacturing sector of the country as a whole, the biggest and the most significant one is that of the electronics industry, contributing more than 30% of the total output of the manufacturing sector as a whole. Much of the prosperity and growth of the electronic industry of the country can be attributed to the consistently increasing demand for the same in the global consumption scenario.

 

Figure 7: Increasing growth and revenue generation in global electronics market[15]

With a positive present as well as future growth trend, this sector of the country is expected to be developing even more in the coming years. On the other hand, the precision engineering industry of Singapore, currently responsible for nearly 10% of the total manufacturing sector output of the country, is also another lucrative and potential sector in the economy[16].

In spite of extreme prospects and potential of the above-mentioned sectors of Singapore, there are several endogenous as well as exogenous economic constraints which are faced by these sectors of the country, which are explained as follows:

One of the primary economic problem faced by the firms in the electronic and precision engineering industry of the country is that of high initial fixed cost. The companies venturing in these sectors, thus, need to invest huge sum of money initially and profits start getting accrued to the firms only after their production and sales increase and they start experiencing economies of scale[17]. Thus, the primary sufferers in this context are the small and medium firms, especially the potential entrants, who on one hand faces difficulty in investing such a huge amount and on the other hand are often prevented from achieving economies of scale by the bigger and already existing cost-efficient ones, thereby creating high barriers of entry and distorted competitions[18].

Apart from the endogenous issues, the industries are also subjected to exogenous economic issues in the global framework. On one hand, the level of competition in the global electronics production market has been consistently increasing and the country faces stiff competition from other countries like China, Japan, Korea and others[19]. Also, the sluggish global labour market has been hampering the productivity and employment aspects of the manufacturing sector of Singapore and the electronics and precision engineering industry have been facing these issues considerably.

Economic Problems and Constraints

Figure 8: Declining labour productivity in Singapore[20]

The above discussed issues faced by the concerned industries in Singapore can have huge negative implications if not addressed properly. Taking this into consideration, the following steps and policies can be taken by the government of the country to rule out the endogenous and exogenous economic constraints faced by the concerned industries:

  • The problems of high entry barriers and high fixed costs faced by the new and small and medium entrants in these industries can be decreased to a considerable extent by provision of protection and financial aids to the companies by the government of the country[21]. This, by facilitating the businesses to grow, by protecting them from the unfair competitions, can help in increasing competition as well as cost efficiency of the industries as a whole.
  • The problems of labour market sluggishness and tighter supply of foreign efficient labours faced by these industries, which can be seen to be hampering the overall labour productivity of these sectors can be ruled out to a considerable extent by provision of different labour training and development programs on part of the government as well as on part of the companies[22]. Skilled based educations in schools and colleges can also help in addressing this issue in the long term.
  • In the increasingly competitive global scenario, to capture greater share of global electronic and precision engineering products markets, the companies in these sectors of Singapore need to be highly updated and cost efficient continuously and huge investments are required in the research and development sectors for the same. The government can device policies and incentives which may attract the investors, both global and international to invest in these sectors[23].

Conclusion

From the above discussion, it can be concluded that the manufacturing industry of Singapore has been one of the most significant sectors contributing to the economic development of the countries over the decades in terms of GDP, employment, income generation and many other aspects. The electronics and the precision engineering industries have been the some of the significantly growing components of the industrial sector of the country, with increasing global demand for their products. However, in the contemporary period, these industries are subjected to several endogenous as well as exogenous economic hurdles, which need to be addressed efficiently to facilitate their future development. For the same steps have to be taken both on part of the companies as well as the government of the country in terms of proper and efficient policy frameworks.

References

Aseanbriefing.com. "ASEAN’s Leading Manufacturing Destinations". Aseanbriefing.com, 2018. Online. Internet. 21 May 2018. . Available: https://www.aseanbriefing.com/news/2014/08/05/aseans-leading-manufacturing-destinations.html.

Ashournia, Damoun. "Labour market effects of international trade when mobility is costly." The Economic Journal (2015).

Britcham.org.sg. "Singapore: An Economy in Transition". Britcham.org.sg, 2018. Online. Internet. 21 May 2018. . Available: https://www.britcham.org.sg/static-pages/o55-singapore-an-economy-in-transition.

Chiu, Stephen Wing-kai. City states in the global economy: Industrial restructuring in Hong Kong and Singapore. Routledge, 2018.

Credenceresearch.com. "Demand from Consumer Electronics Segment to Drive Flexible Electronics Market by 2023 - Credence Research". Credenceresearch.com, 2018. Online. Internet. 21 May 2018. . Available: https://www.credenceresearch.com/press/global-flexible-electronics-market.

Forte, Rosa, and Rui Moura. "The effects of foreign direct investment on the host country's economic growth: theory and empirical evidence." The Singapore Economic Review 58.03 (2013): 1350017.

Frank, Robert, and Edward Cartwright. Microeconomics and behaviour. McGraw Hill, 2013.

Gereffi, Gary, and Donald L. Wyman, eds. Manufacturing miracles: paths of industrialization in Latin America and East Asia. Princeton University Press, 2014.

Holland, John H. "The global economy as an adaptive process." The economy as an evolving complex system. CRC Press, 2018. 117-124.

Kabaca, Serdar. Labour Share Fluctuations in Emerging Markets: The Role of the Cost of Borrowing. No. 2014-47. Bank of Canada Working Paper, 2014.

Kaur, Prabhjot, and Sanjeev Kumar Sharma. "Evaluating the relationship and influence of critical success factors of TQM on business performance: Evidence from SMEs of manufacturing sector." IUP Journal of Operations Management 13.4 (2014): 17.

Policy Frameworks to Combat Economic Issues

Medtech.sg. "Singapore’s Economic Climate and Competitive Advantages - medtech.sg". medtech.sg, 2018. Online. Internet. 21 May 2018. . Available: https://www.medtech.sg/singapores-economic-climate-competitive-advantages-in-the-biomedical-sciences/.

Mti.gov.sg. "Trends in Manufacturing and Manufacturing-Related Services". Mti.gov.sg, 2018. Online. Internet. 21 May 2018. . Available: https://www.mti.gov.sg/ResearchRoom/SiteAssets/Pages/Economic-Survey-of-Singapore-2015/BA6.1_AES2015.pdf.

Ng, Victor Fook Ai, and SHUCHIN YANG. "Changing Strategies of Manufactured Export Expansion in Singapore." Manufactured Exports of East Asian Industrializing Economies and Possible Regional Cooperation (2016): 150.

Pindyck, Robert S., and Daniel L. Rubinfeld. "Microeconomics." (2014).

Rasiah, Rajah, Yap Xiao-Shan, and V. G. R. Chandran Govindaraju. "Crisis effects on the electronics industry in Southeast Asia." Journal of Contemporary Asia 44.4 (2014): 645-663.

Rodan, Garry. "Singapore." (2017).

Sbr.com.sg. "Chart of the Day: Check out how employment in the manufacturing sector crashed". Sbr.com.sg, 2018. Online. Internet. 21 May 2018. . Available: https://sbr.com.sg/hr-education/news/chart-day-check-out-how-employment-in-manufacturing-sector-crashed.

Tradingeconomics.com. "Singapore GDP | 1960-2018 | Data | Chart | Calendar | Forecast | News". Tradingeconomics.com, 2018. Online. Internet. 21 May 2018. . Available: https://tradingeconomics.com/singapore/gdp.

Tradingeconomics.com. "Singapore GDP From Manufacturing | 1975-2018 | Data | Chart | Calendar". Tradingeconomics.com, 2018. Online. Internet. 21 May 2018. . Available: https://tradingeconomics.com/singapore/gdp-from-manufacturing.

Van den Berg, Hendrik. Economic growth and development. World Scientific Publishing Company, 2016.

Wonglimpiyarat, Jarunee. "Innovation financing policies for entrepreneurial development—Cases of Singapore and Taiwan as newly industrializing economies in Asia." The Journal of High Technology Management Research 24.2 (2013): 109-117

[1] Holland, John H. "The global economy as an adaptive process." The economy as an evolving complex system. CRC Press, 2018. 117-124.

[2] Chiu, Stephen Wing-kai. City states in the global economy: Industrial restructuring in Hong Kong and Singapore. Routledge, 2018.

[3] Rodan, Garry. "Singapore." (2017).

[4] Van den Berg, Hendrik. Economic growth and development. World Scientific Publishing Company, 2016.

[5] Tradingeconomics.com. "Singapore GDP | 1960-2018 | Data | Chart | Calendar | Forecast | News". Tradingeconomics.com, 2018. Online. Internet. 21 May 2018. . Available: https://tradingeconomics.com/singapore/gdp.

[6] Forte, Rosa, and Rui Moura. "The effects of foreign direct investment on the host country's economic growth: theory and empirical evidence." The Singapore Economic Review 58.03 (2013): 1350017.

[7] Aseanbriefing.com. "ASEAN’s Leading Manufacturing Destinations". Aseanbriefing.com, 2018. Online. Internet. 21 May 2018. . Available: https://www.aseanbriefing.com/news/2014/08/05/aseans-leading-manufacturing-destinations.html.

[8] Kaur, Prabhjot, and Sanjeev Kumar Sharma. "Evaluating the relationship and influence of critical success factors of TQM on business performance: Evidence from SMEs of manufacturing sector." IUP Journal of Operations Management 13.4 (2014): 17.

[9]Tradingeconomics.com. "Singapore GDP From Manufacturing | 1975-2018 | Data | Chart | Calendar". Tradingeconomics.com, 2018. Online. Internet. 21 May 2018. . Available: https://tradingeconomics.com/singapore/gdp-from-manufacturing.

[10] Gereffi, Gary, and Donald L. Wyman, eds. Manufacturing miracles: paths of industrialization in Latin America and East Asia. Princeton University Press, 2014.

[11] Mti.gov.sg. "Trends in Manufacturing and Manufacturing-Related Services". Mti.gov.sg, 2018. Online. Internet. 21 May 2018. . Available: https://www.mti.gov.sg/ResearchRoom/SiteAssets/Pages/Economic-Survey-of-Singapore-2015/BA6.1_AES2015.pdf.

[12] Ashournia, Damoun. "Labour market effects of international trade when mobility is costly." The Economic Journal (2015).

[13] Sbr.com.sg. "Chart of the Day: Check out how employment in the manufacturing sector crashed". Sbr.com.sg, 2018. Online. Internet. 21 May 2018. . Available: https://sbr.com.sg/hr-education/news/chart-day-check-out-how-employment-in-manufacturing-sector-crashed.

[14] Medtech.sg. "Singapore’s Economic Climate and Competitive Advantages - medtech.sg". medtech.sg, 2018. Online. Internet. 21 May 2018. . Available: https://www.medtech.sg/singapores-economic-climate-competitive-advantages-in-the-biomedical-sciences/.

[15] Credenceresearch.com. "Demand from Consumer Electronics Segment to Drive Flexible Electronics Market by 2023 - Credence Research". Credenceresearch.com, 2018. Online. Internet. 21 May 2018. . Available: https://www.credenceresearch.com/press/global-flexible-electronics-market.

[16] Rasiah, Rajah, Yap Xiao-Shan, and V. G. R. Chandran Govindaraju. "Crisis effects on the electronics industry in Southeast Asia." Journal of Contemporary Asia 44.4 (2014): 645-663.

[17] Frank, Robert, and Edward Cartwright. Microeconomics and behaviour. McGraw Hill, 2013.

[18] Rasiah, Rajah, Yap Xiao-Shan, and V. G. R. Chandran Govindaraju. "Crisis effects on the electronics industry in Southeast Asia." Journal of Contemporary Asia 44.4 (2014): 645-663.

[19] Kabaca, Serdar. Labour Share Fluctuations in Emerging Markets: The Role of the Cost of Borrowing. No. 2014-47. Bank of Canada Working Paper, 2014.

[20] Britcham.org.sg. "Singapore: An Economy in Transition". Britcham.org.sg, 2018. Online. Internet. 21 May 2018. . Available: https://www.britcham.org.sg/static-pages/o55-singapore-an-economy-in-transition.

[21] Pindyck, Robert S., and Daniel L. Rubinfeld. "Microeconomics." (2014).

[22] Ng, Victor Fook Ai, and SHUCHIN YANG. "Changing Strategies of Manufactured Export Expansion in Singapore." Manufactured Exports of East Asian Industrializing Economies and Possible Regional Cooperation (2016): 150.

[23] Wonglimpiyarat, Jarunee. "Innovation financing policies for entrepreneurial development—Cases of Singapore and Taiwan as newly industrializing economies in Asia." The Journal of High Technology Management Research 24.2 (2013): 109-117.

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