The Role of the State in Shaping Development: Two Decades of Growth in Singapore

Author(s): Kevin Grice and David Drakakis-Smith

Source: Transactions of the Institute of British Geographers , 1985, Vol. 10, No. 3
(1985), pp. 347-359
Published by: The Royal Geographical Society (with the Institute of British
Geographers)

Stable URL: https://www.jstor.org/stable/622183

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 347

The role of the state in shaping

development: two decades of growth in
Singapore
KEVIN GRICE and DAVID DRAKAKIS-SMITH

Department of Geography, University of Keele, Keele, Staffordshire, ST5 5BG

Revised MS received 2 May, 1985

ABSTRACT

This paper examines the changing economic fortunes of one of the most dynamic of Third World com
independence just 20 years ago. In this short period of time, Singapore has shifted from post-coloni
expanding industrial economy and most recently into a 'second industrial revolution' based on skilled
nology and sophisticated commercial services. The discussion touches upon many themes, such as the
division of labour and the role of multinational corporations which have featured prominently in re
role of Third World industrialization in the global economy. However, the focus is firmly on Singap
way in which social as well as economic change has been carefully shaped by the state to ensure c
prosperity even with the current global recession.

KEY WORDS: Singapore, Industrial development, Global recession, Economic readjustment, Social cont

THE DEVELOPMENT OF CONTEMPORARY movement, the local region was unstable and prim
SINGAPORE ary commodity exports were erratic. It degenerate
into the seedy city of Paul Theroux's Saint Jac
Economic growth (Theroux, 1973). Moreover, with the intended run
As an independent city-state, Singapore down
is justof20the British naval dockyards and less than
years old. It acquired self governing status
perincent
1959of the labour force in manufacturing
soon after the demise of British Malaya; then became in the 1960s looked dim, particularly
prospects
part of Malaysia from 1963 to 1965; and finally
the population was increasing at a massive rate du
became a republic in 1965. Singapore wastoinitially
a high birth rate and in-migration fostered by th
founded by Sir Stamford Raffles in political
1819 and instability in neighbouring Malaysia an
throughout the nineteenth century functioned as the As with most Malaysian cities, Singapore
Indonesia.
primary trading port for most of the Malayhas penin-
always been predominantly Chinese and still is
sula, particularly for the export of rubber. Its role
Chinese comprise 77 per cent of the present 2-5 mi
was boosted by the opening of the Suez canal
lionwhich
population, Malays 15 per cent, Indians 6 pe
concentrated most shipping from Europe to theand
cent East
others 2 per cent.
through the Straits of Malacca. During the At late
independence, political power was assumed by
colonial period Singapore also becamethe
a major
People's Action Party (hereafter PAP), heade
British naval base. The ascendancy of the island
by LeewasKuan Yew. Ostensibly socialist, the PAP ha
such that on the eve of the British departureproletarian
from the origins but had deftly out-manoeuvere
region, Singapore comprised by far the largest urban communist ally in the transfer of power o
its former
settlement. Its population was one million, the being
departure of the British. For Lee Kuan Yew, wh
triple that of Kuala Lumpur, the second city has continued
of the to retain control of the PAP and
peninsula and the present capital of Malaysia.
government, socialism meant a more efficient rather
The immediate post-war years were, however,
than a more equitable state. Thus, despite a huge
growthno
characterized by economic stagnation. Singapore in GDP, Gini coefficients reveal that
longer played a pivotal role in British colonial tradewidened during the 1970s as wages were
inequality

Trans. Inst. Br. Geogr. N.S. 10: 347-359 (1985) ISSN: 0020-2750 Printed in Great Britain

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348 KEVIN GRICE and DAVID DRAKAKIS-SMITH

kept fairly low. Since 1978, however, year and has an averagemuch higher
room occupancy rate of 86
wage increases have been encouraged per cent. as part of the
re-vamping of firms for Singapore's self-styled
As a result of all these changes, by 1980 the GNP
second industrial revolution. growth rate was into double figures and had even
The development philosophy ofthat
outpaced the PAP
of Japan, being and
on a par its
with those of
leader has been clearly spelled out oil-producing
the Arabian over the states.last 20unem-
Moreover,
years. Its theoretical foundation ployment iswasthedown belief
to 3 per centthat 'a was
and inflation
strong, wise and far-sightedthegovernment will lead
lowest in the capitalist economies of East Asia.
... public participation is viewed basically
Despite such as a Singapore
export performances, pro- still
cess of mass education' (Wang had its and
problems.Tan, 1981,
These resulted p.from its
primarily
241). Planning is therefore, a reliance top-down process
on overseas markets with
and imported materials,
goals set by the leaders of thefeatures politicalwhich would seem to make the
hierarchy and economy
the state bureaucracy ensuresvery that vulnerable
these to the are
world economic
carried recession.
out. Such was the control of the Indeed,PAPin 1980 that
the balance forof payments
many deficit
years not a single opposition stood member at almost US was$5000 elected
million, although
to net
parliament. capital inflow from overseas investments has suc-
Changes in policy occur quite cessfully outweighed this deficit
frequently, for a number of
often
being reversed in a relatively short space of time.
years.
These changes are conveyed to A good
the deal of the economic
public through growth in Singapore
the mass media, over whichhas the government
been achieved has
as a result of direct foreign invest-
almost complete control, and ment poster (Chia,campaigns.
1977; Hamilton, 1983). As In a this respect
result Singapore is a city of slogans. Singapore is vastly
The different
PAP regard from Asia's other New
their development philosophy Industrializing
as very Countries (NIC's), as the World Bank
pragmatic,
others regard it as dictatorial, likes even
to refer fascist
to Taiwan, South(Gook, Korea and Hong
1981). However, balanced (even restrained)
Kong, each of which largely criticism
financed its industrial
of Singapore's development growth from domesticto
is difficult sources.
obtainAs a result, although
from Singaporeans for whomallgovernment four have a narrow loyaltiesrange of labour intensive,
make most appraisals descriptive manufacturing
at best exports,
and Singapore
fawn-has nurtured
ing at worst (see Pang, 1975 for those industries
such an favoured
analysisby its multinational
of cor-
development and equity). Given poration investors
that (such as petroleum
Singapore is products,
one of the few states that grants electronics andcitizenship
shipbuilding/repairs)to rather than tex-
overseas Chinese, perhaps such tiles, complaisance
clothing and plastics. By is 1978,
notin Singapore
surprising. multinational corporations accounted for 52 per cent
One of the earliest decisions by Lee Kuan Yew of employment, 63 per cent of value added, 71 per
after independence was to encourage the growth of cent of total output, and 84 per cent of manufactured
manufacturing industries as a basis for future exports (Hamilton, 1983). Most of the investment is
prosperity-following the lead set by Hong Hong. from Japanese and United States companies.
Singapore has succeeded to the extent that manufac-
turing now contributes 28 per cent of GDP (com- Social change
pared to 12 per cent in 1960), and provides more It is not only economic planning which has
than half of all merchandise exports (Table I). In engineered this type of development in Singapore.
addition the city has reinforced its traditional Social planning too has been manipulated to meet
servicing and entrepot functions for the surrounding the demands of foreign financed industrialization. In
region, and in 1962 was the second busiest port in this context, one of the main priorities has been to
the world, with a substantial proportion of this trade create a favourable climate for investment by build-
being with Malaysia and Indonesia. However, ing a stable and docile population. Lee Kuan Yew
petroleum refining is now the most important indus- has skillfully used the urban development and public
try, to the extent that Singapore is currently the housing programmes to promote this situation
third largest refining centre in the world. Tourism (Drakakis-Smith,1981). First, by encouraging home
too is extremely profitable and this self-styled ownership for middle-income households a stable
'instant Asia' attracts over 2-3 million visitors each bourgeoisie has been created from a potentially

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 TABLE I. Singapore compared to other Asian countries: selected indicators of development 1982

Singapore Malaysia Thailand Philippines Indonesia Hong Kong T

Population (mill.) 2.5 14-5 48-6 50-7 152-6 5-2 18-2

Pop.
GNP growth rate (US
per capita per $)
annum, (1970-82)
5919 1860 1.5 2.5
790 820 5802-4 2.7 2720
5340 2-3 2.
GNP per capita growth rate
Manufacturing, % per
of annum
GDP (1970-82)
26 18 19 7.2 4-3
244-5
13 2.8NA
4-2
Services, % of GDP 62 47 50 42 35 NA N
Export, % of goods and non-factor services 196 51 25 16 22 1
Growth in mfg, % (1960-70) 13-0 NA 11.4 6-7 3.3 NA 22
Growth in mfg, % (1970-82) 9-3 10.6 9.9 6.6 13.4 NA 12
Inflation Rate per annum (1970-82) 5.4 7-2 9-7 12-8 19.9 8-6
Notes:*= Data to 1980 only
NA = Not available
Sources: World Bank Dev. Rep. (1984), Jones (1983), FEER (1982-85), Dept. of Stats. Singapore (1983)

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350 KEVIN GRICE and DAVID DRAKAKIS-SMITH

volatile mixture of immigrant races

The Singapore (one that
government also attempts to
regulate its
exploded into communal violence inpopulation
Malaysiain qualitative
in as well as
1969). Almost 70 per cent of Singapore's population
quantitative terms. From 1987 the principal teaching
live in government housing units. language is Of
to be English
these with all other mother
more
than 90 per cent of the larger tongues relegatedare
flats to secondary
owner- status. For many
occupied. years rigid educational streaming has occurred in
More politically direct, however, has been the order to produce the appropriate balance for the
demolition of slum and squatter districts within various occupational categories and to siphon to the
the urban renewal programme. This has performed top those 'more than ordinarily endowed physically
the double function of eradicating the physical core and mentally' on whom 'we must expend our limited
of radical proletarian opposition to the PAP-the and slender resources' (Caldwell quoted in Gook,
'seedbeds of social and political unrest' (Wang and 1981, p. 245). This has recently been taken to absurd
Tan 1981, p. 219)-whilst at the same time creating extremes with Lee Kuan Yew's complaint that
space for the accommodation of foreign businesses because educated women had fewer children than
within the CBD (see Buchanan, 1972; Gook, 1981). those who were uneducated Singapore's future was
What remains of Singapore's 'Chinatown' now con- threatened. 'Our economy will falter, the administra-
stitutes a harmless tourist attraction of shophouses tion will suffer and society will decline' (Kulkarni,
and night markets. 1983). Social engineering in Singapore seems set for
Similar political controls have also been extended a further acceleration.
to the trade union movement-the cradle of the Thus, in order to achieve its overall development
PAP. As one minister has stated, objectives the state has had to ensure its domestic
environment is conducive to the profitable operation
The old style trade unionist who (fights) to promote the
interest of the workers without regard to the national of multinational capital. This has necessitated poli-
cies that, in the short term have imposed economic
interest ... is a menace to the future of Singapore
(Rajaratnam quoted in Luther, 1978). sacrifices on the lower-income groups, and in the
longer term have brought about an escalating econ-
Over the years, therefore, trade unions have been
omic, social and political control of the population as
institutionalized into industrial peace-keepers, work-
a whole. In short, Singapore stability and efficiency,
ing in the government interest, whilst politically its two major attractions to foreign capital, have
dangerous individuals have been effectively silenced
been built around curbs on personal liberties and
by the retention of 'useful' colonial legislation
choice.
related to detention.
The following section of the paper will discuss
Meanwhile, a suitable workforce has been created
Singapore's industrialization strategy per se; the
for multinational investors by various types ofreasons for its introduction, the mechanics of its
demographic controls. Population growth has beenimplementation and its contemporary nature. Then
curbed by birth control programmes that havewe will examine the effects of the present world
extended far beyond the increased availability of
recession on Singapore's economy, placing its
contraceptive devices to the imposition of fiscal
responses in the context of policies pursued in other
penalties for families with more than two children.
Asian countries.
Immigration too has been severely curtailed, except
in the case of well-qualified and highly skilled
workers. As a result the overall population growthTHE DEVELOPMENT OF AN ASIAN NIC:
rates are down to 1-2 per cent per annum, and this1965 TO 1979
has resulted in labour shortages given the rapid
growth of the economy. The intensification of theThe overseas links
control and even eradication of hawkers can there- The starting point of any discussion of econom
development
fore be seen, in this light, as an attempt to shift more in Singapore must focus on
geographical location at a nexus in trade rout
labour into the formal sector. In similar vein, migrant
workers from Malaysia have been encouraged to linking Europe with East Asia and Oceania. Its pr
enter Singapore where they are employed at lessperity in the colonial era was based upon this fac
than official minimum rates in factory and domestic
and subsequent phases of industrial and commer
occupations. development even into the 1980s (the establishm

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 Role of the state in development: Singapore 351

of an aerospace industry, and the new petro-

Singapore, Malaysia and Indonesia in the mid to late
chemical complex), reflect the continuing1960s. Hence the export-orientated industrialization
importance
of this factor. strategy was adopted by the vulnerable city-state to
generate
In the colonial era the city prospered on and sustain both economic development
the twin
pillars of free-trade and immigration freeand
ofpolitical
restric- strength.
tion, establishing an economic supremacyTo the the
over PAP the multinational companies
rest of South East Asia by controlling the bulk
appeared the ideal ally for this strategy. Their labour
movement of its commodity exports. The intensive operations would create employment, they
distribu-
tion of capital in the port was such that would provide direct access to overseas markets,
European
funds, principally British, centred on the whilst their technical expertise would help develop
commercial
and finance houses directly controlling trade. Only
local skills. a
In addition, the entrenchment of foreign
very small amount was transformed into industrial
capital and foreign institutions in a new Republic
would
capital to service the local market. Generally ensure
the pro-at least in the short term that external
vision of services for the local population was left ato
concerns had direct interest in its survival and con-
tinued
Chinese and Indian capital, itself 'foreign' economic
capital in growth. Accordingly soon after
the immigrant society that developed. independence the 'open-door' policy was adopted
and byin
The entrepot trade began its secular decline 1968
thean institutional framework had been
1980s but the conservatism of the city's established to attract the investment of the multina-
financial
institutions (unlike the banks in Hong tional
Kong companies
in the through a range of industrial
investment
1950s) and the cushioning effect of British military incentives (see Chia, 1981, pp. 444-7).
Themid-1960s
expenditure on the island, which until the physical infrastructure was provided by the
creation
accounted for 25 per cent of GDP, mitigated of an export processing zone designated at
against
Jurongactivi-
the transference of capital into manufacturing New Town, (Fig. 1) 10 km to the west of the
ties. Hence in 1959 when self-government city centre.wasThis has subsequently accommodated
achieved, Singapore was still predominantly
60 per cent ofaall the manufacturing employment
non-industrial society with no tradition created,
in manufac-
and is now the largest industrial estate in
South
turing or indigenous capitalist enterprises Eastwere
that Asia.
unlikely to foster economic growth in theThe stateto
short also very quickly became the major
medium term. organizer of the labour market ensuring that a cheap
Throughout the 1950s unemployment and ranged
very controlled labour force was available to
between 10 and 15 per cent, accentuating potential investors. For example, 90 per cent of
existing
union members
housing and social problems. Overcrowding, par-are now affiliated to the National
Trades
ticularly in the central area of the city was acuteUnion
and Congress, which is headed by a
government
was fuelled continually by a population that wasminister and run by government
growing at one of the fastest rates in the world
bureaucrats. It is hardly surprising that in such a
controlled
(4-4 per cent in 1957). Thus, the incoming PAPenvironment strikes are now almost
non-existent.
administration deemed that rapid industrialization
was essential to combat these mounting The
social andsuccess of the strategy rested on the
overall
economic problems. fact that it was formulated and implemented in a
period when
In addition to the internal tensions, Singapore wasthe developed country economies were
also treated with great suspicion by the still
indigenous
experiencing relatively high growth rates and
elites who came to control the governments the worldof market for manufactured goods was
Malaysia, Indonesia and Thailand. In each of these
expanding. Its implementation also coincided with
countries, the urban economy was dominated the growing by competition between the United States,
minority overseas Chinese groups with well-
European and Japanese firms and their increasing
established trading links with the commercial houses
investment in overseas markets. Many production
of Singapore. Rightly or wrongly, Singapore processeswas
were thus located in the Third World in
seen as a political threat. Regional order economic
to benefit from its cheaper labour costs in a
co-operation was not possible in such an system that has become known as the international
atmosphere
of political instability. This was clearly manifest
division ofinlabour (see Frobel, Heinrichs and Keye,
Singapore's withdrawal from the Malay1980). Federation
in 1965 and the so-called confrontation between In addition to this favourable international

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 CHANGI AIRPORT

Principa
....governmen
EjBult up
Industrial

U.CBD
National
and scie
"Chinato

Reservoi

0 1 2 3 4 5 kms 0 Flatted factory ar

0 1 2 3 miles - Expressways

-+-+- Railways

FIGURE 1. Major land use in Singapore

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 Role of the state in development: Singapore 353
climate, the city-state also benefited substantially
also of some importance from the point of view of
employment.
from factors of specifically regional significance. For These four leading sectors provided
the basis
example, with the increasing military involvement of for the accelerated growth of the
manufacturing
the United States in Vietnam, Singapore became an sector as a whole (see Table II).
Most of this economic expansion was dependent
important servicing depot and rest and rehabilitation
centre. However, of more substantial importance,
on foreign investment and export demand. By 1977
was the discovery of oil in the South China directSeaexports accounted for 65 per cent of total
manufacturing output and in the lead industries, such
which stimulated the growth of the oil exploration
industry in the Republic. Again Singapore's as petroleum and electronic products, the proportion
was nearer 90 per cent. Although industrial growth
strategic location and its existing infrastructure
wasand
made it the ideal base for off-shore exploration heavily
it dependent on the performance of these
has become the regional headquarters for lead most sectors,
of the sheer economic momentum created
the major oil companies. Throughout the also led to an industrial diversification which has
early
1970s oil-rig construction also provided abeen an important factor in reducing some of the
substan-
tial element of the expanding shipbuildingworstand
difficulties of global recession.
ship-repairing facilities. This massive injection of capital also produced a
substantial
In 1965 export industries in Singapore (defined on restructuring of the labour market with
the basis that exports comprise at least half418of000
thepeople entering the work force between
1965 of
total output) amounted to an insignificant part andan1978, thus replacing the traditionally
already small industrial sector, and consisted of aservice sector as the principal source of
dominant
employment.
fairly standard range of light consumer goods, prin- Much of this increase had been pro-
cipally textiles, footwear and other leather vided by female labour, and the female labour force
products
participation
(Cheah, 1980). Industrialization based on such a pat- (FLFP) rate rose from 30 per cent in
1970 to 40 per cent by 1978, with the 20 to 24 year
tern of production would have been very difficult,
given the prior entrenchment of Hong age Kong,
group rising to 73 per cent. The FLFP rate had
Taiwan and South Korea in these products, and risen
further so to 45 per cent by 1982, with that for the
Singapore has subsequently forged ahead in20the
to 24 year old women at just under 80 per cent.
sec-
tors of petroleum and petroleum products, This is a reflection of the predilection of the new
electrical
electronics industries for a more manageable and
and electronic products and transport equipment
cheaper
(primarily oil-rig construction). By 1978 these workforce. Interestingly, the Singaporean
were
the three leading manufacturing industriesfemale labour force is overwhelmingly single, and as
in terms
a result
of value added, although textiles and garments werethe female proportion of manufacturing

TABLE II. Singapore: percentage contributions to GDP (S $ mill. 1968 mkt prices) 1960-1982

Industry group 1960 1970 1975 1978 1982

Agriculture/fishing 3.8 2-8 1-9 1.5 1.0

Quarrying 0-3 0-3 0-3 0.2 0-5
Manufacturing 11-9 20-4 24-1 26-1 21.5
Utilities 2.5 2.5 1.8 1-9 2.7
Construction 3.6 6-8 8.1 6.3 6-5
Trade 35-9 29-2 26.9 26.3 23.2
Transport/communications 14-2 11.0 11-3 14.0 19.
Finance/Business 11.3 14-0 14.6 13-9 20-7
Other services 18.2 14.0 14.6 13.9 20.7
Less net bank services - 17 -0.2 -0-7 -0.9 -6 7
Total GDP 2,122 5,107 8,790 10,089 15,675

?1 = S$3.2 (Nov. 1983)

Source: Dept. Stat. (1983)

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354 KEVIN GRICE and DAVID DRAKAKIS-SMITH

employment (41 per cent in enter

1981) is lower
the Republic, than in
and throughout the 1970s this
the other Asian NIC's where more married
has constituted aroundwomen
11 per cent of Singapore's
are present in the work-force labour
(Jones,force.1983).
Such migrant labour is highly con-
centrated in specific industrial sectors, with male
The role of the state migrants in construction and females in the electri-
Singapore's economic development was
cal/electronic products andclosely
textiles sectors (Heyzer,
1982).
supervised during this period, with They the
constitute
state a 'docile'
being industrial labour
the major regulator and architect,
force, one thatcreating the
because of the temporary nature of
environment most conducive their to
stay the profitable
in the Republic is prone to manipulation. It
can be easily
operation of multinational capital. shed or rehired
In common withaccording to the
most governments it is theeconomic
sole climate. Such labour
provider ofis also
the much more
infrastructure necessary forwilling to work long shifts
development, and or overtime
its than its
role in influencing the demandSingaporean
for labour equivalent, who been
has can generally supple-
highlighted. Beyond this, the state
ment the also owns
low manufacturing sectororwages with part-
time
regulates the allocation of the twowork in the more
other lucrative food hawking
important
sectors
factors of production, land and or one of At
capital. the trades associated
present itwith the
holds approximately 75 per cent
burgeoningof all industry.
tourist land in the
Republic and is empowered toThe state is acutely
acquire aware ofof
whatever the social and
the remainder it requires for political problems that andefined
institutionally over-presence of 'guest'
'development purposes'. In theworkers can causemarket
capital and so it has the
imposed stringent
state is the chief mobilizer ofmeasures
the social
making itsurplus
difficult forwith
migrants to settle in
more than 50 per cent of domestic Singapore (Heyzer
income 1982). passing
In the 1980s the kind
through its hands in one form or another.
of immigration Socialprefers is that
which the city-state
security contributions, which of are paid
the high income by approxi-
expatriate groups, the holders of
mately 85 per cent of the labour the technical force are the
and professional skills on which the
major element of this. Compulsory Republic hopes employer and change.
to base future industrial
employee contributions now amount Longer termto and 45
moreper centdifficulties for
fundamental
of earned income, these being paid have
the economy into a Central
stemmed from its domination by
Provident Fund where they areforeign
wholly used to concerns.
owned finance In Singapore, unlike
national economic development other NIC's, there were
projects. very few
The statejoint ventures or
has a reputation for very licensing sound, conservative
agreements, and thus the local multiplier
financial management, and effect unlike in termsother
of companynewly
creation was quite small
industrializing countries, inatparticular this stage of its development
Brazil and programme. The
South Korea, has not borrowed from
cultivation overseas
of industrial linkagesto with local enter-
finance its industrial development. prises hasThealso been limited bysur-
national the nature of the
plus was such that in 1982 an investment
dominant corpor-
sectors. Local servicing in the electronics
ation was established to profitably utilize
industry, for example, these
is not common because the
funds, principally by investing subsidiaries
in realofestate multinational corporations are locked
in North
America. into the worldwide supply network of the vertically
Finally, throughout the 1970s the state hasintegrated parent companies. It also proved difficult
become increasingly involved in production activi-to attract research and development, because
ties in either competition or partnership with foreignSingapore lacked both the large domestic market
and local private enterprise. In total it now employsimportant for product development, and a techni-
20 per cent of the labour force and controls twocally proficient labour force to enable private firms
major shipyards and shipping-lines, the national air-to engage in such activities.
line and numerous other smaller concerns through a As a result local capital tended to be more con-
variety of holding companies (Lim, 1983). fined to the smaller, more labour-intensive enter-
Increasingly, throughout the 1970s the need has prises producing mainly for the domestic market.
been to manage the difficulties created by growth,These enterprises received much less support from
particularly the very serious internal labourthe state in comparison both to contemporary
shortage. As a short term expedient foreign labour,export-oriented firms and, as we shall see, to small
principally from Malaysia has been encouraged to firms in the 1980s. Only in joint-ventures did a sub-

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 Role of the state in development: Singapore 355
TABLE III. Singapore: selected statistics of the economic recession

Percentage change 1980 1981 1982 1983

GNP 10.2 9-9 6-3 7-9

Exports 34.0 6-8 0.4 3-8
Imports 33"9 13.4 3.4 - 1.2
Tourist arrivals 14.0 10.4 4-5 - 3"5
Contribution to GDP

Manufacturing 17.0 10-0 - 5"6 0-6

Construction 10-0 17.0 35.0 28-6
Finance/business 25.0 18.0 16.8 16-3
Transport/communications 13.0 12.6 11.0 7.4
Source: FEER (1984)

stantially domestic element enter into manufacturing

TABLE IV. Asia: average hourly earnings (US$), 1980
growth.
Increasing awareness of the difficulties facing Country Electronics Garments
its industrial economy, coupled with the growing
competition from other more labour abundant Japan 5-97 3-65
economies induced a qualitative change in govern- Hong Kong 0-97 1-03
ment attitudes and policies from the late 1970s Singapore 0-91 0-80
onwards-one which the state likes to term its South Korea 0.91 0-59
Malaysia 0-42
'second industrial revolution'. It is perhaps no
Philippines 0-30 0.59
0-17
coincidence that these changes have paralleled the
Sri Lanka NA 0-12
well-publicized global economic recession.
NA = Not available

THE WORLD ECONOMIC RECESSION: Source: FEER (1983)

SINGAPOREAN IMPACT AND RESPONSE

FROM 1979 ONWARDS
principal markets. On the other hand, and probably
The onset of recession more important in the long term, the economy is
The aggregate figures presented in Tablefacing
III show
the challenge from the labour-abundant
that the economy has been able to continue its nations which are just beginning to
developing
development momentum with only slight falls in and undercut Singapore's labour costs
industrialize
average rates of growth, and the economy(see is still
Table IV). This is particularly the case with
characterized by labour shortages. However, data by
Malaysia and the Philippines for electronic goods,
industrial sectors reveal that most of the recent
with Indonesia in the textiles and garments sector
expansion has been derived from the and financial
South Korea in shipbuilding.
and business services sector, the transportTheandfall in manufacturing output can be dated to
communications sector and, most important, fromquarter of 1982 and from the third
the second
the construction sector.
quarter of that year total external trade began to
The industry figures also show that it is the
decline consequent upon a reduction in both imports
trade-related sectors, particularly manufacturing,
and exports. Within this sector as a whole, however,
that have been worst affected by the world
certain industrial groupings have been particularly
recession. In this respect the early 1980s presents the
badly affected. The petroleum sector, the Republic's
Republic with two acute constraints. On theimportant
most one export sector, producing 35 per cent
hand the contraction of demand in the of advanced
total exports in 1982, is the most severely affec-
market economies and the associated protectionism
ted. The largest single foreign investment project in
make it difficult for the economy to export to its
Singapore is an ethylene-derived products plant,

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356 KEVIN GRICE and DAVID DRAKAKIS-SMITH

built as a joint venture with the Japanese

through govern-
an increased range of training programmes,
ment. This however, has had to be effectively
particularly 'moth-
in the specialist institutes of technology
balled' since its completion in that
1983were pending
established as an joint ventures with
upturn in the world economy.Germany, The industry
France and Japanfunc-
(Economic Development
tions essentially as a middleman, andpp.
Board 1982, relies
45-47). Atverythe same time the
heavily on nations like Indonesia National
which Wages Counciltheir
supply introduced new wage
own crude oil and then buy back structures
the to reward productive
refined pro- workers and
ducts. Singapore's difficulty is that generallysuch nations
increase wage returns areto skilled labour. As
increasingly processing their aown oil, and
result average earningssoin the
manufacturing rose by
Republic's refineries are losing 81 their staple
per cent between supply
1978 and 1982, giving in turn
sources and must speculate on the world
an additional oil for
incentive market
firms to substitute capital
for any available business. As a forreflection of in
labour, particularly these
the fields of advanced
difficulties, Shell, which has its largest refinery in
technology.
Singapore, announced a gradual cutting back
Complementing of
this approach were various
capacity from February 1983. changes in the state's investment incentives to
Tourism has also been badly hit by
ensure the
that recession
capital- and skill-intensive enterprises
with the total number of arrivals in the first six were encouraged to develop. For example, 'Pioneer
Status' (exemption from corporation tax) has been
months of 1983 falling for the first time since the late
1960s. The hotel occupancy rate is now relativelyextended to cover computers, telecommunications,
low at 75 per cent and with the number of rooms prescision machine tools and the like (see Lim and
available scheduled to increase by a massive 50 per Pang, 1982). The Economic Development Board has
cent by 1987 they are likely to remain low for theplayed a particularly important role in this respect,
foreseeable future. Again the root of the problem is aemphasizing the direct nature of state involvement
fall in international competiveness with.hotel pricesin promoting change, through its financial assistance
in Singapore now the second highest in Asia, after schemes for modernization of plant and machinery
Japan. In addition, the pace of development in the (with an important shift towards small, local firms).
city has almost completely removed those aspects of In addition, and perhaps more important, the Board
an exotic Asian culture likely to attract tourists.has sought to promote industrial research and
Other specific regional factors are also important fordevelopment by both local and foreign firms, and
this sector, particularly the relative strength of the has provided a physical focus in the extensive
Singapore Dollar against the Malaysian Ringgit and Science Park located adjacent to the campus of the
the Indonesian Rupiah. Most of Singapore's visitors National University.
come from its two Malay neighbours. There has thus been a qualitative change in the
Shipbuilding and ship-repairing have also beenforeign enterprises attracted to Singapore, with the
affected, and the government is now accepting thatgovernment actively encouraging the inflow of
it cannot compete in this area with nations such asventure-capital and the participation by private
South Korea. The electronics and electrical goods companies and investors in 'high-tech, start-up' com-
sector has been similarly affected, witnessing the panies from abroad (Minister for Law, Straits Times,
largest job losses of any industrial grouping, though 18 Jan, 1984). Obviously in the short-term this
these have been more than offset by employment means that the economy will be heavily dependent
growth in other sectors of the economy and a prac-on expatriate technicians constituting a further
tice amongst employers of putting workers onaddition to the long list of dependency factors, but
short-time employment schedules pending the in the longer term the lead built up by Singapore in
expected upturn in export demand. this field will favour its emergence as a regional
focus for future investment.
The second industrial revolution The effect of the qualitative change in the nature
Because of such trends the PAP came to realize that of industrial development had almost immediate
the technical skills of Singapore's working popula- impact with the value added per worker increasing
tion would have to be developed as the basis for by 85 per cent between 1980 and 1981 (Economic
much of its international competiveness. Thus, from Development Board 1982, p. 4). The electronics
1979 onwards several policies were introduced to industry furnishes a particularly good example of
improve the quality of the labour force, for example,
such changes with output in 1983 rising by 26.5 per

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 Role of the state in development: Singapore 357
cent from an employment growth of only growing1-5 per for the state wishes to ensure that
affluence,
cent-a 16 per cent increase in valuethe added
economy percontinually upgrades and adapts to
worker. Some 95 per cent of this output, largely
changing international circumstances rather than
semi-conductors, printed-circuits etc, was exported
complacently settling for its present prosperity. The
(Financial Times, 12 Dec, 1984). government now virtually instructs its citizens on
Associated with the growth of the knowledge-
how many children they can have; what they must
based industries, the Republic has continually
study at school and university (including compul-
sory religious instruction); which language they
upgraded its financial and commercial infrastructure,
offering highly sophisticated businessmust services
speak attohome and work; where they must
the surrounding region. The contemporary live; where
analogy they must work; and recently it has
which the PAP leadership likes to convey interna-
announced legislation to make it compulsory for
tionally is that of the 'Switzerland of the children
East', toessen-
look after their parents in old age.
tially a mature nation with a very sophisticated
To justify such draconian measures the leadership
stylethe
financial infrastructure, efficiently serving is toneeds
cultivate a continual sense of crisis and it
of the neighbouring nations for specialist com-
appears that a permanent state of insecurity is an
mercial services. This provides an interesting
important element in the development success of
contrast with the analogy with Israel, Singapore,
which was as it is in the other Asian newly
frequently cited in early years as theindustrializing
model for nations. For South Korea it is the
Singapore to emulate. Despite its difficulties,
threat from the
the north, for Taiwan and Hong Kong, it
Republic has continued to attract foreignis investment
the uncertainties of their relationship with the
particularly in the transport, communications andof China, whilst for Singapore it
People's Republic
information technology services. In this is the regard
uncertainties of being an overwhelmingly
Japanese investment has become increasingly
Chinese city in a Malay dominated region. This
important replacing the supremacy of seemsthe an United
essential requirement of the development
States in the earlier industrialization phase.
path This
adopted,last
necessitating as it does the manipula-
change is hardly surprising given thetion 'look
of the East'
population so that it can quickly meet the
policy which has been engendered by the PAP
challenges presented by changing international
leadership. economic circumstances. The sensitivity of all the
For such a trade-driven economy long-term countries to external criticism is a product of these
recovery can only be achieved by the gradual factors, a sensitivity that has not diminished
increase in its exports to the advanced market despite their relative affluence and apparent brash
economies. However, in the short-term domestic self-confidence.
market growth has had to sustain the economy The PAP reaction to the election of one oppo-
through the worst of the recession-a factor which sition MP in Singapore in 1981 highlights this
is common to all major Asian newly industrializing attitude, with the ruling party subsequently closing
countries. In Singapore the government has largely ranks to make internal dissent less likely. In addition,
induced a massive construction 'boom' designed to in 1982 the Chinese press, traditionally the most
take up the 'slack' in the economy during the conver- critical of the government, was re-organized to
sion to the technology-based society of its 'second ensure closer government supervision. It is ironic
industrial revolution' (see Table III). In essence this to contrast these moves towards its domestic
results from large-scale infrastructural projects, newspaper industry, with the fact that the economy
which needed to be carried out in the long-term, has been increasingly successful in attracting world
being brought forward to continue the development magazines and journals such as The Economist and
momentum. Particularly important has been the The Asian Wall Street Journal to the Republic to
Mass Rapid Transit railway, and an accelerated pub- establish their regional printing and distribution
lic housing programme announced in 1981 which is headquarters. It seems that tighter domestic
aiming to construct another 140 000 flats by 1987. restraints are an essential pre-requisite for the type
Internally the PAP administration is increasing of economic development strategy Singapore is
the control it has over its citizens, acutely aware that pursuing. The threat to re-organize the franchise
the Singaporean work-force is now the major basis because of 'unwise' voting in the December 1984
of its international competitiveness. Curbs and elections (in which two opposition MPs were
restrictions are likely to increase, almost because of returned) is a further indication of such attitudes.

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358 KEVIN GRICE and DAVID DRAKAKIS-SMITH

CONCLUSION provide a tempting model to follow for ambitious

governments in developing countries.
In general terms it would appear that Singapore's
economy has proved very resilient to the pressures
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