Singapore's strategic location on major sea lanes and its industrious population have given the country an economic importance in Southeast Asia disproportionate to its small size. Upon independence in 1965, Singapore was faced with a lack of physical resources and a small domestic market. In response, the Singapore Government adopted a pro-business, pro-foreign investment, export-oriented economic policy framework, combined with state-directed investments in strategic government-owned corporations. Singapore's economic strategy proved a success, producing real growth that averaged 8.0% from 1960 to 1999. The economy picked up after the 1997 regional financial crisis, with a growth rate of 9.4% for 2000, but then fell back in tandem with the economic slowdown in the United States, Japan, and the European Union (EU), as well as the worldwide electronics slump, so that GDP shrank by 2.4% in 2001. The economy rebounded in 2002, expanding 4.0%; but it posted a slower 2.9% growth in 2003, due to the effect of severe acute respiratory syndrome (SARS) in the first half of the year. From 2004 to 2007, the economy expanded by 9.0%, 7.3%, 8.2%, and 7.7%, respectively, driven by the growth in world demand for electronics, pharmaceuticals, other manufactured goods and financial services, and in the economies of its major trading partners--the United States, European Union, Japan, and China, as well as expanding emerging markets such as India. The global financial crisis dealt a blow to Singapore's open, trade-oriented economy in 2008, sending its 2008 fourth-quarter growth to an annualized rate of -16.4%. Growth for 2008 was a low 1.1% compared to the last four years. The official growth forecast for 2009 is between -4.0% and -6.0%, marking what would be the worst year of performance since Singapore’s independence in 1965.
Singapore's largely corruption-free government, skilled work force, and advanced and efficient infrastructure have attracted investments from more than 7,000 multinational corporations from the United States, Japan, and Europe. Also present are 1,500 companies from China and another 1,500 from India. Foreign firms are found in almost all sectors of the economy. Multinational corporations account for more than two-thirds of manufacturing output and direct export sales, although certain services sectors remain dominated by government-linked companies.
Manufacturing and services are the twin engines of the Singapore economy and accounted for 24.6% and 65.6%, respectively, of Singapore's gross domestic product in 2008. The electronics and chemicals industries lead Singapore's manufacturing sector, accounting for 27.6% and 37.8%, respectively, of Singapore's manufacturing output in 2008. To inject new life to the tourism sector, the government in April 2005 approved the development of two casinos that should result in investments of more than U.S. $5 billion. Las Vegas Sands' Marina Bay Sands Resort is scheduled to be completed in late 2009, while Genting International's Resort World is scheduled to open by 2010.
To maintain its competitive position despite rising wages, the government seeks to promote higher value-added activities in the manufacturing and services sectors. It also has opened, or is in the process of opening, the financial services, telecommunications, and power generation and retailing sectors to foreign service-providers and greater competition. The government also has pursued cost-cutting measures, including tax cuts and wage and rent reductions, to lower the cost of doing business in Singapore. The government is actively negotiating six free trade agreements (FTAs) with emerging economic partners and has already concluded 13 FTAs with many of its key trade partners, including one with the United States that came into force January 1, 2004. As a member of the Association of Southeast Asian Nations (ASEAN), Singapore is part of the ASEAN Free Trade Area (AFTA), and is signatory to ASEAN FTAs with China, Korea, Japan, India, and a joint agreement with New Zealand and Australia. Singapore is also party to the Transpacific Strategic Economic Partnership Agreement, which includes Brunei, Chile, and New Zealand.
Trade, Investment, and Aid
Singapore's total trade in 2008 amounted to $656 billion, an increase of 9.6% from 2007. In 2008, Singapore's imports totaled $319 billion, and exports totaled $337 billion. Malaysia was Singapore's main import source country, as well as its largest export market, absorbing 12.1% of Singapore's exports, followed by Indonesia (10.6%), Hong Kong (10.4%), the EU (10.2%), China (9.2%), and the United States (7.0%). Singapore was the 16th-largest trading partner of the United States in 2008. Re-exports accounted for 48.1% of Singapore's total sales to other countries in 2008. Singapore's principal exports are petroleum products, food and beverages, chemicals, pharmaceuticals, electronic components, telecommunication apparatus, and transport equipment. Singapore's main imports are aircraft, crude oil and petroleum products, electronic components, consumer electronics, industrial machinery and equipment, motor vehicles, chemicals, food and beverages, electricity generators, and iron and steel.
Singapore continues to attract investment funds on a large scale despite its relatively high-cost operating environment. The United States leads in foreign investment, accounting for 63% of new commitments to the manufacturing sector in 2008. As of 2008, the stock of investment by U.S. companies in the manufacturing and services sectors in Singapore reached about $106.5 billion (total assets). The bulk of U.S. investment is in electronics manufacturing, oil refining and storage, and the chemical industry. About 1,500 U.S. firms operate in Singapore.
The government also has encouraged firms to invest outside Singapore, with the country's total direct investments abroad reaching $206.5 billion by the end of 2007. China was the top destination, accounting for 13.2% of total overseas investments, followed by Malaysia (7.1%), Indonesia (6.1%), United Kingdom (10.5%), Hong Kong (5.9%), Thailand (5.2%), Australia (5.3%), and the United States (4.5%).
As of mid-2009, Singapore had a total labor force of about 2.94 million. The National Trades Union Congress (NTUC), the sole trade union federation, comprises almost 99% of total organized labor. Extensive legislation covers general labor and trade union matters. The Industrial Arbitration Court handles labor-management disputes that cannot be resolved informally through the Ministry of Labor. The Singapore Government has stressed the importance of cooperation between unions, management, and government ("tripartism"), as well as the early resolution of disputes. There has been only one strike in the past 15 years.
Singapore has enjoyed virtually full employment for long periods of time. Amid slower economic growth in 2003, unemployment rose to 4.6%. As of the end of June 2008, the unemployment rate was 2.3%. In tandem with the global economic crisis and the economy’s contraction, unemployment as of end-June 2009 rose to 3.3% and resident unemployment reached 4.6%. Overall, some of Singapore’s unemployment is attributable to structural changes in the economy, as low-skill manufacturing operations have moved overseas. Since 1990, the number of foreign workers in Singapore has increased rapidly to cope with labor shortages. Foreign workers comprise 25% of the labor force; the great majority of these are unskilled workers.
Transportation and Communications
Situated at the crossroads of international shipping and air routes, Singapore is a center for transportation and communication in Southeast Asia. Singapore's Changi International Airport is a regional aviation hub served by 80 airlines. A third terminal opened in January 2008, and a dedicated low-cost terminal for budget airlines has operated since 2006. The Port of Singapore is the world's busiest for containerized transshipment traffic. The country also is linked by road and rail to Malaysia and Thailand.
Telecommunications and Internet facilities are state-of-the-art, providing high-quality communications with the rest of the world. Radio and television stations are all ultimately government-owned or government-linked. The print media is dominated by a company with close ties to the government. Daily newspapers are published in English, Chinese, Malay, and Tamil.
Information by U.S. Department of State