What is Singapore export model?

Undoubtedly, the driving force behind Singapore export model is fine-tuning of external trade, as it is the key vector for the city state. Without much of physical resources, Singapore by and large has embraced Entrepot trade in addition to trade inventorizing. But then there is a looming geoeconomics risk that could throttle her in near future. More for now:

One third of entire external trade hinges on entrepot consisting of machinery, equipments and refining of oil. Brokering & indenting of raw material supplied by neighbours Indonesia and Malaysia in the form of rubber, timber, spices pearls and many others constitute almost one third of the exported goods.

For this there is a backbone of well-developed sea port in Singapore city and Changi airport that function as trade and passenger hubs. Causeway connecting Singapore with Johor State across the sea lane dividing between the two is vital for the smooth functioning of trade and passenger transit to and fro.

The major tipping points are specified below:

1.  Multinational companies whose branches and go-downs straddle across the entire coast line is the hive of export activity. From the last count there are 3000 odd companies accounting for almost 2/3^rd export volume due to fact these companies are provided with facilities at affordable cost and enjoying taxation rate of 17% which is, lower than personal taxation at 20%.

2. Most of Singapore domestic population of 3.2 million are either professionals or skilled workers standing as the backbone for the management & marketing fields, while semi-skilled and blue collar workers are mainly immigrants numbering around 2.5 million out of which around 36% are from Malaysia alone. The non-citizens holding permanent residency is low compared with the daily travellers across the causeway. This latter figure is steadily climbing due to the increased cost of living within Singapore despite the fact that inflation is tightly controlled by a combination of monetary & fiscal policy

3. Four countries namely, Hong Kong, China, Malaysia and Taiwan in that order accounts for 67% of the export by Singapore. The bottom line is that Singapore cannot alienate any of these countries without exposing herself to geoeconomics risk

4. Structure of exports is skewed in favour of three sectors. Machinery & equipments which include integrated circuits cover up 37% of total exports giving approximately US$ 140  Billion, followed by refined petroleum products at 19% amounting to US$ 76 Billion. Chemical product ranks third at 13%. In addition to bunkering services of 7% there are host of other items exported such as gold which is estimated to be in the region of US$ 19 Billion and ticking.

5. Last but not least is the strategic location of Singapore in the west of the Southern tip of Malaysian peninsular. Cargo ships & oil tankers plying from the West to East has to pass Singapore port.

The crucial fact is that all five points enumerated above have associated geoeconomics risk. So far Singapore business strategy has managed to neutralise these. What about future?

 

Cheers!

 

Muthu Ashraff Rajulu

Business Strategist

Mobile: + 94 777 265677

E-mail: cosmicgems@gmail.com

Blog:   Business Strategist