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Chapter 14: SS-side policies (Market-oriented AS policies (Pro-competition…
Chapter 14: SS-side policies
Definition: AS management policies aim to shift the AS curve in the short run of long run or both, through reducing structural rigidities and production costs and/ or increasing productive capacity of economy and hence influencing economic activity
Market-oriented AS policies
Pro-competition Policy
Pro-competition e.g. competition act to prohibit anti-competitive act such as mergers and aquisitions or abuse authority
Privatisation e.g. Singapore Airlines
Corporatisation e.g. Public Utilities Board (PUB) corporatised to from Singapore Power
Deregulation
Outsourcing e.g.building security, payroll, IT-support and cleaning services
Free trade and free capital movements
Manpower Policy
Reducing power of trade unions e.g. Trade Unions Act regulates the activities of trade unions including proper management
Reducing unemployment welfare benefits
Reducing Government expenditure
Tax-cuts supply side effects e.g. competitive tax regime (corporate tax rate was reduced from 18 to 17% in 2010 & personal income tax rate kept at 22%, lowest among developed countries)
Limitations
Difficult to ascertain
large monopolistic corporations are necessary if economy is to enjoy substantial EOS
for services which are important to society, privatisation may be detrimental
Interventionist Policies
Provide guidelines & information e.g. National Wage Council (NWC) recommends wage restraints and encourage firms to adopt flexible wage system
Regulation & Legislation e.g. reduce business costs by lowering employer's contribution to Central Provident Fund (CPF) & SG government introduced Quality Growth programme to tighten foreign workers policies
Incentives e.g. Baby bonus scheme , increased subsidies for childcare fees to promote population growth
Urban policy & Infrastructure development e.g. Marina Bay Integrated Resorts are built on reclaimed land & Urban Redevelopment Authority (URA) prepares long term strategic plans
Limitations
Wastage of public funds
Bureaucracy & corruption
Workability & compliance
Allocative inefficiency & rationing
Effects of AS policies
Reduce unemployment
Control inflation
BOP equilibrium
Promote economic growth
Additional SG SS-side policies
Economic Development Board (EDB) set up to promote SG as a destination for foreign investments
To support R&D, government provided infrastructure by developing dediccated sites such as Science Park, Biopolis and Fusionpolisfor orgaisations to find a conducive environment
Infratructure projects such as Changi International airport, expressways, Mass Rapid Transit (MRT) System
Start up Enterprise Development Scheme to provide grants for youths to start their innovative business