The Edge Magazine came up with a good year end series highlighting the challenges that Singapore phase going into 2017.
One article caught my attention because I was surprised it can be so hard hitting in a delicate manner. The article talks about our current economic model, what is wrong with it, and do we need to move to a new model.
The Edge sought the opinions of 3 subject matter expert in this area, which in my opinion are very respectable.
I came away from reading this, feeling they raised the problems that many of us identified in the past, and still persist to this day.
Here is my summary of the points from the article:
- In 1972, Goh Keng Swee spoke at University of Singapore, pondering when do we stop importing foreign workers and cease to encourage foreign entrepreneurs and capital to come to Singapore? He, who many believe is a vital architect of Singapore’s economic progress, urge the audience to rethink the model of economic growth. He observed that, being export oriented, we ran the risk of being overdependent on foreign direct investment (FDI) and noted the level of entrepreneurship is lower than in other countries. The rapid growth we enjoy may come to a ‘grinding stop’. It is interesting that when he said this, it was without official sanction.
- In January, a committee on the Future of Economy (CFE) will release its report on how Singapore is to remain competitive. The 30 members come from private sector and lead by Heng Swee Keat and S Isawaran. Its mandate is to build on and update the list during the last economic restructuring in 2010.
- The last report put out recommended a focus on skills, innovation and productivity as a basis of economic growth. Since then, our productivity have actually fell
- Former DBS chariman Koh Boon Hwee, who is now on GIC Investment Board, said that we cannot just do things well, but to be able to create new knowledge and new enterprises. We need an environment which is conducive to create more growth and start-up companies
- DBS economist Irvin Seah highlights inconsistency in our approach in that, we believed that simply tightening the inflow of foreign workers would compel companies to invest in technology. In reality, the tightening was drastic, didn’t give companies enough time to adjust, was very blunt, not targeted. It cause more businesses to wind up.
- Irvin argues that the measure of productivity is flawed, given that it is measure upon GDP. Weak global growth, GDP would naturally be down, which in turn brings down productivity. Irvin believes Singapore needs to find a new model of growth, especially with disruptive technology having a big impact on how businesses are conducted and on consumer preferences and lifestyles.
- Irvin believes the CFE report is unlikely to be radical or prescriptive, which is basically trying to come up with a broad idea of where we want Singapore to be in 10 years but it isn’t really going to tell you how to get there
- Adrian Kuah, a senior research fellow from Lee Kuan Yew school of public policy, said the move to become open, export oriented was ambitious and have served Singapore well. However, the issue of productivity and encouraging entrepreneurship was not new, brought up in 1980s
- Adrian wonders if we should still be so fixated on GDP growth. He thinks the incumbent are still using a benchmark that suits countries that are in a developing phase more
- Mr Koh poke at how policy makers and analyst used to identified trends and channel resources to these trends. Parents then influenced their children to study in these conducive trends in order to get a good job. This has lead to many parents encouraging their children into the finance services sector
- Adrian raised the point that the way Singapore brings investment into Singapore will need to change. This is especially so when its hard to promote investing in Singapore when we are so cost un-competitive. Adrian argues that the objectives would lead to pressure on companies here to keep costs and wages down, in a bid to compete with cheaper locations regionally. Adrian believes we should promote our better infrastructure, access and ease of doing business. Irvin puts it more bluntly that being cost un-competitive makes us look like an “old folks home”
- Mr Koh said that nobody has a good idea what is the correct solution, but there needs to be a mindset shift, even in challenging the meritocracy that have served us all these while. This includes a shift for both policy makers, established enterprises, wealthy families, who may be willing to make some investments in venture capital
- Irvin reflected that his interaction with civil servants gives him the idea that they are unwilling to break away from the usual practices and a tendency to be risk adverse
- The government procurement policies is one example where small companies are left to do sub contracting work, and never had the chance to learn. The contracts are always given to established players
- Local capabilities and expertise are not advanced as a result. We do not develop engineering and materials capabilities
- Mr Koh said that Singapore companies need to become the MNCs of today, like how Japanese and Taiwanese companies have grown and expanded outside their home countries in the 1980s and 1990s. He however, thinks that we are in the watching and waiting mode as the “problems” we see now, are not grave enough to spur a change