Can S’pore be a breakout nation again?

Source: The Straits Times, October 21, 2013 

Robin Chan
On a recent trip to Bali, a Singaporean undergraduate experienced an epiphany.

It was not quite what Elizabeth Gilbert described in her bestseller Eat, Pray, Love, but he reflected to me that after attending the conferences and meeting delegates from around the world at the Apec Leaders Summit, he realised Singapore’s insignificance in the world.

We are just a tiny economy among giants, and the world can easily pass us by, he said.

There is nothing like heading for the warm sunshine of Bali and returning with a cold, hard dose of reality.

I can see where he is coming from. Bali gathered together many world leaders, leading academics and thinkers from the 21 member economies of the Asia-Pacific Economic Cooperation or Apec, which include the United States, China, Russia and Japan.

Indeed, during the week, there was hardly any mention of Singapore.

His point was brought home to me too, at one particular session.

Morgan Stanley’s head of emerging market equities Ruchir Sharma shared his list of the breakout stars of the next decade – exciting economies that will likely do better than their peers.

While the Philippines, Thailand, Colombia, Peru, Mexico and Poland got some love, there was none for Singapore.

These countries have low-cost labour and unrealised economic potential, he said.

But Singapore is no longer an emerging economy anyway, some might say, so no problem there.

Not quite. Mr Sharma singled out South Korea as the gold medallist of growth because he is excited by its innovative capabilities and ability to produce global brands.

And he is bullish about the US, calling it the “comeback kid”.

The US has a game-changer in shale gas, that will lower its energy prices substantially, and he is confident the world’s largest economy will eventually be able to recover its mojo and rejuvenate its long-beleaguered manufacturing sector.

What should we make of Singapore’s absence among the most exciting economies of the next decade?

On the one hand, Singaporeans might welcome it.

At home, the conversation has, over the past few years, turned from growth to equity; and from foreign investments and competition, to redistribution of wealth and protection of a “Singaporean core”.

Since August this year, the Government has moved to strengthen the foundations of what it thinks is needed to build a fair and just society in housing, health care and education.

More recently, it announced a new Fair Consideration Framework that will throw more sand into the wheels of firms that prefer to hire foreigners over locals.

This is all well and good, considering the concerns over rising income inequality, slowing social mobility, and an erosion of a Singaporean identity.

But on the other hand, there is concern over what will drive Singapore’s economy over the next few decades.

Is there a next big thing to get excited about?

In the years since independence, Singapore’s remarkable economic growth has been driven by largely making the right bets on sectors such as electronics, petrochemicals, pharmaceuticals and the integrated resorts.

There are certainly opportunities with 3-D printing and green technology, to name a few.

But the economy is at a crossroads as it tries to strike a good balance between growth and equity, and competition and fairness. It is undergoing long-term restructuring that could impact Singapore’s ability to attract and seize these opportunities.

The discussions at Apec are a timely reminder that the world is not about to stop and wait for Singapore to sort out its problems and figure things out so that it does not fall behind.

Investors are ruthlessly unsentimental when it comes to looking for returns, and there are plenty of countries that continue to strive for growth, that want to compete and innovate.

Just across the Pacific, Peru is one such country. At Apec’s CEO Summit, Peruvian President Ollanta Humala said unequivocally that Peru must continue to grow, and credited his economic reforms to embrace free trade for allowing the country to achieve high-speed growth.

Closer to home, there are Malaysia, Indonesia, Vietnam and Myanmar.

The larger point made by many at the summit is that the growth experienced by many economies in the Asia-Pacific has been unprecedented and unnatural.

In fact, Mr Sharma noted that only a handful of economies have averaged above 5 per cent economic growth in each of the last four decades – Singapore is one of them. This feat has been managed not just through economic policies but also facilitated by an Asia region that has had an incredible period of relative peace and stability.

But as the investment mantra goes, past performance is no guarantee of future success.

With the US and China still finding an equilibrium in their relationship, and maritime disputes simmering in the South China Sea as countries contest for geopolitical space, this peace and stability are not a given.

What lies ahead for Singapore? The remarkable thing about Singapore is that it has been a “breakout nation” for the past four decades.

But sustaining growth has become an even more uncertain and challenging prospect than ever before.

From listening to the experts, I gleaned three broad ingredients that Singapore will need as it navigates the new challenges.

The first is adaptability, which means having feedback loops between the state and businesses and citizens.

This is to allow for policies to be tweaked and corrected to meet changing circumstances on the ground and in the world around us.

The second is political leadership, for the state to be able to think and plan for the long term, and have the political capacity to implement policies.

The recent gridlock and brinkmanship between Democrats and Republicans in the US are no uncertain reminder of the importance of this.

The third is innovation. Economies such as Singapore’s without a low-cost base and abundant resources have to innovate and produce global champions.

To achieve this, entrepreneurship needs to take off, and local companies given the support and resources to expand globally.

It is not as simple as eating, praying and loving but if Singapore can combine these three ingredients, it will be able to sustain growth with equity, and perhaps be a breakout economy again in the decades ahead.