Is the Singapore Model Sustainable for Future Economic Growth?

Is the Singapore Model Sustainable?

Beijing-born Massachusetts Institute of Technology (MIT) political economist Professor Huang Yasheng had criticized Singapore 's state-linked enterprise model dominated by its two giant sovereign wealth funds GIC and Temasek Holdings as a sure-fire way to stifle the economy in the long run.

In a recent speech made at the Civil Service College, Prof Huang urged Singapore to rethink the Temasek model and warns that Singapore's state management model has milked this system for all it is worth.

The private sector is the best way to grow the economy. It has the most productive, most innovative and entrepreneurial culture. The state-owned enterprise system doesn't give you that. You are already hitting the wall. Retaining this strategy could mean sacrificing future growth that is possible only through a bigger, more dynamic private sector, he said.

Prof Huang felt that governments should not get involved in venture financing as they are using taxpayers' monies and questions how the government can defend its decisions to invest in failing individuals and projects.

Nine out of 10 investment projects fail. Does the government have such a high tolerance for risk? It's taxpayers' money, right? I don't think, politically, it's legitimate for the government to keep investing in failing individuals and failing projects. How do you defend these decisions, he asked.

Temasek Holdings is led by the wife of Singapore's prime minister Ho Ching. It had lost billions of dollars in failed overseas investments such as Thailand's Shin Corp, Australia's ABC learning, and U.S's Merrill Lynch. Ho Ching is an engineer by training.

GIC has been headed by Lee Kuan Yew since its inception in 1981, a lawyer by profession who has never worked in the financial industry before.

Prof Huang opined that Singapore should expand its private sector in order to compete with China and India :

Maybe a better way is for the government to fund more basic research and then allow universities, private equity firms, venture capital firms and rich individuals to take care of the rest. That is because even when the state sector is well managed, it is not as innovative as the private sector, he says. From a technological development point of view, you need a bigger private sector to compete, to come up with new products, processes and technologies, to better compete with India and China .

Under Singapore's state-model enterprise, civil servants are often placed in leadership positions in its major state-linked companies and research agencies. For example, the current head of A*STAR is Lim Chuan Poh, a former Chief of Army with no prior experience in the private sector.

Prof Huang felt that creative thinking is often in short supply with civil servants leading the charge due to the culture they are immersed in:

Civil service culture is about discipline. It's about execution. It's about efficiency. Entrepreneurial culture is about challenging the authorities, questioning the existing ways of doing businesses, moving away from the routines and norms. It's about the unconventional, rebellious and diverse. These values are almost polar opposites.

He also criticized Singapore's education system for not producing diversity in ideas and unconventional ways of solving problems and warns that Singapore risks going down in history as an economic has-been if it fails to exploit the potential of its private sector.

Prof Huang had hit the nail on the right spot about the macroeconomic problems plaguing Singapore “its one-dimensional political economy. However, he is not aware of the political implications of the Temasek model which serves two purposes: one, to ensure the continued political hegemony of the ruling party, or rather a select group of people and two, to keep the citizenry weak so that no alternative centers of power can emerge to challenge the status quo.

As entrepreneurs are fiercely independent, unconventional and rebellious by nature, they cannot be brought easily under control or co-opted into the system. Having a few rich self-make millionaires running around will pose a threat to the political elite, as Thailand's Thaksin Shinawatra and South Korea 's Lee Myuang Bak had shown.

Unfortunately, for a repressive, insecure and paranoid regime which is bent on complete control and dominance at all costs, it is unlikely to see the profound wisdom in Prof Huang's words and Singapore will have to pay the price for its ignorance one day when we are overshadowed completely by China and India .

Asia Sentinel: UMNO's Corporate Cornucopia

The House that Mahathir Built

UMNO's Corporate Cornucopia

Written by Our Correspondent

Asia Sentinel, 13 OCTOBER 2010

How Malaysia's companies funneled money into the country's biggest political party

In the 1980s and 1990s, Halim Saad and Tajudin Ramli were two of Malaysia's brightest stars, picked by former Prime Minister Mahathir Mohamad to lead the country's ethnic Malays onto the national stage as exemplars of a new Bumiputera business culture that would catch up with the ethnic Chinese who had dominated commerce as long as Malaysia had been in existence.

When Mahathir took office, insiders say, his plan was to create a cadre of 100 super-rich bumis who in turn would help rural Malays into prosperity under a konsep payung, or umbrella concept routed through the United Malays National Organization, much the way he envisioned driving the country into industrialization through massive projects. But greed intervened. Once the privileged got rich, there was little incentive to share it with the kampongs, the Malay rural villages. Many of the companies eventually collapsed and are being supported by government institutions such as Kazanah Nasional, the country's sovereign investment fund, or the Employee Provident Fund.

Although the Umno connection was widely assumed during Mahathir's 22 year reign as prime minister, today a flock of explosive court documents filed in different Kuala Lumpur courts appear to be breaking open conclusively the open secret that Tajudin and Halim and others were essentially front men for the United Malays National Organization, the country's biggest ethnic political party and part of a class of rentier businessmen who became known as Umnoputras, a play on the word Bumiputera, or native Malaysians, predominantly ethnic Malays.

To Continue, read UMNO's Corporate Cornucopia



UMNO-linked companies:
Faber Group Bhd
KUB Malaysia Bhd
Malaysian Resources Corp. Bhd
Media Prima Bhd
New Straits Times Press (M) Bhd
Putera Capital Bhd
UEM Builders Bhd
UEM World Bhd
PLUS
Pharmaniaga
Utusan Melayu (M) Bhd (partly owned by Syed Mokhtar Albukhary, another Mahathir crony and one of Malaysia's 10 richest men according to the Forbes List
Renong Bhd
Realmild Sdn Bhd
Mahkota Technologies (Also a partnership with Syed Mokhtar Al Bukhary
Malaysian Airlines
Celcom
Malaysian Helicopter Service
Temasek Padu Sdh Bhd
Sabah Shipyard
Labuan Shipyard
Redicare
Medivest