Is Singapore's 'perfect' economy coming apart?

Is Singapore's 'perfect' economy coming apart? - Nikkei Asian Review

"Jialat, a Singlish word taken from Hokkien, literally means "drained." In his early 50s, Aziz -- not his real name -- was retrenched from his job in a professional services company two years ago, and turned to the gig economy to make ends meet, joining hundreds of other former white-collar workers in a nocturnal demimonde of midrange saloons and weary discontent. "Cannot retire. Cannot take my [pension]," Aziz said. "As soon as they let me take it, I'll buy a house in Indonesia and retire there. If I stay here, what am I going to do?"

Midlevel jobs in manufacturing and multinational companies are disappearing, and being replaced by technology and financial services roles, which are easier to fill with younger, more affordable migrants. Singaporeans like Aziz struggle to get back into the workforce. Only half of retrenched over-50s are reemployed full time within six months. Nearly three-quarters of people laid off in Singapore last quarter were what the country classifies as professionals, managers, executives and technicians, or PMETs.

A quarter of a million people are in functional poverty. The bottom 20% of Singaporean households have an average monthly shortfall of S$335 between their incomes and outgoings, according to the government's latest economic survey. Living costs have risen. Water bills are up 30% since 2017; medical costs have increased 10% in just over five years, an acute problem in a population that is aging rapidly. Technological disruption is breaking the link between economic growth and earnings. Growth has slowed to its lowest level since the 2009 financial crisis tipped the island into recession...

"The PAP's legitimacy has depended not primarily on electoral performance or democratic accountability. Its primary source of legitimacy has come from economic performance," says Donald Low, who spent 15 years in senior government roles and is now an associate partner at consultancy Centennial Asia Advisors. "I think the social compact is fraying. The PAP's capability to ensure upward social mobility as long as you work hard and get an education, that ability has been seriously eroded."...

The economic model, which began as a mixture of socialist nationalism and paternalistic authoritarianism, before veering toward Thatcherite shareholder capitalism in the 1990s, has been much mythologized by free marketeers and aspiring autocrats worldwide. Prosperous, crime-free, technologically advanced and just about free enough for comfort, the tiny city-state appeared to have found a formula to inoculate itself against the decline and division that seem to characterize other developed economies in the late stages of capitalism.

"On the surface of it, [the Singapore economy] looks astonishingly miraculous," says Yeoh Lam Keong, the former chief economist of Singapore's state fund GIC. "Everybody thinks it's a perfect economy. On the surface, it looks as though people must be looked after. But that's on the surface."

Yeoh is perhaps an unlikely critic of Singapore's political elite, having spent the majority of his professional life close to the heart of the establishment, stepping down from the GIC in 2011...

The roots of Singapore's current problems, Yeoh believes, were planted in the 1990s, when its politics lurched rightward. In line with the prevailing neoliberal thinking, the government moved toward a more market-based approach to the pricing and ownership of HDB flats... Property prices were booming, so in theory this meant that they would have a valuable asset in retirement, which they could sell or borrow against.

However, HDB houses are sold as leaseholds, and the leases are ticking down. The value of many older homes has peaked, and their owners face a retirement with a depreciating asset and a diminished pension pot. That means the signature social policy has gone from one of the most successful public housing initiatives of the 20th century, to a liability for some elderly citizens, Yeoh said. "It's a time bomb."

Perhaps a more consequential policy decision was made in the belief -- and up to that point, the experience -- that growth would continue to drive social mobility and job creation."

They thought that they wanted to maximize welfare by maximizing growth. They had one huge policy lever, which was immigration"...

Between 2000 and 2010, Singapore's immigrant population nearly doubled from 755,000 to 1.3 million, not counting foreign-born citizens given permanent residence status...

"Relative to the base population, you haven't seen that anywhere else. It's unimaginable. It depressed permanently the wages of all those at the bottom"...

"You're earning your adult life in a middle-income country, and you end up having to retire ... in one of the richest developed countries in the world," Yeoh says. "It's like working in the Philippines and retiring in London."...

"It was already tough for people in their 40s and 50s to find a job, but with the influx of foreigners it has made it harder"...

Yeoh insists that the inevitable impacts of globalization and technological shifts on average people need to be mitigated by governments through social safety nets. Time is running out, and the threats are mounting...

Welfare is a hard sell in Singapore, where meritocracy is still a mantra. The country has no unemployment insurance, very limited unemployment benefits or in-work benefits for low wage earners, little state support for pensions...

"Singapore, for the first 40 years, never needed robust social safety nets," Donald Low says. "Now that society is a lot more mature, and all the low-hanging fruit in terms of progress up the socioeconomic ladder ... have been harvested. With or without growth, social mobility is going to slow."...

Singapore runs a structural fiscal surplus -- S$2.1 billion in fiscal 2018. Almost uniquely among developed economies, Singapore has the financial firepower to tackle its problems.

"We are so parsimonious. We save everything for a rainy day," Yeoh said. "But we need to use that surplus to stave off the bogeyman. ... It's raining like hell."...

The resistance to deeper change, insiders say, is ideological. Speaking privately to Nikkei, current and former PAP members as well as government employees used the terms "ossified" and "calcified," as they lamented that a system once known for its flexibility and willingness to debate internally has hardened, and is no longer willing to challenge its core ideologies. Reformists have been sidelined, in favor of a more conservative, nostalgic core.

"I do think you see signs of atrophy and decay in what has been a highly successful, highly competent, professional, technocratic regime," one said.

Another argued that the combination of a state-controlled media and nervous academia, both prone to self-censorship, lead to an illusion of consensus that leaves policymakers "drinking their Kool-Aid" and blind to the concerns of people on the ground...

In 2011, in the aftermath of the 2009 recession and with mounting discontent over the PAP's population policy, there was an unprecedented swing away from the ruling party, which won 60% of the votes -- although that still translated to 93% of the available seats in parliament. The result led to a degree of introspection inside the government. Unpopular policies, including immigration policy, were revised. Activists said that civic space for public conversations opened slightly.

"There was a kind of flourishing of dissenting views," says Jolovan Wham, a prominent social activist. "That was very short-lived."

In recent months, independent news outlets, opposition politicians and activists, including Wham, have been hit with a variety of criminal and civil charges."