In an article for Nikkei Asia on Monday (23 Jul), famed Bloomberg columnist William Pesek has argued that Mahathir’s success will be the one saving Singapore from itself. This is because “if any government needs a jolt, it is Singapore’s”.
The award-winning journalist started by arguing that “Malaysia’s rot was many decades in the making” because of corruption and a Bumiputra policy which allowed Singapore to overtake Malaysia easily in terms of GDP figures.
Now that Mahathir has won a second term as Prime Minister, Psesk felt that this “[leaves the 92-year-old] Mahathir with the tall and awkward task of reinventing a system he helped create”.
Even so, Mahathir has done it considerably well.
“The Najib government’s questionable economic data made Beijing statisticians blush. Mahathir’s administration is shining light on the true state of Malaysia’s finances, regardless of the consequences in the financial markets”.
As a result of this openness, Psesk said that it is “heartening that Mahathir’s Pakatan Harapan coalition is bringing Najib to justice with lightning speed. And it is certainly great that Mahathir is acting transparently”.
And he concludes that this “is why Malaysia could be the catalyst Singapore needs at a pivotal moment”.
Singapore has become complacent under PAP, and it is a rejuvenated Malaysia that could drive innovation
For Singapore under the People’s Action Party, the “complacency in what is essentially a one-party state” has its negative impact.
Current Prime Minister Lee Hsien Loong “has been caught napping by sticking with too many of the policies his father employed from 1959 to 1990”.
As a result, “decades after beating the middle-income trap, Singapore is [now] having a midlife economic crisis – Wages are stagnant, inequality is rising and the population is aging rapidly”.
Even though there were efforts to encourage innovation and shifting to higher-value-added industries, these efforts were unsuccessful as they “lacked focus, scale and audacity”.
At the same time, “fierce competition from China, India, and Indonesia make Singapore an expensive property in a cheap neighborhood. The only way to grow incomes is to create new wealth, not to try to compete on price”.
The economic fall from Trump’s trade war is evidence of a lack of innovation and self-resilience
Pasek showed that Trump’s trade war is affecting “Singapore’s export-reliant and manufacturing-heavy economy”. He cited the slowdown in non-oil domestic exports in June – 1.1% versus 15.5% the month before – as evidence.
What this essentially reflects is “how little progress Lee’s government has made in transforming the economy into an innovative powerhouse”. It is, at the end of the day, sticking on an economic model which was invented in the 1970s.
Now that Mahathir has returned, this “ups the pressure” as his “focus on retooling the economy could generate a healthy rivalry”.
For one, Pasek argued that the PAP government must take bold and creative steps to increase productivity and entrepreneurship.
This is essential given that Singapore should “rely less on a slowing China” instead focus on “helping smaller companies gain access to joint ventures in Europe, a region anxious for closer coordination with Southeast Asia”.
With tax incentives and regulatory tweaks, it can empower millennials with an idea and a dream to disrupt the old PAP model. A “more dynamic and innovative future” can be had by relying less on factories and more on the natural resource it does have: a smart and determined workforce.
The catalyst that has enabled this is a “sudden burst of reformist energy in Malaysia [which makes] Mahathir an unlikely ally in that enterprise”.