RESTRICTED Report No. EAP-29a This report is for official use only by the Bank Group and specificaDy authorized organizations or persons. It may not be published, quoted or cited without Bank Group authorization. The Bank Group does not accept responsibility for the accuracy or completeness of the report. INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT INTERNATIONAL DEVELOPMENT ASSOCIATION CURRENT ECONOMIC POSITION AND PROSPECTS OF SINGAPORE January 24, 1972 East Asia and Pacific Department Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized
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RESTRICTED
Report No. EAP-29a
This report is for official use only by the Bank Group and specificaDy authorized organizationsor persons. It may not be published, quoted or cited without Bank Group authorization. TheBank Group does not accept responsibility for the accuracy or completeness of the report.
INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT
INTERNATIONAL DEVELOPMENT ASSOCIATION
CURRENT ECONOMIC POSITION
AND PROSPECTS
OF
SINGAPORE
January 24, 1972
East Asia and Pacific Department
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CURRENCY EQUIVALENTS
Current Unit c Singapore Dollar
S$ 1.00 = US$ 0.355 1/US$ 1.00 a S$ 2.82 lFS$ 1 million - US$ 355,000
1/ The new rate, established at the general realignment ofexchange rates in December 1971. All conversions inthe economic report have been made at the old rate ofUS$ 1.00 - S$ 3.06 (S$ 1.00 - US$ 0.327).
This is a report of the economic mission
which visited Singapore from September 5 to 2h,1971
consisting of Messrs. Murray Ross (Chief),
Percy Bargholtz, Aswin Kongsiri and Miss Elke Meldau.
Mr. Norman Hicks and Mrs. Margorie Huang contributed
to the report's quantitative framework.
TABLE OF CONTENTS
Page
MAPBASIC DATASUMMARY AND CONCLUSIONS
I. INTRODUCTION 1
II. GROMTH AND STRUCTURAL CHANGE hStructural Change bSectoral Developments 5Policy of Industrialization 7Housing and Construction 8Population and Mbnpower 9Wages and Prices 11
III.. DE7JELOFMENT PROSPECTS 12Private Investment Prospects 12Public Sector Investment l4Manpoweer Limitations 19h.oductivity and Training 20Wages Folicy Issues 21
IV. FINANCING DEVELOPMENT 22Private Sector Financing 22Public Sector Finances 24Central Government Finances 2LRest of' the Public Sector 26Public Sector Investment 26Budget for 1971/72 28Public Sector Savings Outlook 29Financing Public Investment, 1971/72 - 1976/77 31
V. BALAINCE OF PAYMENTS AND CREDITWORTHINESS 33External Trade 33Domestic Exports 3)Retained Imports 35Services Account 35Capital Account 36Asian Dollar Market 37Gold M-irket 37Trade Prospects 38Petroleum Refining Prospects 39Exports of Manufactured Goods 40Services Prospects 41Current Account Outlook 41Capita]. Account Outlook 41External Debt 43Creditworthiness 3STATISTICAL APPENDID
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. - ° - - -q - -- : - - - - SIN GA PO RE'~~~~~~~y.." ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~~ ~~C,ty area
Exports of goods and services 1,'22 2,387 2,804Imports of goods and services 1,378 2,350 2,933Net transfers -13 -13 -7Current Account Balance 31 24 -136Direct foreign investment (net) 73 92 206Official capital (net) 58 20 46Errors and omissions 18 17 35Balance of payments surplus 130 153 151Total reserves at end of period 1/ 765 1,034 1,215
External Public Debt (US$ million):
Total outstanding (end of period) 169.2 214.1 269.2of wh.ich, Undisbursed 113.6 132.4 118.2
Annual debt service 4.9 6.8 11.0Debt service ratio (percent) 2/ 1.1 1.2 1.8
1/ At market value.2/ In relation to domestic exports.
SUMKARY AND CONCLUSIONS
i. Singapore became an independent country in 1965. The major problemfacing the young republic with a population of two million was that of un-employment, aggravated by the withdrawal of large British military installa-tions. To cope with this problem, the Government embarked upon a policy ofindustrializcation which has proved eminently successful. Between 1965 and1970 GDP increased by 80 percent and during 1968-70 the growth rate averagedsome 15 percent armually. Although rapid developirent of the manufacturingsector played a leading role in this growth, the resumption of trade withIndonesia after the lapse during the Sukarno "confrontation" with Malaysia,the servicing of the off-shore oil prospecting boom in Southeast Asia, theescalation of the Vietnam war and the disturbances elsewhere in the regionaffecting the Overseas Chinese have all contributed to Singapore's unprece-dented prosperity.
ii. Rapid growth during the past five years has been accompanied by astructural transformation of the economy. Stimulated by various incentivesand propelled by large-scale inflows of foreign private capital, the manu-facturing sector grew by nearly 25 percent annually during the past quin-quennium and doubled its share in GDP -- from 10 to 20 percent during the1960's, Petroleum refining, ship repairing and electrical machinery regis-tered the largest gains in value added. But even the more traditional indus-tries, such als food, beverages, tobacco and textiles also expanded substantiel-ly. The construction industry surpassed even the high growth rates of manu-facturing output. Initially stimulated by the GcverTzxent's highly successfullow-cost housing and industrial estates program, its capacity recently becarmeseverely strained under the added impetus of a hotel, office building andluxury housirng boom. Although the services sector, especially trade andtourism, also grew rapidly they were surpassed by the goods sector and theeconomy experienced a basic structural change. In the process, a surpluslabor economry was transformed into one with spot labor shortages.
iii . It is a tribute to Government policies that in spite of the virtualliquidation of the U.K. military bases with the corresponding decline inemployment byr them, sufficient job opportunities were generated in othersectors to achieve virtually full employment. These policies consisted pri-marily of the maintenance of political stability, the creation of a favorableinvestment climate, especially for foreign private investment, and theassurance of industrial peace. Since 1968 relative wage and price stabilityhave prevailed under the aegis of collective bargaining agreements with com-pulsory arbitration provisions. As a result, Singapore's competitive positicnhas been enhanced and it now appears to be most favorable vis-a-vis otherindustrializing countries in the area. At tSeesaraePtliadrtne economxic-andasocial cun-ail.iont o! thn o income gr6ups ha`tvtreatly 12ekefitted frbfmf theincrea!ec'anci imprpved job bpportunities geyfftated by rapid gtoY!th, the wide-spread publ-c-lo, ovt hoating program ahid.the hitd.iy suaccssful f 2&iilyplatLning program.
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iv. The authorities are currently at work on a development strategy forthe 70's which has as its aim continuation of the high growth rate attained inthe recent piast. The prospects for the next quinquennium appear to bereasonably favorable in the light of the industrial investments already madeand the heavy commitments now in the pipeline. The overall outlook for theremainder of the decade is equally favorable provided the sound officialpolicies are continued, although because of primarily physical constraints --manpower and land -- a somewhat lower annual growth rate (say 12 percent)may have to be settled upon as the upper limit. Achievement of a 15 percentgrowth rate through 1976 and only a somewhat slower one in the ensuing years,is predicated on continued inflow of large-scale foreign private investmentand on raising appreciably labor productivity in manufacturing. The authori-ties are fully aware of the requirements. They are continuing to offerinducements to foreign investors, especially to those who undertake to"deepen" the production processes, promote capital-intensive rather thanlabor-intensive industries and have ready access to promising export markets.At the same time, the authorities are proceeding with an intensive programof "technification" to improve the qualifications and raise the productivityof labor in manufacturing.
v. Growth of the private sector over the next five years may beexpected to be propelled by the heavy investments recently carried out or inthe p-lpeline in petroleum refining, ship repairing and ship building, elec-troniox3, electrical and other machinery, chemical and pharmaceutical products,cameras and optics, etc. It may be further bolstered by petrochemicals,fertilizers and other capital-intensive lines of industrial activities whichare still in early stages of consideration but are favored by the authoritiesbecause of their promise to enhance Singapore's earning capacity and theirpeculiar fitness to a setting with labor and land constraints. To providesufficient inducements to continued private investment the public sector willbe required to carry out massive investments in the economic and socialinfrastructure. Rapid development of industrial estates will have to con-tinue, and these will have to be provided with water and power; transportaticrnfacilities -- land, sea and air -- will have to be greatly expanded; andtelecommunications will have to be improved and amplified to meet the needsof a growing modern industrial and commercial center. In response to socialpressures and growing incomes the Government's low-cost housing program islikely to be accelerated and investments in education, sanitation and healthwill have to be expanded. Because of the crucial importance of raisingproductivity in manufacturing and maintaining competitive wage costs, publicinvestment in technical and vocational education will have to play a parti-cularly important role. It is estimated that public and private investmentwill average about 27 percent of GDP over the next five years with privateinvestment continuing to rely heavily (56 percent) on foreign capital inflo's.
vi. Ihe financing of Singapore's rapid development has benefittedgreatly frc,m rising domestic savings, sound management of public finances andlarge-scale inflows of foreign private capital. Private investment increasedits proportion from two-fifths to three-fifths of gross fixed capital forma-tion during the past five years and while external capital financed 30
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percent in 1966, it rose to 70 percent in 1970. Private savings rose from10 percent to 16 percent of GDP between 1966-69. Another factor facilitatingthe financing of the private sector has been the ra-2id evolution of financialinstitutions which mobilized domestic savings and external resources andchanneled them into investment. Fixed term deposits in commercial banks haveregistered a five-fold increase and the financial resources of financecompanies and insurance companies have recently growm at a very impressivepace.
vii. The outlook for the financing possibilities of the private sectorappears quite favorable. With the projected growth of the economy by 15percent annually over the next five years, per capita incomes will rise veryrapidly and even allowing for improved standards of consumption, a highdomestic savings rate -- around 20 percent -- may be expected. Moreover,savings-mobilizing institutions are increasing in number, including severalimportant foreign banks, new financial instruments are being introduced andan expanding capital market is being developed. Even more important,however, is that the rapid growTth of the economy is predicated on the main-tenance of the high volume of foreign private capital inflows and this initself will furnish large-scale fLinancial resources for the private sector.Needless to say, these favorable prospects for the financing of the privatesector assumie continuation of the Government's basic policies toward domesticand fo:reign investors. Finally, the fundamentally sound position and outlool:for public finances, should enable the authorities to assist in the financingof the private sector's needs whienever they deem it to be in the national
interest.
viii. Public sector finances have been soundly managed and a markedimprovement in public sector savings has taken place. Revenues of theCentral Government rose from 17 to 21 percent of GDP between 1966 and 1970,while current expenditures have been held down in spite of a rapid build-upof defense costs as a result of the withdrawal of U.K. military forces. Thefinances of the statutory authorities, which handle most of the economicactivities of the public sector, have been equally well managed and havegenerated substantial savings. In addition, the public sector has had accessto the growing surpluses of the Central Provident Fund. The combined savingsof the Central Government, the statutory authorities and the Central Provi-dent Fund increased from 7 percent of GDP in 1966 to 13 percent in 1970.Provided the same sound policies are continued over the next five years,public sector savings may be expected to rise by 14 percent annually and toconstitute 8 percent of GDP in 1977, after making allowance for adequatelevels of current expenditure. The realization of these estimates willdepend to a great extent on the growth of income and employment in majorsectors of the economy and the continued control over non-essential expendi-tures that has been exercised in the past so that resources may be charmeledinto development-supporting areas to an even greater extent than before.These savings are estimated to cover almost four-fifths of projected publicsector investments and together with modest amounts of internal and externalborrowing should cover the investment and debt amortization requirements ofthe public sector. Moreover, ample scope is believed to exist in containinggrowth in current expenditures and/or raising govermnent revenues.
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ix. The balance of payments has evolved satisfactorily in recentyears largely as a result of growth of entrepot trade following the endof "confrontation" with Indonesia and the large-scale private capitalinflows. Grrowth of earnings from entrepot trade by 14 percent annuallysince "confrontation" ended and the emergence of domnestic exports ofmanufactures, especially refined petroleum products, have generated acurrent account surplus every year until 1970. Since then heavy importsof capital goods for the manufacturing industries have led to a currentaccount deficit. However, these investment goods have been financedto a great extent by direct private investments and the foreign exchangereserves have continued to grow. Recent developrnent of an Asian dollarmarket and a free gold market in Singapore have contributed to this growth.By the end of June 1971 foreign exchange reserves are estimated at US$1.4billion, ecluivalent to some 8 to 9 months of retained imports at currentlevels.
x. The outlook for the balance of payments appears to be reasonablyfavorable. Taking into account the various forces in operation, entrepottrade is expected to grow by 8 percent annually at best and its role inoverall trade will decline. Exports of refined petroleum,will be more thandouble and those of other manufactures will grow in line with increasingindustrial output. These expectations are largely based on the heavyinvestments already made or under way by multinational firms with globalmarket outputs and the assumption that Singapore's competitive positionwill be maintained. In spite of this favorable outlook for exports,imports are expected to grow even faster, largely because of the continuedheavy requirements for capital goods, and growing current account deficitsare projected. However, as last year, the deficits are expected to becovered by large-scale private capital inflows and a viable balance ofpayments situation is envisaged.
xi. Because of the "openness" of the economy -- foreign tradeamounts to some 250 percent of GDP -- it is extremely vulnerable toforeign trade fluctuations and a comfortable foreign exchange reserveposition is dictated. On the assumption that the trade account wfillbehave in the manner postulated above and that private capitaliinflowswill be in the range of US$250 million annually during 1971-75, and thatreserves are drawn down rather sharply to four months of retained imports,no official capital would be required on balance of payments grounds duringthe next quinquennium. It should be emphasized, however, that an equallyplausible case for need of official capital inflow could be projected withonly minor changes in assumptions. Singapore is likely to be in the positionduring the next few years in wihich adverse variations well within themargins of error of any of the balance of payments variables projected here,could well create official foreign financing requirements. Such requirementswould also exist on the assumption that the relative change in reservesffom the present level of eight months import requirements to the projectedlevel of four months would take place gradually, remaining above the fourmonth level until about 1976. On this basis, which would represent a some-what more prudent reserve policy, there would be a requirement in the
projected balance of payments for official external borrowing of aboutUS$50 million a year. It would thus appear that from considerationsregarding reserve policy and private foreign investment uncertainties,continued official borrowing by Singapore is justified even though theimmediate necessity to supplement private capital inflows with officialborrowing is not clearly evident. An official external borrowing levelof about US$50 million a year seems reasonable for the next severalyears. Over the long term, i.e. in the latter 1970's, official borrowingrequirements may well be substantially higher, even allowing for someslowing of the growth of the economy because of labor and land constraints,and increasing complexity and deepening structural requirements of furtherindustrialization. In large measure this need for official capital seemslikely to arise mainly as an offset to very substantial factor payments onthe large-scale previous private investments. In any event, Singaporeshould be able to keep its official borrowings within reasonable levelsby making appropriate modifications in the growth rate. The aboveprojections assume an average annual growth rate of about 14 percentin the 1970's. Singapore would still be developing satisfactorily witha 9 or 10 percent growth rate.
xii. This outlook for somewhat slower economic growth in the latterseventies is quite consistent with a favorable assessment of creditworthiness.Longer term economic growth and export expansion are still likely to behigh, and Singapore's present external debt is low. The outstandingexternal debt is equivalent to US$285 million and service on this debt isunder 2 percent of domestic exports. After making allowance for the abovelevel of annual borrowing, debt service will be less than 1.5 percent in1975 and some 3.3 percent in 1980. Given the satisfactory past performanceof the economy and expectations of its continuation, Singapore may beregarded as creditworthy for loans on conventional terms of the indicatedamounts.
Io INTRODUCTION
1. Singapore, with about 2 million inhabitants, is situated onthe Malacca Straits, at what has been called the crossroads of Asia. Itconsists of the main Island of Singapore and a number of smaller surround-ing islands. With a total land area of only about 225 square milesi/ anda single-tier government structure, Singapore is a present-day versionof a city-state. A former British Crown Colony, it achieved autonomyfor domestic affairs in 1959 and attained complete independence when itjoined as a State in the Federation of Malaysia during the latter's forma-tion in 1963. In August 1965 Singapore withdrew from the Federation andestablished itself as an independent republic. The political record isone of marked stability, with the same party (Peoples Action Party)dominant and the same Prime Minister (Mr. Lee Kuan Yew) in office sincethe first general elections in 1959.
2. Singapore, under the new Government, entered the 1960's witha mixed legacy fromihe past. On the one hand, it had attained the statusof the worldts fifth largest port around which a highly developed entrepottrade was built. With quite high productivity and incomes in entrepottrade, this sector contributed more than one-sixth of GDP and Singapore'sper capita GDP was considerably higher than that of the neighboringcountries. The extensive U.K. military bases, contributing as much asone-eighth of GDP, provided another good source of income. On the otherhand, the manufacturing sector was small, its productivity was generallylow and both output and employment had dropped markedly during the pastfew years. Unemployment -- both open and hidden -- was high, and prospectsfor ameliorating this situation in the face of an expected rapid increaseinthe working-age population were far from bright. The achievement of fullemployment was, therefore, regarded as the prime goal of economic policyof the Government for the upcoming decade.
3. The only feasible way to achieve the goal of employment creationwas considered to be through a rapid expansion of manufacturing for exportmarkets. It was expected that employment opportunities created in thismanner would lead to the expansion of other sectors. The decision to pursuethis strategy in spite of the disappointing past record of performance inthe manufacturing sector was arrived at largely through a process of elimi-nition: Sirngapore did not have resources for more than a very modest primaryproduction and the service sector by itself could not absorb the growinglabor force. Even if some expansion could be expected in entrepot trade,this would not have much impact on employment, nor would the U.K. basesgive rise to the necessary new employment. With a small domestic marketit was further clear that any sizeable expansion of manufacturing inSingapore wiould have to be based on export sales. An UN IndustrialSurvey Mission to Singapore in 1960 and 1961 supported this judgment andmade a nunDer of recommendations as to the steps necessary to make thisexpansion possible. This mission cited two major obstacles: the badlabor relations which had developed in Singapore during the precedingperiod and the high wage level in relation to productivity, which renderedSingapore non-competitive with countries such as Hong Kong and Japan.
1/ The main island is 210 square miles.
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If these problems could be solved# however, Sinpspore*s comparativelywell-educated labor force would be an ioportent asset. The UN missiondid not foresee serious difficulties in raising enough capital domesticallyor abroad to sustain the industrial growth.
4. The Government's policies have been by and large successful andSingapore en,ters the 1970's with low unemployment and even a scarcity oflabor in some sectors, e.g. construction, ship-repairing, etc. Attain-ment of the full-employment goal has been accompanied by a high rate ofgrowth in real GDP -- in excess of 10 percent anni'al average for theperiod 1961-70 and close to 15 percent in the last few years -- andvirtual price stability. After the initial build-ip period, industriali-zation and foreign investment accelerated in the second half of the decade,spurred on by special tax incentives for "pioneer" firms and for exports,the provision of a modern industrial infrastructure, liberal laws regardingcapital movements and some tariff protection for selected industries inan otherwise free-trade environment. Singapore has also been able to solvethe problems of poor labor relations and uncompetitive wages in industry:with new labor legislation in 1968 there has been virtually no industrialunrest for several years, and a reduction offringe benefits combined withextreme wage restraint has glven Singapore a highly competitive positionindeed in wage-productivity comparisons with other countries.
5. New employment has not been created only by the industrialexpansion. A massive public housing program has also played an importantrole in this respect, at the same time as it has led to a considerableincrease in the standard of habitation for a large segment of the popula-tion. In the last few years there has also been a construction boom inoffice-building and hotels which provided employment in the constructionindustry. At the same time, the rapid growth of hotels indicates anothergrowing sector for income and employment which the Government has beenstimulating with some visible success: tourism. Partially offsettingthese favorable developments in the employment situation was the decisionby the U.K. Government in 1967 to withdraw completely in a few years timefrom the military bases in Singapore. These bases provided directly andindirectly an estimated 50,000 jobs. It adds to the measure of successof the Goveirnment's policies that rather than giving rise to unemployment,the withdrawal of U.K. forces has so far had the effect of permitting amore rapid expansion of industry where otherwise a shortage of skilledlabor might; have become severe. Although the full impact of the militarywithdrawal had not been felt by 1971, its earlier threat to underminethe employrnent situation has been greatly reduced by the rapid growth ofother sectors. Furthermore, the effect of the withdrawal has been mitigatedsomewhat by an agreement between U.K., Australia, New Zealand and Singaporethat ANZUK forces would be stationed in Singapore.
6. Although the development of Singapore's econonbr in the pastdecade has been greatly stimulated by sound Government policies, a numberof important exogenous events have contributed to the spectacular growth.
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The most important among these has been the resumption of large-scaletrade with Indonesia. The policy of "confrontation", adopted byIndonesia in 1963 towrard the then Federation of Malaysia, which sharplyreduced Singapore's profitable and important trade wdith Indonesia forseveral years was reversed. Furthermore, Singapore gained considerablebusiness from the boom generated by off-shore oil prospecting in SoutheastAsia and to some extent from the war in Vietnam. The 1967 disturbancesin Hong Kong also undoubtedly helped to focus the interest of the inter-national investing community on Singapore as an alternative. Finally,throughout the period, Singapore's one natural asset -- its location --has proven most valuable and has helped the Government in its attempts tocreate in Singapore a "service center" for Southeast Asia.
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II. GROWTH AND STRUCTURAL CHIANGE
7. The period since Singapore became a separate country has beenone of rapid economic growth. GDP increased over 80 percent from 1965to 1970 and the growth rate P ached an average of 15 percent per annumduring the last three years._ Accompanying this growth there have beenimportant changes in the production, expenditure and employment pattern.Unemployment has diminished sharply and there has been a substantialdecline in the rate of population growth.
Structural Change
8. Due to the virtual non-existence of a primary production sector(only 3 percent of GDP in 1970) Singapore's economy is still prediminantlya service one, but as the table below indicates the goods sector has beenincreasing its share rapidly over the past few years.
SECTORAL CONTRIBUTIONS TO GDP AT FACTOR COST(Percent of total product)
9. In the uses of resources, the most impressive structural changehas been the very rapid increase of investment and the associated relativedecrease of consumption, especially over the past four years. The bulk ofthis change has been within the private sector; private investment tookover 15 percent of the resources in 1970 as against only about 5 percentin 1966. Reflecting this change was the steep decline in the share of
1/ This refers to GD? at factor cost and in current prices. No GDP-deflatoris computed in Singapore, but indications are that price increases on thewhole have been small over the period.
private consumption, but so pervasive has been the impact of overall growthin Singapore that despite this relative decline, an increase in privateconsumption by almost 10 percent annually took place during 1966-70. Publicconsumption and public investment have been both increasing their shares,resulting in a slight growth in the total share of resources used by thepublic sector.
COMPONENTS OF GDP AT MARKET PRICES!.(Percent of total expenditure)
Private sector use 77.2 76.9 74.8Public sector use 22.8 23.1 25.2
1/ These figures are based on recalculated national accounts as given inTable 2.2b of the Statistical Appendix.
Sectoral Developments
10. Comparing the development of the main sectors of production duringthe past two years with the trend during the earlier period, reveals a strongacceleration of the goods sector while the growth rate for services remainedrelatively stable at a lower level -- low only in comparison with the ex-tremely high rate for the goods sector. Manufacturing has been growingrapidly aIl the time, but it gathered further momentum in recent years.The trend value for the construction industry is much lower than that forthe past two years.
11. The changes among several subsectors of services appear moreerratic. The speed of the decline in earnings from the military basesreflects the phasing of the U.K. military withdrawal. The figures forentrepot trade in the earlier years reflect mainly increased activity 1/following the end of the "confrontation" between Indonesia and Malaysia,-while in 197'0 they largely reflect the sharply declining prices for rubberand other commodities. The winding down of the U.S. military effort inVietnam may also have contributed in part to the decline in 1970. As forutilities, the sector grew rapidly (although not as rapidly as GDP in thelast few years), propelled mainly by the rising industrial power demand.
12. Tourism earnings have been one of the fastest growth factors inthe period, albeit starting from a small base, and contributed almost 5percent to GDP in 1970. The number of foreign visitors has grown at anaverage anmnal rate of over 35 percent, due to such factors as Singapore'sposition on important sea and air routes combined with the attractionsof a duty-free shopping center, the influx of U.S. soldiers on "rest andrecreation .Leave" from Vietnam and its emergence as the regional base foroil exploral;ion and other business activities. The growth of tourism has
1/ The conf rontation policy, initiated by the Sulcarno regime in Indonesiain 1963, aimed at the breaking up of the newly-formed Federation ofMalaysia, of which Singapore was then a member. The result was acomplete disruption of recorded entrepot trade activity betweenSingapore and Indonesia. The confrontation ended in 1965.
also had an impact on GDP in a secondary way, namely by stimulating aboom in hotel construction in the last few years; a substantial part ofprivate investment in buildings has been in hotels.
Policy of Industrialization
13. The main emphasis of the Government's development policy through-out the past decade has been on promotion of industrial growth and duringthe last few years this has met with great success. The real breakthroughcame in 196f8, when industrial employment and value added both increased byabout 28 percent and similar rates have been reccrded in 1969-70. Themain factors responsible for this breakthrough can be traced to a set ofmeasures implemented by the Government in 1967-68. The Government intro-duced new anid generous incentives for industrial investment and new laborlegislation which put an end to the labor unrest which had prevailed,reduced fringe benefits and generally provided for stable wages underthree-year minimum collective bargaining agreements with compulsoryarbitration. Both of these measures served to attract large-scale privateforeign investment which accounted on the average for about three-fifthsof total pr:ivate investment during 1968-70. The very rapid growth of theeconomy in these years is largely attributable to this factor.
14. The institutional framework to implement the industrializationpolicy was bolstered by establishing the Jurong Town Corporation (JTC) andthe Development Bank of Singapore (DBS) in 1968 to take over the respectiveresponsibilities for developing industrial estates and for industrialfinancing with Government support. The Ekonomic Development Board (EDB)could thus concentrate on promotional activities needed to find new inves-tors and to help them launch their projects in Singapore. These measureswere so successful that the Government adopted a more selective approachand restricted tax incentives in 1970. The range of products which willbe encouraged henceforth by these incentives has also been narrowed andtariff protection for import-substituting production is no longer granted.
15. The largest industrial subsector is the petroleum industry withabout 30 percent of the total output in 1970. It is in the nature ofrefinery operations, however, that the proportion of value-added in out-put is low, and so the contribution of the petroleum industry to totalmanufacturing value-added was only 16.5 percent. Transport equipment,which includes the ship repair industry, was a close second with 16percent of total value-added, and electrical machinery contributed 10percent. Of the more traditional pursuits the food, beverage and tobaccoindustries added another 14 percent of the total. The petroleum industryplays a negligible role in employment creation, providing only 1.6 percentof total manufacturing employment in 1970. The leading industry fromthe standpoint of jobs was transport equipment with 15.5 percent of thetotal, followed by textiles with 13.5 percent and electrical machinerywith 11.5 percent; the food industries group accounted for 9 percent ofemployment. The electrical machinery and transport equipment industries
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stand out both in terms of value-added and employment. The drop in thegrowth rate in transport equipment in 1970 to some extent apparentlyreflects a cEapacity constraint in the form of a shortage of skilled labor(welders, fitters) and a lag in the expansion of available shipyards.
ANNUAL GROWTH RATE OF VALUE ADDED(Percent)
1968 1969 1970
Textile and :Leather 56 37 17
Electrical machinery 10 170 140
Transport equipment 59 120 24
All manufacturing 28 31 29
16. The main emphasis of the industrialization drive was on employ-ment creation and it succeeded in that employment growth has kept pacewith the growth of value-added during 1968-70, in contrast to the earlierperiod when employment grew much more slowly. Average labor productivityin manufacturing appears to have risen very little and the rapid indus-trial expansion has been practically wholly dependent on a growing laborinput. To a large extent this is explainable by the very rapid growthitself: each year there has been a large proportion of new undertakingsand it is normal to experience a lower productivity for the initialperiod; this may statistically mask productivity increases in establishedlines of production. With fears of unemployment largely dispelled and withspot labor shortages appearing, possibilities of future rapid growth willhave to largely rely on rapid growth in industrial productivity. Prospectsin this respect are encouraging as indicated below in paras. 49 and 50.
Housing and Construction
17. Construction has been expanding rapidly since 1967 when theGovernment introduced stimulating measures for private construction inthe form of substantial reduction in property tax rates for projectsfalling in itsurban renewal program. An ambitious target was set for thepublic housing program during 1966-70, and the rate of new starts wasstepped up greatly in 1967. To stimulate the flow of savings into housing,a scheme of selling on easy installment terms flats built by the Housingand Development Board (HDB) was introduced. The success of these policies
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has been great and a serious demand pressure has developed in the sectorwith rising wages and prices for materials as a consequence.
18. Housing construction is dominated by the impressive publichousin ,fprogram, which now encompasses over 80 percent of' the units beingbuilt.- This program was started when the new Government came into powerin 1959 and it achieved some momentum by 1965 under the first five-yearplan. For the following five years a target of 65,000 completed units wasestablished, and although not quite met, the shortfall was slight. It isestimated that in 1970 about one-third of the entire population was housedin flats built by HDB, and the goal is to increase production further witha target of 100,000 completed units under the third five-year program.Since 1969 when withdrawal of the contributions to the Central ProvidentFund (CPF) was authorized for the purpose of paying for HDB-flats, theprcportion of sales has increased rapidly, and there has developed quitea long waiting list (over 30,000 in September 1971) for these flats. Thelarger flats are now mainly sold rather than rented.
19. The combined demand from the public housing program, the boomin hotel and office construction and the construction associated with theindustrial e)xansion has severely strained the capacity of the buildingindustry. While a large influx of immigrant labor on short-term workpermits, the majority of which has been absorbed by the construction sector,has boosted the supply of unskilled labor, there is an acute shortage ofskilled craftsmen and competent work-site managers. During 1970-71 therehave also beeni temporary shortages of materials such as cement. Steelprices are fixed by Government, but other important building materials haverisen in price by 20 to 25 percent over the last two years and wages havemoved upward in the absence of wage agreements. It is estimated that whilebuilding costs were rising by only 1 to 2 percent annually through 1967,they rose by 3 percent in 1968, 5 percent in 1969 and 8 percent in 1970;the rate jun,ped to 1 percent per month in 1971.
Population and Manpower
20. Population growth in Singapore fell from a rate of 2.5 percentannually in the first half of the 1960's to about 1.5 percent in 1968-69.An increase of 2.8 percent in 1970 is reported but it seems that this islargely the result of better coverage since it is based on a census. Whatis certain is that the rate of natural increase has been declining steadilythroughout the decade as a consequence of falling birth rates; the crudebirth rate was 37.8 per thousand of population in 1960, 29.9 in 1965 and22.1 in 1970. This has been partly due to the decline in the proportion
1/ As private sector flats are larger, the public housing program coversabout 55-60 percent of the total in terms of floor area and construc-tion value.
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of child-bearing women in the high fertility age group of 20 to 34 to thegeneral improvement in income and educational levels, but more directly toconsistent family planning efforts.
21. A five-year Family Planning Program was adopted in 1965. Thisprogram aimed at reducing the then prevailing crude birth rate of 30 perthousand to 20 by setting a target of 180,000 new acceptors during 1966-70.The target was achieved during the first three years, although not in1969 and 1970, and the total for the period was some 157j000. Age-specificfertility will presumably continue to decline due to the continued effortsof the Family Planning and Population Board, but the effects on the crudebirth rates will be countered by changes in the age composition of thepopulation, which currently are such as to bring lar'ge numbers of womeninto the age groups where fertility is highest. It thus seems unlikelythat the original aim for the birth rate will be achieved; preliminaryfigures for 1971 seem to bear this out indicating if anything a siightincrease over 1970.
22. Reliable data on labor force and employment are sadly lacking.The economically active population is estimated to have increased by about75,000 between 1967 (the year when the U.K. military withdrawal wasannounced) and 1970; during the same period unemployment dropped by about15,000. Moreover, an estimated 20,000 of the 30,000 people who lost theirjobs as a reisult of the withdrawal have also been available for new employ-ment in other sectors, raising the total to be absorbed to at least 110,000.The manufacturing sector increased employment by about 60,000, and thepublic sectc,r by about 15,000. The remaining 35,000 must have been absorbedby other sectors for which no data exist. This seems reasonable, however,considering the very rapid growth of the construction and tourism sectorswhich are both rather labor intensive. This assumed employment balancewas assisted by the build-up of the National Defense Forces which currentlydrains from the labor force an estimated annual net of about 5,000 menand by increasing enrollment in secondary and higher education.
23. Faced with a growing shortage of skilled labor in variouscategories, the Government began to relax immigration restrictions in1968 and issued about 56,000 work permits up to the middle of 1971. Inaddition, a system of month-to-month block permits for construction laborhas allowed 10,000, mostly West Malaysians, to come to work in Singaporeby mid-1971;; further it is freely admitted by the authorities that thereare a substantial number of additional non-citizen workers without permits.Although the Government is aware that this rather rapid immigration ispresenting a number of problems in terms of social integration, for thetime being it sees no alternative if the economic development is to con-tinue. The authorities have recently even taken measures to give theimmigrants a more secure status by lengthening the period for whichpermits are given and sinplifying the process of obtaining citizenship.
Wages and Prices
2h. A high degree of wage stability has prevailed since 1967 inspite of the rapid growth in GDP. According to annual sample surveys therehave been no increases at all in average earnings per hour through themiddle of Jul.y 1970. However, these averages exclude bonuses and ex gratiapayments, which play an important role in determining the total remunerationof workers in Singapore. The reported average is also influenced by theinflux of a large number of low-paid female workers. Nonetheless, wagestability has prevailed and is explainable in institutional terms: thenormal form of payment is time rates and the labor legislation of 1968provides for three-year minimum contract periods for collective agreements.
25. More recently upward pressures on wages in some sectors haveappeared as a consequence of shortages of skilled labor. The constructionindustry has already been mentioned (para. 19) and it is estimated thatwage increases in the manufacturing sector during 1970 have been 2.2 percentin labor intensive branches, 6.5 percent in branches utilizing medium skillsand 11 to 12 percent in high-technology branches. It is reasonable toassume that figures for the second half of 1970 and for 1971 will show somegeneral increases in wage levels, especially since many collective agree-ments have expired in that period.
26. It is difficult to get an accurate picture of price movementssince very few price indexes are availab'Le. According to the consumerprice index a very stable price level has prevailed from 1967 to 1970,with even slight declines in 1968 and 1970. The main reason for this isthat the focd item which accounts for nearly one-half declined from itshigh in 1967. There is general agreement, however, that the compositionof the index, which was fixed in 1960, no longer adequately reflects theaverage consumer's expenditures because it gives undue weig'ht to suchitems as rice.
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III. DEVELOPMENT PROSPECTS
27. The Government is currently working on a set of proposals fora developmenl; strategy for the 1970's and a plan of action for the publicsector in support of that strategy. The first stage of development sinceindependence, including the practical attainment of the full-employmentgoal, was achieved with only selective sector planning but it is now feltthat the next stage will require a higher degree of concerted action.The feasibiLity of doubling per capita income by 1975 and a 15 percentGDP growth rate for the rest of the decade is currently being examined.Although the various Government departments have submitted proposals tothe Ministry of Finance regarding the financial requirements in theirrespective sectors, the planning process has not yet reached a stagewhere any firm conclusions can be drawn. However, some broad implicationshave emerged.
28. The past pattern of growth has been one of rapid industrializationled by private foreign investment. Whether the high rate of growth can besustained, will depend on continuation of foreign private investment on alarge scale and on the limited land and manpower resources not imposingserious constraints. Given the present commitmenits, particularly in theoil refining and ship repair and shipbuilding industries, and the largenumber of applications in the pipeline, foreign private investment can beexpected to continue to provide the impetus for rapid industrial growth inthe next four or five years. Moreover, availabilities of manpower and landshould not impose insuperable obstacles during this period provided measuresare taken promptly to expand and improve existing supplies. It seems,therefore that over the short-to-medium term, a 15 percent GDP growfthtarget would be feasible. Beyond the mid-seventies, growth prospects willdepend to a large extent on whether a "deepening" of the industrializationprocess takes place. Many of the large-scale projects such as the oilrefineries and shipyards will be completed by then and a slowdown in therate of fore,ign private investment, and consequently in the rate of economicgrowth, may be expected unless new large-scale capital-intensive projectsare launchedi after 1976.
Private Inveistment Prospects
29. The short-to-medium term growth of the manufacturing sector willbe largely determined by likely developments in the flow of foreign privateinvestment. Foreign private investment in fixed assets in 1970 amounted toabout S$500 million, reaching a cumulative total of S$1,230 million, witha further S$700 million in the pipeline in the form of commitments. Thestream of new commitments has continued throughout 1971 and severalimportant new ventures have been announced. Most of these have been bymultinational corporations or other large firms with established accessto export markets.
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30. Very large investment programs are underway in the petroleumindustry where total refining capacity in the country now stands at some370,000 bpd (barrels per day) of crude oil. Firm projects with construc-tion already started will increase this to some 850,000 bpd in two yearstime. With advanced plans for further investment, industry projectionspoint to a total capacity in excess of one million bpd by 1975, whichwould make Singapore the third largest refining center in the world.In addition, there is also some widening of the product line with thefirst plant for hydrocarbon solvents recently commissioned and two plantsfor lubricants under construction. The Economic Development Board isalso having exploratory discussions with some interested parties about apetrochemical complex.
31. The shipbuilding and repairing industry is expanding rapidly withoutput expect to reach; $745)ilTliWon in 1971 compared with S$230 millionthe year before. So far the emphasis has been on repairs and new buildinghas been restricted mainly to small and simple vessels. The scene ischanging, however, with an increasing demand for specialized equipment,such as oil rigs for the regional offshore oil exploration and productionactivities. Of utmost importance for the future of the industry are theannounced plans by several giant Japanese shipbuilding firms to invest ona large-scale in Singapore. IHI already operates the large Jurong Shipyardas a joint venture with the Government and the decision has been taken toexpand the capacity of its drydocks to take 300,000 tonners shortly withpresumably even larger ones to follow. Hitachi has embarked together witha local firm on a program that will include a drydock with capacity for260,000-tonners and lead to a total employment of about 4,000. Mitsubishiplans to invest about S$150 million, possibly in a joint venture withthe Governme!nt, and hopes to be able to start building tankers by 1974 insizes up to 400,000 tons. Not only does Singapore have an increasingadvantage irn labor costs over Japan, but it is also very convenientlylocated on the important Middle East to Japan route. Finally, discussionsare at an advanced stage about proposals for Japanese firms to engage inthe manufacture of ship parts in Singapore; these are now almost all importedfrom Japan. Besides increasing the value added earned by the shipyards,this would be an important step towards the establishment of a more advancedengineering industry in Singapore.
32. In the fields of electronics, electrical and other machinery, andchemicals a number of large international firms are stepping in to startproduction. Plessey, which up to now has been conducting assembly opera-tions only, is embarking on a S$75 million construction program for an elec-tronics complex which could ultimately provide employment for some 5,000persons. Philips is similarly investing about S$70 million in fourfactories, and General Electric which already has two factories in Singaporeis investing in three more and will attain a total employment figure ofsome 3,000. Beecham is investing S$10 million in a plant for antibioticsand other pharmaceutical products, and Rollei has begun the shift of itsentire production of cameras and cine projectors from Germany to Singaporeand plans to employ about 3,600 persons by 1972.
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33. The list of similar ventures already underway or in an advancedplanning stage could be made substantially longer and it is notable howthe recent additions reflect the increasingly selective policy of theGovernment. Niew investment projects are only approved if they are expectedto contribute significantly to Singapore's export earnings.
Public Sector Investment
34. To sustain the high pace of growth and structural change ofthe recent past and to provide inducements to continued private investment,the public sector will be faced with very large investment requirementsfor both economic and social infrastructure. The industrialization drivecreated demand for industrial estates and factory buildings, for utilitiesand roads. The increased trade has generated a demand for port and airportfacilities as well as for telephones and other means of communication.There is still much substandard housing to be replaced and the combinedeffect of rising expectations and skyrocketing land prices for privatehousing, create growing pressures for low-cost public housing. All thesefactors accentuate the problem of an increasing demand for land, whichoften can only be satisfied at high cost through reclamation from the seaor from draining of swamps. They also make it imperative at all times totry to achieve the most economical land use pattern; the urban renewalprogram and the need to resettle villages, farms and businesses to makeroom for the urban expansion are the unavoidable and costly consequences.
35. As mentioned above (para. 27), there is as yet no developmentplan or other comprehensive plan for the public sector in Singapore. Thereare, however, some fairly fixed plans for important sectors, especially inthe areas where statutory authorities have responsibility. With the aidof the statutory authorities' plans, information from Government departmentsand some mission estimates it is possible to compile estimates of the pro-bable order of magnitude of the investment requirements of the public sector.!-Pile pubifc 'sector investxnahts in fiscal year 1971/72 are expeczed tc beat only S$859 million a steep rise to S$1,100 million in 1972/73 is indicated,followed by limited increases during the remainder of the five-year period.It is, of course, rather unlikely that the actual development will be quiteas projected; it would seem probable that while the total amounts over theperiod may be largely unchanged some investments will slip towards the endof the period0 Moreover, there have been other than financial constraintson implementation capacity and they may also prevail during the next fewyears. Finally, it should be stressed that the various partial plans havenot been approved as integral parts of a comprehensive framework by theMinistry of Feinance and thus may be modified at a later stage.
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PROJECTED PUBLIC SECTOR DEVELOPMENT EXPENDITURES(In millions of Singapore dolLars)
1/ Land transfers from the Government to JTC have been deducted.
36. The estimates of the amounts to be extended as loans to industrial
and commercial enterprises were particularly hard to assess because of their
nature. This category has been rapidly rising in the past few years and is
a dominant item in the Government development budget for the current fiscalyear. Its future behavior must be judged in conjunction with the Govern-mentts domestic borrowing as a source of funds, as it can be said to acertain degree at least that it is only the net sum of these two items thatmatters from a financing point of view; the overall size of the budget can
be varied by increasing or decreasing the amount lent to and borrowed from
the non-government sector. The determining consideration then will be
whether in the view of the Government the enterprises concerned will be
able and should be made to raise their funds directly in the capitalmarket or whether the government should continue to act as an intermediary.
The notional figure used in the projections above reflects the feelingexpressed iil the Ministry of Finance that whereas Government lending may benecessary in the initial stages as new ventures are being launched (e.g. DBS
and the natLonal shipping line), these should gradually be able to stand on
their own financially. The emergence in Singapore of a more developeddomestic capital market should make it easier to implement such a policy.
37. The rapid development of industrial estates wiU continue with1,500-2,000 acres of land prepared annually by the JTC. The bulk of this
is in Juronig Town, which is by far the largest estate in Singapore and
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where the large land-users among the industries are located. A new
estate of a similar kind is being opened up at Sernbawang where one of the
former U.K. navy installations, including a large shipyard, provides the
nucleus. The other estates, around a dozen, are smaller and have nodirect access to the sea; they are used for light and space-intensiveindustries, quite often provided for in so-called "flatted" factories.
The demand for industrial land is such that JTC practically has no un-
committed reserves of developed land and it can in fact be quite selective
about which industries to accept and where to offer them locations. The
largest part of the expenditure foreseen is for land preparation, which
includes reclamation, dredging, filling, road preparation, etc., another
activity wihich requires considerable amounts of money is for the building
of factories for lease.
38. Ihe amounts shown in the above projections are far smaller thanthe expenditures JTC will incur. Part of the explanation is that JTC will
be paying several hundred million dollars for land bought from the Govern-
ment, and this has been treated as an internal transfer in the projections.
The rest of the difference stems from the fact that JTC is increasingly
spending money on functions which should not properly be classified under
the heading of industrial infrastructure, foremost among these is low-cost
housing which according to present plans will become the largest single
expeinditure item for JTC in a few years time. This in turn follows from
the decision to make JTC virtually totally responsible for the entire
development of Jurong Town and not only for the industrial estate proper;
it develops the Jurong port, it provides housing both of the low-cost
type and so-called executive flats and luxery housing, it provides the
social amenities, etc. In many respects JTC may be said to resemble the
New Town Corporations of other countries and indicative of the development
foreseen are the following figures: currently Jurong Town provides employ-
ment for some 36,000 while the total resident population is only about
32,000 -- the saturation stage for the industrial estate is expected to beat a level of about 70,000 employed while the population by 1980 with thehousing program foreseen may be of the order of 400,000 to 500,000.
39. Investment in power generation, transmission and distributionwill be on a very high level throughout the projection period, in the order
of S$175 million annually. Major projects underway are stage II of the
Jurong Power Station where three units of 120 MW each will be commissioned
during 1973, the first stage (another 360 MW) of a new power station at
Senoko to be commissioned during 1975, and substantial strengthening
of the transmission system including the introduction of 230 kV as trans-
mission vc,ltage. The power supply situation at present is good, with an
installed capacity of about 700 MIT and peak demand around 460 MU, but
forecast load growth is 24 percent annually in the period 1971-73 and at
least 15 percent annually after that, so large additions to capacity will
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be needed soon. The expectation of an unusually large load growth during
the next few years is based on reasonably firm knowledge of new industrial
demand (e.g. from refineries), which could push the proportion of sales
that go to industrial and commercial users up to about 75 percent against
last year's figures of 65 percent.
40. A large peak for investment in water supply is expected in 1972
and 1973, when expenditures of S$76 and $110 million respectively are
planned, to be compared with a level of around S$15 to $20 million in
the past. Singapore's water now comes from two different types of sources:
the larger part from river sources in the state of Johore in Malaysia and
the rest from impounding reservoirs on Singapore island. The cheapest
way of obtaining additional supplies from a purely technical point of view
would be to develop additional sources in Johore, but as there are political
complications connected with this (the present installations stem from the
period before independence), the Singaporeans have decided to look for more
water in their own territory. The shortage of water in 1971 has served
to underline the importancT of this.
hi. Investment to improve transportation will require major
expenditures in spite of the fact that the compact country does not need
long roads or railway lines. Major development programs are already under
way for the ports, both at the main port of Singapore and at Jurong and
total expenditure on them is expected to reach peaks of about S$90-100
million in 1972 and 1973 and to remain over S$50 million annually through-
out the projection period. Traffic is expected to continue to grow rapidly,
and PSA's largest investment items concern construction of container
handling facilities (the first specialized container ships are expected to
call at Singapore during 1972) and the provision of new warehousing space
which now is in very short supply. There is also a sizeable expenditure
for reclamation of land in order to provide for further port expansionand unavoidable relocation of functions in connection with the urbanrenewal program. Jurong port, which is designated as the major port forbulk commodities and of course generally serves the large industrial estate,
has seen a rapid build-up of traffic during its few years of existence
and will :provide new deep water berths.
42. Both passanger and freight traffic through the airport are
increasing at a pace that continually prompts new and higher forecasts for
future volume and additional facilities. The choice stands between an
expansion of the present airport or the development of another former U.K.
military airfield into a second major civilian airport. The second alter-
native is estimated to be very much more expensive than the first, but it
would mean less noise problems for the urban area; in both cases the
resettlement problems will be great. As the lead time for the construction
is very long, a decision will be required at the latest by the end of
1972 and so amounts for the project have been incorporated in the expendi-
ture projections from 1974 on.
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43. With regard to public transport, the Government feels that byinterim measures it will be possible to get along through the decade butthat some more efficient system of public transport is urgently requiredby about 1980. A recommendation for the introduction of a mass rapidtransit_system is contained in a UNDP-financed master plan study which hasbeen submitted in draft form in 1971; the next stage will be a moredetailed study for which the IBRD will be the executing agency. Theprojection assumes that expenditures will begin in 1973/7L and thatS$150-175 million will be spent during the next five years.
44. The expansion plans in the field of telecommunications callfor a fairly stable level of expenditure during the next five years. Mostof the money will be used by the STB for improvements to local telephoneservice, where demand is expected to grow by 16 percent annually, butwhere supply so far has kept pace very well. The increasing importanceof Singapore as a commercial and financial center also means that demandfor telex and other international telecommunications is rapidly growing.In order to increase flexibility of operations and to make a quickerresponse to new demands possible, the present Government Department ofTelecommunications which is responsible for this service will be turnedinto a statutory authority on April 1, 1972.
45. The plans for the public housing sector call for almost twiceas many units in the period 1971-73 than were built during the precedingfive years, or about 120,000 compared with 62,500. At the same time theaverage size will be larger, about 750 sq.ft. as against about 500, andconstruction costs are rising. This makes for very large increases intotal expenditures which are reflected in the projections.
46. In view of the current limited capacity of the constructionindustry there could reasonably be some doubt as to the feasibility ofthe very large rise in housing construction volume planned. On the otherhand, there are developments on the demand side for construction thatpoint to the possibility of some real expansion room for public housing.Thus, the hotel construction boom is practically over and the level of newstarts there will fall off sharply. A number of observers also feel thatthe current increase in private housing construction will fade away againsoon, as it is spurred by a temporary increase in demand for luxuryaccommodation which will not be sustained for long as rising costs haveall but priced private housing out of the market. Similarly, doubts areraised as to whether there will not soon be an over-supply of shop andmaybe office space (the office space provided for in known projects bymid-1971 was reported to be more than three times the space currentlyavailable). There may thus indeed be some more capacity in the construc-tion industry available for public housing, and the Minister responsiblehas already stated that an effort will be made after 1973 to further in-crease HDB's program.
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47. The remaining sectors are all of lesser financial importanceand in most cases no spectacular changes in expenditure levels are fore-seen as compared with the recent past. The cost of land acquisition hasbeen projected to rise somewhat as a consequence of the generally risinglevel of activity and ensuing need for land; the same applies to re-settlement expenses where the rates of compensation have also been increasedrecently. In education, the relocation and expansion of the University ofSingapore will be a major cost item, but this is balanced by the fact thatneither primary nor secondary school population will increase during theperiod and thus capital costs for new schools may be more limited. Thegrowing need to give specialized training to workers in support of thedevelopment strategy will entail expenditures, but one can expect theindustries concerned to contribute materially to them. Finally, thebuilding of hospitals has lagged and rather large increases in expendi-ture from the very low levels in the past years should be expected; aU.K. firm of consultants has just started a study with the view of estab-lishing a program for modernization and expansion of hospitals.
Manpower Limitations
48. Thei rapid growth of the past few years has transformed Singapore'seccnomy from a manpower surplus to one with spot labor scarcities. Com-plaints of shLortages are voiced by many of the expanding sectors and itappears that the supply of manpower may well turn out to be among the con-straints for the high growth ambitions of Singapore. The Economic Develop-ment Board has made projections of manpower requirements for growth ratesof 15 percent or higher annuanly which are some 30 to 40 percent greaterthan the projected supply in 1975 and 45 percent greater in 1980 for mostcategories of skilled and semi-skilled labor. The Government is wellaware of this problem and is taking various steps to increase the supplyof skilled manpower. One obvious recourse is to increase immigrationand measures have been taken toward this end. While this can be expectedto be of help) in satisfying the demand for smaller groups of highlyskilled labor, it is hardly adequate to meet the overall labor shortage.There. ae also ssrious problblms re1atfet to thed aesor,:pioft ofX nmigrantsuhicl% inclinas .the authorities to tbhe viev tSat a "out off point" forirLm igr.ation vnill come iTithin three to fiVe 'years.
b9. Another way of increasing the labor force is by raising partici-pation rates and the Government is taking steps in this direction, particularlyby offering incentives to married women. These include locating light in-dustries next to the new housing estates with a view of attracting those notwilling to commute over great distances. Recently the authorities haveindicated their willingness to share with employers the costs of runningnurseries. The higher wages which can be expected in the future may alsoattract more women to seek employment outside the home. The overall effectof these developments and of the changes taking place in the age distribu-tion within the working-age groups are difficult to quantify, but it seems
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reasonable to assume some increase in the participation rate during theperiod under consideration. However, there may emerge a tendency towardsshorter wo;rking hours.
Productivity and Training
50. On balance it seems realistic to expect the manpower availabilitiesto grow by no more than 4.6 percent annually up to 1975 and somewhat moreslowly thereafter. This still leaves a gap in the "requirements" projectedby the Economic Developmemt Board. Since in receint years virtually allproductivity gains took place outside manufacturing and for avariety of reasons these may be more limited in the future, the neededlarge gains would have to come primarily from manufacturing. There areseveral reassuring factors in this connection. First, the changingcomposition of industrial output fostered by the Government's more selectiveapproach to industrialization will lead to a comparatively more rapidgrowth of subsectors with higher productivity. Second, there is someshift within the expanding subsectors fromassembly and other operationsinvolving only low skills and much labor to actual manufacturing, whichshould lead to a higher value added per worker. Third, as noted inparagraph 16, many firms have begun their operatinns only recently andwill gradually pass from the initial period with low productivity to anormal, higher level. The logic of rapid expansion is, of course, thatthere will also be in the future a number of recently started operatinnsin their initial lower-productivity stages; it is reasonable to expect,however, that this will be a decreasing proportiun of the total as theestablished base expands. Consequently, it appears reasonable to expectconsiderable gains in overall productivity, but whether they will sufficeto achieveI the growth goals sought remains problematic.
51. Much of the productivity gains counted upon can only be realizedif the supply of skilled manpower in adequate, a fact that brings thequestion of training into focus as a crucial one. The Government ws wellaware of this and is making determined efforts to increase training capacityboth for high level manpower and for skilled workers. However, the verylarge deficits projected by the EDB after making allowances for thesetraining efforts, indicate, the magnitude of the problem. There is atpresent very little advanced industry actually operating where futureworkers could receive in-plant training and experience. The Governmenthas reached agreements with some of the firms that are establishing largeplants that they will train a number of specialized workers abroad andthis should help greatly, but again the numbers are limited. There isalso the time factor. Training measures that have not yet been startedcan hardly be expected to influence materially the supply of skilledmanpuwer over the short-term. Especially crucial seems to be the lackof experienced staff. While it is possible to train welders, fitters,concrete workers, etc., in crash programs, this is not the case with thosewho are to hold supervisory positions (foremen, work-site managers, etc.).Even making allowance for the very high increases in productivity growth
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which have taken place in other countries within the area (Japan, Hong Kong,Taiwan, Korea), the manpower constraint might prove insurmountable. ButSingapore has demonstrated in the past an ability to surmount what appearedto be quite formidable obstacles.
Wages Policy Issues
52. Workers in Singapore have demonstrated a remarkable spirit ofcollective responsibility by accepting the sacrifices for the benefits ofthe 1968 Employment Act and by adhering to its rules which largely pre-cluded any demands for higher wages until now. As economic success hascome to the country, labor has observed others reap visible benefits in theform of higher profits and salaries of those not covered by the legislation.Needless to say, decreasing unemployment, some selective wage increasesand especially improved housing have been tangible benefits for the broaderstrata, but it is only natural that there is now a rising pressure for con-siderable easing of the wage-freeze for workers. The Government is acutelyaware of the reasonableness of such demands and has officially promised areview of the wages and incomes policy with a view of raising the incomelevels of all segments of population, not only the ones organized in stronglabor unions.
53. The question of the future wages and incomes policy is a veryimportant one, Wages can and should undoubtedly rise, but at the sametime it is necessary that the process be kept under some control as it iscrucial to Singapore's continued success in attracting foreign manufacturingfirms that the wage/productivity ratios for "desirable" industries remainmore favorable than in competing countries. At the same time, wage in-creases when judiciously applied, can also be used as a tool to helpimplement the development strategy; higher wages will put pressure onsectors which now use rather labor intensive methods of production tochange their techniques and thus release labor to other, expanding sectors,and higher wages can also be expected to have a beneficial effect on thefemale labor force participation rate. There is also th1equestion of equity which is important for the continued social stability.The National Trade Union Congress and other unions embrace only a smallproportion of the total number of employed and ways must be found toinclude all groups in an equitable incomes policy.
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IV. FINANCING DEVEILPMENT
54. T'he impressive growth achieved by Singapore is in large partattributable to the rapid growth of domestic savings and largJe scaleexternal capital inflows and their efficient utilization in key sectorsof the economy. The existence of a favorable climate for privateinvestment has encouraged the growth of financial institutions anddiversification of their activities. The principal financial institu-tions are the thirty-six commercial banks. Although only eleven ofthese are local banks, they account for about half of total bank deposits.These accept four different types of fixed deposits with maturities offrom one to twelve months and pay interest rates from 3 to 6 percent.They also accept savings deposits yielding 3-1/2 percent interest. Inaddition, the financial institutions include finance companies, insurancefunds, and the stock exchange.
55. At the apex of this financial pyramid, supervising the activitiesof these institutions, are the Monetary Authority, the Currency Board,and the Bankers' Association. The Monetary Authority and the CurrencyBoard discharge the functions of a central bank. The Monetary Authoritysets reserve requirements for commercial banks and finance companies andmanages the overseas investments of the Government. The Currency Boardissues notes which are 100 percent backed by gold and/or external assets.The Bankers' Association sets interest rates, subject to approval by theMonetary Authority. The effective interest rate charged by commercialbanks on loans and advances as of June 1971 averaged 9 percent.
Private Sector Financing
56. The level of private investment is estimated to have risen fromS$184 million in 1966 to S$918 million in 1970, increasing its proportionof total g,ross fixed capital formation from two-fifths to three-fifthsduring this period. Large scale capital inflows from abroad, includingthe use of Euro-dollars, financed nearly 70 percent of private investmentin 1970, as compared with 30 percent in 1966. The remainder was financedby local savings -- by the increasing availability of savings in thebanking system, finance companies, insurance companies, the absorptionof some newl issues through the stock market, and to some extent by auto-financing. The money market and capital market in Singapore have madeconsiderabLe strides in the past several years although they are stillin a rudimentary state.
57. (Commercial bank deposits tripled from 1964 to 1970, increasingthe ratio of deposit liabilities to GDP from 39 percent to 60 percent.Growth of fixed term deposits has been particularly impressive, showinga five-foldI increase over this period, with the result that quasi-money(fixed-tenn plus savings deposits) amnunted to 70 percent of totaldeposit liabilities in 1970. This growth is related to the high rateof growth in real GDP, particularly as reflected in larger incomes ofhouseholds and higher profits of the trading and manufacturing sectors,
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the savings habits of the public, attractive interest rates and thestability of the Singapore dollar. An additional factor contributingto the rising availability of capital has been the free convertibilityinto sterling which has facilitated substantial inflows of short-termfunds from the sterling area, especially from Hong Kong.
58. The manufacturing sector has benefitted most from theseincreased resources. Commercial bank loans and advances to this sectorincreased from S$84 million in 1963 to S$739 million in 1970. While therelative importance of the manufacturing sector as a borrower fromcommercial banks has increased, that of commerce has declined. In 1963manufacturing represented 10 percent of commercial bank loans and advanceswhile commerce 51 percent, whereas by 1970 the share of manufacturing hadincreased to 34 percent and commerce declined to 31 percent.
59. Other significant savings-mobilizin, in;stitutig -.r the financecompanies and insurance funds. Deposits in finance companies yield somewhatmore attractive rates of interest than commercial bank deposits, and theyhave been growing by about 16 percent per annum over the last two years.Nevertheless, with loans and advances of S$295 million in 1970, they con-stituted only about 14 percent of commercial bank loans and advances.Although the combined assets of insurance companies are still small inrelation to those of finance companies and commercial banks, these havealso shown impressive growth from S$148 million in 1965 to S$247 millionin 1970, orbyabout llpercent per annum. These funds are primarily heldin the form of Government securities and in debentures and shares ofcompanies.
60. Even more impressive than the growth of private domestic savingshas been the large increase in private foreign capital inflows, from S$56million in 1966 to S$630 million in 1970. The Asian Dollar Market, estab-lished in 1969 as an adjunct to the London Euro-dollar Market, has helpedto expand this inflow. Although intended primarily for offshore financing,loans have been extended to Singapore subsidiaries of multi-nationalcompanies. This market is reliably estimated at US$600 million, twice aslarge as total demand deposits in the banking system of Singapore.
61. The outlook for the financing possibilities of the privatesector appears quite favorable. With the projected growth of the economyby 15 percent annually over the next five years, per capita incomes willrise very rapidly and-even allowing for improved standards of consumption,ahigh domestic savings rate -- around 20 percent -- may be expected. The demon-strated savings habits of the populace, the profitability of enterprises,the stability of the currency and the attractive interest rates all militatein this direction. Moreover, savings-mobilizing institutions are increasingin number, including several important foreign banks, new financial instru-ments are being introduced and an expanding capital market is being developed.Even more important, however, is that the rapid growth of the economy ispredicated on the maintenance of the high volume of foreign private capital
- 24 -
inflows and this in itself will furnish large-scale financial resourcesfor the priviate sector. Needless to say, these favorable prospects forthe financing of the private sector assume continuation of the Government'sbasic policies toward domestic and foreign investors. Finally, thefundamentally sound position and outlook for public finances, should enablethe authorities to assist in the financing of the private sector's needswhenever they deem it to be in the national interest.
Public Sector Finances
62. The public sector consists of the Central Government, the fivemain statutory authorities, and the Central Provident Fund; it accountsfor about 40 percent of the country's annual gross investment, about two-thirds of which is carried out by the statutory authorities. These arelargely responsible for providing the infrastructure and basic servicesnecessary to sustain the expansion of the economy. The financing ofpublic investument has relied chiefly on the current account surpluses ofthese entities.
Central Government Finances
63. Sound financial management has been responsible for a markedimprovement in the savings performance of the Central Government. Currentaccount surpluses have tripled over the last four years, increasing fromS$121 million in 1966 to S$385 million in 1970/71. While this can beattributed to the increase in the revenue-to-GNP ratio from 17 percent in1966 to 21 percent in 1970/71, it also resulted from the fact that currentexpenditure growth has not been as rapid in relation to GNP as revenuegrowth.
64. The most significant characteristics of the structure of CentralGovernment revenues have been (a) their reliance on rapid economic expansionand on improvements in tax administration rather than on higher rates oftaxation or new taxes; and (b) the increasingly important role played byexcise duties and income taxes, while reliance on import duties has beendeclining. Another feature of the revenue system has been its heavyreliance on non-tax revenues (2/5 of total) which are derived from thesales of goods and services, interest and dividends, investment earningsand miscellaneous items.l/Current revenues of the Government increased by22 percent per annum since 1966 while GNP in current prices grew by about15 percent per annum. Growth of current revenues over the last two fiscalyears reached 25 percent annually. This rapid growth of revenues stemmedfrom an over-all revenue-income elasticity of 1.51 and an elasticity of1.21 for the tax system.
65. The importance of income taxes as a source of revenue has increasedsubstantially in both relative and absolute terms. They have been increasingwith an elasticity of 1.57 so that they now represent 19 percent of the budgetand 4.2 percent of GNP. This rapid growth is largely attributable to higherincomes in the trading and industrial sectors and to the increasing numberof taxpayers. Although the number of taspayers has increased by over one-third from 76,195 to 102,762 between 1966 and 1969, taxes assessed onindividuals have fallen off as a proportion of total income taxes. The
i/his is in small part dua to the treitnent of soni-l cor.-a6rzi.al type enter.-pvises, such rs the Post Offico and Teiec mi,nu-tic3tion- L2ra 2 t C12 a g `s
rather thaIi net bFM5Is.
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'distribution of resident taxpayers by income bracket indicates that 46percent of taxpayers fall into the lowest bracket of income up toS$6,000, earn 21 percent of assessed income, and yet contribute only 3.9percent of taxes assessed. The distribution of taxes assessed by incomebracket has not changed significantly. In 1969 the top 7 percent withincome over S$20,000 contributed 69 percent of tax revenues; in 1966 thetop 6 percent contributed 66 percent of tax revenues.
66. A sizeable proportion of the increased taxes collected fromcompanies since 1969 has been due to the expiration of the tax holiday formany "pioneer status" firms under "The Economic Expansion Incentives(Relief from Income Tax) Act 1967", and its predecessor. The number ofpioneer companies paying taxes has increased as follows:
Year Total Number Number of Amount ofof of Pioneer Pioneer Companies Tax Assessed
Assessment Companies Paying Income Tax (Millions of S$)
67. The restraint which the Government has been able to exercise incontrolling current expenditures, particularly non-military expenditures,has been most impressive. Total current expenditures increased by 18.4percent over the last four fiscal years and expenditures other than ondefense and internal security by 9.6 percent, while revenues were growingat 22 percent annually over this period. The most significant change inthe composition of current expenditures has been the rapid increase inexpenditures on internal security and defense. These have grown fasterthan the average, thereby increasing the proportion of total Governmentexpenditures allocated for this purpose appreciably, from 16 percent in1966 to 38 percent in 1970/71 and 47 percent is budgeted for 1971/72.The build-up of defense capacity has had topmost priority among Governmentpolicies. This build-up has been particularly rapid since 1968 andoutlays now represent 9.5 percent of GDP. In the future the Governmentintends to maintain a ceiling on defense expenditures of 10 percent of GDP.
68. Within the expenditure restraint a relatively high proportionof the budget (30 percent in 1970/71) and a high proportion of GNP has beenallocated f'or social services. Current expenditures on education have beenincreasing at 8.8 percent annually but the growth of expenditures on publichealth have been held to 4.0 percent annually. Analysis of the economicclassification of current expenditures reveals how well disciplined theGovernment's budget policies have been. Expenditures on wages and salariesof civilian employees have increased by only 8.2 percent annually
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while CNP has been increasing by 15 percent, with the result that theirrelative share has declined markedly, from 45.1 percent to 31.5 percentof current expenditures.
69. The rapid increases in revenues and the restrained growth ofcurrent expenclitures, particularly on wages and salaries, discussed above,have made possible a steady growth in budgetary savings. Between 1966and 1970/71, budgetary savings increased from 3.3 to 6.2 percent of GNP.
Rest of the Public Sector
70. Practically all of the economic activities of the public sectorare carried on by statutory authorities. The authorities are well managedand, with the exception of the Housing and Development Board, all of themgenerate surpl -uses on current account. These surpluses finance over 40percent of the combined development expenditures of the agencies. The mostimportant among them is the Public Utilities Board which is responsible forgas, water, and the generation and distribution of electricity. It accountsfor over 40 percent of the revenues of these agencies, its developmentexpenditures have amounted to between 27 and 39 percent of total developmentexpenditures by statutory agencies, and it generated between 52 and 59 per-cent (S$80 million in 1970/71) of the current account savings of the fiveauthorities combined. Only second in importance from the investment pointof view is the Housing and Development Board which accounts for 29 percentof the development expenditures of the statutory authorities, although itis a net dissaver on current account. Its deficits generally have beensmall, however, and these have been financed by direct subsidies from theGoverrment. The Jurong Town Corporation, with the third largest develop-ment expenditures among the statutory authorities, uses its resources toprovide land and factory buildings for industries in Jurong as well ashousing and social amenities for its workers. The two remaining agencies,the Port of S-ingapore Authority and the Singapore Telephone Board are oflesser importance as investors of public funds, each accounting for between7 and 8 percenit of development expenditures of the statutory agencies. ThePort of Singapore Autherity is of significant importance, however, as asource of one-fourth of the savings generated by all these authorities.
71. The Central Provident Fund is of crucial importance to thefinances of the public sector. The current surplus of CPF accounts for23 percent of the total savings of the public sector and exceeds those ofall statutory authorities combined. The Fund is financed by contributionsof 20 percent of monthly wages, in £he privpte sector hzlf paid by employeesand half b-y employers, ,hich may be iuithdrai%n at the age of 55 in one lump sum.
Public Sector Investment
72. The moet rapidly increasing item in the. development budget has beenthe loans extended to industrial and commercial enterprises, the expenditure
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for other purposes being no higher in 1970/71 than in 1966 and 1967; thecurrent budget, however, authorizes almost a doubling. The loans meanwhilewhich were more than half the Government's development expenditure lastyear and still are expected to be that in the current budget, are given toenterprises in which the Government directly or indirectly has a share ofthe ownership. The largest amounts in recent years, including the current,have been for the Development Bank of Singapore (49% Government-owned), thenewly established national shipping line, Neptune Orient Line (whollyGovernment-owned as yet), and Jurong Shipbuilders (owned by the Governmentin partnership with the Japanese IHI-Heavy Industries, Ltd).
73. The rather low level of direct Central Government developmentexpenditures is explained by the fact that in Singapore it is the "big five"statutory authorities that are responsible for most large-scale developmentprojects (see paragraph 62). The combined development expenditures of theseauthorities are much higher than that of the Central Government and theirrate of grc,wth has been high in recent years, the uxpenditures doublingbetw,een 1967 and 1970/71 and a further increase os over 50 percent isbudgeted in the current year.
74. A. fact worth noting, since is indicates limits to the growth ofcapacity to implement new development projects, is that there has regularlybeen a substantial shortfall of actual expenditures as compared with amuuntsauthorized in the GovernnBnt's development budget. There are severalreasons for this such as that some Government departments are short of stafffor planning development projects (execution is almost always by contractorsin case of construction) and that the process of clearing land has oftenproven to take longer than originally contemplated. The latter problem isespecially important, as land is in short supply and there is practicallyalways a difficult question of resettling people or shifting farmingactivities iwhen a particular piece of land is to be taken up for some urbanuse. This has become such a major hindrance in view of large projects ahead(e.g. expanasion of the airport) that the Government has recently introduceda scheme under which substantially higher compensation payments will begiven, but the requirement to supply new farmland or new very cheap housingwill be somewhat relaxed. Hopefully, this will help to lessen the problem,but it is unlikely to be eliminated, given the limited size of the country.
75. The public sector of Singapore is in a strong financial positionas a result of the trends outlined above. Total public sector savings,including the Central Provident Fund, increased from S$240 million in 1966to $703 million in 1970/71, or by about 31 percent per annum over thisperiod. Over half of the increment in public sector savings has been dueto the increased current acoount surpluses of the Central Government. TheCentral Provident Fund and the statutory authorities each provided betweenone-fifth and one quarter of the remaining increment.
76. Because the investment programs of the statutory authorities farexceeded the savings generated by these agencies -- about three times as largeas savings in 1966-68 and more than twice as large in 1969/70 andin 1970/71-
- 28 -the Central Government borrowred from the Central Provident Fund and fromabroad in order to finance these progriams both directly and indirectly.Total public sector savings, on the other hand, have exceeded developmentexpenditures of the public sector over the last few.years.Budget for 1971/72
77. As budget estimates of expected revenues over the past fiscal yearsconsistently have been conservative, it appears reasonable to adjust thefigures in the light of past and anticipated performance. According to theadjusted budget, current revenues of the Government in fiscal year 1971/72are expected to increase by S$161 million, an increase of 12 percent overthe 1970/71 level, over one-half of which will originate in increased taxreceipts. Income taxes are expected to continue increasing rapidly asincome of business and industry increases, as the tax holidays of firmsgiven pioneer status expire and they begin paying taxes, and as the numberof taxpayers grows. In 1971/72 increased revenues from income taxes areestimated to account for over half of increased tax receipts. A significantincrement in tax revenue is also expected to come from excise duties asdomestic consumption of locally produced goods increases. The balance ofthe projected increase in revenues not originating in tax receipts -- aboutS$77 million -- is expected to come from sales of goods and services byGovernment departments and from interest and dividend income.
78. Current expenditures in 1971/72 are expected to be 32 percenthigher than last year. Increased expenditures on internal security anddefense accounts for 70 percent of the growth in Government currentexpendItures, while a 30 percent increase in expenditures on economicservices, a 16 percent increase in expenditures on social services, andmoderate increases in interest payments and expenditures on internaladministration, account for the remaining 30 percent.
79. Of the additional expenditures on social services, an increase of18 percent has been allocated for health services mainly due to the takingover of two hiospitals previously administered by U.K. resources and foradditional personnel in other hospitals. Expenditures on education areexpected to increase by 10 percent as the major reallocation of resourcesfrom general to technical education, begun two years ago, continues into1971/72. Health and education expenditures together account for over four-fifths of the total spent on social services.
80. As a result of the above expect;tions uith respect to both revenuesand current expenditures, the current account surplus of the Central Govern-ment is expected to decline from S$385 million in 1970/71 to S$246 million in1971/72 or to about the level that existed in 1968.
81. Continued improvement in the savings performance of the rest of thepublic sector, however, is expected to bring aggregate public sector savingsup to about S$617 million in 1971/72, and although this represents a declineof 12 percent over the previous year, it would still be sufficient to finance72 percent of planned development expenditures of the public sector.
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Public Sector Savings Outlook
82. Over the next five fiscal years the Government is expected tocontinue its past policy of relying on the rapid growth of the economy togenerate the tax revenues required to finance most of its planned developmentexpenditures, rather than on increasing existing tax rates or introducingnew taxes. Revenues from income taxes are expected to continue to be thelargest and mnost rapidly growing source of tax revenue. These are expectedto increase with an elasticity of 1.5, which is somewhat lower than in pastyears, because the annual growth rates have been declining since 1968. Theimportance of import duties is expected to continue declining as it has inthe past, owing to increased consumption of domestically produced goods,the specific nature of the rates, and the current policy of graduallyremoving protective duties, now representing over 30 percent of revenue fromimport duties. Revenue from excise taxes, particularly on petroleum, liquorand sugar, on the other hand, are estimated to continue increasing rapidly.Revenues from stamp duties are expected to increase at more moderate ratesthan in the past. These were partially related to the greater volume oftransactions in real estate but now the real estate boom has dampened somewhatand, in addition, the Government is considering removing certain stamp dutieson financial transactions. The substantial increase in revenues from motorvehicle taxes, duties and fees in 1970/71 was mainly due to the additionalregistration of 18,392 new cars, buses and trucks as compared with 14,033in 1969/70. Revenues from this source are expected to continue growing asconsumption increases.
83. As a result of these developments, total tax revenues are estimatedto yield an increase of 15.0 percent annually on the average over the nextfive fiscal years as compared with an average 17.5 percent annual increasein previous years. Non-tax income has been estimated to increase at thesame rate as GDP, although the current budget of the Government predicts anincrease of only 6.3 percent.
84. Increased opportunities will become available for expanding non-military expenditures now that the intention is to limit the proiportion ofrevenues c,> nnelod into internal security anid defense toV10 percent-of CDP.The desirable expenditures on social and econoinic services may nowz beable to increase twice as fast as in recent years. Outlays for socialservices could also increase by 10 percent annually, public health accountingfor about half of the increment. There are plans to continue expandinghospital and school health facilities as well as for the extension of publichealth measures to areas vacated by the U.K. administration. Economicarvices are estimated to increase by 24 percent annually in the coming years.
This implies a three-fold increase in expenditures on postal and telegraphservices, as well as for public works, and a four-fold increase in expendi-tures on civil aviation, as the activities of the civil aviation departmentassume increasing importance in future years. Interest payments have beenestimated to increase by 21 percent per annum on the average to meet increaseddebt service requirements. Expenditures on internal administration are ex-pected to increase modestly in future years as they have in the past.
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85. If Central Government finances develop as indicated above, withcurrent reveniues increasing by about 15.0 percent annually as compared witha projected average annual increase in current expenditures of 15.3 percent,current account surpluses of the Government will increase from S$246 millionin 1971/72 to S$455 million in 1976/77 and on the average they should accountfor about two-fifths of public sector savings, 70 percent of the CentralGovernment's development expenditures, and 30 percent of the developmentexpenditures of the public sector.
86. Sav-ings of the statutory authorities are expected to improve somarkedly in relation to the rest of the public sector that they may becomethe second largest source of public sector savings in tahe next five years.The combined savings of these institutions on the average should representabout 30 percent of public sector savings and be sufficient to financeabout 40 percent of their own planned development expenditures. The PublicUtilities Board should continue to remain the most important of the statutoryauthorities over the next five fiscal years, accouinting for over 40 percentof the rovenues, .about 50 percent of the current surpluses, and about 34percent of the development expenditures of these agencies combined. As inthe past, the Housing and Development Board is expected to remain the secondlargest investor of public funds, with about 29 percent of the total develop-ment expenditures of the statutory authorities, although it is likely tocontinuie having small deficits on current account which will have to befinanced by direct Government subsidies. The Jurong Town Corporation isexpected to have the third largest development expenditures, representingabout one-fifth of the total for these agencies over the projected period,and to have current account savings amounting to one-fourth of its developmentexpenditures, but only about 13 percent of the total savings of the authori-ties. The two remaining statutory authorities, the Singapore Telephone Boardand the Port of Singapore Authority are each expected to account for lessthan 10 percent of planned development expenditures.
87. The public sector's reservoir of substantial low-cost funds, theCentral Provident Fund, is expected to be able to make a continuouslyincreasing current account surplus available for financing developing ex-penditures over the projected period. While annual contributions are expectedto continue increasing rapidly -- 14.4 percent per annum -- as incomeincreases and the labor force expands, outpayments also are expected toincrease rapidly, as the proportion of the population reaching the retirementage increases and the home ownership scheme receives wider participation.Sound financial management of the Fund should nevertheless result in acontinuous improvement in its current surplus of from S$225 million in1972/73 to S$362 million in 1976/77, thereby representing about one-thirdof public sector savings over the next five years and about one-fourth oftotal development expenditures.
88. Total public sector savings are projected to continue to be highand increasing rapidly from S$617 million in 1971/72 to S$1,187 million in1976/77, representing an average annual increase of about 14 percent. The
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realization of these estimates will depend to a large extent on the growthof income and employment in major sectors of the economy and the continuedcontrol over non-essential expenditures that has been exercised in the pastso that resources may be channeled into development-supporting areas to aneven greater extent than before, n6t) that expenditures for defense areexpected to increase at a greatly reduced rate.
Financing Public Investment, 1971/72 - 1976/77
89. Although the public sector is expected to continue generating sub-stantial savings if the trends outlined above materialize, these are unlikelyto be adequate to finance the planned investment program. The developmentexpenditures of the statutory authorities, provided their absorptive capacityis enhanced as intended, are expected to be about three times as large as thecurrent accowut surpluses of these agencies in the first two years and overtwice as large in the last three years of the five-year period. The CentralGovernment is also unlikely to be able to finance all of its planned develop-ment expenditures out of current surpluses. With the addition of the largecurrent surpluses of the Central Provident Fund to those of the Governmentand the Statutory Authorities, total public sector savings will be sufficientto finance between 64 and 91 percent of projected public sector developmentexpenditures, or about 77 percent on average. Amortization payments are alsoprojected to increase from S$73 million in 1971/72 to S$172 million in 1976/77to meet service requirements on existing and on newly acquired loans. Theestimated pattern of financing public investment is presented below:
Gross external borrowing is estimated to be at a level of S$153 millionannually and to account for about 13 percent of the public sector developmentexpenditures. The public sector is also projected to have recourse toborrowing internally an average of S$177 million amnually two-thirds ofwhich, however, will be needed to service public debt and will not beavailable to finance public development expenditures.
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V. BALANCE OF PAYMTS AND CREDITWORTHINESS
90. Because of its strategic position on one of the world's busiestshipping routes, Singapore has traditionally been an important tradingcenter. Since it became a separate country, the economy has been "open"at both ends, giving rise to a high level of transshipment or "entrepot"activity. The main import duties imposed are those on tobacco, liquor,sugar and petroleum imported for domestic use and these are for revenuepurposes. Tlle other duties still in existence are of relatively minorprotective significance and are gradually being eliminated. There areno duties or restrictions on exports.
External Tracle
91. The dominant feature of Singapore's foreign trade is its entrepotcharacter, but the role of retained imports and domestic exports has steadilyacquired greater importance. Government efforts to expand the domesticindustrial base have begun to bear fruit and the importance of entrepottrade, although greatly stimulated by the resumption of Indonesian tradein 1965, has steadily declined giving way to a higher level of imports ofcapital and iintermediate goods for the rapidly growing domestic manufacturingsector. The net result has been a steady increase in the trade deficit.l/
92. Singapore's entrepot trade in the second half of the 1960's wasdominated by three main factors -- the resumption of Indonesian trade, thecontinued high level of Malaysian trade, and the decline in the price ofnatural rubber. The rise in demand for natural rubber in world markets in1966 and 1967 in excess of the increase in West Malaysian productionattracted considerable imports of low grade rubber from Indonesia with theresult that in those two years Singapore incurred a deficit on its balanceof trade with Indonesia. This situation was reversed in 1968 as Indonesia'seconomy recovered from its stagnation and its demand for manufactured importsincreased. bhe high credit risks involved in trading directly with Indonesiaand the lack of adequate port facilities there caused most exporters tochannel their goods through trading houses in Singapore. This led to theestablishment of a secondary market in spare parts in Singapore, thusconsolidating its role as a distribution center for the area, especiallyfor the Indonesian archipelago. By 1970 recorded trade with Indonesiaamounted to about US$556 million, having started from virtually a recorded
1/ All figures used in this chapter are based on the mission's estimates ofthe balance of payments (See Table 3.1b in the Statistical Annex). Theofficial figures (Table 3.1a) do not include Indonesian trade and do notadequately cover merchandise exports, earnings from services, and privatecapital inflows. The result has been an ever-increasing net positive"errors and omissions" item which the mission has reallocated in accordancewith the figures given in the footnotes to Table 3.1b.
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zero in 1965 and earned a surplus for Singapore of about US$103 million.Total trade with Indonesia, including unrecorded trade, is estimated tohave reached US$654 million with most of the difference being in Singapore'sfavor.
93. The revival of trade with Indonesia notwrithstanding, Malaysia hasretained her position as Singapore's largest entrepot trading partner,being the chifef supplier of rubber, spices, coffee and lumber for Singapore'sprocessing industries. Total recorded trade with Malaysia amounted toUS$784 million in 1970, having fluctuated at around this level for the pastfive years, and leaving Singapore with an annual deficit of about US$119million. However, here again an adjustment must be made for unrecordedtrade and it is very likely that Singapore registered a surplus with Malaysiaas it did with Indonesia.
94. Rubber has continued to be the dominant commodity in entrepot tradeand price fluctuations within a declining trend serve to confirm the vulnera-bility of the entrepot sector. A steady decline in world rubber prices from1967 on due to growing competition from synthetics and large increases inWest Malaysian production was only temporarily interrupted by the entry ofMainland China into the market for about 90,000 tons in 1969, resulting inconsidorable windfall profits that year. However, the slight drop in value-added from entrepot trade registered in 1970 can be attributed to the steepfall in rubber prices from the abnormally high level of the previous year.
95. On the whole, Singapore's overall entrepot trade continued to growin the late 1960's, albeit unevenly, the unevenness reflecting changes indemand by the industrialized countries for commodities processed in Singaporeand by the demand of Singapore's entrepot partners for reexports of manu-factured goods. Due to the very large volume of unrecorded trade, it isdifficult to measure accurately the trend in these two components. Itappears that since 1965 reexports of manufactured goods have been accelera-ting, while exports of processed commodities have slowed down, with theexception of 1969. Thus, in spite of the weakness of rubber prices, entrepottrade has been growing at about 14 percent annualJy since "confrontation"ended.
Domestic Exports
96. Petroleum dominated Singapore's domestic exports throughout thedecade. Situated on the main shipping route between the Middle East oilfields and the Far East, Singapore served as the ideal refining center forboth Southeast Asia and Japan and several of the major oil companies estab-lished refineries there in the early 'sixties. This expansion was furtherencouraged by the heavy demands of the Vietnam war, since during 1966-69about one-third of the petroleum exports went to South Vietnam. The winding-down of the war reduced petroleum exports to Vietnam by about US$33 millionin 1970, which considerably slowed-down the growth of total domestic exports
that year. But this decline in what can properly be considered as windfallgains has not affected the oil companies' expectations that demand formineral fuels in the Eastern Pacific region will grow rapidly; their plansfor expanding Singapore's capacity are discussed in Chapter III.
97. Other domestic exports were comparatively insignificant up to 1968when the Government's industrialization drive began to show results in theexternal trade account. In particular, the labor-intensive industries whichwere encouraged in the mid-sixties, such as textiles and wood products,increased their exports by an average of 33 percent annually during 1968-70.More important for the future, perhaps, exports of electrical equipment andindustrial machinery grew by over 200 percent annually over the same period,although starting from a very low base.
Retained Imports
98. Imports of crude oil, the great bulk of which are refined forexport, have formed a major part of retained imports (about one-fifth between1965-70).I/ Aside from these, the most significant factor in retainedimports has been the enormous increase in imports of capital goods, particu-larly during 1968-70 when they more than doubled. The reason, of course,was the capital needs of the rapidly expanding manufacturing sector; thecapital account of the balance of payments confirms that the inflow of capitalgoods was matched by an increased inflow of long-term investment funds fromabroad.
99. The import content of consumption has risen only slightly over the1965-70 period. In fact, imports of consumer goods have actually declinedas a proportion of retained imports. This is somewhat surprising in thelight of an average annual increase in per capita income of over 10 percentduring the same period. It can be attributed, however, to the Government'sconstant exhortations to frugality and the general disapproval of conspicuousconsumption -- factors which should not be underestimated in this small,tightly-knit island society -- and the resulting high level of savingsattained in recent years.
Services Account
100. Although Singapore is estimated to have consistently incurred adeficit on its merchandise account throughout the decade, the imbalance hasbeen mitigated by a surplus in the services account; in fact, between 1966and 1969 Singapore managed to show a surplus on its current account. Thiswas achieved despite heavy outlays on freight and insurance and decliningU.K. military expenditures. The main factors contributing to this were thegrowth in ship-repairs and bunkering services, the increase in touristearnings, and late in the decade, the establishment of a free gold market.
1/ "Retained imports" are defined as all imports other than imports for theentrepot sector.
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Capital Accontt
101. As previously mentioned, Singapore managed to maintain a currentaccount surplus between 1966 and 1969, but due to a massive increase inimports of capital goods, a substantial current account deficit was incurredin 1970. This deficit was more than offset, however, by long-term privatecapital inflows which have grown at a healthy rate, particularly in the lastfive years, and by the inflow of short-term funds from Hong-Kong, MIalaysiaand Indonesia for safe keeping or speculative purposes. Thus, despite thecurrent account deficit, the level of foreign exchange reserves grew byUS$151 million in 1970, or roughly by the same amount as in 1969. In June1971 net foreign exchange reserves stood at US$1,361 million, equivalentto about 73 percent of retained imports in 1970.
102. The bulk of the capital inflows have been in the form of long-termprivate investment in the manufacturing sector. The following table indicatesthat the U.S. has been the main source of these funds, with U.K. and theNetherlands -brailing. The official statistics do not cover capital inflowsto non-pioneer firms from sterling area countries, aind the "adjustment"figure represents the mission's estimates of the short-falls.
103. Well over half of direct foreign investments by the end of 1970 hadgone into the petroleum industry, while the next largest recipient industry,ship-building and ship-repair, received about 9 percent; the electrical and
1/ Establishments in production and under inplementntion.2/ Declin3s solely due to reclassifying foreign investment under "permanentstay schemesi' as "local capital".3/ Includes Switzerland, Swcden, France, Australia, Canada, Malaysia, Nonray,Denmark, Italy, Taiwan, India, Indonesia, Bulgaria and Thailand.
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electronics industries were close behind with 8 percent. The foreigninvestment picture is likely to continue to be dominated by the oil refinerieswhich are exptected to double their capacity by the end of 1973.
104. Relatively little use of external official capital has beenmade; only a srmall amuunt of bilateral aid has been utilized (mostlyU.K. Aid Grant and Japanese Special Grant) of which some US$10 million wasdisbursed in 1970. Total disbursements from IBRD loans during the past fiveyears which went mostly to the statutory authorities, amounted to US$58million or equivalent to about 9 percent of total public sector investmentin these years. Use of suppliers' credits has been minimal with only aboutUs$44 million outstanding (including undisbursed) as of June 1971.
Asian Dollar Market
105. As part of the Government's efforts to establish Singapore as thefinancial center of Southeast Asia, the Asian dollar market was initiatedin 1968 by some private overseas banks with Government support. Thismarket, which is basically a pool of internationally acceptable currenciesdeposited with banks in Singapore by non-residents, was estimated to havegross resources of some US$600 million in mid-1971. Apart from the attractionof the small minimum amount of deposits and the exemption of interest earningsby non-residents from withholding tax, the flow of these funds is likelyto be further encouraged by the introduction of secret numbered accounts onthe Swiss model. There are now 15 banks licensed to handle these funds, andinterest rates in the middle of 1971 had a spread of between 6½ percent forone month's deposits and about 7½ percent for one year. So far only a smallportion of thie funds made available to this market has been used for itsprofessed pri-mary purpose, i.e., to finance industrial development in Asia;since there are no geographical limitations to the scope of lending, amajor part has flowed to the Eurodollar market due to the more attractiveinterest rates prevailing there. Singapore, however, has benefitted fromAsian dollar loans extended to multinational companies for use in establishingor expanding their subsidiaries in the republic.
Gold Market
106. A free gold market, which was created in 1969, has enjoyed rapidsuccess. Official figures do not exist, but the total volume of imports ofgold is estirmated to have increased from one million ounces in 1969 to 4.5million ounces in 1970. Most of the gold is imported from European countries,mainly Zuriclh and London, by licensed traders amongst whom Intraco, a 49percent Government-owned trading company figures prominently. An importduty of US$1.00 per ounce is levied by the Government. Most of the gold isreexported to regional capitals, particularly in Southeast Asia, where freemarket prices are usually higher than in Singapore; very little gold isretained in Singapore, either for industrial or ornamental purposes. Themission estimates that net earnings from this market over the past two yearsamounted to almost US$33 million.
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Trade Prospec ts
107. The structural transformation of the Singapore econony discussedearlier may be expected to have considerable repercussions on the foreigntrade outlook. In spite of the structural changes, however, the importantrole played by "entrepot" trade in the past is not expected to diminishgreatly. Because of this importance of "entrepot" trade, a number ofalternative trends with their implications for growth and balance of paymentsviability have been calculated and are presented below.
108. Despite the many uncertainties surrounding "entrepot" trade, twotrends from the recent past can be extrapolated irto the future. First,earnings from rubber are expected to be virtually stagnant for the next twoor three years. Although the consensus is that prices are unlikely todecline further, the relatively slow growth of the U.S. economy., furtherreleases from the U.S. General Services Administration stockpile and thelarge stocks accumulated in Malaysia, all militate against a quick upturn,Even if the market improves and there is a chance that large orders mayensue from the People's Republic of China, Singapore's earnings are notlikely to benefit appreciably since most of the rubber would be exporteddirectly from Malaysia and Indonesia. Over the longer-term Singapore'srubber processing industries will serve only those Malaysian rubber estatesin South Johc,re which are closest to the Causeway. Efforts to bypassSingapore's processing industries will also have an adverse effect on otherprocessed "entrepot" goods, in particular, timber, coffee and spices.Nevertheless, the growth of "entrepot" trade as a whole is expected to besustained by greater imports and reexports of manufactured and semi-manu-factured goods. This will be reinforced by Singapore's efforts to improveits port, provide efficient communications, warehousing and financingfacilities and preserve the "openness" of its econonm.
109. Cn balance, the outcome of the above two conflicting tendencies isexpected at best to increase earniings from "entrepot" by some 8 percentannually during the next five years, while the share of entrepot in totaltrade will decline to about one-third by 1975. This growth rate, however,is contingent on the maintenance of normal political conditions in theregion. Although indications are that the present stable conditions willcontinue, it is useful to explore somewhat more pessimistic growth ratesfor this sector in view of its vulnerability to such unpredictable factors.Thus, for illustrative purposes, three cases can be postulated to reflectdifferent possibilities, ranging from the adoption of autarkic trade policiesby Singapore's neighbors to an outright threat to its security. The firstcase assumes a some-wthat lower growth rate of 5 percent, the second a zero
gro;rth rate and the third a minus 10 percent gro-th rate for the first three yearstrith a zero gi'oxrth rate thereafter. In each instance 2 strong foreignexchange reserve position is maintained in the belief that given Singapore'shighly exposed position, the Government will try to preserve a level offoreign exchange reserves, equivalent to at least four months of retainedimports, even at the expense of reducing the GDP growth rate.
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110. What clearly emerges from the table below is that in all three
cases the mainitenance of foreign exchange reserves at the above level would
necessitate at least some slowdown in the growth rate of the economy. This
results from the fact that reduced foreign exchange earnings from "entrepot"
trade impose a ceiling on imports of raw materials and intermediate goodsessential for the rising incomes and the rapid expansion of the manufacturing
sector to which GDP growth is closely linked. Thus, under the least favorable
assumption regarding "entrepot" trade, a GDP growth rate in excess of 6 per-
cent would be difficult to achieve. The impact of the other two cases is
much less drastic, but they are perhaps more significant in that they couldoccur without a major political upheaval.
Sensitivity Tests for "Entrepo" Trade
1971-75 1976-80-Average Growth Rates Average Growth Rates
lllo In evaluating the results of these sensitivity tests, it should be
borne in mind that allowance must be made for possible inadequacies of the
trade statistics and for the limitations of the methodology used to make the
projections which assumes constant relationships. Furthermore, thesesensitivity tests have implicitly assumed that the "entrepot" sector wouldbe the only sector directly affected in the "first-round", and the reduction
in the growth rate of GDP, investment, imports and exports are "second-round"
effects derived from the dec'line of entrepot activity. Needless to say, in
the situation postulated in the extreme case, confidence in the security of
Singapore's economy would be seriously undermined and other sectors would
suffer in varying degree. The decline in the GDP grorth rate is therefore
likely to be much more severe than that caused by a change in the "entrepot"
sector alone.
Petroleum Refining Prosects
11 2. The plans of the petroleum companies for increasing refining capacityto over a million barrels of crude a day by 1975 have already been discussed
in Chapter III. Most of the increased output of refined petroleum is intended
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for Japan whose own refining capacity has been restricted for environmentalreasons. In addition, Singapore's refineries would be able to supplementall shortfalls in the refining capacity of any country in the Southeast Asiaand South Pac:ific region, and these are expected to oe substantial.
113. The impact of existing expansion plans of the petroleum companieson the balance of payments up to 1975 will be most beneficial. Taking exportvalues less irnport costs of crude and the foreign exchange component ofoperating costs, net annual earnings on trade account are estimated at aboutUS$196 million in 1973 and US$252 million in 1975. Gross capital inflowsfrom abroad are estimated at US$278 million during 1971-75. In 1973 whenthese inflows are larger than the cost of capital goods imports, and loanrepayments are still minimal, a small surplus on the capital account islikely. By 1975, however, the capital account is expected to show a deficitof about US$71t million, but it will be handsomely offset by earnirngs on tradeaccount of US$252 million .
Exports of Manufactured Goods
134. In view of the limited size of Singapore's domestic market, thefuture rapid growth of the manufacturing sector will largely depend on exportsales. A 15 percent GDP growth rate is predicated on annual growth of exportsof manv-Cactured goods, other than petroleum, by about 22 percent up to 1975,or only slightly less than the estimated growth of manufacturing value added.The prospects of attaining such high export targets appear to be reasonablypromising in the light of the favorable outlook for the continuation ofrapid growth in world demand for imports of manufactured goods. The factthat Singapore's exports of manufactured goods have grown by an average ofover 27 percent during the past three years was directly related to the growthin direct foreign inivestment. The major growth industries in terms of exportshave been in the fields of precision engineering, electrical and electronicproducts, chemicals, and transport equipment which have attracted most of theforeign investments. These investments were primarily carried out by multi-national companies whose objective has been to develop their Singaporeoperations as part of their global marketing programs, as well as to manufac-ture parts and components for supplying parent companies in the home countriesand subsidiaries in various parts of the worldc Thus, if foreign directinvestment continues to play a major role in the growth of the manufacturingsector as is expected, prospects for rap)id grcnrtb of e:"ports o: manufsctu-ec'goods are miost promising. In recognition of the importance o' this factor,theEconomic Development Board is requiring that foreign firms which apply for"pioneer" status demonstrate established overseas markets. Another promisingfactor regarding exports of manufactured goods, is the growth of regionalpetroleum exploration activities which has created an expanding market forhigh-cost equipment. Many of the firms supplying this market are establishingthemselves in Singapore. Finally, Singapore's favorable wage costs shouldhelp make her manufactured products competitive in world markets.
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115. The manufacturing sector will, however, need to import considerablequantities of intermediate goods (including raw materials) since these haveamounted in the past to more than two-and-one-half times the size of manu-facturing value-added. Under the growth rate assumptions outlined in ChapterIII and unless Singapore can appreciably reduce the value of the importcontent of its output, the trade deficit is projected to increase fromUS$.73 million in 1971 to US$972 million in 1975 and US$1,708 million in1980. The impact of these large deficits on Singapore's reserve positionand external capital requirements is discussed below,
Sorvices Prospects
116. The trade deficit has in the past usually been more than offset bya large surplus on the services account, but due to the large increase inimports in 1,970, the current account showed a def-cit in that year for thefirst time since 1965. Despite the virtual disappearance of U.K. militaryexpenditures, earnings from services are expected to grow significantlyduring 1971-75. Earnings from ship-repair services and services providedto the regional oil exploration activities, both of which have attractedconsiderable amounts of foreign investments, should grow by about 30 percentannually according to projections made within the industry. Increased earningscan also be expected from tourism, financial services and the gold market.
Current AccoLmt Outlook
117. What seems to emerge from the foregoing discussion of the tradeaccount is that imports are likely to continue increasing faster than exportsbecause of the heavy capital goods imports needed for rapid industrialization.On the other hand, the services account is expected to show increasingsurpluses but not large enough to offset the expected growth of the tradedeficit. The net effect of the above tendencies will be to increase thecurrent accoumt deficit. Under the assumption of a 15 percent GDP growthrate, the current account deficit is projected to reach about US$332 millionby 1975 and c:urrent account deficits of similar magnitude would emerge evenwith lower GDP growth rates under less favorable assumptions regarding"entrepot" trade prospects.
Capital AccouLnt Outlook
118. The future role of private foreign investment is crucial to boththe rapid growth of the economy and to balance of paynents viability.Although the prospects for continued inflows of long-term private capitalthrough 1972 are good, the cempletion of investments in the oil refineriesand the shipyards is expected to result in a decline in the proportion ofprivate domestic investment that is financed by direct foreign investments.However, there seems to be no lack of interest on the part of foreign investorsin establishing industries in Singapore and it appears reasonable to expectthat on the average some US$250 million equivalent annually in long-termprivate capital is likely to be available during 1971-75. This is predicated
on the maintenance of healthy conditions in world trade since any tendencytowards protectionism or capital restrictions by the developed countriescould seriously affect these private capital inflows 0i
119. Movements of private short-term capital are difficult to assesssince they are more dependent on political rather than economic factors.There is no doubt that Singapore benefitted substantially in the past frompolitical unrest and insecurity in Hong Kong and Indonesia, but "hot" moneyflows are just as likely to reverse direction, especially in view of theSingapore dollar's free convertability into sterlingr It should be bornein mind that such flows seriously distort any systematic effort to projectSingapore's caipital requirements0
120. Under the above assumption that on the average long-term privatecapital inflows of some US$250 million annually will be forthcoming duringthe years 1971-75, that short-term capital movements on balance will benegligible, and that foreign exchange reserves will be maintained at a levelequivalent to about four months of retained imports, no official capitalwould be required on balance of payments grounds during the next quinquennium.It shouldbe eiphasized, however, that an equally plausible case for need ofofficial capital inflow could be projected with only minor changes in assump-tions, Singapore is likely to be in the position during the next few yearsin whdch adverse variations well within the margins of error of any of thebalance of payments variables projected here, could well create officialforeign financing requirements. Such requirements would also exist on theassumption that the relative change in reserves from the present level ofeight months import requirements to the projected level of four months wouldtake place gradually, remaining above the four-month level until about 1976.On this basis, which would represent a reasonable reserve policy, there wouldbe a requirem3nt in the projected balancb of paynents for official e;ternalborrowing of about US35 O..million a year.
121. Perhaps the greatest uncertainty in forecasting Singapore's balanceof payments is the prospect for foreign private capital inflow. Such long-term inflow has risen sharply in recent years from about US$70 million in1968 to over US$200 million a year in 1970 and 1971. This jump was associatodwith the large and rapid expansion in foreign-financed oil refining ardshipbuilding capacity. The projection of such continuing inflows at US$250million as an annual average for the next five years is based on fairly firmcommitments for the next three years, but on more speculative assumptionsthereafter. The assumptions are that as the expected decline in new oil andshipbuilding investments takes place toward the mid-1970's there will beoffsetting increases in light and labor intensive industrial investment fromabroad which will sustain the private capital inflow. Whether this willactually happen on the assumed scale is of course conjectural, and should theprivate foreign investment in Singapore's continuing industrialization besomewhat less than expected, there would again be a greater need for officialborrowing, in order to maintain the high growth rate postulated.
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122. It would thus appear that from considerations regarding reservepolicy and private foreign investment uncertainties, that continued officialborrowing by Singapore is justified even thouigh the immediate necessityto supplement private capital inflows with official borrowing is not clearlyevident. An official external borrowing level of about US$50 million ayear seems reasonable for the next several years.
123. Over the longer term, i.e. in the latter 1970's, officialborrowing requirements may well be substantially higher, even allowingfor some slowing of the growth of the economy because of labor and landconstraints. In large measure this need for official capital will ariseas an offset to the very substantial factor payments on the large-sclaprevious private investments. However, it is clear that there is amplescope to keep official borrowing needs within reasonable bounds by allowingfor some reduction in the growth rate, if this is necessary.
External Debt
124. As of the end of June 1971, Singapore's external public debt(including undisbursed) totalled US$285 million. About one-third of thedebt is held by IBRD and one-third is due to the U.K. Government; suppliers'cr dits constitute only 13 percent of the outstanding external debt. Thedebt service burden arising out of the existing external debt is minimal,equivalent to about 1 percent of domestic exports in 1980. The ratio isprojected to be about 1.5 percent in 1975 and 3.3 percent in 1980 if debtservice payments on assumed new debts are included.
Creditworthiness
125. Since Singapore became a separate country it has managed itseconomy very well. It has adopted la-s conducive to industrial peace and tothe stimulation of domestic and foreign private investment. Public financeshave been placed on a sound footing and public investment has proceeded toprovide the necessary infrastructure and services for growth. As a resultof high levels of savings and investment, a very impressive growth rate hasbeen achieved -- a 10 percent annual average during the 60's and a 15 percentannual average during 1968-70. The balance of payrnents situation has beenmanaged well and foreign exchange reserves reached US$1.3 billion, equivalentto 81½ months of retained imports in 1970. On the basis of the achievementsto date, the outlook for continued sound management of the economy appearsto be promising. Continued growth at an annual rate of approximately 15percent appears feasible. The debt service on existing and projected newexternal debt is estimated at 3.3 percent of domestic exports in 19Singapore appears to be creditworthy for the external borrowing discussedabove regardless of what happens to "entrepot"trade, provided only the growthrate is adjusted appropriately and the sound development policies of the pastdecade arm continued.
STATISTICAL APPENDIX
Table 1- POPULATION
1.1 Population Statistics, 1961-1971 and Projections, 1973-19831.2a Sex and Age Distribution of Population, 1957, 1968 and 19701.2b Sex and Age Distribution of Population, 1973, 1978 and 19831.3 New Family Planning Acceptors, Live Births and Crude Birth
Rates, 1957-19711.4 Age Specific Fertility Rates, 1957, 1962, 1967 and 19701.5a Labor Force and Unemployment, 1966-19711.5b Labor Force and Unemployment, 1971, 1975 and 19801.6 Persons Engaged by Industry and Occupation Group, 1970
1.7 Structure of Employmnent 1957 and 1967
2. NATIONAL ACCOUNTS
2.1a Gross Domestic Product by Sector of Origin, 1961-19702.1b Gross Domestic Product by Sector of Origin, 1962-1970
(annual growth rates)2.1c Gross Domestic Product by Sector of Origin, 1961-1970
(composition)2.2a Expenditure on Gross National Product, 1960-19702.2b Expenditure on Gross National Product (Adjusted), 1966-19702.3a Gross Domestic Expenditure by Major Categories, 1960-19702.3b Gross Domestic Expenditure by Major Categories (Adjusted), 1966-19702.4a Savings and Investment, 1960-19702.4b Savings and Investment (Adjusted), 1966-19702.5 National Income Aggregates in 1970 and Projections for 1971-1980
3. BMAJNCE OF PAYMENTS
3.1a Balance of Payments, 1965-19703.lb Adjusted Balance of Payments, 1965-19703.1c Balance of Payments in 1970 and Projections for 1971-19803.2a Foreign Exchange Reserves, 1963-1971 (in Singapore dollars)3.2b Foreign Exchange Reserves, 1963-1971 (in U.S. dollars)3.?c Foreign Assets, 1965-1970 (in Singapore dollars)3.3a Retained Imports, 1961-19703.3b Retained Imports by Type of Goods, 1965-19703.4 Domestic Exports, 1961-19703.5 Eatrepot and Domestic Trade Summary and Percentage
Year to Year Change, 1965-19703.6a Summary of Analysis of Foreign Trade of Singapore, 19703.6b Analysis of Entrepot Trade, 19703.7 Singapore's Trade with 'West Malaysia, 1970-19703.8 Exports from Singapore: Selected Commodities, 1958-19703.9 Direction of Exports and Percentage Distribution, 1965-19703.10 Direction of Imports and Percentage Distribution, 1965-1970
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4. EXTERNAL DEBT
4.1 External Public Debt as at June 30, 19714.2 External Public Debt Outstanding as of December 31, 19704.3 Estimated Future Service Payments on External Public Debt Outstanding,
Including Undisbursed, as of December 31, 1970
5. PUBLIC SECTOR FINANCES
5.1 Public Sector Resources for Investment, 1966-1971/725.2 Public Sector Resources for Investment, 1966-1971/72
(Ipercentage distribution)5.3 lublic Sector Resources for Investment, 1966-1971/72
I(percentage year to year change)5.4a Public Sector Development Expenditure, 1966-1971/725.4b Public Sector Resources for Investment, 1966-1971/72
(percent of GNP)5.5 Analysis of Public Sector Finances, 1966-1971/725.6 Analysis of Public Sector Finances, 1966-1971/72
(percent of GNP)5.7 Central Provident Fund, 1966-19715.8 Operations of the Statutory Authorities, 1966-1971/725.9 Government Finances, 1966-March 19725.10 Government Current Revenue, 1971/725.11 iGovernment Current Revenue, 1971/72
(percentage distribution)5.12a Government Current Expenditures, 1966-1971/725.12b Economic Classification of Government Expenditures, 1966-1971/725.13 Government Current Expenditures, 1966-1971/72
(percentage distribution)5.14 Analysis of Tax Burden, 1966-1971/725.15 Projections of Government Current Revenues, 1971/72-1976/775.16 Projections of Governnent Current Expenditures, 1971/72-1976/775.17 Projected Revenues and Expenditures of the Statutory Authorities,
1971/72-1976/775.18 Projected Revenues and Exoenditures of the Central Provident Fund,
1971/72-1976/775.19 Projected Public Sector Finances, 1971/72-1976/775.20 Projected Public Sector Development Expenditure, 1971/72-1975/765.21 Projected Development Expenditures, 1971-19765.22 Public Sector Resources for Investment, 1971/72-1976/77
6. MONETARY STATISTICS
6.1 Consumer Price Index, 1961-1971 (June)6.2 Factors Affecting Money Supply, 1963-19716.3 Interest Rates Charged by Commercial Banks on Loans and Advances,
1965-19716.4a Classification of Commercial Bank Loans and Advances to the Private
Sector and Percentage Distribution, 1963-1971 (June)6.4b Classification of Loans and Advances and Interest Rates in Singapore
of All Banks, December 1970 and June 19716.5 Assets and Liabilities of Commercial Banks, 1964-19716.6 Assets and Liabilities of Insurance Funds, 1965-19706.7 Average Weekly and Hourly Earnings by Industry, 1966-1970
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7. MANUFACTURING SECTOR
7.la Composition of Manufacturing Industries, 19697.lb Composition of Manufacturing Industries, 19707.2a Estiablishments in Production and Under Implementation as at
December 31, 19697.2b Establishments in Production and Under Implementation as at
December 31, 19707.3a Jurong Establishments by Industry Major Group as at December 31, 1969
7.3b Jurong Establishments by Industry Major Group as at December 31, 19707.4a Establishments in Industrial Estates other than Jurong by Major
Inclustrial Groups as at December 31, 19697.4b Establishments in Industrial Estates other than Jurong by Major
Industrial Groups as at December 31, 19707.5 Industrial Indicators, 1961-19707.6 Domestic Sales of Manufacturing Establishments by Industry Major
Group, 1960-19697.7 Direct Exports of Manufacturing Establishments by Industry Major
Group, 1960-19697.8a Employment and Output by Industry Major Group, 1966-19707.8b En)loyment and Output by Industry Major Group, 1960-19657.9a Value Added and Capital Expenditure by Industry Major Group, 1966-1970
7.9b VaLue Added and Capital Expenditure by Industry Major Group, 1960-19657.10 Productivity by Industry Major Group, 1960-1970
TOTAL 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0
*Projected on the basis of 1968 age structure and age-specific fertility (source: 1969 U.N. Damographic Yearbook),assuming no net migration over the projection period, and a decline in age-specific fertility rates duringeach of the five-year projection periods according to the average annual rate of decline in age-specificfertility which prevailed during the period 1962-1967. Mortality was derived from model life tables,(region "West" in Coale, Ansley J. and Paul Demeny. Regional Model Life Tables and Stable Populations,Prince University Press, 1966) applying the survivorship figures from the latest U.N. medium-variant popu-lation projection for Singapore.,
SmiIrn.! 1TBR70]s1:- i
Table 1.3
New Faiily Planning Acceptors, Live Births and Crude Birth Rates, 1957-1971
Total New Live Annual Crude Birth RateAcceptors 1/ Pill Others Births Change % (per thousand)
Persons* engaged by Industry and Occupation Group, 1970 1
Occupation ALL Professional Administrative Clerical Sales Service Agricultural Transport Productiongroup OCCUPATION technical and managerial and workers workers fishing and workers and all
GROUPS and related workers related forestry other.Industry ** | workers worker: workers workers
Total - All industries 443,785 46,359 13,409 82,759 49,164 57,410 2,218 27,127 165,339
* Excludes at least 70,000 hawkers, 40,000 domestic servants, 20,000 agricultural workers, 3,000 taxi drivers, members of armedforces and possibly other unspecified minor categories.
** The industries are classified according to a revised classification - the Singapore Standard Classification of All EconomicActivities, 1969.
1/ As at the end of September.Sources Ministry of Labor
Table 1.7
Structure of Em-ployment, 1957 and 1967
1957 Y 1967 -/Industry Persons Percentage Persons Percentage
(thousand) (thousand)
Agriculture, Forestry and Fishing 40.2 8.5 23.2 4.1
Mining and Quarrying 1.6 0.3 2.2 0.1h
Manufacturing 66.8 14.2 110.4 19.5
Construction 24.6 5.2 31.7 5.6
Electricity, Gas, Water andSanitary Services 5.6 1.2 6.6 1.2
Commerce 121.5 25.7 122.0 21.6
Transport and Communications 50-3 10.7 65.9 11.6
Services 159.2 33.7 192.2 34.0
Other activities 2.1 0-5 11.4 2.0
Total Employed 471.9 100.0 565.6 100.0
Total Unemployed 25.0 44.3
Total Economically Active(All Sectors) 496.9 609.9
j Census of Population, 1957.v Singapore National Registration Statistics, 1967.
Wource: Department of Statistics.
Table 2.la
Gross Domestic Product by Sector of Origin, 1961-1970(S$ mliions at current factor cost)
Per capital income (6.S) 1,341 1,427 1,471 1,621 1,595 1,751 1,897 2,026 2,298 2,601 2,904(US$) 143o 466 481 530 521 572 620 662 751 850 949
1/ Includes part of errors and omissions in the balance of payments. All errors and omissions are credited tothe current account for 1960-1966 and between 80% to 95% for 1967-1970.
.5curce: Denartment of 3tatistics.
Table 2.2b
Expenditures on Gross National P?roduct (Adjusted), 1966- 1970(S$ million)
18. Marginal Propensityto Save 0.31 - 0.15 0.62 0.48 0.02
V/ The items 'public consumption' snd 'public capital formation' have been redefinedin comparison with the official national accounts as published in Singapore(table 2.2a). Public consumption is here set equal to government current expendi-ture and public capital formation equal to public sector development expenditure(given e.g. in table 5.5). This divergence from normal national accountingpractice is adopted to achieve comparability between public sector accounts andnational accounts for analysis purposes. The main differenres between the defini-tions in table 2.2a and this table would thus be that now all expenditures fordefence and security purposes are classified as consumDtion and that governmentloans extended to industrial commercial enterprises are classified as oubliccapital formstion. In addition there are a number of smaller divergences dueto the difference between the financial classifntion used in nublic sertor accountingand the economdc classification used normally in national accounting.
2/ Adjusted in accordance with Table 3.1b.
Source: Table 2.4 and Mission Estimates.
Table 2.3a
Gross Domestic Expenditure by Major Categories, 1960 - 1970(In S$ millions, at current market prices)
l/ Including trade with Tndonesia.N.B. Merchandise exports to countries other than West Malaysia are valued at f.o.b., while those to West Malaysia at c.i.f.Imports from countries other than West Malaysia are valued at o.i.f., while those from West Malaysia at f.o.b. Malaysiandocumirnt3 aro accepted in cTdor to £fcilitate the transport of goods acroaa the causeway betweon Singapor and Johoro.eourc : Daportmont of Statistics snsd 'Us3ion Estimaton.
Table 3.6a
Summary of Analysis of Foreign Trade of Singaporej 1970(S$ Million)
Imports Exports
A. Imports for processing 1,333.7 A. Re-exports after processing 1,544.9
B. Re-exports of imports 1,384.1B. Imports for re-exports 1,156.7
Total entrepot imports 2,491.4 Total entrepot exports 2,929.0
C. Retained Imports 5,688.4 C. Domestic Exports 1,826.8of which of which1. Petroleum products 988.7 1. Petroleum products 1 ,067.9
including tankers including tankers2. Others 4,699.7 2. Others 758.9
1/ Gods imported which have been processed in Singapore and not amounting toauinufacturing proper and not falling within the category Of assembly.
2 Re-erports of Sineapore are goods which are exported in the same form as theyhlve been imported. They would cover the cre; ting of bulk and any cperation orpirocess which consists only of one or more of the activities of packing, splittingup into lots, sorting or g-ndlng, marking and putting up into sets.
Source: Department of Statistics.
Table 3.7
Singapore's Trade with West Malaysia, 1960-1970(S$ ?tilions)
i Includes Kuwait and Nationalist China.3 Includes $32 m. from New Zealand, $39 m. from South Korea, $56 m. from Netherlands Antilles, t69 m. from Pakistan, 344 m. from Saudi Arabia, $62 m. from Switzerlandand 352 m. from Tanzania.31 Includes $41 m. from New Zealand, S40 m. from South ;.orea, 233 m. from Netherlands Antilles, S55 m. from Pakistan, $79 m. from Saudi Arabia, $72 m. from Switzerlandand $43 m. from Tanzania.
Source: Trade Division.
Table 4.1
External Public Debt as at 30.6.71(Singapore Dollars)
Page One
Debt Outstanding as on 30.6.71
Source AmountI ~~~~~Repaid
Disbursed Undisbursed Total
TOTAL PUBLIC DEBT 537,118,595 490,709,286 1,027,827,801 154,833,202
LOANS FROM INTER1NATIONALORGANIZATIONS: 243,781,444 237,335,466 481,116,910 16,797,860
ESTDUTED FUTRE SERVIE PAYMETS CN EXnWAL PUBLIC DEBTOUTSTANDING INCLUDING UND DBURSED AS (F DECEMBER 31,1970
DEBT REPAYABLE IN FOREIGN CURRENCYPAGE 3
IN THOUSANDS OF U.S. DULLARS
OTHER PRIVATE FINANCIAL INST.
DEBT OUTSTANDING TRANSACTIONS DURING PERIODBEGINNING OF PERIOD CANCEL'
LATIONS#
DISBURSED INCLUDING COMMIT' DISBURSE' SERVICE PAYMENTS ADJUST-
YEAR ONLY UNDISSURSED MENTS MENTS PRINCIPAL INTEREST TOTAL MENTS
(1) (2) (3) (4) (5) (*) (7) (a)
1969 7,2U1970 'o20U ' - 343 - 343 -6,85?
1971 ' ' ' a
1972 a a
TABHE4c3- SINGAPORE
ESTl(ATE)D FUMJRE SERVICE PAYMN ON WERNAL PUBLIC DEBTOUTSTANDDG INCLUD IZG UNDIBURSED AS OF DECEIMB 31,1970
DEBT REPAYABLE IN FOREIGN CURRENCY
IN THOUSANDS OF U.s. DOLLARS PAGE 4
LOANS FROM INTL. ORGANIZATIONSASIAN DEV6BANK
DEBT OUTSTANDING TRANSACTIONS DURING PERIODBEGINNING OF PERIOD CANCEL-
LATIONS.DISBURSED INCLUDING COMMIT- DISBURSE SERVICE PAYMLNTS ADJUST-YEAR ONLY UNDISBURSED MENTS MENTS PRINCIPAL INTEREST TOTAL MLNTS(1) C2) (3) (4) (5) (6) (7) (6)
1969 a 10#u0O - - - -1970 -luuOu 37,11i 842 - 25 25 a
BST EDL) i-u*ru-a sm-vmE pK'AZN5-N ON XKTRENAL PUBLI DEBTOUTSTANDING INCLUD G UNDMBURSED AS OF DECEMBM 31,1970
DEBT REPAYABLE IN FOREIGN CURRENCY
IN THOUSANDS OF U.S. DOLLARS PAGE 7
LOANS FROM GOVERNMENTSGERMANY (VEDeREPsOF)
DEBT OUTSTANDING TRANSACTIONS DURING PERIODBEGINNING OF PERIOD CANCELS
LATIONS,DISBURSED INCLUDING CUMMIT' DISBURSE& SERVICE PAYMENTS ADJUSTOYEAR ONLY UNDISBURSED MENTS MENTS PRINCIPAL INTEREST TOTAL MENTStl) (2) (3) (4) (5) (6) (7) (8)1970 m 2#732 - a 1U6 106 -
&STIMATED FUTURE SERVIE PADENTS ON ErTNAL PUBLIC DEBTOUTSTANDING CLUDflG UNDrBURSED AS CP DECEMBER 31,1970DEBT REPAYABLE IN FOREIGN CURRENCY
IN THOUSANDS OF U&S. DOLLARS ME
LOANS FROM GOVERNMENTSUNITED KINGDOM
DEBT OUTSTANDING TRANSACTIONS DURING PLRIODBEGINNING OF PERIOD CANCEL&LATIONSo
DISBURSED INCLUDING CUMMIT' DISBURSE* SERVICE PAYMENTS ADJUST;YEAR ONLY UNDISBURSED MENTS MENTS PRINCIPAL INTEREST TOTAL MLNTS(1) (2) (3) (4) (5) (6) (r) CS)1966 4,906 4J906 ' ' 529 ' 529 at
ESTD(TED FUTURE SERVIE PAYMENS C EXTERNAL PUBLIC DEBTOUTSTAIDNG DICLUDIW UNDISBURSED AS CF DECEMBEff 31,1970
DEBT REPAYABLE IN tUREIGN CURRENCY
IN THOUSANDS OF U.S. DOLLIRS PAGE 13
SUPPLIERSSwITZERLAND
DEBT OUTSTANDING TRANSACTIONS DURING PERIODBEGINNING OF PERIOD CANCEL&
LATIDNS^.DISBURSED INCLUDING COMMIT DISBURSE- SERVICE PAYNENTS ADJUST-
YEAR ONLY UNDISBURSED MENTS MENTS PRINCIPAL INTEREST TOTAL MENTS(I) C2) (3) C4) CS) Cs) C?) (8)
196? 6 a1968 6 I ' - a1969 6 6 ' 1 * 1197U 5 5 - U 1 1
1971 4 4 X 1 11972 3 3 1 U 11973 2 a ' 1 U 1 -1974 1 1 - . 1 . 1 -
TABLE4.3- SINGAPORE
ESTIMTED FUTURE SERVICE PAYMENS CN EXTERL PUBLIC DEBTOUTSTADIN IN CLUDING UNDTBBURSED AS OF DECEMBR 31,1970
DEBT REPAYABLE IN FOREIGN CURRENCYPAGE 14
IN THOUSANDS OF U.S. DOLLARS
SUPPLIERSUNITED KINGDOM
DEBT OUTSTANDING TRANSACTIONS DURING PLRIODBEGINNING OF PERIOD CANCELO
LATIONS,DISBURSED INCLUDING CUMMIT- DISBURSE- SERVICE PAYMLNTS ADJUST-YEAR ONLY UNDISBURSED MENTS MENTS PRINCIPAL INTEREST TOTAL MENTS(1) C2) (3) (4) (1) (6) (C) Cc)
1/ Includes 15 months, January 1, 1969 - March 31, 1970.
2/ Includes amounts for housing and port development in Jurong Town.3/ Does not include activities of DBS (set up August 1, 1968).i/ The figures include some land transfers from Government to Statutory Authorities,
which strictly do not constitute expenditures for the public sector.
Source: Ministry of Finance.
Table 5.4b
Public Sector Resources for Investment. 1966 - 1971/72(Percent of GNP)
1966 1967 1968 1969/70 1/ 1970/71 1971/72
I. SOURCESA. Current Account Surplus 6.6 7.2 8.9 9.3 11.2 7-4
1. Government 3.3 3.9 557 . 77 1.92. Statutory Authorities 1.6 1.7 2.0 1.9 2.5 2.33. Central Provident Fund 1.7 1.6 1.4 2.0 2.6 3.2
B. Capital Account Revenues 0.3 0.2 0.4 0.8 0.8 0.8
Table 5.8Operations of the Statatory Authorities, 1966-1971/72
kin mi-Llons of Singapore dollars)
Public Housing and Port of Singapore JurongUtilities Development Singapore Telephone TownBoard Board Authority Board Corporation 1/(PUB) (HDB) (PSA) (STB) (JTC) TOTAL
Expenditures 8 71.4 87.1 106.3 129.7 158.1Benefits:55 Years 2d.2Leaving Malaya 4.2Physical Incapacity o.6Unsound Mind -Death 2.2Ceased to be employees -
Administrative Costs 2.3Home Ownership Scheme 21
Savings 20h.1 22j 254.2 286.5 322.4 362.1
Source: Mission Estimates.
Table 5.19
Projected Public Sector Finances, 1971/72 - 1976/77kin millions of Singapore dollars)
1/ The figures here differ from those in table 5.8a of the appendix.The statutory authorities do their planning on a calender rearbasis and these figures have been used uncorrected here.
2/ Land transfers from the Government to JTC have been deducted.Expenditures by JTC for housing and port development have beenclassified as such under the respective heading.
Source: Plans from statutory authorities and mission estimates.
Table 5.20
Projected Public Sector Development Expenditure,1971/72-197 5/76
1/ The figures here differ from those in table 5.ha of the appendix.The statutory authorities do their planning on a calender yearbasis and these figures have been used uncorrected here.
2/ Land transfers from the Govermment to JTC have been deducted.Expenditures bDy JTC for housing and port development have beenclassified as such under the respective heading.
Source: Plans from statutory authorities and mission estimates.
Table 5.21
Projected Development Expenditure,1971-1976
(In millions of Singapore dollars)
1971/72 1972/73 1973/74 1974/75 1975/76 1976/77
JTC 120 201 228 174 175 201
% land transfers 24 80 94 30 12 10
JTC net 96 121 134 14 163 191
PSA 76 96 77 53 4L 15
STB 38 49 44 4o 41 45
PUB 136 266 287 217 20L 2062/
HDB 130 160 180 210 220 230
Total StatutoryAuthorities L76 692 722 664 672 717
3/Direct Government 184 207 244 302 359 394
Government Loans toIndustrial and 199 200 200 200 200 200Commercial Enterprizes
Total 859 1,099 1,166 1,166 1,231 1,311
1/ Figures for statutory authorities refer strictly tocalender years, not government financial years.
2/ HDB for 1971 has 159 in budget, but concedes that thiswill definitelly not be reached. 130 used here.
3/ Strictly, the! Department of Telecommunications -ll becomnea statutory authority on April 1,1972. It is included inDirect Goverrment above, however.
Source: Plans from statutory authorities and mission estimates.
Table 5.22Public Sector Resources for Investment, 1971/72 - 1976/77
(in millions of Singapore dollars)
1971/72 1972/73 1973/74 1974/75 1975/76 1976/77
I, SOURCES
A. Current Account Surplus 617 701 811 920 1057 11871. Government -bz 275 320 362 417 4552. Statutory Authorities 167 201 237 271 318 3703. Central Provident Fund 204 225 254 287 322 362
B. Capital Account Revenues 55 -- 55 55 55
C. External Capital (Gross) 153 153 153 153 1531. Loans2, Suppliers Credits3. Grants
D. Internal (Gtross) 107 277 243 161 107 88
TOTAL 932 1186 1262 1289 1372 1483
II USESA. Development Expenditure 8 1099 1166 1166 1231 1311
Source: Banking & Financial Institutions Department,Monetary Authority of Singapore.
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Table 6.5
Assets and Liabilities of Commerciai Banks, 1964-71(s$ million, end of year)
1/ Figures are based on data obtained from a sample survey of establishments in principal industries conducted in thelast week of July each year.
2/ Earnings include overtime but exclude bonuses, employers' shares of C.P.F. contributions and payments in kind.3/ Figures for the years 1966-68 are in respect of "worlonen". 'Workman" is defined to include an artificer, journeyman
or any manual worker, whether skilled or unskilled and includes any person, other than clerical staff, employed inmechanically propelled commercial transport but not a seaman, domestic servant, shop assistant, or watchman.
4/ Figures from 1969 refer to "production, transport and related workers" 18 years of age and above. They cover paidemployees only. The category "production, transport and related workers" is defined to include (a) workers who aredirectly engaged in or are closely associated with the processing of materials, the manufacture, assembling, servicinaand repair of products and the construction of buildings, roads and structures, (b) workers who operate stationaryengines and equipment to move materials, products and persons from one location to another, and (c) general labourers.
5/ The industrial classification w,as revised in 1970. In order to maintain comparability, the figures for 1970 in theabove table have been re-clt.;sifieo according to the industrial classification used in the previous years.
Source: Minis Gry of LaboiLr.
Table 7.1a
Conposition of Nlanufacturinp Ind'ustries 1969 1/
Workers Rerruner- ZapitalEstablish- Value Value per est- ation per Expend-
Output Value Added Ernlovrnent Rornun'rat±on ments Added per Added per ablishment worker itureS$ rnil. 7 S$ rul. Noo. a SS mil. A N . .utput % ;;.orker SV * o. S$'OO0 S mll
Total Manufacturing 1 213.9 100.0 856.6 100.0 100,758 100.0 319.8 100.0 1 714 100.0 26.7 8.r 58.8 3.2 212.6Rubber Froce-sing 1;004.9 -T7.3 5,213 12.? -2 T 9.1 l 2.5 5.0
Total R inufa:turing including.-u.z er Proces :ng 4,278.8 9032 9 105 971 332.7 1 742 21.1 8 rO.8 3.1 217.6Granmte quarrying 12.0 10.7 .99.2 70.9 1.0
Tctal fact ring includingRu½ber Processing and 4,290.8 914..6 107,235 337.6 1,758 21.3 8!; 61.0 3-1 218.6Granite czarryi:ng
Notes: (a) The dte.ta for the Petroleum Industry in the 1969 Census were extended to include blending activitywhich accounted for about 2% of the increase in employment, 28% of output and 9% of value added.
(b) Percentages may not add up due to rounding.
1/ Establishments engaging 10 or more workers
Source: Census of Industrial Prodiction
Table 7.1b
1/Co.Tmroition of Manufacturiny Industries 19701
Value Workers Remuner- CapitalEstablish- Value Added per per est- ation per Expend-
Industry Major Group Outuut Value Added yment Reruneration ments Added per worker ablishment worker itureS$ mil. w S nil. , No. .Sr 57o outpu t % 5$000 No. S$'000 S$ nil.
1/ The following establishments are covered by the Survey:
(a) All Pioneer Establishments.(b) All Establishments with foreign investments.(c) Non-Pioneer locally-owned establishments which satisfy either one or both of the following criteria:
( i) Establishments incurring not less than a quarter million dollars in fixed assets.(ii) Establishments employing not less than 50 workers.
2/ Paid-Up Capital, fixed assets, employment, value of output, value added and sales are for firms whichresponded to survey only.
Source: Economic Development Board,
Table 7.3a
Jurong Establishments* by Industra Major Groupas at December 31, 1969
No. of Paid-Up Capital SalesEstablishments (S$ Million) Gross Employ- output Value (S$ llion
Establishment Pro_ Under Fixed ment (S$m.) Added Sal EirtCategory ction mePa- Local Foreign Total Assets (No.) (S$m.) Local Direct Total
* Coverage includes: (a) all pioneer firms; (b) selected non-pioneer firms with foreign investments.1/ Establishments in production and implementation.
Source: Economic Development Board.
Table 7.4b
1/*Establishments- in Industrial Estates* other than
Jurong by Major Industrial Groups as at December 31, 1970
Establishment No. of Paid-Up Capital Gross SalesEstablishment E^ oPadY DisFxe Emloy- Oupt Value (S$ bMilion)Establishments (S$ Million) Fixemd Lm OutputionCategory Ases ment (~K Added Direct ToaProdn. Impl. Local Foreign Total (No.) (S$m.) Local ExNo)rt
1/ All manufacturing establishments, excludes establishments engaged in rubber processing and quarrying, employing10 or more workers.
2/ The coverage of data in the 1969 Census was extended to include blending activity of the petroleum industry.The growth rates compiled for 1969 have been adjusted for the extension.
Source: Census of Industrial Production.
Table 7.6
Domestic Sales of Manufacturing Establishments2'by Industry Major Group, 1960-1969(S$ Million)
Industry Major Group 960 1961 1962 1963 1964 1965 1966 1967 1968 1969
1/ Establishments engaging 10 or more workers.2/ See notes (a) to Table 7.1a.
NOTES: Data cannot be compared with dorestic exports in the balance of payzwnts because the latter treats productsof certain processing industries as entrepot exports.
Source: Census of Industrial Production.
Table 7. 8 a
Employment and Output by Industry Major Group, 1966-1970
1966 1967 1968 1969 1970Industry Major Group No. of Output No.of Output No.of Output No.of Output No.of Output
Total Manufacturing, RubberProcessing and Quarrying 57,521 1,979,905 63,195 2,254,022 80,533 2,806,211 107,235 4,290,799 132,812 4,951,900
Source: Census of Industra-41 Production
Table 7.8b
b1iployment and Output by Industry Major Group, 1960-65
Indust1MaJor Groun ls60 1961 1962 1963 1964 N 965Idstry Major Groun No f,t.p,t. Ho. f Otu o.o pt of of Oupu or of utput o~.o utputWorkers S$'COO Workers S$'000 Workers SS'000 Workers S$'000 Workers S$C000 Workers S$'000