Salient. Victoria University Students Newspaper. Volume 38 Number 8. 1975
The Essence of Singapore's Economy
The Essence of Singapore's Economy
The most significant feature of Singapore's economy is its disproportionately large tertiary sector. Tertiary activities (excluding those in public utilities) occupy about 70% of the active labour force and, as Table 2 shows, this proportion had changed little since 1947. Moreover, despite considerable emphasis on manufacturing development during the 1960's, there was only a slight recorded increase in the proportion of the labour employed in this sector (e.g. 19.2% in 1966).
Some 60% of Singapore's population live on per capita incomes of less than $600 per annum, or less than one-third the national average, and between 20% and 25% of the population are ('in poverty' — meaning they cannot meet the minimum material and physiological needs of daily life. Significantly, the proportion of Singapore's population living in poverty has changed little since 1953, when it was officially estimated that one-quarter of the population were poverty-stricken.
Given the prevalence of poverty, an and a serious problem of unemployment, (and under-employment) the need for sustained economic development is imperative. Insofar as the tertiary basis of the economy is a major impediment to the productive mobilization resources, economic development must necessarily imply diversification.
For Singapore, diversification within the tertiary sector, as is presently occurring through an extravagant expenditure on tourism, cannot guarantee greater economic security, and there is only limited scope for expansion in the primary sector. Diversification means industrialisation, and it was recognised in the state's first Development Plan for 1961-1964, that capital acquired through commercial activities was structurally immobile in relation to the needs of industrialisation, but that there was at the same time a 'considerable amount of local capital that can be invested in industrial enterprises if serious structural immobilities are removed.' The Government, however, could not use 'draconic measures ... to give mobility to capital' for fear of upsetting the confidence of the business community, and discouraging foreign investment. Its activities were therefore concentrated in three principle fields: the creation of an attractive financial climate for industrial investment, including a wide range of tax concessions, free profit repatriation for foreign investors, and state lending institutions; the creation of a sound infrastructure of expanded port facilities, better communications and power supply, and well-developed industrial estates; and the guaranteeing of domestic, social and political stability, and an amenable and cheap labour force.
During the 1960's the Government effectively fulfilled all three roles. Investment in manufacturing increased significantly both from foreign and local sources, but especially from the former. However, substantially increased investment did not imply the creation of a stable industrial base as we had mentioned earlier.
In the short-term, Singapore's dependence will not fundamentally damage its prosperity; in the medium-term (say five to ten years), a strategic Western withdrawal south from Indochina into the Malay world will guarantee Singapore's existence as what one senior American military man has described as 'an excellent back-up facility' for the U.S. military presence in Asia, with continuing sustenance from the scramble for the region's mineral recources; in the long-term (ten to twenty years) anything could happen — at the most most serious, Singapore's precarious dependence, and with it the present politico-economic structure, would collapse in the midst of Malay revolution.