Economic Growth Strategies for Hong Kong & Singapore
Revisiting AIU Econ224 Macroeconomics Individual Project
I originally wrote the base paper for this hub as part of an assignment for my Econ 224 Macroeconomics class over at American InterContinental University Online. I received an A on the paper, although it was a bit of a bear for me to write. There was a little direction and the requirements were a bit...sparse. I've decided to add some graphics and touch it up a bit and share it with others who might be looking for an example of what can be done with the paper as well as anyone who might be interested in the subject matter.
A newly industrialized country, or NIC, is one that has fallen somewhere on the economic measurement scale between developing and first world countries. These countries have moved away from a traditionally agriculture based economy and into more industrialized concerns. This was true of countries including Singapore and Hong Kong during the 1970’s and 1980’s (Investopedia, 2011). These countries are still growing today, and there are several ways they can help to cement their position within the global economy. In an effort to help encourage growth and stabilization within the Hong Kong and Singapore regions, the aid of the World Bank has been enlisted.
The World Bank is a vital source of financial and technical assistance to developing countries around the world. Our mission is to fight poverty with passion and professionalism for lasting results and to help people help themselves and their environment by providing resources, sharing knowledge, building capacity and forging partnerships in the public and private sectors (WorldBank.org, 2011).
Things that are currently of concern to the developing Singapore and Hong Kong include their trade alliances, taxation, and property rights.
Association of Southeast Asian Nations
Singapore must make the decision to join with such organizations as the Association of Southeast Asian Nations, or ASEAN (Investors Offshore, 2011). This will provide them the benefit of being part of the world’s largest free trade grouping. If Hong Kong can gain access to this group, it would be useful to them as well. The ability to enter into such a large conglomeration of trading would be a boon to any country—developing or otherwise. One of the major benefits is that the member countries have reduced and even eliminated tariffs on trade for certain items between other members. As tariffs can greatly hamper or hinder countries’ ability and willingness to trade, by reducing these, it is encouraging trade between member nations, which opens up a much wider market than what might normally be available.
The taxation laws are another thing both Honk Kong and Singapore must keep in touch with. If they do not tax enough, they will not be able to supply the services and infrastructure they need to keep existing businesses and residents or attract new ones. According to Investors Offshore (2011), Singapore does have some relatively light taxation laws:
For resident individuals, Singapore’s tax regime is fairly benign. Capital gains taxes are only levied in very limited circumstances, there are no gift taxes and estate duty was abolished in 2008. Personal income tax rates in Singapore are also relatively light: resident individuals are taxed at progressive rates up to 20% (reduced from 22% in 2006) on income accruing in or derived from Singapore.
LowTax.net (2011) indicates that Hong Kong also has quite low taxes. This helps both burgeoning economies. With low taxes, it is likely that companies will move to the area in order to keep their costs at a minimum. This will then have more people within the communities hired, which means the lower tax rate is not as much an issue for government, because there are now more people paying taxes. It is kind of like the basic law of supply and demand. With lower taxes, there is a lower cost, which means a higher demand to employ in the country. The reverse is that more jobs mean more money into national coffers without changing the price point on those taxes.
Another major economic consideration for both Hong Kong and Singapore is government established property rights. According to GuideMeHongKong.com (2010), Hong Kong is the world’s second best country for opening a business. The criteria for rankings in the list we based on eleven economic influencing factors including “property rights, technology, red tape, investor protection, stock market performance, trade freedom, monetary freedom, personal freedom, tax burden, and market performance (GuideMeHongKong.com, 2010). ”Singapore shares the first spot for property rights and trade freedom…” (PressRun.net, 2011).
The fact is that both people and businesses want to know that they own a piece of something. In particular, with businesses, it is important to know that the company owns its property rather than the government. In countries struggling to advance, keeping governments from taking control of private citizen and business property and resources is paramount. If a business is afraid that they could have their expensive factories taken over by the government due to some new law or a nearby conflict, it is less likely they will set up shop in that area.
For recommendations in regards to growing the economy in either Hong Kong or Singapore, it would be wise to follow all of these recommendations and more. While the specific benefits of these three guidelines have been covered already, it is important to understand that all these items work in conjunction with one another. You can have all the property rights you want in a country, but if taxes are too high, companies will not want to do business there.
Furthermore, the economy is a fickle creature. It is unwise to try to place all of your eggs in one basket. If there is a viable option to better the economy in a country, an honest effort should be put forward toward that goal. This way, multiple techniques can work together to achieve success that will come faster and in greater levels than if trying fewer techniques or even just a single technique. This is also the primary goal behind macroeconomics.
In macroeconomics, the study takes in all financial considerations and studies how they affect the economy. It gives the whole picture rather than tunnel vision focusing on a single aspect that will not answer the important question. What reasons could we have for not following viable, sound practices in improving the economy in any culture?
Economic Growth Strategies for Hong Kong & Singapore: References
GuideMeHongKong.com. (2010). Hong Kong, world's 2nd best country for business. Retrieved July 9, 2011 from http://www.guidemehongkong.com/story/doing-business/hong-kong-worlds-second-best-country-for-business
Investors Offshore. (2011). Singapore - Another Honk Kong?. Retrieved July 9, 2011 from http://www.investorsoffshore.com/html/specials/061511_singapore_another_hong_kong.html
LowTax.net. (2011). Hong Kong: Taxation. Retrieved July 9, 2011 from http://www.lowtax.net/lowtax/html/hongkong/jhktax.html
PressRun.net. (2011). Singapore 2nd freest economy: Heritage Foundation. Retrieved July 9, 2011from http://www.pressrun.net/weblog/2011/01/singapore-nominally-democratic-2nd-freest-economy-heritage-foundation.html
The World Bank. (2011). About Us. Retrieved July 9, 2011 from http://www.worldbank.org
Investopedia.com. (2011). Newly industrialized country - NIC. Retrieved July 9, 2011 from http://www.investopedia.com/terms/n/newly-industrialized-country.asp