Before starting, I would like to begin by quoting Bechir Ben Yahmed, a famous Tunisian journalist and intellectual, so as to throw on this article some of his wisdom, and provide a hint on the article’s content since the title seems to be somehow shallow at first sight, but the meaning will be fully achieved by the end.
"L’aide au développement fournie par les pays riches à ceux qu’on dit (par politesse ou hypocrisie) « en développement » a-t-elle l’utilité qu’on lui a prêtée pendant le demi-siècle écoulé? Ou bien encore est-elle néfaste, comme certains le soutiennent?
Les avis sont partagés, le débat reste ouvert. Mais il apparaît de plus en plus évident que l’aide ne sert à rien ou même fait plus de mal que de bien lorsqu’elle est fournie à des pays qui n’ont pas de politique économique ou dont la politique économique est mauvaise. L’aide est une nourriture : si l’estomac qui la reçoit n’est pas en état de la digérer et de la faire passer dans le corps, elle alourdit l’organisme avant d’être rejetée sans avoir servi." (Ce que je crois face aux crises)
In a nutshell, the quote says that unless efficient economic policies are established, all sorts of help given by rich countries are useless and unnecessary, and could even be more harmful than beneficial. In this vein, the case of Singapore might well illustrate how true the quote is. Without foreign help, Singapore has impressively moved from the bank of penury and in-want conditions, to the podium of world’s leading economies. The economic history of Singapore seems to illustrate an outstanding example of well-achieved sustainable development goals, and therefore a model to developing countries. The rapid passage of Singapore from poverty to opulence is what this article tries to examine through focus on the country’s economic development strategy.
Singapore’s rapid economic growth can be attributed to two main strategies implemented since independence onwards. First, the "open door" policies promoting investments and foreign trade create higher exchange rate and a pro-liberal atmosphere for international commerce. Second, the use of tax incentives, also known as "holiday taxes," to the pioneers of each sector, to encourage productivity, and vitalize specific sectors. Policies enhancing macroeconomics have also a major role in Singapore’s development as they lower inflation, and improve fiscal management. The major impetuses behind creating such liberal climate can be associated to the following points:
1. Enforcing "Market-leading" policies to enhance investments in important sectors.
2. Heavy use of tax incentives to local and foreign companies to promote Industrialization.
3. Intensive investments in infrastructure to facilitate industrial and commercial activities.
4. A governmental engagement to improve human capital through both education and vocational trainings, and thus push for a higher performance at all levels.
These four main points have paved the way for a liberal climate facilitating investments and commercial transactions.
The effects brought about by the new economic policies were reflected in the three decades after reaching autonomy in 1959. That period marks the beginning of the complete changeover of Singapore’s economical status. In fact, Singapore has gradually evolved from a low wage labor-intensive industry to a high wage capital intensive industry ; from producing basic goods to producing high-tech commodity. During that period, Singapore struggled with its overburdening problems such as unemployment, poverty, lack of education, etc. The governmental commitment to rapid industrialization policies was in the interest of reducing unemployment, expanding the small size of its domestic market, and getting rid of its traditional economic activities which were in decline.
Rachel Van Elkan identifies four phases of the economical progress. The first phase, she calls "Import Substitution Policies", from 1959 to 1965, in which Industrialization has been promoted through the protection of the common market with Malaya. Membership in the Malaysian Federation made the size of the domestic market twice as large. In addition, the government did not deny the importance of education in producing an effective nation. Alongside its efforts to boost economical growth, it conceived an educational plan to human capital development, thus to ensure having an educated and well-bred workforce able to carry on sophisticated industrialization. Indeed, in 1965, there was:
- An increase of 33% in primary school enrollment.
- An increase of 94% in secondary school enrollment.
- An increase of 70% in university enrollment.
Owing to the development of human resources, the annual rate of GDP has increased approximately by 5% in only five years, from 1960 to 1965. During that period more than 21,000 jobs were created. Nevertheless, unemployment rate hovered above 10% and remained a main hurdle for the government.
The second phase, Van Elkan calls "Export Orientation Phase", from 1966 to 1973, takes place after gaining independence from the Malaysian Federation. The government attempted to reconstruct the industrial situation by replacing its original labor intensive industry into a more liberal, capital and skill intensive industry. This industrial restructuring shows a downfall in the number of "inward-oriented" traditional manufacturing companies. The "Export Oriented" phase is based on an excellent infrastructure to provide safe transportation for multinationals, and on an outward oriented trade system. The new "Export Oriented" strategy contributed into creating around 147.000 manufacturing jobs.
The third phase, Van Elkan labels as "Industrial Restructuring", and it lasts from 1973 to 1984, because the economic and industrial policies move from promoting labor and export activities into technological interests. The government sought to reduce the investment in traditional domestic industry. According to Rachel Van Elkan, "policies are no longer directed at securing an expansion of sectors like textiles, garments, electronic component assembly, and ship repair. […] Instead, they are encouraging skill- and technology intensive sectors such as electronics, computers, machinery, and pharmaceuticals, in order to generate more value added from the same amount of labour." Alongside the eminent workforce and the excellent infrastructure, the high-tech and engineering industries set the stage to the growth in business and financial services, which in its turn introduces the fourth and last phase of economic development.
The fourth phase is "Economic Diversification", and as the name suggests it, implies a sort of open business multifariousness. With Singapore having become an already developed country able to carry on sophisticated business, the government sought to implement policies in the profit of technological and highly advanced sectors such biotechnology, aerospace, computers and robots, shipbuilding, etc. These domains were seen as the future sectors that would guarantee economic development for the future centuries. In this vein, the government attempted to diversify production, trade, and investment policies in order to provide a climate supportive of modern investment and growth, and to open itself more to multinational companies. In the words of Rachel Van Elkan, "the introduction of new technologies through the establishment of multinational firms in Singapore, rather than licensing foreign technologies to local firms, produced three additional benefits:" which run as follows:
1. Multinational firms assume the responsibility for any damage caused by introducing a new technology.
2. Domestic companies in Singapore could easily adopt and develop the new technologies imported by multinational firms.
3. Upgrading the level of technology in Singapore.
Another major point that helped the openness of Singapore onto European and North American international companies is its strategic geographical position, which presented a direct trade route between the West and the East. To put it differently, Singapore, owing to its geographic location in the world, has become the Western Embassy in Asia.
From a small island and a former British colony with complicated unemployment crisis and limited natural resources, to a world’s leading economy with ; the path has never been easy either to the government, or to the people. Just as the success story of Yee Kuan Lew and his team was at the origin of inspiring Deng Xiaoping, who in his turn did the same thing in his country, Vietnam, it will be inspiring and motivating every other nation contemplating a rapid and quick development. According to Milton Friedman, a conservative economist, Singapore is a paragon of right development. Evidently, not all countries share the same strengths or weaknesses as Singapore, nor the same circumstances of development, but at least, by reducing capital restrictions and adopting a cosmopolitan free-market regime, anti-corruption, and liberal immigration policies, they can establish their first correct steps in the path of right development.
- Ben Yahmed, Bechir. Ce que je que je crois 2.Face aux crises (1980-1996). Jeunes
Afrique Livres, 1997.
- Bercuson, Kenneth. Singapore :
A Case Study in Rapid Development. Google books, 1995. Web. 06 October