AWARD WINNER
For Singapore, pain before greater heights: MAS's
Menon
In a speech - delivered as if in 2065 - the MAS chief paints a picture of the next 50 years
of Singapore
By Andrea Soh
[email protected]
@AndreaSohBT
AUG 6, 2015 5:50 AM
Singapore
IN 50 years, Singapore would rank among the top five richest countries in the world in per
capita terms, with its economy mainly driven by the export of capital and people.
But to reach there, it must first go through a painful period of economic transition when the
entire economy undergoes restructuring ­ the first time since independence that it has to do so
to such a wide extent.
This was how Ravi Menon, the managing director of the Monetary Authority of Singapore,
painted the next 50 years for Singapore to some 330 economists, businessmen and policy
makers from nearly 40 countries at the Singapore Economic Review Conference organised by
Nanyang Technological University (NTU) on Wednesday.
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In a speech ­ delivered as if in 2065 ­ he said the success of Singapore then was made
possible by a culture of innovation, resilience and cohesion.
Gross National Income (GNI) ­ which comprises income received by a country both
domestically and from overseas ­ would be the more relevant measure of Singapore's income
and standard of living, and climate change the defining issue for the global economy, he said.
Singaporeans would be expected to work only 1,400 hours a year, compared to 2,300 hours
this year, but would generate nearly three times as much income. The carbon intensity of
Singapore's economy would also fall, from 0.2kg of carbon needed to produce a dollar of output
today, to 0.05kg in 50 years.
Income distribution would improve, as heavy investments in building human capital and skills
coupled with a more progressive tax and transfer system reduce the Gini coefficient. But
income inequality would remain more stubborn: the top 1 per cent in Singapore would own
around 20 per cent of total wealth, he forecast.
Mr Menon said Singapore's economy is now in its third phase, after the earlier phases of
export­led industrialisation from 1965 to 1984, and the liberalisation and rise of modern
services from 1985 to 2010 that took the city­state from third world to first.
The land and labour constraints of Singapore "came to a head in the 2010s", he said. In 2011,
foreign labour made up one third of the total workforce, and it was "neither economically
efficient nor socially desirable" to allow that to grow faster than the local workforce. Hence the
shift to a productivity­driven growth model across the entire economy, compared to earlier
restructuring that had focused only on the manufacturing sector.
"This third phase of Singapore's economic history marked the most significant step­down in
Singapore's economic growth, with real GDP growing by 3.6 per cent per annum," said Mr
Menon. "However, it also marked the painful but successful economic transition towards
productivity­led growth."
The "decisive turnaround", he said, would come when domestically­oriented services industries
such as education and healthcare scaled up by investing in technology and talent, and
exporting their services.
After that, Singapore would from 2026 to 2040 enter into a phase of regional integration and
the emergence of the ideas economy, accompanied by widespread technological
transformation.
Malaysia and Singapore would set up an "Iskandar­Singapore Economic Zone" to provide
investors an integrated production and services base, he envisioned. Subsequently, the "Asean
Free Economic Zone" would also be established ­ a network of major cities in Asean connected
by extensive transport links and advanced digital communications, allowing for free movement
of goods, services, capital and people.
The bulk of the economic benefits would "rightly accrue" to the developing countries in
Indochina, but Singapore would also benefit from being the "nerve centre" of this network, and
be increasingly driven by the export of capital and people, Mr Menon said.
Singapore, too, would be well­positioned for the pervasive digitisation of the global economy
during this period, due to the two key initiatives of SkillsFuture and the Smart Nation push.
By 2040, climate change would become the defining issue for the global economy, and the
government would introduce a carbon tax to increase energy efficiency and modify
consumption patterns, predicted Mr Menon.
The green industry ­ comprising the development of renewable energy solutions, and carbon
trading permits and derivatives, among others ­ would emerge as the largest contributor to
Singapore's GNI by 2055.
The city­state would also build a dyke that not only prevents rising sea levels from inundating
the island, but also generates ancillary economic activities and allows Singapore to become a
major exporter of dyke solutions to other coastal cities around the world.
Mr Menon characterised the economic journey of the 100 years as a story of continual
restructuring "made possible by a judicious blend of the invisible hand of the market and the
visible hand of good government". A spirit of constant adaptation and lifelong learning would
distinguish Singapore, as does its ability to bounce back stronger from various upheavals and
crises.
Singapore would also be able to "come this far" because it worked together and stayed
together.
"It is not only about a willingness to pay higher taxes to support an ageing population but the
spirit of philanthropy and volunterism that has taken root in our society, especially over the last
50 years," he said. "Our economic success could not have been possible without this deeper
social cohesion that has held the nation together."
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