Economic Policies of Singapore: Government’s Playbook
The pragmatic and unconventional approach to economic policy by the Government of Singapore. This is not always has been in accordance with standard advice of academics and international organisations. Adds another dimension to the importance of the lessons to be learn from Singapore. So does the fact that Singapore has developed seemingly without suffering from many common drawbacks of industrialisation. High inflation and other symptoms of macroeconomic imbalances, a deteriorating income distribution, environmental degradation etc. Similarly, the rapid growth did not lead to serious social problems, common in many other developing countries. This was because social policies helped spread the increasing welfare to broad groups of the population. Because the “meritocracy” pursued by the Government promoted upward social mobility.
Singapore economy like business enterprise
The economic policy of Singapore has been very proactive. Not only reacting to problems when they turn up but designed with clear strategic targets. In fact, the Singapore economy is run very much like a business enterprise. Even the pay of civil servants is partly tied to the performance of the national economy. The scope of this paper is wide and provides a general overview of relevant economic policies pursue after independence from a development point of view. A certain emphasis is put on Singapore’s integration policies with the global and regional economies as this is a cornerstone of the development philosophy of the country.
Although conceive as a regional trading centre and military base the country opted for playing down the regional dimension after independence and chose to plug into the global economy instead. The regional economy returned to the agenda later on. However, but has never replaced the country’s strong international orientation. When discussion development policies of Singapore social policy, education etc. It must be include to some extent in addition to purely economic issues since they have been an integral part of the promotion of development. The significance of well-functioning social institutions, most of them provided by the state, for economic development has been emphasised already.
Economic development of Singapore
Moreover, a full comprehension of the economic development of Singapore cannot be reach without understanding the “endogenous” role of the state. Since one needs to know not only what has been done but also why it has been done. To do this, understanding the interplay between the state and the rest of the economy is essential. In exploring that relation one has to go far beyond a simple “targets and means” approach. Even a superficial glance at the generally available material — which is actually really extensive — shows that Singapore is a very government-driven economy.
A crucial fact that needs to be mention in this context is that the same political party. The People’s Action Party (PAP) has been in power since 1959 which has resulted in a unique consistency of economic policy over time. This reflects an understanding that long-run predictability and credibility are crucial for attracting foreign investors. The consistency can also partly be understand as a result of the fact that one single person, Goh KengSwee, wield a decisive influence on the economic policies, especially during the early years of independence. Furthermore, the same Prime Minister, Lee Kuan Yew, was in charge between 1965 and 1990. Despite the leading role of the Government, the interventions undertake were, by and large, not distortive but aiming at correcting market failures.
Evaluating the development
When evaluating the development policies of Singapore one has to remember that part of the obvious success probably can be explain by other circumstances than policy. History and accident obviously play a major role as well. The country’s strategic location, a relatively good infrastructure and an industrious. Mostly immigrant population, are certainly important and so are the external economic conditions in the 1960s. Among those, the boom in world trade, and the intensified regional oil explorations well as the emergence of multinational companies eager to take advantage of comparative advantages of different locations are especially important. Despite the fact that Singapore is a market-driven open economy. It is impossible to deny the important positive role of the Government, however.
Stable and predictable economic environment
Although the state was very active it was not intrusive as far as regulation of business activities was concerned. Its role was at a more general level. One aspect of this is institution building, including an efficient and reliable bureaucracy which has resulted in a stable and predictable economic environment for investors, foreign and domestic alike. Another one is specific incentives. These may not have been crucial in them for bringing in FDI but have no doubt been important for determining what kind of investment has dominated and for the structural change of those investments over the years.
Thirdly, providing public goods in the form of physical and social infrastructure and contributing to education and upgrading of the labour force as well as to immaterial investment in R&D, all with a clear element of public goods, is likely to have contributed greatly. The internationalisation strategy of Singapore has alternated between a global and a regional approach. Although these approaches large seem to have been parallel the emphasis has usually been heavier on one at a time. Political and security concerns have clearly been a factor behind the process.
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