http://groups.yahoo.com/group/Sg_Review/message/1755?unwrap=1
Mellanie Hewlitt
12 June 2005
Singapore Review
Lifting The Veil On Singapore Politics
Today, we attempt to lift the thick veil which covers much of
Singapore's inner-political circles to catch a glimpse of reality
Attached below are two articles;
a) Industrial Policy, a Tale of Two Cities, By Robert J. Barro, Wall
Street Journal, 2 April 1992
b) Fiscal Predator, By Dan Fineman, Far Eastern Economic Review, 6
May 2004
Both touch on similiar subject matters and reach the same basic
conclusions; that Singapore's facist policy of micro management and
enforced savings has handicapped the private sector amd impoverished
the citizens.
Robert Barro in his 1992 article concluded that:
"Singapore's forced saving and industrial targeting have been
mistakes. These policies have led unnecessarily to reduced
productivity and welfare."
A similiar conclusion was reached by Dan Fineman a decade on:
"Deprived of disposable income by numerous [hidden] taxes,
Singaporeans consistently consume a share of GDP 10-20 percentage
points below Hong Kong levels, while Hong Kong maintains a higher per-
capita income. Their high-revenue, low-expenditure government leaves
Singaporeans a smaller slice of a more modest pie."
"Austere fiscal policies hurt Singapore more than possibly any
country on the planet. Although Singapore markets itself as a low-tax
country with world-class social programmes, in reality the government
taxes heavily and spends little. The resulting huge surpluses --
largely hidden and off-budget -- strengthen the ruling party but
weaken the economy. Unless the government drastically loosens fiscal
policy, businesses will lose competitiveness and long-term growth
will slow."
There is nothing new in the above comparisons between Singapore and
Hong Kong.
What is a revelation is the date of the articles. Robert Barro's
article was written in in 1992 while Dan Fineman's article was more
than 12 years on in 2004. More than a decade separates these two
articles and little has changed during this period. The singapore
government has steadfastly persisted with its socialist policies
against conventional wisdom.
How could anyone be so blind and for so long? Or is this a case of
will-full blindness? Is the PAP Government really seriously intent on
change?
After so many decades, political and economic analyst now question
the sincerity of the Singapore Government. It is no secret that
Government Linked Companies make up at least 50% of the total market
capitalisation of ther Singapore Stock Exchange. And these GLCs are
either directly or indirectly controlled by Singapore's First Familee.
The First Famuilee has a strangle hold over all aspects of Singapore
political and economic environment. And unlike other despotic corrupt
governments in Africa, South America or Eastern Europe, they have
been able to successfully hide this through a corporate veil and also
via a process of legtimised corruption.
This regime has sucessfully resisted recommendations by the IMF,
World Bank and the FTA as well as other free speech pro-democracy
advocacy NGOs to maintain transparent and accountable world standards
in state administration of public funds.
Similiar calls by Opposition political parties (and the international
press) have been met by defamation law suites with Singapore's very
unique brand of justice administered swiftly by a ready and compliant
judiciary which submits to the back and call of the Ruling Elite.
To complement this elaborate charade, Singapore GLCs and state
administration are buried behind a corporate veil of secrecy and
shrouded in mystery. It was a grand illusion ochestrated in perfect
harmony by a state runned local press which would put the likes of
great magicians and artists like David Copperfield to shame. (Who
ever said Singapore lacks creativity?)
Even the size of the country's foreign exchange reserves are
designated as a "State Secret" for reasons of "National
Security" to bring it wiithin the ambit of the Internal Security
Act. Previous conservative estimates of the size of Singapore's
reserves were in the region of USD110-140 Billion, a sizeable figure
for a small nation with a population of only 4 million citizens.
This is money which was accumulated out of the blood and sweat
of the working citizens. It is also money they will never see or
touch, courtesy of Singapore's state constitution which prohibits any
repartriation of profits earned by the government (or the GLCs) back
to the citizenry.
So the USD150billion dollar question is, where does the money go?
Previous queries on such senstive politically incorrect issues were
posed by previous President Ong Teng Cheong who experienced a short-
lived term in office due to "ill health".
He was replaced by a more compliant President Nathan who has adopted
a more co-operative mentality towards internal politics and
management of public funds. Political Analysts expect this compliant
President to stay another term in office. (surprise surprise?)
But lets get back on track to whether the PAP Government really is
intent on change. Why would a Familee who is enjoying the fruits of
ill-gotten gains (all USD150 billion of it) ever want to put an end
to the good-life? Afterall, it would be in the best material interest
of Singapore's Ruling Elite to carry on this game of deception for as
long as possible.
Is all this mere conjecture or fact? Read on and decide for
yourselves. Do open the attached file on Singapore Nepotism to peer
behind the scenes and see the incestous close-knit ties of the
innercircle which constitute Singapore's Ruling Elite.
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Industrial Policy, a Tale of Two Cities
By Robert J. Barro
1,217 words
2 April 1992
The Wall Street Journal Europe
(Copyright (c) 1992, Dow Jones ...
The city-states of Hong Kong and Singapore are two of the heroes of economic development. Gross domestic product per capita grew in both countries at a remarkable 6% a year from 1960 to 1990, and the levels of production per person advanced in each country from one-quarter of the U.S. level in 1960 to about three-quarters in 1990.
These economic success stories motivate us to look at the histories of the two countries to find clues about the policies that enhance growth. The investigation is especially revealing because the governmental actions pursued by Hong Kong and Singapore have, in major ways, been polar opposites. Hong Kong has been largely laissez faire, whereas Singapore has pursued an aggressive form of industrial policy. (One would therefore identify Singapore's policies with Paul Tsongas's and Hong Kong's with Ronald Reagan's. Bill Clinton's policies fit better with those of the formerly socialist economies of eastern Europe. I have no idea which countries' economic policies to identify with George Bush's or Jerry Brown's.)
One should begin with some of the many similarities of the two countries: small city-states that began under British colonialism as trading centers with immigrant populations from China. Neither country has significant agriculture or natural resources, except for harbors. Both economies are highly open to international trade and have remarkably high ratios of exports and imports to GDP. Neither government imposes much direct regulation on business, and neither has high ratios of government consumption purchases or transfer payments to GDP.
Each has been politically stable for some time, although Singapore had difficulties in the 1960s and Hong Kong's prospects for 1997 are uncertain. They are nearly identical in age-adjusted fertility and mortality rates, although Hong Kong had somewhat higher population growth due to greater in-migration. Both countries are strong on education, although Hong Kong had an educational advantage in 1960 and continues to enjoy that advantage today.
I could start the list of differences by noting Singapore's constraints on civil liberties, illustrated by its limitations on the circulation of The Asian Wall Street Journal (a constraint that no doubt limited the Singaporeans' access to the latest innovations in economics). More important contrasts from an economic standpoint involve the government's role in three areas: the volume of saving and investment, the role of foreign investment and the amount of spending on public infrastructure. Singapore has been far more activist in these areas, especially in using the tax and pension systems to compel private saving and in subsidizing foreign investment and entrepreneurship in targeted industries. Its direct public investment has also been much greater than Hong Kong's.
Hong Kong has, in general, been far less interventionist. The major exception is its monopoly position in landholding. The government's land policies have allowed vast, potentially valuable holdings to lie fallow and be brought into productive use only at a remarkably slow pace.
The differences in government policies have led to dramatically different behavior of investment and the balance of international payments. In this story, I am using the purchasing-power adjusted national-accounts data reported by Robert Summers and Alan Heston in the May 1991 Quarterly Journal of Economics. (I used data from the International Monetary Fund and the World Bank to update to 1990.) The Summers-Heston data show that Hong Kong's gross investment has been reasonably stable since 1960 at around 20% of GDP, and its current account has typically been near balance.
Singapore's gross investment was 13% of GDP in the early 1960s, reached 21% between 1965 and 1969, and then soared to an average of nearly 40% since 1970. This staggering amount of investment has been financed partly by the highest saving rate in the world (thanks to governmental coercion, rather than an especially thrifty disposition of the populace) and partly by massive borrowing from abroad (until the mid-1980s). Another way to put this is that Singapore's prosperity in terms of production has not been translated nearly as much as Hong Kong's into high levels of consumption. In 1989-90, when Singapore's per-capita GDP was 104% of Hong Kong's, its per-capita private consumption was only 71% of Hong Kong's.
Prof. Alwyn Young of MIT's Sloan School discussed many of these facts in a recent study ("A Tale of Two Cities: Factor Accumulation and Technical Change in Hong Kong and Singapore," forthcoming in the National Bureau of Economic Research's 1992 Macroeconomic Annual). His stress was on the effects of the different governmental polices on productivity and growth. The main findings follow from the facts already presented: Although Singapore has plowed twice as much of its GDP into investment, the growth rates of GDP have been about the same.
Singapore has, in other words, gotten much less out of each unit of investment. This low return involves two effects: First, there has been so much investment that the real rate of return on capital has fallen to near zero, and second, the growth of productivity (output per unit of quality-adjusted labor and capital) in Singapore has been much slower than in Hong Kong.
Prof. Young attributes Singapore's low productivity growth to its industrial policy of picking winners to target for investment. The problem has not been so much the choice of the wrong winners, but rather the tendency to select new winners too often. Since the late 1960s, Singapore has shifted from a trading-post economy that had a large role for the British military and non-export-oriented manufacturing to an emphasis on export-oriented textiles and clothing, petroleum refining, various electronic products, computers and financial services.
Allegedly, Singapore is now targeting biotechnology and striving to become the Asian center for corporate headquarters. All of this in 20 years in a country of less than three million. One can admire the initiative in tackling one technology after another, but productivity would likely have been better if they had stayed in an area long enough to gain the production efficiencies that result from learning and experience.
I should recall that this discussion concerns two of the great success stories among the world's economies. Hong Kong and Singapore are co-champions in growth rates of per-capita GDP since 1960, and these performances reflect many favorable elements, such as friendly economic climates and political stability. Singapore's shortcomings have to be interpreted relative to Hong Kong's strengths, not relative to the many economic disaster areas of the developing world.
A fair conclusion, however, is that Singapore's forced saving and industrial targeting have been mistakes. These policies have led unnecessarily to reduced productivity and welfare. This lesson is important for developing and developed countries, but the implications for the 1992 presidential election in the U.S. are unfortunately unclear. None of the prospective candidates offers the free-market policies of Hong Kong, and Ronald Reagan and the leaders of Hong Kong are ineligible for the office.