Southeast Asia and the ASEAN Economic Community by Unknown

Author:Unknown
Language: eng
Format: epub
ISBN: 9783030197223
Publisher: Springer International Publishing

In fact, two things happened in 1984: services rose in importance, and overall economic performance fell. Manufacturing decreased in absolute terms as well as relative to GDP. GDP from services did increase in absolute terms, but total GDP still decreased in 1985. A recession had begun in Singapore and lasted through the year. Although the downturn after the Asian financial crisis was more brutal, the 1985 recession was far more traumatic for Singapore. Once again, however, the government carried out a cold analytical diagnosis, listed the internal and external factors, and then moved to address those factors it controlled. Among its many actions was one that would reduce costs and also reduce saving. The Central Provident Fund had been established in 1955, before Singapore became an independent nation, as the pension plan of the country. This was a contribution-based scheme, with contributions by both employees and employers and fixed rates for both. In early 1986, the contribution of employers was reduced provisionally (for a two-year period) from 25% to 10% of wages. As a result, wages costs decreased by 12%, bringing firms back to 1982 levels of competitiveness (for more details on this pivotal period, see Grice and Drakakis-Smith 1985; Chan 1986; Lee 1987; Rigg 1988; for a comparison with other economic downturns, see Woo 2018).

Nonetheless, manufacturing was becoming more sophisticated, at least from 1980 onwards, as indicated by Fig. 6.5. Many authors dub the period 1979–1984 the second industrial revolution of Singapore. The Economic Development Board gave importance to the pharmaceutical, biotechnology, medical technology, electronics and engineering industries with investments in the 1990s. More sophisticated services were also growing in importance, as indicated by Fig. 6.6. Categorizing some industries as more sophisticated than others is somewhat arbitrary—for example, both chemicals and electrical machinery included simple as well as sophisticated processes. In addition, much of the growing sophistication occurred within industries, resulting in greater productivity, rather than through changes in the mix of industries (see Ministry of Trade and Industry 2008 pages 12–14 for an analysis of productivity growth). Figure 6.7 shows that the value added per worker for industry increased more rapidly in Singapore than in Germany, Japan and Switzerland, the highest ranked on the Economic Complexity Index. Unfortunately, the Economic Complexity Index itself does not provide insight to this evolution (this is explained in the appendix).

Fig. 6.5Components of GDP: Sophisticated manufacturing contribution to manufacturing GDP. Note that the definition of sophisticated manufacturing using national GDP is somewhat arbitrary. Here we have included chemicals and chemical products; pharmaceutical and biological products; computer, electronic and optical products; electrical equipment; machinery and equipment; and motor vehicles, trailers and semi-trailers. Data source: SingStat and authors’ calculations

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