The Economic Prospects of Singapore

On material from Koh & Mariano (2006). The Economic Prospects of Singapore, Singapore: Addison Westley.

(Yah. 2006. The book say one. Available at the National Library and all good bookstores in Singapore. Amazon dun have. This is the, erhem, maiden publication of the SMU.)

Fluency of Writing: 3 / 5
Clarity of Ideas: 6 / 10
Content: 12/20
X-Factor: 2 / 5
Recommendability: 4 / 10
Total: 27 / 50

‘While the strategy of attracting foreign investments and producing for a global market has been remarkably successful in propelling Singapore from Third World to First World status, Singapore must now create domestic engines of economic growth if it is to beat the odds and produce more economic miracles.’ Page 5

I am not entirely sure what Mr. Koh means by a domestic engine. Does he mean that demand for growth should be locally driven, i.e. manufacturing in Singapore should be for the consumption of Singaporeans? I seriously doubt that this would be viable. If Latin America can’t do this, neither can Singapore. Does he mean that we should depend more on local companies, such as Creative, instead of focusing on bringing in MNCs and the like? If the second, I wonder what his employer, SMU-Wharton, thinks. Also, if the biomedical sciences and its related industries are considered a domestic engine, how exactly is it domestic?

The second problem I have with the above is … if the strategy is right, and the desired outcomes are achieved, how can the results be considered a miracle? Surely, only if the ends are met while the means are wrong can the whole thingy be miraculous. :p

‘Among the new measures introduced in the 1967 Economic Expansion Incentives Act was the granting of pioneer status, which offered tax exemption on profits for a period of up to five years. This tax exemption scheme effectively reduced by about 20 percent the cost of new investment for foreign firms. Later, in 1975, the granting of pioneer status was extended to a full ten years, which effectively subsidized half the value of new investment.’ Page 11

I would very much like to see the figures involved and clearer definitions of terms. What kind of costs is Mr. Koh talking about? How does Mr. Koh define investment (i.e. is he only referring to expenditure on physical capital)? Do taxes really take up so much of a firm’s profits?

‘The future prospects of Singapore are bright, although there remain many challenges ahead if Singapore were to maintain its economic prosperity. However, if the government continues to drive its economy with the same kind of pragmatism that characterized the past 40 years, imagination is the only limit to what Singapore might become in the next 40 years.’ Page 15

Somehow, the second sentence is contradictory. Surely then, there are two limits: not only one’s imagination, but also one’s pragmatism and the reasoning that lies behind and supports this pragmatism or ‘pragmatism’.

‘One way out of the conundrum is to have a big bang approach: announce a plan to double the population within the next two decades, with a readiness to admit not merely the highly talented but also those with intermediate and lower skills. This will solve the erosion of asset values, alleviate the problems of an aging population, bolster domestic demand and create a firmer base for the twin pillars of manufacturing and services….’ Page 44

The big bang approach was the only solution offered by Mr. Augustine Tan (MP for 21 years), to multiple problems, including, erhem, the challenges of India and China. The limits of imagination ehz?

‘Our comparative study of the four RAEs leads to a six-part summary.

First, the neoclassical predilection for Hong Kong’s free market growth model and against Singapore’s industrial policy is unsubstantiated….

Second, there are three models of growth take-off: HK’s laissez-faire, Singapore’s reliance on foreign MNCs and Korea and Taiwan’s modeling after Japan. All three models succeeded in growth take-off and the assertion that only one model works and the others do not is false

…’

I quite like this chapter Industrial and Economic Development: Comparing Singapore with Hong Kong, Korea and Taiwan, by Mr. Leung, even though I tend to dislike comparative studies. I feel that comparative studies involve very very small sample sizes, and academics involved in comparative studies seem to see only what they want to see. However, Mr. Leung argues quite well and is fairly convincing (esp. in his rebuttal of the Young-Krugman TFP thesis). I still have some reservations, e.g. in his analysis of education.

Oh. I found Mr. Leung’s acknowledgement of ‘an anonymous referee of the chapter for his / her comments’ quite funny. :P

I'm a bit sian of this book already, so will just skim through the rest of it, on trade, infrastructure investment, monetary transmission mechanism and economic institutions.

Ok. The last chapter by Mr. Phelps on economic prosperity and the dynamism of economic institutions is quite good. But Mr. Dudley Baines' comment, during a lecture three years ago, that institutions only work when they do and don't work when they don't, came to mind instantly.