2) Positives of the economy of Singapore: 1- Thriving service industry that cont

Question

2) Positives of the economy of Singapore:

1- Thriving service industry that contributes to 70% of the GDP of Singapore. It best utilizes the pro-business environmental policy of the government that encourages investment in different sectors with attractive incentives. Besides, Singapore is also a major tourism destination in South East Asia and it belongs to the service industry. That’s why, service industry gives approx. 80 % of the employment for people in Singapore and it is the reason for being one positive about Singapore economy.

2- Location advantage. Singapore boasts 190 KM long coastline with deep water ports that come along the major shipping routes in South East Asia. Thus, it simply makes Singapore a major avenue of trade and business. That’s why; it is another big positive for the Singapore economy.

3- Singapore is a developed and trade oriented economy.

4- The manufacturing sector of the country is highly developed.

5- The economy is very business friendly.

6- High investment in Research and Development.

………………………………………………………………………………………………………………….

3) Negatives of the economy of Singapore:

1- The over reliance on Export. The Singapore economy is export oriented, and it depends upon the global business environment. Any uncertainty in a global business environment negatively affects the economy and the economy makes contraction. It is already experienced in the year 2001 and 2008 when the recession took place. Thus, it makes it a negative point. Besides, competitions from emerging economies are also challenging the economy of Singapore.

2- The limitation of arable land area as well as lack of natural resources. Thus, the economy is dependent upon imports whose prices are highly volatile. It causes thinning of profit margin at times. Lack of agricultural land also does not support to meet the domestic demand. Thus, further imports take place. Thus, it acts as a negative point.

3- The openess of the economy becomes a burden in times of financial crisis.

4- The inflation rate is very high.

  Q) Restructure analysis: Using the positive and negative information in questions 2 and 3, give suggestions to help the country restructure its economy or improve it economic growth. Give reasons why these suggestions will improve the economy

Explanation / Answer

Economy of Singapore is growing, but it has an inherent volatility due over reliance on export as well as lack of arable land area as mentioned in point number 3. Thus, the economy needs stability so that eternal shock could be prevented well in time. Regarding this, there are following suggestions with proper rationale.
1.   Arable land cannot be increased. It is a true but harsh fact. But, agriculture produce can be maximized on the basis of the quality of soil and more than one crop should be produced in one season. It will help the country to maximize the advantage. Use of better quality seeds and farm mechanization will also help in the cause. Further, additional produce should be traded with another country for different products of need.
2.   Natural resources cannot be increased, but Singapore can adapt the policy of importing raw and crude natural resource, process them into finished product and export it to other countries. It will help the industry move ahead in the value chain. Companies in Singapore can enter into a long term contract with the nations who are rich in natural resources.
3.   The manufacturing industry is also growing. But, it should contribute more in GDP. The government of Singapore should frame suitable policies to encourage industrial product. It will also help in meeting the demand side of the economy and inflation will be in control.
4.   Development of domestic market for products will help in prevention of shock due to recession in overseas market. Besides, diversification in export will also reduce over reliance upon US and European markets.
5.   Consolidation on the positives of the economy and offering value added services that will help getting superior returns from the trade activities.

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