Around 15 million tourists make a stop in Singapore each year
International trade has played a major role in making Singapore prosperous and remains vital to its future. Singapore is marking the 50th anniversary of its independence this year. Visitors who join the celebrations will find a country with modern transport, reliable energy supplies and a gross domestic product per capita higher than in the US. Significant progress has been made since 1965, when unemployment was high, social tensions were widespread and power cuts were frequent.
Long-term economic planning has helped Singapore overcome these challenges. The Economic Development Board (EDB) was set up shortly before independence to boost the national economy. It made attracting foreign investment a priority, called for major investment in education and skills, and – crucially – recognised the potential of international trade to support the country’s development.
Despite a population of just 5.5 million, Singapore is among the world’s top 20 exporters
Despite a population of just 5.5 million, Singapore is among the world’s top 20 exporters today, according to the World Trade Organization. A hub for major Asian shipping lines, it is involved in commodities trade, in particular importing crude oil and exporting petrol. Manufacturing has advanced from labour-intensive industries such as textiles to high-value goods including chemicals, biotechnology and high-end electronics. Many local businesses supply parts for firms in the US and Europe.
A strong services sector has also developed. Many firms operating across the Association of Southeast Asian Nations (ASEAN) choose to base their financial teams, such as treasury and procurement teams, in Singapore. Around 15 million tourists make a stop in Singapore each year. The city has built integrated resorts incorporating attractions such as aquariums and theme parks to encourage visitors who break their journey between the US and Asia, or Europe and Australia, to stay for more than a few days.
Today, after 50 years of transformation, Singapore faces new challenges. The birth rate is relatively low and the number of retired people is likely to increase while the working population shrinks. Wages have also risen, making it important to raise productivity. Neighbours such as Malaysia and Indonesia have learnt from Singapore’s example, investing heavily in education and attracting inward investment.
Changes in world trade patterns may bring new opportunities, however. Growth in the emerging markets is expected to continue to outstrip developed markets and Singapore has close ties to some of the most dynamic economies in the world. The ASEAN nations are already important trading partners. As countries such as Vietnam and the Philippines grow, they are likely to become more important as export markets.
China’s economy also continues to expand, with HSBC Global Research expecting growth of 7.3 per cent in 2015. More than three quarters of Singaporeans are ethnically Chinese. Mandarin is one of four official languages, alongside English, Malay and Tamil. Singapore and China have collaborated on initiatives such as an “eco-city” in the port of Tianjin, China, designed to showcase sustainable urban development.
Given these ties, Singapore is well-placed to attract Chinese inward investment, sell to increasingly wealthy Chinese consumers, and appeal to increasingly adventurous Chinese tourists. China is likely to become Singapore’s most important trading partner by 2030, accounting for 17 per cent of its international trade, according to analysis by Oxford Economics for HSBC.*
In this anniversary year, Singapore’s economy is expected to grow by about 2.6 per cent. Growth over the longer term will depend, in part, on how successfully the country can capitalise on today’s new trading opportunities.
*HSBC Global Connections Trade Forecast for Singapore, September 2014 https://globalconnections.hsbc.com/global/en/tools-data/trade-forecasts/sg