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Economic Analysis Of Singapore And Jamaica

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Qualitative Economic growth

Prior to becoming one of the leading economies in the world, Singapore was at a juncture where it was evident that economic growth was required to catapult the operation of the economy and this would only prove possible within a short time frame if qualified (successful) foreign companies saw the country as a viable hub for business operations.

The country was hindered by inaccessibility of overseas markets, lack of domestic resources, shortage of management and entrepreneurial expertise and technological retardation. In order to change the business environment to become investment friendly, the responsible authorities took the decision to adopt a liberal foreign investment policy which involved providing various incentives, including the absence of restrictions with regards to the entry and operations of foreign entities. The elimination of government bureaucracy coupled with dynamic political leadership resulted in direct benefits being derived from Foreign Direct Investment in the form of investments, foreign expertise and the utilization of advanced technologies in the varying operations. This transformation resulted in Singapore becoming a global economic city unfettered by the constraints limited resources.

Geographic Location & Workforce - The geographical location is a critical qualitative factor as the country is situated in close proximity to Malaysia and Indonesia. These economies offer viable opportunities for multinational corporations and Singapore serves as the access route to these markets. The prime geographic location is supplemented by the fact that Singapore has an increasingly well educated and disciplined labour force . This social stability is built upon a solid foundation as strategic policies aimed at attracting investment resulted in the enactment of strict legislation designed to minimize labour-management conflict.

Government & Infrastructure - Singapore's economic growth is also attributable to the fact that their government is viewed as transparent with minimal levels of corruption and the country hosts advanced and efficient infrastructure that has attracted investments from more than 3,000 multinational corporations from the United States, Japan, and Europe.

The competitive advantage that Singapore posses with infrastructure is evident in the Port of Singapore which is strategically developed to ensure that trading activities do not become cumbersome. This has resulted in the port being the busiest in the world as it provides easier access to markets for both importing and exporting.

Based on the foregoing, it is evident that Singapore has created a free market economy in which entrepreneurs are allowed the freedom to harness the power of the various resources and channel them into viable economic units that will benefit the Gross Domestic Product of the economy.

Quantitative Economic Growth

Singapore is the smallest country in Southeast Asia. However, it is ranked the 22nd wealthiest country in Gross Domestic Product (GDP) per capita, attributable to government led industrialization (across the island) and foreign investments. The resulting effect is an economy which thrives on electronics and manufacturing exports in conjunction with financial and entrepot trade.

Singapore is characterized as a market based economy and is re-known for its business friendly atmosphere. The economy revolves around trade and relies heavily on exports (equivalent to 243% of GDP in 2005) particularly from the manufacturing sector.

Even though Singapore operates a free market economy, it must be noted that the state plays a major role in ensuring that economic growth is maintained by expanding the economy's growth potential. That is, the country has been experiencing consistently improving economic growth based on increases in aggregate demand. However, while the business friendly environment will continue to attract Foreign Direct Investment (FDI), and the government will continue to channel funds into the requisite infrastructure to foster growth, if there is no expansion of potential output, growth in GDP will eventually come to an end as there will be full employment of labour and other resources.

As such Singapore seeks to continuously expand their output capabilities by focusing on developing a skilled workforce through a heavy concentration on the country's education policy as well as creating spare capacity by importing resources that are refined for export.

Existing Situation based on policies - The economy in Singapore is managed by a heavy concentration on fiscal policies that utilizes government spending to engender economic growth by stimulating aggregate demand. The government promotes high levels of savings and investment through a mandatory savings scheme known as the Central Provident Fund. As a result, Singapore has built up sizable fiscal reserves over the years, thus giving it a strong degree of flexibility especially with regards to reacting to a slump in growth should the need arise.

As indicated by figure 5, Inflationary pressures remained contained with the mix of fiscal and monetary policies utilized. That is, while the operation of the economy is driven primarily by fiscal policies aimed at expanding consumption and investment, exchange rate management is based on the utilization of monetary policies.

The underlying basis for this approach is the increasing inflationary risks from supply side and demand side factors as evidenced in figure 7. While inflation has been largely contained, the fact that the economy is small and open with a heavy reliance on trade indicates that inflation can be easily driven up by external shocks such as increases in oil prices. Inflation rose to an average of 1.2% for the first eight months in 2006 in comparison to the 0.5% achieved for the whole year in 2005, thereby reflecting the effects of increases in oil prices. As such, tighter labour market conditions have been brought into effect and strategies have been implemented to lag the effects of commodity price increases to reduce domestic price pressures.

One of the primary factors used to mitigate the vulnerability of the economy to shocks on the world market are monetary policies aimed at manipulating the exchange rate to ensure that it operates within a particular band. An undisclosed band is set within which the currency is allowed to fluctuate as disclosed by table 6. This allows the country to not only contain inflation, but also engenders real economic growth by utilizing monetary policies to reduce money supply figure1 (this stance has been in effect since April 2004) thereby ensuring that imported inputs remain



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