For an economy to stand, various sectors must remain productive to maintain sustainable development and growth in the country. One sector alone cannot hold a country together. However, some sectors develop more profit than others. In Singapore, the service industry is one of the most productive sectors that increased the economy. The importance of the service sector in the economy of Singapore is laudable as the sector boasts of 75% of the total country’s GDP. Irrespective of its small surface area of a little above 700 km 2, Singapore continues to flourish. The country has not allowed its geographical location or size to impede its economy success in any way. The Country’s economy is so vibrant that it earned itself a reputation for productivity. It was the nickname “Asian Tiger.” What a befitting name!
Over the years, the service sector has undergone a great transformation from the days of small scaled businesses to family-owned businesses. Little by little, this evolution has given rise to higher skilled and more value-added activities like financial services and information technology.
The Service Sector in View
We would bring the Singapore Service sector under the telescope in a bid to have a better understanding of its workings and its impact on Singapore.
1. Educational Sector
The education system, which is a component of the service sector, experience success in producing skill workers. It is also fundamental in this regards as they provide easy access to the market for both importing and exporting. It also provides skills needed to refine imports into exports. This sector is highly patronizing and hence adds to the country’s wealth, as a result of recruiting international students.
2. Energy Sector
The Energy and the Infrastructural sector is not left out as they contribute enormously to the country’s GDP. The oil Industry is responsible for up to 5% of Singapore’s GDP with Singapore being one of the top three export refining sectors in the world. According to reports, the country exported up to 68.1 million tons of refined oil. This Oil industry has led to the promotion of the chemical industry as well as the oil and gas equipment manufacturing sector. Singapore holds a whopping 70% of the world market for both jack-up rigs and for the conversion of Floating Production Storage Offloading Units. It has 20% of the world market for ship repair and in 2008. The marine and offshore industry recruited almost 70,000 workers. The preceding facts show Singapore is a strong force when it comes to the service sector.
3. Biotechnology and Banking Sector
Biotechnology and Banking Service sectors are not left out as they contribute greatly to the wealth and economy of the giant, with Banks in Singapore offering exceptional corporate bank accounts. The Human Rights Watch states that the country is known to host bank accounts containing ill-gotten gains of corrupt leaders and associates. It includes billions of dollars of Burma’s state gas revenue hidden from national accounts. Credit Suisse, which is the second greatest Swiss bank, moving its headquarters in charge of international private banking to Singapore in the year 2005. This contributed massively to the growth of the service sector.
Also, the service industry has contributed massively to the country’s GDP as it boasts 83.9% of all active labor force. It just goes to show that the sector is the live-wire of the country’s economy. Exports, especially of electronics, chemicals, and services account for the labor source of revenue for the economy which allows it to purchase natural resources and raw goods which it lacks. With these facts, it’s safe to state that a decline in the service sector can make this great economy crippled.
Impact of Service Sector Decline on Singapore’s Economy
A decline in the service sector was experienced in externally driven services industries such as wholesale and retail (-1.5% y/y) and finance and insurance (-0.7% y/y). The possible reason for this decline is as a result of stiff competition in the global economy platform. It could be in the form of more quality and cost effective service alternatives from countries with higher pedigrees.
Judging from the fact that the country imports most of the raw materials and goods needed to run various sectors. The fluctuating foreign exchange rate plays a vital role in the decline of the service industry. It is because the industry charges higher for services rendering, hence, dissuading prospects from patronizing while customers either reduce the demand for services required or sort after cheaper alternatives.
Also, the fluctuation in exchange rate might result in the country paying more for import and getting less from exports which subsequently results in Balance of Payment Deficit. This imbalance in payment would require some degree of economic adjustment both on the part of household and firms.
Decline in the service sector
A decline in the Service sector would adversely affect Singapore’s GDP and lead to a rise in the cost of living. Considering how high the cost of living presently is, no one wants to see it grow higher. An increase in the cost of living would subsequently affect the education sector as international students might not want to come into the country to school when they have other cheaper alternatives that provide as much value.
The decline must be tackle now! If the current trends continue, there will be a high tendency for an increase in the unemployment rate around the country. The level of unemployment which is presently at 2% may become as high as 5-10%. This is because sectors will be unable to run their business and force to downsize the number of individuals that make up their workforce so they could run efficiently with few. A rise in unemployment would, in turn, affect the per capita Income leading to a higher cost of living thus widening the gap between the poor and the rich. The country which boasts of the lowest crime rate in the world could gradually turn into an arena for criminals as crime rates will increase.
No doubt, a continuous decline in the service sector will set back the great nation that is Singapore.
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