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COMMENTARY

An Asian economic model

12:04 AM January 04, 2017

Milton Friedman once described Lee Kuan Yew as a “benevolent dictator” from whom a lesson can be drawn: that a free, private-market economic system can be combined with a strong-arm political system. In August 1965 when Singapore broke away from Malaysia, the former was beset with high levels of unemployment, lack of sanitation, little supply of potable water, and an ethnic conflict between the Chinese and Malays. But LKY had a vision for his country: to give it a new national identity and make it a commercial and financial center.

Singapore’s economic paradigm consisted of linking up with the developed countries, attracting their manufacturers, and exporting their goods. LKY showed the investors that Singapore is a safe and stable country in which to invest. He guaranteed the preservation of their property, stifled barriers to commerce, and reduced transaction costs and externalities that hampered doing business. He did not share the left-wing view that multinational corporations (MNCs) prey on the resources of developing countries. He embraced the MNCs, mostly American firms, and partnered with them in converting Singapore into an exporter of world-class manufactured goods.

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LKY’s government adopted interventionist economic policies that fostered positive impacts, such as tremendous growth in manufactured exports, elimination of unemployment and absorption of surplus labor, and accumulation of high savings, surplus capital and equities. Singapore soon entered an era of rapid economic growth through industrialization.

The government managed the factors of production.  It created a government-controlled labor union, the National Trades Union Congress (NTUC), a confederation of trade unions in the industrial, service, and public sectors. The government imposed wage control, restricted or manipulated labor supply conditions, and gave the bargaining power over employment to the employers.  It adopted a no-strike policy in order to ensure industrial peace.

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In return, the government ensured labor standards and fair wages, built housing complexes for the workers, and constructed infrastructure for modern transportation systems accessible to workplaces. The government created an industrial environment in which investors did not fear uprisings from their employees.

To balance the bargaining power of the employers, the government invested in human resource development. It set up technical schools and granted foreign corporations incentives to train unskilled workers for higher paying jobs in electronics, ship repair, and petrochemicals.  For those who could not get industrial jobs, the government partnered with the NTUC and created labor-intensive, nontrade services mostly in tourism and transportation sectors.

The government set up institutes of learning for white-collar job requirements. It provided English-language training programs to bridge the gap between Singaporeans and expatriates of multinational enterprises.  By investing in social development, Singapore alleviated unemployment and fostered orderliness in labor-corporate relations.

Singapore ensured the protection of foreign investments that provided labor-intensive jobs.  Manufactured exports became an engine of growth.  A “no crowding out policy” was adopted. The state did not encroach on businesses effectively run by the private sector.

The Singapore experience also highlighted the indispensability in economic development of an independent judiciary and the government’s adherence to the rule of law.  LKY believed that law and order was essential to economic development.

Filipinos do not lack in intelligence, skills, and capacity for hard work. The English language is second lingua franca to most Filipinos.  And the Philippines will soon rewrite its Constitution. It might just provide for the creation of “pockets of Singapore.”

Frank E. Lobrigo practiced law for 20 years. He is a law lecturer and JSD student at San Beda College Graduate School of Law in Manila.

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TAGS: economy, labor union, Lee Kuan Yew, National Trades Union Congress, politics, Singapore
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