Singapore restructuring holds lessons for emerging Asian economies
Singapore restructuring holds lessons for emerging Asian economies
Bernice Han Agence France-Presse Singapore
Singapore's all-out effort to restore its competitive edge amid severe cost pressures holds lessons for Asia's emerging economies aiming to become major industrial players, analysts say.
Singapore has hit a rough patch after more than two decades of impressive growth that transformed the former British colony into one of Asia's wealthiest countries, despite having scant resources and a tiny local market.
But it is finding out that having a hardworking, English- proficient workforce no longer guarantees economic success when cost pressures are high.
As a result, paychecks as well as pension savings are under downward pressure, and businessmen are clamoring for other cost- cutting measures.
"Even our advantage in English is being reduced. Other countries now realize the economic value of English," Prime Minister Goh Chok Tong said in a recent policy speech outlining the challenges facing the city-state.
Apart from renewing efforts to reduce the cost burden, Goh's government is also working to foster a culture of entrepreneurship and creativity.
Singaporeans, ruled by the People's Action Party (PAP) since 1959, are used to a "nanny state" which intrudes into every aspect of their lives and restricts dissent, but it now wants them to think and act more independently.
"Free trade economies need to be backed with a free market in ideas," said Michael Backman, an Australian author and Asian affairs expert.
"I think that the lesson to come from Singapore right now is that it has run out of ideas," he told AFP.
Singapore, which wants to have a well-functioning market but at the same time has state-owned enterprises dominating the economy, has now "hit a brick wall," Backman said.
"And it's not merely a matter of politics. It's good economics to have competition in goods and services, and in the political arena. They go hand in hand. Sustainable rich countries have both," he said.
Goh acknowledged the city-state's deficiency in the creativity and ideas department as he explained the reasons behind recent decisions to ease some regulations, such as giving the green light to allow bungee jumping.
"We are allowing greater risk-taking, experimentation, diversity, choices and decision-making," the 62-year-old leader said.
"What I had done was to signal a shift in our mindset to being more relaxed and open-minded, and less strait-laced and Victorian."
Faced with an unemployment rate at 20-year highs with 85,000 people or nearly five percent of the workforce jobless, Goh said the status quo was no longer sustainable.
"Our standard of living and our business costs are reaching developed country levels," Goh said.
"We must keep the cost of doing business in Singapore competitive. We must wake up to the fact that the world has changed, and there are many lower-cost players around," he said.
Highlighting the huge cost gap between Singapore and neighboring countries, Goh said for every manufacturing worker hired in the city-state, a company could employ three in Malaysia, eight in Thailand, 13 in China and 18 in India.
Sailesh Jha, senior regional economist at DBS Group, said other Asian economies would eventually have to address the cost issue.
"In the end game, what matters is competitiveness," Jha said.
"That is going to be the critical issue in each of the Asian economies. There will come a time where you will have economies in Latin America... as well as Eastern Europe that will be competing with Asia in the low value products," he said.
According to Steve Brice, Standard Chartered Bank's chief Southeast Asian economist, Asia is paying too much attention to addressing cyclical downturns, at the expense of basic policy reforms crucial to long-term growth.
"I think often there has been so much focus on the cyclical environment which is understandable, but that isn't enough," Brice said.
"We haven't seen enough reforms being undertaken in countries such as Thailand, the Philippines and Indonesia," he said.