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2019 GCE A Level Economics (9757) Essay Q5b: Policies to achieve inclusive and sustainable growth in SG

Discuss the extent to which it is possible for a small, open economy such as Singapore to achieve both inclusive growth and sustainable growth. [15]


In Singapore the government aims to achieve sustained, inclusive and sustainable economic growth. Singapore is a small and open economy. To achieve these macro-goals there are challenges and vulnerabilities due to the small and openness of the economy. Notwithstanding these challenges the extent it is possible to achieve these macro-goals is also dependent on the type of policies adopted to overcome them.

Explain Singapore policies to help achieve sustained growth and limitations / trade-offs

●  Long-run supply-side policies to boost LRAS to support growing AD, together with signing of Free Trade Agreements to improve global competitiveness in terms of trade and FDI to drive growth.

●  MAS takes the stance of a gradual and modest appreciation of the SGD to rein in inflation.

●  Limitations/Trade-offs: Singapore has no domestic sources of energy, mineral deposits, forestry, fisheries and is dependent on the world for resources to sustain growth. Its vulnerability is so stark that Singapore’s dependence on external sources of supply extend to even drinking water and sand for construction. Any major disruption to global supply chain would certainly threaten Singapore’s ability to sustain economic growth. Besides, strong economic growth can lead to larger income disparity and environmental degradation.

Explain Singapore policies to help achieve inclusive growth and sustainable growth and limitations/trade-offs.

Inclusive growth policies

●  In recent years the rising global trend of income inequality has been attributed to the combined forces of globalisation with greater factors mobility and rapid technological changes. These have led to the situation of rising wages for skilled workers in selected sectors while wages of low-skilled workers tend to fall with influx of blue collar workers or those working in ‘sunset’ industries experience stagnated wages. Being a very open economy, these have accentuated income or wage disparity between skilled and unskilled workers in Singapore.

●  To narrow the income inequality gap and improve social mobility/levelling up, the government has invested heavily in providing access to education from pre-school to tertiary level for every eligible person so that none is denied access to education because of lack of financial means. It also heavily subsidises skill training and upgrading programmes to help unskilled workers move up the income ladder. The progressive wage model is used for security guards, cleaners and gardeners and wage subsidy such as workfare Income supplement (WIS) for low-income earners.

●  Medical services are also made accessible to every citizen via government subsidies and means-testing. The HDB or affordable public housing scheme has successfully housed 90% of households including many middle and low- income families.

●  However unlike western developed countries, the Singapore government eschews the use of steep progressive taxes on personal incomes and welfare hand-outs such as unemployment benefits to redistribute incomes as they are deemed as sapping the incentive to work. So while the pie might have grown for most Singaporeans, the gap could still remain big.

Sustainable growth policies

●  As a small island state, Singapore is particularly vulnerable to potential catastrophic floods due to rising sea levels caused by global warming.

●  Thus Singapore has adopted a slew of “green policies” to promote greener living.

● Notably the government has put in place stringent regulations to control industrial and vehicular pollution and deter littering and dumping of waste into rivers and waterways. Singapore has implemented a carbon tax which is the first in Southeast Asia and which it applies economy-wide with no exemptions. Being a small country, Singapore is disadvantaged in alternative energy, with limited sources of renewables other than solar energy. In view of this, Singapore is installing large-scale solar panels that float in its reservoirs and off its shores.

●  On the consumer front the government has also stepped up the promotion of green lifestyle – “reduce, reuse and recycling” and promote the use of electric or green cars (e.g. blue SG car-sharing) to reduce CO2 emissions.

●  Limitations: Takes time for habits to change and for firms to see the benefits of turning green and not just focusing on costs.


●  Singapore has been successful in achieving non-inflationary growth for most years except years when there was worldwide recession that adversely impact its exports leading to recession or high oil or food prices that spiked imported inflation. Supply-side policies, FTAs and a strong SGD do work favourably for Singapore’s interest despite their limitations. The government has leveraged on technology to overcome over-reliance on key imported resources such as sand and water and also started to build up its capacity on necessities and source for more suppliers to withstand disruptions in global supply chain better.

●  The focus now is to make economic growth more expansive to benefit most sectors, reducing income inequality and moving towards greener sustainable growth.

●  Whilst Singapore may not have the world’s lowest Gini Coefficient, it has made significant improvement in income redistribution especially after government tax and transfers. Singapore also ranks highly for Global Social Mobility Index (In 2019, Singapore was ranked #20 out of 83 economies and is significant given that it is one of the only 2 Asian economies in the top 20 ranking.) This shows that the policies to level up those from less privilege backgrounds are working well.

●  Moreover, the government has not only control pollution and congestion successfully but also adopted green lifestyles from switching to green energy, green buildings and even green cars. In fact, its contribution to global warming or CO2 emission is a mere 0.03%, not just a result of our smallness since we produce for a global market, but government efforts to greener growth.

●  All these indicators clearly show that sound economic policies can be implemented to overcome the inherent vulnerabilities associated with a small and open economy.



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