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Tuesday 20 Feb 2018 | 19:12 | SYDNEY
Tuesday 20 Feb 2018 | 19:12 | SYDNEY

Singapore's dual economy



30 June 2009 16:36

Last week I visited Singapore and was quite surprised by what I found. With Singapore in the grips of its worst ever economic downturn, I expected to see and feel a downbeat country with empty hotels and shopping promenades, property markets in free-fall and stirrings of popular disenchantment with the government.

Instead, partially aided by the Great Singapore Sale, the city centre was humming as usual, people were scratching their heads over why real estate prices seemed to be on the rise, and there was widespread support (which seemed to go well beyond self-censorship) for the government and its fiscal responses.
The best explanation I came across for why Singapore (with a resident population now estimated at 4.8 million, of which Singapore citizens make up about 3.5 million) appeared much more at ease than its worst-ever economic numbers would suggest is that Singapore has a dual economy.

The export industries — both traditional low-end manufacturing and the newer services export hubs like finance, internatioal arbitration, processed chemicals etc — are largely controlled by foreign multinationals and employ the vast bulk of the non-Singaporean guest workers and permanent residents.
As these are the industries bearing the brunt of the global crisis in Singapore, Singapore citizens and hence voters are both shielded from the worst effects of the crisis and are the main beneficiaries of the government's early and large fiscal stimulus packages, packages targeted at poorer Singapore citizens and designed to maintain employment levels. It is the multinationals' balance sheets that are hurting and the low- and high-end non-citizen workers bearing the brunt of job losses.
In good times, this dual model means Singapore's economy has one of the highest shares of corporate profits to GDP and hence one of the lower shares of personal income to GDP as well. In the bad times, like now, it also means that Singapore citizens and voters are partially insulated and relatively at ease.

Photo by Flickr user swisscan, used under a Creative Commons license.

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