The death this week of Lee Kuan Yew (1923-2015) who became prime minister of Singapore in 1959 following the granting of self rule by the British to the city island state and then in 1965 reluctantly declaring independence after a collapse of a federation with Malaysia, has highlighted his stunning economic success in transforming the small multi-ethnic city into one of the world's richest.
Lee operated a system of authoritarian capitalism and Roger Cohen, The New York Times columnist, wrote this week: "Lee’s only religion was pragmatism, of which religion (as generally understood) is the enemy, because, to some adherents, it offers revealed truths that are fact-resistant. Any ideology that abhors facts is problematic. (If you believe land is yours because it was deeded to you in the Bible, for example, but other people live there and have for centuries, you have an issue pregnant with violence.) Lee had one basic yardstick for policy: Does it work? It was the criterion of a forward-looking man for whom history was instructive but not imprisoning. He abhorred victimhood (an excuse for sloppy thinking and nationalist delusion) and corruption. He prized opportunity, meritocracy, the work ethic of the immigrant and education."
Singapore, with a local population that comprises 75% ethnic Chinese, marks its golden anniversary this year, celebrating a progressive 50 years and a series of phenomenal economic achievements. However, there are several threats to Singapore’s medium-term growth outlook, according to research by The Economist Intelligence Unit (The EIU).
In the new white paper, Striding Ahead and Feeling Secure at 50 [free on registration], The EIU provides an overview of Singapore’s economic and political milestones, and highlights key challenges to the city-state’s continued prosperity.
Rising anti-immigration sentiment has prompted the government to impose restrictions on the hiring of foreign labour — only 60% of Singapore’s population comprises national citizens. Many Singaporeans have been disgruntled with prime minister Lee Hsien Loong’s open immigration policy, which has seen the city-state’s total population grow by almost a third in a decade. Over this period, the resident population rose by 13% to 3.9m, while the number of foreigners more than doubled.
The EIU points to demographic challenges, including an ageing population and a declining total fertility rate, as additional risks to Singapore’s economic growth. Singapore’s fertility rate reached a record low of 1.25 children per resident female in 2004, and was only marginally higher, at 1.29, in 2012. The fertility rate has been below the notional replacement rate of 2.1 since 1976. Singapore’s lack of childcare facilities and high cost of living will counteract policy measures aimed at increasing the birth rate.
According to Navnita Sarma, Asia Economist at The EIU, anti-immigration policies and demographic factors are contributing to productivity issues and labour shortages. She commented, “As the economic aspirations of neighbouring emerging markets gain traction, Singapore will have to invest more to retain its competitive edge. Sadly, Singapore’s policy efforts to increase birth rates and boost productivity are yet to yield tangible results.
“Having said that, Singapore has invested heavily in state-of-the-art infrastructure, as well as the new Smart Nation concept, of which phase one should be completed in 2015. Additionally, plans to build a high-speed rail link between Kuala Lumpur in Malaysia and Singapore will enable greater connectivity and promote economic integration, bringing together Singapore’s investment and capital, and Malaysia’s land, cheap labour and other natural resources. Singapore also remains at the forefront of fostering closer economic ties within ASEAN, and has strong economic ties with the US and China.”