MODEL OF ECONOMIC DEVELOPMENT:

• Singapore
• India
• China
Cris Q. de Leon, MBA
 ECONOMIC DEVELOPMENT MODEL
 THE MODERN ECONOMY is a complex machine. Its job is to allocate limited
resources and distribute output among a large number of agents—mainly
individuals, firms, and governments—allowing for the possibility that each
agent’s action can directly (or indirectly) affect other agents’ actions.
 Adam Smith labeled the machine the “invisible hand.” In The Wealth of
Nations, published in 1776, Smith, widely considered the father of
economics, emphasized the economy’s self-regulating nature—that agents
independently seeking their own gain may produce the best overall result
for society as well. Today’s economists build models—road maps of reality,
if you will—to enhance our understanding of the invisible hand.
 ECONOMIC DEVELOPMENT MODEL

Singapore
Singapore has been one of the great success stories of South East Asia. The
country started with very little money or resources just a few decades ago
and had built one of the best global cities today. Their success story is not
similar to that of China or Hong Kong. The differences are remarkable.
 ECONOMIC DEVELOPMENT MODEL

Singapore
The world has seen a polarized debate regarding economic models. Some
believe in capitalism whereas others believe in socialism. There seems to be
no third alternative to “the market” or “the plan”. However, Singapore is proof
that a third model does exist. It is a city where capitalism and socialism have
coexisted, and the result has been economic prosperity.
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Singapore
• Singapore has close to 1% of the population of China.
• The GDP of Singapore is about 11% of China
• Singapore has one of the lowest inflation rates in the world. The inflation
has averaged close to 1.9% whereas the global average is close to 3.5%.
• This small city state possesses one of the world’s largest export sectors.
This hugely successful export sector has ensured that Singapore has the
10th largest foreign reserves in the world!
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Singapore
• Singapore is a preferred destination for multinationals. This is because of
the strong anti-corruption laws that have been put in place. The result is
that Singapore has the busiest port in the entire world.
• Singapore is home to over 3000 MNC’s from across the world and these
MNC’s account for over two-thirds of the exports generated by Singapore.
The economy is one of the strongest in the region. The 1997 crisis which
spread like wildfire amongst Asian economies could not do much damage
to the economy of Singapore.
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Singapore
FREE MARKET PRINCIPLES

• The economy of Singapore has followed free market principles in some

parts of their economy.
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Singapore
• Labor Market: Singapore has traditionally followed an open door policy for
immigrant workers. About 35.8% of the labor force in Singapore is made
up of foreigners. Singapore wanted to create an atmosphere wherein the
best, and the brightest from across the globe were welcome into their
economy. That is exactly what has happened. A significant portion of the
success can be attributed to the contributions of immigrant workers. This
policy seems to be changing of late as Singapore has started implementing
policies which makes it difficult for foreign workers to enter into their
nation.
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Singapore

• Bureaucrats Held Accountable: Singapore is the only country in the world

where bureaucrats have a variable pay. This variable pay is affected by the
health of the economy. For instance, during the 2008 crisis when the
economy went down, Singapore’s bureaucrats lost money. It is amazing
how much regulation bureaucrats can eradicate when they are motivated
to do so.
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Singapore

• Low Tax Rates: Singapore has one of the lowest tax rates in the world. The
corporations are taxed at 17%, and the households are taxed at 20%. This
is the reason why all the MNC’s have flocked to Singapore. The end result
has been that Singapore residents have high paying jobs and also the
government earns much more money via indirect taxes.
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Singapore

• Low Government Spending: Singapore government has one of the lowest

rates of government spending. The government meddling in the GDP is
kept below 20%. If the spending goes above 20%, cuts are implemented.
These cuts reduce the expenditure.
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Singapore
SOCIALISTIC PRINCIPLES

Surprisingly some part of Singapore’s economy is also based on Socialistic

principles.
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Singapore

• Public Housing: Singapore has one of the world’s most successful public
housing projects. About 90% of the population of Singapore owns a house.
These houses have been provided to them in government approved
projects at government approved rates. The government of Singapore has
also taken measures to prevent racial concentration.
 ECONOMIC DEVELOPMENT MODEL
Singapore

• They have ensured that there is a mix of different races in every

neighborhood. It is strange that a country with a capitalistic outlook
towards trade has an entirely socialistic outlook towards housing. With
regards to public housing, Singapore is almost like a welfare state.
However, the good thing is that it has worked and Singapore has one of the
best housing systems in the entire world.
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Singapore
• Public Healthcare: Just like the housing system, the public health system in
Singapore is also heavily subsidized. Most of the healthcare expenses are
taken care of by the government. Singapore does have private hospitals and
nursing homes. However, they are mainly funded by taxpayer money. Also,
Singapore forces its citizens to save a part of their income in the “Medisave”
accounts. Employers are also supposed to contribute to these savings. Like
housing, Singapore’s health care system is also well renowned across the
world.
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Singapore
• Singapore’s economic freedom score is 84.4, making its economy the freest
in the 2022 Index. Singapore is ranked 1st among 39 countries in the Asia–
Pacific region, and its overall score is above the regional and world
averages
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Singapore
ECONOMIC DEVELOPMENT MODEL
Singapore

Rostow’s Model of Stages of Economic Growth

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Singapore
• Rostow lays out five succinct steps towards development and critics have
cited that all countries do not develop in such a linear fashion; some skip
steps or take different paths. This theory can be classified as "top-down,"
or one that emphasizes a trickle-down modernization effect from urban
industry and western influence to develop a country as a whole. Later
theorists have challenged this approach, emphasizing a "bottom-up"
development paradigm, in which countries become self-sufficient through
local efforts, and urban industry is not necessary.
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Singapore
• Rostow also assumes that all countries have a desire to develop in the same
way, with the end goal of high mass consumption, disregarding the
diversity of priorities that each society holds and different measures of
development.
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Singapore
• For example, while Singapore is one of the most economically prosperous
countries, it also has one of the highest income disparities in the world.
Finally, Rostow disregards one of the most fundamental geographical
principals: site and situation. Rostow assumes that all countries have an
equal chance to develop, without regard to population size, natural
resources, or location. Singapore, for instance, has one of the world's
busiest trading ports, but this would not be possible without its
advantageous geography as an island nation between Indonesia and
Malaysia.
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Singapore
• In spite of the many critiques of Rostow's model, it is still one of the most
widely cited development theories and is a primary example of the
intersection of geography, economics, and politics.
 ECONOMIC DEVELOPMENT MODEL

India
India has emerged as the fastest-growing major economy in the world and is
expected to be one of the top three economic powers in the world over the
next 10-15 years, backed by its robust democracy and strong partnerships.

https://www.ibef.org/economy/indian-economy-overview
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India

• India’s nominal gross domestic product (GDP) at current prices is

estimated to be at Rs. 232.15 trillion (US$ 3.12 trillion) in FY2021-22.,
• India is the third-largest unicorn base in the world with over 83 unicorns
collectively valued at US$ 277.77 billion, as per the Economic Survey. By
2025, India is expected to have 100 unicorns, which will create ~1.1 million
direct jobs according to the Nasscom-Zinnov report ‘Indian Tech Start-up’.
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India
• India needs to increase its rate of employment growth and create 90
million non-farm jobs between 2023 and 2030s, for productivity and
economic growth according to McKinsey Global Institute. The net
employment rate needs to grow by 1.5% per year from 2023 to 2030 to
achieve 8-8.5% GDP growth between 2023 and 2030.
• According to data from the Department of Economic Affairs, as of January
28, 2022, foreign exchange reserves in India reached the US$ 634.287
billion mark.
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India
• The economic development in India followed socialist-inspired politicians
for most of its independent history, including state-ownership of many
sectors
• India's per capita income increased at only around 1% annualized rate in
the three decades after its independence.
• Since the mid-1980s, India has slowly opened up its markets through
economic liberalization. After more fundamental reforms since 1991 and
their renewal in the 2000s, India has progressed towards a free market
economy.
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India
• In the late 2000s, India's growth reached 7.5%, which will double the
average income in a decade.
• IMF says that if India pushed more fundamental market reforms, it could
sustain the rate and even reach the government's 2011 target of 10%.
• India is the Fifth largest economy in the world by nominal basis and the
third largest by purchasing power parity adjusted exchange rates (PPP). On
per capita basis, it ranks 140th in the world or 129th by PPP.
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India
• E3-India is a macro-econometric model covering 32 States and Union
territories and 38 economic sectors in India. It is used for economy-energy-
environmental impact analysis of new and existing policies, thus providing
recommendations for policy-making at the sub-national level.
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India
 ECONOMIC DEVELOPMENT MODEL
India
• Designed to assess energy and climate policy in a highly empirical
structure, the model combines an accounting framework with a set of
parameters that have been estimated econometrically from a detailed
time-series database.

• Policies can be defined at state level and the model results show impacts in
each state, including impacts on trade between states.
 ECONOMIC DEVELOPMENT MODEL
India
• Designed to assess energy and climate policy in a highly empirical
structure, the model combines an accounting framework with a set of
parameters that have been estimated econometrically from a detailed
time-series database.

• Policies can be defined at state level and the model results show impacts in
each state, including impacts on trade between states.
ECONOMIC DEVELOPMENT MODEL
India
 ECONOMIC DEVELOPMENT MODEL
India
 ECONOMIC DEVELOPMENT MODEL

China
Since China began to open up and reform its economy in 1978, GDP growth
has averaged almost 10 percent a year, and more than 800 million people
have been lifted out of poverty. There have also been significant
improvements in access to health, education, and other services over the
same period.
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China

• China is now an upper-middle-income country. It will be important going

forward that poverty alleviation efforts increasingly shift to address the
vulnerabilities faced by the large number of people still considered poor by
the standards of middle-income countries, including those living in urban
areas.
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China
• Given its size, China is central to important regional and global
development issues. China is the largest emitter of greenhouse gases, with
per capita emissions now surpassing those of the European Union,
although slightly below the OECD average and well below the United States,
and its air and water pollution affects other countries. Global
environmental problems cannot be solved without China’s engagement.
China’s growing economy is also an important source of global demand,
and its economic rebalancing will create new opportunities for
manufacturing exporters but may reduce demand for commodities over
the medium-term.
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China
• Following real GDP growth of 8.1 percent in 2021, growth is projected to
slow to 5.0 percent in 2022. The forecast reflects rising headwinds:
Domestic demand has slowed, and the global economic environment has
worsened significantly with the war in Ukraine. In addition, COVID
incursions have become more frequent and widespread. China is currently
experiencing the largest COVID wave since the end of the national
lockdown in March 2020.
 ECONOMIC DEVELOPMENT MODEL
China
• Following real GDP growth of 8.1 percent in 2021, growth is projected to
slow to 5.0 percent in 2022. The forecast reflects rising headwinds:
Domestic demand has slowed, and the global economic environment has
worsened significantly with the war in Ukraine. In addition, COVID
incursions have become more frequent and widespread. China is currently
experiencing the largest COVID wave since the end of the national
lockdown in March 2020.
ECONOMIC DEVELOPMENT MODEL
China
ECONOMIC DEVELOPMENT MODEL
China
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China
• In addition to this three-layered structure, China has a unique dual
economic structure, comprising state-owned enterprises (SOEs) and
privately-owned enterprises (POEs). While there are sometimes conflicts
between companies from these two sectors, they also co-exist in symbiotic
relationships, with SOEs providing public goods, such as infrastructure and
environment-improvement measures.
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China
• A good example is the development of the world’s most extensive high-
speed railway network, built from practically nothing, in just over a decade.
Such achievements are possible because these enterprises do not evaluate
mission-critical infrastructure projects only on narrow economic viability.
Both Chinese people and businesses, including foreign companies, benefit
from such infrastructure.
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China
• However the geopolitical context develops, China will continue to generate
much of its own economic momentum. Its unique and still-evolving three-
layered duality development framework – the whole-of-nation approach –
will provide it with significant resilience. The country should be able to
continue to make major progress.