Climbing the Global Economic Ladder
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Business Times - 10 Nov 2011 Climbing the global economic ladder The real goal of R&D is raising Singapore's competence to solve complex problems, putting it ahead of its competitors By NGIAM TONG DOW FOR 140 years, from its founding by Sir Stamford Raffles in 1819 to attainment of self-government in 1959, Singapore existed as a free port - open not only to merchants but also immigrant labourers of all races. Our forefathers came from the Malay archipelago, China, India and the Middle East. The British colonial administration was relatively benign, responsible only for governance but not the economy. At the end of the second world war, the British Empire was in retreat and withdrew from its military bases east of the Suez in the mid-1970s, including from Singapore. The local British administration was basically in maintenance mode. Other than defence and security, the new PAP government under the leadership of Lee Kuan Yew was responsible for everything else. As I have said on another occasion, Mr Lee and his colleagues could not have inherited a more unpromising city state. Other than a short flourish during the Korean War boom of 1952, the economy was stagnating. Unemployment exceeded 10 per cent. The city was seething with strikes. The infrastructure was in a state of disrepair. Other than the Tanglin suburbs, most people were living in slums without piped water and electricity. Petty corruption and gangsters roamed the streets. The first order of business for the new government was to create jobs. Though the PAP described itself as a democratic socialist government, its great virtue was that it is completely free of doctrine or ideology. For our first prime minister Lee Kuan Yew, what works is what counts. We have to take the world as it is - not what we wish it to be. In economic parlance, we are price-takers. Lacking skills, the first industries we attracted were labour-intensive light manufactures such as garments, transistor radios, wigs, colour TV tubes. These industries require manual dexterity rather than technical knowledge. In time, we learned that to scale up, we need to skill up first. Low wage labour was rapidly mopped up by the first wave of labour-intensive industries. By the early 1970s, we had achieved full employment. Unemployment fell below the frictional rate of 3 per cent. Since then, our unemployment rate has been hovering around 3 per cent. This is, however, not an occasion for self-congratulation. As there was a shortage of low-wage labour, the turnover of labour - known as job hopping - reached epidemic proportions. The tripartite National Wages Council recommended high 'catch-up' wage increases over three years from 1979 to 1981. We learned a hard lesson. No government can mandate wage increases. Forcing wages to rise beyond productivity increases led to the 1985 recession. We were forced to reduce the employer's CPF contribution rate from 25 per cent to 10 per cent. With this across-the-board wage reduction, Singapore was competitive again. But with a caveat: the economy expanded but did not grow. To keep our wages low, we imported hundreds of thousands of low-wage foreign workers. It was an expedient short-term policy that engenders complacency among employers, unions and the government alike. The economy expanded but did not grow. The lesson to learn is that no country can pay itself more than what its customers are willing to pay. In a global economy, every economy is a price-taker. The only way to raise wages is to increase total factor productivity. TFR can go up only with acquisition of higher skills and knowledge. Thirty years on, we find ourselves in a pickle. We should have grabbed the bull by the horns. Instead, the government, business and unions dodged the issue. Though we had reached the limits of a labour-based economy, we took the easy way out. A million foreign labourers poured into Singapore to work in low-end service jobs. We found ourselves in a time warp which only now we are struggling to get out of. Though I have not seen any scholarly research on the subject, my hunch is that the value-add of foreign service workers is less than the economic cost of bringing them in. As the host country, we have to bear the cost of housing, transportation, health and other social services. Without undue modesty, I dare say that Singapore ranks among the top 10 global cities in the world. We have what EDB calls the pull factor. My plea is that we should not sell ourselves short. In the 1960s, I served as the EDB desk officer for the immigration deposit scheme. By depositing $1 million, entrepreneurial businessmen from Indonesia, Malaysia and Hong Kong could obtain permanent residence for themselves and their families in Singapore. They were free to invest their funds in any industry which could create employment for Singaporeans. The first factory in the Jurong Industrial Estate was established by a group of Indonesian Chinese businessmen. Permanent residents today are no longer required to invest in industry. Most of them invest in property for capital gains. They do not create employment opportunities for our young graduates pouring out of our four universities and six polytechnics. As we are reaching the limits of expansion, we have to move up from a skill to a knowledge-based economy. We need to raise our level of competence. In my view, the millions of dollars we are now devoting to R&D is only the means to an end. The end is not inventions or patents per se. The real outcome is raising our competence to solve complex problems, putting us ahead of our competitors. This would be my definition of a knowledge-based economy. The writer is a former senior civil servant who served as permanent secretary in several ministries. Copyright © 2010 Singapore Press Holdings Ltd. All rights reserved.
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I dare all those government apologists to come up with a logical and cogent argument against a former civil servant who has worked under the true fathers of the economy of Singapore, Goh Keng Swee and Hon Sui Sen.
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Against..?
Why should it be against..?
What he says is just common sense.....and he is just suggesting / advising something or pointing out something.
I agree with him too.
But remember, even LKY himself also said......
CreativeTech cannot win against Apple.
That popiah king tycoon....finally after he reach a certain stage, PepsiCo or some other bigger global company will swallow him.
Because Singapore only has 1 small city state.
There is not enough market, there is not enough brainpower, there is not enough critical mass, etc.
So yes, that writer want Singapore to move up higher in the knowledge economy.
I believe there has been some moves already on that, such as Biopolis and A*Star and maybe a few else.
On the other side of the coin,
That writer has a hunch that bringing in those low-skilled workers actually does not bring a positive net value-add.
Actually I have a hunch of my own.
My hunch is that, by bringing in low-skilled workers, the local talent pool who are in the middle, will be freed up and move up the value chain.
What does it mean, let's look a real world example, not just theory.
Suppose.
A maid.
Let's say a maid come into Singapore.
The wife who is a middle talent person, can then go out and work in the workplace. The lower-skilled job is handled by the lower skilled person.
But just as that writer has not read any academic research on it and just have an instinct, similarly this is just my instinct and my hunch.
But I am quite confident of this.
I am confident that some lower-skilled workers who come into Singapore indirectly boost the ranks of the middle and upper ranks of talents in Singapore.
I have a little bit more theory which expands on this, but maybe it is a little bit sensitive because it touches on certain taboo topics, I will get flamed if I talk further. I just stop here and present my respond as thus.
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There are millionaires who do not have time to enjoy life besides economy, and there are less fortunate who struggle to live happily that resulted from knowledge-based economy instead of enjoying the joys of fruit of peace build over the years. And there are middle-going people begins their journey of struggling to understand knowledge-based economy and developing it. So, the cycle is healthy but the happiness of humanity really on knowledge-based economy or because this knowledge-based economy just a mental state of solace along the journey of life - just like to share discussion with you all or rather an opinion.
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Originally posted by Whimsy:
There are millionaires who do not have time to enjoy life besides economy, and there are less fortunate who struggle to live happily that resulted from knowledge-based economy instead of enjoying the joys of fruit of peace build over the years. And there are middle-going people begins their journey of struggling to understand knowledge-based economy and developing it. So, the cycle is healthy but the happiness of humanity really on knowledge-based economy or because this knowledge-based economy just a mental state of solace along the journey of life - just like to share discussion with you all or rather an opinion.
The problem in Singapore is that people do not derive any satisfaction from their work, and instead work like drones all for the sake of providing for their family. This country does not offer much beyond that. Its citizens are constantly told to be pragmatic, or in other words, forsake any grandiose dreams.
A knowledge-based economy we are not. We are not even half way day. We have been talking about this sort of crap for over a decade and yet till this day, we approach it in such a typical bureacratised way and instead have succeeded in driving off researchers.
Happiness? This talk is ridiculous. This country represents a death of dreams, and there is nothing happy about that state of affair.