Because of its rapid pace of growth, Singapore, along with the other Asian newly industrializing countries (NICs), has changed the way most economists view the process of economic development. The NICs are moving along a path of industrial catch-up already traversed by Japan, and are doing so at twice the speed that Japan took. Others can learn from their experience, and in fact, the NICs themselves are still learning how to maintain continued growth of their economies.

This study is devoted to the economy of Singapore. It is a particularly appropriate time for such a study, since Singapore, in 1985–86, has suffered an unusually severe recession. It is at such times that structural factors important in the medium and long run should be given attention.

Four characteristics of Singapore are striking. The most important is the fact that it is a multiracial city-state of 618 square kilometres, and 2.6 million people. The consequence of its small size cannot be overemphasized, and it is natural that external markets are larger than domestic markets for Singapore producers of goods and services. In fact, Singapore is the most open country in the world.

Secondly, Singapore has recorded the highest savings rate in the world and, since becoming fully independent in 1965 (an unusual independence, thrust upon it when it was expelled from the Federation of Malaysia) has achieved the fastest economic growth of all countries in the world.

Thirdly, the industrial structure of Singapore, if not unique, is certainly different from that of most countries in that 70% of investment in manufacturing is by foreign firms.

Finally, the average wage in manufacturing, while higher than any other developing country, is the lowest of all occupational groups in Singapore — even below agriculture and fishing.

Historical Experience

Although lacking both natural resources and a hinterland of any sort, Singapore does have two powerful assets — its people and its geography. It was its geography, characterized by a large natural harbour and a location astride the most important shipping route between Europe and the Pacific, that gave Singapore its original economic rationale as an entrepôt for the entire Southeast Asian region.