By Kenneth Jeyaretnam
Singapore’s per capita GDP is one of the highest in the world but at the same time Freedom House rates Singapore as near the bottom of the partially free countries with a score of 4 (where 1 is most free) for civil liberties and 5 for political rights. However what is noteworthy is that Singapore appears to be an outlier. If we look at the top twenty countries by nominal GDP in 2008 as measured by the IMF, World Bank and CIA, we find that between 85% and 95% of the countries on the list rated between 1 and 1.5 for the combined average rating for political rights and civil liberties. The countries that did not fall into the category of free states were all oil exporters with low populations such as Qatar and Kuwait (though Kuwait rates as slightly freer than Singapore). You can argue about the direction of causation. However also consider that Singapore finds itself in the company of some of the world’s poorest countries in its ranking in the Freedom House Index. These include Pakistan, Nigeria, Haiti, Uganda and the Central African Republic.
Now Iet’s examine the quality of Singapore’s per capita GDP. Using the Yearbook of Statistics, 2009, I computed that the share of GDP going to foreigners in 2008 was approximately 45%. If we divide indigenous GDP by the total Singapore residential population of approximately 3.6 million we arrive at a figure of approximately SGD 38,000 or USD 27,400 at average 2008 exchange rates. This would push Singapore’s ranking in the charts down from around 22 on average to between 25 and 30, about the same level as Israel and below Hong Kong. This accords more with the fact that employment income’s share of GDP is only some 40% and domestic consumption (which is a good proxy for employment income) is about the same level. And our inequality of income is the second highest in the world (behind only Hong Kong) and ahead of both the United States and China, both of which have huge regional variations. According to a UBS survey recently the living standard of the median Singaporean lagged behind his counterpart in South Korea, Taiwan, Japan and Hong Kong. After adjusting for the differing costs of a similar basket of goods, his income was only on a par with a Malaysian worker. In recent years our GDP growth rate has been high but this has mainly been achieved by adding more inputs of capital and labour (from abroad) rather than by raising productivity which stagnated in 2007 and declined sharply in 2008 and 2009.
The current government’s economic model appears to be one of maximising GDP growth at all costs without paying attention to the question of whether this is raising the living standards of the average Singaporean or the effect it is having on the quality of life.
Now you might have listened to this and say it is all very well to criticise but how would the Reform Party make a difference? Given Singapore’s peculiar set of economic circumstances what choice did we have? Could we do better? I would like to respond by outlining a number of policy areas in which we would advocate a different path. We believe this would lead to better outcomes for the bulk of ordinary Singaporeans. The Reform Party is a liberal free market party and that our openness to foreign investment and trade would not change. Singapore’s small size and lack of natural resources militates against anything else. In certain areas we believe in less state control not more. The Reform Party would, if elected to power, adopt the following policies:
Invest More in Education
The government currently spends only around 2.8% of GDP on education which is one of the lowest in the world. By comparison Sweden spent some 8% of Gross National Income in 2005 and the UK and the US both spent over 5% of GDP. Even Malaysia spent considerably more. An illuminating statistic that I read recently in the IHT was that we only spend about one-third per pupil of what Japan spends on primary education despite having slightly higher GDP per capita levels. In fact the reason Singapore performs reasonably well in international comparisons of exam scores is probably due to the fact that parents are forced to “top-up” their children’s’ education with private tutors and that children with disabilities are effectively excluded from school. The Reform Party would raise education spending, make education universal, free and compulsory up to secondary level. We would also look to broaden access to and improve the quality of tertiary education here so that more of the population can study here without having to go abroad which contributes to the brain drain. How we can afford to do this? My answer is firstly that we cannot afford not to if we are not to become ever more dependent on importing human capital from abroad. Savings can be found by reducing wasteful and unnecessary expenditure in other areas such as defence. Government saving can also be reduced given the excessive accumulation of unproductive overseas assets. A better educated domestic workforce should in time increase the tax base as many foreign workers at the top end may have ways of avoiding even Singapore’s relatively low levels of tax.
The Reform Party believes that Singapore will always need some foreign workers because the local labour pool is small. However a minimum wage will prevent our less well-off workers from being undercut by cheaper foreign labour from abroad and force our employers to use labour more productively
A Rational Immigration Policy
There must be a reassessment of whether it makes sense to continue to have such a liberal immigration regime which has seen Singapore’s population rise by over 60% in the last 20 years. If you take the current government’s argument that we need more foreign workers to counteract an aging population to their logical conclusion then there is theoretically no limit to the size of our population since in time the new residents will also age and their fertility levels will drop. Most of the workers admitted are not those with special skills but semi-skilled mid-level workers who compete directly with Singaporeans for jobs. Also foreign students now comprise up to 20% of the student population at our tertiary institutions. These students benefit from the tuition grant and then are allowed to work here and quickly acquire citizenship without doing NS. This is extremely inequitable and corrodes our national identity. The Reform Party favours a points-based system where only highly-skilled migrants would be admitted. Employers would be required to show that they could not find Singaporeans to fill vacancies before they were allowed to employ foreign workers.
Reform of CPF
The Reform Party would like to see more control over what proportion of their income Singaporeans wish to save. It would do this by earmarking a certain percentage of total CPF to provide:
A Basic National Health Insurance Scheme
Those in private or employer schemes could keep their current insurance and perhaps receive a tax deduction on the cost of their scheme if they opted out of the public health insurance option.
A Basic Pension
Unlike the CPF Life Scheme the Reform Party’s scheme would pay everyone a basic lifelong pension from the age of 65 provided they had worked in Singapore and contributed to CPF for a certain number of years.
After funding these two requirements Singaporeans should be free to choose what proportion of their income they want to put into CPF and where they wish to invest it. Singaporeans could continue to use CPF to finance their property purchases. They should be able to withdraw their excess contributions but at the cost of losing the tax benefit.
It has been pointed out that Singapore’s high ranking in indices for economic freedom, such as the one compiled by the Heritage Foundation, are misleading because they fail to take account of Singapore’s forced savings scheme as well as the dominant role of the state sector.
The Reform Party would examine public housing could be made more affordable by greater competition in its provision. We would also review the government’s role as the biggest owner of land in Singapore and its pricing policies for land sales. In addition we would end the current restrictions on minority owners of HDB properties not being able to sell them except to a minority buyer which has led to a two-tier market. This has disadvantaged minorities who often can only sell their flats for a lower price than the market price.
Privatization of the State Sector
The Reform Party believes that no vital national or strategic interest is served by the government continuing to hold majority stakes in most of the top Singapore companies. Most of these companies are mature and can stand on their own two feet. It would seek to sell them off directly and to privatize Temasek, and possibly GIC, by listing its shares on the stock market and distributing the shares free to Singaporeans.
Reduction of Taxes and Fees on the Less Well-Off
As part of its drive to increase domestic consumption the Reform Party would cut taxes and fees that have a disproportionate impact on the less well-off, such as GST. It would examine whether HDB conservancy charges and other fees were excessive and whether efficiencies could be introduced.
Restoration of Fundamental Rights
Whilst intangible, there is plenty of empirical evidence that political and civil liberalization is a spur to economic growth. I have cited earlier the correlation between GDP per capita and countries’ ranking in the Freedom House index. Undoubtedly one of the reasons this is so is because creativity and originality of thought are both dependent on being able to voice dissenting opinions and to criticise. Also without criticism and freedom of information government mistakes are not discovered and bad policies are not changed.