Role of Exports in Economic Growth of Singapore
Singapore does not possess mineral resources or raw goods for export to other countries. However, due to its strategic location at the Straits of Malacca, it became a base for neighboring countries. Singapore imports raw goods, process them and exports the manufactured goods. Raw materials from mostly nearby countries are refined in Singapore and then re-exported to other nations. Due to this major economic function, the country became a wealth management hub.
History of the Singaporean Economy
The Singaporean deep water harbor is the country’s major natural resource. As a result of its presence, the Singaporeans were previously known for ship repair and building. Most of the natives engage in tin smelting, copra production, and rubber milling. However, the economy of the country was not steady then because of the fluctuations in the revenue generated from tin and rubber. The instability of the export earnings resulted from the price trends and low-quality commodity.
In an attempt to stabilize and boost its economy, the Singaporean government improved industrialization. It developed industrial estates, established manufacturing industries and offered financing and technical services to the industries. Also, it encouraged industrial investment from both local and international investors. The country established a much diversified and stronger economy around 1980. Despite the country’s small size, it became popular in the entire Southeast Asia as a result of its economic importance.
In a bid to promote the industrial activities in the country; the government encouraged advancement from the general labor–intensive operations to capital-intensive and high-technology tasks. The use of improved and technological devices was significant in the refineries and electronic industries.
The Singaporean economy experienced a downturn, five years later. High wages were reported as one of the causes of the decline in the country’s revenue. The country’s products were less competitive on the global market due to the escalated wages. Also, the reduction in the demand for the nation’s products contributed to the economic depression.
Expanding the Economy
Singapore started expanding its economy around the late 1980s. Besides manufacturing, the country delved into communications and financial services. This development led to the establishment of multinational firms in the country. Finance and international banking became the fastest growing sectors of the nation’s economy. These industries accounted for a quarter of Singapore’s GDP. As a result of the thriving economy, the country was then recognized as one of the economic nerve centers of South Asian region.
The productivity of the manufacturing companies increased around 1990. At this period, the sector accounted for 30% of the nation’s GDP. The industries were successful in the production of high quality technologically advanced goods. The country’s export increased, generating more revenue and promoting the economy. The electronic industries dominated the manufacturing sector with most of them producing computer peripherals. Also, oil processing contributed significantly to the growth of Singapore’s economy.
The boom in the country’s economy continued till the financial crisis that engulfed Asia. However, Singapore survived the downturn and recovered up to 5.4% in 1999. The nation’s economy almost doubled in 2000 with a GDP of 9.9%. The increase in the economy resulted from the high demand for IT devices and domestic consumables. Also, investments contributed significantly to the Singapore’s revenue.
Export and Services
Manufacturing industries were the bedrock of Singapore’s economy. Because of technological advancement, it was ranked in 2010 as the world’s third fastest growing economy. With thousands of tourists in this area, the hospitality industry has grown. Singapore is home to many attractions. Though this country adopted a mixed economy, her government still intervenes with the factors of production and macroeconomic management.
Both the state and the market play a major role in facilitating the nation’s economy.
This model of the economic system is essential to the growth of the GDP. In an attempt to boost the nation’s domestic market and revenue, the Singaporean government welcomed foreign investors. Also, it signed policies to protect the country’s financial system from economic woes of external markets. Besides delving into the global market, the government encouraged industrialization. The establishment of new industries ensured that the demands of the global markets were satisfied.
Since Singapore has no natural resources, international trade is essential for revenue generation. Also, this trade has contributed immensely to the growth of the country’s economy. Singapore-based industries import raw materials, process them into finished products and re-export them. The country imports raw goods mainly from the US. Re-exports account for 47% of the country’s exports. The WTO recognized Singapore as the country with the largest trade to GDP ratio.
Singapore has few restrictions on trade. However, there are a few barriers on imports. These restrictions are base on health, public security and environmental concerns. Also, the importation of certain product requires an import licensing. This country has numerous trade partners including the US and other Asian countries. Singapore also refines oil imported from other countries before exporting the processed oil. The country has no oil reserves, but it was ranked as the 18th largest exporter worldwide. Thus, the country is home to the world’s third largest refinery. The country has many petrochemical and petroleum industries.
Manufacturing industries have also contributed significantly to the nation’s economy. Besides the initial specialization in the production of electronics and digital products, the country has expanded into pharmaceutical and biomedical manufacturing.
Singapore is popular globally for offering financial services. The country has the strongest banking system in the world. Due to the nation’s exceptional capabilities in financial management, its foreign exchange market is the fourth largest in the world. Singapore became a renowned wealth management center in Asia.
Also, tourism is another thriving service industry in this country. Singapore receives millions of visitors yearly. Tourism has generated revenue through entertainment and sightseeing. The hospitality industry has also contributed to the economy of the nation. With the establishment of new resorts and hotels to provide accommodation for tourists, the service sector has appreciably improved the economy. Industries and services are the growing sectors that increased Singapore’s GDP.
The boom in industrial production in the country and the high demand of the products in the global market has favored the country. Re-exports has contributed immensely to the growth of Singapore’s economy.
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