SINGAPORE (Jan 28): How do you keep an economy growing? The earlier interpretation of Singapore’s strategic role starting from Raffles’ time to even today was Singapore’s actual physical location in the region, and not so much in the world. Because of that, you saw the rise of Singapore as a trading centre, to manufacturing sector, to petroleum refining, and to the Asian dollar market. So, it is really based on Singapore’s role within Southeast Asia. That I think everyone recognises is no longer really viable.
There are two things happening that are critical for Singapore’s future, bearing in mind that, as a small economy, we do not need a hell of a lot of measures to be sustainable. We just need to be positioned right and we would survive.
The first is to develop the industries we were initially competent in, from a purely regional point of view, to grow them into clusters. Grow them to such a point that we could be in Singapore, Iceland or anywhere, and we would still be a global hub. The best example of this probably is aviation — starting with just Changi Airport and Singapore Airlines. Some would say we are secondary to Dubai Airport and Emirates, but if you look at aviation as a cluster, at how Singapore has developed over the years, there is incredible competency that is integrated with aviation, such as in manufacturing. We are one of the world’s major centres for avionics. Rolls-Royce has two manufacturing centres: Rolls-Royce jet engines are made from scratch only in the UK and Singapore because of our intellectual property protections and technical skills.
Then, how do you ensure more equitable distribution? Both this and the earlier question are very important, but you must have one before you have the other. So, to the first question: Singapore is going to continue to grow, leveraging off what we have, but not in your very traditional idea of a petroleum refinery — that is gone. As for equitable distribution, if there is nothing to grow, then what is there to be inclusive about?
I have said previously that we have a dichotomised dual economy. We have a very externally competitive export-oriented economy in which our wage is in fact quite high and quite competitive. We have then a domestic economy that relies totally on low-cost imported labour, which was left by the government under a policy of benign neglect. It was never intended to make Singapore competitive by itself. It was to make Singapore cheap in order for us to be an efficient and low-cost export platform. To me, that is not sustainable. I have long argued that we need to raise wage rates and skill levels in low-cost and low-skill industries.
In 1985, Singapore was becoming uncompetitive compared with our neighbours because we were a higher-cost, but essentially a low-cost, place. The government unilaterally raised wages. This is the second time it is happening, where we are having wage restructuring. By unilaterally forcing up wages and cutting down on foreign workers, it is very painful, and I can think of measures that would help mitigate these transitions and that the government is not doing enough of. We need to have fiscal incentives to prompt small and medium-sized enterprises to go into sectors that are currently highly inefficient, disaggregated and low cost such as construction.
My very simple reaction to a minimum wage is that it is taking a sledgehammer to crack a nut, particularly in a sophisticated post-industrial economy. If you are in a simplistic society, yes, have a minimum wage — but not when you have an economy that is so sophisticated that wages are changing all the time.
All you need for a politician to be populist is to say, ‘I think we should raise the minimum wage by 5% this year.’ Who is to argue? Then a recession hits. When you have a high minimum wage, that is sticky downwards. Companies always let go people who are the most dispensable. Those are the young and poorly educated.
I also do not believe in a complete laissez-faire economy such as in Hong Kong and the US. A government’s job is to intervene judiciously, selectively and forcefully in areas it has to, to improve people’s lives.
It is the responsibility of business schools to talk about [social and environmental] values. Business schools have failed utterly, if you look at all the excesses and bankruptcies resulting from global financial crises. Yet, business schools have never taught people the right way to view businesses in society. All we have to do is to change one word in the mission statement of the company and the key performance indicators (KPIs) of a CEO, and you would have changed the world forever — that is, to replace the word “shareholder” with “stakeholder”. Once it is the job of a company to maximise stakeholder benefits, and incentives for the CEO are allocated accordingly, then [social and environmental responsibilities] are no longer separate from shareholder value. Right now, the big debate is as if there is a dichotomy between the two. Who are stakeholders of a company? The No 1 priority is still shareholders, followed by customers and employees. No 5 are suppliers and equally the wider community.
CEOs will look at incentives as do we all — we are all financially driven animals. When you give them incentives that are totally based on how much profit you make, they will deliver the profits and not care about anything else. But they would say employees are important. If you simply rejigged the KPIs, however, then there is substance behind what you are talking about.
Should the government set the tone for whatever they want to see done in society? Yes. But I do not agree with the government regulating it. Definitely not.
This is an edited excerpt from an interview with Ho Kwon Ping, executive chairman of Banyan Tree Holdings, a global hospitality group, and founding chairman of the Singapore Management University
This story appears in The Edge Singapore (Issue 866, week of Jan 28) which is on sale now. Subscribe here