International Business Management Assignment

Name: Anwitansia Silvery Agretsby Adam

S I N : 13061103246

ECONIMIC SYSTEM OF SINGAPORE COUNTRY

The economy of Singapore is best described as a mixed economy. Although the country strongly
advocates free-market policies and practices, this has come hand-in-hand with strong government
intervention as well, particularly in macroeconomic management and major factors of production such as
land, labour and capital resources. Oddly enough, both the free market and the state have a high degree of
influence on the economy.
The Singapore Model seemed to have been born out of necessity. Ever since the country was
found by the East India Company in 1819, the economy of Singapore has hinged on a free port with a free
market. Singapore relies heavily on international and regional markets as its own domestic market is
relatively small. As such, Singapore had to develop a high degree of economic openness, free trade and
free markets in order for the economy to thrive. However, the inherent vulnerability in depending on
external markets compelled the government to enact economic policies that would safeguard the country
from perturbations in the global market. The government has also been responsible for developing new
economic initiatives and industries that could respond to the needs of the global market. To date, the
Singapore Model has proven to be extremely successful. Globally and regionally, Singapores economy
has demonstrated astounding resilience to financial crises such as the 1997 Asian Financial Crisis or the
2008 Global Financial Crisis. Singapore is the only Asian country to have AAA credit ratings from all
three major credit rating agencies Standard & Poors, Moodys and Fitch. Government intervention has
trickled down to various facets of society as well, from education to transportation and to the media.
Often, this has led to social policies that have been catered towards enhancing the economy. A common
label for the country is that of Singapore Inc. where the country appears to be run more like a
business, rather than as a nation itself.

Singapore is a small country with no natural resources. To promote economic growth and
development, Singapore has kept its economy open to foreign investments and international
trade since its independence in 1965. Within half a century, Singapore has progressed from a
third world economy into a global business hub. Located at the crossroads between the East and
West, Singapore is an attractive location for global businesses to gain access to new and
emerging markets in Asia. With its excellent infrastructure, robust and transparent regulatory
environment, political stability, skilled workforce and a stable and efficient tax regime,
Singapore
has
become
a
trusted
hub
for
many
businesses.
Singapore has a territorial tax system which taxes foreign income on a remittance basis. Double
taxation is eliminated through the provision of a foreign tax credit for taxes suffered by the
taxpayer abroad on the remitted income and through avoidance of double taxation agreements.
Income derived by companies in Singapore is taxed at a flat rate of 17%. The rate has been kept
low to encourage new investment and maintain a conducive business environment.Overall,

Singapores competitive corporate income tax regime, complemented by a conscious effort to

lower tax compliance costs for taxpayers, underline the Governments commitment towards
making Singapore a place where enterprises with substantive operations may thrive.
Singapore is the 14th largest exporter and the 15th largest importer in the world.
Historically, international trade has strongly influenced the economy. According to the WTO,
Singapore has the highest trade to GDP ratio in the world at 407.9 percent. Due to its
geostrategic location and developed port facilities, a large volume of Singapore's merchandise
exports involve entrept trade with 47 percent of exports consisting of re-exports. As a strong
advocate of free trade, Singapore has relatively few trade barriers. Trade partners with Most Favoured
Nation (MFN) have zero tariff rates applied to their products apart from six lines for alcoholic beverages.
There are however some import restrictions based mainly on environmental, health, and public security
concerns. The import of rice also requires import licensing in order to ensure food security and price
stability.
To create job opportunities following the massive unemployment and labour unrest, an environment
conducive to industrial development had to be formed, thus leading to the birth of the Jurong Industrial
Estate

the
first
of
many
such
estates
on
the
island.
It was during this exciting period of growth that the Singapore Economic Development Board (EDB) was
established with a budget of $100 million to take on the challenge of convincing foreign investors that the
country
was
a
good
place
for
business.
These two developments marked the start of Singapores industrialisation programme that began with
factories producing garments, textiles, toys, wood products and hair wigs. Along with these labourintensive industries were capital and technology-intensive projects from companies such as Shell Eastern
Petroleum
and
the
National
Iron
and
Steel
Mills.
The success of this programme over time meant new issues had to be tackled, namely the lack of raw
resources that once came from Malaysia and rapidly growing local demand. Singapores solution then
was to develop its export-oriented industries, as EDB opened its first overseas centres in Hong Kong and
New York to be better placed to woo foreign investors.