Singapore needs innovative economic plans to maintain its position as a global economic powerhouse. Its current ones are insufficient.
By Oliver Ward, Edited by Isabel Yeo
According to Lee Kuan Yew, Singapore’s past economic success was dependent on the population’s “innovativeness, entrepreneurship, team work, and…work ethic”. Today, innovation seems to be missing from Singapore’s economy. As a result, Singapore’s economy is struggling to meet growth targets.
The country is now grappling with issues of rising inequality, the wavering popularity of open immigration policies and slower economic growth. Growth rates are dipping in the key sectors of manufacturing, shipping and services. The country’s new restrictions on foreign labour are contributing to the problem of labour shortage as well.
Capital Economics Asia Economist, Krystal Tan, believes that “going forward, Singapore’s economy is likely to see weak growth rates of 1-ish percent and that is nothing to be happy about”.
(Source: The World Bank)
The country is quickly approaching its space and workforce growth limit, and the city-state needs some innovation and creativity to drive future economic growth. Singapore needs another Lee Kuan Yew-type visionary to encourage innovation and entrepreneurship among its people.
The Government has unsuccessfully attempted to inspire economic growth
Prime Minister Lee Hsien Loong has tried to increase the size of the Singaporean workforce with some initiatives. His government encouraged women to join the labour pool, promoted older people getting back into work and previously endorsed the arrival of foreign workers into Singapore.
He also launched a decade-long, US$2.6 billion initiative in 2010 aimed at boosting the productivity of existing industries. The target was to increase productivity by 2-3%. However, the results have so far only yielded a 0.5% growth in productivity.
The country’s economy cannot merely rely on its existing industries for revenue. It needs to create and expand into new industries to bring new streams of revenue to the island.
The Government can do more to encourage innovation and development
Singapore could try to instigate a start-up boom by offering enticing grants to research and development in high-end industries like tech, biotechnology, energy and health. The national budget for research and development has only increased minimally in the last few years.
Upgrading the physical infrastructure for businesses should also be a priority. Mayor for the North West District, Dr Teo Ho Pin, called for the relocation “of existing supporting business and building new business clusters for ‘future economy’ industries, including smart city technologies, medical and pharmaceutical manufacturing, or finance and professional services.”
A level playing field will see growth in the private sector
While government-backed companies were essential to Singapore’s growth in the 1960s and 1970s, they are now stifling growth and innovation in the private sector. Smaller, private start-ups and medium-sized companies (SMEs) who add innovation and creativity to the market are being muscled out by larger, government-run rivals. SMEs account for 99% of businesses in Singapore, yet contribute less than half of its Gross Domestic Product.
Conditions favourable to smaller companies like tax cuts and the negotiation of lower international trade tariffs will bring new ideas, new processes and new industries to Singapore. Current tax regulations for SMEs are not as enticing as other regional start-up locations.
With the negotiation of lower trade tariffs, these benefits could also go much further. Smaller start-ups in Korea, Europe and the US are looking for international joint ventures. Cooperation with international start-ups could bring new technologies to Singapore and further drive growth. With a stable political system and well-educated society, Singapore already has the ideal conditions for start-ups to thrive. Singapore should capitalise on this through forward-thinking economic policies aimed at igniting a start-up boom.
Lee Kuan Yew championed Singapore’s investment in education
Besides innovation in the business sector, Singapore would also benefit from innovation in the education sector. The older Lee’s school system was forward thinking, the younger Lee needs to ensure his system is too.
Ex-Education Minister, Heng Swee Keat has set out his plans to innovate and improve the education system of offering a more holistic approach. In a speech to Parliament, he advocated a move away from knowledge-based learning. He said the school system should be “more about how to process information, discern truths from untruths, connect seemingly disparate dots, and create knowledge even as the context changes.”
The “Thinking Schools, Learning Nation” initiative has seen schools move away from a focus on quantity of knowledge and concentrate more on the quality of the skills the children learn. Through this forward-thinking education system, the workforce of the future will be dynamic and able to adapt to any new industry.
The next generation cannot merely be book-smart. As Lee Kuan Yew said, “those with good minds to be scholars should also be inventors, innovators, venture capitalists, and entrepreneurs; they must bring new products and services to the market to enrich the lives of people everywhere.”
A different challenge for Lee Hsien Loong
In guiding Singapore through its economic development, Lee Kuan Yew had the advantage of looking at economically developed countries in the West and analysing their successes and failures. His son, Lee Hsien Loong, does not have the same benefit. Singapore is already a first-world country, on par with the developed West – solving its new economic problems and facilitating another economic transition will require great foresight.
If Singapore wants to see great economic growth once again, its government needs to implement innovative economic policies, create a level playing field in the private sector and construct an education system that moulds the innovators of tomorrow. Singapore had a visionary in Lee Kuan Yew; now it is time for his son to forge his own legacy as a visionary and innovator himself. The future of Singapore’s economy depends on it.