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As one of the industrialized countries in Asia, Singapore’s economy can be characterized by a vibrant free-market economy, reasonable income distribution, widened trade surplus to other nations and a well established financial business framework strengthened by a corruption-free environment.
This island whose main feature is its strategic geographic location was able to surpass the challenges it faced at the time of its Independence in 1960s. The country was confronted with dearth of natural resources, small domestic market, rapid population growth and being highly dependent on entrepot trade. In order to surmount unemployment and reduce the dependence on the entrepot trade the government of Singapore implemented a pro-business, pro-foreign investment, export-oriented economic policy combined with state-directed investments in strategic government-owned corporations.
From 1966 to 1978 the country seen major upheaval, during these years, the British phased out the military base over a period of 5 years, high unemployment rate, lack of natural resources and fiction with Indonesia impeded its position as key trading post in the region. The government thus adopted a process of industrialization by the way of export oriented strategy. In the process, the entrepot economy of Singapore was replaced by a diversified economic structure based on finance, manufacturing, trade and transportation activities. By the year 1978 the unemployment rate of the country had drastically decreased, professionals and unskilled workers were imported to man labor-short factories and offices and manufacturing industry had become a big factor in the growth of the economy.
Singapore’s gamble on globalization paid off in 1980s. Despite the stiff competition from other cost effective developing countries in foreign investment, the salaries and wages showed significant increased. At that time, economy of the country was rested on five major zones namely- export-oriented manufacturing; petroleum refining and shipping; production of goods and services for the domestic economy; international market service; and regional entrepot trade. The government promoted investment policy which focused on value added services and skill development programme thus education and training to efficiency was empowered by the government improve the human resources.
In 1998 Singapore experienced economic slowdown due to the regional crisis which started with the devaluation of Thai Baht in July 1997. The adverse condition of the other economy in the region affected Singapore’s economy, from an 8.3% economic growth to a negative growth of 1.4% in 1998. From 1999-2000 the country economy shows moderate growth. Singapore’s economy was badly affected by the slump of technology, the 9-11 attack in 2001, and the Severe Acute Respiratory Syndrome (SARS) outbreak in 2003 which restrain tourism and consumer spending.
After absorbing major shocks Singapore economy recovered due to its sound economic strategy, excellent infrastructure, numerous foreign investors and high skilled workforce. In 2007 the country recorded a 7.8 % in real growth of its GDP. Major redevelopment initiatives also boost constructions, leisure and retail industries, as well as tourism.