Singapore's biggest danger: complacency

Singapore

SINGAPORE - South-east Asia's "miracle city state" - will need to change if it wants to continue to thrive in its second half-century and better tackle changing headwinds such as land scarcity and a rapidly ageing population, says The Economist.

In a special report on the Republic titled The Singapore Exception, the publication points out that while there were ample reasons to be optimistic about Singapore's economic outlook, it would need "to determine the type of society it wants, and respond accordingly".

The report, which examines different aspects of Singaporean "exceptionalism" - ranging from its economy and politics to foreign policy - also discusses if the Republic's survival is under threat. It opined that the island state is now at an "inflection point" and faces vastly different threats from those of half a century ago.

"The biggest danger Singapore faces may be complacency - the belief that policies that have proved so successful for so long can help it negotiate a new world," says the report.

The other, it says, is the somewhat waning confidence in the People's Action Party (PAP) as evinced by the ruling party's showing in the 2011 general election.

Referring to a 2013 white paper on population - in which the government projected that the population in Singapore would reach 6.5-6.9 million by 2030 - it says that these projections have caused alarm.

"Already, probably more than half the people living in Singapore were not born there," says the report, adding that the proportion seems likely to rise and Singaporeans fear that foreigners are taking up too much space on the island, that is "getting tight".

"The government argued the proposed levels of immigration would be necessary to maintain even moderate growth because Singaporeans are not reproducing themselves," it adds.

Singapore's growing ageing population is another challenge which the government has begun to address by putting in place a package of benefits for the "pioneer generation" since 2011 and introducing pension payments and extending subsidised medical care.

Yet, the report notes that some "social needs" were still unmet; the promise of home ownership and a comfortable old age now seem more of a challenge.

In terms of the economy, after "decades of prudence", Singapore was well prepared, it says, for most eventualities such as an external financial crisis given its diversified economy with a strong manufacturing base as well as many service industries.

But the economy cannot continue as it has done because a growth model that relies on many immigrant workers is unsustainable and has already become politically contentious. Toward this end, it points out that the government has been trying to prepare for change, with an intense focus on labour productivity.

The structural changes being made include a rebalancing of the education system to meet industry needs and incentives to spur business innovation and automation.

Another big part of the solution which the government has identified is cyberspace, with Singapore having invested heavily in the infrastructure of the Internet. Yet, in terms of an "e-intensity index" developed by consultancy firm BCG, it scores less well than South Korea, Denmark and even Britain.

One initiative - the "Smart Nation" drive - could help change that.

In addition, the report says that while there were plenty of reasons to be optimistic about Singapore's economic future, the "well-educated, globally aware young people" and their leaders need to decide what sort of society they want.

"The danger is that they will no longer be meritocrats sitting atop an unequal yet basically harmonious society, but an elite in a country that relies on increasing numbers of short-term migrants treated with little respect; and where an ageing, less-educated group of fellow citizens feel disgruntled and let down."

"Many countries in the world face similar dangers, but in Singapore they are especially stark because of its size and its severe ageing problem," says the report. It adds that, in any case, Singapore was better equipped than most countries to avoid the worst outcomes.