The primary aim of Singapore’s new government. It emphasized on the following key elements:
Investment in Government-Owned Corporation
Foreign Direct Investment: Singapore provided MNCs with enough incentives to invest in it and to improve the nation’s employment, technology and managerial expertise. FDI was thus considered a central component to Singapore’s growth model.
Pro-Business Environment: The Singaporean government provided everything to establish a business for foreigners and MNCs in turn getting FDI. After years of effort, Singapore became the “easiest place to do business” for 10 years to only becoming the second in 2016. It invested in basic infrastructure, creating an educated labour force, as well as providing tax incentives for foreign investments. They also focused a lot on providing an efficient and simple process for new firms to incorporate. The government reduced cooperate taxes for firms, who had their headquarters in the country. Singapore also invested heavily in the best education to train high skilled labour. The workforce was globally competitive due to the bilingual language system including English and a mother tongue.
Trade: Singapore entered several Free Trade Agreements as they knew that being a port of trade, this would make it more lucrative to traders around the world. Several shipping companies in fact use Singapore as their trading port because of these agreements. They had agreements with countries like United States, India, China and have been negotiating with EU for some time.
Targeting Productivity and Innovation
Do you see any current threats that might de-rail that model?
The vision and growth plan that PM Lee Kuan Yew had was very successful in the beginning for at least 40-45 years, as the 50th National Day was closely approaching, there was a lot of pressure on the government to make changes to this method.
Singapore was heavily depending on foreign workers to meet the labour demands. The employers from companies turned to low cost labour from neighbouring countries. This led to foreign workers composing 1/3 of the workforce. This led to Singaporeans complaining about the increase of foreigners given the country’s limited resources. According to them the costs had increased but they did not see jobs increasing.
Another thing that concerned the citizens was the overdependence on MNCs. They were pessimistic about the nation’s ability to create domestic global firms. Around 99% of Singaporean Businesses were Small and Medium Sized enterprises. These were weaker and found it hard to compete with the MNCs.
Singapore also depended a lot on foreign investments, overtime this had to the economy using the investments as a crutch and they managed and controlled it.
Singapore being a trade driven society was sensitive to changes in global demand. The financial crisis effected the global demand and this reduced orders from major trading partners and this also posed a negative effect for the economy.
Asian countries like Malaysia and Indonesia, China had sufficient low-cost labour. Companies could produce similar quality products at cheaper costs. Singapore is losing its competitive and comparative advantage.
Singapore is also facing demographic issues like a rapidly aging society and low fertility rates as well as issues like increasing costs of living and income inequality. Singaporeans felt stressful and unsatisfied with the government’s current policies. This would lead to some retaliation and lack of respect for the government rules. The Singaporean started thinking that they needed a new ruling party and this led to PAP losing a lot of votes and power in the election of 2011. Things have changed since then with a slight increase in 2015 general elections but there are still mild protests still.
Given that the nation has a lack of space and resources. Singapore has to rely on more innovative ways to stay strong and make its place in the society like The NewWater Plant which recycles water from sewages etc. and turns it into clean drinking water, to make sure that one day, Singapore can become self-reliant.
Singapore has to counter this disadvantage using its size and innovative strategies. The old methods can be used as a guide but as they say like medicines with time even old methods will no longer have any effects.