SP 2016: Panel on “Inclusive Growth?”Feb 16, 2016 at 11:59 am | Hits: 1432
By Tng Ying Hui and Chang Zhi Yang
Mr Ong Ye Kung
Acting Minister for Education (Higher Education and Skills)
Mr Vikram Khanna
The Business Times
Mr Yeoh Lam Keong
Lee Kuan Yew School of Public Policy
Dr Chua Hak Bin
Head of ASEAN Economics
Bank of America Merrill Lynch
Professor Tan Kong Yam
Asia Competitiveness Institute
Lee Kuan Yew School of Public Policy
In the third panel of the Singapore Perspectives 2016 conference, the speaker and panellists focused on whether “inclusivity” and “growth” could go hand-in-hand, and if so, what it meant for Singapore and how it could be achieved. The broad themes discussed included: addressing inequalities in society, economic restructuring, sustaining innovation and productivity growth.
In his opening statement, Mr Khanna offered a few questions to outline the scope of the discussion. He asked if inequality was a problem for Singapore, what inequality was and why it was a problem. Another area for discussion identified by Mr Khanna was the implications of innovation on inequality. Despite being a huge potential source of growth, innovation could lead to displacement of workers, dislocation of businesses and disruption in industries.
Acting Minister Ong Ye Kung: Ingredients for Inclusive Growth
Mr Ong started his speech by defining inclusive growth. Citing the national pledge, Mr Ong said inclusive growth is based on “justice and equality so as to achieve peace, prosperity and happiness”.
But current indicators of inclusive growth were inadequate, he said. Gross domestic product (GDP) per capita only measures economic activities and makes no claim on subjective concepts such as welfare. Besides this, the Gini Coefficient, which uses the number zero to express perfect equality and one to indicate perfect inequality, is also flawed, he said.
Mr Ong went on to map out ways to achieve progress, prosperity and happiness — the key facets of inclusive growth.
Progress is achieved first by keeping a lean and progressive tax system. Next, social programmes are needed, such as the GST Voucher Scheme and MediShield Life, which have aided redistribution of economic benefits. Education is also a key ingredient for social progress. It is a “critical social leveller and we must get it right,” Mr Ong said.
Before social distribution can be achieved, prosperity — which Mr Ong defined as economic growth — is needed. He assured the audience that although Singapore no longer enjoyed high single-digit growth rate, it could continue with lower growth numbers. With economic growth and redistribution policies as enablers of mobility, 14.3% of children born to parents in the bottom 20% of the income bracket have reached the top 20% of income in their late 20s and early 30s. This figure is higher than other developing countries, such as the United States, United Kingdom, Denmark and Canada. However, the challenge for Singapore is to become more competitive and attractive so it does not fail the young. Singapore currently is rolling out initiatives for economic transformation, such as the SkillsFuture programme and the Research Innovation Enterprise 2020 (RIE2020) plan.
Finally, to achieve happiness, Mr Ong urged people to engage in philanthropy and volunteerism.
Concluding, Mr Ong said the government does not deliver “left” or “right” policies for ideology’s sake — their policies aim to achieve inclusive growth.
Singapore’s Six Problems
The first panellist, Mr Yeoh Lam Keong, noted that inequality has become a problem in Singapore; the disparity between income groups is coupled with a stagnating wage growth for the “average person in the economy”. There are several reasons for that, one of which has been the country’s pursuit of cheap labour. While current efforts are aimed at generating productivity-driven growth, the effect of past policies continues to be felt.
The country needs to tackle six key policies to achieve inclusive growth, Mr Yeoh said, and he asked if the government could “commit to achieving key long-term targets” in these areas: Abolishing poverty; achieving retirement adequacy, affordable public housing and healthcare for long-term chronic illnesses, education reforms that enable social mobility, a Hong Kong standard of public transport; and keeping the population target below 6.9 million.
Mr Ong replied that the government had in the last few years been able to achieve some of these goals. While giving out grants is important, skills-training and initiatives that enable people are better ways to deal with inequality, he said. He also added that while abolishing absolute poverty was a worthwhile endeavour, it was not so straightforward when implemented.
Economic Restructuring and Innovation
Citing low growth figures, Dr Chua Hak Bin was concerned about the “interventionist policies” that have shifted “so much left at the expense of growth”. Impact from policies such as the SkillsFuture programme to encourage lifelong learning, may be difficult to quantify, he said. In addition, the more than $3 billion Productivity and Innovation Credit Scheme has not revived private investments and labour productivity growth. Dr Chua asked how the outcome of schemes like the $19 billion RIE2020 plan should be measured.
Speaking about Singapore’s research and development plans, Prof. Tan Kong Yam quoted an Economist Intelligence Unit report that ranked Singapore as having lower innovation efficiency ratio than Finland, Japan and the United States. Although Singapore has pumped in a lot of resources into research and development, it has not gotten the most bang for its buck. How can Singapore improve its innovation efficiency ratio in the next five to 10 years, Prof. Tan asked.
Mr Ong said he too was concerned that the government was only “tinkering but not doing something bold” to transform the economy. Using the anecdote of Walt Disney as an example to emphasise the importance of restructuring, Mr Ong said the Hollywood movie giant used to focus on cartoon characters Mickey Mouse and Donald Duck, but today it has turned to Marvel comic superheroes and Star Wars.
Singapore is, however, doing better than Hong Kong and Taiwan, whose economies rely largely on one key industry. Singapore accrues 19% of its GDP from manufacturing and also has a growing services sector that leverages its manufacturing and scientific expertise. Mr Ong said Singapore must continue to preserve its science and industrial bases as drivers of innovation.
Balancing Between Efficiency and Equity Goals
During the question and answer session, one participant noted that inclusive growth and welfare would require a significant tradeoff between efficiency and equity, and also incur related transaction costs. Adding on, he said that he struggled to get a sense of the effectiveness of government social policies in achieving welfare aims such as “better health, better happiness”, and wanted to know how the government could reduce the transaction costs involved in achieving equitable outcomes.
Minister Ong agreed that it was important to maintain efficiency even when pursuing equity goals. He shared that the government relies on ground feedback in addition to quantitative metrics to evaluate its policies. However, he also felt that the allocation of public resources in certain areas could be further improved. For instance, in the area of healthcare, more resources could be allocated to community healthcare relative to acute care so that there could be sufficient step-down care to meet the needs of the population.
Prof. Tan said that working through the public healthcare, public transport and public housing systems is a more efficient way to achieving welfare redistribution, as they are important pillars of social stability. Mr Yeoh argued that the government has ample resources to achieve better welfare, but the question was whether it was willing to use the resources rationally to achieve the targets he had outlined for healthcare, education and public transport.
The Silver-Haired Generation
When asked by a participant whether Singapore could accommodate a rising dependency ratio in our rapidly ageing society, Minister Ong acknowledged the importance of this matter. He recalled that it was very difficult to help unemployed middle-aged PMEs and older workers find jobs when he was with the Employment and Employability Institute (E2i). Using the metaphor of cash and stored-value cards, Minister Ong said: “Young people are like cash. There is a lot of currency with what they have just learnt, but older people are like stored-value cards. The value is there but you must have the right interface to tap in.” He underscored the need for a new form of HR practice. For a start, recruiters should “never sort applications by age”. At the same time, older people and younger people have to learn to work better with each other.
Productivity of the SME Sector
It was highlighted that the SME sector has not managed to raise productivity, despite the huge amount of resources provided by the government. Minister Ong replied that top-down economic development would be increasingly difficult to manage given the increasingly diverse economy. Singapore needs to see more bottom-up driven innovation and discovery of new areas of economic strength. He believed that this would bode well for the SME sector, especially SMEs that are able to look at the entire value chain of production and see it as a huge business space of opportunities.
Responding to the question by a recent graduate on whether there would be a day when a degree is no longer a precondition for social mobility, Minister Ong answered that the issue was not so much about getting a degree than it was about having the perseverance and resilience to invest time and effort throughout one’s life to develop an area of specialisation. “There is no shortcut and you have to spend your whole life working in one area and becoming very good at it,” he said. But the minister pointed out that there were different institutions to support learning at different stages of development, even after leaving school (e.g., SkillsFuture), so that one could truly deepen skills and gain mastery of one’s work. This would in turn contribute to the competiveness of Singapore’s economy.