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.