Singapore’s domestic economy is unsustainable, has low efficiency

Posted on 26 April 2012

Ho Kwon Ping, SMU’s board of trustees’ chairman, says liberal import of unskilled workers led to low wages and productivity.

The domestic economy cannot be sustained with cheap labour as more and more of them are needed just to keep pace with growth. Infrastructure such as our transport system simply cannot cope.

Singapore has a peculiar problem: We have a two-tiered economy that is not sustainable.

There is the high-productivity and skills-competitive economy, which includes manufacturing and financial services.

And then there is the low-efficiency, unsustainable domestic economy, which is defined as all the businesses catering to customers in Singapore. These include small and medium-sized enterprises dealing in retail, hospitality, construction and cleaning industries, and so on and so forth.

This sector’s low wages and low productivity is due to the liberal import of unskilled workers.

As a result, this relentless increase of such workers to satisfy the growing domestic economy has already outstripped the ability of transport and housing infrastructures to keep pace.

Ho Kwon Ping.

Look at what is happening to our public transport system now. Rough ride, you know.

Moreover, it is this low-efficiency domestic sector that requires restructuring the most: Wage increase coupled with rapid productivity will be game changers.

And this is where Professor Lim Chong Yah’s much talked about “Shock Therapy” can be applied, provided specific sectors are first identified.

Industry-specific measures and a high level of coordination are necessary for therapeutic effects to kick in, and wage increase must go hand-in-hand with rapid productivity without delays.

It shouldn’t become a chicken-and-egg issue to see whether productivity or increased wages come first to drive the other. They should work in tandem.

It is also disingenuous of Prof Lim’s critics to use scare tactics such as “scaring investors away” and “drastic economic decline” to reject his “Shock Therapy” proposals.

Critics of the plan should run their economic models and make their findings available.

The merits of the proposals can then be debated with coherent arguments that are grounded in data and reason.

This is a 60-second reduction of the original article published in The Straits Times on April 25, 2012.

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- who has written 2685 posts on New Nation.

Wang Pei can be considered a new citizen of Singapore. She has been here all her life, just that her environment's changed beyond recognition.

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  • Paul Rice

    The lack of efficiency in Singapore has been known for a long time . It has also failed to foresee that many production processes in the future will be automated , and even the construction sector will have to change dramatically and become much more high tec.
    Then there is the problem of creativity which requires people who do not automatically believe or accept what government says