The Economy Pt.1

Hello!

Today is our first session about the economy. We drew out some differences between China's and Singapore's economy and Singapore's success in undergoing such rapid economic growth.

We began our discussion by going through some of the facts of our economy. For example: What does Singapore export? Well, we do export quite plenty of goods, and some examples are refined oil, organic materials, medical and technical equipment and aircraft parts. Most of these are high-end goods that bring in a lot of money so that the country can still profit despite spending a lot of money on importing.

It is no secret that Singapore's economic miracle has caused Singapore to go from a third-world country to a first-world one. Not many countries have been through this process in a single generation, from a country with high rates of unemployment, poverty and one-third of its population living in slums and squatter settlements, to one of the four Asian Tigers. And the few reasons for our success is our strategic location, which made us a global trading centre, our welcoming stance towards foreign trade and investment and a small, clean and efficient government. Altogether, we would be able to conduct huge amounts of trade, especially since welcoming trade and investment would mean countries would be able to contribute to Singapore's growing economy. An efficient and clean government would mean proper orders are carried out and conducting business quick and well.

Compared to China, our economy may be small, but we have a higher GDP per capita, which is to be expected, taking into account the difference in population. Life expectancy for both male and female in Singapore are higher. Looking at the differences, it would seem that Singapore has a stabler economic system than China. However, this is not the case.

Singapore, due to the lack of resources, relies heavily on importing materials from other countries. For example, we may not have oil in Singapore, but we buy oil and refine them before selling them out. This contributes to $43.8 billion of our exports. If that country that we rely on suddenly stops providing us with oil, 12.6% of our overall exports will be gone! More than one-tenth! Also, because Singapore does not have a large domestic market to buffer the consequences of fewer exports, our economy would not do very well if other countries have weaker demands for imports. Therefore, if we rely so heavily on trading, we are vulnerable to any change in our trade market and any slight differences would be magnified when it reaches Singapore. Our economy, compared to China, who has a rich abundance of natural resources, manpower and huge domestic market, is really unstable!

Singapore, therefore, should not be complacent as a country, for even though we may be rich with a vibrant economy right now, it does not mean it would always be this case. If China, our biggest largest foreign investor and trading partner, do not want to invest or trade with us anymore, that would mean a terrible blow to our economy. The economy would do badly because we are a trade-oriented market economy, and is very vulnerable to changes in trade and possible geographical projects. The talk about the Kra Canal, for one. It meant ships did not have to pass by Singapore and could trade at Thailand, where the Kra Canal would be located. For Singapore, that meant trade would decrease as many ships would prefer to go to Thailand instead as it would save them oil and travelling time. Singapore would be in huge trouble because trade plays a huge role in our economy and losing trade meant the economy would be negatively affected. Therefore, Singapore must not be complacent and would need to prepare ourselves for such problem. That then leads us to the next point: The importance of having good relations with China.

Since China is our biggest investor and trade partner, complications in our relationship may cause China to stop trading or investing in us, which means losing a huge sector of our economy. Simply put, we need China more than they need us. An example of that would be the nine armoured vehicles belonging to Singapore that were seized in Hong Kong. It was a warning from China to Singapore, yet Singapore was unable to demand them back as we know that the diplomatic relationship is too important to risk over nine vehicles. Having a good relationship basically means a stabler economy. And as they say, when China sneezes, Singapore catches a cold. The problem in China may be small, but when it reaches Singapore, it is magnified and would affect us greatly.

Maintaining the good relations between China and Singapore is necessary because any decisions made by China would greatly affect Singapore. Therefore, Singaporeans should not be complacent as we are very vulnerable to negative changes and as much as possible, we would like to avoid that.