Last week, Singapore was at the center of international attention as it held a state funeral for its founding Prime Minister Lee Kuan Yew. Many people were surprised that Singapore’s per capita GDP is $56,112, eighth highest in the world. How did one of the Four Asian Dragons become so wealthy? It is hard not to compare the city-state to Korea, whose per capita GDP last year was $28,739. Singapore’s per capita GDP exceeded $30,000 in 2006 and $40,000 in 2010, and has remained over $50,000 since 2011.
The deciding moment was 2004, when Singapore adopted a new strategy to innovate its economic structure and nurture the finance, service, tourism and convention industries. The second leap was led by the government. When the economic slowdown resulted in 2.2 percent growth in 2001, the Economic Review Committee (ERC) was set up under the Ministry of Trade and Industry in December of that year, and the committee in February 2003 proposed immediate measures and a 15-year long-term plan.
The long-term plan focused on shifting the direction of state policies from “efficiency” to “innovation” and included five strategies, expanding free trade agreements, inviting foreign investment, boosting entrepreneurial spirit, innovation in the manufacturing and service sectors, and educating and training the work force. These are strategies that can be heard in Korea. However, Singapore put them into action and got back on track. The Singaporean economy grew 8.3 percent in 2004, 6.4 percent in 2005 and 7.9 percent in 2006. While the growth rate fell to 0.8 percent in 2009, it made a great comeback in 2010 by growing an astonishing 14.8 percent. Despite the worldwide economic slump, it grew by 5.2 percent in 2011.
Economic development is led by the civil servants, who are uncorrupted and innovative. Government-initiated projects are often associated with inefficiency in Korea. But in Singapore, it is safe and efficient, thanks to the unique public servant system. Singaporean civil servants are divided into specialized departments, such as public corporations, committees and commissions, and general administrative agencies. Those working in specialized departments are like employees of Corporate Singapore, thinking and acting flexibly and swiftly and establishing the future vision and innovative strategies. The administrative public servants are bureaucrats in charge of consistency and continuity of policies and systems.
What Singapore has maintained most consistently is a tolerant policy toward businesses and the wealthy. The corporate tax is 17 percent, the lowest among major economies and far lower than the 25.9 percent average of OECD members. France attempted to increase its highest income tax rate to 75 percent and failed, but in Singapore the highest income tax rate is 20 percent. It is a part of the national strategy to encourage business and investment.
More than 7,000 global companies, 1,500 Chinese companies and 1,500 Indian companies have their Asian or global headquarters in Singapore. Xiaomi, which is challenging Samsung Electronics in the smartphone industry, set up its global operations headquarters in Singapore. These foreign companies provide 44 percent of jobs, contributing to the low unemployment rate of 2 percent.
Of course, Singapore has its share of social issues, including serious income disparity. The minimum wage is not guaranteed out of fear of compromising competitiveness.
There is no universal social security system. The government provides opportunities for growth, and individuals are left to make their own living. A Singaporean friend says Koreans like to say “hurry, hurry,” while Singaporeans grow up hearing, “It is business, not charity.” The society is strictly based on the merit system, and one must be successful in business to survive. Lately, there are signs of changes, such as medical welfare for the poor.
Korea and Singapore are juxtaposed in terms of economic growth and social changes. Korea is more advanced in democratization and social development. However, Singapore has established its own future strategy. What is Korea’s survival strategy for the future?
JoongAng Ilbo, April 2, Page 28
*The author is an editorial writer of the JoongAng Ilbo.
by Chae In-taek