The Economic Powerhouse of Singapore

[Music] this is Singapore a city-state nation just off the coast of Malaysia it is one of the most praised and highly regarded economies amongst the business community in the world it was up until recently ranked by the World Bank as the easiest country in the world to conduct business but it has recently been usurped by new zealand of all places so make of that what you will even been content with its silver medal though Singapore has made itself a central home of finance business and trade for all of Southeast Asia which is remarkable considering it is a nation without much of the way of land resources or even a particularly large population as always though we will be looking at the economics behind how this country got here and this is an interesting one because Singapore has had an extremely diverse economic history that as with many of these numerical economies started over 200 years ago with British colonialism in 1819 the British government set up a trade post on the southernmost tip of the Malay Peninsula and converted it into a halfway house for all the trade the British East India Company was doing in Southeast Asia this formed the creation of a great seaport and trade routes that involved going through Singapore this is all great north but the port city really didn't take off until 50 years later after the completion of the Suez Canal which effectively connected the Mediterranean with the Red Sea and then on to Southeast Asia effectively doubling the trade volume of the region and the port of Singapore for the next hundred years Singapore was a relatively prosperous little British outpost similar in many ways to Hong Kong it wasn't until 1957 that the Malaysian government claimed independence from England and then in 1965 Singapore claimed independence from Malaysia independence being the new hit thing in the region at this time for Singapore been out on their own was great North but it also lost a huge part of what it needed to prosper up until that point Singapore acted like a little bit of England in Southeast Asia for better or for worse international companies and shipping organisations liked the stability and confidence of the Union Jack rather than doing major business with a newly formed an untested micronation unemployment and poor living conditions were right and a newly formed Singapore government sought to turn that around through a scheme of very hands-on economic development of its own citizens through education and productive investment while at the same time looking to attract foreign investment through a system of very hands-off commercial regulation Singapore's success is really a story of foreign investment over 70 percent of the country's total output is made up from foreign companies trading within the country most notably in the banking shipping and oil industries Singapore is a hugely attractive location for these industries for a few reasons for starters Singapore had turned around its reputation and is now seen as a very safe very stable nation that investors have lots of confidence setting up operations in a few years after their independence it was not unimaginable to believe that a populist government of Singapore under the People's Action Party could have aggressively nationalized any of investments made into the country and so businesses were a bit tentative to throw money into the country at this time nowadays of course it is seen as a safe haven for investment in the region Singapore was also very attractive to multinationals because of the taxation and banking privacy laws that they had passed Asia was a rapidly growing region and they needed their equivalent of Switzerland in the southeast and they found it in Singapore beyond this it was just a convenient location right at the center of major shipping routes connecting the new economic powerhouses of Asia with the West these factors all combined to attract massive foreign investments of all kinds of foreign companies that made up the sea of glass skyscrapers found around the city today which suited Singapore just fine because it was all part of the plan remember all the work the government of Singapore put into educating its citizens and developing productive infrastructure well that's what it was for Singapore knew it was not going to prosper from raw economic production it was a tiny nation that needed to be smarter it needed to be the clever little middleman for as much activity as it could get involved with in the region it was never going to be a major oil country it had some deep-sea reserves that it takes advantage of sure but it didn't have enough landmass to realistically compete with other nations reserves it could be the middleman and refine oil for the region and today Singapore is home to one of the largest oil refineries in the world all in a convenient location to ship off this refined oil once it has been produced it also knew that its domestic service sector would not be able to carry its own weight to become a properly wealthy with its small population but what it does instead is act as a neutral base of operations for financial service companies throughout the entire region Singapore also realized that its opportunities for tourism will limit it sure it's a really beautiful country with lots of great food and culture but it's just so small that it's unlikely that most people would make a trip to see the country itself what people will do though is stay over in Singapore because again it is a very good middleman between major international countries like China Japan India and Australia and even the Middle East Singapore has also capitalized on this by operating one of the largest international airline companies in the world furthering the ways that they capitalize on their central location it has been said that the art of good business has been a good middleman and this is certainly something that Singapore has down to a fine art from the outside it might just look like Singapore is pushing numbers around and piggybacking off the success of rapidly developing neighbors but this is not entirely fair for starters most of the world is relying on the service sector these days for most of you watching just ask yourself the question does my personal job effectively boil down to pushing numbers around I know mine does so we don't really have the right to judge Singapore now do we all jokes aside though this tactical decision on behalf of Singapore to make itself not a producer but rather a facilitator of economic development has made it a poster child for many politicians and groups advocating for their particular flavour of economics on the surface Singapore's economy looks pretty simple a small micro nation filled with bank buildings trade ports low taxation and hopeful Goldman Sachs interns the typical capitalist paradise right well yes or no Singapore is really a Tale of Two Cities the gleaming metropolis of multinationals built on the backbone of some surprisingly socialist style policies for starters income tax in Singapore is super low topping out at around 22% for extremely high income earners and even then very few people pay that if anything at all but this doesn't mean that taxes aren't levied on the citizens and denizens of Singapore they are just done where the government sees fit the government of Singapore really hates cars is a small nation with a decent population and lots of urban areas which is a recipe for severe congestion and pollution Singapore also doesn't want to be a strict authoritarian nanny state so it doesn't want to outright ban cars it takes a very social problem and adds a super capitalistic flair to it in Singapore cars are expensive this isn't because of any import tariffs or foreign exchange issues though this is do purely to the registration system involved in getting a car onto the road in Singapore through a system of limited issue licenses registration and government checks a base model Honda Civic would cost you around 104 thousand US dollars through this system the government of Singapore hasn't outright said no you can't have cars it has just said sure if you want a car you better be a really productive member of society if you want a car ya better work in turn a lot of the income generated from car registration is put back towards developing public transport infrastructure to alleviate the need for anybody to really want a car further shifting the balance of supply and demand of the automobile to a more favorable level where most people will just say actually no I'd rather just catch the train this unique blend of mixing super free-market policies with well-thought-out socialist policies extends to most facets of the economy of Singapore it's part of what makes a place so easy to do business in despite what most people may think having a pure capitalist economy with no rules or regulations would be pretty terrible even for hard core established businesses they need some degree of government intervention to ensure that common goods are maintained property is protected contracts are upheld and also that there is still a population left to do business with Singapore has obviously had some advantages it was in the right place at the right time both economically and geographically to capitalize on the growth of Asia as a global region of trade but prosperity wouldn't have just happened to a small little spit of land off the coast of Malaysia with very little in the way of arable land or natural resources it did things right to ensure it was the go-to middleman for as much as it could be a part of in the region by developing the right mix of the right economic policies and not containing itself to one ideology to dictate the direction of an entire nation hi guys thanks for watching I hope you enjoy the latest video if you did please consider liking and subscribing I've also left a link to our discord server as you may have heard in the most recent video we are planning to hold debates on this server after the video next week at this time so if you do want to be involved in that please get in contact with one of our moderators and they will set you a team otherwise I will be answering questions for as long as I can keep up with the comments here on YouTube but otherwise thanks guys bye

Channel: Economics Explained

Views: 387,336

Keywords: the economy of singapore, the economics of singapore, the economy of singapore explained, the economics of singapore explained, singapore economics explained, economics explained singapore, singapore economy explained, singapore economy, singapore economy economics explained, singapore economics, how singapore economy works, how the singaporean economy works, singaporean economy, singaporean economy explained, singaporean economics explained, economics explained

Id: aKuNk5ZRzLg

Length: 10min 3sec (603 seconds)

Published: Sun Nov 17 2019