The future of Singapore's economic growth
Robert Solow, in his famous growth model, attributed technological progress as the key determinant of a country's long run growth rate. Paul Krugman reinforced Solow's point in his article, The myth of Asia's miracle, stating that East Asian countries' spectacular growth rates would not be sustainable because they rely mainly on inputs to drive their growth rates. Finally, Alwyn Young had also contributed an article, A Tale of Two cities, that compared Hong Kong's growth rates and Singapore's growth rates. The results showed that our Total Factor Productivity (TFP) is almost zero or negative, i.e. factor inputs are the sole contribution to our spectacular growth, while in Hong Kong, TFP's contribution is a much more important factor in its growth process.
Although many economists from Singapore had mixed conclusions about the contribution of TFP to our growth from 1960-1985, Singapore has recently acknowledged the necessity for creativity and entrepreneurship to fuel our growth rates for the 21st century. What we have covered in this tutorial is analyzing the various fiscal incentives that Singapore used, previously, to attract foreign investments in the country. As Solow's model would suggest, this 'first growth strategy' of attracting foreign capital to Singapore, together with our massive unemployment in the 1960s, largely fueled our spectacular growth rates then.
Furthermore, to further facilitate this first growth strategy, it was necessary for us to adopt an export promotion strategy. Prior to 1964, Singapore, anticipating a common market agreement with the Malaysian federation, adopted an import substitution policy. After we were 'thrown out' of the federation, we had no choice but to switch to an export promotion strategy.
Under this strategy, there can be no room for the restriction of trade using the classic 'infant industry argument'. This argument is often used by many countries to develop their own local industry. Thus, I think this is perhaps one reason why, at this present moment, we only have one local enterprise that resembles a 'market leader' in the world, Creative Technologies. Sim Wong Hoo had to go overseas to secure funding for his newly set-up firm for no bank in Singapore was willing to take the risk then. In fact, a common joke was that, if Sim Wong Hoo had been a university graduate, he might have ended up in a cushy bureaucrat job in the civil service and Creative may not have existed. This joke illustrated, in an ironic way, our growth strategy in the past. The government had to take the lead to do 'the right thing' from the very beginning, we could ill afford the luxury of 'letting a thousand flowers bloom' by relying on local entrepreneur efforts. Thus, any Singaporean who is smart and talented would be in high demand by the Singapore government. The local sector in Singapore would thus have no choice but to cope with the shortage of talented individuals.
I also suspect that our educational system then was geared towards facilitating this growth strategy. Singapore's technological base was very primitive then and for us to benefit the most out of the incoming foreign investment, we need Singaporeans to absorb the new foreign technology quickly and correctly. Thus, we made the right decision, early on, to make English our first language instead of our mother tongue. We also emphasize the learning of Mathematics and Science. The tough rote-learning process that all of us complained about was, perhaps, also unavoidable then. We simply have to learn things fast, without bothering about the process in which knowledge was accumulated. I recalled the horror of my university tutor in mathematics, a Caucasian, in discovering that all of us, in our first year as undergraduates, know how to differentiate a function, for example y = axn , using the dy/dx = naxn-1 rule without even understanding what is the concept of taking limits of a function and the mechanics of the differentiation process J. This rote learning process that most Singaporean students utilized in our education was no doubt reinforced by the popular 'ten year series' of exam questions. I think it is still popular now J.
At this present time, the situation is different. Many countries are now opening their doors for foreign investment, their labour is much cheaper than ours and their productivity are not too far behind us too. If you have noticed, while we are still trying to attract foreign investments, we are now trying to urge Singaporeans to be entrepreneurs in setting up their own firms, as well as being creative. The idea behind the 'second growth strategy' is, instead of having foreign firms to invest here, Singapore will send its own local firms out into the US market and sell directly to them, like Creative Technologies.
Of course, this new direction in which Singapore is embarking is far from being as clear cut as the old one. If you want to get foreign investments here, besides the fiscal incentives which we have discussed, we must ensure Singapore has an efficient infrastructure, i.e. roads free from traffic jams and low crime rates. Furthermore, as I have mentioned earlier, our education system must be geared towards literacy and rapid absorption of foreign technology, leading to the inevitable process of rote learning. All this seems pretty straightforward. For our new growth strategy, we must now have Singaporeans moving from knowledge absorption to knowledge creation. The way I interpret the Straits Times, we are still trying to figure out the most efficient method of doing it; if 'efficient' is the right term to use in dealing with the promotion of creativity.
To give a specific example, how do we get Singaporeans to be more creative? This reminds me of what Jesus said about trying to pour new wine into old wineskins (Luke 5:37-39). In the educational context, the new wine could stand for creativity and the old wineskin could mean the present educational system. At present, we are attempting to overhaul our present system, instructing the teachers to teach creative thinking, installing more computers in schools and so on. These changes are indeed laudable but is it enough? The show Patch Adams strikes me as a story that illustrates what a creative person might do, and how damaging it can be for conventional paradigms. Thus, it is a matter of who survives in the end, the individual or the paradigm, the subsequent result might have an important bearing on whether creativity is enhanced or crushed by society.
The recent 'chastening' of the Chinese High students by MOE, telling these students to focus on their studies instead of protesting, albeit peacefully, against the retirement of their principal, is perhaps an insightful example. In the past, using our previous growth strategy, such incidents would be heavily frowned upon because we do not want to scare away foreign investment. At this present moment, it is uncertain whether such continued frowning by the authorities might hamper efforts to instill creativity in Singaporeans. As a PAP MP, Davinder Singh has put it in his recent address, "One cannot encourage creativity and then compartmentalize it". Thus, although Singapore now needs its people to be creative, we may still be stuck with the old wineskin that may not be able to accommodate creativity (It reminds me of the classic "You can't handle the truth" rebuttal by Jack Nicholson to Tom Cruise insistence of "I want the truth" in A Few Good Men).
Furthermore, Singapore is not alone in trying to revamp its educational system to emphasize creative thinking. Countries like Taiwan are also attempting the difficult task of moving its people to the knowledge creation stage. A 1986 Nobel Prize winner in Chemistry, Professor Lee Yuan Tseh, who is a Taiwanese, recently proposed some sweeping changes for the Taiwanese educational system. At this point of time, I can say that Singapore is clearly not ready for those type of changes. Let us hope that these changes may not be necessary for true creativity, otherwise Taiwan would really sprint ahead of us in achieving success in the knowledge-based economy.
I guess we would have to grapple with this new growth strategy in the next century. One lesson we can learn from Robert Solow's model, which won him the Nobel Prize in economics, it is this mysterious 'TFP' that will sustain our growth rate for the next millennium.