A New Economic Direction

A New Economic Direction

Singapore’s extraordinary economic growth over the last 40 years has made it an interesting case study for many emerging economies. However, Singapore is highly dependent on the export markets of Europe and America, and the current economic downturn highlights the danger of this dependence.

In addition, the economy is highly reliant on foreign workers, with foreign workers making up 69.3% of our construction workforce, more than 50% of our manufacturing employment, and a quarter of our services jobs. This huge influx of foreign workers causes two problems: it depresses the wages of Singaporeans to the point that they cannot have a decent standard of living in Singapore without wage supplements or subsidies; and it places great strain on our living environment, healthcare, education, and transport infrastructure.

Such a model does not help us to achieve our economic goals of a better standard of living for all Singaporeans and is unsustainable in the medium- to long-term.

Three Broad Thrusts

Is there an alternate model then? I propose three broad thrusts: seeking a local competitive advantage, integration with our neighbours, and developing indigenous enterprises.

1. Seeking a local competitive advantage

In order for us to be successful in the long-term, we must take advantages of whatever local, and location specific advantages that we have. These advantages are less easily duplicated than preferential tax rates, physical infrastructure, and even regulatory and business support services.
Instead we should focus on:
a) Transport and logistics
Singapore is still straddles the world’s busiest shipping lanes, and logistics, shipping, heavy engineering associated with moving goods should still play a big part in our economy. Exporting our expertise in this area through PSA and SATS would also constitute part of the strategy.
b) Agriculture and biodiversity
Singapore is located amongst the largest rainforests in the world, with a great diversity of species, some of them endangered. The proximity of these resources should give us a natural advantage in:
- making improvements to agricultural productivity,
- the exploitation of pharmacologically active compounds, and
- increasingly important in the context of global warming, the management of biological and other natural resources.
This advantage has yet to be exploited in a major way.
c) Arts, culture and education
We have a highly educated population, and our past policies and open immigration has also created a place where people of many different cultures, Indian, Chinese, Malay, Thai, Philipino, and English can mix and intermingle. We have the ingredients to create an arts, culture and education nexus in the region, where we can provide education services for neighbouring countries in their own languages, create music, theatre, movies, literature, computer games and so on that can be exported to the region. We would also facilitate cross-cultural understanding by promoting Thai movies in Indonesia, and create a more integrated Asean.


2. Integration with our neighbours

We have tried to participate in the economies of our neighbours through acquisitions of significant businesses in their countries. While this is still a viable option, it is not without its own risks. It is important that Singapore participation in the region is accepted at the people-to-people level in our neighbouring countries, and not just at the government-to-government level. To this end, we should:

a) Focus on ASEAN language and culture
Education should also give regional language and culture a larger role, so that citizens can be comfortable working not only in America, Europe, Australia and China, but also Indonesia, Philippines, Vietnam and Malaysia. Creation of joint entertainment and educational material can also facilitate integration. Computer games, movies, documentaries and educational material for the ASEAN markets will create local employment and can potentially be exported beyond ASEAN.
b) Contribute beyond transactional aid
Our responses to natural or man-made disasters in neighbouring countries have been generous from a humanitarian perspective, and we have been fast to respond. However, we should also consider using our resources to provide development on a longer term basis beyond business parks. We should include social facilities like schools, hospitals, playgrounds and religious facilities. This will encourage integration and co-operation and increase the acceptability of Singaporean participation in the economies of our neighbours. The delivery of such services can be made through Singaporean firms, which encourages greater engagement by Singaporeans in the region, and also provides these businesses with a base from which to seek further economic opportunity.

3. Developing indigenous companies

It is not uncommon for companies from Korea or Japan to bring along their suppliers or supporting companies when investing into other countries. Such an approach lowers the costs of operating in an unfamiliar environment for the leading company, and allows the supplier companies to grow stronger and develop their own economies of scale. The government can facilitate the growth of indigenous companies through:

a) support from government-linked companies (GLCs)
In Singapore, where GLCs lead the way in investing globally, they can help local businesses by picking local subcontractors over foreign ones, all other things being equal. They can facilitate the entry into overseas markets by creating joint ventures with Singapore firms or facilitating the creation of such entities between Singapore firms and local firms in the overseas markets, and incorporating them as part of their supply chain. A conscious effort should be made to support Singaporean organizations.
b) Lowering the costs of business, land and property in Singapore
The indiscriminate targeting of multiple industry sectors creates competition for scarce industrial and commercial space. A more focused and restricted targeting of industries may lower overall economic growth, but may benefit the same number of locals, or even more locals, by lowering costs for local businesses and creating jobs that can filled by Singaporeans.


a) releasing talent into the private sector
The limited talent pool in Singapore makes it important that we achieve the right allocation of skills between the public and private sector. In order to develop indigenous companies, we must encourage young talented people to join local small and medium-sized businesses and to help make them successful. SMEs are, however, in competition with the public sector which offers high paying jobs at low risk, and multi-national corporations which offer high paying jobs with high risk, but also much higher potential payouts. While SMEs have to hold their own with the latter, there is no need for them to compete with the public sector. Public sector wages should be set to attract the top 30% of each cohort, rather than to be set so high as to remove the top 3% or 5% from the private sector. This will help balance the allocation of skills across the economy.

Conclusion

While the current economic model with its high dependence on cheap foreign labour, and exports to the US and Europe has served us well in the last 2 decades, there are increasing signs that this model is not sustainable in the mid- to long-term. Some of these include:
- the increased volatility of Singapore’s economic growth which causes more frequent disruptive dislocations in the employment market,
- highly depressed wages at the low end of the employment market which creates the need for income supplements for local Singaporeans,
- the strain on our housing, transport, healthcare and education infrastructure which results in the housing of foreign workers in substandard accommodation, and the subdivision of condominiums to serve as worker dormitories.

While we and the rest of the world will still be dependent on the US and European markets, it is probably necessary to shift some of the focus to Asian markets, and to be more selective in the kinds of industry we pursue. This is so that we can continue to create jobs for Singaporeans at wages that allow them a reasonable standard of living in their own country.

Death the Great Leveller

Death the Great Leveller
Why organ trading should remain banned

By
Joseph Teo


In an article in the Sunday Times on 2 Nov 2008[1], the Minister for Health Mr. Khaw Boon Wan announced that he planned to amend the Human Organ Transplant Act to allow people who donate their kidneys to get monetary compensation from the recipient or a voluntary organization. He said that “the World Health Organisation, and countries such as the United States believe that it is ethical to compensate donors so they do not suffer for their act of altruism.” He hinted that the sum will be “at least five figures, possibly six”.

However, such an approach and argument is flawed on three counts.

First, altruism is “the fact of caring about the needs and happiness of other people more than your own”.[2] Such acts are considered noble and worthy of admiration precisely because there is no material benefit – the altruistic person receives only the acknowledgement from one’s peers for their act of self-sacrifice. Such people and such acts are valued because they encourage the suppression of individual need for the good of others and for the good of the greater community. The greater the capacity of a society to do this, the better it is able to survive difficult times.

The act of compensating donors for kidneys removes the altruistic component from the act, and makes it a commercial transaction. By allowing compensation, we are saying that as a society, that we value altruistic acts less, and that with money and power, all things, including the denial of death, is possible. It will encourage individualism, and a “me first” mentality found in some other countries. This cannot possibly be good for us as a nation.

Second, organ trading will exacerbate the rich-poor divide. In an environment where all prospective recipients are in a queue regardless of whether they are rich or poor, all are treated equally, and the lives of both rich and poor are valued equally. Legalising organ trading creates an environment where those who can afford it “bypass the queue” - immediately creating the preferential treatment of one group over another. Poor or even middle-class Singaporeans are unlikely to be able to afford sums that are five or six figures. Arguing that “the National Kidney Foundation could step in to help” does not work in a situation where a suitable donor for two prospective recipients with hard to match donor requirements are in competition for a single kidney. Would the wealthy recipient outbid the National Kidney Foundation? Would a poor or middle-class Singaporean die because he wasn’t rich enough to afford a kidney? In addition, one would ask if the National Kidney Foundation, even with its considerable reserves, would be able to fund more than a few six digit kidney acquisitions, and if so, would are the funds best used in the interests of these very few.

In the National Longevity Insurance Committee (NLIC) Report[3], Professor Lim Pin noted that there were public concerns that “The scheme benefits those who are wealthier as they will live longer”. However, the NLIC noted that “there is as yet no robust local data to support the use of any other factor (apart from age and gender) to price the premiums”. The NLIC Report is silent as to whether such robust data exists in other countries, and did not propose that we try to obtain such robust data before making a key policy decision. Perhaps the NLIC might provide a reason for not making such a recommendation. Will legalising organ trading allow the rich to live longer? Will it create a situation where the poor and middle class end up subsidising the rich when the National Lifelong Income Scheme kicks in?

Third, legalising organ trading retards the search for alternatives. A wealthy cancer patient may, in recognition and acceptance of his impending death, and in a true act of altruism, use his wealth to support cancer research, so that others need not suffer the same pain. A wealthy individual suffering from kidney failure may instead choose to “compensate” a “donor” lavishly. The incentive to do something for the common good is removed, and is instead replaced by a private transaction where only individuals benefit. By making it possible to easily harvest organs from the poor, we reduce the incentive and desire to create fully artificial organs such as the Jarvik 2000 artificial heart[4].

Some have argued that banning organ trading is ineffective, since the wealthy may go overseas and obtain organs from willing “donors” anyway, and legalising organ trading is a means to protect the interests of the “donors”. This thinking is inconsistent and somewhat skewed. In the first place, while it is true that banning organ trading in Singapore may encourage some to go overseas to obtain what they cannot obtain legally in Singapore, it is not sufficient reason to make it legal. If it were so, then we should not ban sexual relations between men and underaged girls in Singapore, since it would encourage some men to go to our neighbouring countries to seek this illicit pleasure. In the second place, it is not clear that getting someone to undergo significant risks to his health, and to jeopardize his future well-being for the sake of some money is in his best interests. Just as it is not necessarily in someone’s best interests to offer him cheap and easy credit for him to buy a house that he could not ordinarily afford. A truly altruistic act, in the interests of a person in such dire straits as to be willing to give up a kidney for “compensation”, would be to use the money as an outright donation, to build infrastructure or otherwise improve the local economy.

In summary, legalising organ trading diminishes the value of altruism and encourages a “me first” mentality, divides the nation into “haves and have-nots”, and retards the search for alternatives to harvesting organs from poor people. Rich or poor, powerful or weak, smart or simple, we come into this world naked, and naked we will leave this world. Death is the great leveller. Let us come to a graceful acceptance of it, and not choose to exploit those less fortunate than us.

[1] “Law to change so kidney donors can be compensated”, by Salma Khalik, Sunday Times, 2 Nov 2008.
[2] Oxford Advanced Learner’s Dictionary, Seventh Edition, Oxford University Press 2005.
[3] “Report by the National Longevity Insurance Committee”, dated 4 Nov 2008, by Prof. Lim Pin et al. http://mycpf.cpf.gov.sg/Members/Gen-Info/CPF_LIFE/NLIC.htm,
[4] “World's first permanent artificial heart patient dies”, AFP, 4 Dec 2007. http://health.asiaone.com/print/Health/Health.html