by Rajiv Chaudhry


Back in 2009 TOC ran a series of articles by Rajiv Chaudhry pointing out the problems with an endlessly growing economy in a country as constrained by land and other resources as Singapore. In the light of the interest generated by the government’s recent White Paper, the editors have decided to republish the articles

It is a sine qua non that growth is associated with development and that developing countries continually strive for growth because they wish to move forward, along the scale in the development continuum. But growth comes with costs. Does there come a point in time when “growth at all costs” can be challenged, when continual growth is no longer perceived to lead to unlimited benefits for a country’s citizens? Does the equation growth = development always hold?

My answer is an unequivocal No.

The equation of growth with development does not hold when a country is small, has limited resources and land size, and has achieved near developed country status. To continue to seek unlimited growth under these circumst­ances, when a tipping point has been reached, is to go into a slow but sure decline.

I suggest that that point has now been reached in Singapore. It is time to review the “growth at all costs” model, with a view to better understanding the implications and costs and thereafter moderating and managing the process of controlled growth to ensure a sustained quality of life for our citizens.

History has proven that Singapore’s economic and political decisions in the past were “right”. Our leadership has propelled Singapore forward and upward from Third World to First, to borrow the title of Minister Mentor Lee Kuan Yew’s second volume of memoirs, in one generation.

But just because something has worked well in the past does not necessarily mean that it will continue to work well in the future. Circumstances change and with them, thinking must adapt to new frameworks and concepts, with a view to sustaining a viable future for the citizens of our country.

 

Background

The Singapore Tourism Board (STB) bills the country as “Uniquely Singapore”. Singapore is certainly unique, though perhaps not in the sense the STB means. Relative to the size of its economy, there is no other country with such limited land resources.

Singapore has a land area of 710 sq km and a Gross Domestic Product (GDP) of $257 billion supporting a population of 4.84 million people.

The only other country that comes close in terms of land area, GDP and population is Hong Kong which covers an area of 1,108 sq km (link) and supports a population of 7 million. Its GDP in 2008 was US$207 billion equivalent to S$310 billion.

Singapore’s land area has increased from 581.5 sq km (link) before 1960 to 710 sq km in 2009, or by some 20%, through land reclamation. There are plans to continue reclamation up to 2030 and beyond but these plans are up against the conflicting need to maintain sea lanes, as well as the increased cost of reclaiming land from deeper waters of 15 metres or more. There is also resistance from neighbouring countries on various grounds ranging from threats to their coastal shipping and fishing industries as well as ecological considerations (or quite simply because Singapore, by reclaiming land, is pushing the boundaries of its coastal and therefore, territorial waters).

So it would seem that the pace of reclamation will slow in the future and ultimately plateau around the 800 sq km mark. (link)

In medieval times a prosperous country such as Singapore would have simply gone out and conquered more land. Or, to borrow an idea from 19th century America (or the British Empire as recently as 1957* ), perhaps Singapore should have purchased the Riau islands from Indonesia. Since both options would be regarded by most people as being pipe dreams, we must live with the fact that Singapore is a country where land is a real constraint.

 

Long-term trends

Given this limitation of physical constraints to growth, the question for policymakers is, how best to use this scarce and precious resource?

A high-growth strategy served Singapore well in the first 25 years of independence. It is well-documented that when Singapore separated from Malaysia in 1965, both its economy and infrastructure were fragile. The departure of the British forces soon afterwards exacerbated the situation and it was necessary for Singapore to go out to the world on a war footing to market itself as a destination for MNC investments.

Singapore has been singularly successful in this quest.

Between 1965 and 1990, Singapore’s annual GDP ballooned from $3 billion to $66 billion (link) or by a factor of 22 times. Between 1990 and 2008, the economy mushroomed further to $257 billion, or by a factor of nearly 4 times. Impressive growth by any standards.

Yet, this growth comes at a price. More on this later.

Singapore’s second great constraint is manpower, or rather, the lack of it. When it attained independence, its population was 1.88 million (link). By 1990 the population had increased to 3 million of which some 10% or 311,000 were foreigners. By 2008, the population had increased further to 4.84 million comprising 3.16 million citizens, 478,000 permanent residents and 1.2 million foreigners. Citizens now comprise some 65% of the population, down from 90% in 1990.

To accommodate the 61% increase in the total population since 1990, there has been a frantic pace of construction. The steady influx of people into the country has kept up the pressure on rentals and property values, thus creating wealth on paper and increasing Singapore’s total ‘equity’ which is firmly anchored on the bedrock of property prices.

People bask in the warm afterglow, knowing that their savings, invested mostly in property, are not only safe but, like warm baker’s dough, are steadily rising.

There are consequences, though, to the relatively rapid and sudden increase in population on a land-limited island like Singapore. These outcomes will be discussed in my next article.

TO BE CONTINUED

 

*Lousiana purchase in 1803, Texas and Mexican Cession in 1848, Alaska in 1867; Christmas Islands were transferred from Singapore to Australia in 1957

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