Singapore's economy faces some major concerns resulting from intensified regional competition and the transformation from being investment-driven to innovation-driven. This paper examines (1) the accumulation and utilization of huge government surpluses in the past 40 years; (2) the country's total cost structure (e.g., land, wages, and regulatory costs); (3) the relationships among small and medium-sized enterprises, government-linked companies, and multinational corporations; and (4) the product and market diversification that is needed to mitigate the impacts on unemployment resulting from structural changes and the transition from manufacturing to services. Singapore's comparative and competitive advantages as a strategic hub of economic activities in Asia are examined and policy recommendations are put forward.

This is a revised version of a paper prepared for the Asian Economic Panel meeting jointly convened by the Hong Kong Institute of Economic and Business Studies, The University of Hong Kong, the Earth Institute at Columbia University, the Global Security Research Center, Keio University, and the Korean Institute for International Economic Policy, 12–13 April 2004, Hong Kong, SAR, China.

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