An extract from Kenneth Jeyaretnam's speech in Jurong Rotary Club:
Good Evening, Ladies and Gentlemen of the Jurong Rotary Club, thank you for inviting me here tonight. Before I came here I had a vague idea of what the Rotary Club stood for. I understood that it was about like-minded professionals meeting regularly and organising charitable works. However I wanted to know more so I went to the Rotary International website where I watched a video which described some of your more commendable global initiatives such as your programme to eradicate polio outside the laboratory and your educational scholarships aimed at promoting international peace and understanding. Some of the phrases, which I remember the video using to encapsulate the philosophy of the Rotary Club, were: “Service above Self”, “Make A Difference”, and “Become Involved”. I would like to discuss the relevance of the last two phrases to the mission of the Reform Party.
As I’m sure you’re aware, I have the honour of being the Secretary-General of the Reform Party, which was founded in July 2008 by my father, the late Mr. J. B. Jeyaretnam. That makes it by a long way Singapore’s newest political party. The Reform Party aims to make a pretty significant difference. Our immediate aim is to get elected to Parliament in the next election but we want to be perceived as a potential alternative government by the time of the election after that. As our name states, we’re about reform. We aim to achieve reform, not only in the political sphere but in the economic and social spheres as well. We believe not only that you can have both freedom and prosperity but that beyond a certain level of income you cannot have prosperity without freedom.
Now I’m aware that you are all hard-headed businesspeople and you’re probably thinking that freedom doesn’t really matter because you can have prosperity without freedom. Singapore’s per capita GDP is one of the highest in the world but at the same time Freedom House rates Singapore as near the bottom of the partially free countries with a score of 4 (where 1 is most free) for civil liberties and 5 for political rights. However what is noteworthy is that Singapore appears to be an outlier. If we look at the top twenty countries by nominal GDP in 2008 as measured by the IMF, World Bank and CIA, we find that between 85% and 95% of the countries on the list rated between 1 and 1.5 for the combined average rating for political rights and civil liberties. The countries that did not fall into the category of free states were all oil exporters with low populations such as Qatar and Kuwait (though Kuwait rates as slightly freer than Singapore). You can argue about the direction of causation. However also consider that Singapore finds itself in the company of some of the world’s poorest countries in its ranking in the Freedom House Index. These include Pakistan, Nigeria, Haiti, Uganda and the Central African Republic.
Now I’d like to move on to examine the quality of Singapore’s per capita GDP. Using the Yearbook of Statistics, 2009, I computed that the share of GDP going to foreigners in 2008 was approximately 45%. If we divide indigenous GDP by the total Singapore residential population of approximately 3.6 million we arrive at a figure of approximately SGD 38,000 or USD 27,400 at average 2008 exchange rates. This would push Singapore’s ranking in the charts down from around 22 on average to between 25 and 30, about the same level as Israel and below Hong Kong. This accords more with the fact that employment income’s share of GDP is only some 40% and domestic consumption (which is a good proxy) for employment income) is about the same level. And our inequality of income is the second highest in the world (behind only Hong Kong) and ahead of both the United States and China, both of which have huge regional variations. According to a UBS survey recently the living standard of the median Singaporean lagged behind his counterpart in South Korea, Taiwan, Japan and Hong Kong. After adjusting for the differing costs of a similar basket of goods, his income was only on a par with a Malaysian worker. In recent years our GDP growth rate has been high but this has mainly been achieved by adding more inputs of capital and labour (from abroad) rather than by raising productivity which stagnated in 2007 and declined sharply in 2008 and 2009.
The current government’s economic model appears to be one of maximising GDP growth at all costs without paying attention to the question of whether this is raising the living standards of the average Singaporean or the effect it is having on the quality of life. In a recent paper entitled “Globalizing State, Disappearing Nation: The Impact of Foreign Participation in the Singapore Economy” by Linda Lim and Lee Soo Ann, the authors explore the implications of current policies:
The 21st century presents the Singapore economy with new challenges.These include its inevitably high cost structure (reflecting increasing local shortages of land and labour, but not of capital), the restructuring of global value-chains in industries in which it had specialized (such as electronics and computers), and the emergence of new competitors for capital, technology, skills and global markets, particularly China and India. In response, rather than leaving the risks of restructuring the national economy to local and global market forces and the private sector, and loosening the bonds of state control with economic maturity, as other developmental states such as Taiwan and Korea and economies-in-transition such as China and India) have done, the PAP government has chosen a strategy of “more of the same”.
This includes bureaucratic targeting of favoured sectors for receipt of (now much more costly) state subsidies and tax-breaks directed to attracting capital investment and technology from foreign companies and institutions serving international markets. But unlike the earlier era of labour- and then skill- and capital-intensive multinational export manufacturing, the newly favoured sectors (such as “life sciences”, gambling casinos and high value-added services like finance, medicine and education) create disproportionately more jobs for foreigners than for locals, at all skill levels, and can only be sustained by massive immigration. They are also much more capital-intensive and risky, and subject to stronger global and regional competition, than was the case in the past. Because of these simultaneous “big bets” in a small place, the reliance on external factors of production, and the costs of failure, are much higher, arguably requiring even greater state control to maintain social stability.
It goes on to say:
These policies, together with changes in the global economic environment and the globalization processes of multinational companies, have resulted in much more ambiguous impacts on the local population. GDP growth, hinged to globalization in specific ways dictated by the state, has continued to be generally strong despite occasional setbacks which reflect continued if not increased vulnerability to the vicissitudes of volatile regional and global economies. But growth itself has occurred with low shares in GDP for labour incomes (relative to capital returns), and consumption (relative to investment and government expenditure), increased income inequality, and a decline in the relative incomes of local Singaporeans relative to foreigners. The specific forms and requirements of GDP growth have also contributed to the undermining of national identity and social cohesion which previously held together the people of this “hub economy” and sustained their support for their government.
The article speculates on the reasons for these policies:
It has also earlier been suggested that “the self-interested bureaucracy (is) likely to resist privatization (and) the ruling party is increasingly motivated primarily by the wish to keep itself in power”. Besides addiction to political control for its own sake, reasons for this might include lack of trust in an increasingly disadvantaged and disempowered indigenous electorate, and an understandable eagerness to hold on to the extraordinarily high salaries and perquisites given to leaders of the ever-expanding state economic apparatus, including a remarkable 60 per cent increase in salaries for government ministers already earning seven-figure U.S. dollar salaries, that generated considerable local disaffection. The fact that government officials are rewarded economically, through salaries and bonuses, as well as politically, through promotion in the ruling party hierarchy, for delivering GDP growth, may also lead to “growth fetishism” and thus to preference for the easiest route to growth, which is through the addition of inputs of foreign capital, labour and skills.
Singapore’s continued rapid GDP growth in the post-industrial era has thus been bought at the price of expanding and entrenching the economic as well as political dominance of a one-party state that maintains its power in part by brokering the increased and even privileged participation of foreign capital, talent and labour in the “local” economy. Foreigners beholden to the state for its beneficence and their own presence are unlikely to challenge its authority, in the way that an independent, globally competitive and non-state-dependent domestic entrepreneurial class—still weak and largely absent in Singapore—might.
Now you might have listened to this and say it is all very well to criticise but how would the Reform Party make a difference? Given Singapore’s peculiar set of economic circumstances what choice did we have? An alternative government would not be able to do better. I would like to respond by outlining a number of policy areas in which we would advocate a different path. We believe this would lead to better outcomes for the bulk of ordinary Singaporeans. Let me say straight away that the Reform Party is a liberal free market party and that our openness to foreign investment and trade would not change. Singapore’s small size and lack of natural resources militates against anything else. In fact in certain areas we believe in less state control not more. The Reform Party would, if elected to power, adopt the following policies:
Invest More in Education
The government currently spends only around 2.8% of GDP on education which is one of the lowest in the world. By comparison Sweden spent some 8% of Gross National Income in 2005 and the UK and the US both spent over 5% of GDP. Even Malaysia spent considerably more. An illuminating statistic that I read recently in the IHT was that we only spend about one-third per pupil of what Japan spends on primary education despite having slightly higher GDP per capita levels. In fact the reason Singapore performs reasonably well in international comparisons of exam scores is probably due to the fact that parents are forced to “top-up” their children’s’ education with private tutors and that children with disabilities are effectively excluded from school. The Reform Party would raise education spending, make education universal, free and compulsory up to secondary level. We would also look to broaden access to and improve the quality of tertiary education here so that more of the population can study here without having to go abroad which contributes to the brain drain. Some of you may object as to how we can afford to do this. My answer is firstly that we cannot afford not to if we are not to become ever more dependent on importing human capital from abroad. Savings can be found by reducing wasteful and unnecessary expenditure in other areas such as defence. Government saving can also be reduced given the excessive accumulation of unproductive overseas assets. A better educated domestic workforce should in time increase the tax base as many foreign workers at the top end may have ways of avoiding even Singapore’s relatively low levels of tax.
Minimum Wage
The Reform Party believes that Singapore will always need some foreign workers because the local labour pool is small. However a minimum wage will prevent our less well-off workers from being undercut by cheaper foreign labour from abroad and force our employers to use labour more productively.
A Rational Immigration Policy
There must be a reassessment of whether it makes sense to continue to have such a liberal immigration regime which has seen Singapore’s population rise by over 60% in the last 20 years. If you take the current government’s argument that we need more foreign workers to counteract an aging population to their logical conclusion then there is theoretically no limit to the size of our population since in time the new residents will also age and their fertility levels will drop. Most of the workers admitted are not those with special skills but semi-skilled mid-level workers who compete directly with Singaporeans for jobs. Also foreign students now comprise up to 20% of the student population at our tertiary institutions. These students benefit from the tuition grant and then are allowed to work here and quickly acquire citizenship without doing NS. This is extremely inequitable and corrodes our national identity. The Reform Party favours a points-based system where only highly-skilled migrants would be admitted. Employers would be required to show that they could not find Singaporeans to fill vacancies before they were allowed to employ foreign workers.
Reform of CPF
The Reform Party would like to see more control over what proportion of their income Singaporeans wish to save. It would do this by earmarking a certain percentage of total CPF to provide:
A Basic National Health Insurance Scheme
Those in private or employer schemes could keep their current insurance and perhaps receive a tax deduction on the cost of their scheme if they opted out of the public health insurance option.
A Basic Pension
Unlike the CPF Life Scheme the Reform Party’s scheme would pay everyone a basic lifelong pension from the age of 65 provided they had worked in Singapore and contributed to CPF for a certain number of years. After funding these two requirements Singaporeans should be free to choose what proportion of their income they want to put into CPF and where they wish to invest it. Singaporeans could continue to use CPF to finance their property purchases. They should be able to withdraw their excess contributions but at the cost of losing the tax benefit. It has been pointed out that Singapore’s high ranking in indices for economic freedom, such as the one compiled by the Heritage Foundation, are misleading because they fail to take account of Singapore’s forced savings scheme as well as the dominant role of the state sector.
HDB Affordability
The Reform Party would examine public housing could be made more affordable by greater competition in its provision. We would also review the government’s role as the biggest owner of land in Singapore and its pricing policies for land sales. In addition we would end the current restrictions on minority owners of HDB properties not being able to sell them except to a minority buyer which has led to a two-tier market. This has disadvantaged minorities who often can only sell their flats for a lower price than the market price.
Privatization of the State Sector
The Reform Party believes that no vital national or strategic interest is served by the government continuing to hold majority stakes in most of the top Singapore companies. Most of these companies are mature and can stand on their own two feet. It would seek to sell them off directly and to privatize Temasek, and possibly GIC, by listing its shares on the stock market and distributing the shares free to Singaporeans.
Reduction of Taxes and Fees on the Less Well-Off
As part of its drive to increase domestic consumption the Reform Party would cut taxes and fees that have a disproportionate impact on the less well-off, such as GST. It would examine whether HDB conservancy charges and other fees were excessive and whether efficiencies could be introduced.
Restoration of Fundamental Rights
Whilst intangible, there is plenty of empirical evidence that political and civil liberalization is a spur to economic growth. I have cited earlier the correlation between GDP per capita and countries’ ranking in the Freedom House index. Undoubtedly one of the reasons this is so is because creativity and originality of thought are both dependent on being able to voice dissenting opinions and to criticise. Also without criticism and freedom of information government mistakes are not discovered and bad policies are not changed. I would like to quote from what President Obama said on his trip to China:
I'm a big supporter of non-censorship...... Now, I should tell you, I should be honest, as President of the United States, there are times where I wish information didn't flow so freely because then I wouldn't have to listen to people criticizing me all the time. I think people naturally are -- when they're in positions of power sometimes thinks, oh, how could that person say that about me, or that's irresponsible, or -- but the truth is that because in the United States information is free, and I have a lot of critics in the United States who can say all kinds of things about me, I actually think that that makes our democracy stronger and it makes me a better leader because it forces me to hear opinions that I don't want to hear. It forces me to examine what I'm doing on a day-to-day basis to see, am I really doing the very best that I could be doing for the people of the United States.
I would like to conclude by saying that I hope I have convinced you that the Reform Party has credible ideas and policy alternatives to deal with some of the problems and challenges Singapore faces. Some of you will of course still be sceptical-perhaps you are a civil servant or work for a GLC-linked company or belong to that segment of the population which has done well from current policies. Maybe not all of you are Singaporeans. However to those of you who like what the Reform Party has to say, I would urge you to “make a difference” and “become involved” by joining us. You can become a member by going to our website and downloading a membership form. This does not mean you have to play an active role. We will keep your membership details confidential. For those who want to play a more active role we are looking for talented people to become candidates or help with policy formulation in different fields. We also need donations if we are going to be able to fight an election and to achieve our aim of getting into Parliament. I will end with same words I used at the Reform Party dinner:
Wake Up, Stand Up, Sign Up!
Ladies and Gentlemen, thank you very much.
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