Growth

Model of Singapore
Group 5
Yash Goradia
Dhairya Kajaria
Ankita Rathi
Jaspreet Sandhu
Sahil Sanghvi
Shriraj Shetty

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[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. Singapores 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
Singapores report card
6. The Porter Model
7. References

[GROWTH MODEL OF SINGAPORE] 3

TOP 10 THINGS YOU DID NOT KNOW

ABOUT SINGAPORE

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[GROWTH MODEL OF SINGAPORE] 5

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Welcome to Singapore: Quick Facts

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

POPULATION

China, 13,31,400

14,00,000
12,00,000

India, 11,56,898

10,00,000
8,00,000
6,00,000
4,00,000

USA, 3,07,212

2009

2007

2005

2003

2001

1999

1997

1995

1993

1991

1989

1987

1985

1983

1981

1979

1977

Singapore, 4,658

1975

1973

South Korea,
48,509
1971

2,00,000

[GROWTH MODEL OF SINGAPORE] 7

The population of Singapore its less than 1 % of Indias and Chinas 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 Japans 44.5 years but as compared
to Indias 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

1,00,00,000

USA, 94,85,136

90,00,000
80,00,000

China, 89,08,894

70,00,000
60,00,000
50,00,000
India, 34,15,183

40,00,000
30,00,000

2007

2005

2001

1999

1997

1995

1993

1991

1989

1987

1985

1983

1981

1979

1977

1975

1973

1971

10,00,000

2003

South Korea,
9,48,906
Singapore,
1,29,521

20,00,000

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).

[GROWTH MODEL OF SINGAPORE]

PER CAPITA GDP OF SINGAPORE COMPARED TO OTHER NATIONS

35,000

USA, 31,178

30,000

Singapore,
28,107

25,000
20,000

South Korea,
19,614

15,000
10,000
5,000

China , 6,725
India , 2,975

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).

[GROWTH MODEL OF SINGAPORE] 9

Sectorial Distribution

Sectorial contribution
Manufacturing
Utilities
Ownership of Dwellings

Construction
Services Industries

5%
21%

4%
2%

68%

MANUFACTURING SECTOR

Manufacturing Sector
Transport
Engineerin
g
16%

General
Mftg.
Industries
11%

Electronics
25%
Chemicals
8%

Precision
Engineerin
g
15%

Biomedical
Manufactu
ring
25%

10 [GROWTH MODEL OF SINGAPORE]

SERVICE SECTOR

Service sector
Other Services
Industries
16%
Wholesale &
Retail Trade
25%

Business
Services
21%

Transportation
& Storage
11%

Finance &
Insurance
17%
Accommodation
& Food Services
Information & 4%

Communications
6%

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

[GROWTH MODEL OF SINGAPORE] 11

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.

12 [GROWTH MODEL OF SINGAPORE]

Singapores 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 JohorSingapore
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

Singapores 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).

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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 Singapores 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.

14 [GROWTH MODEL OF SINGAPORE]

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 BERIs 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.

[GROWTH MODEL OF SINGAPORE] 15

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
Singapores 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 banks well-established channels to distribute its insurance
products.
b. General insurance for businesses seeks to protect your businesss general
needs and liabilities such as theft, business interruption, personal
accident
c. Life Insurance for businesses seeks to protect the lives of the businesss
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 Indias 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 Forums (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 Consultings 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 Internationals 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 Internationals 2010 Location Ratings System
whereas India ranks #27 in the region. According to Gallups, 2010 Potential
Net Migration Index Singapore is the most desirable immigration hot-spot in
the world.

[GROWTH MODEL OF SINGAPORE] 17

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 nancial 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 worlds major nancial
hubs scramble to prepare themselves for the full internationalisation of Chinas
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 worlds 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.

[GROWTH MODEL OF SINGAPORE] 19

WHAT CONTRIBUTED TO THE GROWTH?

Electronics
industry

Services
sector

Manufacturing
sector

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.

20 [GROWTH MODEL OF SINGAPORE]

SINGAPORES HDI COMPARED TO OTHER COUNTRIES

1
0.9
0.8

Singapore

0.7
0.6

China

0.5

India

0.4

USA

0.3

South Korea

0.2

World

0.1
0
1980

1990

2000

2010

2012

FURTHER BREAKDOWN OF SINGAPORES HDI

1.2
1
0.8
0.6
0.4
0.2
0

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

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.

[GROWTH MODEL OF SINGAPORE] 21

HDI RANKINGS OF TOP NATIONS:

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

SINGAPORES 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)

23

55

Ease of doing Business

16

132

Country with lowest tax

misery

11

18

21

64

43

Country most open to

trade

10

34

136

119

Least Corrupt country

19

45

80

94

Worlds best country for

business

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.

[GROWTH MODEL OF SINGAPORE] 23

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