TR EMERITUS

OPINION

One of Singapore’s unique National Day “rituals” involves the publication of letters from grateful citizens singing praises of the PAP regime in the PAP-controlled Straits Times Forum. However, with the number of letters drying up in recent years, the Straits Times has little choice but to publish those from PRs instead.

The featured letter this year is by a rather naive Singapore PR Dr Wilfred Chan who described how he was moved to “tears” after watching the National Day Parade showing how Singapore was “transformed” into a First World country with one of the world’s highest GDP per capita income in only 45 years.

He concluded that this “feat” will not be possible without the PAP leaders like its octagenarian strongman Lee Kuan Yew and called on Singaporeans to be “proud” of them.

Isn’t it strange that Singaporeans need a foreigner to remind them of their country’s own achievements?

Singapore miracle or myth?

Before we begin, let us not forget that the PAP is only a political party which happens to form the government of Singapore. Singapore is much larger than its government and let alone a mere party.

Singapore’s accomplishment is not unique in the world. In fact, Japan, South Korea, Hong Kong and Taiwan have all become first world countries in less than 45 years. What’s more remarkable is that Japan’s economy miracle took off from the rubbles of World War Two while South Korea was devastated by a three-year war with North Korea which it remains at war with technically till this very day.

Contrary to what the PAP would like us to believe, the British did not bequeath a swamp or a wasteland to Lee Kuan Yew when they left Singapore. We were already ahead of other countries in the region in terms of GDP per capita income and was far more stable politically compared to the racial strife in Malaysia and Indonesia and the armed conflicts in Indochina.

The British also left us excellent infrastructure such as the largest dry dock in Asia as well as an established civil service and education system. Our people are our greatest asset and we are able to take off well ahead of other Asian countries partly because of our strong command of the English language.

Our economic policy in the early years was not formulated by Lee Kuan Yew, a lawyer by training, but by a Dutch economist Albert Winsemius who suggested Singapore opened its doors for MNCs to set up their base of operations here with tax-free incentives.

Singapore’s growth in the early years till 1990s

Singapore’s strong economic growth in the early years was due largely to its hardworking, thrifty and docile people.

American political academic Samuel P. Huntington noted that ”the economic policies enacted by the Singapore government are just basic necessities and not conditions leading to success, and thus Singapore’s economic performance is not decided by the PAP government’s policies.” (read more here)

Another renowned economist Paul Krugman compared Singapore’s economic growth to that of mass mobilization of resources in the former Soviet Union:

“Consider, in particular, the case of Singapore. Between 1966 and 1990, the Singaporean economy grew a remarkable 8.5 percent per annum, three times as fast as the United States; per capita income grew at a 6.6 percent rate, roughly doubling every decade. This achievement seems to be a kind of economic miracle. But the miracle turns out to have been based on perspiration rather than inspiration: Singapore grew through a mobilization of resources that would have done Stalin proud. The employed share of the population surged from 27 to 51 percent. The educational standards of that work force were dramatically upgraded: while in 1966 more than half the workers had no formal education at all, by 1990 two-thirds had completed secondary education. Above all, the country had made an awesome investment in physical capital: investment as a share of output rose from 11 to more than 40 percent.” (read more here)

Singapore has one of the highest saving and investment rates in the world, During the past 20 years it has averaged about 37%, and for several years during the 1980s it approached 50%! Thus, Singapore typically invests between two and three times as much of its income as the United States. (Source: FRBSF)

U.S. economist Kenneth Kasa wasn’t impressed by the Singapore model of development:

“We cannot rule out the possibility that Singapore invests too much and is dynamically inefficient.”, he wrote.

The abundant capital or reserves controlled by GIC and Temasek is commonly misunderstood by outsiders and trumpeted by the PAP regime as evidence of its success. However it is more a result of wealth exploitation than creation.

In 1967, the PAP regime passed a Land Acquisition Act which allowed the state to acquire private lands for development purposes at very low prices below market rates. How much money has the PAP regime made over the last 43 years from the “nationalization” of private lands?

To use the sale of state land as an example: in Hong Kong all proceeds from the sale of state land is used for government spending, whereas in Singapore all proceeds from the sale of state land goes into the reserves.

The PAP regime also introduced a forced mandatory saving scheme for the people known as Central Provident Fund (CPF) which locked up the hard-earned savings of millions of Singaporeans who are not permitted to withdraw them unless they kept an astronomical “minimum sum” of $117,000 in their ordinary accounts.

How much of the CPF funds are used to finance the purchases of GIC and Temasek Holdings remain unknown, but they are certainly not lying idly around.

As we can see from the above, Singapore’s spectacular GDP growth in the 1960s to 1990s is largely the result of the high saving rates of Singaporeans and wealth exploitation by the state via strongarm tactics and not because of wealth creation or technological innovation.

That’s why Singapore boasts of no world class companies like Sony, Samsung, Hyundai, Acer or Whampoa Hutchinson except two sovereign wealth funds which can afford to lose billions of dollars of national reserves in an instance without any political repercussions.

Singapore’s growth in the last decade

In the 21st century, when it is becoming clear that Singapore can no longer follow the same trajectory of growth as its workforce becomes more expensive, the PAP regime opens the floodgates to cheap foreign workers indiscriminately to maintain Singapore’s competitiveness.

Singapore’s GDP growth in the last decade is largely the result of the influx of cheap foreign labor and not because of gains in productivity which languishes far behind that of other developed countries.

According to a shocking press release from the U.S. Department of Labor last year, Singapore experienced the steepest decline in productivity among 17 developed economies in the world in the years 2007 – 2008. (read article here)

Not only that, it had the lowest increase in the hourly compensation per unit labor cost and one of the highest increase in manufacturing unit costs as well.

By some estimates, a third or more of Singapore’s 6.8% average annual growth from 2003 to 2008 came from the expansion of its labor force, primarily expatriates, allowing Singapore to post growth more commonly associated with poor developing nations. (Source: Wall Street Journal)

According to the same report, the relentless influx of foreigners into Singapore has depressed the wages of ordinary Singaporeans, increased the cost of living, especially that of public housing and led to an overall decline in the standards of living.

Cambridge-educated economist Kenneth Jeyaretnam noted that as high as 45 percent of Singapore’s GDP gains are attributed to foreigners in 2008.

The PAP regime’s pro-foreigner and ultra-liberal policies would be suicidal in any other democratic states, but not in Singapore where it only manage to maintain a tight grip over a subservient citizenry via repressive laws and lack of any meaningful political competition.

Had other developed countries pursue the same liberal economic and labor policies as the PAP regime with scant regard to the welfare of its citizens, they will be able to post higher growth than Singapore.

Nobel Prize laureate Joseph Stilgitz has criticized the use of GDP growth as an indicator of the welfare of a nation and rightly so. GDP growth measures the total output of an economy only and says nothing about the quality of life  in a country.

Though Singapore’s GDP figures have been impressive in the last decade or so, the median wages of an average Singapore worker remains stagnant at $2,400 monthly while our income gap has widened considerably to the highest among developed countries.

In a UBS study titled “Price and Earnings 2009″, though Singapore has a GDP (PPP) per capita higher than Switzerland, Singaporeans have much lower wages and purchasing power than the Swiss. (download the study here)

Singaporeans have a low purchasing power of only 39.9, comparable to Kuala Lumpur (39.5), Warsaw (34.0) and Bogota (33.7). Though Malaysia is still a developing country and has a GDP (PPP) per capita of only $14,215, less than 3 times of ours, the ordinary Malaysian citizen has about the same domestic purchasing power as the Singaporean.

Conclusion

There is nothing miraculous about Singapore’s economic performance under the PAP regime which is due more to clever exploitation and transfer of wealth from the people to the state rather than genuine wealth creation.

There is a wide gulf between Singapore’s impressive GDP figures and the standard of living of the majority of its citizens. The gains from Singapore’s economic growth are not fairly distributed among the population with the rich getting richer and the poor becoming poorer.

Singapore will never take off to become a truly knowledge-based modern economy so long the PAP regime maintains its tight-fisted control over the political landscape and cracks down on freedom of speech and expression which are quintessential for creativity, innovation and entrepreneurship to take root and flourish.

Read also:

>> Singapore’s limits: Curse of the GDP

>> Singapore has the lowest wages and domestic purchasing power among Asian Tigers

>> Moving towards a Russian standard of living

>> Why Singaporeans are paupers in their own country

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