Tuesday, February 28, 2017

Address wider questions raised over CFE report

Han Fook Kwang
Editor At Large

FEB 19, 2017

The questions came thick and fast as soon as the Committee on the Future Economy (CFE) released its report on Feb 9. It's a good sign - better than if there had been indifference and silence.

So, here are the top three questions culled from what has been reported in both the mainstream media and online.

First, there are those who feel the committee has understated the problems with the current economy. They want these addressed first before looking to solve tomorrow's issues. A businessman friend of mind sent me this text: Dealing with urgent current issues is as important as planning for the future.

Former MP Inderjit Singh put it this way in a Facebook post: "It seems that the government remains in a state of denial about the worrying state of the economy... the CFE missed the opportunity to study what weaknesses Singapore has developed and how to overcome them.

"The CFE has blamed the current state of affairs on the global slowdown which is not a complete picture...We should have gone deeper into what is wrong locally and addressed those issues...in areas like cost competitiveness, government agencies' support and the financing landscape that has become very tough for companies."

The key question is: Is the economy in bad shape and in need of an urgent fix or is it basically sound and slowing down because of external factors beyond Singapore's control? The thing is that you can cite any number of economic data to back your case, for and against.

That business friend pointed to these: the number of companies folding up has been going up and is at an all-time high. Even though it's offset by new companies being formed, the net number has been declining and is fast approaching levels not seen since the financial crisis of 2009. The picture is the same in the labour market, with job creation numbers the lowest since 2009.

Economic growth was 2 per cent last year, the same as in 2015 and down from 3.3 per cent in 2014. That's three years of slow growth which has never been experienced here. Argument clinched? How bad can it get before urgent action is taken?

Not so fast.

If I were the Government defending its economic record, I could cite the $12.9 billion worth of foreign investments last year creating 20,100 jobs and the Economic Development Board's projection that this year will be similarly bountiful.

If the economy is so bad, why are foreigners still confident about Singapore? Unemployment, though rising, is still only about 3 per cent, which is considered close to full employment. Tourism numbers and the amount they spent were at a record high last year - not bad for an economy supposedly in need of an urgent fix.

So, who is right?

Both sides may be, because the economy is an evolving and diverse one with some parts thriving while others are barely struggling to keep afloat. Whatever the real situation, it is a question crying out to be answered. I hope the Government will respond to it soon and comprehensively.

Second question: Why is it that after a year of deliberations, the high-powered committee comprising five ministers and which consulted 9,000 stakeholders could not come up with major new ideas to grow the economy but rehashed much of what has already been said?

To recap, the strategies it recommended included : Expand and diversify the country's international connections, deepen the skill levels of workers, promote enterprise and innovation, and improve the economy's digital capability.

Motherhood statements! Same old, same old, critics declared. They are right, but it doesn't mean the committee was wrong in believing these old chestnuts are what is needed to transform the economy. In fact, if the lack of specific grand schemes in the report signals a move by the Government away from attempting to pick winners in the economy, it's a good thing.

There are no quick fixes for an economy struggling to keep productivity up when business costs are higher than in other competing countries. And certainly, not another billion-dollar productivity scheme, please.

Encouraging Singapore companies to be more enterprising and entrepreneurial, promoting a culture where people are valued for the skills they possess, not their academic qualifications, are exactly what's needed, not just for the future but yesterday. If anything, I would fault the Government for not being bolder, and yes, enterprising, enough to quicken the pace of this change in mindset and culture.

Which brings me to the third set of questions: Previous economic committees had also identified these strategies, and many policies and schemes were indeed implemented as a result. Did they produce the desired outcome? If not, why? Shouldn't the CFE have done a critical review so we don't repeat past mistakes?

The Economic Review Committee (ERC) set up in 2001 made these two key recommendations in 2003: Make Singapore a key node in the global network serving the globalised economy, and develop a creative and entrepreneurial nation willing to take risks. Sounds familiar?

To be fair, the economy has grown three times since the ERC, and the economy is now much more diversified. But are Singaporeans more enterprising and buzzing with creativity? Why have there been so few world-class Singapore companies since that 2003 report? It is a pity the CFE did not go into a full discussion of this to draw lessons from the past. Much can be learnt from critically reviewing past policies which might help in the search for more effective solutions.

There have been many other questions raised by other commentators and pundits, apart from the three I have highlighted. The committee has not responded to any of them. Perhaps it is waiting for the debate in Parliament on the Budget Statement which begins later this month and where ministers are expected to speak about specific programmes to support the CFE's proposals.

I hope they will not just announce new schemes, but also address some of the wider questions. There is a lot at stake, including the future of the economy.

The writer is also a senior fellow at the S. Rajaratnam School of International Studies at the Nanyang Technological University

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