EGSD (Singapore)

Group 5 Yash Goradia 17 Dhairya Kajaria 28 Ankita Rathi 42 Jaspreet Sandhu 46 Sahil Sanghvi 48 Shriraj Shetty 55

Growth Model of Singapore

2 [GROWTH MODEL OF SINGAPORE]

Index 1. Top 10 things you did not know about Singapore 2. Welcome to Singapore: Quick Facts 3. Sectorial Distribution • Manufacturing Sector • Service Sector • Top 10 exports • Top 10 imports • Corruption in Singapore

4. Singapore’s History and Structure 5. The Growth Model • Policies through the years • Present day policies • Policies conducive to growth • Ease of doing business • Investment in Education • Investment in Infrastructure • Investment in Environment • Singapore: Financial Hub • What contributed to the growth? • HDI • Singapore’s report card

6. The Porter Model 7. References

[GROWTH MODEL OF SINGAPORE] 3

TOP 10 THINGS YOU DID NOT KNOW ABOUT SINGAPORE




Welcome to Singapore: Quick Facts

POPULATION

Population: 4.6 million

GDP (PPP): $314.9 billion

4.9% growth

5.7% 5-‐year compound annual growth

$59,711 per capita

Unemployment: 2.0%

InWlation (CPI): 5.2%

FDI InWlow: $64.0 billion

Singapore, 4,658

China, 13,31,400

India, 11,56,898

USA, 3,07,212

South Korea, 48,509

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The population of Singapore its less than 1 % of India’s and China’s population. Singapore has a healthy sex ratio of 970 females for every 1000 males and the average age is 38 years, which is pretty healthy compared to Japan’s 44.5 years but as compared to India’s 25.5 years, it is very high. It is a wrong notion that GDP is one of the most common indicator to understand a countries growth and performance of the country through the years. If you see here the GDP of Singapore compared to other countries is very low but the per capita (i.e. but considering the size of the population) is an actual indicator of the economic conditions. And as you see here Singapore is one of the top ranking nations when it comes to per capita GDP. Now lets go deeper into understanding the formulation of Singapore's economy and which sectors contribute toward its GDP. Being a nation with low resources (which will be explained later), Singapore is dependent on one of its most important growth factor i.e. the Human capital. And so, the contribution for the service sector is high. GDP OF SINGAPORE COMPARED TO OTHER NATIONS

In the chart above, USA tops the chart with a GDP of $94,85,136 followed by China ($89,08,894), India ($34,15,183), South Korea ($948,906) and Singapore ($129,521).

Singapore, 1,29,521

China, 89,08,894

India, 34,15,183

USA, 94,85,136

South Korea, 9,48,906

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8 [GROWTH MODEL OF SINGAPORE] PER CAPITA GDP OF SINGAPORE COMPARED TO OTHER NATIONS

In the chart above, the order of the nations completely changes. USA still remains on the top with the Per Capita GDP of $31,178 followed by Singapore ($28,107), South Korea ($19,614), China ($6,725) and India ($2,975).

Singapore, 28,107

China , 6,725

India , 2,975

USA, 31,178

South Korea, 19,614

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Sectorial Distribution

MANUFACTURING SECTOR

21%

4% 2%

68%

5%

Sectorial contribution Manufacturing Construction Utilities Services Industries Ownership of Dwellings

Electronics 25%

Chemicals 8%

Biomedical Manufactu

ring 25%

Precision Engineerin

g 15%

Transport Engineerin

g 16%

General Mftg.

Industries 11%

Manufacturing Sector

10 [GROWTH MODEL OF SINGAPORE] SERVICE SECTOR

TOP 10 EXPORTS TOP 10 EXPORTS % Share % Growth

Petroleum Products 25.1 -‐4.9

Refined Electronic Valves 20.0 -‐2.6

Telecommunications Equipment 2.9 0.9

Parts and Accessories 2.9 -‐14.3

Data Processing Machines 2.3 10.7

Specialised Machinery 1.9 9.0

Electrical Circuit Apparatus 1.7 1.3

Measuring Equipment 1.7 9.4

Electrical Machinery 1.6 -‐1.4

Organo-‐Inorganic Compounds 1.6 -‐13.5

Total exports 100.0 -‐0.9

Wholesale & Retail Trade

25%

Transportation & Storage 11%

Accommodation & Food Services

4% Information & Communications

6%

Finance & Insurance 17%

Business Services 21%

Other Services Industries 16%

Service sector


TOP 10 IMPORTS TOP 10 EXPORTS % Share % Growth

Petroleum Products Refined 20.4 -‐4.3

Electronic Valves 15.4 4.3

Petroleum Crude 10.5 18.1

Telecommunications Equipment 3.5 -‐1.1

Aircraft & Associated Equipment 2.1 26.5

Parts and Accessories 2.1 -‐8.5

Data Processing Machines 1.8 7.3

Non-‐electric Engines & Motors 1.7 16.3

Natural Gas 1.6 24.6

Civil Engineering Equipment Parts 1.6 6.2

Total Imports 100.0 3.2

CORRUPTION IN SINGAPORE

The corruption in Singapore is one of the least in the world, most of the countries around it are highly corrupt but Singapore with such a high cultural diversity still has been able to maintain very low corruption rates.


Singapore’s History and Structure How did a country with no natural resources, infertile land and high cultural diversity, which is just spread across 63 islands which in total were just about 580sqkm managed to be one of the most advance nations with high GDP and HDI rank? Part of the answer lies in its history and the other part in its structure. Ever since the 14th century the island of Singapore is been important because of its strategic location. The land has for most of its history been under foreign rule of which most recent was the East India company (British) and Japanese. The Residence in the region have seen a lot of hardship and have earned their freedom and so they have a very hardworking and dedicated nature, which combined with the open and free flowing policies of Singapore have given a very strong frame work for the county to prosper. Singapore consists of 63 islands. There are two man-‐made connections to Johor, Malaysia: the Johor–Singapore Causeway in the north, and the Tuas Second Link in the west. Jurong Island, Pulau Tekong, Pulau Ubin and Sentosa are the largest of Singapore's smaller islands. Ongoing land reclamation projects, which have increased Singapore's land area from 581.5 km2 (224.5 sq. mi) in the 1960s to 704 km2 (272 sq. mi.) today; it may grow by another 100 km2 (40 sq. mi) by 2030. Some projects involve merging smaller islands through land reclamation to form larger, more functional islands 5% of Singapore's land is set-‐aside as nature reserves. There are only about 250 acres of farmland remaining in Singapore.

The Growth Model

POLICIES THROUGH THE YEARS Singapore’s economic growth can be classified into four periods:

The first period (1965-‐80) : The government's main policy objectives were to promote growth by attracting foreign direct investment (FDI), create jobs and expand productive capacity (Peebles and Wilson 1996). During this period, Singapore achieved rapid growth and primarily exported textitles,garments and electronics. However, its economy was also affected by the worldwide recession of 1974-‐75, which had been caused by the 1973 oil crisis.

The second period (1980-‐90) was shaped by government policies launched in the late 1970s and early 1980s to restructure the industry by focusing on high-‐tech manufacturing and high value-‐added services. A deep recession began in 1985 which was partly caused by a slump in global demand, especially from the United States (Rigg 1988).


The two periods after 1990 were influenced by the government's strategic plan to transform Singapore into a developed nation, which emphasized qualitative development. By this period they were engaged in biotech research, pharmaceuticals, and aerospace engineering.

These two periods, and especially the 2000-‐10 period, were also affected by the accelerated pace of globalization, the rapid penetration of information technology, and increasing turbulence in the world economy. Factors that had a tremendous impact include the Asian financial crisis of 1997-‐98, the global recession caused by the dot.com crash in 2000, the 9/11 terrorist attack in 2001, and the 2008-‐09 global economic crisis.

PRESENT DAY POLICIES:

1. Free Market Trade and Agrement

a. With FTAs Singapore-‐based exporters and investors stand to enjoy a myriad of benefits like tariff concessions, preferential access to certain sectors, faster entry into markets, investment and Intellectual Property (IP) protection.

b. Singapore has concluded 18 regional and bilateral free trade agreements (FTAs) with 24 trading partners and 35investment guarantee agreements.

c. The network of countries with whom Singapore has signed FTAs with makes up atleast 60% of global GDP.

2. Physical and Economic infrastructure

a. constantly provide first-‐class and advanced infrastructure like excellent shipping, air links and public transportations

b. Singapore has developed as advanced and reliable infocomm infrastructure to enable smooth communications among countries

c. Singapore has started wiring up the Next Generation Nationwide Broadband Network (Next Gen NBN) and is targeting to complete by 2012. The Next Gen NBN is Singapore’s nation-‐wide ultra-‐high speed fibre network. A strategic enabler of economic and social growth, the network will prepare Singapore for an infocomm-‐enabled future and place it at the forefront of broadband development internationally.


3. Political and Government Environment

a. Unlike its neighbouring countries, Singapore was politically stable. Individuals who threatened national, political, or corporate unity were quickly jailed without much due process.

b. Effective tax policies to maximise profits and attract investors. Ex The government of Singapore has offered tax exemptions to start-‐up companies in order to encourage them to reinvest and expand.

c. Provided financial and tax incentives e.g. Pioneer Schemes, Finance and Treasury Centre Tax incentive or Global Trader Program

d. Foreign company that registered an international or regional headquarter enjoyed lower corporate tax. companies do not have to pay taxes for gains on sales of fixed assets or gains on foreign exchange on capital transactions

e. No control on foreign exchange as well as profit remittance or repatriation of capital and profits from Singapore. Hence, the deep and liquid capital market can become an alternative source of financing for businesses

4. Robust legal System

a. Anti-‐corruption laws are strict and regarded as the fairest nation in Asia

b. Being a member of World intellectual property organization protected ideas and innovations making it a technological hub

FACTORS CONDUCIVE TO GROWTH

1. Competitive Workforce and employment Act

a. Singapore has 90% literacy and large amount of skilled workforce and has topped BERI’s survey for competitive workforce for 31 years

b. The country set up many technical schools and paid international corporations to train their unskilled workers in information technology, petrochemicals, and electronics.

c. Shares a co-‐operative relation with govt., business and unions. The absence of labour unrest in Singapore creates a conducive business environment for investors

d. Employees feel safe and secured due to employee act which provides retrenchment benefits in event of redundancy.


2. Foreign investment a. More than 7,000 multinational corporations and another 26,000

international companies have been attracted to investing Singapore. UK and japan being the top 2

b. The Singapore government encourages free enterprise with no restriction on foreign ownership of businesses. Nearly all sectors of Singapore’s economy are open to 100% foreign ownerships.

c. No obligation for investors to register or report their investment capital, loans or technology agreements.

3. Competition act a. The Competition Act promotes healthy competitive markets by

prohibiting certain business practices that restrict competition in the market

b. Activities such as Price-‐fixing; Sharing of markets or sources of supply; Predatory behaviour towards competitors; and Mergers that have resulted in, or expected to result in, substantial lessening of competition within the Singapore are not allowed

4. Business credit facilities a. myriad of banking credit facilities offered by the banks in Singapore to

meet the different needs of various businesses b. Several government statutory boards such as the Economic Development

Board (EDB) and Standards, Productivity and Innovation Board (SPRING Singapore) under the Ministry of Trade and Industry Singapore (MTI) are set up to identify opportunities, plan contingencies and develop policies that create a globalised, pro-‐business, creative and diversified economy.

c. It serves enterprises from a range of industry sectors to develop industry-‐wide infrastructure, develop and upgrade capabilities, and create new market opportunities.

d. Works closely with industry associations and partners, such as the banking and finance sector, to create more financing programmes and options for SMEs at various stages of their growth.

5. Business protection

a. Bancassurance is a growing business in the financial services centre in Singapore. It is where an insurer partners with a bank and leverage on that bank’s well-‐established channels to distribute its insurance products.

b. General insurance for businesses seeks to protect your business’s general needs and liabilities such as theft, business interruption, personal accident

c. Life Insurance for businesses seeks to protect the lives of the business’s key persons, to ensure business continuity

16 [GROWTH MODEL OF SINGAPORE] EASE OF DOING BUSINESS

1. Business Environment : Far easier, less expensive and less time consuming to register company in Singapore.The World Bank ranked Singapore #2 for investor protection, #4 for taxes and #1 for trading across borders. a free-‐market economy, an open and corruption-‐free environment, and a low tax regime.

2. Taxes : Singapore corporate tax rate is 8.5% for profits up to S$300K and a flat 17% for profits above S$300K. Compare that to India’s corporate income tax rate of 30.9% for taxable income up to INR 10 million and 33.9% for taxable income above INR 10 million. Unlike India, there is no dividend tax and no capital gains tax in Singapore. Moreover, foreign-‐sourced income is taxed only when remitted into Singapore whereas Indian companies are taxed on worldwide profits irrespective of whether they are remitted into India or not.

3. IP Protection: Singapore is reputed for its Intellectual Property regime, which is ranked as the third-‐best in the world by the World Economic Forum’s (WEF) ‘2010 Global Competitiveness Report.

4. Global Competitiveness: Singapore also has world-‐class infrastructure (ranked #5), with excellent roads, ports, and air transport facilities.Lack of corruption, high degree of government efficiency, high efficiency of goods and labor markets are other factors that contribute to ease of doing business.

5. LABOR FORCE: Aon Consulting’s ‘2010 People Risk Index‘ ranks Singapore as #3 in the world for low risk of recruiting, employing, and relocating employees while India ranked #59.

6. OPENNESS TO TRADE: The World Economic Forum ranked Singapore as #1 in its ‘2010 Global Enabling Trade Report‘ on factors like domestic and foreign market access; efficiency of customs administration; efficiency of import-‐export procedures; availability and quality of transport services; and regulatory environment.

7. BUREAUCRACY: Singapore ranked #1 as having the most efficient bureaucracy in Asia in a survey carried out by the Political and Economic Risk Consultancy (PERC) in June 2010 and is also perceived to have the least corruption in the world according to Transparency International’s ‘2010 Corruptions Perception Index‘.The World Economic Forum ranked Singapore as the ‘Country with Highest Public Trust of Politicians’ and the ‘Country with the Least Burden of Government Regulation’ in its ‘2010 Global Competitiveness Report‘.

8. LIVING ENVIRONMENT : Singapore has been ranked as the best place to live for Asian expats by ECA International’s ‘2010 Location Ratings System‘ whereas India ranks #27 in the region. According to Gallup’s, ‘2010 Potential Net Migration Index‘ Singapore is the most desirable immigration hot-‐spot in the world.


INVESTMENT IN EDUCATION Education for primary, secondary, and tertiary levels is mostly supported by the state. All institutions, private and public, must be registered with the Ministry of Education. English is the language of instruction in all public schools, Singaporean students consistently rank in the top five in the world in the two major international assessments of mathematics and science knowledge. Singaporean students were ranked first in the 2011 Trends in International Mathematics and Science Study conducted by the International Association for the Evaluation of Educational Achievement and have been ranked top three every year since 1995. Investing in Education for the 21st Century MOE subsidises the operations of schools and tertiary institutions: $5.04 billion to the primary schools, special education schools, secondary schools, independent schools, centralised institute and junior colleges $3.19 billion to the 4 autonomous universities, i.e. NUS, NTU, SMU and Singapore University of Technology and Design (SUTD), UniSIM, and Singapore Institute of Technology (SIT) $1.22 billion to the 5 polytechnics and 2 tertiary arts institutions $606 million to the 3 colleges of ITE For FY2011, MOE will continue to build on our strong fundamentals and invest in initiatives in the following areas: Teachers – Our Most Important Asset – We recognise good teachers as the key driver of a quality education, and will continue to improve the ways we develop good teachers and engage them professionally. Students – The Focus of Our Education System – We are committed to delivering a holistic education that places its focus on the student as an individual worth nurturing and strives to ensure the best outcome in life for each student. Opportunities – Education for All Singaporeans – We are committed to ensuring that all students have access to quality and affordable education. We seek to provide a diversity of opportunities for all Singaporeans, to ensure that their aspirations can be met at all levels of ability and across a range of aptitudes. Additional support will be provided for children from lower and middle income families. Of all non-‐student Singaporeans aged 15 and above, 18% have no education qualifications at all while 45% have the Primary School Leaving Examination as their highest qualification. 15% have the GCE 'O' Level as their highest qualification and 14% have a degree. Some schools have a degree of freedom in their curriculum and are known as autonomous schools. These exist from the secondary education level. INVESTMENT IN INFRASTRUCTURE: Singapore's infrastructural development has been monitored and controlled by Government agencies. The Government Concept Plan was first developed in 1971. It was fine tuned later to formulate “A Ring Concept” . The Changi Airfreight Centre (CAC) located at the Northern end of the airport is a 24 hour one stop service centre to airlines, cargo agents, shippers and consignees. The CAC is operated as a Free Trade Zone (FTZ), where cargo is easily moved, consolidated, stored or repacked without the need for documentation or customs duties. According to estimates, it handled 1.86 million tons of cargo in 2008.

18 [GROWTH MODEL OF SINGAPORE] PSA Singapore Terminals is Singapore's port and the world's busiest transshipment hub. PSA Singapore Terminals operates 4 container terminals and 2 multipurpose terminals in Singapore, connecting all kinds of vessels-‐including container ships, bulk carriers and cargo freights-‐to a network of 200 shipping lines with connections to 600 ports in 123 countries.

1. It takes care of about one fifth of the world's total container transshipment throughput. It handled 29 million twenty foot equivalent units (TEUs) of containers in 2008.

2. Singapore offers a world class telecommunications infrastructure and its efforts to bring every citizen to the information highway is taking shape.

3. According to information released by Infocomm Development Authority, May 2009, Singapore is the most wired country in the world, with a household broadband penetration rate of 115.2%.

INVESTMENT IN ENVIRONMENT Investment in environment is considered one of the most important not only the government but even the the residence have taken it upon them to reduce their carbon footprint, they have strict rules regarding the conversation of the environment and they have invested billions in developing alternate ways for of sustaining growth and energy SINGAPORE: FINANCIAL HUB Singapore is already an unrivalled financial hub in Southeast Asia and is increasingly a prominent wholesale funding centre in both the debt and equity markets for the wider Asia region. According to DBS Asian Insights Conference Report 2013, as the world’s major financial hubs scramble to prepare themselves for the full internationalisation of China’s currency, Singapore has emerged as a likely venue for increased settlement and issuance of renminbi-‐denominated instruments in the ASEAN region. Singapore will dethrone Switzerland in the next two years as the world's top centre for managing international funds (Rueters), , as a global tax crackdown and tighter regulation weaken the Alpine nation's appeal to investors. It is the world’s fourth largest foreign exchange centre and has very deep US dollar funding capabilities. In addition to the hundreds of multinational corporations that use Singapore as their regional headquarters, the city-‐state also hosts some 4,000 companies from mainland China who use Singapore as a launching pad for their Southeast Asian trade.


WHAT CONTRIBUTED TO THE GROWTH?

• The twin pillars of the Singapore economy are the manufacturing and services

related industries. • The manufacturing sector contributes to about a quarter of the economy, and its

share has been broadly unchanged over the past two decades. The services sectors make up about 67% of GDP, with strong contributions from the fin and bus services sectors.

• The electronics industry accounts for a much larger 42% of total manufacturing output.99% of Pharmaceuticals produced in the country are exported thus giving a value add of almost 100%

HUMAN DEVELOPMENT INDEX The Human Development Index (HDI) is a composite statistic of life expectancy, education, and income indices used to rank countries into four tiers of human development. It was created by the Pakistani economist Mahbub ul Haq and the Indian economist Amartya Sen in 1990 and was published by the United Nations Development Programme.

Services sector

Manufacturing sector

Electronics industry

20 [GROWTH MODEL OF SINGAPORE] SINGAPORE’S HDI COMPARED TO OTHER COUNTRIES

FURTHER BREAKDOWN OF SINGAPORE’S HDI

Despite the small size of the country, in terms of both the geographical composition and GDP, Singapore has a high Human Development Index, in comparison to other countries like India.

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Singapore China India USA South Korea HDI 0.895 0.699 0.554 0.937 0.909 Health 0.966 0.846 0.722 0.926 0.958 Education 0.804 0.627 0.459 0.994 0.942 Income 0.925 0.646 0.515 0.897 0.833

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HDI RANKINGS OF TOP NATIONS:

• Norway – 1 • USA – 3 • South Korea – 12 • Singapore – 18 • China – 101 • India – 136 • Niger – 186

SINGAPORE’S REPORT CARD Key Indicators Singapore USA S. Korea China India

Population Density (per sq. km.)

7022 32 501 139 360

Life Expectancy (yrs.) 81 78 78 73 64

Literacy Rate 99% 99% 99% 93% 66%

Infant Mortality (Deaths per 1000 lives)

3 6 4 23 55

Ease of doing Business 1 4 8 16 132

Country with lowest tax misery

11 18 21 64 43

Country most open to trade

2 10 34 136 119

Least Corrupt country 5 19 45 80 94

World’s best country for business

4 12 29 96 97

22 [GROWTH MODEL OF SINGAPORE] THE PORTER MODEL

A model that attempts to explain the competitive advantage some nations or groups have due to certain factors available to them. The Porter Diamond is a model that helps analyze and improve a nation's role in a globally competitive field. The model was developed by Michael Porter, who is recognized as an authority on company strategy and competition; it is a more proactive version of economic theories that quantify comparative advantages for countries or regions. Traditional economic theories cite land, location, natural resources, labor and population as determinants in competitive advantage. The Diamond Model uses a more proactive approach in considering factors such as: -‐The firm strategy, structure and rivalry -‐Demand conditions for products -‐Related supporting industries -‐Factor conditions The Diamond Model demonstrates that countries can become competitive regardless of whether they possess natural factor endowments such as land and natural resources. In the Diamond Model, the role of government is to encourage and push organizations and companies to a more competitive level, thereby increasing performance and ultimately the total combined benefit.


References • http://www.doingbusiness.org/rankings • http://www.transparency.org/cpi2012/results • http://www.tradingeconomics.com/countries • http://hdrstats.undp.org/ • http://www.heritage.org/index/ranking • http://country-‐facts.findthedata.org/compare/106-‐122/Singapore-‐vs-‐India • http://www.mas.gov.sg/Monetary-‐Policy-‐and-‐Economics/Monetary-‐Policy.aspx • http://in.reuters.com/article/2013/07/04/singapore-‐swiss-‐funds-‐

idINDEE9630AX20130704 • http://en.wikipedia.org/wiki/History_of_Singapore • http://www.youtube.com/watch?v=xRvbrzIyV9E

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EGSD (Singapore)