Economic Environment of Singapore

International Marketing 560

Economic Environment of Singapore

Laura L. Erwin-Hall

October 12, 2007

"Home to some 4.48 million people (based on the last census in 2005 reported in 2006), Singapore is the fourth most densely populated country in the world and has one of the highest per capita gross domestic products in the world."1 The employment rate is 2.40 million (June 2006), with unemployment at an all-time low at only 2.5 percent. The labor force consists of mainly manufacturing, transportation and communication, construction, and financial, business, and other services. Singapore is orderly, prosperous, and modern. According to Richard H.K. Vietor, a Harvard Business School professor, Singapore, along with China and India are best positioned to take advantage of a global economy. Singapore is labeled the most developed state in Southeast Asia. "Hard work, incredibly efficient institutions, and great leadership have made Singapore rich."2

Most people live in high-rise apartment complexes and due to the high taxation on owning their own vehicles, most commute to work on public transportation systems. "The dominant ethnic groups are the Chinese, Malays, and Indians The literacy rate of Singapore stands at 95 percent."3 Every male citizen is obligated at age 18 to fulfill military commitment and are required to complete reserve enrollment and attend refresher trainings approximately once per year until they are 35 to 40 years of age.

Since the ethnicity of Singapore is so varied, there are many languages spoken in Singapore, but the government recognizes four official languages: English, Malay, Mandarin, and Tamil. The national language is Malay, but English is used as the main business language. English was brought to Singapore by the British in 1819 when the British had a port and later a colony on the Island. When Singapore became independent in 1965, the government decided to keep English as the business language. English is used as the unifying language between the three major races in Singapore and the main reason English was chosen as the business language is because it is also the global language for most countries regarding business, technology, and science. English is also the main language in the Singaporean education system.

There is a dialect of English which is also spoken. It is called Singlish. Singlish is quite difficult for British and American English-speaking persons to understand. This is because words are blended together to form new words. For example, "don't know" in Singlish is "dunno".

The second official language is Malay which is similar to Indonesian and is written by using the Latin alphabet. Prior to English becoming the "common language", shared among most of the people in Singapore, Malay was the language most shared by people of different races and nationalities. In fact, their National anthem, Majulah Singapura, is still entirely in Malay.

The third official language is Mandarin and it is considered one of the six official languages of the United Nations. "Globally, Mandarin dialects have more speakers than any other language."4 Today, many young, non-ethnic Chinese around the world learn Mandarin in order to compete in new opportunities in China.

Tamil is the fourth official language. It is also an official language of the Indian state of Tamil Nadu and Sri Lanka. There are over 77 million people in the world who speak Tamil.

As well as varied languages in Singapore, the country is multi-religious too. "However, the main religion is Buddhism, with 42.5 percent of the population declaring themselves Buddhists."5 Other religious groups are Christianity, Islam, Taoism, and Hinduism or no religion at all.

With so many races and so many religions within Singapore, the government has made religious tolerance and racial harmony a high priority. The "Singapore: International Religious Freedom Report 2006" makes note of the fact that "the constitution provides that every citizen or person in the country has a constitutional right to profess, practice, or propagate his or her religious belief so long as such activities do not breach any other laws relating to public order, public health, or morality."6

"Fiscal policy in Singapore is directed primarily at promoting long-term economic growth, rather than cyclical adjustment or distributing income."7 To meet its objective, the Singapore Government follows two basic principles. (1) The government's role is to provide private enterprise a stable environment in which to thrive. The main focus of the Singapore's government spending is on essential public goods and services to Singaporeans. Key areas of expenditures are on education, public housing, health care, and national security. (2) Tax and expenditure policies should focus on incentives for saving, investments, and enterprise. Singapore's main source of governmental savings comes from taxes which are then used to increase economic competitiveness and attract foreign investments. Singapore is ranked number one for economic freedom. This combination of fair tax policies and the careful expenditure program, along with high economic growth has allowed Singapore to gather consistent budget surpluses. Their fiscal policy has also contributed to Singapore's high savings rate and allows it to achieve one of the highest investment rates in the world. In addition, Singapore does not have any foreign debt. The government promotes high levels of savings and investment through a mandatory savings fund known as the Central Provident Fund. Large portions of its budget are spent on education and technology. "In 2005 Singapore spent 21 percent on education, compared to the United States where only four percent was spent on education." 8

Singapore officials have preached that globalization leads to income equality. The average household annual income in Singapore as of October, 2007 is $7560/USD. This has risen from $3343.02/USD in 2000. The economy of Singapore is a highly developed and successful free market economy in which the state plays a minimal role. Although government entities such as the sovereign wealth fund Temasek control corporations and are responsible for 60% of the gross domestic products (GDP). Singapore is almost corruption-free and has one of the highest per capita GDPs in the world. Exports, particularly in electronics, chemicals, and services provide the main source of revenue for the