Last updated October 2004
One of the infamous East Asian Tigers, Singapore’s
average 8% growth rate since independence in 1965 has propelled the small,
densely-populated island city-state into the group of global high-income countries,
with a GNI per capita of $21,230 in 2003.  Singaporean economic policy is grounded in promoting foreign direct
investment and export sectors. Manufacturing and services respectively account for 24% and 64% of the
economy, and 42% of manufacturing is in electronics, with a more recent
emphasis on biotechnology.
Economic hurdles in the last decade included the 1997 regional
financial crisis, the slump in the world market for electronics in the late
1990s, and the 2003 SARS epidemic, which slowed growth to slightly more than 1%
in 2003. Current predictions for growth
are based on the increasing world demand for electronics and the positive
economic indicators of Singapore’s
major trading partners: the US,
EU, China and Japan.
Since international trade is so fundamental to its economic
support for trade liberalization is strong. In addition to its membership in
the WTO, Singapore helped create the Association of South East Asian Nations
(ASEAN) and is a member of the Asia Pacific Economic Cooperation (APEC). Its bilateral free trade agreement (FTA) with
the US, signed in May 2003, was one of the first signed as part of the US’s new
bilaterally-focused trade policy, and emphasized the importance of this
geographically tiny country in the world economy as the US’s 14th
largest trading partner.
The Asian Pacific region’s position towards regional integration
is undergoing significant changes. The "open regionalism" typically
associated with APEC appears to be counteracted by a drive toward preferential
trade initiatives. Until recently, most East Asian countries pursued
policies through unilateral liberalization, APEC and the World Trade Organization
(WTO). Now, even Malaysia, which has traditionally opposed FTAs as
part of its advocacy for a united developing country front at the WTO, appears
to be opening to the idea of bilateral trade deals.
ASEAN agreed to start talks for a regional trade agreement (RTA)
and New Zealand
in January 2005, with plans to complete talks within two years and accomplish a
complete free trading zone by 2017.
Plans to sign an already-negotiated deal with China at the ASEAN summit
in November 2004 are set. ASEAN is also
set to begin talks with Japan and Korea in 2005 for deals involving the six
most developed ASEAN countries (Brunei, Malaysia, Indonesia, the Philippines,
Singapore and Thailand), with intentions to bring the four remaining members
(Cambodia, Myanmar, Laos and Vietnam) into the fold several years later. 
In line with the global shift towards bilateral trade deals, a
consequence of the difficulties encountered during the Doha Round of WTO
negotiations, Singapore has signed many new bilateral trade agreements within
the past two years. The 2003 US-Singapore FTA, which addressed a wide
range of trade issues, marked a new period of extensive bilateral US FTAs which
the US has used
as a model for its subsequent FTAs with countries including Chile,
Morocco, and Australia.
Singapore reached similar FTAs with neighbors Australia and New
Zealand in 2003, and its FTA with Japan took effect in November 2002. In
September 2004, the EU’s newly designated trade minister announced that the EU
would reconsider its policy against bilateral trade deals, a potential coup for
which has been seeking an EU FTA as a way to both increase trade with the EU
and pave the way for a more expansive Euro-Asean FTA. 
is also in the midst of negotiating the Comprehensive Economic Cooperation
Agreement with India
to explore new areas of economic cooperation in tourism, bio-technology and
joint development of their special economic zones. The countries are also
discussing the need strengthen cooperation in counter-terrorism, an important
new issue for the South Asian region that affects its attractiveness for
Textile Export Assistance
As the January 1, 2005 deadline for lifting global quotas on
textile trade approaches, many small developing countries have heightened their
concerns that their export markets will be eliminated by a flood of cheaper
Chinese exports. Singapore
has offered assistance to Malaysia,
specifically the use of Singapore’s
port as an export location, and is looking to do the same with Vietnam
and Cambodia to
ease the transition for its neighbors and increase textile trade through the
port itself. 
Biotechnology has been identified as a fast growth industry for
the Asia-Pacific Region. With an
estimated growth rate of 55%, it is expected to reach over $3 billion by
2006. With the competition mounting between the Asian countries to
establish their position as good environments for this type of industry, Singapore is
marketing itself to foreign scientists and entrepreneurs in an ambitious bid to
build up its biotech
sector. Major focus is being centered on gene therapy, agri-sciences,
bioinformatics, genomics and proteomics.
The government has set aside $2 billion for research in biotech, health
care and medical technology until 2005. 
In addition, the country will open a 500-acre science park in 2004 in
hopes of convincing biomedical institutes and companies to make Singapore
their research and development hubs in Asia, not just a
manufacturing base. To Singapore’s advantage, the country allows scientists to
clone human embryos and keep them alive for up to 14 days in order to extract
stem cells. A drawback, however, is the lack of trained scientists, a
legacy of Singapore's bias for business degrees over science degrees.
In October 2004, Singapore
hosted the BioMedical Asia conference, gathering industry leaders to
discuss the latest trends in the biomedical sciences industry. 
is also acting to strengthen its position as a regional
arbitration hub. The Singapore International Arbitration Centre (Siac) has
announced many reforms in this regard, including reducing fees by 40% for
arbitration services.  Siac will now
be four times cheaper than the Kuala Lumpur Regional Centre for Arbitration and
five times cheaper than the Paris-based International Chamber of
Commerce. Besides the fee reduction, Siac will also expand its pool of
arbitrators to handle disputes in growth areas like intellectual property and
biotechnology. The scope of arbitration will also be broadened to include
areas such as aviation cargo claims and joint-venture disputes.
In September 2004, Siac agreed with the Indian Construction
Industry Development Council (CIDC) to establish a Siac-CIDC dispute resolution
centre in New Delhi to help India's
construction industry resolve disputes worth nearly 12 billion US dollars. 
The Challenges of
Terrorism and Investment
Suspected terrorist presence in countries near Singapore,
have caused some worry about the reputation of the regional investment
environment. However, in the absence of any significant or suspected
attack attempts, this concern seems to have receded during 2004. It could easily become a big concern if there
were to be any bombing or similar incident at any point in the future.
For Singapore, the massive new markets of China and India also
represent a challenge. These regional neighbors can either be either a
goldmine or landmine. Just how profitable things turn out depends on how
Singapore prepares. A more prosperous China and India will mean bigger markets,
more investment opportunities and bigger trading partners for Singapore and the
region. But the negative aspect of tapping the growth of these giants is
may lose business, jobs and investments to them. China is already making its
rapid growth felt, and it poses formidable competition. To keep its
economy competitive, Singapore
must maintain its reputation as the most convenient regional business hub and
continue to maintain the highest-level investment environment.
Considering the current economic dynamism of South Asia,
Singapore must remain proactive in order to maintain its dominant position
within the region. Just as the country is creating incentives to develop
new industries such as biotechnology, Singapore must also respond to challenges
in sectors where it has traditionally led. For example, although
Singapore is currently considered the service hub in the South Asian region,
Malaysia is becoming more competitive. The country's recent focus on FTAs
does show that the leadership is attempting to establish trade and investment
links bilaterally, and that Singapore
is prepared to take full advantage of the immense market potential of their
close neighbors, India
If the past is any indication, Singapore
will be ready for its future challenges.
World Bank Singapore Data Profile.
US Dept. of State Background Note on Singapore, http://www.state.gov/r/pa/ei/bgn/2798.htm.
“Australia, NZealand, ASEAN agree to free trade talks next
year.” AFX – Asia, September 6, 2004.
Menon, Suresh. “Road to S'pore-EU FTA opens as Europe
EU may open bilateral trade talks once the new trade commissioner takes over.” The
Business Times Singapore, September 25, 2004.
“Singapore to help Myanmar export textile products.” Xinhua General News
Service August 24, 2004.
Montlake, Simon. “Singapore’s Biotech Bid,” International Herald Tribune, Aug 19, 2002.
Ai-Lien, Chang. “Biomedical experts gathering in Singapore” The Straits Times (Singapore), October 11, 2004.
Vijaynan, K.C. “Arbitration costs cut to attract cases,” The Straits Times (Singapore) Sept 24, 2002.
“Singapore to help India's construction industry resolve disputes”, Deutsche
Presse-Agentur September 27, 2004.