Across the Causeway: A Multi-dimensional Study of Malaysia-Singapore Relations

13. Economic Relations: Competing or Complementary?

200 Teofilo C. Daquila 200 13 Economic RElations competing or complementary? teofilo c. Daquila Singapore and Malaysia belonged to a group of countries popularly known as the High-Performing Asian Economies (HPAEs) by the World Bank in its 1993 publication entitled The East Asian Miracle: Economic Growth and Public Policy. Indeed Singapore and Malaysia had grown remarkably during the last four decades only to be interrupted by the 1997/98 economic debacle. As Table 13.1 shows, Singapore grew by about 8–10 per cent during the 1960–1996 period, and Malaysia by about 6–10 per cent during the same period. During the next seven years (1997–2003), Singapore’s growth decelerated because of the 1997/98 crisis, the 11 September 2001 bombing, and the SARS crisis in 2003. However, it registered a significant expansion tablE 13.1 Growth rate of Real GDP in malaysia and singapore (In percentages) 1961– 70 1971– 79 1980– 90 1991– 96 1997– 98 1999– 2003 2004– 06 Malaysia 6.5 8.0 6.2 9.6 –0.02 4.8 6.0 Singapore 10.0 9.0 7.6 8.9 4.4 3.4 7.8 Source: World Development Index CD ROM 2003 and ASEAN Secretariat (www.aseansec.org) Economic Relations: Competing or Complementary? 201 by about 8 per cent per annum during the 2004–2006 period. For example, in 2005, the Singapore economy grew strongly by 5.7 per cent, which was well above the expected growth of 4.5 per cent.1 In 2006, it posted a robust growth of 7.7 per cent which was within the 7.5–8 per cent revised expected growth.2 Malaysia’s growth dropped markedly in 1997/98 period, but it managed to recover significantly in the next five years (1999–2003) to register an average growth of about 5 per cent per annum. It also registered a higher than average growth rate of 6 per cent per annum in the 2004–2006 period. In its 2005 edition of the Asian Development Outlook, the Asian Development Bank3 cited Singapore and Malaysia as among the best performers in the AsiaPacific region in 2004.4 The ADB further reported that the overall growth performance of these countries was due to the continued strength in external demand because of the robust growth in major industrialized countries and the recovery of the global electronics market. Domestic demand likewise contributed markedly, particularly business investments in East Asia and Southeast Asia, combined with the strengthening of consumption demand in most countries.5 Singapore and Malaysia have also shown remarkable improvement in their per capita income. Table 13.2 shows that during the 1970–2002 period, Singapore registered a faster improvement in its per capita income than Malaysia. Malaysia’s per capita income was almost half of Singapore’s (US$950) in 1970. However, in 2002, Singapore’s per capita income rose by almost 22 times, while that of Malaysia expanded eightfold. In 2006, Malaysia’s and Singapore’s per capita incomes increased further to about US$6,000 and about US$30,000, respectively. Thus, by international classification, Singapore is considered a high-income country while Malaysia, a middleincome country. Malaysia and Singapore have also experienced a structural transformation away from agriculture and towards non-agricultural sectors, with the tablE 13.2 Per capita income in malaysia and singapore In US$ Growth rate, % 1970 1980 1990 2002 2006 1970– 96 1970– 2002 2003– 06 Malaysia 400 1,830 2,380 3,900 5,880 9.9 7.5 10.9 Singapore 950 4,830 11,740 21,122 29,500 13.7 10.7 8.8 Source: World Bank. Various Issues. World Development Indicators. Washington DC. 202 Teofilo C. Daquila manufacturing sector providing substantial stimulus to economic growth as Table 13.3 shows. As their economies continue to grow and as their incomes per capita rise, Malaysians and Singaporeans have increased their demand for goods and services, consistent with their changing tastes and preferences. Thus, more services and institutions have been created to cater to their rising demand for goods and services. This is reflected in the growing importance of the services sector, particularly, the financial and business sectors as well as transport and communications sectors. The services sector in Singapore provided the largest contribution, accounting for 60–70 per cent of the total output in the 1970–2002 period. In 2006, the services sector shared about...