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The anatomy of export-led growth : an empirical study of Singapore's industrialization and trade flows, 1967-1979 : a thesis presented in partial fulfilment of the requirements for the degree of Master of Arts in Economics
This thesis examines analytically and empirically the reasons which have accounted for the spectacular growth in Singapore's manufacturing sector since her Independence. The principal objective of the study has been to investigate the impact of the industrialization strategy on the growth in manufacturing output, export and investment. In conducting the analysis within the framework of the theories of international trade, the study makes a contribution by discovering new facts and providing empirical insights into some of the contradictions between theoretical predictions and observed facts. In Chapter 2, the nature and extent of export expansion and import substitution within Singapore's industrial sector is investigated. Export expansion is found to have contributed significantly to the growth in manufacturing output. Chapter 3 examines, with the help of the Constant-Market-Share model, the various components of export growth. The finding reveals that Singapore's increasing share of exports can be attributed, in order of magnitude, to competitiveness, favourable export markets and good commodity composition. The relationship between unit labour costs and cost competitiveness is also examined and reported in Chapter 3. Chapter 4 provides a rigorous test of Singapore's comparative advantage within the framework of the Ricardian theory and Hecksher-Ohlin model. The results indicate that unit labour costs and skill intensity are important determinants of Singapore's comparative advantage. This is in line with the Singaporean government policy of restructuring the economy into a "brain-service" centre. The measures of intra-industry trade are critically reviewed in Chapter 5. Intra-industry trade is found to exist between Japan and Singapore and it is increasing over time. Such growth in intra-industry trade between these two countries is found to be related, to a significant extent, to the differences in the relative skill intensities of the two countries. Chapter 6 provides some background information on the magnitude, direction and contribution of foreign investment to the growth in Singapore's manufacturing sector. The study reveals that skill intensity and unit labour costs are important factors responsible for the rapid growth of foreign investment in Singapore. It is also observed that Singapore is heavily dependent on foreign investment in terms of manufactured output, export and employment. Thus, Singapore's "success" in her industrialization programme seems to be based on her largely "open door" policy towards foreign trade and foreign investment. The indigenous sector, although growing in importance, is still relatively small.