By Sim Ying

In the spirit of a continuing constructive dialogue about how to achieve a sustainable economy that works for everyone, I welcome Chee Soon Juan’s response, “Let’s talk experience, economics and productivity”, to my opinion piece, published recently by TOC. I would also like to thank TOC for facilitating an open discussion and demonstrating what publications like this should do: offer divergent opinions on matters of national import.

However, notwithstanding the writer’s arguments, for which I thank him, I stand by my original views.

In a debate, everyone is entitled to his or her own opinions, but not to their own set of facts. I will comment on the writer’s set of facts, as articulated in his response, which, regrettably, do not appear to be facts at all, but rather misguided opinions.

But before proceeding, I would observe that despite his lengthy essay, the writer neglects to address the key concerns that were raised previously in my article, and published by TOC. The author fails, for instance, to explain why he’s opposed to infrastructure creation and continued development. He also studiously avoids articulating how he specifically expects to spur innovation in the minds of the next generation of Singapore workers. His only linguistic formula appears to be more slogan than concrete particulars: “Society. Culture, Intrinsic, Extrinsic, Incentive.” If Bill Gates and Mark Zuckerberg had relied on such diaphanous watchwords, it’s a safe bet that Microsoft and Facebook would still be unrealized ideas, ghosting, as it were, the halls of those two entrepreneurs’ Harvard dorms. The writer also declines to offer up any substantive ideas or plans for how to raise worker productivity, a major challenge confronting the country. Worse, the writer advertises his distressing anti-foreigner credentials in no uncertain terms. They are more cause for concern than inspiring, and could, if followed to their logical conclusions, serve to deflate, if not reverse, the fortunes of Singapore’s future economy.

Allow me then to address the author’s opinions as erroneous facts.

Set of Facts No. 1:

On Experience in Governance

The writer offers Bill Clinton, Mahathir Mohamad, Tony Blair, Angela Merkel and Lee Kuan Yew as examples of leaders who “presided over periods of robust economic growths in their respective countries but who had limited experience in governance, corporate or otherwise.”

I would remind the writer that before presiding over the U.S. economy, as president, Clinton served as governor of Arkansas for eleven years. And Mahathir held public office for twelve years before becoming prime minister. Tony Blair sat in parliament for four years before ascending to Labour’s shadow cabinet where he served an additional nine years before becoming PM. Merkel was in the Bundestag for fifteen years before becoming Germany’s first woman Chancellor. LKY and others built up the Singapore state from scratch, piece by piece, with nothing to lose. Today, however, Singapore has everything to lose, which is why actual experience in governance is so, so important.

Those leaders had a total of fifty-one years of high-level working experience before they got anywhere near running their country’s national economy. That’s not inconsiderable, and it’s a far cry from the author’s claim that they had “limited experience”. At the risk of repetition, I note once again that the author has no such experience.

Set of Facts No. 2:

On Heng’s Financial Credentials and the 2008 Global Financial Crisis

The writer makes the case that PAP cabinet members hail from multiple professions that do not align with their current posts. Since this conversation is about Singapore’s economic future, and not about who’s running the Ministry of Health, it should be noted that while Chee conveniently omits any reference to the current Minister of Finance’s background, it should be said that Mr. Heng Swee Kiat has 6 years with MAS, 4 years at MOE, and 2 years at MOF. Also, he was 4 years as Permanent Secretary at MTI. That’s sixteen years of hard experience, the majority of which was in dealing with Singapore financial affairs. There’s nothing even remotely “dicey” about Heng’s experience or background as finance minister. Is the author in a position to match that?

And, remarkably, in an effort to lambaste Tony Tan’s financial astuteness when he was GIC’s director, the author appears to attempt to lay blame for the 2008-2009 world financial crisis at his old desk–and by extension at Istana’s doorstep. He observes, without much sense of global awareness, that “when [Tan] was the executive director of the GIC, he had made some disastrous investments in Western banks – despite repeated warnings from experts – which caused the GIC to suffer a $60 billion loss.”

Perhaps if the author were more familiar with the world of investment and finance, he would have demonstrated a more circumspect attitude about what actually happened back then. As astute readers will recall, both the U.S. subprime mortgage and stock market crash of 2008-2009 were a near universal opportunity financial horror story. By some estimates, the U.S. lost between US$15.5- 25 trillion dollars in market value, of which large chunks still have yet to be fully recovered.  To provide a sense of just how large the financial disaster was, the Carnegie Endowment for International Peace reported that many countries were adversely affected, including: Ukraine, Argentina, Jamaica, Ireland, Russia, Mexico, Hungary, the Baltic States, the United States, and the United Kingdom. Other countries affected, but less so, were China, Japan, Brazil, Iran, Peru, and Australia. But Singapore, thankfully, has not been placed on either of those lists. In other words, it did a reasonably good job under horrendously stressful circumstances of isolating itself from the worst blows of one of the world’s most catastrophic financial meltdowns–ever.

This is not to say that GIC didn’t itself suffer a loss, as the writer notes. But GIC eventually sold its stake in Citigroup, and made a US$1.5 billion profit. So some global perspective is called for here. And to be accurate, this year—almost ten years later–GIC did, in fact, take a $5.6 billion loss on a UBS investment made near the time of the crash. So GIC’s net loss can now be estimated to have been around $3.5 billion—not $60 billion. Not great, but not the end of time either, and nowhere near the levels of loss sustained by other countries that will probably never be recovered. Still, the global financial collapse was not of Singapore’s making, and no one predicted it, not even Chee.

Set of Facts No. 3:

On Productivity and Blaming Foreigners

The writer commented on the fact that PM Lee Hsien Loong once said that the PAP had ‘maxxed out’ on, in Chee’s words, “easy ways of growing our economy.” Chee then went on to disparage the use of foreign labour as a source of growth in Singapore, and decried continued reliance on such workers as promoting an “unhealthy state of affairs”. To back his claim, he quoted the late Dr Goh Keng Swee, who once cautioned that “[Singapore’s] position is probably unique in that she is now dependent on a continuing supply of foreign workers to sustain growth…”

But Chee quoted the PM narrowly, and out of context, and neglected to reflect his whole point, which was as follows: “Now, one in three of our workers are foreign. You really don’t want that ratio to go more and more extreme. What can you do next?… The only thing you can do is productivity. Work smarter, work better, deliver the results, and improve lives. And productivity is very tough to do, and that’s what we depend on now.”

So while the PM acknowledges that there may be a limited to the numbers of foreign workers that should, in a perfect world, be brought in, he is also quite cognizant of the fact that increased productivity does not come easily. The World Economic Forum’s (WEF) paper, “The 12 Pillars of Competitiveness”, describers these cornerstones:

Many determinants drive productivity and competitiveness. Understanding the factors behind this process has occupied the minds of economists for hundreds of years, engendering theories ranging from Adam Smith’s focus on specialization and the division of labor to neoclassical economists’ emphasis on investment in physical capital and infrastructure, and, more recently, to interest in other mechanisms such as education and training, technological progress, macroeconomic stability, good governance, firm sophistication, and market efficiency, among others. While all of these factors are likely to be important for competitiveness and growth, they are not mutually exclusive—two or more of them can be significant at the same time, and in fact that is what has been shown in the economic literature.

Yet, in view of the complexity of what’s needed to generate competitiveness and productivity, Chee chooses instead to beat his snare drum against the need for foreigners, without himself offering any new thinking on the matter. One has to wonder: Is Chee S.E. Asia’s slow-burning Donald Trump? Does Chee see the question of yea or nay foreigners as the perfect wedge issue to improve his electability? It’s hard to say. But in today’s world, one rife with new brands of foreigner-phobia, this anti-them and pro-us sentiment, cast in an easy-to-go-to populist lingo, can hardly be viewed as a means to properly unite the country. Rather, it appears to be a tactic of divisiveness, which could one day undo Singapore’s financial success. For the sake of argument, what if Singapore’s bid to increase its productivity falls short of the mark? Then how will the economy continue to grow without the fulsome support of more and more foreign workers? This is a certainly a possibility because of the declining numbers of Singaporeans.

But the author appears to be oblivious to this dim population forecast and the problems it foretells. Instead, he laments the “supporting role” played by Singaporeans in the economy and criticises foreigners, stating “[they] are now the main force behind our economy.”

But, as noted above, Singapore has a significant population issue, which, like it or not, goes to LKY’s original justification for welcoming foreigners to set up shop in Singapore. “If Singapore depends on the talent they can produce out of 3 million people,” he said, “it’s not going to punch above its weight.” Of course, his rationale was enunciated long before today’s hyper-competitive regional forces came into play, which may make his reasoning triply true these days, as Singapore confronts stiffening competition, struggling birth rates and an aging population.

Still, it’s not as though Singapore were alone in its need to attract foreigners to assist the country’s economy. Otherwise known as Japan, Inc., Japan depends on mega-streams of foreign labour to support its economic engines. This is the same Japan, mind you, that was once one of Asia’s most insular demographic regions, a de facto bastion of national labour purity. No foreigners, please, was for all intents and purposes, its national motto. Now, no longer.

But with Singapore’s plummeting fertility rates, standing at below 1.4, these rates are insufficient to meet the 2.1 replacement rate. This, of course, may not bode well for Singapore’s future economic growth, which must be sparked by a growing population. Worse, Singapore’s working-age population is thinning, and rapidly growing older. That this demographic group is expected to swell to 900,000 by 2030, with its attendant rising state costs, will only elevate Singapore’s worker deficit. And who will pay the bills, a declining home-grown population?

But don’t take my word for it. PM Lee Hsien Loong acknowledged this reality some time ago. He said what the writer doesn’t want to acknowledge. “Based on trends,” he said, “if we project into 2050, even with immigration, the population pyramid will be inverted … We are going to be growing old faster than any society in the world…. Who will pay the taxes, to spend on whom? How do we keep [the economy] prosperous, vibrant and forward-looking? Who will man the Singapore Armed Forces and defend us?”

Those fine questions require serious answers, and for all this talk about improving productivity and creating innovation, what if Singapore falls short?

Set of Facts No. 4:

On Population Growth and Sustaining GDP

While the author’s populist arguments advocate for a kind of less-foreigners-are-good-foreigners policy, so that “locals [not foreigners] can drive our economy”, where will Singapore find itself should a sluggish Singapore GDP (at 2% expansion in 2016; better in the first half of 2017, with a 2.7 per cent on a year-on-year basis) persist? Or worse, what if, due to heightened regional competition, GDP becomes flat or even negative? Or, heavens forbid, what if the world is struck by another global recession, hardly inconceivable.

Further, as raised above, what if efforts to pump up productivity and spur on innovation go sideways? Then how compelling is the writer’s populist sentiment that Singapore shouldn’t welcome “foreigners” to more fully support the economy?

After all, economists by and large agree that the twin engines of GDP growth are 1) population and 2) productivity. However, if productivity isn’t robust, population better well be.

In his study “Population Growth, Factor Accumulation and Productivity”, Harvard’s Lant Pritchett highlights LSE’s Prof. Robert Cassen’s claim that a “larger population may generate economies of scale; they may induce favorable technological change; and when population is growing, the average age of the labor force will be younger, which may have beneficial productivity effects.”  Other economists suggest that increased population growth inevitably leads to “greater productivity either by inducing innovation, producing innovation, or through creating greater economies of scale, specialization or agglomeration.” (Boserup, 1981, Simon, 1992, Kremer, 1993).

In other words, increasing Singapore’s population could be a very, very good thing, especially since the country faces a downward turn in population growth and a whole new set of challenges from regional competitors, and is constrained by virtue of its small size, while struggling to maximize new access to land.

So, whether the writer cares to admit it or not, future population increases, whether they be as a result of an influx of foreigners or not, may be critical, and may make the difference between achieving higher productivity and accelerating innovation or not.

On the subject of innovation, Harvard’s Joseph Schumpeter defines it as 1) devising new products; 2) creating new production methods; 3) making new markets; 4) locating new raw materials; and 4) “establishing a new organization in any particular industry, capable of creating a “monopoly position in the market.” So when Chee speaks about making innovations somehow happen, these are the pertinent areas in which it must happen. But making breakthroughs in theses challenging areas isn’t as easy as whistling in the dark. Ask any entrepreneur. It’s not just talk; it’s action.

Population growth, productivity and innovation enjoy a quasi-symbiotic relationship. They rise or fall together. But Chee advocates for fewer and fewer foreigners, even though Singapore’s population levels are admittedly in peril.  PM Lee Hsein Loong appears to call for a certain modulation in the incoming tide of foreign workers; but if current downward trends in the rise of local population continue, only foreigners will be capable of making up the difference. However, accommodating far greater numbers of workers will also require even more national infrastructure and housing, which means, of course, continuing to build up and out.

So what could stop Singapore from doing just that? The embrace of policies the writer has articulated, unfortunately. A fair question seems to be: Is Chee the Nigel Farage of Singapore? After all, he’s a politician who would likely sever Singapore’s economic relationship with vital portions of the world by promoting a type of Singexit that would effectively bar more and more foreigners from working here. The writer’s seemingly fulsome rejection of internationalism (spelled anti-TTP) and his ardent embrace of an authentic brand of hyper-nationalism could be viewed as both wrong and extreme, and may eventually spell deep trouble for Singapore’s economy.

In any case, Chee’s preference for his own variation on isolationism, his passionate anti-foreigner platform, is a shove backwards to a time that never existed, or, put another way, a push forward into a realm of fanciful impracticality. But in both form and substance, his reticence to embrace foreigners may be counter-economy and could frustrate, if not implode, future growth, which could unhinge Singapore’s future economy.

But don’t take my word for it. According to Prof. Richard Florida, director of Martin Prosperity Institute at the University of Toronto and Global Research Professor at New York University, “a growing number of studies… suggest that geographic proximity and cultural diversity—a place’s openness to different cultures, religions…. play key roles in economic growth.”

He points to a 2011 study, “Cultural Diversity, Geographical Isolation and the Origin of the Wealth of Nations,” written by economists Quamrul Ashraf of Williams College and Oded Galor of Brown University, that charts the “role of geographic isolation, proximity and cultural diversity on economic development from pre-industrial times to the modern era.”

In conclusion, Prof. Florida claims that the paper finds “diversity spurs economic development and homogeneity slows it down…[and] that cultural diversity and geographic openness matter significantly to economic development…”

He notes:

It’s time for diversity’s skeptics and naysayers to get over their hang-ups. The evidence is mounting that geographical openness and cultural diversity and tolerance are not by-products but key drivers of economic progress. Proximity, openness and diversity operate alongside technological innovation and human capital as the key engines of economic prosperity. Indeed, one might even go so far as to suggest that they provide the motive force of intellectual, technological, and artistic evolution.

To be sure, Chee may see a political opening for his isolationist economic prescriptions, which have about them a certain sense of timeliness. For instance, his go-it-alone jingoism seems to echo Trump’s “America First”. And with pro-nationalist and anti-foreigner movements popping up here and there about the globe, Singapore could very well find itself consumed by something akin to it, at least until cooler heads prevail. But the seminal question Singaporeans should ask themselves is: Isn’t Singapore smarter and better than this? Shouldn’t Singaporean be proud of their international character and cosmopolitan flavor, their embrace of social diversity and people of different religions from afar? And aren’t those foreigners who do come to work here and do eventually become citizens, aren’t they, in fact by then, in all measurable ways, as much Singaporeans as those born and bred here? And why should they be seen as foreigners at all? They’re Singaporeans, first and last.

Diversity isn’t encumbrance, it’s strength, and a key contributor to rising GDP.

Set of Facts No. 5:

On Good Governance and International Talent

The writer also rebukes in his response Transport Minister Khaw Boon Wan. Khaw called on train operators “to look to Taipei to emulate the reliability of its rail system”, and seek out Japanese and Swedish engineers to “help us figure out what’s causing the interminable breakdowns of our MRT system.” But what, it needs to be asked, could be wrong with that? Seeking out advice about best practices– no matter whence it comes—is intelligent, and standard academic procedure. As an academic in his own right, Chee should know this; but evidently not. Is his arch-nationalism getting the better of him? To reasonable men and women, it would appear normal for governments to search high and low for ways to improve their citizen services. But not to Chee.

He proceeds to belabour his point, all the while continuing to reject the need for and contributions of foreigners from neighboring countries, and before asking his ostensibly momentous question: “[H]ow did we come to this after 50 years of PAP rule?”

But why shouldn’t the government ask for input from Japan or Sweden, for instance? Sweden’s subway system was built in 1950; Tokyo’s in 1954; and Singapore’s in 1983. That means Sweden’s and Japan’s engineers have a combined total of 60 more years of experience than Singapore’s. The writer’s reflexive tendency to reject deeper experience and perhaps more sage advice in the area of problem solving is cause for alarm, not support.  It also comes part and parcel with his curious assumptions about how little experience counts for in efforts to secure a strong and growing economy.

Still, and to be fair, the author makes a very reasonable point about the necessity of cultivating more home-grown engineers. It’s true that in the past substandard pay levels have created a disincentive for students who’d been considering careers in engineering. But, of course, other mitigating factors have contributed to an insufficient engineering workforce. One is the perception among potential students that the profession is not exactly sexy, at least when compared with the more highly visible ones like banking, medicine, legal and business. However, and again to be fair, both NUS and Keppel Corp. have now boosted innovative research and development centers, and opportunities are mounting in the fields of desalination, waste management, security and transportation–all of which will require local engineers.

Set of Facts No: 6

On Cheap Labour and Infrastructure

To back up his sometimes eloquent and elegant vilification of foreigners and their place (or non-place) in Singapore society, the author notes that economist Manu Bhaskaran has also chastised PAP’s immigration policies. In the past, Manu has claimed that these policies “made us addicted to cheap labor, and it was done without providing enough infrastructure to cope.”

That is correct and the government is guilty as charged, but isn’t that yesterday’s argument, not today’s? After all, Singapore’s actively constructing new infrastructure, for as far as the eye can see. Which makes the author’s taking Minister Lawrence Wong to task over building new infrastructure—or pouring more concrete—strange, because on the one hand the writer decries the state’s lack of infrastructure, and, on the other, complains that the government’s remedying that situation by pouring too much concrete. So Chee seeks to have it both ways; but in the real world of politics, he can’t.

Set of Facts No. 7

On an Absence of Perspective, Unwanted Foreigners, and Paul Krugman as Prognosticator

In his response, the writer posits the rather novel argument that Singapore isn’t “unique” in its “rags-to-riches” story, at least in Asia, and therefore concludes that the very nature of its none uniqueness somehow or other undercuts Singapore’s demonstrable economic accomplishments. In view of this perspective, some readers might well ask: Is the author taking us down an Alice in Wonderland rabbit hole, to a place where success is called failure and failure is called success?

To wit: Chee headlines his case against Singapore’s accomplishments with his clever caption, “The PAP’s achievements (or not)”, and mocks the perfectly reasonable argument that there aren’t 150 other countries that wouldn’t envy Singapore’s economic success. He then sarcastically invites comparisons between Singapore and Chad, Mauritania and Yemen, should, he says, Singaporeans feel the need to feel better about themselves and their country. This is rich, and embarrassing because according to the 2016 World Bank GDP rankings, Singapore stands at No. 38, which put it well ahead of such countries as Sweden, Austria, Qatar, Norway, and Kuwait, and many other first world countries. It constitutes failure to stand ahead of Austria? And where is Chad on this list? At 119. Where is Mauritania? At 143. Where is Yemen? At 80. The writer obviously needs to get around more. Has he ever actually been to Chad? His lack of perspective on the country’s marked economic achievements is not a mark of distinction.

The author also attempts to minimize Singapore’s economic achievement by comparing it to Japan’s, South Korea’s, Taiwan‘s and Hong Kong’s, countries that also have experienced remarkable growth since the end of the Second World War. This is a fair, as far as it goes. But, of course, those other economies realised their enormous financial successes with populations that were considerably higher than Singapore’s, which, in 1965, when building began, was only at about 1.88 million.

Compare Singapore’s population today, which hovers at a compact 5.5 million, and Japan’s, which looms at 127 million; and South Korea’s, at an enormous 51 million; and Taiwan’s, at a hefty 23.5 million, and even Hong Kong’s, at a substantial 7.34 million. In other words, Singapore achieved comparable results with a population size considerably lower than those of these other more mega-states. It made good with, as it were, two hands tied behind its back.

Is this achievement (or not)?

Still, Chee never saw a Singapore success story he didn’t like. He continues to complain:

And while the Japanese, Koreans and Taiwanese are drivers of their own economies, Singaporeans…. have been shafted to the back seat.

But, at last look, Singaporeans do, in fact, control and lead Singapore’s economics, and have been for more than fifty years. They are the ones driving the bus—not sitting in the back because they are the ones who’ve been devising policy (agree with it or not), and implementing plans and making the financial success that the author so disdains. Foreigners as drivers of Singapore’s economy? Not so much. But certainly they have contributed, and played a vital supportive role in its success.

Ironically, Chee quotes economics Nobel laureate Paul Krugman to bolster his claim that Singapore’s success is actually Singapore’s soaring deficit. He notes that Mr. Krugman once dismissed Singapore’s “miracle growth” by warning that “all of Singapore’s growth can be explained by increases in measure inputs. There is no sign at all of increased efficiency.”

But, of course, this is the same Paul Krugman who once argued that China “is headed for a terrible fall”. According to Stephen Leeb, author of Red Alert, Krugman worried that China was “vastly overbuilt” and was “facing a massive credit crisis”. Furthermore, Krugman insisted that China “can no longer count on cheap labor to continue to drive growth at the rapid levels seen historically.” Leeb writes that Krugman predicted that “China’s growth engines have run out gas and its jet plane will experience a crash. His ‘only question is how bad the crash will be.’”

In 2017, however, China’s GDP is expected to be as high as 6.9%; so its jet plane has not yet crashed. Krugman got it completely wrong.

More relevant, however, may be Krugman’s judgement about the future of the Singapore economy. In his 1994 article for Foreign Affairs (November/December, The Myth of Asia’s Miracle). Krugman writes: “…Singapore is an economic twin of the growth of Stalin’s Soviet Union”, which at the time represented the epitome of Krugman’s idea of a failed economic state. Leeb states: Krugman simultaneously offered duplicate reasoning on the other fast growing Asian economies, Taiwan, Hong Kong and South Korea…”, claiming that “they had expended or were on the verge of consuming their entire available capital and labor resources…. and lacked any signs of future productivity improvement… that they had already achieved most of their potential, and for Singapore, he wondered only how fast it would fall.”

That was nearly 25 years ago. Leeb insists that what people like Krugman missed was Singapore’s facility for “leveraging the advantages of modern technology” in an economy “fired by ever greater labour and capital tools.”

So Mr. Krugman is a flawed prognosticator, gifted economist though he may be.

Set of Facts No. 8

On Freedom and Economies

The writer raises a relevant and intriguing question about the influence of political freedom on the growth of economies. The Economist has recently addressed this question and has added nuance to the conversation. With eyes wide with amazement, it observed that even authoritarian China has achieved a remarkable and sustained growth over the past 50 years. It lifted up hundreds of millions of Chinese out of poverty, while still controlling the levers of its state-led economy. One can argue whether or not this is the proper order of things, and that economic prosperity should be a product of a full democracy, but China’s growth as a non-democracy is now an uncontested reality. Therefore, the causation between democracy and sustained economic growth in the 21st century is not quite so clear.

Set of Facts No. 9

On Entrepreneurs, Casinos and Tax Havens

The author supports entrepreneurship as a means to stoke Singapore’s future economy. This is good; but it is not an entirely revolutionary or very original position. Moreover, the development of a fecund environment conducive enough for the development of entrepreneurs and their success may take many years, if not a generation. Through policy, of course, government can encourage it and create a space for it, but it can’t necessarily rely on it as an economic panacea, at least in the short-term. And even then, success comes without guarantee. Forbes magazine writes that 90% of all startups fail. That’s huge. So while the entrepreneurial payoff may be one day great for Singapore, the time it will take to achieve it is not an inconsiderable factor. Meanwhile, Singapore must pay its way going forward. So innovation as boulevard to national prosperity is still quite a few days off, as measured by probabilities.

The writer laments the presence of casinos in Singapore. Once again, some perspective is called for. There are 7,682 casinos worldwide that operate in more than 142 countries. They crisscross the globe, from North America to Oceania. In Asia alone, there are 263 casinos operating in 17 countries. Out of which Singapore owns exactly four. So for most people it’s fairly difficult to get too worked up about them, so long as they add revenue to the economy. In 2017, revenues from casinos in Singapore are expected generate around $4 billion. That pays for quite a few social services.

As for Singapore being a “tax haven”, as the writer claims, Investopedia defines a tax haven as follows: “A country that offers foreign individual and businesses a minimal tax liability in a politically and economically stable environment, with little or no financial information shared with foreign tax authorities.”

Investopedia also writes “an increasing number of U.S. corporation, including Microsoft, Apple and Alphabet, are keeping cash in offshore tax havens to minimize corporate tax.” But there’s nothing unlawful or illicit about this practice. In fact, Investopedia doesn’t even define Singapore as a tax haven. Rather, it lists the following countries as tax havens instead: Andorra, the Bahamas, Belize, Bermuda, the British Virgin Islands, the Cayman Islands, the Channel Islands, the Cook Islands, Hong Kong, The Isle of Man, Mauritius, Lichtenstein, Monaco, Panama and St. Kitts and Nevis.

That’s because these countries pretty much uniformly offer 0% tax rates to companies incorporating there. By comparison, Singapore’s rates are at a reasonable 17%. That’s significantly different. (University of Michigan Prof. Emerita Linda Lim claims that both Hong Kong and Singapore are listed as “grey zone” countries.) And the main reason why international businesses are even drawn to set-up in Singapore is not simply because of its more moderate corporate tax rates, but because of its reputation for its ease of doing business, and for the fact that Singapore recognized as a world leader in arbitration and the settlement of business disputes. So Singapore is leveraging its assets, as other countries might leverage their reserves of iron ore, rice or wheat. That’s just smart management of available assets, and not, as the writer seems to infer, an undesirable shortcoming.

Chee completes his essay on Singapore’ economic shortcomings by claiming that the country has achieved the “high mediocrity of low expectations.” As political slogans go, this one is rather pithy, but it also lacks real world actuality. At pains to make his point stick, the author quotes the PM who previously described Mr. Lim Swee Say’s so-called “suaku” moment during Mr. Lim’s recent trip to China. According to the PM, Mr. Lim had explained in China how “backward [Singapore was]… in terms of the use of cashless payment”.

Whether this was a “suaku” for Mr. Lim or a “gotcha” moment for Mr. Chee remains to be seen.  Frankly, in the wider scheme of things, it hardly matters. The history of nations is about one nation inching ahead or falling behind another in the competition for exploiting inventions. But was the writer aware of the potential benefits of using “cashless payments” prior to Mr. Lim’s trip to China?  This is a more pertinent question as the writer seeks to exalt himself while ostracising the government. I don’t think so. But if the writer’s as visionary as he claims, then why not? Does his own lack of awareness about “cashless payments” suggest then that he represents the “high mediocrity of low expectations” in the field of opposition politicians? I don’t think so.

Set of Facts No. 10

On Policy Ownership

Chee makes five assertions he claims contradict my statement that his “ideas about how to achieve a vibrant and viable future economy are about as vague and untested as his own business experience”. He points to the proposition that the PAP has adopted his ideas over time and now incorporates some of them into government policies. In this regard, he then raises a legitimate question: ”[W]ouldn’t our ministers be reckless to adopt them, even in variation?” Leaving aside for the moment that his responses address past economic issues and fail to enunciate detailed (or even partial) plans for how to elevate Singapore’s “future economy”, I will respond to each of his claims.

A. Chee claims credit for proposing that “we bring up the tax bracket for top earners closer to the 30% mark.” He said this in 2010. And in 2015, Finance Minister Tharman Shanmugaratnam did raises taxes on upper income earners, but went nowhere near 30%. To be precise, the Finance Minister raised taxes on the top 5% of income-earners in the following manner: for earners making $250,000, there was a minimal 0.2% increase, up from a rate of 8.3% to 8.5%; for earners bringing in $800,000, there was an incremental 1.4% increase, from 16% to 17.4%; and for earners collecting $1,500,000, there was the largest increase of 1.6%, from 17.9% to 18.5%.

Would the writer have us believe that these nominal tax rate increases for the very top earners bring Singapore’s tax rates within distant proximity of his proposed target of 30%? Again, I don’t think so. It seems a stretch to claim credit for a minimal progressive tax rate hike on high wage earners that resulted in a high end increase 11.5% percentage points below the one he proposed 5 years earlier. In hindsight, it seems as though his plan was more orphaned than adopted.

B. Chee claims credit for the PAP’s Progressive Wage Model launched in 2015. He notes that he had been “pushing for minimum wage since 2001.” This is true. He had called for a universal minimum wage of $5 per hour. But the PAP’s 2015 “Progressive Wage” was not actually about providing a comprehensive minimum wage. Rather, it was a pinpointed minimum wage for cleaners, security personnel and landscapers. This was necessary, it was believed, due to the low wages earned by workers in those areas that resulted in “high turnover and labour shortages.” But the Progressive Wage benefits were not simply intended to raise depressed wages. They were also meant to permit “training” and to make “improvements in productivity and standards.”

Chee’s universal minimum wage raise was not PAP’s Progressive Wage. Chee’s was universal. PAP’s was very targeted and was tied to training and productivity enhancing measures. It’s hardly fair to claim that they were one in the same or even close variations.

C. Chee claims ownership of his 1990s “Singaporeans First” policy, whereby “local employers hire Singaporeans first before they employ foreigners”. He then notes that “the PAP introduced the Fair Consideration Framework requiring ’employers to consider Singaporeans fairly before hiring Employment Pass holders.'” It sounds similar, doesn’t it?

But a closer examination of the facts reveals a marked distinction between the PAP’s recent legislation and Chee’s early-on proposal, especially in terms of the legislation’s intent.

In 2013, then Minister of Manpower, Tan Chuan-Jin, explained the purpose of the Fair Consideration Framework as follows:

These changes are part of a broader effort to ensure that good jobs continue to be created for Singaporeans. Many Singaporeans we spoke to (at MOM’s OSC sessions on Jobs in June 2013) understand the need for a diverse workforce. They recognise the need to compete for jobs on the basis of merit. The framework is not about ‘Hire Singaporeans First, or Hire Singaporeans Only’. What the government is doing is to help them get a fair opportunity. Singaporeans must still prove themselves able and competitive to take on the higher jobs that they aspire to. We will continue investing in our continuing education and training infrastructure so that Singaporeans can upgrade their skills and remain competitive in the workplace.

The minister’s statement demonstrates the government’s ready acknowledgement that Singaporeans must compete based on merit and that investing in “continuing training” was key to them securing the “higher jobs.” Whereas, Chee believed, at least according a report in the New York Times, published in 2001, “that talented foreigners should be allowed to work in the island-state only if there are no locals for the job and that, if employers have to retrench, foreigners should go first.” That’s a different policy emphasis altogether.

Why is this important?

This is what LKY counter-argued about the negative affects such a say-no-to-foreigners policy would have on SIA: “You say sack foreigners and keep the Singaporeans when SIA retrenches. But when you are short of captains and pilots, who will join you?”

Health Minister Lim Hng Kiang also made a similar case in another field, claiming “that three out of 10 doctors and nurses were foreigners and that Singapore could not recruit enough locals to run its health care industry… If we reduce the number of foreigners, hospitals will be undermanned, services will fall, and Singaporeans will be worse off.”

It should be recalled that the writer’s “Singaporeans First” policy was also opposed by another opposition party at the time.

So it seems fair to describe Chee’s policy as a hard “Singaporeans First,” and that PAP’s “Fair Consideration Framework” is much more nuanced approach– a Singaporeans First (Lite) policy, as it were. The larger point here may be that PAP’s policy is not so much one borne out of a fiery brand of nationalism, but one based on changing circumstances on the ground. But if Chee wants to take credit for PAP’s 2013 policy, nearly twenty-five years on, so be it.

D. Chee claims “The SDP launched our National Healthcare Plan in 2012 where we called for individual healthcare risks to be pooled. In 2015, the PAP announced that its Medishield Life ensured that ‘everyone shares in the national risk pool.’”

But didn’t Obama’s Affordable Care Act, passed by the U.S. Congress in 2010, also incorporate the policy concept of high-risk pools? So perhaps the PAP borrowed from Obama’s plan? Or the writer tore a page from it, too? It’s not possible to say.

E. Finally, author states that in 2010, “the SDP proposed a retrenchment insurance scheme to provide financial support for those retrenched.” He goes on to claim, “Just this year, the PAP introduced the Returner Work Trial to do the same.”

But the two retrenchment programs are actually quite different. The government’s program, open to PMETs unemployed for “at least two years”, offers a “new grant to employers who train them.” It’s a targeted retraining program, in other words. But Chee’s is an 18-month grant program, based on a grant of a percentage of the worker’s previous salary, which stops once an individual regains employment. The focus of the PAP program and the writer’s appear to be unreservedly different. Again, it seems a stretch to claim that the latter is derived from the former in any fundamental way.

Set of Facts No. 11

On Productivity Spending, Inspiration and Action Plans

Finally, in the last section of the writer’s response, he cites an article written by former Straits Times’ editor Mr. Han Fook Kwang in 2015. Mr. Han wrote that “the Government has spent $21.2 billion since it launched its restructuring exercise, including paying for the National Productivity Fund, Work Credit Scheme, the National Research Fund and all the various productivity incentives. That’s almost the entire Education budget this year, but with little progress to show.”

But let’s provide some spending context.

First, this sum was spent over 11 years, starting with an initial investment in the National Research Fund in 2006, followed by the formation of the Productivity Fund in 2010, and the Work Credit Scheme in 2013, as well as other incentive programs.). At the same time, these investments took place about the time of the 2008-2009 financial crisis, repercussions from which are still being sorted out. So it’s fair to say that the country’s R.O.I. may have been diluted and/or delayed. But as long-term investments, investments in improved productivity are not unreasonable.

Mr. Lim says the same in his article, and writes, “To be fair, there’s nothing wrong with the current strategy of transforming the economy, by getting Singapore companies, especially small and medium-sized enterprises, to upgrade, improve their productivity and be less dependent on cheap foreign labour…The problem is that it’s so hard to do.”

Mr. Lim concludes his column by saying, “The key is education, because it is what determines the quality of the people and whether they have the ability and creativity to do well, especially in the new digital world that is disrupting much of traditional business.”

But in the realm of innovation, it’s fair to point out, things are not always as they seem, nor quite so clear, because the top leaders in the technological revolution are all college drop-outs. They include, of course, Bill Gates (Microsoft), Mark Zuckerberg (Facebook), Steve Jobs (Apple), Michael Dell (Dell), Evan Williams (Twitter), Larry Ellison (Oracle), and even Travis Kalanick (Uber) and Julian Assange (WikiLeaks).

So education only gets you so far for innovation. Ultimately, what’s required is inspiration.

Second, as a percentage of annual budget (about $70 billion in 2017), the investment of the last 11 years represents about 2.8% per year–a fairly reasonable sum, even if those returns may have been diluted or delayed due to the global financial crisis and a slower-than-normal period of recovery from the worldwide recession.

Third, since Mr. Han Fook Kwang wrote his article, Singapore’s GDP has grown from 1.9%, to 2.0%, to a projected 2.5%, in years 2015, 2016, and 2017. (GDP grew by 2.20% in the first quarter, and 2.9% in the three months to June, 2017.). That’s a 2.1% average 3-year growth rate. This compares rather favourably to the U.S.’s 2.26% average growth rate, and the E.U.’s 1.83% rate during this same time. Does this mean Singapore is headed to the average growth rate of 6.78% between 1975-2017? Not likely. Not without much bolder actions.

Which brings us to Professor Lim’s claim that the solutions proposed by the CFE are “exactly the same as the ones put up by the Strategic Economic Plan in 1991, Committee for Singapore Competitiveness in 1997 and the Economic Review Committee in 2003.

“Essentially,” Chee quotes the professor as saying, “[the CFE report] is saying the same thing in different words.” But on closer inspection, is it?

Clearly Singapore’s economic circumstances have changed in recent years and the country faces an entirely new set of challenges. We all recognize this.  This shift is reflected in the tone of the CFE’s report.

41. Cities are the economic drivers of the future. Singapore’s capacity to flourish in the future global economy is tied to the city-state’s ability to attract and create opportunities. The city must be well-connected externally, with sufficient space to growand rejuvenate internally. (emphasis added)

Recommendation 5.2: Continue to plan boldly for growth and city rejuvenation 
44. Notwithstanding our limited land, we can increase the space we have, provided we plan and execute boldly.(emphasis added)

We must also develop ways to create new space…. We can also use our existing space better… (emphasis added)

114. Singapore’s capacity to flourish in today’s highly connected world is tied to our ability to attract and create opportunities. Our city must therefore be planned in a way that connects us globally, and provides us with options to grow. We should pursue new and creative ways of organising our city for vibrancy and connectivity, and invest in the right infrastructure ahead of time.  (emphasis added)

The report’s emphasis on planning boldly for growth and making major investments in “infrastructure ahead of time” seem like departures from the previous reports.  And if not, this time they seem to mean it. But will they apply a new level of inspired innovation in their planning?

That is the question.

Finally, Chee concludes his response by citing his own work:

At a societal level, an intrinsically motivated people is a people more productive and innovative than one fed on a staple of extrinsic rewards.”

That’s certainly undeniable, but his watchwords about ”Society. Culture. Intrinsic. Extrinsic. Incentives.”, well-intentioned as they may be, are unmoored from any concrete, inspired plans of action. Offer those and you really might have something.

I’d like to conclude my response (to which I invite Dr. Chee to reply) with an anecdote given by Professor Lim at one of her briefings. She begins by remarking on how Singapore lacks a basic entrepreneurship spirit. “We are a follower model…” she says, “and that’s why we need the government to push [people] to become entrepreneurs, which really hasn’t happened.”

But then she concludes by telling a little story about a Chinese businessman at a conference in New York she’d attended. He was expressing frustration and confusion about why the U.S. was so advanced in its investments, citing such successful companies as “Google, Apple, everything!” How could this be? he asked. He’d been told that American schools had been declining for 30 years! That the West was dead. How come? he asked. How come the US is so successful?” Then he allowed how “It must be some secret US industrial policy it has that is so sophisticated that we don’t know about it.”

He’s right, of course, the U.S. does have a secret plan. And Singapore needs one, too. But that secret plan isn’t so much a plan, as inspiration– inspiration in the form of concrete action plans.

This essay is as a response to Chee Soon Juan’s response to the author’s initial essay. The author’s initial essay was in turn a response to Chee’s response to Lawrence Wong’s speech on major infrastructure projects.

The Online Citizen’s publication of this Op-Ed is not an endorsement of the views expressed herein. Just as we publish Op-Eds from opposition figures that contradict each other, so also do we seek to encourage open debate by publishing Op-Eds from contributors with views supporting the current government’s policies. Should you wish to contribute to this debate, please feel free to send in your responses to [email protected] and we will get back to you shortly.

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