Alternative proposals for a better Singapore
The local Chinese evening daily, Lianhe Wanbao (联合晚报), emailed me earlier this week to ask for my comments on Singapore’s social welfare system. This was with reference to the article in The Economist (”The stingy nanny”), which I blogged about on 15 February. The Wanbao article appeared this evening.
The following are my responses to the reporter’s questions: Read more »
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The respected British weekly, The Economist, has published a cutting criticism of Singapore’s social safety net (or lack thereof) in its latest edition dated 13 February 2010, titled “Welfare in Singapore: The stingy nanny”. Here are some excerpts:
Citizens are obliged to save for the future, rely on their families and not expect any handouts from the government unless they hit rock bottom.
In government circles “welfare” remains a dirty word, cousin to sloth and waste.
The most destitute citizens’ families may apply for public assistance; only 3,000 currently qualify.
Applicants complain that the process of seeking help is made tiresome and humiliating. Indeed that could be the point, supposing it deters free-riders.
But the thinness of the safety net also reflects a widespread article of faith, recited and reinforced over the years. Even among the social workers who work in hard-hit communities there is surprisingly little frustration at the meagreness of the handouts on offer or at the lengthy application process.
In 2008 the World Bank rated it the third richest country in the world, in terms of GDP per head at purchasing-power parity. And the idea that its Big-Brotherly government might be outfoxed by conniving welfare queens seems odd.
Lee Kuan Yew, Singapore’s founding father and still its “minister mentor” has maintained that ambitious migrants help to keep citizens on their toes. In an interview given to National Geographic last July he said that if native Singaporeans lag behind “hungry” foreigners because “the spurs are not stuck on [their] hinds”, that is not the state’s problem to solve.
The Economic Society of Singapore (ESS)—not exactly a radical cell—recently proposed to a government committee that it should build a more robust safety net, starting with unemployment insurance. This would promote social stability and help muster public support for Singapore’s open-door migration policies, it argues. Properly designed, such measures would not create disincentives to work and thrift. “While self-reliance is a good principle in general, it may be neither efficient nor just if taken to extremes,” noted the ESS.
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I read through all 53 pages of the much-awaited Economic Strategies Committee’s (ESC’s) main report, which is supposed to “chart the course for Singapore’s economic development over the next decade”. The report proposed ways of increasing productivity and expanding our international economic footprint. It then shifted gear to talk about how to make Singapore a more attractive destination that rich and internationally-mobile “talents” would want to call home. The report’s areas of study are summarised in the diagram below.
While I appreciate the work that the committee members (or rather, their secretariats) have put in, I felt that the recommendations were too skewed towards boosting high-end growth of large corporations, with insufficient emphasis on growing the sector that is in the best position to generate broad-based growth for Singaporeans — small and medium-sized enterprises (SME).
To be fair, the ESC did present a few proposals for growing SMEs:
1. Develop stronger alliances between large and small players to promote technology transfer, test-bedding and commercialisation. Provide incentives for MNCs to co-develop innovative products and services with SMEs, helping Singapore-based companies build credible track records, enhance innovation and accumulate knowledge capital.
2. Catalyse the supply of growth capital for growth-oriented SMEs based in Singapore, through seeding public-private co-investment funds.
3. Enhance access to human capital for SMEs, which usually face more difficulties in attracting and retaining talent, through broadening the scope of internship programmes and facilitating a ready network of mentors to provide strategic and expert advice.
I think the ESC’s proposals for helping SMEs are too peripheral and are hardly enough to generate much growth in our domestic private sector. Without significant growth in our SMEs, we will continue to be at the absolute mercy of the winds of the global economy, as this last recession has demonstrated.
SMEs as a key engine of growth
Singapore cannot continue to depend so heavily on manufacturing exports and foreign MNCs to power our economy, when many MNCs are making plans to relocate to cheaper locations. We need to develop new engines of growth that are sustainable and benefit ordinary Singaporeans, not just foreigners and rich elites. The domestic private sector could form this new growth engine.
To achieve broad-based growth, it is critical that we help local enterprises prosper. This will not only benefit the national economy, but countless individual Singaporeans as well. SMEs make up 99 per cent of business establishments in Singapore and employ 56 per cent of all workers here. Many of those with lower paper qualifications are only able to find work in SMEs, as they do not possess the skills that many MNCs demand. SMEs tend to cater more to local consumers and businesses, and so are less likely to shut down and move to lower cost countries — taking all their jobs, intellectual property and technical know-how with them — when economic winds shift.
While SMEs employ 56 per cent of the workforce, they contribute only 42 per cent of Singapore’s GDP. Their comparatively lower output is due to many factors, including a lack of economies of scale, international connections to market their goods, access to financing and a shortage of talented workers willing to work for them instead of MNCs.
So far, the government’s efforts to specifically help SMEs have focused on training programmes for SME managers and the grooming of a few SMEs which are deemed to have the potential to become home-grown MNCs. The result is that a few enterprises receive a disproportionate amount of funding and assistance from the government, while those that really need the help get very little.
The government should dispense of its habit of “picking winners”. Instead, more effort should be put into attracting venture capital (VC) funds to our shores. These private sector investors can provide a greater amount of funding that start ups need to bring their ideas to market. VCs are more in touch with the market than civil servants are, so they are in a better position to assess the investment potential of start ups. Also, the risk of failure is spread out among many VC firms. So even if one VC makes a wrong investment, the fallout will be more limited than if a government agency makes a huge bet on an industry which ends up in utter failure.
Developing an entrepreneurial culture
Entrepreneurship is the bedrock of SMEs. Without entrepreneurs starting small businesses, there would be no SMEs to speak of. Thus, increasing the number of entrepreneurs and their success rate will directly contribute to the growth of SMEs.
The government has a few training programmes to support entrepreneurs. However training alone will not help Singapore reach the tipping point of entrepreneurship. For this to happen, a culture of entrepreneurship needs to be developed among not just working adults, but has to start from young with students and their parents.
The entrepreneurial culture in Singapore is weak, especially when compared to other developed economies like Taiwan, Korea and the US. The recent Global University Entrepreneurial Spirit Students survey (GUESS) of 2,300 students from local tertiary institutions found that only 18 per cent of them intended to start their own businesses after graduating. In contrast, a whopping 69 per cent planned to take up salaried jobs.
We need a mindset shift in our society regarding what constitutes career success. Our current education system is too geared towards preparing students to be good employees, not entrepreneurs. Most local students strive to ace their exams so they can get into good universities and land a stable, well-paying job working for some large firm or the government.
Entrepreneurs require a very different skill set from salaried workers. A business owner needs to do a lot of selling and marketing of one’s goods or services. This takes a lot of innovation, confidence and humility — all skills which our schools have not adequately prepared our young for.
The stigma of failure in our culture needs to be changed. There needs to be a greater tolerance for those who stumble while trying. A lot of the “afraid to fail” mindset originates from our education system, where examination results define a student’s success or failure.
Schools should see it as their mission to nurture future business owners, not just salaried workers. They should start teaching the basics of running a business, like managing cash flow and selling, early in secondary school. Our young should be brought up with the mindset that the brightest and most capable students start their own company after graduating (or more likely the other way around), rather than win government scholarships or work in MNCs.
Parents often frown on their children taking the entrepreneurial path, as it is seen as more risky and less likely to guarantee financial success. To counter this, schools could consider tying up with business associations to conduct seminars for the parents, to explain the motivations behind what their children are learning, so that parents too can catch the vision about entrepreneurship and encourage their children to pursue that as a career.
Conclusion
These are just a few proposals that could help SMEs and entrepreneurs in Singapore. I believe that growing our local private enterprises holds the key to our next phase of economic growth, which unfortunately I feel the ESC has overlooked.
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I am a non-constituency MP from the Workers' Party. I blog in my personal capacity. 
