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Singapore cannot rely on foreign economy forever
December 31st, 2010 | Author: Contributions
Singapore is one country that transformed itself from a developing to an industrialised one through reliance of the foreign economy. It depended on the inflow of foreign direct investments and the export of goods. This model has not changed over the last 50 years of Singapore history.
During the last global financial crisis, Singapore economy suffered one of the worst shocks amongst all economies in the world. The reason was simple. Its over reliance on foreign economy. When experts advised the leaders and policy makers to expand Singapore’s domestic economy, the response was fully of rhetoric and cynicism.
PAP leaders and government scholars argued that Singapore population of 5 million is too small to become a major engine of economic growth. That simplistic answer basically reflects their incompetence. They actually know the solutions but they know they are incompetent to implement them.
The solutions lie in a two fold approach. Firstly the 5 million local population need to be able to provide sufficient investment towards Singapore economy. Singapore millionaires have a combined wealth of $300billion according to some estimates. Combined wealth of GIC and Temasek are around $500 billion according to some estimates. These two pool of funds itself provide a great starting point. What is lacking is the opportunities for investment. For this the GIC and Temasek need to divest control of their companies. Singapore also need to expand its domestic economy to include regional economies hereby creating a pseduo domestic economy beyond its actual domestic economy. This will require rapid reforms to transportation linkages, possibly a common currency. Even if Singapore links up to Malaysian and Indonesian economies, that will provide an increased pseudo domestic economy size of around 270 million. This expansion then need to be continued to include Vietnam, Thailand and Philippines so that the pseudo domestic economy size expands to around 500 million.
A second important source for domestic economy is domestic consumption which needs to substantially increase. This will only be possible with a minimum wage to uplift the incomes of the bottom 20%-30%. Other income stability policies through productivity growth approaches need to be pursued. The increased psuedo domestic economy will also provide a substantially increased pseudo domestic consumption level.
These strategies are nothing new or ingenious. That is essentially what European countries have been doing for the last 20 years. What really is the challenge is that Singapore needs leaders who are capable of implementing this change. Leaders who can communicate and negotiate effectively like mature civilised adults with leaders of Malaysia with whom both countries’ relations have been poor since seperation. Leaders who can effectively engage regional countries such as Indoesia, Philippines, Thailand where corruption is high and policy making is slow.
PAP only knows how to engae these countries through its Ministry of Foreign Affairs. ASEAN has proven to be a shameful failure.Cocktail parties indeed have proven to be the least effective. Relyin on George Yeos, Tommy Kohs is futile. European countries did not formulate their European union using a personalities driven approach.
The first form of integration should lead up to other forms of intergration. What is essentially different between status quo and Singapore market integrated with regional markets is the rapid increase in trade in goods and services due to rapid changes to the rate at which goods and people move between markets. That hence requires a transport linkages revolution. What is required is rapid expansion of road links, air links, rail links and sea transport links.
Both GIC and Temasek have the financial capacity to facilitate this. Their role should be this and not running NTUC supermarkets in neighbourhoods which any other Sheng Siong or Mustafa can do.
Following this reform, the integrated markets can easily support other measures such as common legal frameworks, banking systems, currency etc. Even the most corrupt, incompetent and indolent bureacrat or politician in neighbouring countries will be forced by market participants from consumers to investors to follow up with supporting reforms.
The sad reality is that there seems to be a prevailing sense of kiasuism that should such reforms be pursued then Singapore will loose its competitive edge in a common market. One has to visit evidence to reject this paranoia. In the experience of 200 year Europe, no small nation lost all its competitiveness. There was once fear in Netherlands a hundred and fifty years ago that if they integrate with UK through trade they will loose their competitiveness in banking and accounting fields. Till today they have not. Oddly Singapore harbours the fears that European countries discarded 100 years ago.
.
West Coastian
December 31st, 2010 | Author: Contributions
Singapore is one country that transformed itself from a developing to an industrialised one through reliance of the foreign economy. It depended on the inflow of foreign direct investments and the export of goods. This model has not changed over the last 50 years of Singapore history.
During the last global financial crisis, Singapore economy suffered one of the worst shocks amongst all economies in the world. The reason was simple. Its over reliance on foreign economy. When experts advised the leaders and policy makers to expand Singapore’s domestic economy, the response was fully of rhetoric and cynicism.
PAP leaders and government scholars argued that Singapore population of 5 million is too small to become a major engine of economic growth. That simplistic answer basically reflects their incompetence. They actually know the solutions but they know they are incompetent to implement them.
The solutions lie in a two fold approach. Firstly the 5 million local population need to be able to provide sufficient investment towards Singapore economy. Singapore millionaires have a combined wealth of $300billion according to some estimates. Combined wealth of GIC and Temasek are around $500 billion according to some estimates. These two pool of funds itself provide a great starting point. What is lacking is the opportunities for investment. For this the GIC and Temasek need to divest control of their companies. Singapore also need to expand its domestic economy to include regional economies hereby creating a pseduo domestic economy beyond its actual domestic economy. This will require rapid reforms to transportation linkages, possibly a common currency. Even if Singapore links up to Malaysian and Indonesian economies, that will provide an increased pseudo domestic economy size of around 270 million. This expansion then need to be continued to include Vietnam, Thailand and Philippines so that the pseudo domestic economy size expands to around 500 million.
A second important source for domestic economy is domestic consumption which needs to substantially increase. This will only be possible with a minimum wage to uplift the incomes of the bottom 20%-30%. Other income stability policies through productivity growth approaches need to be pursued. The increased psuedo domestic economy will also provide a substantially increased pseudo domestic consumption level.
These strategies are nothing new or ingenious. That is essentially what European countries have been doing for the last 20 years. What really is the challenge is that Singapore needs leaders who are capable of implementing this change. Leaders who can communicate and negotiate effectively like mature civilised adults with leaders of Malaysia with whom both countries’ relations have been poor since seperation. Leaders who can effectively engage regional countries such as Indoesia, Philippines, Thailand where corruption is high and policy making is slow.
PAP only knows how to engae these countries through its Ministry of Foreign Affairs. ASEAN has proven to be a shameful failure.Cocktail parties indeed have proven to be the least effective. Relyin on George Yeos, Tommy Kohs is futile. European countries did not formulate their European union using a personalities driven approach.
The first form of integration should lead up to other forms of intergration. What is essentially different between status quo and Singapore market integrated with regional markets is the rapid increase in trade in goods and services due to rapid changes to the rate at which goods and people move between markets. That hence requires a transport linkages revolution. What is required is rapid expansion of road links, air links, rail links and sea transport links.
Both GIC and Temasek have the financial capacity to facilitate this. Their role should be this and not running NTUC supermarkets in neighbourhoods which any other Sheng Siong or Mustafa can do.
Following this reform, the integrated markets can easily support other measures such as common legal frameworks, banking systems, currency etc. Even the most corrupt, incompetent and indolent bureacrat or politician in neighbouring countries will be forced by market participants from consumers to investors to follow up with supporting reforms.
The sad reality is that there seems to be a prevailing sense of kiasuism that should such reforms be pursued then Singapore will loose its competitive edge in a common market. One has to visit evidence to reject this paranoia. In the experience of 200 year Europe, no small nation lost all its competitiveness. There was once fear in Netherlands a hundred and fifty years ago that if they integrate with UK through trade they will loose their competitiveness in banking and accounting fields. Till today they have not. Oddly Singapore harbours the fears that European countries discarded 100 years ago.
.
West Coastian
