In the 19th century, the British maintained a hands-off policy. They invested very little for our development. They let Chinese dialect groups and gangs fight one another. They didn’t bother to do LKY-style social engineering. Singapore still grew very fast. It was because we had a great location as a deepwater port of call between East and West.
During our few decades as a nation, we exploited our deepwater port advantage. We built industries that catered to the shipping trade routes inherited from colonial times. We offered value-adding or processing services to ships that brought raw materials or components, and sent these on to their destinations. We capitalized on the colonial legacy of English to draw in Western tourists, build an international business and legal infrastructure, and extend our shipping hub into an airport and MNC headquartering and conferencing hub.
We did not do anything visionary or ‘out of the box’. We merely developed our preexisting advantages to their logical conclusion. These advantages would have been present regardless of which party was in power.
I understand many Singaporeans are trained in our tunnel-vision education system. Many will not know economics. Let me stress that none of our early economic policies require World Class Talent or Graduate Mother IQ. Any O-level economics student (yes, Cambridge offers Econs O level) can analyze our ‘comparative advantage’ and give the same advice.
Singapore also became a place of refuge for people fleeing instability and racism in other Asian countries. That has brought in a lot of investment in both monetary and human capital. In other words, we profited from others’ misery.
As long as our neighbours remain poor, racially polarized and badly governed, we will continue to be more attractive.
But Malaysia and Indonesia are becoming democratic. They are still discriminatory, but this is decreasing. They are making progress in developing their legal and sociopolitical infrastructure. They still have a long way to catch up, but Singapore is steadily becoming less attractive.
We are not the only port near shipping routes. We have always had our regional rivals. Aceh, Penang-Georgetown, Melaka and Jakarta/ Batavia all come to mind. These places have declined because of war, political instability or central government neglect. But do not assume that Aceh will forever be mired in civil war, that Jakarta will perpetually be corrupt, or that Malaysia will forever direct all development to inland Kuala Lumpur. Betting your future on others’ folly is folly itself.
Vietnam, India, China and the Gulf Arabs are also improving rapidly. Yes, we are still ahead in medical services, in education, and pharmaceuticals. But the manufacturing and most value-added pillars of our economy cannot survive competition from these countries. And will they never develop their own education and medical sectors? This is the same kind of arrogant fantasy that presumes the child of a non-graduate mother cannot succeed!
China had the world’s highest GNP per capita during the Song and Ming dynasties. Bengal (Bangladesh plus West Bengal, the area around Kolkata) had a higher GNP per capita than Britain until the late 18th century. 13th century Abbasid Arabs manufactured more industrial products than all Europe until they were destroyed by Genghis Khan. (Arabs made glassware, handguns, precision machinery and even robot toys of the type immortalized in Sinbad the Sailor and Middle-Eastern Wizards’ Golem fantasies. They developed the world’s most advanced hospitals, banks and courier services).
As late as 1830, India and China produced roughly half of global output. Britain had overtaken them in per-capita GNP, but these two countries remained ahead of poorer Eastern European lands.
It is unwise to fantasize that the Middle East, India and China will be forever poor and backward and require Singaporean manufacturing genius to supply them with processed goods. To assume that others are stupid and you are smart is plain folly.
During the 1990s, Singapore placed enormous bets on wafer fabrication like Chartered Semiconductor and the petrochemicals industry on Jurong Island. Now the Arabs are developing their own petrochemicals industry. China is making its own semiconductors. Market rumors even suggest that Chinese firms may make a bid for Chartered.
You don’t need a first class honours from Cambridge to realize that it doesn’t make sense to spend huge sums reclaiming Jurong Island to build a petrochemicals industry when we produce no oil and consume so little. Any O-level economics student can tell you the same. Why would the UAE and Saudi Arabia export crude thousands of km to us and pay us for refined products exported back to them? Why would China buy refined products from us if they can refine the crude at source in Kazakhstan? Other producers built their own refineries, so now Jurong Island is being kept afloat primarily by oil from Indonesia and Bunei.
We cannot even expect Indonesia not to develop its own refining industry. During the Suharto years Indonesia exported crude for foreign exchange so it did not care to do its own refining. As Indonesia industrializes it will increasingly make sense to locate oil refining in Indonesia, right where both the production and the market are.
And what about the semiconductors? Again, any O level economics student should tell you to locate a wafer fabrication plant where land is more plentiful, where engineers are cheap, where water is easily available, where there are many related industries (electronics plants) and where there is a huge domestic market. China and Taiwan have all these. Do we?
LKY and PAP have spent the last few decades praising themselves as geniuses with exceptional foresight. Are they? Even worse, they keep assuming other people are equally lacking in foresight!
Singapore has placed enormous bets on some of the most expensive casinos ever built. And now Taiwan is building casinos on Kinmen and Penghu. Cheap land, cheap labour, cheap food, beautiful scenery, real Chinese-speaking, within swimming distance from China. Should we bet that Chinese gamblers will choose Singapore instead?
Singapore gave UBS our biggest residential property, Command House, just before the banking sector crashed. Now UBS is sacking entire private banking teams in Singapore.
From 2006 onwards, the U.S. media, veteran investors and mainstream economists were increasingly warning of a real estate bubble and impending crisis. During the same time Singapore liberalized its laws on property sales and loosened regulations on the financial sector. The property market is declining steeply now. Many developers have bought ultra-expensive en bloc estates that they must develop to pay back their loans. More property is scheduled to enter the market in 2010 and 2011 than ever in our history. At a time when we are shedding a record number of jobs and more foreigners are leaving.
You don’t need O levels to figure out what will happen to the property market. You don’t need A levels to figure that if Singapore banks are making loans to businesses, investors, REITs and individuals using property as collateral, the future doesn’t look rosy.
Should we praise LKY and PAP for their vision?
Let me conclude with a warning:
Venice was a rich, thriving port for many years despite its autocratic government. Then it declined and fell into genteel obscurity. Today Venice is a sinking city, swamped by rising sea levels, visited by tourists only.
In the 1980s the government once compared us with Venice. Is a Venetian future awaiting us?
As the government has said so many times, we are dependent on others. We rely on foreign orders. Our economy needs foreigners. We ride on their coattails.
In the past, we were able to progress by offering what others did not have. Low Crime. Stability. Rule of Law. Efficiency. Lack of Corruption. But none of these things are unique to Singapore. All of our advantages can be replicated in other countries. And bit by bit, they are.
Big countries always take a long time to develop. LKY will not live to see Indonesia or India or China rise to first world status, and develop their own economies to the point when they have no need of Singapore. He will not live to see Aceh reclaim its 13th-17th century place as the greatest Southeast Asian port.
Unlike us.
We almost certainly will see Java regain its 11-13th century position as one corner of an economic triangle linking China/Northeast Asia with Southeast Asia and India/the Arabs.
What lies ahead of us if we lack truly visionary leaders who can lead us into the future? What will happen when our neighbours develop themselves? What will happen as the children of elites pass straight through Raffles, get scholarships and take power as the next generation of elites? Will they continue to pay themselves multi-million dollar salaries, suppress all criticism and award themselves ever-higher titles and posts? 5 Deputy Prime Ministers and 5 Senior Ministers, perhaps? Will they continue living in their own SPH-manufactured fantasy world, relying on foreigners to keep us going?
Decline rarely happens quickly. We are a stable country and remain so for the foreseeable future. We will not collapse in riots and civil war. But if things should continue moving in the same direction, we will slide into genteel poverty. Because it is too expensive to live here, non-elite people who don’t have high paying civil service jobs and health-pension benefits will leave. Over time, we will become a quiet, depopulated backwater like Venice where tourists outnumber locals at any time.
Is that what you want? :(:(:(
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