When discussing Asia’s economic success, economists always take Singapore as a role model to develop nations and create wealth. At the onset of celebrating Singapore’s 50th anniversary of nationhood, Sri Lanka as a democratic and socialist republic, still has many lessons to learn from Singapore. Dr. Razeen Sally, a Director of the European Centre for International Policy Economy and Associate Professor at the Lee Kwan Yew School of Public Policy at the National University Singapore, recently shared some insights about the possible lessons that Sri Lanka can learn from Singapore in developing the country through a fresh set of reforms that would help the country navigate while facing a weak global economy at the same time, which is highly competitive.
Dr. Sally said that Sri Lanka is at crossroads and during the previous decade three or four things had gone out of control.
Political authoritarianism, ethnic relations, extremely unbalanced foreign policy which was very much weighted towards China and the de-liberalisation of the economy are some of the key factors that went in the wrong direction. Since January 8, we have seen that some of the things are slightly moving towards the right direction with more ethnic reconciliation and a balanced foreign policy. We saw several economic policy mistakes in the previous regime. One of my colleagues described Lee Kwan Yew as a political superman. Lee Kwan Yew came here in the 1950s and when he was in Colombo he thought that Singapore could emulate Colombo. He again visited when Dudley Senanayake was the Prime Minister but by then he knew that things were going wrong.
There have been false dawns in the past in Sri Lanka one was the war and another was in 1977 during the Black July. The Singapore Airlines management contract with SriLankan ended during the time of the UNP government and the Black July snapped everything else away. Speaking about what lessons Sri Lanka can learn, Dr. Sally highlighted the conclusions first.
Let’s start from the conclusions. Sri Lanka cannot replicate Singapore in South Asia. Singapore is the only fully-functioning centre where many of its experiences and lessons can be applied to the rest of the world. When taking Singapore as a model, some of its historical background shows how it has become a developed state today. Singapore was a small island located along the coast of the Indian Ocean that was engaged in the sea growing trade. The next turning point took place in 1819 when Sir Stamford Raffles founded the Modern Singapore.
During this time the British Empire was eyeing a port of call in this region to base its merchant fleet and to forestall any advances made by the Dutch. Singapore, already an up-and-coming trading post along the Malacca Strait, seemed ideal. Singapore was a free port from the beginning and was fully open for the people from 19th to 20th century. But eventually it was compromised by the Great Depression and then from the late 1940s to the late 1950s Singapore stagnated, it was politically unstable and underwent many political crises. In 1959, the growth of nationalism led to self-government and the country’s first general elections where Lee Kwan Yew became the Prime Minister of Singapore.
Today Singapore specializes in high value manufacturing while using only 10 percent of its workforce. Singapore manufactures high-end electronics, pharmaceuticals, petrochemicals while specializing in maritime engineering and aviation. It has diversified over a broad spectrum of avenues from accounting to business, resorts and education and today it is the fourth largest financial centre in the world. Singapore is the hub for higher education where today it is the ultimate destination for international students to complete their higher education. It is also a hub for water services. This gives a picture of how Singapore has changed. Singapore is a global city; however we come across all kinds of cities. There are only a handful of global cities in the world out of which London, Hong Kong, Dubai and Singapore stand above the rest.
Singapore is a free port and therefore tariffs are zero. Foreign investment is welcomed but investment in several sectors is restricted. The banking-dominated financial system is well supported by liquid capital markets. As of 2014, 119 of 124 banks were foreign. The state retains some ownership in the financial sector. This is what Singapore is today. Singapore is ranked third among Asian countries in 2014 on Gallup’s Potential Net Migration Index, ranked first worldwide for the ease of doing business by the World Bank for 2012, consecutively for seven years. Times Higher Education placed the National University of Singapore at number 21 among the top 100 universities in the world and 13th in Engineering and Technology category.
Lessons for Sri Lanka
According to Dr. Sally, the essence of the ‘Singapore story’ is getting the basics right. Simplicity, predictability and consistency have been three components that contributed to the success of Singapore. Singapore’s economic freedom score is 89.4 making its second freest economy in the 2015 index. Already benefiting from one of the world’s highest levels of economic freedom, Singapore has reinforced its commitment to continued reform. Sustained efforts to build a world-class financial centre and further open its market to global commerce have led to advances in four of the 10 economic freedoms, including financial freedom and investment freedom. Singaporean society has a low tolerance for corruption and the effective rule of law strongly under girds all aspects of economic development. More work to reduce the state’s involvement in key sectors will be necessary to realize continued advances in economic freedom.
Dr. Sally further mentioned that as in most countries, there are on-going concerns over issues of transparency and the power of deeply entrenched groups. Political speech is regulated, inhibiting organised pressure for policy changes. Contracts are secure, there is no expropriation and commercial courts function well. Singapore has one of Asia’s best intellectual property regimes.
What should be done?
Singapore’s regulatory framework is one of the most efficient in the world. Starting a business takes three days and required procedures are straightforward. No minimum wage is enforced but wage adjustments are guided by the National Wage Council. The state funds housing, education, transport and healthcare subsidy programmes and influences other prices through regulations and state-linked enterprises.
Concluding his speech Dr. Sally said, Sri Lanka should always follow the categorizations. Ever since it had access to the open economy there has been corruption. Therefore, policies and regulations have been ignored. As a result, Sri Lanka has de-globalized over the past few years. There need to be barriers on all kinds of investments and trade promotions. Dramatic changes need to be done on foreign investments to make openness work. Sri Lanka has to take advantage in key moments of opportunity. It just recovered from an era of highly arbitrary authoritarian politics and the Opposition now should take serious actions against corruption if Sri Lanka needs to improve. Sri Lanka is not a secular multi-ethnic society but it should be one and the foreign policy should align with your economic interests. If these components do not exist, then Sri Lanka has no chance to become the Singapore of South Asia.