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The Singapore economy is near breaking point and cannot be sustained going forward without society tearing apart, says a former government economic planner who has just completed a 45-page paper "Creating Jobs and Enterprise in a new Singapore economy - Ideas for Change". Tan Jee Say feels strongly that new economic directions are urgently needed to prevent a socio-economic tragedy from unfolding, and he has proposed a $60 billion National Regeneration Plan to transform Singapore into a knowledge-based regional services hub that puts Singaporeans first in jobs and enterprises created in a new Singapore economy.
Jee Say's analysis and prescription are persuasive, according to Lord Butler who as Head of the British Civil Service in the 1980s and 1990s, oversaw the "painful transition" of the United Kingdom from a predominantly manufacturing economy to a knowledge-based one. Lord Butler commended the paper and described it as a thorough and well-argued piece of work that deserves the attention of policy makers.
by Tan Jee Say
The Singapore economy has become more volatile in recent years, with business cycle fluctuations becoming more pronounced, and Singapore experiencing three recessions (1998, 2001 and 2009) in the past 15 years, in contrast to only one recession (1985) in the 30 years between 1965 and 1995. The greater volatility led to more job losses that lasted for longer periods. Volatility has resulted in lower growth.
Low Productivity
Singapore's low labour productivity growth in recent years is a statistical phenomenon and is the result, not the cause, of our poor economic performance. To focus on raising productivity as a key economic strategy, an old and discredited strategy adopted by the government since the early 1980's, is like putting the cart before the horse - can we expect it to succeed when it has failed to do so in the last 30 years with productivity continuing to be stuck in the lows to this very day in spite of all the high-sounding campaigns by high-level productivity councils? Rather we should focus our minds on economic policy because it is bad economic policy that has resulted in Singapore's heavy dependence on foreign unskilled and low-skilled workers that in turn pulls down labour productivity.
Unsustainability of Manufacturing
A major contributor to the increased economic volatility was manufacturing which has been promoted by the government in the past 5 decades as a key pillar of its economic growth strategy. The strategy was successful in the first 2 decades but by the early 1980's, it was running into bottlenecks as Singapore's constraints manifested themselves.
Singapore has little comparative or competitive advantage for manufacturing to flourish as land, labour and skills are in short supply. The manufacturing sector can only remain viable in Singapore through more subsidized factory land and space, uninterrupted inflow of cheap foreign labour, and generous tax holidays and other giveaways. Such economic distortions in the last thirty years have delayed Singapore's economic restructuring. We cannot afford and should not tolerate further wastage, not even for another year.
Two additional factors weigh against manufacturing - firstly, most top students are not opting to read engineering as their first choice in the local universities and polytechnics, a trend that does not augur well for the innovative potential of nor the prospect for 'complex manufacturing' , a niche that the ESC wants to promote; and secondly, Singaporeans are happier working in the services sector than in manufacturing industry. Without a happy and talented workforce, can complex manufacturing succeed in a sustainable way?
Which Services for the Future?
Singapore's future lies in services. We can thrive as a dedicated services hub for the region as we had done so in the past as a vibrant commercial metropolis even before Singapore went into manufacturing in a big way in the 1960's.The rest of the region has also progressed as we have. To continue to be relevant to them, we have to develop into a full-fledged integrated services hub with the best offerings available in the field. It should be knowledge-based that will capitalise on Singaporeans' high level of education and experience of the world's best practices. It must be the right kind of services that do not exploit or offend the sensitivities of the region.
The two huge casinos are the wrong kind of services activities to have. Economic development is more than just about generating jobs and income growth. There is a moral purpose as well, otherwise we might as well turn Singapore into a prostitution hub or a distribution centre for drugs which will bring us untold riches. Economic development is about developing and using human capital to produce decent and worthwhile goods and services in a sustained way.
On the other hand, casinos are a soft option that preys on human weakness to generate profits. They destroy the work ethic and lead to broken families and other social problems. The casinos should be closed down so that Singapore can part company with those who choose to prosper through vices such as gambling, prostitution or drugs; only then can Singaporeans once again walk tall and proud on the high and honourable path to economic development and prosperity.
To make up for the economic loss from closing down the casinos, we need to move aggressively to develop those services we are currently good at providing so as to yield quick returns such as services involving the port, transport connectivity, financial institutions, education and healthcare. While we can be proud of having good basic infrastructure, there are still serious gaps to be filled particularly in education and healthcare. Once these holes are plugged, Singapore will have a fully developed infrastructure that will enable it not only to uplift the well-being and standard of living of its own citizens but also have additional capacity to serve the needs of the region.
End of Part One. You can read Part Two here
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The writer was with the Ministry of Trade and Industry from 1979 to 1985 where he headed economic and manpower planning and also served as secretary to the late Dr Albert Winsemius, the economic adviser to the Singapore Government. From 1985-1990, he was the principal private secretary to Mr Goh Chok Tong. In 1990, he went into investment banking and subsequently took up fund management. He is a Chartered Fellow of the Chartered Institute for Securities & Investment. He is a graduate of Oxford University where he read philosophy, politics and economics.
He will be sharing his insights of the Budget 2011 this coming Saturday 19th Feb at TOC's Budget Forum 2011.