Singapore continues to accumulate accolades that attest to its attractiveness as a place for new business formation. On 3rd November, the Prosperity Index released annually by London-based think tank, The Legatum Institute (TLI), ranked Singapore’s economy as the most successful in the world. This blog post discusses the Index in detail as it relates to Singapore.
The Economy Sub-index that Singapore ranks first in the world is one of eight measured by TLI. It tracks metrics including:
- The effectiveness of a country’s macroeconomic policies
- Economic satisfaction among the general public compared with their expectations
- Foundations for future economic growth
- Efficiency of the financial sector
Singapore’s status as the world’s leading economy is largely due to its productivity rate and the strength of its export market. TLI measures the former in terms of capital per worker, as opposed to the value added or output achieved by each worker. This is a methodology that is favourable to Singapore, a country which has long enjoyed one of the highest capital:labour ratios in the world. At US$240,750 per worker, Singapore has the second highest capital per worker in the world, behind only Luxembourg (US$272,931). TLI also noted that 47 percent of Singapore’s manufactured exports are high-tech — the third highest proportion globally.
Other countries that did well in the Economy Sub-Index include Switzerland, China, Norway and Germany.
Singapore also performed well in many of other Sub-Indices measured by TLI, including Entrepreneurship and Opportunity, Safety and Security, Governance, Health and Education. Additionally, the think tank highlighted that:
- 94 percent of Singaporeans are happy with their access to food and shelter
- At 2 percent, Singapore has one of the lowest unemployment levels in the world
- 96 percent of Singaporeans believe that the country is a safe place for people of different ethnicities. This makes that Singapore has less ethnic tension than any other country in the world — according to its inhabitants, at least.
In the overall Prosperity Index rankings for 2015, Singapore comes in at 17th, one place better than last year. This is higher than regional competitors like Japan (19th), Hong Kong (20th), Taiwan (21st), Malaysia (44th) and Indonesia (69th). The top five countries overall are Norway, Switzerland, Denmark, New Zealand and Sweden. Thus, the report affirms Singapore’s attractiveness to entrepreneurs who want to incorporate new businesses.
What are Singapore’s weaknesses?
Singapore did somewhat less well in the categories of Social Capital (25th) and Personal Freedom (38th). The former measures social cohesion, engagement in civil society and the strength of families and communities. The latter measures how well the state guarantees individual freedom and encourage social tolerance.
Given that Singapore has a number of laws that promote safety at the cost of individual freedom, its ranking in the Personal Freedom Sub-Index is unsurprising. Although Singapore did not rank particularly well in the area of Personal Freedom, it is perhaps worth pointing out that its ranking in this area did place it fourth in Asia, behind only Hong Kong (26th), Taiwan (31st) and Japan (33rd). China came in at a dismal 120th.
Other notable findings
- Globally, Norway topped the Prosperity Index, despite not placing first in any of the eight categories. Instead, the country ranked in the top ten for each Sub-Index.
- The fastest-rising country in the Index is Indonesia (69th), which has risen 21 places in the last seven years.
- Canada won the title of the freest country in the world.
- Norway, New Zealand, Iceland, Ireland and Canada are the most tolerant countries towards immigrants.
First published in 2007, the Prosperity Index is designed to spark debate about wealth creation among policy-makers, academics, the media and the broader public. Going beyond traditional indicators of prosperity, such as GDP per capita, the Index is the only global measurement of prosperity based on both income and wellbeing. TLI believes that prosperity is as much about the joy of everyday life as it is about the accumulation of material wealth, and so it encourages governments to promote both high levels of income and the subjective wellbeing of their citizens.
To produce the Prosperity Index, TLI analyzed findings from the 142 countries in the world that have the most readily-available data. Econometric analysis identified 89 variables that are the most predictive of prosperity, including:
- GDP per capita
- Number of people in full-time employment
- Inflation rate
- Number of phones per 100 people
- Number of secure Internet servers
- How rested citizens feel on a day-to-day basis
- Public satisfaction with government attempts to address poverty
- Political and business corruption
- Pupil:teacher ratio in schools
- Years of secondary and tertiary education per worker
- Life expectancy
- Hospital beds per 1,000 people
- Incidence of tuberculosis
- Ability to express political opinion without fear
- Proportion of people that are married
- Proportion of people that attended church in the last week
These variables were sorted into eight Sub-Indices as follows:
- Entrepreneurship and Opportunity
- Safety and Security
- Personal Freedom
- Social Capital
Each country was given a ranking of 1-142 in each of the eight Sub-Indices. These numbers were then added together and divided by eight to give an overall ranking for the country in question.