Remaking Singapore Case Study

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Case Study:

Remaking SingaporeCase Study:

Remaking Singapore Syndicate 5Muhammad Ridwan – 29112555

Machadi Dhana – 29112303

Mahammad Khadafi – 29112324

Pedro Putu Wirya – 29112565

Seto Kusparyanti – 29112306

Yuliani Dewi Risanti – 29112321

Rahdianto Maulana – 29112554

Singapore At GlanceSingapore At Glance

• Previously, part of Sriwijaya Kingdom

• Found by Raffles: 1819• Sovereignity: 1958• Area: 710 km2• Currency: SGD• Legislature: parliement

Early Modern SingaporeEarly Modern Singapore

• Britain made Singapore as an important trading center and port with policy of duty free trade which proved beneficial.

• Singapore developed a classic entrepot economy, which funneled exports and imports to surronding region, mostly tin and rubber from Malaya.

• During World War II, Singapore was tranformed into Britain’s principal naval and air base in Asia, got captured by Japan in 1941, and backed to Britain in 1945 with devastation condition.

• Singapore reconstruction took 4 years, in 1949 Singapore condition returned to pre-war levels.

The Period of 1958 - 1964The Period of 1958 - 1964

• In 1946 Singapore became a separate Crown Colony; and first election was held in 1948 for 6 of 25 Council Seats.

• Due to communist threats, British imposed the 1948 Internal Security Act (ISA), a detention without trial for persons suspected of being ‘threats to security’

• Full sovereignity was granted in 1958, with constitution of unicameral parliamentary democracy.

• In 1963, Singapore and Malaya formed Federation of Malaysia• Singapore GDP declined by 4% in 1964 after the Indonesia agent

bombed a Singaporean hotel and seized fishing boats as a part of its “konfrontasi” with malaysia.

• In 1965, Malaysia ejected Singapore


• In 1965, Lee Kuan Yew became Singapore’s first Prime Minister and his People’s Action Party (PAP) winning all seats in parliament.

• New Policy to create a Singaporean identity that would unite the country’s diverse ethnic groups (62% Chinese, 16% Indians, 14% Malays, 8% Others):– Four official languages (English, Malay, Mandarin Chinese, Tamil) was taught in

school.– Compulsory service in the Singapore Armed Force (SAF) to create a shared

experience across society.

• Policy of Internal Security Act was still retained.


• Orderliness and cleanliness were hallmark of the new Singaporean society, and strictly enforced by the goverment.– High taxes of cars to avert traffic jam and pollution– Alarm for taxi, if it overspeeding– Fines for littering, smoking, and failing to flush public toilet– Long hair men prohibited in government– Mass media was driven to favor government

• To create jobs and provide housing, government create two boards.1. Housing Development Board (HDB) in 1960, to build 10,000 low and middle

income housing units per year.

2. Economic Development Board (EDB) in 1961, to support job creation by attracting investment, like Jurong Industrial Estate


• Other entities:– Public Utility Board in 1963, to oversee the supply of water, electricity, and gas– Port of Singapore in 1964

• Central Provident Fund (CPF), a social security plan introduced in 1955, was relaxed in 1968 to allow low income citizens to buy low cost HDB.

• Government-Linked Companies (GLCs) were formed– Keppel, Sembawang, Jurong Shipyard for ship building and repairing industry– Neptune Oriental Lines (NOL) for shipping line– Singapore Refining Company, an oil joint venture company togehter with Caltex

and BP

• GLCs were forced to compete on same terms with foreign rivals because government provided initial capital but no special support or protection.


• Government policy, on contrary with others recommendation:– Export-led economic growth; differ with UN study of import substition strategy– Welcomed foreign direct investment, when many nations in Southeast Asia

viewed western firms as vestige of colonialism – Exchange rate was close to market rates, free convert fee for Singapore Dollar,

and low duties of exports and imports.

• EDB open foreign offices in another countries, pursuing multinational companies that sold to worldwide markets.– By late 1969, 7 major firms, including National Semiconductor and Texas

Instruments, had plants in Singapore

• Economy problems:– Unemployment rate remained over 10% in 1967– British pull out its army in 1970, which contributed at the loss of 18% GDP based

on military expenditure and 20% of employment

Becoming an Asian TigerBecoming an Asian Tiger

• 1960 – 1965: GDP Growth 5.8%• 1966 – 1973: GDP Growth 12.9%, the highest rate in the world due to

foreign investment inflow, export-oriented manufacturing and external trade all grew rapidly.

• Monetary policy:– Maintenance of very low inflation– Keeping its foreign exchange rate a level below IMF standard preparation for the global

shocks; in 1991, Singapore’s reserves of foreign currency reached S$59 billion

• Port of Singapore, as world’s fourth busiest, became the most important income for government first priority– Built the region’s first container freight terminal in 1972– Introduced 24-hour berthing service– British naval dockyards were converted into ship repair center

• British navy refueling facilites were transformed into the largest petroleum refining center in Asia.

Becoming an Asian TigerBecoming an Asian Tiger

• In 1973, peak of an economic boom, guest unskilled workers appeared.

• Shortly after, first international oil shock was happened.– Two digit growth of GDP ended– Real GDP growth fell from 11.2% to 6.1%– Compounded annually from 1973-1979, economy grew at 7.1%, far exceeding world

average

• Second international shock was happened.– Recession in many countries in 1979 - 1980– Singapore’s real GDP grew by more than 9%– Lee government initiated large wage increase, between 14% - 20% policy to encourage

factories to use higher technology and not relocate to other countries

• The large wage increase impacted on the real GDP of Singapore grew 8,4% from 1980 – 1984.

Recession and ReformRecession and Reform

• In 1985 a deep recesion with declining 1,4% real GDP was accompanied by a sharp rise in unemployment, weak external demand, low profit and much-reduced investment in manufacturing.

• The 1979 overambitious wage policy impact the structural deficiencies in the economy, growth of labour productivity hadn’t keep pace with the rising wages, which had seriously eroded the nation’s cost position in Asian economies.

• The Economic Committe recommended – The government lessen its extensive managerial and development role to allow

the private sector more freedom– Flexibility in wage-setting and reduction of the high mandatory CPF contribution

in order to stimulate domestic demand– Scaling back the mandatory contribution to the social security fund to 35% from

its peak at 50% in 1984-1985


• The economic recovery had been begun by the end of 1986, which was sustained in 1987, when the real GDP growth rate of 9,8% and in 1988 high export growth and domestic demand led to 11,5% real growth.

• Fast growth in 1989 and 1990– Manufacturing sector (led by electronics components) grew by 9%– Financial services grew by 15%, accounted for 28% of GDP and employed 11%

of labor force.


• The strong world trade growth assisted the impresive performance of Singapore such as:a) The manufacturing sector led by electronic component grew by 9,5% in

1990

b) Singapore had become Asia’s third most important financial center.

c) Singapore also was the world’s third largest oil-trading center.

d) Chiangi airport was voted the world best airport for the third straight year.

e) Singapore airlines named the best airline in the world and profitable.

• Singapore tension with Indonesia and Malaysia had recede enough by the late 1980s for three countries to announce establishment of a “growth triangle” (Singapore, Malaysia state of Johor and Riau islands of Indonesia).

Singapore Maturing : 1991 to 2008Singapore Maturing : 1991 to 2008

• In the early 1991 Goh’s new goverment issued a long range plan called The Next Lap which the plan plotted long run social and economic goals.

• During the 1990s, the Singaporean goverment implemented a number of policy initiatives motivated by the experiences of recession in 1985 and following up on the vision set out by “Next Lap”

1) EDB set the goal of attracting 500 world class companies to carry out HQ activities by 2010.

2) PSB was formed to identify and nurture promising SMEs to become Asian MNCs.

3) The “Thinking school, Learning Nation” program was launched to transform education system.

4) Research centers and advanced training programs were launced in a number of areas (development of “IT2000”)


• Asian financial crisis in 1997-1998– Exchange rate fell by 16% against US dollar, but appreciated against currencies

of Singapore’s neighbours, increasing its relative cost position in the region– Stock market fell by 54%

• Committee on Singapore’s Competitiveness was created in 1997– Recommend that Singapore reduced its business cost, maintain investor

confidence, and continue to build up the people’s capabilites to ride out the economic storm.

– Solidify financial system, diversify the economy by developing new markets for exports and form strategic alliances with regional economies.

– Privatization of the National Computer Board and the opening of government IT to private sector services


• 9/11, terrorist attack in New York in 2001– Internal Security Act was used to arrest several dozen members of radical Islam

group, which heightened the insecurity of Singaporeans, as well as strained the social cohesion between moslem and others.

– The IT and telecommunications industries crashed– GDP growth worsened from 8.3% in 1997 to – 2.4% in 2001, the worst GDP

decline ever recorded

• In March 2003, the spread of SARS virus worlwide– Took a heavy toll of business tourism, which accounted about 5% of GDP– Transport related business also dropped 70% for inbound, 80% for outbound– Singapore Airlines suffered its first loss, impacted on having to lay off 414

employees– HDB shed 3,000 of its 8,000 staff for restructuring exercise


• Economic Review Committee (ERC) was created

• Short term adjustments to improve the relative cost position of companies– CPF was cut to 13%, and even 9% for older worker– Monthly salary cap for computing reduced from S$6,000 to S$4,500– Rental rates for government owned industrial space were lowered– Government related fees were frozen and fee increases deffered– Taxes were shifted to goods and services tax, similar to VAT– In 2004, foreign sourced income and domestic investment income from financial

instruments were exempted from tax– In 2005, the corporate tax rate was reduced to 20%


• Long term adjustments – Expanding economic ties with countries in the wider region (spanning India,

China, Japan, and Australia) to enhance Singapore’s regional hub status– Promoting new export industries in education, healthcare and professional

services– Building stronger private companies through promoting entrepreneurship– Attracting global talent– Facilitating economic restructuring through worker education and skills retraining


• Policy, based on ERC reports– FTA with US in 2003– GLCs, including Temasek Holding, became more active investor abroad– Workforce Development Agency was created in 2003 to lead efforts on upgrading

worker’s skill– In science policy, National Research Foundation was created in 2006, with

iN2015 and i-Gov2010 program, to develop the IT infrastructure and the use of e-service by government

– Ministry of Information, Communications, and the Arts (MICA) planned to transform Singapore into ‘vibrant global city for information and the arts’

• International film makers in Singapore• Singapore Media Academy was set up • International media organizations, like CNBC and MTV• Museums

– Marina Bay area was turned into exicitin environment of business, tourists, and residents


Temasek Holding Geographic Portfolio


Temasek Holding Sectors


Prosperity Growth

Singapore in 2008Singapore in 2008

• By 2008, Economics of Singapore grew. This can be seen in the achievement that had been reached : Singapore ranked 4th in the prosperity league of countries (behind

Norway, but ahead U.S. and Hongkong). The ratio of working age people to pensioners had dropped Labour productivity stood at 96% of the OECD average Singapore trade was well over 400% of GDP Foreign investment had reached historic highs The world’s best environment in term of rules and regulation for

conducting business, non existent corruption National University of Singapore (NUS) was ranked 30th globally Ranked 9th in spending on R&D and 13th on the number of researchers

in the workforce Ranked 16th on the intensity of local competitiveness Become home for a large number of Asian regional HQ for multinational

companies


Singaporean FDI


Singapore Patents

Singaporean ClustersSingaporean Clusters

The Singaporean economy consisted of a portofolio of clusters, which shall be developed further by government policy.

Petrochemical

Accounted for 10,3% of Singaporean industrial output the 3rd largest manufacturing sector. Finance

This industry contributed 13% to Singapore GDP in 2008 (growth rate 7,3%). Logistics

The largest container port in the world (owned by Temasek Holding; 3,6% of market share).

Information technology

IT services and electronics manufacturing accounted for 8,9% of GDP and employed more than 90.000 workers.

Singaporean ClustersSingaporean Clusters

Biopharmaceuticals

The domination of production with the highest value added of all Singaporean non – oil export. Tourism

The “Uniquely Singapore” campaign and also tourism board invested about $90 millions to entice visitors from target

market. Education

Singapore was hoping to become a global education hub by setting up the Singapore Education Services Center for foreign students in Singapore.

What’s NextWhat’s Next

In 2008, Singapore entered recession as the result of the global financial crisis.

Financial services and logistics clusters became the first to be shaken.

New policy by Prime Minister, formed an Economic Strategies Committe (ESC) to provide recommendation to reach sustainable future growth.

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Remaking Singapore Case Study

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Transcript of Remaking Singapore Case Study