10 econ responses Flashcards
- Economic Diversification: Developing Export-Oriented Industrialisation
Previously: Import Substitution Industrialization
How it works:
Promote industrialization in Singapore to create products to be sold in the domestic market and Malaysia
Restrict imports from other countries
Goal: Replace Singapore’s dependence on imports
But this became impractical after independence…
Singapore industrializes (Creates own products for domestic market + Malaysia within common market) + Import quotas
Reliance was placed on private enterprises whose basic decisions were determined on the expectation of a common market with the neighboring Federation of Malaya. A system of import quotas was introduced for a limited number of goods, along with controls on how many enterprises could enter a particular field.
Enter Dr Albert Winsemius!
Singapore’s chief economic advisor from 1961 – 1983
Worked for the United Nations Development Programme (UNDP)
Advised Singapore to solve its economic challenges by adopting export-oriented industrialization to attract MNCs to invest in Singapore
Export-oriented:
Mainly concerned with the export of goods or services.
EXPORT-ORIENTED
INDUSTRIALIZATION
Industrialization:
The process of developing manufacturing in an economy on a large-scale, especially through the adoption of technology and machinery.
Export-Oriented Industrialization
Economic diversification: Allows Singapore to make more profits from trading with the global economy, beyond just the domestic market and Malaysia
Inviting Multinational Companies (MNCs) investment: Reap the benefits of MNC investment in Singapore
Multi-National Companies (MNCs):
A company which has facilities and other assets in at least one country other than its home country.
Benefits of MNCs in Singapore
Raise employment rates
Almost 150,000 jobs were created between 1967 – 1973
Provide technical training and work experience for local workforce
Increased work productivity
Built up local expertise to fill job vacancies previously filled by foreigners
Increased access to modern technology
Helped keep Singapore competitive globally
Increased exports of locally manufactured goods to more overseas markets
Elaboration: The government focused on industrialisation to diversify the economy and find varied sources of development. In 1961, the Economic Development Board (EDB) was established to promote industrial growth. Post-1965, an export-oriented economic policy was adopted. Measures included: (1) Attracting foreign investments and MNCs (e.g., Seiko, Shell, Hewlett-Packard). (2) Transforming Jurong into Singapore’s first industrial estate. (3) Setting up the Jurong Town Corporation (JTC) to manage industrial estates. Explanation: These efforts led to a significant increase in manufacturing activities and created almost 150,000 jobs between 1967-1973, addressing unemployment. Foreign investments provided technical training and modern technology, aiding global competitiveness. Increased exports also expanded local companies’ access to overseas markets. From 1966-1973, Singapore’s GDP growth rate exceeded 10% almost every year.What MNCs Wanted + What Singapore Provided
Profits: Maximize profits and minimize costs
Singapore: Lowered tax rates
Safety: Operate in a safe and secure environment
Singapore: Strengthened internal security, defence forces, diplomatic relations with countries around the worldWhat MNCs Wanted + What Singapore Provided
Labour: To have a reliable supply of labour
Singapore: Young and growing labour force, supported by trade unions and employers which sought to raise productivity
Facilities: Have suitable location for factories and space for future expansion
Singapore: Set aside land to develop industrial estates
- Economic Diversification: Developing Infrastructure
Elaboration: The government developed infrastructure to support economic diversification, including: (1) Improving telecommunications: The Singapore Telephone Board doubled telephone lines from 100,000 to 200,000 within five years. (2) Expanding banking and financial services: The Development Bank of Singapore (DBS) was established in 1968, and many foreign banks set up operations. (3) Setting up the Public Utilities Board (PUB) in 1963 to manage electricity, gas, and water supplies. (4) Improving transport facilities: Air Transport - Paya Lebar Airport expansion, replaced by Changi Airport in 1981. Sea Transport - The Port Authority of Singapore (PSA) was set up in 1964, managing ports in Jurong, Sembawang, and Tanjong Pagar. Land Transport - An expressway system was built and roads connected industrial estates to housing estates. Explanation: These measures improved connectivity and accessibility, supported MNC operations, attracted foreign investors, and facilitated manufacturing industry growth.INFRASTRUCTURE DEVELOPMENT
To attract MNCs and other foreign investors and facilitate the growth of manufacturing industries
Telecommunications
Goal: Boost connectivity among industries and households
100,000 telephones installed in just 5 years (1967 – 1972)
SINGAPORE TELEPHONE BOARD CHAIRMAN ALAN YEO (LEFT) OFFICIATING A CEREMONY TO MARK THE INSTALLATION OF THE 100,000TH TELEPHONE AT THE NEW HOUSING BOARD FLAT OF TAN CHER KIM AT KEMPAS ROAD IN KALLANG BASIN WHO WAS AWARDED ONE YEAR FREE SERVICE. THE CHAIRMAN WAS CONFIDENT OF HAVING 200,000 TELEPHONES IN OPERATION BY 1975.
Banking and Finance
Goal: Provide banking and financing services to MNCs and other companies in Singapore
Development Bank of Singapore (DBS) was set up in 1968 to finance industrialization and other development projects
Foreign banks also set up operations
Banking and Finance
Goal: Promoting a safe and secure financial system
The Monetary Authority of Singapore (MAS) was set up in 1971 to formulate Singapore’s monetary policies, provide banking services and money management to the government, and loan money to Singapore’s financial institutions
Public Utilities
Goal: Ensure that there is consistent and sufficient supply of water, electricity, and gas to industries and households at the lowest possible prices
The Public Utilities Board was set up in 1963 to regulate the provision of public utilitiesAir Transport
Goal: Expansion and upgrading of air transport facilities to accommodate the increase in passenger and cargo traffic
Paya Lebar Airport was expanded in the 1960s-70s to include a passenger terminal and a new arrival terminal
Changi Airport was opened in 1981
Sea Transport
Goal: To promote the use, improvement, and development of the port to accommodate the rise in cargo traffic in Singapore
The Port of Singapore Authority (PSA) was formed in 1964 to manage port operations
Port facilities set up in Jurong, Sembawang, Tanjong Pagar, and Pasir Panjang
Land Transport
Goal: Reduce traffic congestion and increase connectivity between areas
Roads were constructed to connect industrial areas and housing estates
Expressway system built to reduce time needed for travel and reduce traffic congestion
Tourism
Goal: Increase tourist traffic and expenditure in Singapore
Singapore Tourism Board (STB) or then Singapore Tourism Promotion Board (STPB) set up to coordinate the efforts of hotels, airlines and travel agents to develop the Singapore’s tourism industry
1973 Oil Crisis
In October 1973, members of the Organization of Arab Petroleum Exporting Countries (OPEC) proclaimed a ban on the sale of oil to nations that had supported Israel during the Yom Kippur War
Oil prices skyrocketed - Jumped nearly 4 times in less than 3 months
Singapore was significantly affected, as it imported ALL its oil
Petrol and electricity prices in Singapore skyrocketed
Increase in cost of living
Increase in prices of goods
Increase in public transport fares
Decrease in economic growth rate
Increase in cost of producing and transporting goods 🡪 Increase in price of goods 🡪 Decrease in demand for Singapore’s exports
While Singapore eventually recovered from these shocks by 1976, crises like these are reminders of its vulnerability to external developments due to the openness of its economy
Results
Between 1967 to 1973, almost 150,000 jobs were created, to the point that foreign workers had to be recruited to fill job vacancies
Until 1973, Singapore’s gross domestic product exceeded 10 per cent every year
By 1990, Singapore’s GDP per capita had risen to about US$13,000, surpassing South Korea, Israel, and Portugal.
