Rajiv Chaudhry / Writer
In this four-part series, Rajiv contends that Singapore’s current economic model of high growth, which has served the nation well in the past, is unsustainable for the future as it will undermine Singapore’s ability to provide a high standard of living for its people.
Part One | Part Two | Part Three | Part Four |
The fallacy
In 20 years time Singapore’s streets and shopping malls are likely to be much more crowded, its living quarters more cramped and commuting to work much more stressful than it is today. There will be few primary forests remaining outside the catchment areas.
Pressure on all types of services will mount because of the large numbers of people crammed into a relatively small amount of space.
(Photo: The Montée de Clausen castle in the City of Luxembourg. Luxembourg is a country Singapore could emulate. Courtesy of Wolfgang Staudt / Creative Commons)
Our population has already grown tremendously. A population of 7-8 million will be double that in 1990 and four times that at independence.
During this time, our land area will have has increased by only 20% while population density will have has gone from 3,235 people per sq km (ppsk) at independence to 6,760 ppsk now and will increase to 10,000 ppsk when the population is 8 million.
This is the fallacy of never-ending growth, in the context of a country so severely constrained by physical limitations and lack of manpower. Why is it a fallacy? Because the fruits of this growth are of dubious value.
A country may adopt a high growth model during its developing phase but when it has achieved First World status on the Human Development Index (HDI) -– which uses parameters such as per capita GDP, life expectancy, infant mortality and literacy – it needs to re-examine its growth strategy and adopt a different economic model.
A “growth at all costs” model is good for only part of the journey. When a mountain is looming and we start the climb, we need to engage a low gear. But when a plateau is reached, it is necessary to change gear so as to comfortably cruise at a higher speed for a long time.
Leisure time a measure of quality of life
We have gone full-cycle, only to create another similar cycle for ourselves to run, albeit not at the very beginning of the old cycle, but with similar implications. We shall need to train and retrain each new wave of immigrants that comes in. Our job will never be done. We will strive and strain, yet our citizens may never enjoy a quality of life that is sustainable or comparable to that in Europe.
An important measure of quality of life is the amount of leisure time that citizens have. In Europe, the average working hours are 36.8 hours per week while paid annual leave averages 26 days. Its citizens place a high premium on leisure time and weekends and they rarely allow their working lives to interfere with family and leisure pursuits. In summer in the Scandinavian countries, it is common for offices to close at 3.00 pm, so that workers are able to make full use of the good weather.
In Singapore, the Ministry of Manpower (MOM) stipulates a maximum of 44 work-hours per week and 14 days’ annual leave. Anecdotal evidence, however, suggests Singaporeans spend far longer hours at work than MOM regulations specify. At the same time, look at the amount of time their children spend on schoolwork, homework and tuition.
There is lip service for “work-life balance.” If we look around us, there is little evidence of it. The more people there are, the greater will be the competition and strife. This does not mean that we must be complacent but surely, we must have, to quote William Henry Davies, “time to stand and stare” when we call ourselves a developed nation?
Conclusion
Singapore has done well on the HDI, on which it is ranked 25th. However, in its haste to grow the economy and its single-minded focus on achieving the outward trappings of a developed country, it has neglected another important indicator of development, the Gini coefficient which is used to measure income inequality.
As a result, it has failed to pull along the less fortunate in our society, the people C K Prahalad refers to as being at the ‘bottom of the pyramid’ (BOP)[i].
A Human Development Report by the United Nations Development Programme (UNDP) in 2007/08 on income equality placed Singapore 78th in a list of 126 countries, with a Gini index of 42.5, the same as Burundi and Kenya, and behind other developing countries such as Pakistan, Vietnam and Bangladesh (the greater the difference in income between the top and the bottom, the lower the ranking).
So a great deal lot more needs to be done to raise the living standard of those at the BOP. It is here that the energies and minds of our planners and policy-makers need to be concentrated.
We need to shed our sometimes over-sized ego and discard talk of “punching above our weight” in world affairs and concentrate instead on quietly getting on with the job of nation-building with particular emphasis on helping those at the BOP.
In the 1970s and1980s, Singapore’s urban planners planned for a target population of four million. Singapore met and surpassed this target and is now aiming for 6.5 million.
Contrast this with a country such as Luxembourg (area 2,586 sq km) which has a population of just 480,000, yet enjoys per capita GDP of $141,625[ii], the highest in the world according to the IMF and World Bank.
Its economic goals are perhaps no less modest than Singapore’s, yet by concentrating on services and moderate growth policies, its small population is able to enjoy an extremely high quality of life, giving it the 4th highest ranking in the Economist Intelligence Unit (EIU)’s Quality of Life index.
It has not felt the need to “import” large numbers of people and grow additional “wings” to its economy, which is anchored mainly by banking and financial services (in recent years, it has tried to attract successful Internet companies). Nor has it felt the need to be all things to all people.
It is certainly a model that is worth emulating.
As our leaders have told us many times, Singapore is unique and needs to find unique solutions to its own particular situation. We are unusual in having a limited land mass with high economic value and output and no friendly hinterland on which we can depend.
No other country in modern times has had to face quite the same set of circumstances. There is no template or model that tells an Asian country how to rapidly grow an economy (and population size) with an open immigration policy and then “shrink” it or at least keep the population stable while “growing” the quality of life index.
But it is something our state planners must urgently turn their minds to.
End of Part Four. This article concludes the entire series.
Part One | Part Two | Part Three | Part Four |
______________________________________________________________________________
[i] ‘The Fortune at the Bottom of the Pyramid’ C K Prahalad, Wharton School Publishing www.whartonsp.com
[ii] Singapore’s per capita GDP is $58,458
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How can we compare Luxembourg to Singapore.
Luxembourg can feel secure because they are surrounded by EU. Singapore cannot feel secure because we are surrounded by ASEAN. The rest of them are fighting rebels, facing political unrest, under dictatorships or blaming us for their problems.
53) yeehong
Good point.
Comparison will be good if it is apple to apple.
Some could be of the view that Luxembourg compared to Singapore is like durian compared to and gromper keeschelche
Dear Gerald,
Thank you for your kind words.
It is never easy turning around a battleship in mid-cruise but let those who are being paid much more than you or I worry about it!
TMM, thank you too, for your insightful comments.
Let me try and deal with some of the criticisms:
1 Gini coefficient: The Gini has been criticized for many reasons including the difficulty of collecting accurate data and gathering comparable data across countries. It is true that developed countries such as the US and Hong Kong have high Gini coefficients. The point is, there is high income inequality here and as we move towards developed country status, this gap should be narrowed. In the Scandinavian countries, widely regarded as the most advanced societies on earth, the difference in salaries between the top and the bottom is about three times (a Managing Director generally earns about three times what a young graduate, just joining, would earn). Of course, basic education levels are also high.
2 Migrant workers and taxation: All Western European countries depend upon migrant workers, especially during harvesting time. Also, EU foundational rules allow free movement of people across the continent. Many Eastern European workers have moved west. What we need to look at is population density because this directly impacts quality of life.
Likewise most countries in Western Europe have high taxation. In return, the state gives its citizens many benefits. The cost of living must be seen in relation to the quality of life, reflected in many indicies.
3 86% of Luxembourg’s labour force is engaged in the services industries, only 13% in manufacturing and 1% in agriculture. Manufacturing as a percentage of the economy has steadily shrunk since the 1960s.
Small countries are generally better off concentrating on services. 90% of Hong Kong’s economy is services based, although it can be argued that Hong Kong has the benefit of a huge hinterland that it can service.
In a recent report in Today Bermuda , also a services based economy, claimed to have the highest per capita GDP in the world of US$100,000 ie about S$150,000. I disregarded this report for the purposes of my article as Bermuda’s population size (70,000) is not comparable to Singapore’s.
4 By the way, France, has a work-week mandated by the state of 35 hours, lower than the EU average.
“Comparison will be good if it is apple to apple.”
Strange. When comes to this, some argue must compare apple to apple. But when comes to ministers’ pay, it is not…
#51 yeehong: what has this got to do with the economy? Nobody is saying Singapore should lower its defence preparedness.
In case you are not aware, Europe has seen some of the bloodiest battles in human history. In World Wars 1 and 2 alone, 85 million people lost their lives (15 m in WW1 and 70 m in WW2). More recently, there have been bloody conflicts over Kosovo and the US and Russia came dangerously close to confrontation over Georgia.
All these can easily spill over into western Europe. That is why they have NATO (the real one, not Singapore version! :) ).
57) Rajiv Chaudhry
One must be praised when one deserves praise. And Rajiv, I salute you for your fine effort in your 4 part article. You certainly deserve praise for your fine piece of work of art.
//what has this got to do with the economy? Nobody is saying Singapore should lower its defence preparedness.
In case you are not aware, Europe has seen some of the bloodiest battles in human history. In World Wars 1 and 2 alone, 85 million people lost their lives (15 m in WW1 and 70 m in WW2). More recently, there have been bloody conflicts over Kosovo and the US and Russia came dangerously close to confrontation over Georgia.
All these can easily spill over into western Europe. That is why they have NATO (the real one, not Singapore version! ).///
I think in SG’s context, significant loss of live in Asia too in WW1 & WW2, and similarly more recently, the NKorea issue, cross straits issue could also spill over SG.
LX has got the real NATO, SG got SAF onlly.
Could that be why our Military expenditures are much higher than LX.
LX = 0.9% of GDP (2005 est.) whereas SG blows 4.9% of GDP (2005 est.)
That is a significant burden to the economy.
56) Small Time Businessman
///“Comparison will be good if it is apple to apple.”
Strange. When comes to this, some argue must compare apple to apple. But when comes to ministers’ pay, it is not…///
Of course it is, nobody is saying it is not.
34) KopitiamApek on May 30th, 2009 2.04 pm
32) Roderic Sng
I have been told I sometimes goes off topic. Aren’ t the question off topic?
////
I accept that you do not know the truth as you have no answer.
We live in a world based on evidence. I thot you have the evidence. Alas…..
Else, Show it. I am being very fair to you.
“Comparison will be good if it is apple to apple.
Some could be of the view that Luxembourg compared to Singapore is like durian compared to and gromper keeschelche”
Good point. How about Swiss standard then ? Now who mentioned this swiss standard ? did he not know about this apple to apple ? or apple to peanut ?
Now tell me which good apple should we compare then bearing in mind you should also incorporate one nagging apple ingredient called the ministarial pay. hello yeehong, are you also copying here.
What is gromper keeschelche, some peanut cake ? I just love the internet ? A lot of common things made difficult just seem to get demystified. You shoud stick to your kopitiam.
To 59). Swiss can also feel secure because they are surrounded by EU. I cannot think of a good example to compare right now. I think our past ministers have done a good job, but I agree with you that our ministers are certainly wayyyy over paid. Our ministers need enough to have a comfortable living but not too much that they are out of touch with the people.
To Rajiv Chaudhry.
I said Luxembourg can feel secure because they are surrounded by EU. Right now, it is impossible for any two EU countries to go to war. But I never said EU can feel secure, EU cannot feel secure because they are surrounded by Russia, the Balkans, Africa and Middle East.
To maintain our defense we need money and a manufacturing sector. Money that comes from high GDP. I can tell you that I would love to just sit back and relax but the reality doesn’t permit me to. (Moreover, France and UK is suffering from huge budget deficit because of lazyness and lack of discipline but that’s for another thread.)
As for manufacturing, in times of war we cannot survive by cutting each other hair. We have to make things, like weapons, and tanks, and ammunitions to survive and win. Hong Kong can focus on service industry because they are under the protection of China, and China have a huge manufacturing base. Iceland tried to the financial industry and look where it got them. Now UK even label Iceland as a terrorist nation.
And I think that we are less likely to be attacked if we have a huge expat community. If we have a huge U.S. and China expats community, then who ever that attack us will also piss off U.S. and China. It is not a guarantee that we won’t be attacked, but if we are attacked the expats can be at least used as meatshields.
To 59)
Not to ignore the Singapore Malays and Indians but a Thai King once label the overseas Chinese as “Jews of the East”.
I think the nearest countrys that we can compare ourselves to are Israel, Taiwan and South Korea. We are all small developed countries with every unsafe borders, although Singapore is under less threat of war that the other three. And to my knowledge all of us still maintain our manufacturing industry, which can be converted to making military stuff during war time.
We cannot survive by cutting each other hair or designing websites for each other.
“To 59). Swiss can also feel secure because they are surrounded by EU. I cannot think of a good example to compare right now. I think our past ministers have done a good job, but I agree with you that our ministers are certainly wayyyy over paid. Our ministers need enough to have a comfortable living but not too much that they are out of touch with the people.”
You have been forthright on the pay part without the hard-to-defend meandering excuses usually coming from the “fire-fighting brigade”.
I do not see much difference between past or present ministers as I view them as one big collective entity where the individuals have only been cosmetically shuffled around and are still very very very wellllllllllllll taken care of. Just that the present cohort has to deal with a more discerning citizenry.
War is illogical and irrational human madness, so to say whether it is more likely to occur in this country or that country is like trying to guess whether which tree to park under in an open carpark so that the birds will be less likely to “lau sai” on your car that you just spent the entire Sunday polishing, : )
Rajiv Chaudhry
Bit too short this piece. It would have been better if you could have gone into greater detail on how S’pore could emulate Lux given that S’pore is not part of bigger economic entity (ASEAN spin notwithstanding) with all that entails — free movement of labour and capital, and specialisation etc
Maybe extend yr series?
Hello Mr A Tan
Luxembourg was mentioned only as an example of a small country with a services model economy and high per capita GDP. I have cautioned in my penultimate paragraph about drawing too close a comparison with an European country.
Singapore is already plugged into the global economy and should continue to service the global market. The immediate geographical environment is not that important.
I am glad you liked the articles sufficiently to suggest the series should be continued. However, a decision on whether or not there is anything wrong with the present economic model and what, if anything, should be done about it really lies with the government.
My own view is that if nothing is done to change the current economic model, Singapore will end up as a very crowded country with high income disparity
The “red flags” with regard to the current economic model have been highlighted in the previous parts, especially parts 2 and 3. Some of these are:
- Labour intensive industries should be disincentivised (except maybe high value activities such as oil refining or rig-building)
- Supply of foreign workers should be restricted, except for the most essential services. This will raise wages at the bottom for Singaporean workers.
- Currently industrial land is, arguably, not being valued to reflect its true long-term scarcity value. Industrial land prices should be revised upwards
- Tax breaks and other financial incentives for manufacturing industries should be discontinued
These measures will raise the cost of manufacturing in Sinapore and there will be some attrition in this sector. The services sector is, however, expanding and should be able to take up the slack.
Luxembourg has taken over four decades to reduce its dependence on manufacturing and grow its service sector. It is not too late for Singapore to start now.
hi Rajiv Chaudhry,
how does the service industry on the whole sustain give limited if not constant reduction in disposeable income? besides, for those who can afford may prefer short get-away at regional destinations where the exchange rates are favourable. leading to those who can ill afford to travel buy at higher local prices.
will this lead to another bubble waiting to burst, then S’pore go into another cycle of economic “slump” like now? maybe another bonus part 5 diving into the topic of indentifying real growth, not “bubble” industry?
Hi mice is nice,
I’m not sure what your question is.
Are you asking whether a services orientated economy can lead to a bubble being formed?
“Bubbles” usually refer to inflation of asset values, such as properties and shares. Their vales rise during times of easy availability of money and low interest rates. Such continuous rises in values sometimes cannot be sustained, leading to a correction which is commonly known as the bubble “bursting”.
Central banks (in our case the MAS) have traditionally been careful to adjust money supply so as moderate inflation (keep inflation down). There is a growing recognition that in future, they must also act to prevent asset inflation.
I don’t think asset inflation is limited to any one type of economy.
hi Rajiv Chaudhry,
////Are you asking whether a services orientated economy can lead to a bubble being formed?////
yes, that is my question.
i fear that overhyping this industry could be dangerous. would then taxpayers money be spent on companies to artificially prop things up again? while jobs are lost to keep companies afloat….