Economy
Global ranking drops
Its population increase and powerful euro help push Singapore way down the ladder. By Seah Chiang Nee
Jul 11, 2005

In a changed landscape, Singapore's developed status has eroded, its global economic ranking overtaken by countries that had lagged behind it.

At its peak in 1997, the republic ranked among the world's top eight in per capita GDP, but after several years of economic weakness, it has now dropped to 22nd.

The recently released IMF World Economic Outlook 2005 showed Singapore at US$26,481, behind even the poorer European countries like Italy (US$31,874) and Spain (US$27,074) that it had little problem beating previously.

Other nations that were behind but have surged ahead of Singapore include Australia (US$33,629), Britain (US$30,098) and Germany (US$35,075).

Its traditional rival Hong Kong, which was slightly behind, has shot up to a dozen places above the republic at US$32,292, helped by its link to the strong US dollar.

Between 1999 and 2003, Singapore's per capita GDP at purchasing power parity fell from US$27,800 to US$23,700. At the peak, only three countries ranked higher on PPP terms; today it's 22nd.

(PPP takes into account price differences between countries for a more accurate measure of national wealth.)

To put things into perspective, Singapore's global slide was not caused solely by its trade weakness, but also by currency movements.

The GDP per capita, the value of a nation's goods and services divided by the population, is measured in US dollars.

The dozen or so nations that overtook Singapore were Europeans whose rankings were boosted by the powerful euro, especially over the Sing dollar.

Another major cause was Singapore's population jump due to immigration. It went from three million in 1996 to 4.18 million in 2003, the period of the ranking decline.

The island plans to push it to seven million by 2030 by immigration, which will make it hard to reclaim its former high per capita position.

The revelation couldn't have come at a less opportune time for the ruling People's Action Party, which is preparing the ground for general elections.

The slide explains why Prime Minister Lee Hsien Loong is leaving the bulk of Singapore's foreign affairs to his senior Cabinet colleagues to concentrate on the hard-hit economy.

However, there are bright spots.

Firstly, it appears to be on the mend. In 1996, the per capita GDP stood at US$25,105 but it fell to US$20,775 in 2001. Last year, it recovered to US$26,481.

Singapore is in transition. Its economy is being restructured, which probably means that the future could be more hopeful than the present.
The state has signed a series of bilateral free trade agreements with major trading partners and invested billions to expand its life sciences, tourism, and hub activities in health, education and the performing arts.

The republic has also decided to build two mega casino resorts by 2009 after saying "no" to casinos for 40 years. When mature, all these new activities will move the economy.

But the most cheerful news has come from investments abroad.

While the domestic scene didn't measure up in recent years, its external pair of economic wings has done better.

In fact, Singapore has become quite a global investor. Between 1998 and 2003, as its GDP per capita weakened, smallish Singapore invested an incredible S$147bil abroad, doubling its total global investments to nearly S$300bil, the Department of Statistics announced last week.

More than half were in direct investments, mostly in Asia, topped by China with 37.2%, followed by Malaysia and Indonesia.

At the same time, the government's investment arm Temasek Holdings announced it had agreed to buy US$1bil of stock in China Construction Bank's initial public offering.

A number of Singaporeans have greeted Singapore's drop to 22nd position with pessimism.

One questioned if it could still be classified as a First World nation, saying it's best described as a League player dropping from Division One to Division Two.

"Forget the Swiss standard of living; Singapore doesn't even have the Spanish standard of living!" declared another writer, throwing cold water on one of Goh Chok Tong's pledges when he was prime minister.

Some blame the woes on the open-door immigration policy, pursued for more than 10 years.

"Instead of a stronger economy as promised, it has become weaker," declared one.

Singaporeans take the ranking game seriously. They drool when told that theirs is the most globalised country or the second best airport in the world, but when the grades fall, the public pessimism could also be exaggerated.

This happened last month when Singapore Airlines, which was frequently named the best airline, managed only a fourth place.

Some attribute it to rising expectation among youths who are used to the good life and anything that falls short of it represents a mini crisis.

Some simply find it hard to accept that in this competitive world, others are improving all the time.

The world has changed and so will global ranking. They will likely change more regularly with new names popping up and old ones disappearing.

Speaking about the fortune of nations, one writer said Argentina was one of the world's richest nations at the turn of the century because of its natural resources and cattle.

"Today they are nowhere near the top," he said.

Being practical, the majority of Singaporeans are less bothered by world ranking than the living reality at home.

Many multinational corporations have pulled out and the government is frantically raising skills and reducing costs (including wages), cutting into Singaporeans' living standards.

The poor are hit the hardest and the rich-poor gap has widened. The Department of Statistics said the wages for the bottom one-fifth of Singaporeans had fallen by 3.2% between 1998 and 2003.

At the same time, another survey by Housing Development Board (HDB) confirmed that the household income for those living in smaller one-room and two-room flats had declined by 17% to 14.5%.

Singaporeans who have gone through worse times see the recent past as a passing cloud.

Lee Kuan Yew has told youths not to despair because their future will be brighter. Singapore 2030 will be a flourishing global city of six to seven million people, he adds.

Singaporeans who admire his vision are hopeful that in 25 years, their city may achieve the current living standards of Switzerland (per capita GDP US$52,879).

(This article was written for, and published in, The Sunday Star on Jul 10, 2005)