THE TEMASEK REVIEW

OPINION

The Economic Strategies Committee unveiled a series of recommendations last week to re-orient Singapore’s economy for the next few years among which includes decreasing our reliance on foreign workers, boosting labor productivity, increasing investments in Research and Development and fostering more $100 million SMEs in Singapore.

It is strange that Singapore’s political economy is left entirely out of discussion when it should be involved in the first place given the Singapore government’s pervasive control over our economy.

Political economy refers to interdisciplinary studies drawing upon economics, law, and political science in explaining how political institutions, the political environment, and the economic system—capitalist, socialist, mixed—influence each other.

Singapore’s economy is a highly developed state capitalist mixed economy. While government intervention in the market is kept at a minimum, the state controls and owns firms that comprise at least 60% of the GDP through government-linked companies and its two giant sovereign wealth funds GIC and Temasek Holdings (Source: countryrisk.com, 2004)

Its political system is that of a “hybrid democracy” as defined by U.S.-based NGO Freedom House – one which resembles a democracy in that regular elections are conducted, but lacks the essential pillars of a democratic state such as a free and independent media, a robust civil society and separation of powers between the executive and legislative.

Human Rights Watch recently condemned Singapore as a “textbook example of a politically repressive state.” which is not quite unlike despotic regimes like China, North Korea, Iran and Myanmar.

While ESC’s recommendations make sense with Singapore’s economy evolving gradually from one based on low cost manufacturing to a developed one producing high-tech products, they are unlikely to take off without corresponding changes made to Singapore’s political economy.

The other three Asian Tigers - South Korea, Taiwan and Hong Kong have all produced internationally recognized brand names such as Samsung, Hyundai, Acer, and Whampoa Hutchinson but not Singapore and it is not hard to see why.

Creativity and innovation requires a free environment for free minds to explore novel ideas freely without any restrictions.

Singapore’s restrictive political environment and education system simply do not foster or promote the qualities needed for innovation such as creativity, courage, and perseverance.

All great inventors, innovators and entrepreneurs in history have a rebellious streak in them – they dare to question the establishment and to blaze a path of their own.

The theory of Relativity would not have existed today had Albert Einstein not challenged Issac Newton’s version of Physics. There would not be Microsoft today if Bill Gates remained in awe of IBM then. And Google would not take the world by storm if its founders stay in their comfort zone.

Furthermore, the continued dominance of our domestic economy by government-linked companies is choking the life out of our SMEs right at the very beginning.

Korea’s Chipstat and Taiwan’s TSM semi-conductors will never take off if they have to compete with the equivalent of Chartered Semiconductors in their own countries. Neither will the small biotechnology startups such as Celgene, Genzyme and Vical survive in San Diego, U.S.A if they have to compete with the likes of A*STAR for funding.

The Singapore government’s “top-down” approach to R&D is a disastrous mistake and will continue to cost billions of dollars of taxpayers’ monies simply because its myopic strategy of picking out winners and investing in established scientists deprive the critical drive, passion and intellectual stimulus needed to conduct ground-breaking research.

To this date, what has the Singapore government got to show for all the billions of dollars they have been plowing into Life Sciences?

There is a correlation between the level of openness and the number of patents produced by a country:

As seen in the above table, Singapore ranked a miserly 17th position in the world in terms of the number of patents produced per million population.

The countries ranked above it are all democracies whose people enjoy far greater political freedom than Singaporeans.

The Singapore government should realize that it is part of the problem and so long it refuses to let go of its control of the nation politically and economically, the true potential of its citizens will never be fulfilled to the fullest and we will forever lag behind the likes of Japan, Korea and Taiwan in innovation and R&D.

Free minds require a free environment to soar and no talent, be it local or foreign, will be able to survive, let alone thrive in such a restrictive and oppressive political environment which the PAP has promulgated in order to perpetuate its political hegemony.

As in all totalitarian states, absolute control of the economy by the state is critical to keeping the citizenry under control and to prevent the emergence of a pretender to the throne.

With a significant proportion of Singaporeans being on the payroll of the government or its associated companies, many of them are so glued to their rice-bowls that they cannot imagine a Singapore other than the status quo.

The command structure of both the Singapore’s political system and economy kills off creativity, independent thinking and innovation right at its roots before they have the chance to develop further.

In today’s borderless world brought together by the internet, it is the “software” which matters more than the “hardware”.

The former Soviet Union was a great military power too under the absolute control of the Communist Party, but while the state is military strong, its people lagged far behind the Americans in terms of entrepreneurship, innovation and creativity, resulting in an economically stagnant and culturally anemic society.

As for China, it has a sufficiently large population to make up for its losses in human resource development for now though it will soon reach the same bottleneck as the Soviets one day if it still does not reform its archaic political system.

Being a small country, Singapore cannot afford to go down the slippery slope taken by the Soviet Union. We need to free the minds of our people from the shackles imposed on them by the PAP and allow them to explore the world freely and fearlessly.

To quote from an article published in the Economist last week:

“For all its frustrations, open and accountable government tends in the long run to produce better policies. This is because no group of mandarins, no matter how enlightened or well-meaning, can claim to be sure of what is best for a complex society.”

In a recent speech made at the Civil Service College, prominent MIT political economist Professor Huang Yasheng urged Singapore to “rethink” the “Temasek model” and warns that Singapore’s state management model has “milked this system for all it is worth.”

“The private sector is the best way to grow the economy. It has the most productive, most innovative and entrepreneurial culture. The state-owned enterprise system doesn’t give you that….You are already hitting the wall. Retaining this strategy could mean sacrificing future growth that is possible only through a bigger, more dynamic private sector,” he said.

He also opined that Singapore should expand its private sector in order to compete with China and India:

“Maybe a better way is for the government to fund more basic research and then allow universities, private equity firms, venture capital firms and rich individuals to take care of the rest. That is because even when the state sector is well managed, it is not as innovative as the private sector, he says. From a technological development point of view, you need a bigger private sector to compete, to come up with new products, processes and technologies, to better compete with India and China.”

With due respect to them, the PAP leaders do not have the monopoly on the truth. Singapore will be far better off in the long run if the government relinquish its control of the domestic economy.

State-linked conglomerates should either by privatized entirely or broken up into smaller units like what South Korea did to its chaebols in the aftermath of the 1997 financial crisis and Temasek Holdings should divest of all its stakes in local state-linked companies.

GIC and Temasek Holdings should be entirely depoliticized and hired highly qualified and experienced fund managers to manage our reserves instead of lawyers, engineers and civil servants who never step a foot into the financial industry before.

Instead of investing in risky assets like financial institutions overseas, they should put our money in safe bonds and securities which though generate smaller returns, are less volatile.

The annual returns should be made accountable to Singaporeans and diverted to a pension fund for help the elderly like the Norway Pension Fund.

The government should only play a regulatory and supportive role in the economy instead of micro-managing it.

As the South Korean example has shown, leaving major state enterprises entirely in the hands of private entrepreneurs and investors will reap greater dividends in the long run.

Let us wait for the day when Singapore can produce its own Samsung, LG, Acer and BenQ and take our economy off to the next stage, free from the PAP’s interference.

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