The following article was written on 8 August 2000 - (there seems to be a printing error concerning the Year 2000, which should be Year 2003, as it contains comments on the recent NTU Academics interpretation of Manpower Statistics).
Given the many declaration by the Singapore Government of the need to change, to restructure, to accept that changes are needed to face the challenges of a New World, new competition, the attitude and the practise of politics of the Ruling Party (a.k.a the Singapore Government) govern the lives of Singaporeans remains unchanged for the last twenty years.
More transparency, please
Asian Wall Street Journal
August 8, 2000
Column: By Hugo Restall
IN most countries, if the government is withholding information you can bet it's bad news. It follows that when journalists reveal that officials are hiding something, the public starts salivating for a scandal.
In Singapore, by contrast, the government routinely holds back all manner of data. And Singaporeans don't seem all that bothered about it because, believe it or not, they trust their government.
That may seem incredible considering that in today's world, cynicism about government behavior is pratically considered common sense. So it's actually a tribute to the Singaporean government's past performance to point out this trust. But that doesn't mean the city state's attitude toward informat! ion, or entrusting important decisions entirely to the elite, is healthy.
The current debate over "remaking Singapore," in Lee Kuan Yew's phrase, is critically important. The economy suffered recessions in 1998 and 2001 and contracted severely in the second quarter of this year, and while society remains stable, there is an expectation that the government will take action to put things right. However, that very assumption -- government has all the answers -- is at the center of Singapore's malaise. If the economy is to be freed up and entrepreneurs encouraged to take risks in order to restore growth, full disclosure about the state's stewardship of the nation's wealth is needed.
Up until now, data on the economy has been kept patchy until outside criticism has necessitated an informed response. Most recently, a study by a team of researchers at Nanyang Technological University found that foreigners had taken three out of every four new jobs over the last five years. The government replied that the true figure was one out of 10, and the university economists admitted that there had been a flaw in their calculations. But still there are no reliable figures on the size of the foreign labor pool and its breakdown across different sectors.
Another good example is the allegation by economists Alwyn Young and Paul Krugman that Singapore's economic success was based on increased inputs, particularly capital, rather than productivity growth. This thesis deeply upset the Singaporean elite, as it threw into doubt the wisdom of their policy of enforced saving and investment in government-linked companies (GLCs). It inspired the government to offer several rebuttals which did clarify the real productivity picture, without entirely demolishing the original argument.
Mukul Asher, an economist at the National University of Singapore, conducted a landmark study that discovered that the Central Provident Fund, Singapore's state-run pension system, achieved only a 1.8% return from 1983 to 2000, a time when the economy was growing at an average rate of 8%.
Prof. Asher accused the fund of having "a lack of transparency and accountability, particularly in investment management." It's rather incredible that there is still no official data on the portfolio or returns for a fund of more than $50 billion which is supposedly to provide for people's retirement.
Two years ago, the US Embassy in Singapore published a report which estimated that the GLCs accounted for 60% of the domestic economy. In order to rebut this, government statisticians went to work on this problem for the first time, coming up with their own figure of 13%.
Whether or not that figure is correct, Singaporeans themselves are sometimes rankled by the secrecy surrounding the GLCs, since these favored firms are suspected of stifling private-sector competition. The government controls its most significant stakes in companies through the holding company Temasek, which is accountable to the Finance Ministry but doesn't reveal details about its holdings or performance either. As a private company that may be within the letter of the law, but since it is a major store of national wealth, with assets of more than $40 billion, it's not unreasonable to expect its accounts to be open to the public.
The same goes for the Government of Singapore Investment Corporation (GIC). Controlled by a board chaired by Lee Kuan Yew, the GIC is charged with investing Singapore's offshore wealth, estimated at more than $100 billion. For a long time, this organization was a completely closed book. Two years ago Mr Lee started to talk about the need for more transparency, but this apparently only applied to the organization's structure, such as who sits on the board. It's still not known what assets the GIC holds, or what returns it has achieved.
In most places, such secrecy about public wealth would create massive corruption. In Singapore, it has just sown confusion. For instance, the government's surplus returns stored up during good times can be spent off-budget during recession to stimulate the economy without increasing the fiscal deficit. This is comparable to the corporate practice of managed earnings; in this case, the government is managing citizens' expectations. That might sound benign, but it obscures the real state of government finances and makes it harder to debate fiscal policy.
It won't be easy to change this preference for secrecy, because Singapore's system is an organic whole. There is no viable opposition in parliament to hold the government's toes to the fire and force it to divulge inf! ormation. And secrecy and control over the economy helps the government maintain its political control. It's no wonder that the elite is hesitating over taking any substantive steps to reduce forced savings or divest its stakes in the GLCs.
That said, releasing more information is one of the logical first steps in remaking Singapore. The recently concluded free trade agreement with the US will require greater transparency, one sign that this has already been recognized. A better understanding of where the old model is falling down is necessary to convincing the public of the need to build a more entrepreneurial economy -- a transition which may also bring more inequality and uncertainty.
Fortunately the Singapore's government has built up reserves of trust with its people which can be drawn on to manage this transition. Sharing more information about the financial reserves it has been holding in their name would ser! ve to enhance that trust and prepare the way for change.
Mr Restall is Editorial Page Editor of The Asian Wall Street Journal