Latest Singapore Economic Roadmap Marks Time
Bold initiatives remain undelivered
Anyone familiar with past economic Singapore plans for facing the future would recall how radical they could be. Then Finance Minister Goh Keng Swee in the early 1960s led with bold industrialisation plans centered on the Jurong area and on the late 1960s decision to allow foreign banks to set up the Asia Currency Unit (Asiadollar) accounts. Lee Hsien Loong, now prime minister, with his 1985 report focused on tax reforms, business incentives and on wage increases to spur productivity.
By those standards, the latest report, entitled Committee on the Future Economy, is a long list of motherhood exhortations, quite unobjectionable but essentially a push to carry on the existing path – just do it better.
That unremarkable outcome is perhaps hardly surprising. Of the 140 pages of the full report, no less than 20 are taken up with lists of the members of the various committees, subcommittees and contributors to the report, plus four more pages of the members of the secretariat which had to digest and distil the vast input.
The exhortatory flavor of the report is well summed up by the bullet points of its Executive Summary:
- Deepen and diversify our international connections
- Acquire and utilise deep skills
- Strengthen enterprise capabilities to innovate and scale up
- Build strong digital capabilities
- Develop a vibrant and connected city of opportunity
- Develop and implement Industry Transformation Maps (ITMs)
- Partner each other to enable innovation and growth
The reasonable premise of the exercise is that Singapore is facing new challenges. At home it faces a rapidly aging population with a median age of 40 and rising fast, and fertility stuck at around 1.3 births per woman of child bearing age. Internationally it faces growing opposition to free trade and globalization and slower world GDP growth, even in a relatively buoyant Asia. But, it says Singapore can still achieve 2-3 percent annual GDP growth, well above that of other advanced countries.
Early in the report it notes that over the 2009-2016 period value added in manufacturing grew at an annual average 6.2 percent while overall value-added rose only 2.5 percent. It contributes 20 percent of GDP while employing only 14 percent of the workforce. The contrast between this sector and services should naturally lead to a discussion of the future size of the workforce.
Over that period there has been a rise of 21 percent in total employment, but as years of low fertility are now impinging on the size of the citizen workforce, the increase has mainly come from immigration of new citizens, permanent residents and high-skill employment pass holders – but above all from mostly low skill foreign workers on work passes. These are the people who do the dirty or dangerous work and have no claim on the nation’s acclaimed public housing. Nonresidents now comprise 39 percent of the workforce.
Curiously the report does not have anything to say about this increased reliance on work pass holders, nor about the rate of immigration of those deemed eligible for citizenship. This is surprising given that an earlier government report suggested that the nation would need 25,000 new citizens a year to maintain the existing size of the citizen workforce whose median age is already 43. The workforce participation rate is currently 68 percent and will probably decline slowly.
This failure to tackle the one single most important ingredient in growth expectations is understandable given that immigration has become a politically sensitive subject in Singapore. But it indicates a retreat from boldness. The report recognizes the need and scope for improvements in service sector productivity through automation, digitalization etc.
However, there is nothing specific in the document, as for example in the 1980s policies, to spur it either through a new high wage push, nor a policy to reverse the ever-increasing reliance on work pass holders who supply so many essential services but have scant social protection. They help keep the real incomes of residents growing faster than otherwise would be the case.
The report is full of high-sounding phrases: Maximize synergies across industries; Support innovation and risk-taking; make Singapore a model of sustainability; advance urban mobility solutions, digitalisation, electronic payment systems, move Singapore from telecommunications hub to digital harbor, enhance food security through agricultural innovation, promote port, airport and rail connectivity etc. etc.
All very worthy stuff but much of it already well covered by government policies, agencies and funding. There is an indication of a need to increase revenues but no suggestion of a need for major changes in the tax system.
Nor is there any attempt to look back critically, admit failures while identifying successes. Lee Hsien Loong himself has in the recent past expressed worries about low productivity, which is especially surprising given Singapore’s high rate of savings.
Nor does the report have anything specific to say, other than a high-speed train to Kuala Lumpur and the importance of ASEAN, about how relations with neighbors can add to growth – as links to India have surely done over the past decade. Nor for example is there any suggestion of making a bigger play for Hong Kong’s business given the particular additional problems the rival city faces.
Maybe there are no clear-cut ideas which would make a break from the past and spur the nation further. Perhaps the economy is now too complex. Perhaps, given the global uncertainties, now is a time to watch and wait for a while, not big initiatives. Nonetheless, the report does lack a single bold step, such as the 2005 decision to allow casinos or the one at the start of the millennium to increase the rate both of immigration and number of work pass holders.
In short, it is the work of a highly competent and ever-eager bureaucracy which has many successes to its credit and always aspires to be in the forefront of technological change and high standards of urban life. But it may be reluctant to examine the underlying social issues which, for example, keep fertility so low despite years of official exhortation and spending and overall workforce productivity lower than the savings rate should suggest.
Finding new paths sometimes means publicly discarding old ones. And maybe a generation of leaders who grown up in an era of peace and prosperity lack the sense of vulnerability that Lee Kuan Yew, child of an era of mayhem, always felt.