OPINION: Growth in 2000-2009: Heedless, Headless and Tailless - Devadas Krishnadas

The Malaysian Insider, 25 Mar 2013
The Singapore economy suffered a series of economic shocks in the first half of the last decade. We began the new century struggling to get over the Asian Dollar Crisis when in 2001, we were buffeted by the ripple effects of the Dot Com bust and then the impact of SARS in 2003.
By 2005, as the term of government neared its conclusion, it was clear that the preceding five years were effectively wasted years in terms of economic and wage performance.
At the time, global macroeconomic indicators began to show a positive turn suggestive of growth possibilities for us. We embarked on aggressive labour force augmentation to feed those possibilities.
However, undetected by most, including the policy makers, the supply-side tactic to take advantage of demand-side growth opportunities quickly turned into the demand side-strategy generating supply-side growth, as labour force addition — rather than productivity — began to be the primary driver of Gross Domestic Product (GDP) performance.
This supply-side growth created overheating effects in housing and transport and removed the impetus for capital investments in productivity, in favour of cheap labour injections.
It is arguable that the wage stagnation at the lower end and marginal improvements in the middle of the income ladder were a by-product of this. Most Singaporean workers therefore did not benefit much from the growth.
The data shown in the table shows that almost all the GDP growth over 2005 to 2009 — the period prior to the government committing to moderation in foreign labour intake — was a function of labour force change. Of this, the greater proportion, indeed almost all, came from foreign supply.
The data is admittedly cloudy because the government was pursuing an aggressive programme to absorb new citizens. Citizens and permanent residents (PRs) together form the “residents” of the labour force. Hence, if it were possible to strip out the additions to the PR pool and allocate them as foreign labour — which they functionally were, being foreign-supplied injects into the labour force — we should logically expect to see that the foreign labour force change was even higher.
On reflection it is not hard to argue that this growth model came at longer term costs and negative externalities which outweigh the short term economic benefits. This is a reflection of search for growth which, however well-intentioned, did not think ahead to side effects nor consider the citizenry’s sentiments.
It was therefore heedless but also headless, because it was not calibrated well as the government itself acknowledged; and tailless, because the benefits did not fully trickle down to most Singaporean workers. Full story