The next Singapore of Asia?
by Dinesh Weerakkody
Given the country profile and geographic location of Sri Lanka and the fact that it boasts of a highly educated literate work force, becoming the next Singapore of Asia was the dream of J. R. Jayewardane in the 70s, and now Ranil Wickremesinghe in this decade. However as to what we must do to get there was never really worked out and the North East war buried any hopes of getting there in the short term. So the simplistic answer that was given by our gurus to achieve NIC status was peace. While we all agree that durable peace is very important it is not the panacea for all our economic ills. We have to focus on removing the structural and political factors and bureaucracy that have impeded our growth process since independence. Therefore the process of economic and political reform itself needs to be reformed and speeded up and in addition anti-bureaucracy must become the mantra and the mission of the government.
The success of many of the economies in East Asia in achieving rapid and equitable growth have occupied our leaders since the study of developing economies began in earnest, in the hope of identifying a development model for Sri Lanka that would reflect the East Asian development experience. However, consequent to the economic meltdown in the 1990s in Asia, our analysts began to say that East Asias extraordinary growth was only a fluke and that there was nothing exceptional about East Asia and we should look West. But, to their astonishment East Asia miraculously recovered from near terminal economic sickness. This issue is now baffling many western economists as they desperately try to interpret the factors that helped the Asian recovery in a very confused world scene. However those who understand the limited relevance of economic theory to the prosperity and wealth of nations will not be surprised by Asias swift recovery.
Today, prosperity and confidence have returned to most of the Asian nations, it seems even for a giant like Japan the outlook does not look that pessimistic, despite the fact that the recovery mood in Asia may not go very deep as yet. The Asian tigers may be upbeat with the turn of events, but many of these economies still have huge overcapacity and limited bank credit, but it seems the examples shown by South Korea and Japan, where at every level of society people have been prepared to accept pay cuts in order to get back on track, demonstrates that the most important point of development are the inner qualities and resilience of a society and its citizens.
The economies in East Asia that grew rapidly in the 80s and early 90s used the same policy instruments as other developing economies, but with a greater success. Economists however conclude by saying that East Asias extraordinary growth was due to superior accumulation of physical and human capital and that these economies were also better able than most to allocate physical and human resources to highly productive investment. In this sense there was nothing miraculous about these East Asian economies, each have performed the essential functions of growth better than most other economies. This indicates that sound economic policies and well ordered markets help, but much more is also required.
The striking internationalization of competition in the 1990s has been accomplished by major shifts in the economic fortunes of nations. Governments and firms have inevitably been drawn into a heated debate about what to do. Due to our consistent failure to adopt a development model to suit Sri Lankas physical and human resources much discussion over the last 20 years has been centred around the eight economies in East Asia. Interestingly, the two common factors that helped East Asia to grow faster than any other region of the world has been the "national environment" and a "strong government".
Singapores boom was identified with just one person Lee Kuan Yew. in his farewell speech to his party just before he relinquished office said: "your generation has to grapple with the problems of relative success, with a future no longer primarily concerned with overcoming poverty, ignorance, disease, unemployment. That the baton has been passed on to a vigorous group with high ideals and principles is the most important single achievement in the last 10 years. Realistically speaking the crux of the difference between "success" and "failure" lies in the basic philosophy. If the basic philosophy is wrong, then however strong, determined, and able party leaders and members can be, the end result will still be defeat and disaster, as has happened in the communist countries. On the other hand, is socialism as flawed as communism? The reality is, communists often call themselves socialists and confuse everyone. So whether socialism is flawed depends on how we define socialism. If by socialism we mean state control of all the factors of production then socialism will no doubt fail like communism. But if by socialism we mean a philosophy which tries to equalize opportunities in each generation, after inequalities have resulted because of different endowments and efforts in a previous generation, that of their parents then such socialism need not fail. However, if in the name of socialism, redistribution of wealth goes too far it will stifle the motivation to complete and do ones best. Then socialism will cause failures.
The Singapore government improved the lives of people by increasing the equality of opportunities. This was done by making health, education, housing and jobs more easily accessible to all. Had the government attempted a policy like equality of rewards which was what many countries attempted, they would have failed. Equality of rewards would have met the "iron rice bowl". This must mean minimal effort by everyone and low productivity all around resulting in poverty. In Singapore whilst income and bonuses have increased and taxes have been reduced, the government at the same time increased medical charges, university fees, road fares, fines and foreign mail levies. The government explanation has been that, with each years wage increase, pension costs increases. So health services, university fees and cost of services go up in cost. According to government sources they have two options; increase taxes and pay for these increased labour costs. But by increasing taxes to pay for increased subsidies - the end result would slow down the economy and become uncompetitive in the world market. So the best way to get moneys worth for goods or services is to give the consumer the money and let them choose whether, what and where to buy it. This is what Sri Lanka should be doing in the current context to stimulate the economy in the short term. In fact, in the 80s the absence of subsidies made Hong Kongs economy more efficient than Singapore. As Lee Kuan Yew says, "whenever we can, we give money to people either in reduced taxes, or through vouchers like the education vouchers for independent schools, let people choose where to spend."
The schools in Singapore have to compete for students by offering the best education, for that education voucher. It is obvious that the balance, government and people must strike is a practical one, a question of judgement. Furthermore, the ideal balance will vary from time to time, and from situation to situation. Lee Kuan Yew suggests that "we must do enough to improve social cohesion and national unity; winners must be well rewarded but non-winners must also share in the gains, though not to the same extent. It is very much like a tennis or swimming tournament. If a few top winners take all and there are a few consolation prizes for other participants then those who are unlikely to win the top prizes will automatically give up coming to the tournament to participate.
This illustration pinpoints the need to maintain a balance between competition and co-operation. Singapore would not have achieved the best her people are capable of. Without co-operation Singapore would have lacked the social cohesion and national unity without which the society would have been vulnerable and ineffective as a nation. The reality is, there is a price for every policy option. For example, those who recommend that Singapore reduces the stress in the education by reducing the importance of examinations forget that whilst a stress free education system leads to a relaxed society, it also leads to a low achieving society; i.e. low growth economy. Societies that have stress free schools and universities have intractable economic problems simple because their workers are not productive. They cannot compete with the Japanese or the Koreans or the Taiwanese. As Lee Kuan Yew says: It is up to you to decide whether you want to stay on track in pursuit of excellence, or to go for a more relaxed system, which means accepting lower standards of achievement and less rewards." In the final analysis if we want to catch up with countries like Singapore and Hong Kong we have to get our act together and to do that we will need disciplined and progressive leaders. Half hearted attempts will get us no where.
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