Academic journal article Forum on Public Policy: A Journal of the Oxford Round Table

The Singapore Economic Growth and Social Development Story: Miracle or Nightmare?

Academic journal article Forum on Public Policy: A Journal of the Oxford Round Table

The Singapore Economic Growth and Social Development Story: Miracle or Nightmare?

Article excerpt

Introduction

The starting point of this paper is the startling fact that from a cashflow perspective--the Singapore government does not spend a single cent on healthcare, pensions or public housing. Singaporeans pay about $10 billion of pension contributions and interest a year into Medisave (which is part of the national pension scheme called the Central Provident Fund (CPF)), and the government spends $4.9 billion a year on healthcare--which in a sense, means that the government does not spend a single cent on healthcare. The CPF is entirely contributed by the citizens from their salaries--which means that the government does not spend a single cent on pensions. Public housing is sold at a profit which means that the government does not spend a single cent on public housing as well.

Singapore is often cited as the growth miracle of the late 20th century, as she moved from a Third World to First World country, within a span of less than 50 years. The Wealth Report in 2012 had also ranked Singapore as the richest country in the world (1). Goh (2005) (2) had charted Singapore's industrialisation evolution from one of being labour-intensive in the 1960s to an export-orientation policy in the 1970s, which relied heavily on attracting Multinational Companies (MNCs) to invest in Singapore. The 1985 economic recession exposed Singapore's weakness in the over -reliance on foreign capital, investments and trade, and explained the shift towards encouraging local entrepreneurship in the 1990s.

Singapore's pursuit of labour-intensive industries and capital investment from MNCs allowed Singapore's GDP to grow at 8.5% every year in the early 1980s (3). However, the shift towards a knowledge and innovation-driven economy seems to have been put on a backburner in recent years. Government officials have spoken up against the pursuit of higher education, which has been seen as the backbone for the development of a knowledge economy. Just last year, National Development Minister Khaw Boon Wan said, "If they cannot find jobs, what is the point? You own a degree, but so what? That you can't eat it. If that cannot give you a good life, a good job, it is meaningless. (4)" The government's support of entrepreneurship has also been put into question, as the Singapore economy suffers from a drain of local investments. The substitution with cheap foreign labour and a high prevalence of crony capitalism has led to an anti-competitive business environment, which has driven down wages and created a discontented populace, leading to the largest protests in Singapore over the past two years, since the country's independence.

Indeed, since the early 2000s, the government has pursued a "growth-at-all -costs" strategy, which reversed Singapore's economic evolution to one akin to the 1960s and 1970s. The "growth-at-all-costs" strategy relied on a GDP-growth-driven agenda, underpinned by three key pillars, of a cheap labour substitution and wage depression model, a high tax-based revenue and low government transfers model, and an internal debt-fuelled investment model.

Cheap Labour Substitution and Wage Depression Model

Since 2004, the spike in foreign worker numbers have increased unabated, leading to a depression of wages. In 2004, in a bid to increase the foreign worker workflow, Acting Minister for Manpower and Minister of State for Education Dr Ng Eng Hen had said, "What we want to do is disseminate some information to the workers before they come (here)."There is no need for you to part with your money before coming to Singapore. You can come on your own. We will supply you with a work permit (when you come to Singapore). There is no fee for the work permit." (5)

The creation of the employment passes also had the effect of dampening wages. The Work Permit, S Pass and Employment Pass are unofficially pegged to the secondary and below, polytechnic diploma and university degree educational levels, and salary bases are imposed with which companies are required to hire foreign workers on these salary bases at pass level. …

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