Globalisation involves the removal of trade barriers and the increasing integration between economies. Singapore had taken advantage of opportunities provided by globalisation by increasing world trade, strengthening economic integration, lowering costs and raising productivity. Singapore is a newly industrialised economy and one of the five founding members of ASEAN. Singapore, like many nations imports goods which include machinery and equipment, mineral fuels and chemicals, and exports goods such as machinery and equipment, pharmaceuticals and refined petroleum products to its various trading partners like Malaysia, Hong Kong, China and Indonesia making it the 14th largest exporter and 15th largest importer. Figures 1-4 demonstrate the imports and exports by commodity. Singapore has a GDP of $274.7 billion and a growth rate of 1.8%. Its current unemployment rate is 1.8% and its inflation rate is 4.5%.
Globalisation has increased international convergence in Singapore as its economy integrates within the global realm and starts moving in sync with another economy. For instance, if an economy is experiencing an upturn in economic growth, it may influence other economies to experience a similar result. Singapore displays international convergence by adopting certain reporting methods to attract investors from well-situated corporations, increasing the levels of trade and Foreign Direct Investment (FDI) between different economies. FDI involves direct investment in foreign assets/businesses by which they own a significant part of the business. Figures 5 and 6 illustrate Singapore’s FDI outside of its economy as well as the FDI of other countries in Singapore which depicts the mutual benefit experienced by Singapore and the countries investing in it.
Furthermore, with globalisation, economies are trading at an exceptional level which increases aggregate demand for exports as well as the level of production in export-oriented industries. Combined due to amplified levels of international trade, economic activities have also increased, resulting in more jobs, greater disposable income and a higher GDP, which all compel economic growth. Although there are many barriers to entry, the global economy has recently seen significant progress towards free trade; where governments impose no artificial barriers to trade between countries. Free trade promotes economies to take advantage of comparative and absolute advantage and enables countries to obtain goods and services that they are unable to produce themselves or cannot produce in sufficient quantity. Neighboring countries such as Qatar have taken advantage of Singapore’s lack of natural resources to raise the price of gas sold to Singapore even though there is a contract in place. Indonesia has agreed to renegotiate its natural gas sales contract with Singapore to meet the domestic demand for the fuel.
Free trade leads to short-term unemployment (0-5 years) as domestic businesses find it hard to...