UNIVERSITI TUNKU ABDUL RAHMAN

CENTRE FOR FOUNDATION STUDIES PERAK CAMPUS

FOUNDATION IN ARTS

Academic Year 2012(Jan Intake)

Semester 1

PRINCIPLES OF ECONOMICS (FHBM 1014)

“SINGAPORE VS PORTUGAL”TUTORIAL GROUP

T2

INSTRUCTOR INFORMATIONMS KAMALASWARI A/P SOMASUNDARAM

GROUP MEMBERS

No. ID No. Name1 12AHF00300 WEE MUN YEE2 12AHF00317 TAN MOOI KEE3 12AHF00255 VIVIAN LIM SZE YIN4 12AHF00249 GAN HUI XIN567

DATE OF SUBMISSION16.03.2012(Friday)

CHAPTER 1: ECONOMIC BACKGROUND1.1 ECONOMIC BACKGROUND OF SINGAPORE Singapore has a successful and highly developed free-market economy. It is best

described as a mixed economy. Singapore government started a pro-business, pro-foreign

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investment, export-oriented economic policy framework, combined with state-directed in

strategic government-owned corporations. It enjoys a corruption-free and remarkably open

environment, and stable prices. This has been proven successfully when Singapore’s GDP real

growth increased. Due to many worldwide problems, Singapore’s economics bounce back each

time because of being attracted by major investment from other country. In year

2009 ,government strength of renewed exports as a result of the global crisis,.

Singapore has a very small land area and has no natural resources. The economy is

mainly driven by manufacturing, financial services and tourism. The major industries included

electronics, construction and so on. Singapore government approved the opening of two casinos

in April 2005 which resulted investments over billions of dollars, to improve its tourism sector.

Despite rising wages, the government finds ways to improve higher value-added activities in the

manufacturing and services sectors to maintain its competitive position. The country has also

been through cost cutting measures, including tax, wages and rent reductions to lower the cost of

starting a business in Singapore. Singapore intends to negotiate eight free trade agreements with

other qualified economic partners.

Singapore’s financial services industry is important to the economy of Singapore. Its

business supportive environment and political stability has attracted many multi-national banking

and investment firms.

1.2 ECONOMIC BACKGROUND OF PORTUGAL

Portugal has a highly income mixed economy. The Global Competitiveness Report 2008-

2009 edition placed Portugal in the 43rd position out of 134 countries and territories. Most of the

imports came from the European Union countries of Spain, Germany, France, Italy, and the

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United Kingdom. Most of the exports also being exported to other European Union member

states. The Portuguese currency is the euro (€) and the country's economy is under Eurozone

since its starting. Portugal has become a diversified and increasingly service-based economy

since has joined the European Community.

The economy had grown by more than the EU average for much of the 1990s, but fell back

in 2001-2008, and contracted 2.5% in 2009, before growing 1.3% in 2010. But GDP fell again in

2011, as the government implemented austerity measures, including a 5% public salary cut, a 2%

increase in the value-added tax, and an extraordinary tax on yearend bonuses to comply with

conditions of an EU-IMF financial rescue package agreed to in May 2011.

A poor educational system and a rigid labor market have been obstacles to greater

productivity and growth. Portugal also has been increasingly overshadowed by lower-cost

producers in Central Europe and Asia as a destination for foreign direct investment. Portugal's

low competitiveness, low growth prospects, and high levels of public debt have made it

vulnerable to bond market turbulence.

Portugal is a developed country with a very high Human Development Index, the world's

19th-highest quality-of-life, and a strong healthcare system. Portugal is one of the world's most

globalized and peaceful nations.

CHAPTER 2: ANALYSIS

2.1 THE COMPARISON OF GROSS DOMESTIC PRODUCT (GDP) BETWEEN

SINGAPORE AND PORTUGAL AND ITS REASONS.(REAL GROWTH RATE)GDP of SINGAPORE

Year 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

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GDP 9.1 -1.2 4.2 4.6 9.2 7.4 8.7 8.8 1.5 -0.8 14.5

GDP of PORTUGAL

Year 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

GDP 3.9 1.9 0.7 -0.9 1.6 0.8 1.4 2.4 -0.1 -2.5 1.3

The graph shown that the GDP of Singapore from year 2000 until year 2010. In year

2001, the GDP real growth rate of Singapore is -1.2% whereas the GDP real growth rate of

Portugal is 1.9% . The difference between two countries is 3.1%. The GDP real growth rate of

Singapore is lower than Portugal because the worldwide electronics slump. After two year

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contraction, Singapore economy grows back strongly due to its strong and stable economics

activities in the run.

In the year 2004, the GDP real growth rate of Singapore is 9.2% whereas the GDP real

growth rate in Portugal is 1.6% and the difference between two countries is 7.6%. The GDP real

growth rate of Portugal is lower than GDP real growth rate of Singapore. One of the reasons that

affect the GDP real growth rate is due to industrial production decrease. Other reasons area

weakening of the US dollar, general slowdown of major economics and in turn, decreases in

overseas demand.

In year 2010, the GDP real growth rate of Singapore is 14.5% whereas the GDP real

growth rate in Portugal is 1.3%. The difference between two countries is 13.2%. The GDP real

growth rate of Singapore higher than Portugal. After global financial crisis, the government

Singapore to establish a new growth path that focuses on raising productivity. Singapore has

attracted major investments in medical and technology.

2.2 THE COMPARISON OF UNEMPLOYMENT RATE BETWEEN SINGAPORE AND

PORTUGAL AND ITS REASONS.

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From the graph above, we can see that the unemployment rate yearly in Portugal is

much higher than in Singapore. The unemployment rate for Portugal in year 2000 is 4.3% , but it

rises to 7.5% in year 2005. During year 2010, Portugal’s unemployment rate reaching an

historical high of 10.7% . In the other hand, the unemployment rate in Singapore in year 2000 is

3.0% ,which was 1.3% lower than in Portugal. The unemployment rate in Singapore then

increased to 0.1% in 2005 and decreased to1.1% in 2010. The differences between the

unemployment rate in Portugal and Singapore for the year 2005 and 2010 are 4.5% and 8.6%

respectively. All the unemployment rates shown are average figures for their respective years.

Portugal is a developing country, therefore this causes the unemployment rate is higher

than the unemployment rate of Singapore. One of the main reason causes unemployment rate of

Portugal higher than Singapore is Portuguese has low academic achievements or qualifications.

In statistics, Portuguese only have 20.6% of citizen, whom in between the age of 25 to 64

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reached only high school level. During year 2007, Portugal has 5.1% of illiteracy rate, and it

becomes one of the highest illiteracy rates across Europe countries. As most of the advertised

jobs required working experience, Portuguese who do not have any working experiences also

causes them jobless. In additional, it may also have an influence in the unemployment issue due

to the slow response of government.

Singapore is a corruption-free country and, it is compact with infrastructure due to the

size of its country is one of the reasons why it has lower unemployment rate. Singapore’s

government did a good job in preparing for economic crisis. Government doesn’t neglect the

social security, but measure the financial budget regularly in every year to help reducing jobless

issue. Besides, Diversification of sectors is also one of the causes. It has increased the job

opportunities, therefore causes the unemployment rate decreased. The drop in Singapore’s

unemployment rate was also due to gradually improving and structural changes in economy by

low-skill manufacturing operations have moved overseas. Other than that, highly education and

academic achievements or qualifications has caused the downward of the unemployment rate.

In conclusion, Singapore undeniably has better planning and organization compare to

Portugal therefore it has a lower unemployment rate. Singapore planned to diversify their

economy proves to be vital. Besides that, the absence of a significant underground economy and

lower corruption rate in Singapore is also one of the reasons why Singapore gets lower

unemployment rate than Portugal.

2.3 THE COMPARISON OF INFLATION RATE (GDP DEFLATOR) BETWEEN

SINGAPORE AND PORTUGAL AND ITS REASON.

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Inflation is referring to the increase in the general level of prices of goods and services in

an economy over a period of time. While the GDP deflator (gross domestic product deflator)

measures changes in the average of prices of all goods and services that make up GDP (gross

domestic product).

As shown in the graph above, the inflation rate (GDP Deflator) of Singapore on 2007 is

6.4. While in 2008 is -1.2. This shows the inflation rate in Singapore has decreased from 2007 to

2008. While moving on towards 2009, the inflation rate has increase to 0.3.

While in Portugal, the inflation rate on 2007 is 3.2. There is a small decrease in 2008 that

is 1.6. While in 2009, the inflation rate has drop from 1.8 to 0.5.

Comparing the both country, in year 2007, Singapore has a high inflation rate than

Portugal with difference of 3.2 higher than Portugal. While the rate in year 2008 and 2009, the

inflation rate in Singapore is a little bit lower than Portugal. The difference between both

countries is 2.8 and 0.2 lower than Portugal respectively.

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The inflation occurs in Singapore in year 2007 hits highest within 10 years. The reason is

the electronic road pricing (ERP) rates has risen for the 3rd time in the year. Besides that, the

wages of the employees are increased. This lead to the increasing of quantity of demand and lead

to higher price in a vicious inflation. Hence, the prices of oil, goods and services are followed to

raised and hence caused inflation.

While in year 2008, the inflation rate has drop. In year 2008, the inflation rate is lower

than year 2009. The cost-of-living allowance and food prices are increased. Besides that, raise in

petrol price reflect on the increasing of the price of transportation and communication. Since

inflation is occurred, the prices of goods and services increased. Hence the quantity demanded is

drop. The inflation rate in year 2009 is increased upon the oil prices going up and quantity

demanded risen.

While in Portugal, the changes of the inflation rate are not so distinctness, only the year

2007 until 2010 have a little bit distinct. In the year 2007, the inflation rate is 3.2. The inflation is

caused by the highly costs of the food and energy. Besides that, the economy has slowdown in

the year 2007. The wages paid are failed to keep up with the inflation.

While in year 2008, there is a slightly decrease of 1.6. The regulated energy price has

decreased and lead to the decreasing of transportation sector. The food market such as vegetables

and fruits are dropped too. The petrol, housing, water, electricity and transport price followed to

drop also. Only the medicine and phone cost were higher. Meanwhile, during the year end, the

unleaded fuel price, diesel price, and the energy costs start to turn upwards and increased. Hence,

in year 2009, the inflation rate has dropped about 1.1. This occurred because the consumers are

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encouraged to postpone the purchases and hence the pressure is given to the European Central

Bank to make more steps to revive the economy.

2.4 THE COMPARISON BETWEEN ECONOMIC ACTIVITIES (BY SECTORS)

BETWEEN SINGAPORE AND PORTUGAL AND ITS REASONS.

Manufacturing is one of the main sectors of Singapore's economy. Although from 1980

onward Singapore has concentrated more into developing its service industry, Singapore’s

manufacturing industry is still very important to the economy. The industrial production index

for the economy has increased slightly in 2003 by 3.1% after having had a negative growth of

11.6% in 2001, due to the lower demand of Singapore’s manufacturing products from the US,

which Singapore’s main importer. In 2003, the manufacturing sector constitutes 24.3 % of the

total GDP, a slight increase from about 23% in 1997 and 2001. The main sectors in the

manufacturing industries include that of electronics, chemicals, engineering and biomedical

engineering.

For the other economic activity in Singapore is wholesale and retail trade. In 2003, the

wholesale and retail trade contributed to about 13 % of the total GDP of Singapore, with an

amount of more than S$ 21 billion. Overall, the wholesale and retail trade employed close to

300,000 workers in 2003. From 1999 to 2003, labor productivity has experienced a significant

positive growth (except in 2001) with growth in labor productivity being 7.3 % in 2003. The

total retail index in 2003 had an 8 % growth compared to 2002. The domestic wholesale index in

the first quarter of 2004 increased by more than 5 % and the foreign wholesale index increased

by more than 15 % when compared to the same period in 2003.

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Singapore has continued to alter its composition of non-oil exports into more skill

intensive goods. The composition of exports has significantly changed over the years from its

early low-skilled industries era to the current period of higher-skilled manufacturing. In the

present time, Singapore’s exports rely more on its exports of chemicals rather than

manufacturing in the 1990s, or lower technology goods like food in the 1970s.

The main activities of Singapore in the tourism sector are hotels and restaurants services.

In 2003, the tourism sector contributed to about 1.9 % of the total GDP, with estimated earnings

of S$ 3.2 billion. This was a significant decrease from about S$ 4.2 billion in 2001. In 2003, the

number of total visitors has decreased by about 19 % from 2002 with significant decreases of

visitors from all countries of origin. Hotel revenues also decreased in 2003 by 27 % while food&

beverage revenues decreased by 13.7 % from 2002.

In line with the significant declines in the tourism sector over the recent years, the

Singapore Tourism Board proposed the Tourism 21 Vision, which aims for Singapore to be the

tourism capital of the East Asian region. The plan includes the recreating of Singapore as the

destination for Business Tourism Center as well as the Tourism hub for South East Asia. Other

plans include that of redesigning Singapore’s main tourist destinations, such as the Sentosa

Island.

Other than that, transport and communications sector also one of the main economic

activities in Singapore. The transport and communications sector contributed S$ 21.8 billion in

2003, which constituted more than 13 % of the total GDP. The transport and communications

sector was the third largest sector in 2003. In total, the sector employed about 216,000 workers

in 2003, up by about 18,000 from 1999.

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Major activities in this sector include land transport and supporting activities, water

transport and supporting activities, air transport and supporting activities, storage and

warehousing, as well as other related activities such as passenger and cargo transportation

utilities, telephone and postal services and internet provision. Table 8 below shows the key

changes in the transportation and communication activities from 2000-2003.

Agriculture is one of the main sectors of Portugal's economy. Agriculture in Portugal is

based on small to medium-sized family-owned dispersed units. However, the sector also

includes larger scale intensive farming export-oriented agro businesses backed by companies.

Agriculture, forestry, and fishing employed 17.8 percent of Portugal's labor force but accounted

for only 6.2 percent of GDP in 1990. The country produces a wide variety of crops and

livestock products, including vegetables,rice,corn,barley,olives,oilseeds,nuts,edible

mushrooms,dairy products,poultryandbeef and others.

Forestry has also played an important economic role among the rural communities and

industry (namely paper industrythat includes Portucel Soporcel Group,engineered woodthat

include Sonae Indústria, and furniturethat includes several manufacturing plants in and around

Paços de Ferreira, the core of Portugal's major industrial operations of ( IKEA ). In 2001, the

gross agricultural product accounted for 4% of the national GDP.

For the other economic activity in Portugal is industry. Portugal is a significant European

minerals producer and is ranked among Europe's leading copper producers. It is also a noted

producer of tin, tungsten and uranium. However, the country lacks hydrocarbon exploration

potential, as well as iron,aluminium and coal deposits, a feature that has hindered its miningand

metallurgy sector's development. Industry is diversified, ranging from automobile (Volkswagen 12

Autoeuropa,Peugeot Citroen),aerospace ( Embraer), electronics and textiles, to food,

chemicals od ,chemicals food,chemicals,cement and wood pulp. Volkswagen Group's AutoEuropa

motor vehicle assembly plant in Palmela is among the largest foreign direct investment projects

in Portugal.

Travel and tourism continues to become extremely important for Portugal, with visitor

numbers forecast to increase significantly over the next years. However, there is increasing

competition from Eastern European destinations such as Croatia who offer similar attractions,

which are often cheaper. Consequently, the country is almost obligated to focus on its niche

attractions such as health, nature and rural tourism in order to stay ahead of its competitors.

2.5 THE COMPARISON BETWEEN IMPORT AND EXPORT ACTIVITIES BETWEEN

SINGAPORE AND PORTUGAL AND ITS REASONS.(LIMITED TO 3 MAIN TYPES

OFGOODS OR SERVICES)

Singapore imports natural resources such as mineral fuels and raw goods which they do

not have the country. Consumer goods and raw goods are purchased so that they can be refined

them for re-export, example in the oil refining and water fabrication industry. Besides, Singapore

also imports food and beverages. There is no land for agriculture to support their own food. Even

drinking water from other countries such as Malaysia is also imported due to lacking of drinking

water resources. Singapore exports machinery and equipment including electronics is one of the

main sources of revenue for the economy. Re-export of refined raw goods as consumer goods

after purchasing from other countries has been always practicing in Singapore. By the way,

biotechnology industry is aggressively promoted and developed. Pharmaceuticals are exported

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by Singapore as it is now account for more than 16 percent of the country’s production of

manufacturing.

Portugal, as to the importation of natural gas, under the applicable legislation, importers

of natural gas into the national natural gas market for uninterrupted consumption are responsible

for the creation and preservation of natural gas reserves, which shall be permanently available

and susceptible of being duly identified, measured and controllable previously by the SNGN

Global Technical Manager (Transportation Operator) and subsequently by the authorities.

Natural gas reserves shall, by principle and without prejudice of any exceptions authorize by the

Government, be kept in natural gas storage facilities located inside the Portuguese territory and

shall comply with the mandatory amounts established by law. Any associated costs shall belong

to the importation entities. Energy Imports and Energy Exports present the energy equivalent

amounts of electricity, coal, natural gas, oil and oil products that have crossed the national

territorial boundaries of a country, whether or not customs clearance has taken place. Crude oil,

natural gas, and natural gas liquids are reported as coming from the country of origin; refinery

feedstock and oil products are reported as coming from the country of last consignment.

Coal or oil in transit is not included. If electricity is "wheeled" or transited through a country,

the amount is shown as both an import and an export.

CHAPTER 3: CONCLUSION3.1 DESCRIBE THE CURRENT ECONOMIC PROBLEM / CHALLENGES FACED BY THE CHOSEN COUNTRIES AND RECOMMEND WAYS TO OVERCOME THEM.

REFERENCEhttp://en.wikipedia.org/wiki/Portugal#Economy

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https://www.cia.gov/library/publications/the-world-factbook/geos/po.html

http://en.wikipedia.org/wiki/Economy_of_Portugal

http://en.wikipedia.org/wiki/Inflation

http://www.indexmundi.com/facts/indicators/NY.GDP.DEFL.KD.ZG/compare?country=bb#country=pt:sg

http://www.iclg.co.uk/index.php?

area=4&country_results=1&kh_publications_id=228&chapters_id=5113

http://earthtrends.wri.org/pdf_library/country_profiles/ene_cou_620.pdf

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