Global Economic Environment

Singapore should focus industrial policy on biomedical sector

Summary: Singapore has managed to achieve remarkable economical growth during 1970s to 2000s. The per capita GDP increased from US$914 in 1970 to US$20,748 in 2002. However, new concerns required Singapore adjust its old policies in early 2000s to be more competitive in the global trade while helping its people to be better-off.
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Singapore was successful in building comparative advantages in the past three decades.
The rapid economic growth of Singapore was achieved through tight government control on attracting foreign direct investment. FDI has been the principal source of external capital for growth in Singapore. * Singapore invested tremendous amount of time and money in building infrastructure and improving efficiency, provided tax incentives and educated labors. By 2000, cumulative FDI stood at US$114 billion. * Total trade making up 277% of GDP in 2001 because of “Free Trade” policy. * The Monetary Authority of Singapore (MAS) maintained a low inflation rate through an exchange rate-centered policy.

New challenges behind the numbers
Although the GDP looks good on the paper, the benefits of the country were not shared with the individuals. * External influence such as high FDI that China achieved due to its comparative advantage, disputes with other countries and Security issues from outsiders. * The share of GDP implied that Singapore relied heavily on exports and FDI. C + I + G + (X-M) = Y * Trade balance grew 29%, with number from US$-855 million to US$12,872 million. (Exhibit 1), while the consumption share of GDP decreased from 67.5% to 42.2%. (Exhibit 2) * 17% of US$69 billion invested to China. But the rate of return is low.