Competitive Economy In Southeast Asia (Research Paper Sample)

WHICH IS THE MOST ECONOMIC COMPETITIVE ECONOMY IN SOUTHEAST ASIA?
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Which Is The Most Economic Competitive Economy In Southeast Asia?
Introduction
The nature of the competitive landscape existent in the region of Asia-Pacific is very open. As outlined by the 2014-2015 World Economic Forum’s Global Competitiveness Report, within this region, there are three economies that are ranked amongst the top ten globally with three more featuring on the list of top 20. This, however, does not cover for the worse of nations within the region, with about 5 of the 144 countries taken into consideration well below the 100th Mark (Coleman 2015, 31). With respect to the Global Competitiveness Index (GCI) of the report, there is a continued strong performance by the region’s tigers, except for the recorded steady decline of South Korea, which has currently fallen to the 26th position.
For the past four consecutive years, from 2010, Singapore has maintained its second position globally inn terms of competitiveness of its economy. This is mainly due to the stable performance that it has showed with respect to all the considerable dimensions of the Global Competitive Index. In the year 2014, 2015, Singapore has been noted to be the sole economy that has managed to appear in the top three within the seven out of the 12 pillars that were applied in the determination of competitiveness (Coleman 2013, 110). The nation is topping in the pillar of the efficiency of the goods market, and comes second in the financial and labor market respectively. Singapore boasts of having an institutional framework that is considered amongst the best globally as well as a world class infrastructure characterized with excellent ports, roads, and facilities of air transport. The economy of the nation also strongly relies on an efficient fiscal management of about 6.9 percent GDP surplus are recorded in 2013, and macroeconomic environment. Notably, the country has also taken on one of the most promising steps, such as education, which help ensure the prosperity and innovativeness of the country as a whole.
Reasons for the economic competitiveness in Singapore
Macroeconomic environment
Currently, the nation is considered one of the most well managed, and open economies states that are business friendly globally. Typified by the bilateral free trade agreement (FTA) that they signed in 2003 with the United States, the states have remained on the forefront of liberalization of trade. This marked the very first agreement between the United States with a nation from the Asian region (Wilson 2011, 26). Indeed, amongst the nations of the Association of South East Nations (ASEAN) block, Singapore juxtaposes as the major liberalization vanguard, and still continually supports the development of a debt market within the region. The nation has remained exemplary for economic development in the region in the past several decades.
The nation has had its economic policy shifted towards the maintenance of competitiveness both in trade and the flows of investment. This is especially in the faces of the pressures that develop from the regional producers that are low cost, for instance, India and China. The Economic Review Committee was established by the nation’s government to help in the laying of a foundation for entrepreneurial and diversified economic base founded on administration (Bellows 2006, 233). This program is mainly based on entrepreneurship and liberalization, which are the real recipes for ensured expansion in the service industries and value addition on the chain of manufacturing industries.
Since the country poses as being amongst the strongest free trade advocates, Singapore faces relatively very few trade barriers. Mark you, the zero tariffs applied on the products by the nations within the Most Favored Nation (MFN), greatly boots the trade that exists amongst the members. As at 2010, the exports of Singapore were at US$351.2 billion in valuation. At such time, its primary partners of exports were: Malaysia, 11.5 percent; Hong Kong, 1.6 percent; US, 11.2 percent; China, 9.7 percent; japan, 4.6 percent and other minor participants. The imports of the nation were esteemed at about US$310.4 billion (Coleman 2015, 37). The primary source of imports for Singapore was the US at 14.7 percent followed closely by Malaysia at 11.6 percent, China at 10.5 percent, Japan at 7.6 percent, Indonesia at 5.8 percent, South Korea at 5.7 percent and others.
The monetary policy adopted by the nation has continually safeguarded its financial security within the regional trade. Unlike most of the others trading partners that enjoy the free trade liberalization, Singapore does not take into account its interest rates in the management of its monetary policy, rather; it mainly manages its exchange rates (Wilson 2011, 25). This is reaffirmed by the Monetary Authority of Singapore (MAS), in the review of 2014, October of the policy that was first adopted in April, 2012. Through the gradual but constant maintenance of the appreciation for the nation’s dollar nominal effective exchange rate (NEER), its strength has relatively remained stable. Despite the recurrent bouts of periodical exacerbation of price pressures, MAS has constantly ensured a bias to the monetary policy to see to it that the nation’s capital base remains stable.
Microeconomic environment
* Political stability
The nation has nominally been a democratic nation, under the rule of the People’s Action Party from 1965, the time it gained independence. As at the elections of May 2011, PAP took 81 seats out of the possible 87 in legislature, which was considered the lowest in history. Even though some civil rights are restricted, such as freedom of speech and assembly, the trade strategies such as international trade and economic liberalization have greatly boosted trading activities in the region (Country Reports - Singapore' 2015, 2). Besides, the nation enjoys a corruption free status, marked with easy chances of investment and starting up businesses.
* Labor force
The unemployment rate of the nation is currently among the lowest in the world. Majority of the labor force of the nation is well educated and highly skilled. This is mainly a sequel of the educations policies and reforms that have been adopted since the recession that the nation faced around the 1980s. This period prompted the government into foreseeing the probable shortage of labor that was due in the future. The primary education has been made compulsory and free to all the citizens. Globally, the nation is also considered amongst the lowest annual growth rates of population, at about 0.817%. To counter the challenge, the government of Singapore actively got involved in the sourcing of expatriates and immigrants who could live within the nation and provide labor (Country Reports - Singapore' 2015, 10). Standing at the moment, about 35.8 percent of the total labor force is composed of majorly the foreign workers. This has been a very great advantage to the nation as most of the foreigners mainly take up the jobs and positions that its citizens shun, and mostly at very low prices.
* Industries
The country has one of the largest industries in the world such as the petroleum and petrochemicals. Currently, the nation has diversified into other sectors such as the electronics and digital media. For the past forty years, the nation has concentrated on importation of oil from the other nations which it then refines to be used further by other nations. Indeed, just after Rotterdam and Houston, Singapore falls third globally in oil refinery (Country Reports - Singapore' 2015, 17). The Singapore Petroleum Company is a top player in the petroleum industry, engaged in the exploration, refinery, distribution and production.
Challenges faced by the nation
Foreign labor policies
The changes that are currently taking place in the policies regarding foreign labor will most definitely put strain on the nation’s labor market. Since the Great Recession, the nation has been faced with a constant annual unemployment increase rate, with a projected steady unemployment rate projected to stand at about 2 percent in 2015. This has subjected the government to a very critical situation while trying to balance between ensuring constant supply of labor to the manufacturing industry and taking into consideration the global demands, at the same time (Bellows 2006, 235). The 2011 watershed election highlighted the resistance to the influx of the foreign and cheap workers, which prompted the June 2014 move towards the setting of the maximum quota for the foreign laborers.
Depreciation in the nation’s currency
It is projected that the strength of the currency of Singapore will dwindle due to the changing sentiment of the international investor rising from the unwinding of the very loose policy on monetary in United States. This will greatly impacts the international trade as the nation will no longer enjoy the position that it has always enjoyed as a result of the strength of its currency.
Resources
The nation suffers lack of any natural resource apart from the deepwater ports and fish. Because of the lack of natural resources, the nation relies greatly on the international trade and the foreign investors such as the multinational corporations to help provide for its population of about 5 million. Mark you; the nation does not have any basic agricultural base, which is considered the most important for the success for any nation. As such, in case of a major difference within the trade relations, Singapore is bound to suffer. Therefore, the nation stands at the risk for being overtly reliant on the other nations.
Strategies laid down for future improvements