Export-driven economy shrinks
Singapore was once regarded as a “Tiger economy” along with other countries in Asia when referring to its robust and unperturbed economic growth. Its economic success, with a per capita income of over US$24,000, was attributed to its free market capitalism, with about three-quarters of its income coming from external trade and investments.
The PAP (People Action Party), which has ruled Singapore since it became a nation state in 1965, has developed this tiny country to be a favourable business island for the free market, by imposing some measure of state capitalism. This was accompanied by its pro-business policies and neo-liberalism which has subjugated workers’ rights and independent trades union, as well as other fundamental democratic rights.
In a recent interview in the CNBC, Prime Minister Lee Hsien Loong related that the country’s role in the global economy: “We are part of the world economy. We make chips, we make pharmaceuticals, we make petrochemicals. We consume maybe one percent of what we make of these things. Probably less …We are making for the world. We buy from the world, for the world… that’s how we prosper.”
Now with the vulnerability of the same free market system, Singapore, the richest country in Southeast Asia, is forecast to slip into its worst recession this year, with the economy likely to shrink by up to 5%, perhaps as much as 10% if exports continue to fall sharply. Previously, the worst recession since 1965 was in 2001, when the economy contracted 2.4%.
Demand for Singapore’s exports declining rapidly
Singapore’s manufacturing output contracted by 22.4% in February. The key electronics cluster continued to be weak, recording a 37.3% drop in production on-year. Numbers do not look healthy for the biomedical sector either, with pharmaceuticals posting a 29.4% decline. Tourist arrivals see the worst on-year drop in 6 years, down over 15% in February. These figures show that Singapore is a heavily export dependent economy with the US, Europe and China as its main export countries and under the current unprecedented global economic impacts, the demand from these countries is declining at a rapid pace.
For the first time ever, Singapore has to use its trillions of dollars in foreign reserves to help fund a US$13.7 billion ‘Resilience Package’ announced in the budget in January. However, Prime Minister Lee Hsien Loong said in a BBC interview that these measures will “help companies to remain viable but we must understand that what we can do is to buffer the impact…you must wait for the storm to pass”. Meanwhile, the still influential Prime Minister’s father, Lee Kuan Yew, who is also a mentor minister, predicted that the ‘storm’ may take up to “two to three years” at the optimistic scenario but “at the worst, four, five, six years…” to recover.
Moreover, the government’s investment arm, Temasek, which has invested heavily in overseas and in government-owned enterprises, such as the telecom giant SingTel, Singapore Airlines, DBS Bank Keppel Corporation and Semb-Corp, gains a large portion of its income from overseas operations. Their share prices and overseas income have plummeted.
The biggest impact of the recession is the escalating job losses that have become a national dilemma affecting all from the migrant workers to professionals.
Migrant workers first to be sacked and forced home
Singapore, which has no natural resources, depends mainly on shipyard, construction and manufacturing industries. When these industries were going well in 2007, almost 800,000 migrant workers were hired for cheap labour. But as the economy plummeted into recession last year, demand for labour dropped and major projects were cancelled or delayed. Many migrant workers from Malaysia, Bangladesh and others are the first to be sacked and forced back home. Last month, some 60 unemployed Bangladeshi migrant workers assembled in front of Singapore’s Ministry of Manpower, demanding work and unpaid wages from previous employers. One of them, Rahman, who gave up his farming job in Bangladesh and took a loan of S$7000 from money lenders back home to pay an agent fee to work in Singapore, said: “We take loan, we cannot pay, we die”. The lives of most of the migrant workers, who have come to work in metropolitan Singapore for better wages to support their families in their home country, are now in jeopardy.
This recession is not only affecting the exploited migrant workers but also some of the local workers or even professionals that have enjoyed high living standards over the years. Before the recession, a local married couple with higher education degrees and 3 years working experience, could earn a combined S$7,000 to S$8,000 a month. Since the recession, thousands have become unemployed and many are working with reduced wages (working shorter weeks or taking pay cuts).
Degree and diploma holders form the biggest number of redundant local workers in Singapore, in which half of those sacked in the last quarter of 2008 were professionals, managers, executives and technicians. Graduates make up half the number of the new jobless and according to government figures unemployed graduates more than doubled to 14,800 in December 2008 (from 6,200 in 2007). It is also expected that 17,000 youths will be graduating this year from local universities and some 8,000 to 10,000 more from foreign institutions. In a survey of 100 graduating students, conducted by a local newspaper, more than half said “they were afraid of heading into the real world”.
Recently a local newspaper reported that up to 66,000 Singapore civil servants could face a cut in their salaries this year, as a result of the economic slowdown. Meanwhile, to cut costs, the government linked companies, such as Singapore Airlines, are planning to lay off thousands of workers.
The government, in its stimulus package, has allocated large sums of money for retraining redundant workers for possible future jobs, which could be in areas different to those they have worked in before, but this will not be attractive to many semi-skilled and skilled workers or to the many retrenched professionals.
Recession and social and political conflict
Singapore has a population of 4.84 million, including about a million foreigners. According to Credit Suisse, if the recession persists at least for the next two years, it may force the exit of 200,000 unemployed foreign workers and around 100,000 locals. This could be another problem for the already declining consumption in the domestic market and it is against the government’s policy to further enlarge its population to maintain its skilled manpower. The high living standard enjoyed by Singaporeans could be in peril if this recession persists and this could possibly lead to social and political conflict.
Some commentators even suggest that Singapore should shift away from its export-driven economic development model to survive the deep recession. But this seems impossible given the nature of the country and the present character of global capitalism.
Singapore, as a small country and without natural resources, has to be dependent on the global market for its economic survival. This is because the means of production are controlled by national and multinational companies and their activities are linked to global capitalism to make exorbitant profits. The rapacious nature of this profit-orientated system has exposed the vulnerability of an export-dependent country like Singapore to the anarchy of global capitalism.
The consequences caused by this crisis of capitalism are now being loaded onto the shoulders of the working and middle class. As long as the production is not planned according to the needs of the society, this crisis will be repeated. The creator of the wealth, the working class, should play a leading role, with the support of the middle class and the oppressed, changing this profit-based system to a democratic socialist planned economy to fulfill the needs of society.