Growth and Evolution of Singapore's Biomedical Industry

Ni Cao

Abstract

Economic growth of the island-state of Singapore has been boosted by a remarkable expansion of its biomedical sector over the past ten years. The purpose of this thesis is to reveal insights about such a knowledge-intensive growth pattern by identifying and evaluating various contributing factors.

As an introduction, this thesis presents a literature review on studies of Singapore’s biomedical sector in previous academic works, among which there seems to be a general consensus regarding the importance of Singapore government’s active role and the hybrid growth model involving manufacturing and research and development (R&D). The paper then offers an analysis on Singapore’s comparative advantages, followed by some case studies on emerging firms in the private sector. The case studies agree with the literature on the importance of the government’s long-term involvement, but suggest that local research activities are contributing far less to Singapore’s expansion in the biomedical sector than foreign expertise to date.

A two-sector endogenous growth model tailored to represent Singapore’s growth experience in the biomedical industry is introduced in this thesis. The government provides tax-financed infrastructure services that serve as a factor of production. Under this framework, we derive a complete analytical solution to the optimal tax and infrastructure spending decision. The two-sector treatment, which differs from the one-sector models in most of the previous studies, enables the model to predict structural changes that are characterised by increasing share of the advanced sector over the long run. In addition, an extension model captures government’s ability to attract FDI. Using numerical examples, the optimal level of FDI promotion activities is solved.