Why Singapore Can Survive and Prosper: The Importance of Government Initiative
Joseph Wirija (University of Southern California)
Singapore is a small South East Asian country located on the southern most tip of the Malaysian peninsular. Like many of her neighbors, she was once a British colony and British influence can still be felt in Singapore today. Singapore's strategic location made her a maritime trading power for the British and she was often known as the Britain's Asian "Port of call" (Chwee, 5.1.1). Being a major port with thousands of traders and sailors coming and going (some who eventually decided to make Singapore their home), Singapore has been constantly exposed to different cultures. This is a contributing factor to Singapore's vibrant multiculturalism.
Despite Singapore's strategic location, she has her share of problems. When Singapore was granted independence in 1965, there was a high unemployment rate, her income per capita, and quality of life was relatively low too. In additional, she does not have any natural resources and depended a lot on trading which ultimately exposed her to business fluctuations in the world economy. Today, Singapore boast one of the world's richest and developed countries. Singaporeans are said to enjoy one of the highest standard of living in the world.
This paper seeks to explore and evaluate how government initiative has helped to create a modern Singapore- a dynamic and modern city, considered, by many, a place where businesses can flourish and where talents from around the world converge. We shall also explore the advantages and disadvantage of such huge involvement by the government in running Singapore.
A government charts the political direction and can exercise control over the actions of the members of society. An efficient and honest government often implies economic stability and improvement. (Mauzy and Milne, 186). Singapore's successful government initiative can be broken down into 4 sections:
- Economic Policies
- Domestic Affairs
- Foreign Affairs
When Lee Kwan Yew led Singapore into independence in 1965, he knew that for Singapore to become an Asian economic powerhouse, the government had to transform her from being a predominately export and import economy to something more diverse.
Upon independence, the first thing Singapore's leaders did was to implement several economic stimulus policies. The prosperous world economic situation in the mid-1960s favored Singapore's growth and development. Singapore started off as a manufacturing economy. The government set up the Jurong Town Corporation to develop Jurong and the other industrial estates such as Changi. By late 1970, there were 271 factories in Jurong and there were more than 100 factories under construction. These factories created about 32,000 jobs.
Foreign investors were attracted to Singapore not only by this improved labor situation but also by incentives such as tax relief for up to five years and unrestricted repatriation of profits and capital in certain government-favored industries. American firms flocked to invest in Singapore, accounting for 46 percent of new foreign capital invested in 1972. Companies from Western Europe, Japan, Hong Kong, Taiwan, Malaysia, and Australia also invested capital, and by 1972, one quarter of Singapore's manufacturing firms were either foreign-owned or joint-venture companies.
The region's petroleum resources were also an attraction for foreign investors, who saw Singapore as the natural base for exploration, engineering, diving, and other support companies for the petroleum industry in nearby Indonesia. Singapore was also envisioned as the oil storage center for the region and by the mid-1970s, she was the third largest oil-refining center in the world.
Singapore also took the initiative to form a group called ASEAN in 1967. The group's main goal was to increase economic activities, such as trade, in the South East Asian region. The second purpose was to make and implement policies that would help the region as a whole. Singapore has been heavily involved in ASEAN. For example, in the early 1980s, Singapore headed the ASEAN campaign to find a solution to the problem of a military state in Cambodia. Singapore's continuous involvement in ASEAN and the economic policies she has implemented have allowed her to growth steadily at a rate of approximately 6% through recent years.
In 2009, Singapore was ranked second by the 2009 Index of Economic Freedom. This shows that the Singapore economy is highly resilient as it has been able to remain relevant and competitive through the on-going tumultuous global economic crisis. This result also suggests that Singapore marches alongside other world leaders on the forefront of economic freedom. In Singapore, economic regulations are straightforward, virtually all commercial operations are performed with transparency and efficiency and corruption is almost nonexistent. Both the income and corporate tax rates are competitive, and the overall tax burden is low. Foreign investment is welcomed and given equal treatment as local investments. Although non-tariff barriers still limit overall trade freedom, Singapore does not impose any tariffs.
The Singapore government firmly believes that education is a long term investment. Since Singapore does not have any natural resources, the best way to remain competitive is to invest in her only resource, which is the human resource. The introduction of the Compulsory Education Act (Cap 51) made it compulsory for all Singapore citizens above the age of 6 to complete at least 6 years of formal education. The main reason for passing this law was that the government was worried uneducated citizens would be unable to equip themselves with the necessary skills and knowledge to be productive citizens in Singapore's knowledge-based economy. This policy has been a huge success because parents who do not obey this law will be prosecuted under section 7(1) of Cap 51 and they may be liable on conviction to a fine not exceeding $5,000 or to imprisonment for a term not exceeding 12 months or to both.
The government highlighted 4 central elements in the construction of the education system. The first element was that Singapore's education system had to be respected for its high standards, which were to be comparable to top institutions worldwide. Secondly, the government declared that money should not be an obstacle to school enrollment and created various financial aid schemes for parents who could not afford to pay their children's school fees. Thirdly, meritocracy had to be the defining factor in a student's cross-over from a lower ranked institution to a higher ranked one. Finally, the educational system had to be responsive to economic changes in society. For example, when Singapore first started as a manufacturing economy the school concentrated more on technical skills. Presently, with Singapore well established as a knowledge and high technology-based country, schools are focusing on equipping students with the necessary knowledge based skills instead
Singapore has one of the most educated populations in the South East Asian region. The ease of accessibility to a pool of diverse talents has attracted many multinational companies to bring their businesses in Singapore. The influx of multinational companies in the early 1990s provided Singapore with an inflow of income and created more jobs, which lowered the unemployment rate. Currently, Singapore has one of the lowest unemployment rates in the world. With less people unemployed, social problems, such as the crime rate, which studies have shown are directly related to unemployment, are at minimal level. With higher income, Singaporeans have more purchasing power, hence their standard of living and quality of life is one of the highest in the world too. According to the Central Intelligence Agency, Singapore has a literacy percentage of 92.5%. This figure is 10.5% higher than the world's literacy level of 82%.
The Singapore government has always strived to fully utilize her educated population. In recent years, the government has placed a great emphasis on research and development. According to Singapore's department of statistics, Singapore increased its spending on R&D from $3.0 billion in 2000 to about $6.0 billion in 2008. This is proof of the government's commitment to maintain Singapore's status as one of the "Asian Tigers" and is also a reflection of the government's foresight regarding the abundant benefits of investing in research and development. A successful research and development effort has resulted in the increase of GDP and further enhanced Singapore's reputation as an innovative country.
This stellar reputation has benefited Singapore greatly. Many top pharmaceutical companies such as Pfizer have made Singapore their headquarters for their South East Asia operations. Singapore not only enjoys the monetary benefits of this arrangement, but also intangible benefits in the form of valuable knowledge transferred to Singaporean employees of Pfizer in the course of their work.
Singapore is a multicultural society composed of 4 main racial groups- Chinese Malay, Indian, and Eurasian. Post-independence, the government sought to build a multiracial and multilingual society that would be unified by a unique "Singaporean identity." The 1964 race riots in Singapore were still fresh in the minds of all Singaporeans and the government knew that in order to prevent such events from recurring, every citizen had to "stand united as one people (Ng, MOE)".
One of the first steps taken by the government post-independence was to promote inter-race mingling. For example, Singapore celebrates Racial Harmony Day annually and Racial Harmony Day celebrations are held in all schools. On this day, students dress up in different ethnic costumes and enjoy a delicious spread of food characteristic of each different race.
The government has even gone to the extent of ensuring that all public housing blocks (HDBs) have a certain quota of each race present. The number of Chinese to Malays to Indian to other minorities in each public housing district is roughly based on the percentage ratio of each race to the entire population. Because of such initiatives, Singaporeans have come to accept racial differences and are more willing to compromise, hence minimizing risks of racial conflicts. This inter-racial peace also contributes to the low crime rate in Singapore.
All Singaporean males are required to serve 2 years of national service. This is to ensure that Singapore can defend herself if there were to be any military invasion. Although the Singapore army lacks manpower, it has some of the best and most advanced weapons arsenal. However, Singapore has always strived to maintain good relations with as many countries as she can. Thus, the fear of Singapore being attacked is far from most Singaporeans' minds.
Overall, the government has done an amazing job in relation to domestic affairs. In 2008, a French credit insurance firm, Co-face, conducted a study on which country is the safest to do business in. The rating criteria included risks inherent in the business climate, economic and financial prospects and company payment behavior. Singapore, together with Japan and Germany, obtained a rating of A1 (the safest band). In conclusion, a stable and safe Singapore has attracted countless companies and investors because there is no need to worry about worker demonstrations, violent riots or social uprisings disrupting, or even destroying, their business ventures.
The Singapore trade to GDP ratio is among the highest in the world. A study done by the World Trade Organization (WTO) found that Singapore has a GDP to trade ratio of about 430 between the years 2003 to 2005; this figure is the highest in the world.
Today Singapore still depends heavily on international trade- the percentage of trade that contributes to her 2008 GDP is around 33.67%. In order to maintain smooth operations of her import and export markets and to easily put into effect free trade agreements, Singapore must preserve her good relationship of mutual trust and confidence with her trading partners. With free trade agreements with many countries, Singaporeans can enjoy foreign goods at lower prices because of the absence of trade tariffs. This implies that citizens can afford more foreign goods and services, thus further enhancing their quality of life. The benefits and opportunity of trade for Singapore will increase in the future as the volume of global trade increases in size. The graph below shows global trade as a percentage of world's GDP. We can see that global trade as a percentage of the world's GDP grew from around 12% in 1970 to around 25% in 2003. According to intelligence from Morgan Stanley, this percentage is expected to grow steadily from 25% in 2003 to about 35% by the year 2010.
Having good international relations may also result in the exchange of intellectual properties such as scientific research. For example, Germany technology company Siemen sets the pace in Singapore's technological and economic development, especially in the energy, industry and healthcare sectors. In fact, Siemen built more than one third of the power plants in Singapore (Yeang, 2). These power plants have ensured that Singapore will continue to enjoy her current standard of living and not have to be too dependable on other nations for power.
Singapore has experienced her fair share of conflicts with her neighbor, Malaysia. The government has put a lot of stress on preserving peace and co-operation with Malaysia for a few reasons. First, Singapore depends on Malaysia for fresh drinking water. If Malaysia stops selling Singapore fresh water, Singapore would have to turn to Indonesia. However, buying water from Indonesia will cost Singapore more capital as the source is further away. Thus, if Singapore was to have a continuous and efficient flow of fresh water from Indonesia, they would have to invest millions of dollars in bringing underground piles to transport the water over. The enormous amount of money spent on building piles could be better invested on other essential aspects of the economy, such as education.
Secondly, as Malaysia is many times larger than Singapore, it has a larger army than Singapore. Hence, if relations between Singapore and Malaysia were to turn sour and Malaysia invades Singapore, there is a high chance that the effect on both the people's welfare and the economy would be devastating. This may not only claim the lives of thousands but also have an adverse effect on the global stock market and therefore, a devastating effect on Singapore's economy.
In reality, it is often hard to maintain a good relationship with friends forever. Mutual commitment and constant communication between Singapore and her "allies" are needed to ensure that their ties remain tight. In other words, Singapore has to be very sensitive to many issues and try to remain on the fence as much as possible. For example, during the heat of the China-Taiwan conflict, a Singapore leader claimed that Taiwan was part of China. This comment was blown completely out of proportion and caused much unhappiness amongst the Taiwanese leadership.
Criticisms of Singapore's Government
Singapore's economic policies are not perfect. For example, recently, some scholars pointed out the failure of the Singapore government in managing its Sovereign wealth fund (SWF). Although Temasek Holdings is the designated body in charge of handling these funds, it has not done its job well. 40% of the SWF's investments are locked into financial institutions, with no bottom yet in sight (Singapore Angle). This is an understandable cause of concern because of the ongoing financial crisis, which is crippling the stock market. After Temasek's assets shrank by 31% from S$185 billion to S$127 billion in less than a year; the government had no choice but to fire CEO Ho Ching. Her departure was seen as part of rebuilding Temasek's image as a government linked company looking after the locals' interests. At present, there has been no dramatic break-throughs for Temasek Holdings. However, we must give credit to the government's quick response to the aforementioned embarrassing and undesirable situation.
Singapore's education system does have its drawbacks. Singapore's education system is very rigid and success is wholly based on grades. Students are streamed, according to their academic aptitude, from as early as primary 4 (when they are 10 years old). Unlike the United States, the Singapore education system does not give students a second chance. In order to enter the best local universities, students have to ensure that they are streamed into the top tier and maintain their place there throughout their educational journey.
As Singaporeans are generally very image conscious, parents put immense stress on their children to get into the elite stream. To achieve this, students are usually too focused on the academic aspect of their education to take the time to engage in sports or creative activities. Unsurprisingly, Singapore students are generally less creative than their American counterparts, who are given ample opportunities to embrace a holistic education. (Yong Zhao, The School Administrator). This extreme exposure to stress at such a young age has resulted in an unhealthy percentage of children under the age of 12 suffering nervous breakdowns and other anxiety disorders (Ho, 47). School related suicide cases are very real in Singapore. In April 2000, two primary school students aged 10 and 12 committed suicide. It was later found out that the reason for their suicides was because they failed they had "failed" their parents in failing to get streamed into the best class.
The government knows that the education system is stressful and it has set up counseling and stress management centers throughout the country to help students cope. One such agency is "The Minding Center" . However, it must be said that perhaps it is the parents of these children who should attend workshops, as they need to know that their children's childhood is worth far more than straight As. That said, society also has a stake in the blame. In countries like the United States, gap years are encouraged to allow disillusioned students or students who need to clear their heads or even students who need to "discover" themselves. No reason will be mocked and such students are certainly not belittled. Instead, they are told that their places will be waiting for them should they decide to return to school.
In Singapore, taking a gap year carries with it much stigma. It is assumed that students who do so are either pregnant or too mentally frail to survive in the system. These students are labeled "dropouts", which is seen as a derogatory term. For many Singaporean students, there seems to be an unspoken rule that they can either finish their education in one go or drop out and never return to their studies. Torn between such drastic paths, is it any wonder Singapore has such an abnormally high rate of students suffering from psychological problems.
Compulsory National Service has some downsides too. Singaporean males in local and overseas universities are at least 2 years older than their peers. Many parents feel that National Service has deprived their sons of two "prime" years and has resulted in them entering the workforce at a relatively late age (compared to the women). Moreover, many young men have died in accidents that occurred while they were serving the army. On 15th June 2005, 24 year old Second Sergeant, Ong Jia Hui, drowned during training. The case was not reported until 2 years later when the relatives of Ong demanded a public explanation of Ong's death. Today, the article of the Ong's drowning cannot be found anywhere on the internet except in Wikipedia. Many believe that this is due to the Singapore government's ironclad censorship rule over local publications, on paper and on the web. It is an unspoken fact that there are many more such army tragedies, which go unreported (SgForum).
Singapore's overdependence on trade can have a negative impact on the economy too. The high trade to GDP ratio that Singapore possesses shows us that she is very much affected by global events. If the world's economy is doing well, Singapore's economy will do well too and vice versa. According to the Financial Times, Singapore's growth in 2009 is expected to drop to 10.1% and the unemployment figure is at 4.8%. These figures are record lows. The main reason for this is because of the global recession and Singapore's high dependence on trade (Burton, Financial Times). In times of recession, people tend to cut down on consumption. Hence, the demand for goods and services falls. With the decrease in demand, export and imports are also reduced in volume. With less import and export, which accords for about 33.1% of Singapore's GDP, Singapore economy growth is directly hindered.
There has been criticism that having this racial quota for public housing is a method employed by the People Action Party (PAP) to ensure their political longevity. However, these criticisms have been based on the unfounded assumption that all Chinese Singaporeans are loyal PAP supporters who will always vote for the PAP. Hence, by determining a certain percentage of Chinese in each public housing district, the PAP will be able to guarantee electoral victories in most districts. In reality, there is no way to prove this assumption is true.
Another criticisms made of the Singapore government is that it is too paternalistic and that a government should let its people choose what's best for them, instead of choosing what's best for its people. This is a pressing concern because the younger generations, who have grown up in such a "blinkered" environment, may develop a crutch mentality. A crutch mentality is unhealthy because it hinders individual growth.
A generation of Singaporeans with crutch mentalities will be detrimental to Singapore's economy because they tend to conform to existing trends and policies instead of innovating ways to make our economy more dynamic. Hence, there are worries that if the Singapore government does not take a step back and give the younger generation more breathing space and room to make mistakes, the younger generation may find themselves helpless when it is their turn to "run the show" in the future. In such a situation, society will either stagnate or decline.
The Singapore government has also been blasted for being totalitarian in their stringent censorship of speech and their encroachment into the right to freedom of expression. For example, the Attorney-General of Singapore brought the Wall Street Journal to court last year on a contempt of court charge. Also, in 1986, after then-Prime Minister Lee Kwan Yew declared that Time magazine had "engaged in the domestic politics of Singapore", the Singapore government restricted the circulation of Time magazine from 18,000 copies a week in October 1986 to 2000 copies a week in January 1987.
What Singapore is Today
The reason why Singapore is so successful today is mainly because of these four factors- Economic Policies, Domestic Affairs, Foreign Affairs, and Education. The leaders of Singapore have always had a meticulously thought-out plan to maximize Singapore's growth with optimum efficiency. As such, Singapore is regarded as an economic power to be reckoned with and Singaporeans are able to enjoy the fruit of their leaders' hard work.
Study conducted by the Statistic department of Singapore tells us that Singapore had a growth rate of 13.6% in the late 1960. This is the period when Singapore's then-stimulus plan to generate growth for the newly independent country. The growth rate has remained positive, with the exception of 1985, 1998, and 2002 (Asian financial crisis). A positive growth rate means a growing GDP. According to Singstat, the Singapore GDP has increased from $1,085,417,000 in 1966 to $ 181,946,900,00 in 2008 and her GDP per capita from $561 in 1966 to $37,597 in 2008. With more income, Singaporeans have more purchasing power and are able to afford more goods and services to improve their quality of life. In a recent study done by Worldwide Quality of Living Survey, Singapore was ranked 26th place. Singapore jumped six places in a global ranking of cities with the highest quality of living, overtaking places such as Paris in France and Honolulu and San Francisco in the United States (Chan, 1).
Even though the post September 11th crisis, local and foreign investment in Singapore continued to grow. In addition, Singapore direct investment abroad has also continued to increase steadily. The Singapore government must take kudos for this. Its goals and clear have helped it implement efficient and effective policies to make Singapore what she is today.
Singapore has been going through many difficulties including the current financial crisis, but every time, she seems able to survive and overcome such difficulties, and revive and reemerge as an even stronger and more prosperous society. This is because of the prudent government initiative supported by a vast majority of Singaporeans. With the advancement of developing countries, Singapore cannot let herself be overtaken. Although it is true that the Singapore government is more paternalistic than most other democratic governments, this has proven no obstacle to the flourishing of a dynamic pool of homegrown talents, a high standard of living and an economy thriving with fresh opportunities. Moreover, the conception of the government as a caring, if sometimes a bit overbearing, big brother, is one that has brought stability and re-assurance to all Singaporeans since her independence.
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