A hundred countries in a hundred days: Singapore

Per capita GDP, US$, from IMF WEO, April 2021; IMF forecasts 2021–26

This post officially launches “A hundred countries in a hundred days”, a Country Success series. This may seem ambitious for a single country risk analyst like myself to do… and do well. So, in deference to this sympathetic view, I will only commit to meeting this goal by the standards of the solar system, rather than Earth (see below).

NASA: https://spaceplace.nasa.gov/days/en/

NASA reports that the inner planets, Mercury and Venus, rotate on their axes approximately every 2 months and 8 months, respectively. So, by using the term “day”, I am committing to covering one Earth country at least every Mercury day, or if I get waylaid in a deep dive (been known to happen), one country for every rotation of the oven planet known as Venus that the Soviets explored so thoroughly before dismantling their state.

This commitment to a rhythm of “a country a day” (solar system day, liberally defined) will continue for as long as I can swing it, or at least until aliens attack and seize control of Earth. And, given the assault in recent years by Earthlings on globalization and multilateral cooperation, a self-defeating Earth process that seems to occur periodically according to a historical cycle, the last time being during the interwar years 1919–39, there are doubts that a unified defense of Earth by humanity against an alien invasion could be mounted. Good news though: country risk analysis is not geocentric and could be applied to alien civilizations. I’ll check for related job openings on Indeed.com.

Enough Sci Fi. We do need a joke now and again, ay? Thank you for the indulgence.

This material can get dry at times. Not really. Take Singapore.

Singapore — the densely populated and dynamic city-state of 5.8 million inhabitants, located in Southeast Asia off the coast of Malaysia in between the South China Sea and the Indonesian archipelago — stands athwart perhaps the world’s busiest sea lanes, plied by great power navies, where at least one-third of global trade passes.

This multi-ethnic nation has experienced rapid economic growth over the last fifty years, under the guidance of enlightened but autocratic leadership, going from a poor, less-developed British colony to an independent, diplomatically active nation, and achieving parity with the United States in income per head. Its economy boasts technological advancement and diversification, leading-edge infrastructure, and top-performing educational and health care systems.

This is our first country in the series.

The chart at the top of this post shows how Singapore has closed the income gap with the U.S., going from 40% of U.S. income per capita in 1980 to rough parity today (both countries among the wealthiest in the world, with >$60,000 per head, before the pandemic).

All in on globalization. Singapore achieved success by going all-in on globalization. It possesses among the lowest barriers to trade in the world and is a global financial center. The country is integrated in the global value chain, becoming a leader in electronics manufacturing, transport, logistics, technology, internet startups and banking. The authorities provide a low-tax, pro-business climate that attracts foreign investors, many companies locating their regional headquarters there. The rule of law and courts are known for fairness in commercial matters.

Skills acquisition. Singapore empowers its workforce. Its students continually top the ranks in international exams. Its education system is characterized by central direction while allowing school autonomy in achieving goals. It boasts well-paid teachers, lifelong teacher training, national standards for achievement, and concerted efforts to provide equal education to the disadvantaged. It offers workers access to life-long training.

Health care and pensions. Like the U.S., Singapore’s market-oriented economic model results in greater inequality than seen in, say, Western Europe. However, unlike Americans, most Singaporeans benefit from a fully-funded pension plan and health savings accounts. This is achieved through mandatory household savings, although the government cautiously raises taxes against future needs. However, like the U.S., Singapore’s health care coverage is not universal, as entitlements exclude expats and migrant workers. The pandemic has pointed up Singapore’s need to broaden health care and social welfare coverage. Still, inequality is lower in Singapore than in the U.S. Furthermore, U.S. entitlement spending — Social Security and health care — is expected to deplete trust fund assets in the next 10–15 years.

Singapore achieves favorable health outcomes (e.g. among the highest healthy life expectancy in the world) at low cost, which supports a productive workforce. Singapore’s health care system is characterized by burden-sharing and cost containment. System features include: government-provided catastrophic insurance alongside private insurance, means-testing of subsidies, competition among health care providers, and cost-sharing across households, health care providers, private insurers, and the government.

Financial cushion. The country’s finances are well managed. Singapore saves a huge portion of national income (42% of GDP vs. the U.S.’s 19%), driven by persistent fiscal surpluses, which fill the coffers of its sovereign wealth funds with a massive rainy day cushion. The country comfortably funds a robust level of investment (25% of GDP vs. the U.S.’s 21%).

Strategic planning. Importantly for our objective of identifying country best practices for U.S. policymakers, Singapore deploys strategic planning — led by government and partnering with the private sector. It does this better than most. By identifying weaknesses and pulling together stakeholders to draw up and implement plans to correct them, the government of Singapore focuses on success in the long term — a perspective elusive in the U.S. context. See section below for an in-depth discussion.

Flawed democracy. Singapore falls well short of the U.S. and other countries on democracy, that is, on the political participation permitted to its citizens. This is captured in a low “Voice and Accountability” score with the World Bank, Freedom House’s designation of Singapore as only “partly free”, and the EIU ranking of Singapore at the bottom of a group it calls “flawed democracies”.

Singapore’s government has been run by one party since independence — dominated by one family — and civil liberties are sharply curtailed. The Economist reports that Singapore’s Public Order law limits freedom of assembly, and internet posts critical of the government can land Singaporeans in prison. Singapore’s authoritarian characteristics make the country vulnerable to social unrest in the event of a sustained economic downturn — a stressor the city-state has avoided for decades.

The most competitive country in the world, yet falling short on entrepreneurship. Restrictions on individual freedom can negatively impact economic performance. Singapore is ranked as the most competitive country in the world by the World Economic Forum — that’s right, most competitive country in the world, folks, just ahead of the U.S. — due to its infrastructure quality, effective government, free markets, top health outcomes and low level of violence.

But, the country falls short on innovation, business dynamism and entrepreneurship. Entrepreneurship may be a benefit enjoyed more often in societies that promote freedom.

Good government and authoritarian features coexist. To that point, the World Bank ranks Singapore first in the world for government effectiveness — first in the world, folks — but only 124th of 204 countries (the bottom 40%) for democracy (“Voice & Accountability”).

Slowing productivity growth. Growth in productivity due to innovation, called Multi-factor productivity growth by economists, declined in Singapore in recent years, below rates in the U.S. and Germany. This is despite having posted stronger productivity growth than these countries over the long term. See chart below.

Multi-factor productivity growth: an important measure of innovation in a country. MFP reflects the portion of growth in output that is due to innovation, sometimes called Total factor productivity growth. Annual growth rate %, 5-year, 10-year and 30-year averages to 2019. MFP growth reflects that portion of output growth that is not due to adding labor or capital, but due to using these factors more efficiently or getting more out of them through technology. Sources: OECD for U.S. & Germany; Singstat for Singapore. Singstat reported that in 2020 during the pandemic, multifactor productivity shrank 5.6% in Singapore.

Singapore’s innovation gap, combined with the impact of trade tensions, is responsible for the productivity growth slowdown. It appears that a country’s strength can also be a liability. As globalization has suffered a reversal in recent years, battered first by the US-China trade war begun in 2018, and then by the pandemic, with its onshoring of the global supply chain, the U.S. has reopened a small lead over Singapore in per capita income. (See chart at the top)

What is striking about Singapore is that the country proactively addresses its weaknesses (except, generally speaking, on the political front). To do so, the authorities deploy strategic planning.

Future Economy Council. The Future Economy initiative, a government-led collaboration rolled out in 2017, demonstrates the country’s determination to improve. The initiative focuses on skills and knowledge acquisition, digitalization, firm-level innovation, and deepening global integration.

The Future Economy Council (FEC), led by the Finance Minister and including representatives from industry, unions and academia, assesses economic trends, sets priorities, and implements the plan.

COVID impact. The FEC directs efforts to adjust the country’s strategic plan to the post-pandemic economy. Once the first COVID infections appeared in January 2020, the prime minister convened a whole-of-government committee to deal with the problem — implementing first a lockdown, then a robust testing and contact tracing program, and subsequently a 3-phased reopening plan. Partnering with business for a safe reopening became a priority.

The FEC announced in April 2021 an adaptation of its strategic plan to the new reality. Long-term structural trends were reassessed. Supply-chain reconfiguration, accelerated digitalization, remote work, and changing consumer preferences are being incorporated into the strategic plan.

Likewise, the government adjusts in line with changing pandemic conditions. In May 2021, the country returned to Phase 2 of its reopening, from Phase 3, given rising infections around the world, including in partner countries such as India.

Industry transformation. Since its inception, the FEC has deployed “industry transformation maps” (ITMs) as a tool to set strategies for 23 of Singapore’s economic sectors. The FEC has sought ways to help Singapore’s firms become more efficient, and to “scale up” through regional and global alliances, in order to compete with larger firms in the major economies.

In April 2021, the FEC announced that the ITMs would be updated through 2025. Industry plans would be aligned with the country’s R&D effort in order to better plan for emerging structural changes. Going forward, the FEC would focus on advanced manufacturing, transport, education and health care, the urban economy, services and technology, hospitality and sustainability.

Other challenges. While Singapore’s response to the pandemic was muscular and effective at containing the spread and limiting fatalities, migrant workers in overcrowded dormitories were initially neglected, so the virus spread there. And, vaccine rollout has been sluggish (though largely this is beyond the country’s control).

Strategic planning, while empowering the nation to take the long view, sometimes results in excessive complexity in Singapore. Multiple government-led taskforces are created to energetically work on overlapping projects, requiring realignments and mergers of competing initiatives.

Politics. Lately, politics has created uncertainty in Singapore, despite the leaders’ best intentions. The ruling People’s Action Party (PAP), in power since 1965, has generally offered the nation predictability. However, the PAP had a weak showing in July 2020 in the country’s highly-controlled elections (winning 61% of the vote, low for the PAP). The Prime Minister-designate, Mr. Heng Swee Keat, the Finance Minister who chairs the FEC, garnered only 53% in his constituency. So, Mr. Heng in April was dropped from the leadership succession. The Economist reports that this highly rules-based society lacks rules for succession, a feature most democracies possess.

Authoritarian societies nearly always run succession risk, but Singapore has in the past managed this well. However, as prosperity has become harder to secure, given globalization’s retreat, stress has been injected into Singapore’s politics.

Climate change. Singapore’s record on climate change is not great. The country ranks 161st of 180 countries on greenhouse gas emissions per capita by Yale University’s Environmental Performance Index, only slightly better than the U.S.’s abysmal 167th ranking. Strategic planning must be brought to bear on this pressing issue.

Clearly, the U.S. should not — could not — adopt Singapore-style strategic planning lock, stock and barrel. The political cultures of these two countries couldn’t be more different. Furthermore, the Singapore model is difficult to replicate in large, decentralized countries. Singapore’s experience is more relevant for other global cities — such as New York, Hong Kong, Tokyo, Dubai, or Sao Paulo. That said, strategic planning is indispensable almost anywhere, and should be adapted to a country’s circumstances.

In a paper I co-authored with Lucila Broide, called Ten Point Plan: Strategic Planning for the U.S., we recommended a strategic planning structure that fits U.S. democracy. The approach seeks to avoid the cozy relations between government and business that strategic planning’s opponents warn against, what the Economist has called “crony capitalism”, a problem the magazine suggests is evident in Singapore.

To avoid this, and to align strategic planning with the rules and practices of American democracy, we argued that a U.S. Council on the Future Economy (CFE) should be chaired by a cabinet secretary and include an “associated” Advisory Board of industry leaders. This would formally separate business from government, empowering industry leaders only in an advisory role.

That said, Ten Point Plan calls for the Advisory Board to be chaired by an “innovation czar”, a sort of Steve Jobs type. S/he would seek to bust silos across American industry in order to share ideas and align corporate strategy with national priorities. The key national priority would be to achieve economic growth that is strong, sustainable and equitable over the long term.

No Industry Transformation Maps here, but track firms’ performance. An Office of the Future Economy would be established in the White House with a Director appointed by the President and confirmed by the Senate. This office would track a set of performance metrics in such key frontier and disruptive technologies as: AI, robotics, autonomous vehicles, transportation systems, new materials, medical technology, e-commerce and fintech, social media, 5G, cybersecurity, quantum computing, advanced manufacturing, pandemic defense, renewables and green tech, and whatever else important emerges on the horizon.

There would be no directive to U.S. firms to meet specific targets, but U.S. performance would be tracked and published. The mere act of tracking performance in leading technologies — out of the White House — raises our game.

Likewise, the Committee on the Future Economy would play a political role. The White House Senior Advisor for Political Affairs would pull together a bipartisan group, including party leaders from both houses of Congress and the National Governors Association (NGA), to address reforms that support consensus-building and coordination at multiple levels of government.

A Political Subcommittee of the CFE would recommend rules changes to Congress that would fast-track legislation with broad bipartisan support. It would normalize procedures for “deliberative negotiation” — expanding on the Congressional “gang” approach. Strategies to address gerrymandering and partisan campaign finance would be considered. The remit of the Political Subcommittee would be to forge a consensus over economic policy, so that the CFE’s Strategic Plan could be implemented.

Strategic Planning is not socialism. As the experience of Singapore proves — with its low-tax, pro-business, free market economy — strategic planning, led by government and partnering with the private sector, is not socialism, but rather, international best practice.

Roger teaches political economy at NYU, is the former Head of Country Risk at GE, & co-author of Ten Point Plan for the U.S. (https://countrysuccess.net/)