Wednesday, 3 March 2010

Singapore economy: advanced or not?

While its per capita GDP is relatively high, it lags behind on value-added per worker

1 comment:

Guanyu 道 said...

Singapore hasn’t quite revisited the issue since, even as it’s plainly evident over the years that it is by far the most advanced economy in the region, at least in terms of economic infrastructure and business sophistication.

Not least, too, there are various responsibilities and obligations attached to the ‘developed country’ tag - from carbon emission standards to the level of contributions to the UN peacekeeping budget.

But there’s little doubt that Singapore has all the makings of an advanced economy as it transforms and re-invents itself along the ESC path to become a high-skilled, innovation-driven, vibrant global city.

The IMF already declares it one, on the basis of economic criteria like per capita GDP.

But while Singapore’s per capita GDP may be relatively high, it lags well behind advanced economies such as the United States and United Kingdom on a related measure, value-added per worker.

Per capita GDP is output per person in the population. Value-added (VA), on the other hand, is basically output net of total operating costs. It can be seen as a measure of the ability to create wealth.

One reason why Singapore’s VA per worker (and GDP per worker, too, for that matter) is relatively low, when its per capita GDP is relatively high, is because more of its people work, compared with the developed economies. Or what’s called the labour force participation rate - about 66 per cent here, compared with the developed economies’ average of barely 60 per cent.

And seeing as VA per worker is but a proxy measure of productivity - the conventional measures being GDP per worker or GDP per hour worked - it is little wonder that the ‘P’ word has now risen to the forefront of the national agenda.

On that score, then, perhaps Singapore still does have some way to go before it fully reaches advanced economy standards.