Why Singapore works

Mar 25, 2011

The latest issue of weekly magazine The Economist includes a special report on the future of the state, including this article on what the West can learn from Singapore's system of governance.


WHEN people talk about Singapore's education miracle, they normally think of rows of clever young mathematicians.

The hair design and beauty therapy training centres at the Institute of Technical Education (ITE) are rather different. The walls are covered with pouting models, L'Oreal adverts and television screens. There is a fully fitted-out spa and a hairdressing salon. It all seems rather more Sex And The City than Asian values, though the manicurists, pedicurists, cosmetologists and hairdressers toil diligently.

Asked whether he wants to go to university, the holy grail of most Asian families, a young barber called Noel replies that he would rather open a hairdressing salon. Mei Lien wants to set up her own beauty salon; Shuner would like to work in hotels abroad.

Until recently, the ITE - dubbed 'It's The End' by ambitious middle-class parents - was the dark side of Singaporean education. The city state streams pupils rigorously and is unashamedly elitist: One school claims to send more students to Ivy League universities than any other secondary school in the world. But such a system also produces losers - and many of the bottom third who do not make it to university come to the ITE.

Since the 1990s, the Government has worked hard to change the ITE's image. It has not only spent a lot of money on new facilities and better teachers, but also put a great deal of thought into it, scouring the West for best practice in vocational training. And it has encouraged students who are used to failure to take pride in their work. That has involved discipline (a list displays the names of class-shirkers) but also fun outside the classroom: The ITE has sports teams and concerts, just like any university.

This attention to detail has paid off. Many of the graduates have to compete with cheap migrant workers, especially in service jobs, but most of them are snapped up quickly. The hairdressers and beauty therapists are off to the new casinos, or 'integrated resorts', as they are prudishly known. Singapore, already near the top of most educational league tables, has created yet another centre of excellence that is beginning to attract foreign visitors.

Singapore is important to any study of government just now, both in the West and in Asia. That is partly because it does some things very well, in much the same way that some Scandinavian countries excel in certain fields. But it is also because there is an emerging theory about a superior Asian model of government, put forward by both despairing Western businessmen and hubristic Asian chroniclers. Simplified somewhat, it comes in four parts.

First, Singapore is good at government (which is largely true). Second, the secret of its success lies in an Asian mixture of authoritarian values and state-directed capitalism (largely myth). Third, China is trying to copy Singapore (certainly true). Last, China's government is already more efficient than the decadent West (mostly rubbish).

For all the insults hurled at 'Disneyland with the death penalty' (to use Neuromancer author William Gibson's gibe), Singapore provides better schools and hospitals and safer streets than most Western countries - and all with a state that consumes only 19 per cent of gross domestic product. Yes, that proportion is understated because it does not include the other fingers the Government has in the economic pie, such as its huge landholdings, the Central Provident Fund (a mandatory savings scheme) and Temasek (a government-linked investment company). Yes, it is easier to serve five million people on a tiny island than 309 million Americans on a vast landmass. Yes, it has relied on immigration, which is now creating strains (and will be the main topic in the next election). And yes, Singapore's bureaucrats can make mistakes, such as letting an Islamist terrorist escape in 2008. But its Government does pretty well.

The Chinese are fascinated by it. 'There is good social order in Singapore,' Mr Deng Xiaoping observed in 1992. 'We should draw from their experience, and do even better than them.' It sends streams of bureaucrats to visit Singapore. One of the first things that Mr Xi Jinping did after being anointed last year as China's next leader was to drop in (again) on Minister Mentor Lee Kuan Yew, who ran the island from 1959 to 1990, and his son Lee Hsien Loong, who has been Prime Minister since 2004. The Chinese are looking at other places, too - most obviously Hong Kong, another small-government haven. But it is hard to think of any rich-country leader whom China treats with as much respect as the elder Mr Lee.

So what lessons are the Chinese learning? There is an odd imbalance between the things that Singapore and others make so much noise about and the reasons why the place works. In particular, the 'Asian values' bits of Singapore - its authoritarianism and its industrial policy - that the Chinese seem to find especially congenial are less vital to its success than two more humdrum virtues: a good civil service and a competitively small state.

Singapore is certainly a fairly stern place. It has been run by the People's Action Party for half a century. The elder Mr Lee, a Cambridge-educated lawyer who was originally seen as a bit of a left-winger, set up a parliamentary system in which it has proved curiously difficult for the opposition to do well. From 1966 to 1981, Mr Lee's PAP won all the seats. It has opened up a bit, and in the most recent election in 2006 it won only 66 per cent of the votes and 82 of the 84 seats. The media, and particularly the Internet, have also gotten a little freer.

The Singaporeans argue that they have the perfect compromise between accountability and efficiency. Their politicians are regularly tested in elections and have to make themselves available to their constituents; but since the Government knows it is likely to win, it can take a long view. Fixing things like the ITE takes time. 'Our strength is that we are able to think strategically and look ahead,' says the Prime Minister. 'If the government changed every five years it would be harder.'

There is more truth in this than Western liberals would like to admit. Not many people in Washington are thinking beyond the 2012 presidential election. It is sometimes argued that an American administration operates strategically for only around six months, at the beginning of its second year - after it has gotten its staff confirmed by the Senate and before the mid-term campaign begins.

Yet even assuming that voters are happy to swop a little more efficiency for less democracy, Singapore still seems a difficult model to follow. Not only is it manageably small, but balancing authoritarianism and accountability comes down largely to personal skills (and even the opposition admits that the two Lees have been extremely good at it). More generally, Singapore's success as a planning state has a lot to do with the sort of people who run it.

One thing that stands out in Singapore is the quality of its civil service. Unlike the egalitarian Western public sector, Singapore follows an elitist model, paying those at the top $2 million a year or more. It spots talented youngsters early, lures them with scholarships, and keeps investing in them. People who don't make the grade are pushed out quickly.

Sitting around a table with its 30-something mandarins is more like meeting junior partners at Goldman Sachs or McKinsey than the cast of 'Yes, Minister'. The person on your left is on secondment at a big oil company; on your right sits a woman who between spells at the finance and defence ministries has picked up degrees from the London School of Economics, Cambridge and Stanford. High-fliers pop in and out of the Civil Service College for more training; the Prime Minister has written case studies for them. But it is not a closed shop. Talent from the private sector is recruited into both the civil service and politics. The current Education Minister used to be a surgeon.

Western civil services often have pretty good people at the top, but in Singapore meritocracy reigns all the way down the system. Teachers, for instance, need to have finished in the top third of their class (as they do in Finland and South Korea, which also shine in the education rankings). Headmasters are often appointed in their 30s and rewarded with merit pay if they do well, but are moved on quickly if their schools underperform. Tests are endemic.

How much strategic intervention takes place in the economy? The Lees have dabbled in industrial policy, betting first on manufacturing and then on services. Temasek manages a portfolio of $190 billion. The country is now trying to push into creative industries, with limited success thus far, as ministers admit.

These attempts at dirigisme have made Singapore a more reserved, less entrepreneurial place than Hong Kong with its feverish laissez-faire. It certainly has far fewer larger-than-life billionaires. But it is hard to hail Singapore as a success of top-down economic management in the way some Chinese seem to think. Indeed, the core of Singapore's success - its ability to attract foreign multinationals - owes far more to laissez-faire than to industrial policy.

Rather than seeing foreign investment as a way to steal technology or to build up strategic industries, as China often does, Singapore has followed an open-door policy, building an environment where businesses want to be. The central message has remained much the same for decades: Come to us and you will get excellent infrastructure, a well-educated workforce, open trade routes, the rule of law, and low taxes.

In other words, Singapore's competitive advantage has been good, cheap government. It has worked hard to keep its state small; even education consumes only 3.3 per cent of GDP. But the real savings come from keeping down social transfers and especially from not indulging the middle class. The older Mr Lee thinks the West's mistake has been to set up 'all you can eat' welfare states: because everything at the buffet is free, it is consumed voraciously.

Singapore's approach, by contrast, is for the Government to provide people with assets that allow them to look after themselves. Good education for all is one big part of it. The other mainstay is the CPF. A fifth of everybody's salary goes into their account at the CPF, with the employer contributing another 15.5 per cent. That provides Singaporeans with the capital to pay for their own housing, pensions and health care and their children's tertiary education.

There is a small safety net to cover the very poor and the very sick. But people are expected to look after their parents and pay for government services, making co-payments for health care. The elder Mr Lee especially dislikes free universal benefits. Once you have given a subsidy, he says, it is always hard to withdraw it. He is convinced that if you want to help people, it is better to give them cash rather than provide a service, whose value nobody understands. China, he thinks, will eventually follow Singapore's model.

But arguably, the place that should be learning most from Singapore is the West. For all the talk about Asian values, Singapore is a pretty Western place. Its model, such as it is, combines elements of Victorian self-reliance and American management theory. The West could take in a lot of both without sacrificing any liberty. Why not sack poor teachers or pay good civil servants more? And do Western welfare states have to be quite so buffet-like?

By the same token, Singapore's Government could surely relax its grip somewhat without sacrificing efficiency. That might help it find a little more of the entrepreneurial vim it craves.