Prime Minister Lee Hsien Loong on Monday explained how we arrived at an infrastructure lag. He elaborated on how the decision to augment the labour force and the population was taken in the context of the economically bleak first half of the last decade.
The gross domestic product (GDP) growth is a function of a combination of changes in productivity and labour force growth. Historically, Singapore had productivity-driven growth. Many will remember the productivity campaigns of the 1980s and early 1990s. Productivity-driven growth creates added value for the economy. It also typically expands it in a more stable and sustainable way.
Straightforward labour force injection creates a temporary boost to the economy but can quickly lead to a tail-wagging-the-dog effect. For example, this can be seen in the rapid growth of the food and beverage sector, and the overheating property sector to cater to population growth.
This in turn leads to higher demand for workers in the construction and food and beverage sectors, which then creates its own feedback loop. Full story
