Singapore

Garry Rodan

• Publisher: Taylor & Francis
• Year: 2017
• Print ISBN: 9781138722699
• eBook ISBN: 9781351758123
• Edition: 1
• Topic: Social Sciences
• Subtopic: Politics
• Index: Social Sciences

This title was first published in 2001. A collection of valuable, previously published essays analyzing the major social dynamics shaping the increasingly complex society, economy and polity of contemporary Singapore. Topics range from ideology and culture to the character of the state and its institutions and the possibilities for political reform.

Part I
The State and Institutional Development

[1]

SOME ASPECTS OF ROLE OF STATE IN SINGAPORE

Mukul G Asher

Reprinted from Economic and Political Weekly, Vol XXIX, No 14, April 2 1994, pagination originally: pp 795–804

This paper analyses selected aspects of the role of the state in Singapore. Over the last three decades, Singapore has been able to combine good macro-economic performance and good social and demographic indicators with authoritarian policy and corporatist management. Singapore has used market as an instrument rather than as a mechanism.

The paper discusses the issue of economic boundaries of the state in Section II; budgetary policy in Section III; a role of public enterprises which has been extensive in Singapore in Section IV; and the Central Provident Fund (CPF), which has become an important socio-economic institution, in Section V.

The paper cautions that unless certain pre-conditions are met, pursual of policies and style of management similar to that of Singapore by others could lead to very different results. Therefore, great care must be taken in drawing lessons concerning the role of the state from Singapore’s experience. The paper suggests that rapid aging of the population combined with affluence would pose a formidable challenge to the policy-makers, and meeting it may require significant modifications to the present role of the state in Singapore.

I. INTRODUCTION

After nearly two and a half decades of almost uninterrupted rapid economic growth, Singapore is now an affluent society, with per capita GNP of US$ 14,210 in 1991.¹ In this remarkable economic performance, the Singapore state² has played a crucial role. Two major economic functions performed by Singapore are as a production base for selected goods and services, such as oil refining, disk drives, financial services, and transportation services; and as a middleman for the region and beyond. Its economy is dominated by the multinational companies (MNCs),³ and by the state-owned enterprises (SOEs), which in Singapore’s case may be divided into statutory boards and government linked companies (GLCs).⁴ The state ownership of land increased from 44 per cent of total land in 1960 to 76.2 per cent in 1985 [Lim el al 1988: 101]. The land in Singapore is usually leased for a long period, but its ownership is retained with the state. Since the early 1990s, Singapore has been making a concerted drive to regionalize its economy by developing investment and other economic relations in the region.⁵ Singapore also has high saving and investment rates;⁶ and high persistent structural surpluses in the budget.⁷

In Singapore, economic, social and related information is regarded as a strategic resource at the state’s disposal rather than a public good. In the remarkable economic performance and in bringing about the present structure and features of the economy, state’s role has been vital. The state has acted as strategist, planner, regulator or enforcer, manager and administrator, entrepreneur, social engineer, and a direct participant in economic activities. In the process it has either set up or has undertaken overseeing responsibilities relating to cultural, social, political and economic organizations and institutions.

As Singapore has till now provided a viable combination of high growth, good social and demographic indicators such as educational attainment,⁸ home ownership,⁹ and life expectancy,¹⁰ and authoritarian polity, with corporatist management,¹¹ its experience is of particular interest to those countries which give improving economic performance priority over other concerns such as political reform.

Singapore has used foreign models, at times explicitly to support particular socioeconomic strategy adopted. Margolin divides the ideological and intellectual transformation of Singapore into three periods since the 1950s. These are: “the ‘revolutionary’, Third Worldist one of the opposition years; the social-democratic one of the 1960s; and the ‘Nippo-Swiss’ one of the last two decades” (1993: 85). Each successive model is more and more economy-centred, and so has been the case with the Singapore society as a whole [Margolin 1993: 85].

A necessary but clearly not sufficient condition for an economy-centred society is near-monopoly of politics and political processes by the governing elite, and depoliticisation of the rest of the population and of issues. It also requires population which is willing to accept such a focus. An important determinant of this willingness is the ability to provide rapidly rising living standards, even to the elderly who are no longer participating in the labour force. Thus, authority, both political and moral, of the elites and legitimacy of the government in an economy-centred society are inextricably linked with the ability to provide rapidly rising living standards.

This paper examines the role of the state in Singapore in selected areas, and suggests possible implications for other countries. It is organized as follows. Section II discusses the issue of economic boundaries of the state.¹² In the Singapore context, it concerns the manner in which market has been used; and steps taken by the Singapore government to ensure effectiveness of its style of economic management. Budgetary or fiscal policy represents for any government an important instrument to influence aggregate economic activity, to assign priorities in government expenditure, and to raise resources through tax, non-tax and borrowing sources to finance government expenditure. The discussion in Section III of budgetary policy also briefly touches on the role of fiscal incentives in Singapore. A brief discussion of the role of public enterprises including privatization is provided in Section IV. One of the important socio-economic institutions in Singapore is its national provident fund, called the Central Provident Fund (CPF). Brief comments are offered about the CPF in Section V. The final section provides the concluding observations.

II. ECONOMIC BOUNDARIES OF THE STATE

In the conventional economic literature, market and government represent two alternatives to economic organization. The balance between the two has undergone significant changes over time. Before the great depression of the 1930s, faith in market mechanism and in Adam Smith’s ‘invisible hand’ under which individuals pursuing their own self-interest were pictured as achieving the overall maximum well-being of the society was extremely high. But the great depression of the 1930s revealed in a dramatic manner failure of macro-economic co-ordination; and the second world war demonstrated possibilities of effective government planning and intervention. This, combined with the importance attached to the goals of distributive justice and of positive freedom, designed to improve the capacity of individuals to expand consumption demands, meant that role of government expanded significantly. But such expansion led in due course to intensive examination of the concept of government failure. Reasons for such failure may be summarized as follows: (i) consequences of many government actions are extremely complicated and difficult to foresee; (ii) government may promulgate policy measures, but it has only a limited control over relevant variables; (iii) there is a gap between legislation and intention, and between those who set broad policy framework on the one hand and those who frame detailed rules and procedures and who actually implement them on a day to day basis on the other; and (iv) different interest groups may vie with each other in a society, and this may complicate the task of defining what is overall public interest.

In addition to the failure in macro-economic co-ordination noted above, other reasons for market failure include monopoly power (when buyers and sellers are price-makers rather than price-takers and entry and exit barriers are high); externalities (when actions by an individual or a firm affect cost or utility functions of others but these do not get reflected in the market); public goods (when marginal social cost of an additional person consuming a good is zero and when those who do not pay cannot be excluded because of technical infeasibility or high cost); and asymmetric information (when either a buyer or a seller has markedly more relevant information in a transaction). However, as Weimer and Vining (1992: 76) have noted, “market failure is most likely in situations where information asymmetry occurs in combination with public good problems in secondary markets”.

In addition to the above types of market failure, reservations about the efficiency of capital and insurance markets, and concern for values other than efficiency such as equity, including income and consumption distribution, freedom and human dignity provide the analytical rationale for the role of government in the economy.

Thus, both market and government are imperfect alternatives. Indeed, as Helm has noted, “…. economic theory does not provide any evidence to support a general preference either for markets or for planning” (1989: 42–43, emphasis in the original). A pragmatic approach would be to assess which of the two failures is greater in a specific situation and context, and to then decide on whether market or government is more appropriate. If government is chosen, it is also necessary to design the instruments of intervention in a careful manner, taking into account sources of government failure noted earlier.

While the emphasis in the economics literature has been on market and government (or planning) as alternative mechanisms, economic success achieved by Japan and other east and south-east Asian countries, including Singapore, which have borrowed heavily from Japanese methods of economic and to a lesser extent political organization and management, has raised many complex issues regarding market and government. Friedland has described the Japanese policies as favouring “…. producer over consumers, bureaucratic control over political debate and stability over innovation” (1993: 12). Indeed, the above policies, and the role of the bureaucracy in guiding markets have led some analysts such as Clyde Prestowitz Jr and Chalmers Johnson...

Table of contents

• Cover
• Half Title
• Title Page
• Copyright Page
• Table of Contents
• Acknowledgements
• Series Preface
• Introduction
• Part I The State and Institutional Development
• Part II Social Transformations and Political Directions
• Part III Ideology and Culture
• Part IV Social Policy
• Name Index