Singapore Future Economy

The Straits Times reported an extract of my analysis of the issues the Singapore economy faces today and also some recommendations which I feel the government, companies and all of us Singaporeans should consider if we want to create a vibrant Future Singapore Economy.

I did the analysis based on the feedback I have gotten from many from the private sector and also based on my own personal experiences. Many Singaporeans have expressed concern about whether there is a great future ahead for Singapore.

I urge everyone to share ideas and suggestions you may have. We all have to take personal interest in such issues as the government alone may not have all the answers in the complex world ahead of us.


Download the PDF here:  Paper-on-The-Future-Singapore-Economy-Final-1.pdf (1492 downloads)

Executive Summary



  1. This year in 2017, the economy is expected to grow at 2.5%. However, some, like me, feel that Singapore has the potential to grow more. I am not an economist so I am not at expert at what kind of growth levels we should be targeting. But practically if we do some things, I believe these changes will translate to additional growth for us.

Let me make some macro points first:

i.   We should start focusing more on GNP rather than GDP because we need to start encouraging our local companies to derive their economic value by being based in Singapore but earning more income from overseas, like what the Japanese did post-World War II. This means we need many more Singapore companies to become bigger and be the MNCs of the future with HQs in Singapore. Singaporeans must also be prepared that job opportunities will be significantly overseas and they must be prepared to become international citizens. Our education system must change to trains such a work force that is global ready.

ii.   Singapore’s economy is going through significant structural changes and it will is a fallacy to think that this is simply some form of cyclical change. If we really want good times to come back, we need to make significant structural changes. Companies need to understand that business as usual will no longer work any more and that they too need to transform their business models, embrace productivity and search for new products, services and markets to survive. Singaporeans need to realize that they will have to be prepared to work in multiple industries and multiple roles in their working life.

iii.   Third, disruption is going to change everything in the world. Many types of disruption are already affecting many economies and industries, including through de-globalization/nationalism/Trumpism; in the regional balance of power with the fall of the TPP and rise of China’s e One Belt One Road; most obviously currently through technological/digital disruption; disruptive business models as companies and countries have to start thinking like start-ups and have simple and flexible organization structures; and through strategic planning tensions arising from the volatility of trends and data, I read that two-thirds of companies have a planning horizon of less than four years because one cannot predict for too long today.

  1. We are already seeing signs of stress in our economy. For instance, in 2016, the number of companies shutting down was a record number of in almost every sector of the economy, the highest over the last six years.


The Problem Areas

  1. So, what have we done wrong and where are there gaps that need to be fixed?

i.Internal Issues

The truth is that the global economy is undergoing structural changes and Singapore is not alone in the issues we face but there are several miscalculated government policies have gotten us to this stage in the first place. These are:

-The population explosion, particularly relaxed capital inflow and real estate investment laws, which allowed wealthy foreigners snapping up our property and propping prices up. Firstly, this created a landlord phenomenon in industrial real estate as rich foreigners bought industrial property only to rent it out without creating any economic value. Also, the increase in wages did not keep up with the increase in property prices over the years as cheap foreign labour depressed wages. This can be attributed to the growth at all costs policy allowed to flourish for decades that allowed cheap factor inputs, like cheap foreign labour, to distract our focus from productivity.

ii.Real Estate

Industrial rent rose by 30% and Industrial land prices notched up 60% from 2012 to 2014. Up to 2014, Singapore’s industrial property price index grew the most, at 8.8% quarter-on-quarter, compared to residential and commercial properties. SMEs thus have limited options for affordable space for the following reasons:

  • JTC share of total market dropped from 12.8% to 3.7% since divestment (based on data I saw in 2015)
  • REITS maximize returns and have to increase rentals regularly
  • Private developers design premier industrials spaces to maximize returns
  • Lax policies allowing investors to invest in industrial property for returns

Therefore, the net Effect for SMEs is that if you don’t own a property you are in trouble.

iii.Rising Business Costs & Manpower Crunch

Business cost and manpower availability have been the big problem faced by SMEs and start-ups. There is no relieve in sight but the government needs to do something about it fast as I believed many of these are induced by these policies:

– Sudden sharp cutting down of the foreign labour supply

– Government land divestment policies & REITs

– Transport cost as a result of the legacy COE system

– Many hidden costs and taxes (utilities, fuel, high foreign workers’ levy etc.)

iv.Dual Economy

Many a times there seems to be a big mismatch between what government says about the state of the economy and what many SMEs are experiencing. For example, for the last couple of years, the widespread feedback from SMEs and start-ups has been that they are seeing tremendous pressures and business is bad for them. At the same time, we hear government leaders say that economy is not in bad shape. Whether it is down to a flaw in the feedback channels or the government engaging a narrower segment of the business community (example GLCs), there seems to be a dual economy that is building up, and the government needs to ensure that it is listening to both. Here are the reasons why I feel the dual economy exists today:

a.   Rules and Regulations made for MNCs and GLCs – difficult for SMEs to comply

b.   Land policies favour MNCs and GLCs – cheaper rental and easy land allocation. I have personally experienced a situation

c.   where a MNC gets a token rent of $2 per year while a similar sized local company may pay a few hundred thousands of dollars as their annual rent.

d.   Bank financing – easier and cheaper for MNCs and GLCs to get loans – no bank looking after the SMEs development needs.

e.   EDB cleared obstacles for MNCs (for example the Apple story where an EDB officer account managed the whole Apple start-up) whereas SMEs left to fight own battles.

f.   KPIs favours large companies – government grants, financing schemes and R&D grants focus on quantum of money disbursed and not the number of companies.

g.   EDB and IE Singapore manage some economic schemes – they naturally help more GLCs and larger companies – too difficult to deal with smaller companies.

h.   Tax incentives, including temporary rates as low as 5 per cent for companies setting up regional headquarters. An example is the Global Trader Programme (GTP) that favours large foreign companies and less so local smaller companies.

Long-term Problems and Strategies

  1. In my opinion, our economy reached its peak performance about 10 to 15 years ago. Since then we have been struggling to look for new drivers of the economy with few significant successes, with the financial sector being the exception but even that was done more than 15 years ago. In 2004, we of course unveiled the next big thing for the economy as being the Integrated Resorts and Casinos, but that strategy has been questionable on so many fronts. If we are to grow our economy, we need to firstly abandon the old MNC-led approach and look to develop our local enterprises. For that to happen and to develop a dynamic local economy, we need to address the following longer-term structural problems and develop innovative strategies:
  • Cost competitiveness
  • Making sure SMEs have access to financing
  • Addressing our productivity issue
  • Avoiding a highly disruptive economic strategy by moving up the value chain too rapidly
  • Helping us regain our international economic relevance and competitiveness
  • Making sure our technological and R&D investments yield results
  • To review a more flexible regulatory regime if we are truly going to be a Smart Nation
  • Designing Better KPIs to measure our government agencies’ performance, particularly our economic agencies
  • A dedicated industrial transformation agency that is cross-agency as the industries have to be multi-functional

Recommendations for Future Economy

i.   Create Singapore MNCs of the future

  • Create a Single Agency for Start-ups and SMEs – Singapore Economic Development Agency (SEDA), to support local enterprise from inception to the time they become the MNCs of Singapore. An agency capable of following the company throughout its lifecycle, much like what was announced recently through the merger of Spring and IE. This is a good start but the SEDA will take on more functions like from EDB and IDA.
  • Establish a new Equity fund, Temasek 2 – Focused on developing future MNCs (not managed by Temasek – set up a new agency)

ii.   Create better access to financing/funding

  • A greater need for both Equity and Debt Financing to support the different development stages of companies, from start-up to internationalization.
  • To do this we need a new development bank, an EXIM bank, an SME bank, a private equity exchange and to revamp SGX and Catalist.
  • Make Singapore cost competitive again through a focused committee

iii.   Better manage costs of land/rent by JTC playing a more direct role as a land owner and regulator through a Rent Control Act and discouraging the role of REITs

iv.   Restructure how government supports industries through a matrix structure made up of horizontal and vertical industry support instead of the present one dimensional industry vertical approach

v.   Bring back the National Productivity Board to reinstate the focus on productivity as our economic culture

vii.   Balancing technological disruption with a lighter regulatory touch so that we can really be a Smart Nation

viii.   Revamp tertiary education completely to prepare the workforce of the future by, among other things, getting students to design their own jobs, getting universities to step-up specialized professional education, making ITE and polytechnic education more attractive for younger Singaporeans to give more skills-based qualification and a minimum wage scheme tied to SkillsFuture so as to incentivize Singaporeans to upskill.

ix.   To provide preferred local market access to our start-ups and SMEs especially to get our GLCs and MNCs to work with our start-ups on test bedding and experimenting their technology and products so that there is a more accommodating and collaborative ecosystem like in the US or Israel.


Today, when I speak with the business community, many feel the business environment has gotten much tougher and some find it difficult to operate in Singapore. However, we see regular data and reports that the economy is doing well. The government’s position is that the economy has recovered and is going to do well. There is a mismatch of what both side are saying.

One thing is for sure – Disruption will change things. Singapore is not unique in this area. Every economy, every country, evert industry and every company will be affected and this will in turn affect all citizens of all countries. Those who can adapt and adopt fast will survive and enjoy the many opportunities in the future and those who are slow to move will face tremendous difficulties. One thing is important – Confidence in our future. Increasingly, I am hearing pessimism about our future in Singapore. Parents are starting to worry about their children’s future in Singapore – whether their children can have good jobs, have a good house to stay and can enjoy a good life.

We must be able to send a message of Hope and Opportunity to our young Singaporeans – that they can have a great future in Singapore and that Singapore will adapt and adopt fast to face the disruptions coming our way. More importantly, that Singapore’s economy will remain vibrant and strong and that everyone will have good careers and enjoy a good quality of life in Singapore. We must give everyone confidence in our Future Economy by doing the right things now so that we can create a vibrant economy and a vibrant future for all.