Malaysia’s “balanced growth” better than Singapore’s “higher growth”? (Part 1)

by Leong Sze Hian

Malaysia’s former prime minister, Tun Dr Mahathir said recently that Malaysia’s balanced growth was better than Singapore’s higher growth. (“Dr M: Malaysia’s growth slower, but more balanced than Singapore”, Themalaysianinsider, Jan 30).

This caused a heated debate on both sides of the causeway. As much of the arguments for and against were kind of subjective, perhaps we could look at some of the statistics and, as they say, let the numbers do the talking.

Also, with elections iminent in Singapore and Malaysia, it may be timely now to have a review of the policy changes and statistics over the last 5 years or so in Singapore, with reference to the Singapore ruling Government, People’s Action Party’s (PAP) manifesto published in the last elections.

In this connection, it is perhaps noteworthy, that the Malaysian Government published a 135-page, Mid-Term Review of the Ninth Malaysia Plan 2006 – 2010, on 26 June 2008. In contrast, I understand that no comparable review of Singapore’s PAP Manifesto has been done. (The manifesto can be read here)


In its manifesto, the PAP promised to

  • Redesign old jobs to pay more, and upgrade workers’ skills so that they can earn more” and
  • Create jobs by growing new industries and upgrading existing ones

Cleaners and road sweepers, etc, now earn around S$650 a month, down from around S$800 in 2005

Singapore workers had only an estimated just over 1 per cent per annum real median wage increase from 2001 to 2010. The previous two years had negative real wage growth, with real earnings falling by 3.2 and 1.2 per cent, in 2008 and 2009, respectively, and grew by just 0.5 per cent last year, despite the 14.7 per cent record GDP growth

In contrast, Malaysia has fared relatively better, where real wages grew by 1.9 per cent per annum from 1998 to 2007, and was -4.7 and 1.4 per cent in 2008 and 2009, respectively.

Even though Malaysia’s inflation per annum increase at 2.4 per cent, from 2000 to 2009, was marginally higher than Singapore’s, the important outcome to ordinary Malaysians is that they generally had a higher real wage growth than Singaporeans.

What is perhaps the most significant difference between Malaysia and Singapore, from the perspective of wages, may be that Malaysia has already approved the implementation of a Minimum Wage, whereas Singapore’s Government is still against having one.

According to an International Monetary Fund (IMF) study of five selected countries in Asia, Singapore had the lowest Real Wage/Earnings from 2008 to the second quarter of 2010

Singapore workers have one of the longest work hours per week in the world, at 46.6 hours, beating South Korea which had the longest work hours in the world in 2008.

Among the resident labour force, the seasonally adjusted unemployment rate for December, was unchanged at 3.1%.

Since there were 48,023 new citizens and PRs last year, I surmise that the Singaporean unemployment rate (if known) may have risen, given that the growth in local employment was on a relative to “new citizens and PRs” context, only 54,200. The non-seasonally adjusted unemployment rate for locals increased from 2.6 per cent in the third quarter to 2.7 per cent in the fourth quarter

In contrast, while Malaysia’s unemployment rate may appear to be slightly higher than Singapore’s, at 3.2, 3.3 and 3.7 per cent in 2008, 2009 and 2010, respectively, I understand that Malaysia’s rate is truly reflective of the unemployment of Malaysians, whereas Singapore’s does not break-down the unemployment rate data into citizens and PRs.

The break-down of the unemployment data of locals into Singaporeans and PRs continues to remain a secret, despite almost yearly calls by Singaporeans for disclosure.

Anecdotally, employers may prefer to hire non-Singaporeans as they do not have to pay Central Providend Fund (CPF) contributions, may not have to pay maternity leave, give national service reservist leave, cope with turnover problems, etc, as work permit and S-Pass workers are generally tied to the same employer for two years

Between 2007 to 2009  productivity in Singapore declined sharply among small and medium-sized enterprises (SMEs), with all sectors registering lower levels of output, with Profit Per Employee ranging from minus 25 to minus 70.6 per cent.

In contrast, Malaysia’s productivity grew by 4.2, 2.9 and minus 1.8 per cent, in 2007, 2008 and 2009, respectively.

Re-employ older workers

Under the section “Helping older Singaporeans lead full and active lives”, the PAP said it would “encourage companies to employ and retrain older workers”.


However, recent media reports have said that companies are cutting workers’ pay when they reach 60, not offering re-employment, etc.

Also, the Retirement Age Act to be implemented in 2012 will allow employers to cut pay based on “reasonable factors” like the employee’s productivity, performance, duties and responsibilities.

The Act allows singapore employers to give an Employment Assistance Payment (EAP) of between S$4,500  to $10,000, if the employer does not re-employ the worker. Of course, employers may also terminate or reduce pay and benefits even before employees reach 62, provided it is based on “reasonable factors” other than age.

Malaysia does not an re-employment act, as its retirement remains at age 55, with their Employee Providend Fund (EPF) withdrawal at 55 (partial withdrawal of EPF Account 2 at age 50).

Workfare (Work Incentive Scheme for older lower-income Singaporean workers)

It was also written in the Manifesto that the PAP would-

  • “Do more for lower-income Singaporeans” and
  • “Distribute Workfare Bonus to encourage and reward work”

Currently, many self-employed older lower-income Singaporeans do not contribute to Medisave in order to qualify for Workfare, because the entire Workfare payout is to their Medisave account, which can only be utilised to pay for approved medical expenses and medical insurance premiums.  Employees only get about 29 per cent of their Workfare payout in cash, with the bulk to their CPF.

In contrast, Malaysia does not have a scheme like Workfare, but will be  implementing a minimum wage.

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