chapter two - Linkages and the International Environment

Summary

Singapore, along with the other Asian NICs, has shown impressive growth rates over the last two decades. Yet, unlike the other three Asian NICs, Singapore's growth is characterized by increasing internationalization of its economy, with foreigners playing an important role on the growth front. This chapter examines the nature and evolution of the foreigner's role within the Singapore economy over the past two decades. Has this role risen over time and is it expected to rise further in future? What is the optimal degree of dependence on foreigners, and has Singapore exceeded it?

In view of future constraints posed by lower labour force growth, land, water and other constraints, how does a more mature Singapore economy maximize growth in the context of a less benign international environment? Would this growth strategy call for a greater dependence on foreigners than at present? How should Singapore manage such dependence in a way that will ensure its continued prosperity? Finally, what are the implications for Singapore's future linkages with the world in view of certain changes in the international environment, particularly relating to the changing role of the United States and Japan?

The Foreigner's Role

The term “foreigner” is broadly used here to refer to non-residents who are stationed within Singapore or outside Singapore in the course of their dealings with the country.

Foreigners' contribution to production of net output in Singapore is not only high (by NIC standards) but rising over time. The share of resident foreigners and resident foreign companies in GDP expanded from 15.7% in 1966–73 to 23.6% in 1973–79, and to 28.1% in 1979–84 (Table 2.1). Net factor payments to foreigners formed 8.5% of GDP in 1979–84, compared to 5.1% in 1966–73. Foreigners seem to be sending more factor income back to their home countries than what overseas Singaporeans are sending back to Singapore.