During UK export week: How Singapore became a net exporter

Joe Wright, 13 November 2013

Given that this is Export Week, it feels appropriate to re-examine the UK’s position as an exporter. Exporting – it may seem a little obvious to point out – is of paramount importance for UK business simply because there are billions more people to sell to across the world than in Britain. Britain, however, is a net importer, and by a huge margin. In 2012 the UK experienced its biggest trade deficit since 1989 (£59.2bn), more than double that of the previous year (£22.5bn).

Our greatest exporter is currently the services sector, an industry made up of everything from accountancy and insurance to hairdressing and catering. Though the sector is doing very well (creating 1,000 jobs in Britain a day, according to Markit) it will never turn Britain into a net exporter. This is simply because services, by and large, cannot really be exported, not in the way manufactured products can (how do you deliver a haircut to someone in Germany, for example?). The fact that we have managed to export more services than products is not really testament to how great we are at providing services but to how far the manufacturing industry has fallen in this country.

So what can be done? A report for Civitas in 2010 by Xin Wei Yeo analysed Singaporean industrial policy to extrapolate how it had created – almost from scratch – an export driven high-value manufacturing sector. Fifty years ago Singapore was suffering from a rapid economic decline after its separation with Malaysia (1965). To tackle the problem of having a dramatically shrunken domestic market, Singapore adopted an aggressive industrial policy to orientate itself toward exports. Today, it boasts a burgeoning chemicals, biomedical and energy sector and a trade surplus of 4.53 billion SGD, up from 3.95 billion in 2012.

During the 70s Singapore developed its economy with an education and automation-led restructuring to create a high value economy, brimming with skilled labourers and manufacturing facilities. The next phase of Singapore’s economic renewal is particularly pertinent to the UK, especially when considering the stark regional inequalities in Britain. During the 90s, the government began fostering ‘clusters’ of industry earmarked for growth. It created industrial complexes in which the entire value chain of an industry could be situated together. From research and training institutions, to manufacturing plants – all were put together to create a hub and speed up the process of turning research into produce.

Compared to the Government’s economic strategy to date, the report makes for discomforting reading. As a new book for Civitas by Patrick Diamond argues, there is a serious danger the coalition is seeking merely to ‘resuscitate a flawed economic model’. Instead of diversifying Britain’s economy, both regionally and sectorally, the government is redoubling its efforts to expand the financial services sector to ‘secure Britain’s place as the world’s bank’, also now for China and the Middle East. When tied to the lack of a real industrial policy these become worrying signs that the Government is hoping the financial sector can once again subsidise the British economy.