In his famous article The Myth of Asia's Miracle (1994), Nobel Prize winner Paul Krugmen wrote:
"But it is only when one actually does the quantitative accounting that the astonishing result emerges: all of Singapore's growth can be explained by increases in measured inputs."
The factors leading to the rapid growth of the Singapore, wrote Krugman, were one-off - a dramatic improvement in education of our workforce & the share of employed rising from 27 to 51% of the population. Krugman concluded that "Singapore is unlikely to achieve future growth rates comparable to those of the past".
Krugman was wrong! Singapore grew by 8.1% in 2005, 6.4% in 2006, 7.9% in 2007 and 7.7% in 2008[Link]. Krugman could never imagine in 1994 that the PAP govt will resort to massive import of foreign labor to boost the GDP growth:
“Between 2005 and 2009, Singapore’s population surged by roughly 150,000 people a year to 5 million—among the fastest rates ever there—with 75% or more of the increase coming from foreigners,” Wall Street Journal (see report below).
More input, more growth. Put aside the hard work of improving efficiency and technical progress, and just expand the population.
"The influx helped boost Singapore’s economy in the short run by creating new demand for goods and services and helping manufacturers keep labor costs low. Developers built apartments and posh shopping centers for the new arrivals." - Wall Street Journal
The population growth was great for property developers, service providers like telcos and manufacturers. Many of these are GLCs.
"At the same time, though, foreign workers have driven up real estate and other prices and made the city-state’s roads and subways more congested. Their arrival has kept local blue-collar wages lower than they would be otherwise, exacerbating Singapore’s gap between rich and poor" - Wall Street Journal
The effects of this massive influx have been largely negative for the ordinary citizens especially the poor whose living standards have fallen sharply in recent years.
The foreign labor policy implementation has been deceptive. We were initially told that they were needed to complement the local labor to bring in skills that did not exist in Singapore. Then we were told that they were here to create jobs for Singaporeans. We were also told that they were needed because of our low fertility rate. Recently, we were told the Chinese workers are needed to sustain Singapore-China ties[Link].
Singaporeans expressed concern about this policy as early as 2000. These concerns grew louder and louder. 2 years ago, I attended a 'meet the MP' dialogue and a resident stood up to express unhappiness over the policy. Some where in his long winded explanation the MP told the resident "not to be small minded". There is nothing small minded about Singaporeans' concerns about this policy. We don't have anything personal against the thousands of individuals who are here to seek a better life for themselves and their families - most of us would do the same if we are in their shoes. In fact it is important that these workers are treated well when they are here in Singapore and their rights as workers protected and respected because poor treatment of these workers will spread to Singaporeans especially those working for low wages. Singaporeans are not asking the govt to keep foreigners out...all we are asking for is for its implementation to result in benefits for ordinary Singaporeans. However, this may not be so easy for the PAP govt to do...
Over the years, the interests of the PAP has expanded beyond that of ordinary Singaporeans. Its large network of GLCs and TLCs provides high paying jobs for the elites in the establishment. PAP leaders are selected from a power-elite network [Link] whose loyalty is to a system that rewarded and benefited them rather than Singapore and ordinary Singaporeans. For the PAP govt, this internal selection process has primacy over general elections ....the PAP govt has had no qualms about modifying election rules - GRCs to parachute newcomers, linking flat upgrading to votes, repressing the opposition etc. All these moves to take the power of choice from ordinary Singaporeans. In their corporatist model, Singapore is Singapore Inc and our PM is the CEO and ministers, the board of directors. Elections are secondary because leaders are selected and appointed to their positions. When you understand this, you will begin to see that the PAP govt policies are consistent with this model. Raising of transport fares during recession to prevent fall in profits, increasing foreign labor as the income gap expands and massive reserves buildup at the expense of ordinary Singaporeans' ability to retire.
If you have any doubts about what the PAP govt really is, it should disappear once you look at the outcome of the foreign labor policy. The foreign influx increased as income gap rose, cost of living rose, structural unemployment worsened and living standards fell. As long as GDP grew and corporate profits rose, ordinary Singaporeans were made to shoulder the burden of the negative effects of PAP policies. The only little kink in this system and model of govt is the one-man one-vote system. Despite the rules limiting the activities of political opponents, control of the media and the unfair playing field (GRCs and estate upgrading), the PAP exposed its own insecurity[Link] by tweaking the system yet again with the 'cooling day' to gain an advantage. They have not found a way to remove the one-man one-vote system without completely losing their legitimacy. Other tweaks have been considered along the way:
"And whether you have one-man, one-vote or some-men, one vote or other men, two votes, those are forms which should be worked out. I'm not intellectually convinced that one-man, one-vote is the best. We practice it because that's what the British bequeathed us and we haven't really found a need to challenge that. But I'm convinced, personally, that we would have a better system if we gave every man over the age of 40 who has a family two votes because he's likely to be more careful, voting also for his children. He is more likely to vote in a serious way than a capricious young man under 30. But we haven't found it necessary yet. If it became necessary we should do it. At the same time, once a person gets beyond 65, then it is a problem. Between the ages of 40 and 60 is ideal, and at 60 they should go back to one vote, but that will be difficult to arrange"
- Lee Kuan Yew in an Interview with Fareed Zakaria[Link]
Maybe one day they will suggest that newly converted citizens be given 2 votes since they have been exposed to 2 different systems, they will be appreciate the PAP system better....and so on. It is because the one-man one-vote system is still around and the PAP govt need to conduct elections soon that we get this concilatory message[Link] from PM Lee on New Year day that the foreign influx will be 'moderated' and the benefits of economic growth will be shared among all citizens - the same PM didn't hesitate to up his ministers' pay and hike the GST almost immediately after the last elections. There is really no excuse for Singaporeans not to understand how this govt work and what they have to do to secure their own future and that of their children. Whatever the PM says today, the size for foreign population (now 36%) is set to continue rising until Singaporeans become a minority in the own country because that is the path of least resistance to satisfy the extensive interests of the PAP govt. Unless Singaporeans make the right decisions at the next elections, things will not change and the outcome for ordinary citizens can easily be predicted.
Singapore's Expat Surge Fuels Economic Fears
By PATRICK BARTA And TOM WRIGHT
SINGAPORE—For years, this rich city-state has marketed itself as one of the world's most open economies.
But as Singapore recovers from recession, its residents are questioning a key part of the country's economic model: its long-standing openness to foreigners.
Singapore Struggles with Immigration Issues1:55
As Singapore grapples with an uncertain future amid weak demand for its exports to the U.S. and Europe, it faces a sensitive subject: the role of foreign labor in sustaining its multi-decade economic boom.
Singapore has thrown open its doors to bankers and expatriates in recent years, making it easy in many cases to establish residency and hastening the country's emergence as an Asian version of Dubai. It also welcomed low-skilled laborers from Bangladesh and other developing countries to help man construction sites and factories.
The goal was to capture more Asian wealth and offset Singapore's low birth rate with immigrants, spurring economic growth. But the push has also fueled discontent, turning immigration into a red-hot political issue in a country where dissent is still tightly controlled by the government.
Between 2005 and 2009, Singapore's population surged by roughly 150,000 people a year to 5 million—among the fastest rates ever there—with 75% or more of the increase coming from foreigners. In-migration continued in 2009 despite expectations it would collapse because of the global recession.
The influx helped boost Singapore's economy in the short run by creating new demand for goods and services and helping manufacturers keep labor costs low. Developers built apartments and posh shopping centers for the new arrivals.
View Full Image Reuters
Crowds gather at the Ministry of Manpower amid a wage dispute.
By some estimates, a third or more of Singapore's 6.8% average annual growth from 2003 to 2008 came from the expansion of its labor force, primarily expatriates, allowing Singapore to post growth more commonly associated with poor developing nations.
At the same time, though, foreign workers have driven up real estate and other prices and made the city-state's roads and subways more congested. Their arrival has kept local blue-collar wages lower than they would be otherwise, exacerbating Singapore's gap between rich and poor.
Some economists say the most damaging effect of the immigration is that the influx appears to be putting a lid on productivity gains, as manufacturers rely on cheap imported labor instead of making their businesses more efficient. Labor productivity, or output per employee, fell 7.8% in 2008 and 0.8% in 207—a phenomenon that could eventually translate into lower standards of living.
Lee Ah Lee, a 58-year-old who makes 850 Singapore dollars a month (about US$600) clearing tables in a cafeteria, says the flood of immigrants has made it hard to make ends meet by pushing down blue-collar pay in Singapore, which has no legal minimum wage. Sitting nearby in a drab apartment block built by Singapore's Housing Development Board, a state-owned body that constructs and sells subsidized housing, 79-year-old Lee Kwang Joo says low-skilled foreign workers are often housed in corporate dormitories, meaning they have no housing costs and can survive on lower pay.
On Temasek Review, a Web site dedicated to Singaporean affairs, one writer recently warned Singaporeans would be "replaced" as "3rd class citizens" by foreigners, while another said that immigration "will emerge as the single most important issue" in Singapore's next general election, due by 2011.
Immigration "kept our economic growth high but, at a tremendous cost," says Kenneth Jeyaretnam, the secretary-general of Singapore's Reform Party, a small opposition party founded in 2008. Relying on foreign labor to help boost growth is unsustainable, adds Choy Keen Meng, an assistant professor of economics at Singapore's Nanyang Technological University. He says a better model would involve the reining in immigration and accepting that Singapore is becoming a more mature economy like the U.S. or Europe, with a long-term growth rate of 3% to 5% a year.
Singapore, unlike many of its neighbors, has a reputation for reliable public services and minimal corruption. Its openness to foreign investment is one reason why gross domestic product is expected to rebound to 4.5% this year, according to the Asian Development Bank, from a contraction of 2.1% in 2009.
Still, Prime Minister Lee Hsien Loong, speaking at a Singapore university in September, said there was a need to be "mindful of how quickly our society can absorb and integrate" new arrivals, and vowed to curb immigration.
The government is also studying immigration as part of a wide-ranging review of the city-state's economic model launched in 2009. Results of the review, due this month,are expected to include steps to diversify Singapore's economy and reduce its reliance on exports to the United States and Europe by boosting domestic consumption, among other things.
Yet people familiar with the government's plans say it is unlikely to press for deep cuts in immigration, and will aim to find other ways to restore productivity growth. Singapore remains committed to a long-term goal of increasing the population to 6.5 million, though it would do so by prioritizing high-skilled residents as opposed to blue-collar workers.
Immigration "is not a weakness, it's a strength," said one person familiar with the long-term economic planning process. "People want to come here, why not make use of that strength?"
Serious cuts to immigration could also generate a backlash from other interests—notably the factory owners and real-estate developers who rely heavily on foreign arrivals. Many employers complain that local Singaporeans, accustomed to a higher standard of living than most other Southeast Asians, are unwilling to take on menial jobs, and are likely to resist further tightening of foreign labor supply.
Write to Patrick Barta at email@example.com and Tom Wright at firstname.lastname@example.org