Mariano Browne
Economic development is not a straight path, and policies must be adapted to suit each country’s circumstances. A key learning is that a country must have a directional goal to inform its policies and an overarching strategy that has three critical components. The first is a clear sense of direction and long-term goals. The second is priorities that guide the inevitable choices and trade-offs. The third is to identify the alternative paths.
Last week, this column noted that Singapore passed through four broad phases, moving from import substitution (1959-65) to an export orientation (1966-1973), industrial restructuring (1973-1984) and economic diversification (mid-1980s onwards).
The key point is that development resulted from active government intervention in response to changing world conditions. Rather than a fixed number of master plans, Singapore’s approach was characterised by pragmatic policy shifts and continuous adaptation. In the process, Singapore developed from a semi-closed, low-wage, labour-intensive economy to a very open, high-wage producer of high-technology, capital-intensive products.
The switch from import substitution to export orientation based on foreign direct investment was a deliberate decision. Making Singapore a “business-friendly” destination to encourage multinationals to use Singapore as a manufacturing and export base was not in keeping with conventional wisdom at the time. A key institution in that process was the Economic Development Board. Established in 1961, it remains central to Singapore’s investment in formulating sectoral plans and attracting foreign investment.
Planning was and remains key to the country’s economic development path. The Economic Development Plan for the Eighties was presented to Parliament in 1981. The Government developed industrial land, built infrastructure, reformed labour laws to promote industrial peace, and invested in education, with an emphasis on technical skills relevant to industrialisation. This was followed by the 1991 Strategic Economic Plan, which proposed transforming Singapore into a developed nation within 30 years. It focused on creating a knowledge-based economy and on driving innovation.
Whilst it is simple to document the work of institutions and identify success factors, it is less easy to capture the people element. No one lives forever, and people make plans. Leaders come and go, and if Singapore’s success has been identified with its visionary first leader, Lee Kuan Yew, its continuing success must also be attributed to his successors.
No plan will work unless people do the enabling work to translate those plans into actions and translate those actions into outcomes and continuous results. Arguably, Singapore is still in the phase of developing and adapting as a knowledge-based economy, as economic success is a race with no finish line.
To maintain its standard of living, Singapore must continually adapt and adjust to a changing geopolitical environment. This means that its people also had to adapt and improve their skills to adjust to the evolving economic structure. This required a robust education system which was integrated with the identified needs of its industrial plans.
Singapore faced significant labour issues, especially in the first two decades after self-government. These issues were systematically resolved through state-led institutional reforms, political control of unions, and a productivity-based social compact, rather than through laissez-faire labour markets as continues in Trinidad and Tobago.
The labour movement was leftist and highly politicised, with frequent strikes and industrial action. Unemployment was high (10-14 per cent), and the workforce in the early years was primarily low-skilled and lacked the skills required for industrial development.
The Singapore Government’s response was coherent but not consensual. It split and weakened left-leaning unions and detained militant union leaders where necessary. It transformed the National Trade Union Congress (NTUC) into a cooperative partner of the Government rather than an adversarial bargaining unit. The labour movement was integrated into the State by making unions part of state boards and by having union leaders sit in Parliament. To formalise this cooperative process, it institutionalised tripartism between government, labour and employers and established a National Wages Council to provide wage guidelines.
The State pursued a rapid increase in employment, resulting in full employment by the 1980s. Labour peace was “purchased” through jobs, not bargaining power. To complement this approach, the Government provided public housing, a mandatory savings scheme and quality education and health care. It delivered economic growth, competent, credible institutions, and minimal corruption. In the process, wages, skills, and industrial policy were aligned, and the labour movement accepted restraint because growth delivered housing, jobs, and education.
Many reasons are advanced for Singapore’s success, including its stable, reliable and efficient government, together with its emphasis on meritocracy, pragmatism and rule of law. The early establishment of a Corrupt Practices Investigation Bureau helped build its reputation for clean governance and as a reputable place to do business. Its strong focus on education, from infancy through tertiary, and on workforce development has established its reputation for producing capable people.
If T&T is to achieve consistent positive growth, it cannot remain anchored in a business model prone to sharp boom and bust cycles. Further, the belief that the state is a redistribution agency for energy-sector earnings is no longer viable. The bankruptcy of this model is clearly demonstrated by this administration’s attempt to address a 12-year backlog in negotiations with public-sector unions. This is a model that is firmly rooted in looking back, not to challenges that lie ahead.
Mariano Browne is the Chief Executive Officer of the UWI Arthur Lok Jack Global School of Business.
