Singapore and Malaysia Economic Relationships

Singapore and Malaysia are two countries whose relationships are quite controversial. Although they have a lot of mutual economic affairs and their cultures are closely connected, there is still an element of competition between them. Nowadays, Malaysia and Singapore present two separate countries, although from 1962 to 1965, Singapore was a part of Malaysia. The union between these two countries existed only for three years, and there were numerous reasons for that, including conflicts between two nations and different views of further economic development of the country. These issues caused the separation of Singapore; the countries got an opportunity to push their own agendas concerning economic development, but the links between them are still very strong.

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Nowadays, Malaysia presents a country that is believed to have one of the largest economies in Southeast Asia (Mansor & Yeoh, 2016). Despite the fact that its economy is still developing, it is considered to be one of the most competitive ones all over the world. Malaysia is an agriculture-based country; its hot and wet climate makes it possible to grow various agricultural plants used for different needs. For instance, large areas in Malaysia are used for growing plants to produce natural rubber. Malaysia has access to the sea, and it lets its population catch fish and marine food. There are large tropical forest areas, so timber is another good that makes this country richer. Besides, it has a lot of inorganic resources, petroleum, natural gas, iron ore, and tin ore (Saari, Dietzenbacher, & Los 2016). To continue, Malaysia has a developed production sector, and it is one of the primary sources of income for the country. The sphere of consumer goods manufacturing is very important for its economic development; a lot of brown goods are produced or assembled in Malaysia. Due to the cheap labor, many plants in Malaysia have turned into assembling departments of foreign companies producing electronics. Nevertheless, its economic development has become slower (The Straits Times, 2016).

As for Singapore, it has a developed market economy that depends upon exporting various goods such as domestic electronic equipment, pharmaceutical compositions, and fossil fuels. The economy of Singapore is believed to be one of the most open economic systems. Besides, there are far fewer cases of rent-seeking behavior in this country. It is per capita GDP is one of the highest in the world. Its economic development is quite active; the government invites investments in the pharmaceutical industry and medical equipment production. The most developed branches of its economic activity include nautical architecture, production of electronic devices, and the sector of financial services. The fact that the country is located at the intersection of major shipping routes, and it shows a broad industrial growth has contributed to its present economic position in the world.

The country can be regarded as an influential power; its international clout seems even more significant if we compare it to the area of Singapore that is relatively small. When Singapore became a self-sustainable country, its leaders faced the problems connected to the resource scarcity and bad condition of the domestic market (Managi & Sharma 2016). As for the present situation, it seems to be much better. Business owners from Singapore collaborate with a few thousands of multinational companies; the latter are usually attracted by a very low level of corruption in this country, its experienced labor force, and extensive infrastructure. Most of all, it collaborates with corporate giants from Japan, the United States, and European countries. The items of export rendering the largest profit for the country are various petroleum products, articles of food, beverages, chemical materials, textile, clothing, parts of electronic devices, communications equipment, and transportation facilities. As for the items of import, Singapore buys a lot of goods from other countries. They include aircraft, crude petroleum, radio and television sets, and their components, iron, steel, and cars.

Cooperation between Singapore and Malaysia

It is common knowledge that Singapore and Malaysia had a significant difference in opinions on its path of development when they presented one country. Nevertheless, we can say that the leaders of these countries have managed to preserve mutually beneficial relations between them. One of the sectors of economic activity that are influenced by these relationships, most of all, is trading. For instance, Malaysia belongs to the number of countries that import large amounts of goods into Singapore (the largest exporter into Singapore is the United States). Conversely, Singapore also contributes to the economic growth of Malaysia. However, these two countries boost each other’s welfare, not just by buying and selling goods.

Besides that, Singapore and Malaysia join their efforts together in order to make the region more developed as the economic upturn of any region cannot occur without stronger economic links. Singapore and Malaysia, together with Indonesia, are the participants of the “SIJORI Growth Triangle,” the union established twenty years ago. Establishing the union was a very profit-making decision that helped to carry out a variety of missions. Nevertheless, the primary task of the union is to use the advantages of these three countries in order to establish and strengthen the links between their capitals and governments. Due to that, the infrastructure of the region can become more developed, and it can improve its attractiveness for investors all over the world. The establishment of the union can definitely be called an effective measure aimed at moving the economy of the region forward. What is more, it presents a factor that helps to regulate the intercourse of Singapore and Malaysia; due to the needs of the union, the representatives of these countries have no alternative but to accommodate each other’s interests.

These neighboring countries are both connected to the field of tourism that brings them a profit, which is quite substantial (Hall & Page 2016). This is another strong reason that encourages Malaysia and Singapore to unite their efforts despite the fact that the opinions of their governments on many issues tend to contradict each other. The cooperation of the countries in the field of tourism seems to be quite fruitful; at the moment, they are developing a new cruise project that would help to make the region more attractive for tourists from different parts of the world. However, the attempts of these countries to establish and maintain productive relationships are not limited to these fields mentioned above. In addition, Singapore and Malaysia develop special joint programs aimed at work with young people in order to create an experienced working force (Pook 2016). As it is reported by mass media, the training programs will be implemented with the support of the sports ministry of Malaysia. What is more, Singapore and Malaysia act as allies when there are urgent ecological problems such as air pollution that occurs in Asia from time to time (Sunchindah 2015).

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Competition between Singapore and Malaysia

Despite all the reasons that encourage Singapore and Malaysia to develop and maintain mutually advantageous cooperation, their relationships cannot be called perfect; to some extent, the countries seem to be business rivals for each other. The competition between the countries seems to be the most obvious when it comes to developing their infrastructures with the help of foreign capital. As it can be seen now, Singapore remains a little bit more attractive for foreign investors than Malaysia. It happens due to the peculiarities of its economic system. Thus, the level of corruption is very low in Singapore if compared to other countries of the region. Besides that, Singapore is attractive to other countries because of its low tax rates. The most intensive investments that Singapore attracts are spent on the development of pharmaceutical production and the production of medical equipment. Moreover, Singapore belongs to the number of countries that are believed to be the largest foreign direct investors. In general, local companies tend to invest money in foreign companies located in China, Malaysia, Indonesia, and the United States, and this activity brings them a substantial benefit.

As for the situation with investments in Malaysia, this country can also be called quite successful. For instance, Malaysia is included in the list of the most credible countries making foreign direct investments. The country is also quite attractive for foreign investors, and this fact remains the heart of the problem that sets a contradiction between Malaysia and Singapore. Their competition is also connected to the need for relocation for job placement. Both countries make efforts to develop the programs that would help to perform the relocation of the employees or the entire businesses to Malaysia and Singapore and from them, as well. The biggest economic corridor in Malaysia is Iskandar that is located in Johor; the corridor exists for more than ten years (Ruban 2016). Due to the further development of economic corridors that takes place in Malaysia, the better decision was to relocate many businesses from Singapore to this country. This breakthrough decision makes Malaysia quite a serious competitor for Singapore. Moreover, the two countries seem to have a serious conflict of interest when it comes to trade. The items of export that bring Malaysia and Singapore the most substantial profit seem to be the same; they include fruits, plants, petroleum, petroleum products, and electronic devices. This fact also encourages their competition and makes countries invent new ways to make their goods more popular all over the world and increase their quality.

Challenges that Singapore Faces

It is a fact that Singapore is a country where people have quite a high quality of living. Nevertheless, there are certain challenges that Singapore is facing, and some of them are connected to the activity of their neighbor, Malaysia. One of the most urgent problems that Singapore is facing now is a lack of freshwater; in order to provide all the people with water, Singapore has to get it from Malaysia (Feng 2016). The situation with water was even worse last year when the weather was extremely dry, and it had a negative influence on the most important source of freshwater in Singapore. The water supply to Singapore was performed with the help of the Johor River. A variety of measures has already been taken to prevent the problem. In case of further deterioration of the situation, Singapore will have to use stricter measures and ban many activities connected to the use of water space.

Military forces of the country also have to be on guard as there have been a few attempts of foreign planes to incur into its airspace. What is more, citizens are concerned about the fact that they are unable to retrieve the money from their Central Provident Fund accounts unless they leave the country and give up their citizenship. Another challenge of Singapore was a territorial conflict with Malaysia over Pedra Branca. The conflict started more than thirty years ago. Pedra Branca is an island that is quite small; nevertheless, it is believed to have certain strategic importance. Pedra Branca is located closer to Malaysia; nevertheless, according to the decision of the court, it has to be a part of Singapore. Another important event was a conflict connected with land reclamation in the Strait of Johor that could have a negative influence on the environmental situation in Malaysia.

Conclusion: Maintaining and Strengthening the Relationship

Despite all the difficulties and conflicts, the leaders of both countries understand that the relationships have to be maintained due to many reasons. The countries are located very close to each other; there are many similarities between their cultures and languages. What is more important, political stability in the region is impossible without the effective and fruitful cooperation of the countries. Political leaders of Singapore and Malaysia understand the importance of these relationships, and this is why many meetings aimed at discussing further cooperation are held. The discussions are devoted to the issues of workforce education, cooperation in the field of tourism, and developing transport systems (Parameswaran 2016). For instance, the agreement concerning Tanjong Pagar railway station was signed more than twenty years ago. According to that, Malaysia was ready to free up a larger territory for its development, and Singapore agreed to entrust the development to private companies in Malaysia.

Reference List

Feng, Z 2016, ‘Concern over Singapore’s water supply from Malaysia: Vivian’, The Straits Times, Web.

Hall, M & Page, S 2016, The Routledge handbook of tourism in Asia, Routledge, New York.

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‘Malaysia’s economy grows 4% in Q2, slowest pace in nearly 7 years’, 2016, The Straits Times, Web.

Managi, S & Sharma, S K 2016, ‘Special issue of the Singapore economic review – economics of crises and disasters’, The Singapore Economic Review, vol. 61, no. 01, pp. 1-10.

Mansor, N & Yeoh, K K 2016, ‘Economics and development: socioeconomic progress in Malaysia and FEA at 50’, Malaysian Journal of Economic Studies, vol.53, no.1, p. 1.

Parameswaran, P 2016, ‘Malaysia, Singapore to ink new pact on high-speed rail project’, The Diplomat, Web.

Pook, A L 2016, ‘The dilemma of having foreign workers in Malaysia’, The Straits Times, Web.

Ruban, A 2016, ‘In Johor, Iskandar Malaysia says property glut nothing surprising’, Yahoo News, Web.

Saari, M Y, Dietzenbacher, E & Los, B 2016, ‘The impacts of petroleum price fluctuations on income distribution across ethnic groups in Malaysia’, Ecological Economics, vol. 130, no.1, pp. 25-36.

Sunchindah, A 2015, ‘Transboundary Haze Pollution Problem in Southeast Asia: Reframing ASEAN’s Response’, ERIA Discussion Paper Series, Web.

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