IN
THE aftermath of GE 2011, a new buzzword entered our political vocabulary.
Political reporters wrote about the ‘new normal’ of Singapore politics. Being
an ‘old normal’, I wondered what was new.
From third world to first: Like any other country in the world,
Singapore now competes in a global economy. In such an economy, importing cheap
foreign labour is no longer a viable strategy. It is a dead end.
That was until I spoke to NUS undergraduates at a ‘tea chat’ as a
guest of the Master of Cinnamon College, one of seven new colleges forming part
of NUS’s new University Town. I wanted to understand the mindset of the younger
generation compared with the old mindset of my generation.
Except for the few activists of the University Socialist Club, my
contemporaries at university were politically passive but not naive. In the
political environment we were then in, we thought it prudent to keep our
thoughts to ourselves.
In contrast, NUS undergraduates today are more articulate. They
have courage of their own convictions, expressing their views vigorously at
tutorials or the cafeteria.
Prime Minister Lee Hsien Loong has to deal with an electorate that
is vastly different from the old normal of his father’s generation. The command
politics of his father no longer works. While Mr Lee Kuan Yew appealed to
emotions, PM has now to appeal to reason.
In my synopsis, I posed the question: Though Singapore has held
seven general elections, can Singapore be considered a democratic state?
Let me state what we are not. We are not a theocratic state like
the Vatican or present day Iran. We are definitely not ideological states like
North Korea, Cuba or China.
The western concept of democracy is government of the people, by
the people, for the people. China’s emperors had to gain the consent of the
people to earn the mandate of heaven to rule. In my view, the core purpose of
government is to raise the livelihood of the people.
The People’s Action Party (PAP) has won every one of the seven
general elections since independence in 1965. The PAP won the mandate to govern
because it delivered jobs and housing. Singapore is almost a model state
attracting some of the ablest people in the world to work here. Would they also
live here and raise their families?
There are two competing strands in our body politic. The first
strand is meritocracy. It is modelled on the Chinese imperial scholar system
where the best minds compete in nationwide examinations presided over by the
emperor himself. The Singapore President Scholar is akin to the Chinese
Imperial Scholar. Both systems aim at identifying the best talent to serve the
country.
The second strand relates to the system of selecting leaders. It
is modelled on Plato’s Republic. In the Republic, peers select their own
leaders until the philosopher king emerges. As the first among equals, he is
accountable to no one but himself.
Over time, peer selection breeds a leadership that becomes
complacent. Though our state is rooted in meritocracy, we must beware of the
dead hand of peer selection. Elitism creeps in imperceptibly.
The recommendation by the ministerial salaries review committee to
peg ministerial salaries to the median income of the top 1,000 income earners
reflects an elitist mindset which is troubling. If the primary purpose of
government is to raise the livelihood of the people, a better statistical
measure of livelihood would be the median income of all workers, not just the
top 1,000 income earners or the MX9 salary scale of the Civil Service.
Curiously, both the government and the Workers Party accept that
ministerial salaries be pegged to high income earners rather than the median of
the work force, which is $3,070 a month as at June 2011.
The term first world is the vocabulary applied to wealthy European
countries in the early 20th Century. In the early 1900s, Argentina was
considered a first world country. Dr (Henry) Kissinger praised Singapore for
moving from third to first world. Singaporeans may agree with the first but not
the second half of his compliment.
Singaporeans of my generation remember vividly the slums,
joblessness, dirt and disease of the 1950s. Through dint of hard work and
discipline, we moved rapidly from a labour to a skill-intensive economy. By the
early 1970s, we achieved full employment with an unemployment rate of 3 per
cent.
The great challenge for us today is that we have reached the
limits of our skill-based model of growth. Nothing stands still. The BRIC
countries (Brazil, Russia, India and China) are rapidly catching up on the
United States, Japan and Europe in the automotive industry. China and Japan are
embarking on the design and manufacture of commercial aircraft. But it will
take considerably more time to succeed in the production of jet engines,
landing gears and constant speed drives – key components of an aircraft.
Singapore has to move from a skill to a knowledge-based economy.
The products and services of such an economy are characterised by high
technological content. To position ourselves for such an economy, Singapore
devotes the greater part of our national budget to education and training.
When I was in school in the 1950s, only three out my O level class
of 40 went on to university. Today, 30 per cent of a primary school cohort
enrol in tertiary education. Raising our average educational level from primary
to post-secondary should make a world of difference for our international
competitiveness.
So I observe with some dismay that the manufacturing share of our
GDP dropped from a high of 30 per cent in the 1980s to 20 per cent currently.
We need to ask ourselves why our concentration on engineering and science-based
education is not yielding dividends in productivity and innovation.
Instead, the employment share of low-wage, low-skilled personal
services is rising. Are we overeducating our children? This is a heretical
thought contrary to all my basic EDB instincts. In EDB, our article of faith is
that the higher the education level, the more rewarding will our jobs become.
Our total factor productivity should be rising not stagnating.
In my view, productivity and real wages of the bottom 20 per cent
of our work force have not risen because our labour policies allow employers
easy access to low wage foreign labour. In national accounting, low wage
foreign labour may not be as low-cost as employers believe. If we add the cost
of housing, transportation, health and other social services which employers
have to provide for their foreign work force, they may be better off training
and equipping their Singaporean employees to raise their productivity. Rising
productivity enables workers to be paid more. Inflation sets in only when wages
are raised without any increase in productivity.
Productivity can only be raised when CEOs leave their comfort
zones and take direct charge of the production process. They have to be hands
on, not resorting to outsourcing. Productivity should be the key KPI (key
performance indicator) for the award of bonuses to CEOs and management.
At the national level, PM is the CEO. Bonuses for the Cabinet
should be pegged to increases in the median income of the work force, rather
than the GDP.
Like any other country in the world, Singapore now competes in a
global economy. In such an economy, importing cheap foreign labour is no longer
a viable strategy. It is a dead end.
The 2012 budget is politically adroit, replete with spending
proposals which basically are income transfers from the taxpayer to the poorly
paid, the disadvantaged and the aged. Income transfers are palliatives,
temporary reliefs to abate rising social discontent. They do not help to raise
productivity. The real challenge is to grow the economy by raising total factor
productivity.
It is not easy. A Japanese scholar pointed out in an article in
Japan Echo that the optimum rate of productivity increase achieved by his
country averaged 4 per cent annually. We need to remember that the Japanese are
one of the most diligent people in the world. Singapore is already straining at
the seams with a current resident population of five million. We are embarking
on a crash programme to build more MRT lines, hospitals, HDB flats, schools and
universities to accommodate the sudden surge in population.
The economic assumption is that we can increase our GDP if we can
accommodate more people. In my view, even doubling our population to 10 million
people will not make things better. More likely, a larger population can only
make matters worse.
We have to grow through raising productivity, not higher
headcount. We need to be smart enough to produce more with less. Our higher
education levels and superior infrastructure enable us to compete in
knowledge-based industries and services. We transformed ourselves in the 1970s
from a labour to a skill-intensive economy.
There is one reality our younger generation has to face. In a
global economy, you will be competing not only with friends and classmates but
with the best and brightest of your generation in India, China, Brazil, Russia
and Eastern Europe.
University graduates in China and India are willing to work for a
tenth of what our young engineers and scientists expect. If we fail to raise
our total factor productivity, Singapore would just be an also-ran in the race
to be a knowledge-based economy.
When Sir Stamford Raffles founded Singapore in 1819, his town
planner demarcated the town into several ethnic enclaves. Kampong Glam
(Malays/Arabs), Chinatown (Hokkiens, Cantonese, Teochews), Little India
(Tamils), and Tanglin (Europeans).
Empress Place on the left bank at the mouth of Singapore River was the administrative and civic centre. The British governor presided from the Istana. The Istana where our President and Prime Minister have their offices is the seat of government.
Empress Place on the left bank at the mouth of Singapore River was the administrative and civic centre. The British governor presided from the Istana. The Istana where our President and Prime Minister have their offices is the seat of government.
Each racial group was free to conduct their own trades, practice
their own religions, set up their own schools, and largely married within their
own race and ethnic group.
The colonial government provided the overarching framework of law
and order and schooling in the English medium. Being a British colony, the
language of administration was English. Access to English medium schools was
open to all races. English became the lingua franca acceptable to all the races
as none has any in-built advantage over the other.
From 1819 to 1959 when Singapore was granted self-government, our
different races lived lives of passive co-existence. Even then, Singaporeans
witnessed at first hand the madness of three racial riots in the 1950s-60s.
Learning from bitter experience, our government established the inter-religious
council and enacted legislation to protect minority rights.
Income gaps
In 2012, what will be the threat to social stability? In a society that is racially diverse and practising different faiths, it is matter of pride for me as a Singaporean that we have learnt to treat our neighbours as our friends. Future social unrest will arise not from racial or religious differences but from the growing class divide caused by widening income gaps. The top 1,000 earn million-dollar annual salaries while the rest a monthly median income of US$3,070. The gap is untenable.
In 2012, what will be the threat to social stability? In a society that is racially diverse and practising different faiths, it is matter of pride for me as a Singaporean that we have learnt to treat our neighbours as our friends. Future social unrest will arise not from racial or religious differences but from the growing class divide caused by widening income gaps. The top 1,000 earn million-dollar annual salaries while the rest a monthly median income of US$3,070. The gap is untenable.
Paradoxically, this income divide is seeded in our deep belief in
meritocracy. In the past, equal opportunities in education have provided the
social mobility to enable the bright boy from a poor family to make good. The
playing field was level for all students.
The spread of private tuition has changed the educational playing
field. During my school days, only the academically weak students of rich
parents take remedial tuition. Taking private tuition was not a badge of
honour. Today, any parent who can afford the fees will send their children not
for remedial but enhancement classes to give their children a head-start over
their classmates.
Though there will still be the exceptional individual who triumphs
against all odds, more and more of our state scholars will come from upper,
middle income families with professional parents. There is no easy answer to
the problem of an uneven playing field in our schools. In itself, private
tuition is unalloyed free enterprise which society should encourage, not frown
upon.
The challenge is to level up, not to level down. One suggestion I
have is to make classes for academically weaker children smaller. The
student-teacher ratio should be more favourable than in brighter classes so
that the teacher can give more personal attention to each student, which is
what private tuition is all about.
The elitist among us will invariably ask the question whether this
is the right allocation of teaching resources. This was the very question I
asked of my late EDB colleague Ong Wee Hock who requested more funds to expand
our industrial training centres. The ITCs are the precursor of our ITEs. I had
to eat my own words later when our ITC trainees with barely O levels went on to
start their own factories producing parts and components for MNCs.
It is hard to find the university graduate who becomes a
successful entrepreneur. The prevailing reward system drives our graduates to
become bureaucrats/managers both in government and business. White collar jobs
pay better than blue collar jobs.
In the early 1970s when we achieved full employment, some of us in
the EDB began to ask the question about the critical size of populations. We
did some desktop research and found that there were several industrialised
European countries with population size of around 5-6 million. These were
Israel, Norway, Sweden and Finland. Our town planners went to work and
concluded that Singapore with a land area of 670 square kilometres can
comfortably accommodate a population of 5-6 million.
Flying on auto-pilot, we allowed in one million foreigners in the
last decade. As we arrive at our numerical target of five million, Singaporeans
find themselves squeezed on crowded MRT trains and buses. Low wage foreign
workers replaced older Singaporean workers in menial jobs.
As our births fell below replacement levels, we resorted to
immigration as an instrument to top up the babies that young Singaporean
couples are not having. There are also elements of political re-engineering.
Submerged in our immigration policies is the belief that to maintain racial
harmony, we need to keep the current population balance constant.
I have come to the conclusion that we have been peering at the
wrong end of the population telescope. Since the 1970s when job hopping became
a bottleneck, computer technology has made many manual operations in production
obsolete.
The key is to produce more with less manpower. The window to raise
total factor productivity through application of knowledge and training is fast
closing with the opening up of India, China and Indonesia. Singapore has lost
two decades relying on low-wage, low-skilled foreign labour to drive economic
growth.
Our managers and administrators are among the best paid in the
world. They will have to get off their high horse and personally lead the drive
for higher productivity. Outsourcing is a bad word in my vocabulary. Companies
and government ministries should figure out how to train their staff and
redesign jobs and processes to achieve more with less.
Grants should not be given to management (consultants) to do a job
they are already paid to do. Instead, interest free loans should be given to
enterprises with clear roadmaps to re-equip and raise the productivity of their
workers.
I am against job credits in any form because they are simply wage
subsidies which do not raise productivity in any way. My personal observation
is that job credits simply add to the bottom line for payment of bonuses to
management who do not have to lift a finger to raise the productivity of their
enterprises.
We failed to bite the bullet in the 1980s to restructure our economy. There may be no second chance the next time around.
We failed to bite the bullet in the 1980s to restructure our economy. There may be no second chance the next time around.