EFFECTIVE PROTECTION OF PIONEER INDUSTRIES IN SINGAPORE
TING GRACE YOKE-MUI
TING GRACE YOKE-MUI
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Abstract
The Singapore Government in 1961 embarked on an industrialization programme, when it was felt that the entrepot trade sector of Singapore's economy had limited potential, from the viewpoint of solving Singapore's unemployment (which was a serious problem then) and maintaining a high rate of economic growth. The first few years of the programme saw the rather undiscriminatory policy of the government in encouraging new industries to be set up with the prior consideration of the numbers it could absorb. But such a policy could not last. The defects and limitations of industries largely geared to the domestic market with the help of tariffs and quotas prompted the government towards the promotion of export orientated industries. But in spite of the change in policy, there still exists a considerable number of tariffs to protect local industries. It is against this background that this study has been carried out mainly to analyse the more important aspects of costs and benefits of pioneer industries granted protection. Has the granting of tariffs, helped industries to be more export-orientated, or are they content only to serve the domestic market? Chapter II analyses the sales position of pioneer firms and industry groups in order to show the need for increased export-orientation. An attempt (aside the usual sample survey method) is made to construct an index of brand consciousness of certain consumer products. Chapter III is the main chapter of the study. The nominal and effective protection granted to industries is studied together with value-added contribution of the firms in question. Dangers of over-protection and disadvantages to the consumer and user industries are brought out to serve as an argument for tariff reduction or removal. Chapter IV provides a true picture of the labour absorption capacity of selected pioneer firms. It has been discovered that some of the existing industries are contributing a very small percentage both towards employment opportunities and value-added. From the labour rate of protection calculated, domestic labour is to a large degree unprotected because of the low wages paid to labour and the capital intensiveness of most of the industries. In Chapter V, the foreign exchange savings/earnings, domestic resource cost of foreign exchange earned, cost to the consumer is analysed, to provide an additional argument as to whether certain industries are worth protecting and that existing tariff rates should be scaled down. In the final analysis, it would appear that a scheme of subsidies aimed at promoting exports may be a more appropriate and beneficial form of aid to pioneer industries than tariffs. For long-term growth, industries must take the outward path of export expansion. It is also concluded that the setting up of industries must be studied with a more cost-conscious rather than just a benefits approach if Singapore industries are to be able to stand on their own feet and compete internationally.
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1972
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