NATIONAL INTELLIGENCE SURVEY 44C; SINGAPORE; THE ECONOMY

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• Document Number (FOIA) /ESDN (CREST): CIA-RDP01-00707R000200090009-7
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'4 9
CONFIDENTIAL
44CIGSIE
ina
y 1973
TIONAL
ENTIAL
-V miW
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0
CONTENTS
This General Surrey supersedes the one dated
July 1568, copies of which should be destroyed
A. Economic appraisal I
Rapid growth and high per capita income; eco-
nomic difficulties of the 1P60's; development of
individual sectors; prospects.
B. Structure of the economy
I. Agriculture, fisheries, and forestry 3
Land use; insignificant contribution to the
economy; most food imported, but self -suf-
ficient in pork, poultry, and egg products;
declining fisheries industry; no forestry pro-
duction.
2. Fuels and power 4
No indigenous fuels; heavily dependent on
petroleum imports; expanding refinery ca-
pacity; well developed electric power in-
dustry.
3. Me:Als and minerals
Virtually no mineral resources and limited 8
mining activity; small steel indusryy.
CONFIDENTIAL
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Page
4. Manufacturing and construction
6
Most dynamic sector of the economy; in-
11
centives for industrial development; relative
3
decline of the rubber and food processing in-
Land use chart)
dustries; expanding refining, textile, and wood
12
products industries; largest ship repair center
4
in Southeast Asia; rapid c-)nstruction of public
Royal Dutch Shell's petroleum re-
housing.
13
5. Domestic tiade
10
All domestic trade handled by pzlvate enter-
Mobil petroleum refinery photo)
prise.
14
C. Economic policy and development
10
I. Policy I
10
Essentially a free enterrrise economy, with
Fig. 8
direct government participation limited to
9
developing the infrastructure.
Warehouse facilities photo)
a. Current account expenditures
10
Surpluses partially financa the develop-
16
ment budget; rise in defense expenditures-,
income tax largest source of revenue.
FIGURES
Page
Fig. 1
Page
b. Development policy and budget
11
Economic planning and development ex-
3
penditures.
Land use chart)
2. Money and banking
12
Well- developed financial structure and stable
4
monetary conditions.
Royal Dutch Shell's petroleum re-
3. Manpower
13
Shortage of skilled labor; distribution of the
5
employed labor force; use of foreign labor.
Mobil petroleum refinery photo)
D. International economic relations
14
Foreign trade of vital importance to the economy;
14
free port with few tariffs; rapid growth of do-
industry groups table)
mestic exports and of retained imports; Malaysia
Fig. 8
the most Important trading partner; unrecorded
9
trade with Indonesia expanding; large merchan-
Warehouse facilities photo)
dise trade deficit on balance of payments covered
Fig. 17
by service account surplus and inflow of foreign
16
private capital; overall balance of payments sur-
plus; limited external economic assistance.
Glossary
17
FIGURES
Page
Fig. 1
Economic indicators chart)
1
Fig. 2
GDP, by sector of origin chart)
3
Fig. 3
Land use chart)
3
Fig. 4
'Agricultural production table)
4
Fig. 5
Royal Dutch Shell's petroleum re-
12
Fig. 13
finery photo)
5
Fig. R
Mobil petroleum refinery photo)
5
Fig. 'i
Output and employment, by major
14
Fig. 15
industry groups table)
7
Fig. 8
Public housing project photo)
9
Fig. 9
Warehouse facilities photo)
9
ii
1
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Fig. 10
Current account expenditures table)
11
Fig. 11
Government revenues table)
11
Fig. 12
Distribution of development ex-
penditures (table)
12
Fig. 13
Composition of the employed labor
force by economic sector (table)
13
Fig. 14
Summary of foreign trade table)
14
Fig. 15
Commodity composition of foreign
trade (clout)
15
Fig. 16
Direction of foreign trade chart)
15
Fig. 17
Balance of payments table)
16
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The Economy
A. Economic appraisal (U /OU)
Singapore's economy is among the most dynamic in
the world. Its high (9 annual real economic growth
rate during 1961 -E7 accelerated to 14% during 1968-
71 (Figure 1). In 1971, gross domestic product (GDP)
reached $2.3 billion, I providing a per capita GDP of
almost $1,100, one of the highest in Asia. The
extraordinary economic growth since the late 1960's is
largely due to a boom;ng manufacturing sector.
'All dollar values in this chapter are. in terms of U.S. dollars. In
converting Singapore doll.krs to U.S, values, yearend rates have been
used.
Index 1960 100
1.00
90
as
70C
60f
5W
400
300
200
100
0
14or 62 63 64
'Excluding rubber processing.
"Conscmer price index.
Fi GURE 1. Index of economic indicators (U /OU)
z
i
t
Benefiting from a hard- working labor force, a well
developed infrastructure, and a stable government
which has provided a variety of incentives to investors,
manufacturing output has expanded rapidly. Most of
the new industries have bezn export oriented and their
foreign sales increased about 24% annually during
1964 -70. At the same time, Singapore has impioved its
position as the major commercial center for Sautheast
Asia and as the most important port on the sealaries
between the Far East and Europe. All of these
achievements have come about with little domestic
inflation and without the benefit of any significant
foreign economic aid.
The island republic ,as fared with a number of
serious economic pcahlears in the raid- and late 1960'x.
The annual population grrwth w ;e. 2.5'. air(.] the rate
of unemployment was officiali, estimated at over 94.
About one -third of the population lived in urban
slums or squatter villages in the citv's suburbs.
Moreover, when the British ann(wnced in 1968 their
intention to withdraw their relatively large military
contingent by 1971. Singapore feared even greater
unemployment and the lass of substantial revenue
from British military expenditures. In at; effort to
mitigate the effect of British withdrawal and provide
jobs for the unemployed, the government encouraged
the growth of manufacturing. This program has been
remarkably successful, and life for the country's 2
million inhabitants has been substantially impr!)ved.
Per capita GDP has increased by two- thirds since
1965, while unemployment has fallen lramatically. In
fact, Singapore now must import foreign labor to fill
skilled jobs. Total population growth was reduced to
only 1.7% by 1971, and r.iore than one -third of the
population now live in modern public housing
projects.
Singapore's economic progress has depended
basically on its human skills and its strategically
located, excellent harbor. The small island has few
other material resources and therefore must import
most of its foodstuffs, raw materials, fuels and even
water. Singapore has long been a leading entrepot
center, processing rubber, petroleurn, timber, coffee.,
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65 66 67 68 69 70

spices, copra, and other primary products of Southeast
Asian countries for reexport and serving as a
distribution center for manufactured goods, food-
stuffs, machinery, ;aid textiles produced in industrial
countries.
Singapore is one of the busiest ports in the world,
vying with New York for third Alice in terms of gross
tonnage handled. Cargo- hartd!ing facilities h
improved considerably; the volume of tonnage
handled rose 125% between 1966 and 1971, when it
reached 48 million freight tuns. The country profits
from having the only harbor between the Middle i ?ast
and Japan with drydocks capable of ha idling large
ships. In mid -1972 Singapore completed a major
container terminal, the only one in Southeast Asia,
and a second terminal is already under construction.
To facilitate its commerce, arivillary facilities such as
banking, insurance, storage, transportation, and
communications have been highly developed.
The service -based economy also has benefited from
expanding tourism and nearby oil exploration. Tourist
spending quadrupled between 1965 and 1971, when it
reached $1"5 million. These gains alone have so far
more than offset the lt,,s of revenue caused by the.
British withdrawal of forces. The island's well
developed economic infrastructure: readily meets the
needs of petroleum companies, which have been
rapidly expanding their prospecting operations in
Malaysia and Indonesia. Supply bases are being
established and ship repair and construction are being
expanded. Many foreign oil workers and their families
have settled in Singapore, bringing with them
considerable spending power.
Singapore's highly sophisticated financial sector has
been a major contributor to overall economic
expansion. Although still far behind, it has been
gaining on Hong Kong as the Asian financial center.
Since 1968 the government has allowed some banks to
hold tax -free deposits (Hong Kong does not), enabling
Singapore to establish an Asian dollar market.
Deposits have grown spectacularly �from $30
million at the end of 1968 to about $2.1 billion in
1972. to addition, Singapore's free gold market prices
are lower than those in Hong Kong. The country's
well- organized and highly liquid financial institutions
can easily accommodate both public and private
needs for development spending.
Although trade and services have been the
traditional pillars of the economy, the most dynamic
sector is industry. The value of manufacturing output
has increased about five times since 1960. Since the
local market is small, most new plants are export
Wiented. Despite the fact that there is no domestic
RA
crude oil production, Singapore has becorne the
regional refining center because of its hiving well
established trading and service facilities arts; a well
trained labor force. The petroleum industry now
accounts for the largest share of industrial investment
in Singapore, and in terms of value added, it surpasses
all other industries.
Foreign investment in more labor intensive
industries i. becoming it reasingly important. In
1970, fines such as Phillipy of Holland, Plessey of the
lJuited Kingdom, and General Electric of the United
States decided to set up new factories in Singapore to
produce various electronic components. hollei Werke
of West Germany is transferring its entire production
of 35 -mm cameras to Singapore to better compete-
with Japan. In addition, the output of textiles,
pharmaceuticals, and engineering goods is growing
rapidly.
As a restilt of the growth and structural changes that
took place in the vonvmy during the 1960's, the
composition of foreign trade has changed consider-
ably. Petroleum is now the most important single trade
item, accounting for dearly h0% of domestic exports
and 17% of retained imports in 1970, while imports of
machinery and equipment required by the expanding
manufacturing sector rose from less than 10% of
retained imports in 1960 to 26% in 1970. Entropot
trade, although increasing it volume, de
somewhat in importance, falling from about 60% of
total recorded trade in 1965 to 40% in 1970, when it
contributed some 1 l of Singapore's GDP. Exports of
domestic origin doubled during 1966 -70; they
accounted for 381 of total cxr arts in 1970, compared
with 25% in 1965.
In 1970, Singapore had a trade deficit of $414
million, which was more than double. the 1966 deficit.
This was offset in part by it surplus on the services
account, which reduced the deficit on the current
account to $136 million. The current account deficit,
however, was more than offset by 'Jong term private
capital inflows, which increased from only $18 million
in 1966 to $206 million in 1970. The overall balance of
payments surplus reached $151 million in 1970, about
the same as in 1969. Foreign exchange reserves
amounted to $1.36 billion at the end of 1970.
Singapore's economy is likely to remain one of the
most prosperous in Asia. It has a stable government, a
resourceful business community, and a well
disc;*plined labor force which is adaptable to new
methods of production. Official policies have
promoted investment by providing fiscal incentives,
imposing indirect wage controls, and establishing self
contained industrial estates. Extensive programs to
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e
3
f
i
train workers in sophisticated technical skills are being
Implemented and will eventually relieve the shortage
of skilled labor, Continuing industrial development,
the large inflow of foreign private vap ital, and
increasing e arnings front tourism should maintain the
!1Igh economic growth rate.
B. Structure of the economy
The structure of the
Singapore econom has been
changing significantly during the past decade. The
most dramatic change has been the growth of the
manufacturing sector from 13.6 "0 of GDP in 1965 to
nearly 21 o in 1970 (Figure 2), This coincides with a
decline in the services sector, reflecting in part the
withdrawal of British forces. The change also reflects
i -1 part a structural change in national accounting
under which shipbuilding and ship repair were
transferred from the services sector to the manufactur-
ing sector in the late 1.960'x. I'll( agricultural sector,
always relatively unimportant in Singapore, continued
its decline from 4.6 of GDP in 1965 to less than 3%
in 1970. Construction increased from 4.6% to more
than 5 Of GDP during the same period, largely
b ecause of the extensive building of public housing.
Entrepot trade, traditionally the lifeblood of the
economy has not expanded as rapidly as others( ,ors,
Millions or U.S. Dollars
$9�_,
$1,8111
100" /u 1000%
Other services
t
7.1%
7.0% Government services
Ownership of dwellings
TRADE 19.1
30.5%
15.37. Domestic trade
2547. Enterpot trade 11.4%
10.1% 2.47.
4.3 Electricity gas and wate 5'2�!0
Construction
Manufacturing ana quarrying
t
t 4.6% Agriculture and fishing
1965
I' 1970
FIGURE 2. GDP, by sector of origin (U /OU)
and its share Of GDP rose only from about 10% in 1965
to about 11.4% in 1970. Domestic trade increased in
importance as its share of GDP rose from 15% to 19%
during the sane period. (U /()11)
1. Agriculture, fisheries, and forestry (U /OU)
a. Agriculture
Agriculture makes it relatively insignificant
contribution to the Singapore economy, largely
because the amount of land available for cultivation is
so limited. Agriculture and fishing account for less
than 3% of GDP, and for Only 4% of Singapore's
domestic (..xports. Less than 10:0 of the population,
one of the lowest shares in Asia, is dep on
agriculture Or fishing for a livelihood.
About One -fifth (less than 30,000 acres) of
Singapore's total land area is devoted to agriculture
(Figure 3). About one -third Of the cultivated acreage is
planted to rubber. while coconuts, fruits, and
vegetables each account for about One fifth. Tobacco.
fodde grass, and flowers Oecupv the remaining
cultivated acreage. Although rice is the principal food
consumed, none is grown domestically, and all the
island's requirements must be satisfied through
imports. fn 1971, rice imports were 272,600 metric
tons, Of which 45,900 tons were destined for reexport.
3
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FIGURE 3. Land use, 1972 (U /OU)

Most Singapore farm: ,-rs are engaged in the
intensive, small-scale cultivation of vegetables and
other food crops, while it small number of estates
produce rubber and coconuts, Tobacco is rotated with
vegetables as a cash crop. Tropical fruits such as
pineapples, bananas, arid papayas are also grown.
Yields are high because of the intensive methods of
cultivation employed. There has been virtually no
growth in crop production, however, due to the
declining acreage allotted to agriculture as the urban
complex encroaches on agricultural land.
Singapore's production of some,. 41,500 metric tons
of vegetables and root crops meets only about one
third of domestic requirements; the remainder must be
imported (Figure 4). Local fruit production also meets
only a fraction of domestic needs, and Singapore
depends heavily on frui! imported from Australia sod
Malaysia. About 4,400 metric tons of fruit, 3,000 tons
of coconuts and 2,(XX) tons of rubber were prr;d .ee_u in
1970. Singapore has been promoting a export of cut
orchids, which in 1970 were valued at $400,(XXI, or
three times the value in 1965.
Animal husbandry is one of the major components
of local agriculture. In 1970 livestock production was
valued at about $230 million. Livestock are generally
raised by smallholders. Singapore has lwen more than
self sufficient in pork, poultry, and eggs s9;ice the nuid-
1960's and exports its surplus almose entirely to
Malaysia. Singapore is a net importer of beef. Two
abattoir and quarantine stations provide the necessary
slaughtering facilities,
h. Fishitig
Singannre's fishing industry has been :leek� ing,
largely because of the decreasing catch from nearby
waters, which has been clue to water pollution and
land reclamation projects. The dumber of licensed
fishermen declined from about 4,000 in the mid
1960's to 1,919 in 1970, while the fish catch amounted
to only 14,000 metric tons in 1971, down from more
than 18� V tons in 1961. Local production provides
only 20% to 25% of domestic nods, and in 1971 fish
imports amounted to nearly 54,(1(X) metric tons. There
FIGURE 4. Agricultural production (U /OU)
(Mottric tons)
4
is little prospect for improvement of production from
inland waters, and further efforts to lAster (lie
industry will focus on offshc,e, deep -sea commercial
fishing. For example, in 1970 three processing plants
and an ice factory were established at the ,wrong
fishing port. which also serves as a fish marketing and
distribution center. to 1969, facilities for training
offshore and deep -sea fishermen and for investigating
new fishing grounds were established at Changi.
c. Forestry
No forestry pro&uction takes place in Singapore, but
some entrepct trade in forestry products is carried on.
2. Fuels and power (C)
a. Fuels
Singapore has almost no indigenous fuel, except for
limited qua.titics of fuelwood for household use, and
it is heavily dependent on'mported petroleum to meet
its energy requirements. Prior to 1964, most of the
petroleum imported was for reexport without refining;
since then, Singapore has greatly increased its refining
capacity. In 1972 there were four producing refineries
with a total capacity of about 380,(X1!) barrels per day
(b.p.d.), two hydrocarbon solvent plants, and one lube
plant, representing a total investment of some $250
million. Three of the four refineries are being
c?xpandcd, and a fifth is under construction. Total
capacity after completion of all projects will be in
excess of 8(X),(XX) b.p.d, arid total investment will
amount to some $450 million.
Sirgaport,'s oldest and largest refinery complex it
located on the offshore island of Pulau Bukum (Figure
5). This complex, owned and operated by Royal
Dutch Shell, has a capacity of 250,000 h.p.d. which
makes it one of the lar;;cst refineries in the Far East.
Plans call for exivinding capacity to 350,00) b.p.d. by
1974. In 1971 Esso completed an 61,000 b.p.d.
refinery on the island of Pulau Aver Chawan. This
refinery represents the largest single U.S. investment in
Singapore. Expansion plans call for expai.ding
capacity to 231,000 b.pA. by thu mid- or late 1970's.
Mobil, one of the first U.S. firms to settle in the jurong
Industrial v,state, has a; refinery with a designed
capacity of 18,(XM b.p.d., bat production has been
running at 27,000 b.p.d. (Figure 6). British Petroleum
operates a 25,000 b.p d. refinery at Pasar Panjang,
where limited space Hill restrict further expansion.
The Singapore Petroleum Company, a joint venture of
two U.S. firms and the Development Bank of
Singapore, is constructing a 650X) b.p.d. refinery
which is scheduled to begin production in 1973.
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1980
1095
1970
Rubber
2,365
1,500
2,000
Fruits
3,260
3,790
4,430
Vegetableei
29,900
31,550
30,000
Root crops.
9,450
9,100
11,500
Tobacco
441
500
482
4
is little prospect for improvement of production from
inland waters, and further efforts to lAster (lie
industry will focus on offshc,e, deep -sea commercial
fishing. For example, in 1970 three processing plants
and an ice factory were established at the ,wrong
fishing port. which also serves as a fish marketing and
distribution center. to 1969, facilities for training
offshore and deep -sea fishermen and for investigating
new fishing grounds were established at Changi.
c. Forestry
No forestry pro&uction takes place in Singapore, but
some entrepct trade in forestry products is carried on.
2. Fuels and power (C)
a. Fuels
Singapore has almost no indigenous fuel, except for
limited qua.titics of fuelwood for household use, and
it is heavily dependent on'mported petroleum to meet
its energy requirements. Prior to 1964, most of the
petroleum imported was for reexport without refining;
since then, Singapore has greatly increased its refining
capacity. In 1972 there were four producing refineries
with a total capacity of about 380,(X1!) barrels per day
(b.p.d.), two hydrocarbon solvent plants, and one lube
plant, representing a total investment of some $250
million. Three of the four refineries are being
c?xpandcd, and a fifth is under construction. Total
capacity after completion of all projects will be in
excess of 8(X),(XX) b.p.d, arid total investment will
amount to some $450 million.
Sirgaport,'s oldest and largest refinery complex it
located on the offshore island of Pulau Bukum (Figure
5). This complex, owned and operated by Royal
Dutch Shell, has a capacity of 250,000 h.p.d. which
makes it one of the lar;;cst refineries in the Far East.
Plans call for exivinding capacity to 350,00) b.p.d. by
1974. In 1971 Esso completed an 61,000 b.p.d.
refinery on the island of Pulau Aver Chawan. This
refinery represents the largest single U.S. investment in
Singapore. Expansion plans call for expai.ding
capacity to 231,000 b.pA. by thu mid- or late 1970's.
Mobil, one of the first U.S. firms to settle in the jurong
Industrial v,state, has a; refinery with a designed
capacity of 18,(XM b.p.d., bat production has been
running at 27,000 b.p.d. (Figure 6). British Petroleum
operates a 25,000 b.p d. refinery at Pasar Panjang,
where limited space Hill restrict further expansion.
The Singapore Petroleum Company, a joint venture of
two U.S. firms and the Development Bank of
Singapore, is constructing a 650X) b.p.d. refinery
which is scheduled to begin production in 1973.
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FIGURE 5. Royal Dutch Shell's petro-
!eum refinery complex on Pulau
3ukum, with causeway to additional
facilities on Pulau Bukum Kechil
"Little Bukum Island (U /OU)
Vi
W 217
FIGURE b. The Mobil refinery at Jurong; capacity is
scheduled to be increased to 150,000 b.p.d. by the
raid- 1970's (U /OU)
1
it
J
5
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b. Electric power
The electric power industry in Singapore is one of
the best developed in Southeast Asia. All power
facilities are owned,by the government and operated
by the Electricity Department of the Public Ut.i, ties
!30ard. Total installed capacity reached 706,000
';ilowatts (kw.) at the end of 1971, and production
during the year amounted to 2,585 million kilowatt
hours (kw. -hr.). Per capita production of electricity o;
1,247 kw. -hr. in 1971 was the highest in Southeast Asia
and more than three times that of West Malaysia. The
entire installed capacity is contained in four plants,
including three conventional oil -fired power plants
Pasir Panjang B and Jurong, with a capacity of
240,000 kw., and Pasir Panjang A, with a capacity of
177,000 kw. �and one gas turbine plant, St. Jaynes.
with a capacity of 49,000 kw.
Electricity is distributed throughout the island by a
primary system composed .4 66 kilovolt (kv.) and 22-
kv. lines, which serve the p;;ncipal urban and im�
dustrial users. This system fec Is a secondary 6.6 -kv.
network, which is designed to supply rural areas and
other smaller load centers. The 66 -kv. system was
extended in 1970 by submarine cable to petroleum
refineries located on two smaller islands, Pulan Bukom
and Pulau Ayer Chawan.
Consumption of electric power has been growing
rapidly, averaging 16.5% annually since the mid
1960's, due mainly to expanding manufacturing and
commercial activities. Presently, more than two- thirds
of the available electricity is consumed by industrial
and commercial users, having risen from about one
half in 1966. Almost all of the remaining electric
power is consumed by domestic users, with a small
amount used for public lighting.
To meet anticipated demand, the Electricity
Department has formulated a long -range develop
ment plan extending to the year 1981. Capacity is to
be increased by 1,720,000 kw. by expanding the
Jurong Plant by 360,000 kw. during 1972 -73 and by
ecnstructing a new thermal power plant of 1,360,000
kw. at Senoko in the northern part of the island. The
120,000 kw. first stage of the Senoko .Plant is scheduled
to become operational in 1974, but full capacity will
not be attained until 1981. Simultaneously, the
existing 66 -kv. and 22 -kv. transmission grids will be
expanded considerably. In addition, the country's first
230 -kv. lines will be built to ease the load on lower
voltage networks and to provide high capacity links
between major power plants. The first expansion stage
of transmission facilities will be financed in part by a
$15.5 million loan from the Asian Development Bank.
L
3. Metals and minerals (U /OU)
Singapore has virtually no mineral resources, and
mining activity is limited to obtaining raw materials
for the manufacture of bricks, blocks, and tile] -nd the
quarrying of granite and of coral (for lime
production). There are a few small cement plants
which together produce some 600,000 meta:;: tons of
cement annually. Although mineral production is
negligible, Singapore does engage in entrepot trade in
minerals, serving as a transshipping and warehousing
center for tin, iron, and aluminum ores, and for steel
and other finished metal products.
Singapore has a small but growing steel industry,
consisting of scrap processing and rolling facilities, as
well as a number of small steel pipe mills and
galvanizing plants. Scrap arid ingots are imported
mainly from Malaysia and Australia. National Iron
and Steel Mills (NISM), the country's largest steel
mill, produces some 150,000 metric tons annualiv.
NISM recently installed its fifth furnace, which will
nearly double current production, and capacity will
eventually be raised to between 300,000 and -'i
tons. In addition to its three bar mills, NISM has
purchased a wire rod will with a total annual capacity
of some 200,000 metric tons of steel wire rods, about
one- fourth more than the combined production of its
Present three m. :ls.
4. Manuf.:::turing and construction (U /OU)
a. Manufacturing
Manufacturing is the most dynamic sector of the
Singapore economy. During 1961 -70 it grew by about
20% annually, and in 1971 it accounted for 23% of
GDP, compared to 9% in 1960. The government
promoted industrial development in the mid- and late
1960's to offset the impact of the withdrawal of British
troops and ships and the slowing growth rate of the
entrepot trade. The government's active support of
industrialization, the high degree of political stability,
the energetic labor force, and the well developed
infrastructure and commercial facilities in comparison
with other Southeast Asian countries have all
contributed to a favorable climate for investment and
growth.
Through the mid- 1960's, industry lization was
encouraged to reduce unemployment, and emphasis
was placed on establishing labor- intensive light
industries that produced largely for the domestic
market. Since 1968, however, emphasis has been
shifted to export oriented industries, financed and
managed primarily by international firms that can
provide the necessary capital and technological skills.
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3
Measures used to promote industrialization include
incentives to fal industries, which -ire commonly
referred to as pioneer industries. Among other benefits,
pioneer firms receive full exemption from the 40%
corporation tax for a 5 -year period after production
begins. By the end of 1970, 271 pioneer firms were in
production and another 34 were scheduled to be
operating in the next year or so. Total capital of the
producing firms was about $220 million of which
about half was foreign capital. Pioneer firms employed
more than 50.000 people and the value of output
exceeded $594 million in 1970, more than four times
the level in 1966. Comprising only 15% of total
manufacturing firms in Singapore, pioneer industries
account for some 40% of total manufacturing output
and 39% of total manufacturing employment.
About half of the country's pioneer firms are located
in Jurong, the largest of the industrial estates. In 1972
it encompassed about 6,600 ac; !s, of which about one
third was for industrial use and the remainder for
residences, the town center, and recreational areas.
When development is completed, Jurong is expected
to cover an area of 12,000 acres, with about 500
factories and 70,000 workers. A new industrial estate is
being constructed at Sembawang, a former British
navy inztallation. In addition to Jurong and
Sembawang, there are 11 smaller industrial estates
which, in contrast with the two larger estates, have no
direct access to the sea and are primarily for light
industries.
The structure of the manufacturing sector has
shifted dramatically since 1.:0. For example, the food
processing industry was the country's major industry
in terms of output and employment in 1960,
accounting for 33% of total manufacturing outrat
and 23% of employment (Figure 7). By 1970, however,
the food processing industry provided only 17% of
total output and 10% of employment. The rubber
industry, traditionally one of Singapore's major
industries, consists largely of processing, grading, and
packing imported crq:dc: rubber into standard export
grades of remilled rubber and smoked sheets. It also
has been declining in importance for the past decide.
The value: of output actually dropped from $391
millic a in 1960 to $312 million in 1970, and
employment fell by some 5% during the same period.
The fastest growing industries in terms of output
during the decade were petroleum refining, electrical
equipment, and transport equipment (including
shipbuilding and repair), which together now account
for some 50� %0 of total output. The petroleum and Loa]
products industry alone accounted for 29.85 of the
total value of manufacturing output in 1970. The
transport equipment, textile..;, and .4othing, and
electrical machinery industries are Singapore's largest
employers.
The food processing industry produces it variety of
foodstuffs, including canned meat and fish, processed
poultry, canned fruits and vegetables, dairy products,
vegetable oils, beverages, and confectionery. Future
FIGURE 7. Output and employment, by major industry groups*
(U /OU)
(Percent of total)
1960
1970
Output
Employment
Output
Employment
Food, beverages, and tobacco
33.0
23.0
17.0
9.9
Paper products, printing and publishing....
10.3
16.4
3.4
7.7
Textiles, clothing, and leather products....
3.3
4.7
;;,g
14.2
Rubber products
3.9
3.2
1.3
1.8
Chemicals and chemical products..........
13.7
5.2
5.3
4.2
Petroleum and coal products
*na
*sea
29.8
1.6
Metal product.a
6.5
6.3
5.3
Machinery
3.6
:i.3
1.9
3.1
Electrical equipment
3.7
4.6
8.5
11.6
Transport equipment
6.8
8.3
8.4
15.5
Other
15.2
23.0
1.1.3
23.0
T otal
100.0
100.0
100.0
100.0
Value in millions of U.S. dollars...........
$152.1
$1,301.5
Number of persons employed
27,418
126,449
*Excluding rubber processing.
*Data are not separately available; are included
in data on chemicals and chemical products.
*Includes the wood and cork, furniture,
nonmetallic mineral products,
basic metal industries,
and miscellaneous other industries.
k
7
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development of the industry will focus on products
such as instant and packaged foods and exotic oriental
delicacies for export. The industry tansist!, of about
250 plants and some 12,600 workers. Most food
manufacturing plants are small, but modern
production methods are being adopted.
Singapore's textile and clothing industry (includes
leather products) was established in the early 1960's
and has expanded rapidly since then. Output
increased .11 times during the 1960's and in 1970 was
valued at $62 mil 'kion.. The textile industry is the
manufacturing sector's econd largest emplo
(transport equipment is first), accountieg for 14 of
total employment in 1970 compared with less than 5%
in 1960. About half of the industry's output is
exported.
The' textile and clothing industry consists of a
relatively large number of small firms. About 10% of
all manufacturing firms in Singapore are involved in
textile production, but most are small enterprises and
employ only a handful of people. These firms are
heavily concentrated in the clothing sector, which
employs about 58% of the textile and clothing
industry's total labor force. A few large firms, such as
South Grand Textiles Ltd., account for much of the
yarn and fabric production, however, and employ up
to several hundred persons each. Many of these larger
firms involve foreign investment, mainly from Hong
Kong Japan and Taiwan. The government's
Economic Development Board also has an interest in
at least one of these large firms, most of which are
located in the Jurong industrial estate. About one
third of Singapore's textile production and exports
come from plants in Jurong.
Singapore's wood products industr: consists
primarily of several plywood and veneer plants which
use timber imported from Malaysia and produce
mainly for export. Products include furniture, parquet
flooring tiles, door and wiva frames, and wooden
cases. The industry is being expanded and upgraded.
New products include knocked -down furniture,
wooden toys and prefabricated structures, and new
facilities are being installed for the production of
higher quality veneers and prefinished and
prefabricated units. Particle board, chipboard, and
hard board plants are also being established to utilize
waste materials. The printing, publishing, and
packaging industries also are well developed. Paper
products include paper and paperboard, in rolls and
sheets, and corrugated fiberboard cartons.
Singapore's electrical equipment industry includes it
small but rapidly expanding electronics sector which
manufactures and assembles electronic products and
8
components, including transistors, diodes, inductors,
capacitors, resistors, transformers printed circuit
boards and computer components. Raw materials and
parts are imported from Japaii, the United States,
Taiwan, and Hong Kong, and most of the output is
exported. The industry consists of about 45 foreign
and local firms employing some 15,000 workers. The
government is particularly interested in training
workers in the electrr,uics fiela, and international firms
are aiding the overnment in conducting training
progroms designed to provide some 5,000 skilled
workers by 1975.
Singapore is now the largest ship repair center in
Southeast Asia. There are four major shipyards
Keppel, Sembawang, Jurong Shipyards (Private) Ltd.,
and Jurong Shipbuilders (Private) Ltd. �and about 40
smaller ones. These yards employ some 16,000
workers. The increased interest in oil exploration in
Southeast Asia has encouraged the growth of ship
construction, especially of rigs, barges, tugs, and
hydrographic vessels. While a record year of growth
was registered in 1970, a shortage of skilled labor and a
lag in the expansion of existing shipyards restricted the
industry's growth in 1971 and 1972.
The small rubber products industry which includes
the production of tires, rubber footwear, hosing,
compounds, foam rubber, and other articles. While
the value of output of rubber products nearly tripled
during 1961 -70, its share of total m nufacturing
output declined from 4% in 1960 to about I in 1970.
h. Construction
The construction industry has expanded rapidly
with the rising demand for public housing, office
buildings, industrial plants, and hotels. In 1967,
Singapore offered substantial property tax reductions
for those projects constructed under the urban renewal
program. In addition, the Housing Development
Board (HDB) provided easy credit terms for the
purchase of its flats (Figure 8). As a result of these
policies, the public: housing program now accounts fcr
about 80% of all residential units being built. Under
the First Five Year Building Program (1960 -65),
54,000 units were completed, and under the second
plan (1965 -70) the target of 60,000 units was nearly
met. The goal for the third plan (1971 -75) is 100.000
units.
The Singapore Port Authority has been investing
heavily in warehousing and storage facilities (Figure
9), rationalization of cargo handling, and billing and
service operations, and is continuing to push ahead
with construction of a $27 million container port with
elaborate ancillary services.
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:py
I
N
0
r
v
A 1 A IV
FIGURE. 9. One of the Port of Singapore Authority's
modern covered storage facilities (U /OU)
r
M
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FIGURE 8. The public ",ousing project at Toa Payoh
includes 8,000 apartments and is typical of many
others in Singapore's burgeoning new housing
programs (U /OU)

5. Domestic trade (U /OU)
I
I
s'
i
s
In Singapore, all domestic trade is handled by
private enterp rises. The government does not engage
in commercial undertakings and does not exercise
direct control over prices, although it has on several
occasions pressured producers of basic necessities to
withdraw proposed price increases. Most wholesale
and retail trade is dominated by local businessmen,
although a few large manufacturers of consumer goods
have their own retail outlets.
There are a few Westem -style department stores
and supermarkets carrying a fairly wide range of
consumer goods. Since 1966 several stores have been
opened that market goods produced in mainland
China. These stores offer a variety of light consumer
goods including wearing apparel, electrical appli-
ances, musical instrumep`s, textiles, and toys at low
prices. Most retail shops are small and offer only a
limited inventory of goods. The population relies
heavily on public markets for fruit, vegetables, fish,
meat, and eggs.
C. Economic policy and development
(U /OU)
1. Policy
Singapore essentially has a free enterprise economy,
with direct government participation limited to the
infrastructure. The go ernment owns and operates
port facilities, the telecommunications system, and
most electric power facilities. Indirectly, it is very
active in planning, financing, and otherwise
encouraging economic growth. In addition to
providing special tax incentives to new industries, as
well as technical and various consulting services, the
government has established some 13 industrial sites
with the infrastrw �ture and other facilities needed to
attract investors. The government also provides
various welfare programs, including public health
services, child care centers, and counseling services,
which help attract and hold an experienced labor force
in urban areas.
Singapore welcomes private foreign investment and
actively encourages the inflow of foreign capital for
industrial developrneat. The government makes little
distinction between local and foreign capital,
although it prefers joint ventures with both local and
foreign participation. Government support of
industrial development is largely through the pioneer
industry program. To qualify for pioneer status, a
company must have a minimum fixc_l capital
expenditure of $355,000. Pioneer status is riot granted
10
to those ir.Justries producing exclusively for the
domestic market, nor to industries which are already
well developed. Benefits granted to pioneer status
firms include a 5 -year lax exemption period, tax
exemptions on dividends paid during that period, loss
carryover for tax purposes beyond the tax relief period,
and deduction of capital cost allowances following
termination of the tax relief period. There are also
incentives for the expansion of selected established
enterprises.
There are no comprehensive statistics on the extent
of foreign investment in Singapore. In 1971, foreign
investment in the manufacturing sector was estimated
at $628 million. Of the total already invested, the
United States accounts '.or the largest single share.
a. Current account expenditures'
Singapore's generally sound financial policies have
resulted in current account surpluses which rose from
$30 million in 1966 to $72 million in FY1970/71. The
current account surplus is transferred to the
development budget but normally does not cover total
development spending. A rising share of development
spendirg is financed by borrowing. During the First
Economic Development Plan (1961 -65), 72% of the
financing came from tl.a surplus of the current
account budget, including profits of government
statutory authorities such as the Public Utilities Board
and the Port of Singapore Authority. The surplus
covered only about one -third of the %nancing of the
FY1971/72 development plan; the remainder was
financed by domestic and foreign borrowings and it
draw -down of foreign exchange cash balances.
Current account expenditures have more than
doubled since 1966 and in FY1970/71 reached $379
million (Figure 10). This growth is largely attributable
to the rapid rise in internal security and defense
expenditures, which accounted for 28% of current
account expenditures in FY1970/71. The first major
increase occurred in 1966 after the break from
Malaysia, and the second in IWO after the withdrt,.val
of British troops. The second largest category of
spending was education, which amounted to $5.
million, or 15% of the total. Another $39 million was
spent on health and other social services. About $33
million were allocated for a wide variety of economic
services, including postal and telegraph services and
public works programs.
2 Singapore has changed its financial reporting from calendar to
fiscal vears. Years for the current account are calendar years through
'.968 and fiscal years (1 April-31 March) since 1969. The
development budget has been formulated on a fiscal year basis since
1970. The development budget covered in this chapter, however, is
for calendar year 1970, since the fiscal year figures include same
double counting because of the change in reporting.
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&.vvvi vw I W.
1,
total revenues in FY1970/71. These revenues were
derived primarily from the sales of goods and serv;ees,
interest and dividends, investment earnings, and land
sales and rent.
b. Development poUcy and budget
The Singapore Government initiated a coordinated
development effort in the early 1960's. The Virst
Economic Devclopment Plan (1961 -65) emphasized
infrastructure, especially public housing. A second
plan, intended for the 1966 -70 period, was never
implemented because the government decided instead
to use a flexible development program with annually
adjusted targets. Development expenditures have
increased rapidly. During the first plan, spen.,ing was
about $60 million annually, and by 1970 annual
outlays had tripled to $180 million. The FY1972/7
development budget called for expenditures of $380
million.
Economic projects have accounted for about two
thirds of total development expenditures. Of the $180
million spent on development in 1970, about $118
million was used to expand industry and related
infrastructure (Figure 12). The withdrawal of British
military forces caused a substantiai increase in defense
Total 20.6 32.5
Internal security r,nd defense......... 26.1 105.2
General administration 43.2 145.1
Total 169.3 378.9
*Fiscal year ending 31 March 1971. Expenditures were re-
ported by calendar years through 1968.
*Includes debt servicing, internal administration, and con-
tributions to the Sinking Fund ($6.6 million in 1966 and $87.2
million in FY1970/71).
*Components may not add to totals shown because of
rounding.
FIGURE 11. Government revenues (U /OU)
(Millions of U.S. dollars)
1966 1970/71*
Tax revenue:
FIGURE 10. Current account expenditures (U /OU)
(Millions of U.S. dollars)
Income tax
35.9
85.1
1966 1970/71*
Social services:
37.:3
Estate duty.
Education
40.5
56.5
Public health
23.2
26.9
Other
15.7
12.7
Total
79.4
96.1
Economic services:
fees
Postal and telegraph services........
7.2
10.6
Civil aviation
1.6
1.9
Public works
7.5
9.1
Other
4.3
10.9
total revenues in FY1970/71. These revenues were
derived primarily from the sales of goods and serv;ees,
interest and dividends, investment earnings, and land
sales and rent.
b. Development poUcy and budget
The Singapore Government initiated a coordinated
development effort in the early 1960's. The Virst
Economic Devclopment Plan (1961 -65) emphasized
infrastructure, especially public housing. A second
plan, intended for the 1966 -70 period, was never
implemented because the government decided instead
to use a flexible development program with annually
adjusted targets. Development expenditures have
increased rapidly. During the first plan, spen.,ing was
about $60 million annually, and by 1970 annual
outlays had tripled to $180 million. The FY1972/7
development budget called for expenditures of $380
million.
Economic projects have accounted for about two
thirds of total development expenditures. Of the $180
million spent on development in 1970, about $118
million was used to expand industry and related
infrastructure (Figure 12). The withdrawal of British
military forces caused a substantiai increase in defense
Total 20.6 32.5
Internal security r,nd defense......... 26.1 105.2
General administration 43.2 145.1
Total 169.3 378.9
*Fiscal year ending 31 March 1971. Expenditures were re-
ported by calendar years through 1968.
*Includes debt servicing, internal administration, and con-
tributions to the Sinking Fund ($6.6 million in 1966 and $87.2
million in FY1970/71).
*Components may not add to totals shown because of
rounding.
FIGURE 11. Government revenues (U /OU)
(Millions of U.S. dollars)
1966 1970/71*
Tax revenue:
Direct taxes:
Income tax
35.9
85.1
Property tax
24.5
37.:3
Estate duty.
1.6
:3.2
Payroll tax
3.3
5.8
Indirect taxes:
Import duties
48.0
57.1
:Motor vehicle taxes, duties, and
fees
12.1
21.4
Excise duties
8.2
35.4
Other
7.2
22.1
Total revenue
140.8
267.4
Other revenue:
Sales of goods and services..........
19.0
44.5
Interest and dividends.
5.9
33.4
Land sales and rent
4.6
14.6
Other
31.9
90.9
Total other rev, nue 61.4 183.4
Grand total 202.2 451.0
*Fiscal year ending 31 March 1971. Revenues were reported
by calendar years through 1968.
*Components may not add to total shown because of
rucading.
ll
lS. *M,'Y,T':'!d
Government revenues have increased even faster
than expenditures, rising front $202 million in 1966 to
$451 million in FY1970/71 (Figure 11). Income taxes
are the largest single source of revenue, accounting for
almost one -fifth of total revenue. The rapid rise in
income tax revenues- -from $36 million in 1966 to $85
million in F i'1970,/71-was due to the increase in the
tax base, particularly following the expiration of the
tax holiday for many pioneer firms. The number of
pioneer firms paying income tax tripled between 1968
and 1971, whereas the amount of tax assessment
increased from $1 million to $8 million during the
same period. The tar rate on individual income ranges
from 6% on the first $815 to 55% of the excess over
$32,500. Corporations are assessed at a flat rate of
40 Resident corporation shareholders are given full
tax credits on their own assessments for taxes paid by
the companies. A variety of deductions and
exemptions are allowed for both individuals and
companies.
Import duties, while growing far more slowly than
income tax receipts, are still a major source of revenue,
accounting for about 13% of the total revenues in
FY1970/71. The growth of import duti,.-- reflects the
rise in imports, particularly of crude petroleum. Other
major sources of tax revenue are property taxes and
excise duties. Nontax revenues accounted for 40% of
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FIGURE 12. Distribution of development expenditures,
1970* (U /OU)
MILLIO
U.S. PERCENT
DOLLARS OF TOTAL
Economic development:
Industry
48.2
26.8
Public utilities.......
32.5
18.1
Transport and communications.....
22.1
12.5
Land reclamation and development..
13.8
7.7
Other
1.2
0.7
Total
117.8
65.8
Social development:
Housing
34.0
18.9
Eddeatkm
3.9
.2
Sewer syst.
3. 0
1.7
Community services
1.2
0.7
Health
0.8
0.4
Total
42.9
28.9
Public admin;stration and defense...
18.9
10.5
Grand total $179.6 100.0
*Calendar year.
*Components may not add to total shown because of
rounding.
outlays, and public administration and defense
accounted for more than 10% of development
erpenditures in 1970, compared with only 2% during
1961 -65. With social development expenditures
growing much more slowly than the other categories,
its share of total expenditures fell from 36% in the first
plan to 24% in 1970. About 80% of social expenditures
in 1970 was for public housing, and the remainder for
health, education, sewer systems, and community
services.
The FY1971/72 budget continued the relati; e
decline in social development expenditures to 20% of
the total while economic development expenditures
increased to some 69 Additional programs designed
to improve industrial infrastructure and transport
fa.:ilities accounted for most of this growth. Public
administration and defense accounted for the
remaining 10% of the development budget expendi-
t u res.
Long -range development objectives reflect the
declining importance of entrepot trade and the
emphasis on industrial development. In order to
strengthen the technical manpower b ase, Singapore is
bolstering its industrial and vocational training
programs by expanding the universities and arranging
for on- the -job training in selected industries. There is
also a program to establish a comprehensive wage
policy that reflects productivity increases. A new plan
being formulated for industrial land development is
1.2
designed to locate nonpolluting light industries near
residential areas to more fully utilize the female labor
force.
2. Money and banking
The basic unit of currency in Singapore is the
Singapore dollar (S$), with an exchange rate in late
1972 of US$1.00= S$2.80. Until June 1967, when
Singapore dropped the Malayan dollar and began
issuing its own currency, the currency- issuing function
was performed by the Malaysia Board of Com-
missioners of Currency. The Singapore Currency
Board now issues Singapore's currency, which is fully
hacked by external assets, gold, and convertible
currencies. Because of the devaluation of the British
hound, Singapore in June 1972 flecided to peg its
currency to the U.S. dollar.
All central banking functions, with the exception of
currency issu: are performed by the Monetary
Authority, which was established on 1 January 1971.
In addition to the Currency Board and the Monetary
Authority, other financial institutions include the
commercial banks, the Central Provident Fund (CPF),
the Post Office Savings Bank (POSB), the Develop-
ment Bank of Singapore (DBS), finance companies,
insurance companies, and the Singapore branch of the
Malaysia- Sit.gapore Stock Exchange. The CPF is the
largest of these institutions, with outstanding member
balances of about $300 million. Few employers are
allowed to operate their own pension funds; most
employers -the outstanding exception being the
gov,rnment -are required to contribute monthly to
the CPF for all their employees. The DBS is a major
source of industrial financing, providing loans and
advances to industrial enterprises, subscribing and
underwriting stocks and bonds, and guaranteeing
loans. It also engages in some commercial banking
functions.
Commercial banking has been developed exten-
sively in Singapore. By the end of 1971, there were 36
domestically owned commercial banks, which
operated a total of 177 banking offices, and nine
foreign owned banks. Total commercial bank deposits
reached $1,126 million in Ju: a 1971, representing a
19.5% annual growth since 1966. Shifts in banking
activity reflect structural changes in Singapore's
economy. Singapore banks traditionally concentrated
on providing short -term capital to finance trade and
commercial ventures, but between 1965 and 1971 the
share of total commercial bank loans and advances to
finance trade declined from 48% to only 31 while
longer term loans to industry increased from 17% to
34% of the total.
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Singapore traditionally has enjoyed stable monetary
conditions. During the 1960's, the consumer price
index rose by only about 1% annually, although the
latter part of the decade saw some acceleration.
During the period 1967 -70, the money supply
increased by about 13% annually, more then double
the rate of the early 1960's, but the ;e,.;rease slowed
somewhat after 1970. The sharp increase in net bank
claims on the private sector, resulting largely from
industrial expansion, was one of the principal causes of
monetary expansion. Saving deposits increased
considerably during the late 1960's, largely offsetting
the expansionary influence on the money supply.
In line with the government's goal of establishing
Singapore is the Financial center of Southeast Asia, the
Asian dollar market was initiated in 1968 by several
private overseas banks� principally the Ban!; of
Ame-ica �with govemmerrt support. [n mid -1972 the
market had estimated total resources of about $2.1
billion. While the purpose of this market was to
finance industrial development in Asia, most of the
funds initially flowed to the Eurodollar market
because of the more attractive interest rates there.
Now, however, Asian and Australian customers are the
main users. In addition to the Asian dollar market, a
free gold market was created in Singapore in 1969.
Most of the gold is i from Europe and
reexported to Asian countries. Very little gold is
retained in Singapore. The government levies an
import duty of $1.00 per ourlce of gold; by 1971
Singapore's net earnings from this market amounted
to some $33 million.
3. Manpower
In marked contrast to the serious rate of
unemployment in the mid 1960'x, Singapere now
suffers from a labor shortage. In 1966 an official
government survey indicated that about 9% of the
labor force was unemployed, while unofficial
estimates placed the rate as high as 17 At that time
only 17,000 people were entering the labor force each
year, but even this number could not be absorbed.
Industrialization during the late 1960's increased the
number of new jobs created from 15,000 annually to
40,000 in the manufacturing sector aloe�^ in 1971. The
main contributors to this rapid job expansion were the
labor intensive shipbuilding and repair industry, the
textile and clothing industry, and the electronics
industry. Although the number of annual entrants into
the labor force has nearly doubled since 1966, the
rapid growth of employment opportunities has created
a shortage of workers in many skilled job categories.
The Singapore Government has adopted two major
programs to alleviate the shortage. The most effective
thus far has been a program encouraging the
temporary influx of foreign workers possessing the
required skills. Since mid -1970, some 70,000 work
permits have been issued under this program,
primarily to Malaysians. Work permits are viewed as
only a short-term solution, however, and for the long
term, emphasis is being placed on improved training
programs for Singaporeans. More vocational institutes
have been established and existing university and
technical college training facilities are being
expanded. The secondary school system is being
reorganized to give a higher priority to techi,ulogical
training, and joint industry and government training
programs h the been created to provide both on -the-
lot) and overseas training. The cost of training can be
deducted from payroll taxes.
The total labor force was estimated at about
700,000 in 1970. Excluding self employed farmers,
taxi drivers, hawkers, and itinerant workers, there are
470,000 workers, of whom one -third were in
manufacturing, one -fifth in commerce and most of the
remai-der in transport and finance (Figure 13).
Because of severe unemployment in the mid- 1960's,
Singapore limited wage increases in an effort to attract
investment and thus provide more jobs. The wage
restraint policy continued until May 1972 when the
government accepted the recommendations of the
newly formed National Wage Council. The new wage
policy called for a general private sector wage increase
of 8 including an annual bonus payment and a 2%
increase in CPF contributions by both employers and
employees. Civil servants were given a comparal,le
FIGURE 13. Composition of the employed labor force,
by economic sector, 1971 (U /OU)
PERCENT
SECTOR
EMPLOYEES
OF TOTAL,
A`riculture, forestry, and fishing....
2. 25 6
0.5
Mining and quarrying
1,833
0.4
Manufacturing.. I.
152,639
32.2
Electricity, gas, water, and sanitary
services
15,228
3.2
Construction
24,841
5.2
C ommeree
102,259
21.5
Transport, storage, and communica-
tions
46,706
9.8
Finance, insurance, real estate, and
bupiness services
28,472
6,0
Community, social, and personal serv-
ice
100,484
21.2
Total
474,718
100.0
13
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wage hike in March 1972. The government plans to tie
future wage increases to productivity increases while
keeping w, ges low enough to continue to attract
foreign investment.
D. International economic relations
(U /OU)
Singapore's foreign trade, which totaled $4.0 billion
of recorded trade, and as much as $900 million of
unrecorded trade in 1970, is of vital importance to the
economy (Figure 14). Singapore depends on imports to
supply raw materials to its rapidly developing
industrial sector, while much of its manufactured
products are exported to overseas markets. Moreover,
Singapore traditionally has been the leading entrepot
port in Southeast Asia, reexporting the primary
commodities of neighboring countries and supplying
their equirements for finished goods from Singapore
warehouses. Although entrepot trade has declined in
relative importance, from 60% of total recorded trade
in 1965 to about 40% in 1970, it still contributes more
than 1.1 of Singapore's GDP. The decline has been
due to the rapid expansion of foreign trade, the
deve!oprnent of Singapore's export oriented manufac-
turing industries, and to the increasing tendency of
neighboring countries to establish their own direct
trading channels.
FCURE 14. Summary of foreign trade, 1970 (U /OU)
(Millions of U.S. dollars)
Entr pot trade:
Exports 957.1
Imports 603.2
Total 900.0
Adjusted total trade:
Exports 2,239.6
Imports 2,676.6
Total 4,916.2
14
Singapore essentially has long been a free port with
few tariffs, but with the govemment's promotion of
industrial development, some tariffs and import
quotas have been imposed to protect domestic
manufacturers. The main import duties, however, are
for revenue purposes. These are levied mainly on
tobacco, liquor, sugar, and petroleum, which are
imported for domestic consumption. There are no
restrictions on exports. To maintain Singapore's status
as an entrepot port, two free -trade zones went into
operation in September 1969. These zones include all
of Singapore's deep -water wharves and some lighter
facilities. Important entrepot trade commodities
include rubber, coffee, copra, rattan, spices, palm oil,
petroleum, machinery, textiles, and timber. Rubber,
most of which is imported from Malaysia, has always
been a major commodity in Singapore's entrepot
trade although falling world market prices have
caused a slight decline in value: during the past few
years.
Singapore's exports of domestic origin doubled
during 1966 -70, and in 1970 accounted for 38% of
total recorded exports, compared with only 259i in
1965. More than half of this rapid growth reflects the
striking increase in exports of petroleum products,
which rose from $129 million in 1965 to $350 million
in 1970. During the late 1.960's, about one -third of all
petroleum exports were sent to South Vietnam. Since
petroleum products account for more than half of
domestic exports, the slowdown of the Vietnam war
has resulted in a considerably lower growth rate for
domestic exports. Other locally produced exports
include wood products, textiles, iron and steel
construction materials, and boats (Figure 15).
Of $2.5 billion total recorded imports in 1970, on
25% was designated for reexport, compared with
nearly 50% in 1965. The fastest growing category of
retained imports is capital equipment for Singapore's
new industries. Manufactured goods and petroleum
are also major retained import commodities.
Malaysia is Singapore's most important trading
partner, accounting for 17% of Singapore's total
recorded imports and 155vc of its exports in 1970
(Figure 16). Exports to Malaysia have declined since
the early 1960's as Malaysia has developed its own
industrial capabilities. Manufactured goods and
machinery, still the two largest categories of exports to
Malaysia, have declined in absolute value. Imports
from Malaysia, on the other hand, continue to
expand. About one -third of Singapore's imports from
Malaysia are crude rubber for reexport. Palm cil is the
second largest trade item.
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Total
1,560.3
Other trade:
Domestic exports
597.1
Retained imports........... I
1,858.8
Total
2,455.9
Total recorded trade:
Exports
1,554.2
Imports
2, 462'. 0
Total
4,016.2
Adjustment for unrecorded trade:
Exports
685.4
Imports
214.6
Total 900.0
Adjusted total trade:
Exports 2,239.6
Imports 2,676.6
Total 4,916.2
14
Singapore essentially has long been a free port with
few tariffs, but with the govemment's promotion of
industrial development, some tariffs and import
quotas have been imposed to protect domestic
manufacturers. The main import duties, however, are
for revenue purposes. These are levied mainly on
tobacco, liquor, sugar, and petroleum, which are
imported for domestic consumption. There are no
restrictions on exports. To maintain Singapore's status
as an entrepot port, two free -trade zones went into
operation in September 1969. These zones include all
of Singapore's deep -water wharves and some lighter
facilities. Important entrepot trade commodities
include rubber, coffee, copra, rattan, spices, palm oil,
petroleum, machinery, textiles, and timber. Rubber,
most of which is imported from Malaysia, has always
been a major commodity in Singapore's entrepot
trade although falling world market prices have
caused a slight decline in value: during the past few
years.
Singapore's exports of domestic origin doubled
during 1966 -70, and in 1970 accounted for 38% of
total recorded exports, compared with only 259i in
1965. More than half of this rapid growth reflects the
striking increase in exports of petroleum products,
which rose from $129 million in 1965 to $350 million
in 1970. During the late 1.960's, about one -third of all
petroleum exports were sent to South Vietnam. Since
petroleum products account for more than half of
domestic exports, the slowdown of the Vietnam war
has resulted in a considerably lower growth rate for
domestic exports. Other locally produced exports
include wood products, textiles, iron and steel
construction materials, and boats (Figure 15).
Of $2.5 billion total recorded imports in 1970, on
25% was designated for reexport, compared with
nearly 50% in 1965. The fastest growing category of
retained imports is capital equipment for Singapore's
new industries. Manufactured goods and petroleum
are also major retained import commodities.
Malaysia is Singapore's most important trading
partner, accounting for 17% of Singapore's total
recorded imports and 155vc of its exports in 1970
(Figure 16). Exports to Malaysia have declined since
the early 1960's as Malaysia has developed its own
industrial capabilities. Manufactured goods and
machinery, still the two largest categories of exports to
Malaysia, have declined in absolute value. Imports
from Malaysia, on the other hand, continue to
expand. About one -third of Singapore's imports from
Malaysia are crude rubber for reexport. Palm cil is the
second largest trade item.
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FIGURE 15. Commodity composition of recorded foreign
trade (U /OU) Mala,,
Japan recently surpassed Malaysia as the largest Other
supplier of goods to Singapore, accounting for nearly Western Europe
18% of total imports in 1970. About one -fifth of these United Kingdom
are textile fabrics; steel and machinery are other major Other
categories. Japan take only about 5% of Singapore's United
exports, about two thirds of which are petroleum
products. Other major trading partners include the ether
United Stater;, which takes about 8% of Singapore's
exports and supplies 10% of its imports, the United
Kingdom, Australia, and Hong Kong.
Singapore has a substantial volume of unrecorded
trade, most of which is with Indonesia. Indonesia was FIGURE 16. Direction of foreign trade, 1970 (U /OU)
15
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Singapore's second largest market and supplier before
of U .S
I a rs
the cessation of trade relations in 1963. Indonesia's
R
NED D IMP ORTS
trade embargo during the co nfrontation brought a
x445.1
--"1�� $104A
decline in Singapore's trade with third countries as
13.3
Other
4.6
well, since Singapore served as an entrepot for third
Machinery and equipment
260
country commerce with Indonesia. Sono barter trade,
smuggling and trade through third countries
continuf but its magnitude cannot be ascertained.
31.9
Manufactured goods
33.3
The signing of a trade agreement in early 1967 ended
embargo, and trade with Indonesia has expanded
ti'0
Chemical products
substantially. Estimates made by the World Bank of
H the
8.6
Petroleum products
5.6
17.4
30.8
Food, beverages. and tobacco
IMPORTS
13.1
M191ors of U.S. Dollars 2,462.0 Milhoo
1960
1970
Far last
Japan 1916
SINGAPORE
Malaysia 16.7
Other 14.7
DOMESTIC EXPORTS
Western Europe
$70.9
10D% 597.1
United Kingdom 1,3
Other 11 A
Other
United States 12.7
Textiles
Wood products
2.3
6.5
Other 18 0
2.3
Machinery and equipment
2.4
2.7
12.4
Chemical products
Vegetable oils
4
2.8
Petroleum products
Crude and processed rubber
Food, beverages, and tobacco
0.7
1960
1970
EXPOM
Excludes re-exports
11,554.2 Million
FIGURE 15. Commodity composition of recorded foreign
trade (U /OU) Mala,,
Japan recently surpassed Malaysia as the largest Other
supplier of goods to Singapore, accounting for nearly Western Europe
18% of total imports in 1970. About one -fifth of these United Kingdom
are textile fabrics; steel and machinery are other major Other
categories. Japan take only about 5% of Singapore's United
exports, about two thirds of which are petroleum
products. Other major trading partners include the ether
United Stater;, which takes about 8% of Singapore's
exports and supplies 10% of its imports, the United
Kingdom, Australia, and Hong Kong.
Singapore has a substantial volume of unrecorded
trade, most of which is with Indonesia. Indonesia was FIGURE 16. Direction of foreign trade, 1970 (U /OU)
15
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unrecorded trade show ap increase from $222 million
in 1966 to about $900 million in 1970. Most of the
growth was in unrecorded exports .presumabl to
t Indonesia -which increased more than fivefold
during
g 966 -70.
Singapore became a member of the United Nations
in September 1966 and subsequently, of the Economic
Commission for Asia and the Far East (ECAFE), the
International Monetary Fund (IMF), the World Bank
(international Bank for Reconstruction and Develop-
ment- IBRD), and the International Finance
Corporation (IFC). in addition, Singapore is a
member of two Asian regional economic organiza-
tions -the Colombo Plan and the Asian Development
Bank (ADB).
Singapore's balance of payments data do not
include Indonesian trade and do not adequately cover
earnings from services or
private capital inflows.
Estimates reallocating the large errors and omissions
item have been made by the IBRD. According to these
estimates, Singapore's overall balance of pavmcnts has
shown increasing surpluses since 1966, characterized
by large and growing trade deficits offset by a surplus
on the services accot�_ and private capital inflows
(Figure 17).
The growing merchandise trade deficit is largely
due to the increase in retained imports, particularly of
capital equipment for Singapore's growing industries.
In 1970, the trade deficit reached $414 million, more
than double the 1966 level. The surplus on the services
account reflects Singapore's position as a leading
financial and commercial center in Southeast Asia. In
addition to ancillary services such as banking,
insurance, and transportation, Singapore is attracting
a growing number of tourists. In the early and mid-
1960's, earnings from British military expenditures
accounted for a very large share -some 70% to 80%
of service account surpluses. As the British began the
withdrawal of their forces, however, these earnings
declined and in 1970 accounted for only about half of
the service account surpluses. Asa result of the
growing trade deficit and the slowing growth of the
services account, Singapore had a current account
deficit of $136 million ii, 1970, compared with
surpluses of from $31 million to $48 million during
1966 -69.
S
i
r
16
FIGURE 17. Balance of payments (U /OU)
(Millions of U.S. doQars)
1988 1970
Current account:
Exports mports
1,132.8 2,099.3
I
1,320.1 2,513.8
Trade balance 187.5 -414.5
Nonmonetary gold (net) 1.1
Freight and insurance..........., 8 28.5
Transportation 193.7
portation..... 89.6 164.9
'Travel 27.8 99.3
Investment income......... 19.5
Government transactions*.......... 39.
180.9 132.2 2
Other, 10.3
32.6
Servic,-s (net) 234.7 259.8
Transfers (net). -14.7
Current account balance......... 31.4 136.1
Capital account:
Private long term capital........... 18,4
Official loans and grants..... -1.7 208.0
Capital account balance.......... 16,7 45.8
Net errors and omissions..... 13.0 251 .8
Overall balance 35.1
81.1 150.8
*Mostly British military expenditures
The 1970 current account deficit was more than
offset by king -term private capital inflows, which
increased from only $18 million in 1966 to $206
million in 1970. The overall balance -of- payments
surplus reached $151 million in 1970, about the same
as 1969 and more than double the' 1966 level. Foreign
exchange reserves amounted to $1,361 million in 1970.
Singapore has received only limited amounts of
external aid, most of it in the form of technical
assistance. The United Nations Development Program
contributed about $7 million in 1970, including the
provision of technical services. U.N. projects place
heavy emphasis on providing technical education for
Singapore's lebor force. Sortie $10 million in bilateral
aid was disbursed in 1970, mosi of which was a United
Kingdom aid grant and a special Japanese grant. In
addition, several loans have been extended to
statutory authorities in Singapore by the World Bank.
During 1965 -70, these loans amounted to $58 million.
The United States d oes not have a bilateral aid
program in Singapore. It does, however, operate a P. L.
480 Title Ill program for the distribution of food
urpluses by private organizations.
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CONFIDENTIAL
Glossary (U/OU)
I
I ABBREVIATION I'.NOLISII
ADB Asian Development Bank
CPF.............. Central Provident Fund
DBS Development Bank of Singapore
1 EDB............. Economic Development Board
HDB Housing Development Board
IBRD............ Interr. "tional Bank for Reconstruction and Development
ITC International Finance Corporation
IMF International Monetary .Fund
NISM............ National Iron and Steel Mills
i
POSB Post Office SavingF Bank
I
I
i
I
i
i
f
J
"R
CONFIDENTIAL

CONFIDENTIAL
CONFIDENTIAL
i
oyJ
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