Sunday, April 29, 2012

Six major flaws in PAP's immigration policy

The Temasek Times, April 29, 2012 (source)

Note: This article was first published in the old Temasek Review in March 2010

The twin issues of immigration and foreign workers have perpetually hogged the headlines since last year, an indication of how it has become a “national obsession” of Singaporeans.

Despite the ruling party’s fervent attempts to assuage rising resentment, frustration and anger on the ground, Singaporeans remain unconvinced by their reasoning that foreigners are “essential” to Singapore.

To be fair to the PAP, there is nothing fundamentally wrong in Singapore recruiting more foreigners to boost its declining birth rate – the root cause of the problem lies in the way the policies are implemented which takes into little consideration the possible long-term impact on the rest of the populace.

Three questions come to mind immediately:

1. Why do we need immigrants?
2. How many immigrants do we need?
3. Who are we targeting exactly?

The first question has been addressed many times by the PAP leaders and academics – being a small nation without any natural resources, human resource is our greatest asset.

Singapore’s birth rates has been declining to below the level needed to replace the population and if no measures are taken to rectify the situation, we will end up like Japan – an aging society with manifold repercussions for the nation.

Hence, we need immigrants to keep our population growing and to economy competitive.

Unfortunately, the PAP appeared to have implemented the policies too hastily under their ambitious plan to increase Singapore’s population to 6.5 million people while neglecting the other intangible consequences of immigration.

Six major flaws of the PAP’s immigration policies:

1. Too many, too soon:

Singapore has been accepting immigrants since the 1980s and 1990s from Malaysia, Indonesia, Hong Kong and Taiwan without causing much discomfort to the local population.

This is because the immigrants have come in smaller numbers and are similar to Singaporeans in terms of culture, language and beliefs and have few problems assimilating into Singapore society.

The pace of immigration picked up when Prime Minister Lee Hsien Loong assumed office in 2003 and all of sudden the floodgates are opened to accept foreigners from all over the world especially China and India where the majority of the newcomers hail from.

In the span of less than 5 years, foreigners now make up 36 per cent of Singapore’s population, up from 14 per cent in 1990. Of the remaining 64 per cent who are citizens, a significant proportion are new immigrants born overseas.

Does Singapore really need to let so many foreigners into the country within such a short period of time?

In 2008 alone, there were over 90,000 PRs and 20,000 new citizens which is obviously stretching the nation’s infrastructure, such as public housing to accommodate all of them.

PM Lee now promised Singaporeans that the rate of immigration will be continued in a “measured and calibrated” manner. Is this a tacit admission that the uncontrolled influx of immigrants between the years 2003 – 2008 had been a mistake?

2. Inadequate infrastructure such as public housing to accommodate newcomers:

It doesn’t take a genius to realize that with so many foreigners flocking to study, work and live in Singapore, one needs to increase the number of public amenities and upgrade the infrastructure to accommodate them such as public housing.

According to HDB financial report 2008/2009, only slightly more than 11,000 new flats were built between the years 2006 – 2008 when there were over 90,000 PRs and 20,000 new citizens alone in 2008.

The lack of foresight on the part of HDB to plan beforehand to build more new flats to house the immigrants is appalling and its failure to do so has led to sky-rocketing HDB flat prices today.

Due to the lack of new flats, especially those in the prime districts, Singaporeans have to compete with PRs in the resale flats which resulted naturally in the rise of the prices of resale flats.

Public transport such as buses and MRTs are also poorly prepared for the increase in population as evidenced by the packed buses and trains every morning.

3. Targeting the wrong people:

Singapore should be targeting foreigners who can add value to Singapore and not open its doors indiscriminately to every Tom, Dick or Harry.

Mainland China is one important source of immigrants for Singapore, but we are not getting their cream of the crop.

According to a Gallup poll done in July 2009 among Chinese college students, their top emigration destination is the United States, followed by France and South Korea. Singapore isn’t even featured among the top five.

Why isn’t Singapore attracting the best Chinese talents? Instead of examining the cause, we settle for their “lesser talents”, many of whom are uncouth peasants from the poorer inland provinces.

What Singapore is getting are not first class talents but economic migrants who cannot survive in their own countries and they are now competing with Singaporeans for limited jobs because they cost much less.

China is vast country with 23 provinces and more than 1 billion people of various races and religions.

The ethnic Chinese in Singapore come mostly from the southern provinces of Guangdong and Fujian.

Singapore should be focusing on luring prospective migrants from these two provinces instead of allowing Chinese from all across the mainland to come here.

As they share the same dialect and culture as local Chinese, they will have fewer problems integrating into Singapore society as compared to Chinese from far-flung inland provinces who come from a completely alien world altogether.

4. Ease of getting PR and citizenship:

Unlike countries, getting a PR and citizenship in Singapore is incredibly easy without any major restrictions.

Most developed countries like Australia, Canada and U.K set an English proficiency test for immigrants and only those who pass the test are able to work and live there.

In Australia, one has to live there three out of a period of five years before they are eligible to become PRs.

However in Singapore, the newcomers are “fast-tracked” to become PRs and citizens without first familiarizing themselves with the country first and spending adequate time to make the decision.

A Chinese national and Singapore PR Zhang Yuanyuan who worked as a teacher in a private institution in Singapore revealed to the media that she became a PR within 2 months of application.

Even construction workers, cleaners, masseurs and prostitutes are able to lay their lands on a Singapore PR, the stepping stone for citizenship.

According to the Home Affairs Ministry, two out of every three PR applicants are successful, an astonishingly high success rate for a first world country.

Because citizenships are given out too soon to foreigners, there is insufficient time for both parties to assess if they are really “compatible” with each other.

5. Lack of a comprehensive plan to integrate the newcomers:

Due to the large number of unsuitable migrants who are given citizenships too soon, we now end up with the problem of having to integrate them.

Again, the ruling party did not come up with a comprehensive plan to integrate the newcomers when they embarked on their ambitious plan to increase Singapore’s population via immigration way back in 2003.

It is now very difficult to integrate those who are already in Singapore because they have come in such big numbers that they tend to congregate within their own communities than to reach out to the rest of Singapore.

We are already seeing ethnic “enclaves” emerging in different parts of Singapore such as the Chinese in Geylang, Indians in Punggol and Filipinos in Tampines.

Furthermore, as they share few similarities with the Chinese, Malays and Indians though they may be of the same race, it is near impossible to expect them to assimilate into our society any time soon.

As usual, the ruling party comes up with a grandiose $10 million Community Integration Fund to throw money at the problem.

How does organizing tea parties, community events and free language courses help to “integrate” the immigrants into Singapore is anybody’s guess when they should have done their homework first before opening the floodgates to immigration.

They will simply turn up for the free food and goodies before return to their own cliques as before – do you call this “integration”?

6. Neglect of native Singaporeans:

The key reason why many Singaporeans are so vehemently against the ruling party’s immigration policies is because they feel they are not getting a fair deal as citizens from the elected government of the day.

Dr Vivian Balakrishnan said the government cannot “shield” Singaporeans from competition, but they are the ones who forced Singaporeans to compete with foreigners on unequal terms.

Firstly, the Singapore male is already disadvantaged by having to spend 4 weeks away from work annually due to reservist obligations.

Secondly, there is no way Singaporeans can compete with foreigners in terms of cost because they do not have a family here and they can easily support them back home with their meager pay earned in Singapore.

While in the past only extremely qualified professionals and blue collar workers in sectors shunned by Singaporeans are allowed into Singapore, we are now seeing an increasing number of semi-skilled foreigners on S-passes and these are the group of foreigners who are competing with locals for jobs and depressing their wages in the process.

To exacerbate the situation, there is a dearth of social welfare benefits for Singapore citizens who have to depend entirely on their CPF and medisave for retirement and medical expenses.

CPF is proving to be grossly inadequate to support Singaporeans through their twilight years and many have to continue working just to feed themselves and their families.

With so many grouses bottled up inside, it is only natural to expect Singaporeans to blame foreigners for their woes, whether rightly or wrongly.

Had the ruling party taken the necessary measures to ensure that Singaporeans are well taken care of first before they let the foreigners in, there will not be so much anger against them now.


Instead of focusing solely on the benefits of immigration, which is namely to sustain the population and economy, the government should look at the entire problem from a holistic perspective.

Immigration has its pros and cons. We must evaluate the potential problems bring about by uncontrolled immigration first before deciding on the number of immigrants to accept each year.

Wednesday, April 25, 2012

Human Rights Foundation to Lee Hsien Loong on Dr Chee Soon Juan

Oslo Freedom Forum CEO and President of Human Rights Foundation Thor Halvorssen has written to Prime Minister Lee Hsien Loong, asking him to lift the ban on Dr Chee Soon Juan's travel so that he can make the trip to Oslo, Norway to speak at the Forum.

The letter has been copied to diplomats, NGOs and news agencies around the world. Several online newspapers including Huffington Post, Daily Caller, Washington Post, and The Republic [p.s. and Yahoo!News] have carried the news. 

The Norwegian Foreign Minister Jonas Gahr Store has answered a question in the Norwegian Parliament, Stortinget, with the following: “The case regarding Dr. Chee Soon Juan has been addressed by the Norwegian Ambassador to Singapore, who has asked the Singaporean authorities to reconsider their decision.” (see the news report at the end of this post.)


Two faces of Singapore: opposition leader Chee Soon Juan,
and Prime Minister Lee Hsien Loong (WikiMedia Commons)
An Open Letter to Prime Minister Lee Hsien Loong of Singapore

Thor Halvorssen, President of Human Rights Foundation  (source1, source2)

Friday, April 13, 2012

Chee Soon Juan: The case against wealth disparity

Part 1 of  Wealth Disparity

Singapore Democrats,
Tuesday, 10 April 2012 (source)

The current turmoil that embroils the world's economy has disrupted more than just markets, it has exposed the grotesque underbelly of society where the rich have been allowed to run away with much of the wealth, leaving the vast majority in difficulty.

While one percent of the world's wealthiest families own nearly 40 percent of the world's wealth, one-third of workers – or 1.1 billion people – are either living in poverty or are unemployed.[1]

Just as with the world's wealth disparity, the rich-poor gap in Singapore is also extremely pronounced. In fact, Forbes magazine ranks Singapore as the world's third richest country, measured by GDP per capita adjusted for Purchaisng Power Parity.[2]

But according to the CIA World Factbook, our Gini coefficient index, a measure of income inequality, is the second highest among developed economies. At 0.473 (on a scale of zero to one with a higher score signalling more inequality), our income disparity is even greater than that in the United States - and that's really saying something. [3] For perspective, the average Gini among members of the Organisation for Economic Cooperation and Development (OECD), a grouping of developed economies, is only around 0.3.

In another measure of the ratio of the richest 20 percent to the poorest 20 percent, Singapore came out as the country with the highest inequality. (See figure below, source:

The Manpower Ministry reported that the income of the poorest 20 percent of Singaporeans stagnated over the last 10 years. Though their nominal income rose to $1,400 in 2010, $200 more than in 2001, real income only rose by 0.3 per cent over the decade.[4]

As disturbing as this news is, it may be an optimistic view. Financial analyst Mr Leong Sze Hian calculates the real pay of low-income workers such as cleaners may have declined by about 38 per cent in the last 10 years or so. Citing official statistics, Mr Leong showed that in 2000, the median gross wage for this category of workers was $1,277. By 2010, he points out, this fell to $960.[5] On the other end, those who earned $10,000 a month or more has multiplied four times in a decade. [6]

These numbers translate into starkly different worlds that the rich and poor in Singapore live. Consider the lifestyle of Mdm Carol John, a Singaporean housewife, struggles on $700 a month. She goes to bed at night sleeping on thin mattresses on the floor in a one-room flat with her three young children.

"I can't save anything, it's so difficult for me," Mdm John says. "We don't benefit at all from the economy. As far as I know, my husband's pay hasn't gone up."[7]

Mr Singhania, on the other hand, bought a luxury yacht costing him $435,000 and wants to buy a bigger one for $1.3 million. He was attracted to Singapore's grandiose living standards for foreigners.

A $3.6 million car. Anyone?
"You've got everything you want in Singapore,” he says, “you want to buy a fast car, you want to buy a big boat, you want to buy an aeroplane, whatever you need, you can get in this country."[8]Even a $3.6 million car, apparently. A local sportscar company is selling these motoring jewels to anyone "who wants to be different, after having had so many Ferraris, Lamborghinis and Rolls-Royces." And its business seems to be doing just fine.[9]

Technically, there is a difference betwen wealth and income inequality. The former refers to the difference in one's net wealth, ie, what you own (money in your bank account, your house, stocks, etc) versus what you owe (car loan, mortgage, credit card loan and so on). Income inequality refers to the difference between the revenue that that the richest individuals or households derive (from salaries, stock dividends, sale of belongings, etc) and those earned by the poorest segment.

The dangers of extreme wealth inequality

In this imperfect world, no one expects perfect equality. Income inequality is inevitable and there is truth that inequality spurs economic progress. However, the imbalance in wealth as I have described above - where, on one extreme, a wealthy family is able to buy a car worth more than a bungalow while, on the other, a poor one cannot even afford a bed - is inequality gone berserk.

Such extreme wealth disparity is not just a benign and inevitable economic outcome resultng from forces of the free-marlet, it is a perncious scourge deliberately constructed and maintained by the wealthy and one that wreaks its havoc in many ways and upon many sectors of society:

The Economy
. In a study published by the International Monetary Fund (IMF), economists Andrew Berg and Jonathan Ostry found that income inequality threatens, not supports, economic growth. They studied the Gini coefficient indices of various economies (including Singapore's) between 1950 and 2006 and tracked them over periods of economic growth. They found that as income inequality increased, growth periods lessened. They observed that

equality appears to be an important ingredient in promoting and sustaining growth. The difference between countries that can sustain rapid growth for many years or even decades and the many others that see growth spurts fade quickly may be the level of inequality. Countries may find that improving equality may also improve efficiency, understood as more sustainable long-run growth.[10]

A wide income gap also creates price distortions affecting the economy in unseen and undesirable ways. If the wealthy get too rich too quickly, the demand for goods and products increases exponentially. The rise in prices escalates beyond what the rest of society can afford.

An example of this phenomenon was the unprecedented inflation in 2007/08. Global commodity prices shot up, including that of rice and other basic necessities. The sky-high prces were maintained, in part at least, by the fact that the wealthy in Singapore could afford them because their wages rose faster than the poor. The burden of escalating prices fell on the lower-income groups.

Between 1998 and 2003 the average expenditure of richer households was much less than their income (see table on right). The bottom 40 percent of households, however, saw expenditure outstrip their wages.

A more recent development is HDB resale prices which continue to surprise even the most-experienced real estate agents. This is due to the higher-income groups paying huge amounts for the flats, leading the housing market to skyrocket and leaving the middle- and lower-income groups trapped in a price-warp unable to keep up with the inflation.

Belatedly, the Government has tried to rein in runaway housing prices by restricting wealthy foreigners from buying property on this island.[11] Such measures, however, are piecemeal and does little to tackle the overall problem.

Political stability. If inequality begets greater inequality, there will come a time when society breaks apart as it did many times throughout the course of history. From the fall of ancien regime in France to the sacking of the Last Emperor in China, from the Arab spring revolutions to the riots in modern Europe, populations snap when inequality veers to the extreme.

One ingredient needed in such explosions is greed – greed of those at the top. Greed becomes a problem when it is untethered. It is an emotion and, like all emotions, it does not lend itself to rational thought. But, then, neither does desperation. When people are faced with daily struggles and they see rich people indulge in over-the-top, in-your-face extravagance, something happens to the psyche. At some inevitable point, desperation and anger mix into a combustible cocktail that explodes in society's face.

Renowned economist Nouriel Roubini who foresaw the crisis that engulfed the world in 2008, put out this warning:
Any economic model that does not properly address inequality will eventually face a crisis of legitimacy. Unless the relative economic roles of the market and the state are rebalanced, the protests of 2011 will become more severe, with social and political instability eventually harming long-term economic growth and welfare.[12]

So far, Singapore has been able to avoid such trouble not because we are doing better economically but because the crackdown on protests is much more efficient and effective. But there will come a point where conditions will get so bad that no amount of control will contain the frustrations of workers in this country and the turmoil will begin.

Health and healthcare
. The development of biotechnology has significantly advanced healthcare. And yet, medical treatment remains unaffordable for swathes of the Singaporean population.

Associate Professor Paul Tambyah pointed out in his presentation at the launch of the SDP's healthcare plan studies that show that lower-income groups are deterred from seeking medical care because of the high cost of treatment. As a result, life expectancy is lower. In the graph below, it can be seen that countries with greater wealth disparity also have lower life expectancies with Singapore positioned on the wrong end. (See figure below, source:

Higher-level – and more expensive – intervention is needed when these individuals succumb to diseases when early intervention could have arrested the problem. Additionally, those affected are effectively removed from the productive cycle of the economy. For those who find the money to pay for care, many end up in debt. Of the top three reasons that Singaporeans find themselves drowning in debt, medical expenses is one of them.

Poverty and inequality also drains the economy when segments of the population come under stress and mental health becomes a casualty. Singapore has the highest rate among developed economies for Obssessive-Compulsive Disorders (OCD) with 3 percent of Singaporeans afflicted. The figure for the United States is 2.3 per cent, while in Europe it is 1.1 per cent. OCD are anxiety-related disorders that trigger ritualistic behavioural excesses.[13]

Other manifestations of the emotional strain from financial want include diseases like alcoholism, drug abuse and even problem-gambling. The social cost, although hard to quantify, is nevertheless a very real one for which society has to pay.

Family, education and crime
. Financial deprivation also exacts a burden on familial relationships. Divorces often result from such want and the dysfunctional family further erodes the emotional and physical make-up of its members. Children growing up in such households are often the victims and they become easy-pickings for gangs.

Wealth inequality also limits the educational progress of those in the lower-income groups. Upon graduation, employment opportunities are much more limited for students from poorer families and the types of jobs are almost always the lower-paid ones. This vicious cycle puts those already at a disadvantage further down the totem pole. Family background is a major determinant in an individual's educational attainment.

Academic failure and school drop-out rates rise dramatically among needy families. This creates a culture of poverty which often lends itself to criminal behaviour. Offences such as drug abuse, borrowing from loan-sharks, inability to pay fines, etc arise from poverty. It should come as no surprise that unequal societies have higher prison rates. The graph below shows that Singapore, with its high inequality, has also one of the highest numbers of prisoners per capita.

Race relations.
Income inequality does not affect the ethnic groups uniformly. The Malay community in Singapore receives the brunt. The table on the right shows that household income is the lowest among the Malays. Not only that, in the ten-year period between 1990 and 2000, the rate of household income growth among the Malays is also the lowest.

The continuing slowness of the Malay community's socioeconomic progress constitutes an unhealthy obstacle towards improving relations between Malays and non-Malays in Singapore.

. Taken together, these factors militate against the building of a cohesive society. Wealth disparity increases the social distances between sub-populations. Disparate living standards lead to segregated lifestyles where the rich increasing alienate themselves from the rest of society by erecting ever-exclusive gated residences. Inequality destroys trust and undermines cooperation, it does not serve the common good.

Under such circumstances, the ability of the population to defend itself against threats and crises is severely restricted. Harvard law professor and former US solicitor-general, Charles Fried, noted:
To work together, to trade, and to accept authority as an enabler than a hindrance to enterprise, people must trust each other and trust requires and engenders respect. Gross inequalities are incompatible with relations of trust and respect.

Does the PAP have a plan?

Apart from causing extreme imbalance in wealth, the international system is very much behind the current recession in Singapore. The worry is that such a problem is not the cyclical boom and bust of global economics but a deep structural weakness in the way money is made in this country.

It is exacerbated by our being part of the global network of tax havens whose predatory nature in the world of high finance is hollowing out the very economies on which we depend for our own economic health, the subject of Part 2 of this discussion.

The problem that confronts our nation is clear. What is unclear is how the PAP is going to take us forward. Singapore is caught in this downward spiral where ordinary Singaporeans find it increasingly difficult to make economic progress. This is because the Government has positioned our economy to depend on multinational corporations (MNCs) which are constantly seeking out ever cheaper sources of labour.

In order to retain these multinationals, we have had to import foreign labour enmasse. Singaporeans cannot hope to compete with workers coming from our poorer neighbouring countries who are able to accept lower wage levels. Because of this, the income of working Singaporeans have been artificially depressed. It seems that the longer Singaporeans work, the less we earn.

Abundant foreign labour in Singapore has an deleterious effect on our productivity as well as our infrastructure. Even former Minister Mentor Lee Kuan Yew acknowledged that
We've grown in the last five years by just importing labour. Now, the people feel uncomfortable, there are too many foreigners. Trains are overcrowded with foreigners, buses too, property prices have gone up because foreigners with permanent residence are buying into the market.

Unfortunately, there doesn't seem to be any solution coming from the Government as it continues to rely heavily on foreign workers to prop up our GDP. As quickly as it announced that it would reduce our dependence of foreigners in 2010, it reversed course and increased its import of foreign workers the following year (from 53,000 such workers in 2010 to 85,000 in 2011).

Some may argue that as the economies in China and India expand, incomes in those countries will increase and wage equalisation will take place across the region, making Singapore more competitive again. But such a view makes the assumption – and it is a very big assumption – that the MNCs do not find new sources of cheap labour in Latin America, Africa or the Middle East.

There can be no dispute, we need an alternative economic paradigm where minimising wealth disparity is our prioriy. The big danger is that the PAP will prevent us from moving in that direction.

Chee Soon Juan is Secretary-General of the Singapore Democratic Party.


1. Global Jobs Crisis: Third Of Global Workers Either Unemployed Or Impoverished, Huffington Post, 23 January 2012.
2. Singapore 3rd-richest country: Forbes, Straits Times, 26 February 2012.
3. Distribution of family income - Gini index, CIA World Factbook 2012.
4. Low-wage earners' pay stagnated over last decade: MOM, Yahoo!News, 12 October 2011.
5. Cleaners’ pay up $250 to $1,000: Congratulations? The Online Citizen, 25 February 2012.
6. There is nothing uniquely Singaporean about inequality, Straits Times, 14 September 2011.
7. Singapore's economic boom widens income gap, Reuters, 9 November 2007.
8. Ibid.
9. S'pore's most expensive car at $3.6m launched this weekend, The Business Times, 26 February 2012.
10. Inequality and efficiency, International Monetary Fund, Sep 2011.
11. Singapore Cuts Options for Wealthy Seeking Permanent Stay, Bloomberg, 4 April 2012.
12. The instability of inequality, Nouriel Roubini, 13 October 2011
13. '1 in 10 will suffer from mental illness': Study, Straits Times, 19 Novemeber 2011.


Part 2: How did we come to this? - here

Part 3: What we can, and must, do - here

Related: Softly, softly will not narrow income gap,  by Yawning Bread (here)

Thursday, April 12, 2012

Prof Lim Chong Yah's warning on the Singapore economy

TR Emeritus, April 10, 2012 (source)

Professor Lim Chong Yah, who was a key architect of the economic restructuring exercise that overhauled Singapore’s wage system in the late 70s, said that the growing income inequality is approaching dangerous levels.

Prof Lim also noted Singapore’s over-dependence on cheap foreign labour. He said that Singapore now ‘needs shock therapy to wake up its economy’ and ‘the only way out is to restructure again’, in the area of wages of low earners.

Prof Lim is the Albert Winsemius Chair Professor of Economics at the Nanyang Technological University. He advocates for workers’ training and equitable wages and chaired the National Wages Council from 1972 to 2001, during which real wages grew at an average of 4.6% per year. He helped mastermind an economic shake-up from 1979 to 1981 that lifted wages for workers and helped Singapore move from a ‘low-skilled, low-value added and highly labour-intensive structure’ to one that used more technology and knowledge.

He attributed the opening of floodgates to foreign labour, to Singapore’s fear of being uncompetitive. The result was that the non-resident labour force increased from 300,800 in 1991 to 1.2 million last year, out of which only 1.7 per cent earned wages high enough to pay income tax. Not surprisingly, GDP expanded impressively during this period.

More worrying is the growing income inequality in Singapore, as measured by the Gini coefficient, which Prof Lim highlighted. Singapore was at 0.473 last year, perilously close to the danger 0.5 mark, ‘normally considered a dangerous line to reach, far less to cross’.

Income inequality has worsened as global forces pull up the highest income groups while cheaper foreign labour which has been flooding Singapore, pulls down the lowest income groups.

Prof Lim’s proposal, which he called ‘Economic Restructuring II’, includes substantially increasing wages for the lowest-paid workers and freezing top earners’ salaries for three years. He proposed that NWC should discuss such a restructuring exercise process.

Prof Lim was speaking at a lecture given at the Economic Society of Singapore yesterday evening (9 Apr). Prof Lim has made clear that he was merely expressing his own personal views.

With regard to the timing of such an exercise, he felt that despite the weak external economic condition, ‘this is the best timing’ for such a move given Singapore’s low unemployment rate and strong fiscal position.

During an interview after the lecture, he told the media, “I have no intention to destroy the investment climate. But if a company is labour-intensive and needs to import cheap labour it may think twice. For high-skilled companies that use a lot of technology, Singapore is still an ideal place.”

TR Emeritus, April 10, 2012 (source)

Speaking at a conference held in conjunction with the launch of the NTU’s Economic Growth Centre almost 7 years ago (26 Jul 2005), Professor Lim Chong Yah, a key architect of the economic restructuring exercise that overhauled Singapore’s wage system in the late 70s, warned the Government to tread carefully on relying too much on cheap foreign labour [Link].

Prof Lim then said Singapore had done well economically since its independence, leaping from a Third World country to a First World economy but it might also have been “too free” in letting in cheap foreign labour.

He said, “Maybe we should not allow a too free flow of very low value-added labour, very low-wage labour to Singapore.”

He added that such an “excessive supply would dampen the wage rate among the lower income people”.

“That will create another problem… it will contribute to the development of a very lowly paid sector in the economy, because we can get very cheap labour from the region.”

So, the government should “maybe be a little more careful in allowing cheap labour to move into Singapore in our pursuit of high growth”, he said. “Which means that we cannot aim for very high growth… because if you aim for very high growth, then you’d want to bring in a lot of labour from outside. Then only can you have very high growth.”

Unfortunately, this was precisely what the Government did in the next 6 years or so by opening the floodgates to bring in a lot of labour from outside stimulating “high growth” in Singapore.

This was in part due to the general success of the general election in 2006, which “emboldened” the PAP Government. In the 2006 GE, PAP won 82 of the 84 seats with a respectable 66.6% votes (37 seats were won through walkovers).

With the full backing of the votes and seats won, PAP embarked on a huge population expansion programme by massively importing foreign labour.

Between 2006 and 2011, the number of non-resident foreigners increased from 876K to 1.4 million (59% increase) while that of PRs increased from 418K to 532K (27% increase).

The big increase in number of foreigners affected the quality of life for Singaporeans, competing with Singaporeans in jobs and resources, and not to mention depressing the wages of Singaporeans.

By 2011, Singaporeans were visibly fed-up with the PAP Government’s over-liberal foreign labour policies. It showed in the general election of 2011.

Angry Singaporean voters began to speak out against PAP Government and voted against the PAP. For the first time since the independence of Singapore, all the constituencies were contested in 2011 GE with the exception of Tanjong Pagar GRC which was walked-over due to technicalities – the opposition team was disqualified as the nomination papers were submitted 35 seconds late. PAP scored the lowest winning of % votes (60.1%) in the history of Singapore and lost 6 seats to the opposition.

Furthermore, also for the first time, PAP lost a GRC with two full PAP cabinet ministers kicked out in an election. Not only that, three other PAP cabinet ministers were indirectly affected. Even though the 3 have won the election with low % votes, Raymond Lim, Wong Kan Seng and Mah Bow Tan, were forced to step down due to public anger at their missteps in their respective ministries. To appease the public, PM Lee even quickly formed a pay review committee after the 2011 GE to look into lowering the ministers’ pays.

7 years later, at yesterday’s (9 Apr 2012) lecture given at the Economic Society of Singapore, Prof Lim now made another observation and warned that the Singapore’s growing income inequality is approaching dangerous levels. He said that Singapore now ‘needs shock therapy to wake up its economy’ and ‘the only way out is to restructure again’, in the area of wages of low earners.

He said, “I have no intention to destroy the investment climate. But if a company is labour-intensive and needs to import cheap labour it may think twice.”


Tan Jee Say's view on Lim Chong Yah's proposed economic restructuring

TR Emeritus, April 12, 2012 (source)

Professor Lim Chong Yah’s “shock therapy” proposal brought back fond memories of my time at the heart of national economic and manpower planning in the Ministry of Trade and Industry. It was the early 1980’s. I was the secretary to the late Dr Albert Winsemius, Singapore’s economic adviser, who visited us about two times a year to review the economy. This was the time of the year when he would advise on the government’s position at the annual National Wages Council negotiations. I sat on the NWC as alternate member to my permanent secretary Mr Ngiam Tong Dow, providing economic inputs to the Council which had representatives from employers, trade unions and government. Prof Lim was the chairman then.

We were candid with our analysis of the serious problem of severe manpower shortages and the economy’s increasing reliance on lowly paid foreign workers. Prof Lim was completely supportive of the proposal to restructure the economy by raising wages substantially to dampen employers’ demand for lowly paid workers. He succeeded most admirably in rallying the Council’s members including employers’ representatives, behind the economic restructuring plan.

The high wages did not hamper economic growth as the GDP continued to grow at around 10 per cent a year in the subsequent few years. When the regional recession in 1985 hit Singapore badly, controls on the inflow of lowly paid foreign labour were eased, resulting in a steady increase in the non-resident workforce from 119,500 in 1980 representing a mere 7% of the total number of workers, to 1,157,000 in 2011, a proportion of 35% of the overall labour force. A whopping 5-fold increase in foreign worker dependency! Not surprising, wages of the bottom 10 to 20 per cent of Singaporean workers stagnated or even fell. As wages fell, profits went up, enabling companies to pay huge bonuses to their top executives, further widening the income gap and magnifying the economic inequality in society. What a double whammy – rising dependency on foreign labour and falling wages of Singaporean workers, the exact opposites of the twin objectives of economic restructuring that was started 33 years ago!

No wonder Prof Lim was frustrated and as one of the principal architects of economic restructuring, had every right to be angry about the misdirection of the economy. And anger was barely disguised behind his latest “shock therapy” proposal which he described as Economic Restructuring 2. The approach of using substantial wage increases is similar to that of the 1979 economic restructuring but since the latter’s twin objectives had not been achieved to this day, his “shock therapy” should rightly be described as Economic Restructuring Delayed 33 years!

I regard Prof Lim’s proposal of raising wages by 50% for workers earning below $1500, and freezing the wages of those earning more than $15,000, as probably a bit too broad-based and non-discriminatory. I prefer a targeted approach of a minimal wage policy so as to reign in employers’ demand for cheap foreign workers. At the same time, we should remove the current policy of allowing foreign professionals to come to Singapore for twelve months to look for a job as they could depress the wage levels of Singaporean professionals if the former become desperate in their search for jobs.

As for fears that reducing the number of foreign workers would shrink the size of the Singapore economy as companies reduce the scale of their operations or even move out of Singapore, let me say that the government should not stand idly by doing nothing but be proactive in promoting economic restructuring by creating jobs and enterprise in a new Singapore economy. In my economic essay published last year ( , I had proposed a $60 billion plan to regenerate the economy to provide jobs that Singaporeans want and that will make use of their education and skills. This National Regeneration Plan will more than make up for any shrinkage of economic activities arising from a reduction of foreign workers.
A minimum wage policy and a $60 billion National Regeneration Plan are a bold 2-prong strategy to achieve a sustained and long lasting restructuring of the Singapore economy that will benefit all Singaporeans. With our educated workforce and huge fiscal reserves, we have the resources and a duty to our next generation, to embark on this worthwhile journey now and not wait for another 33 years. And I say to the government, let’s do it!

* Jee Say was a Presidential candidate in the 2011 Presidential Election. Reproduced from

Related: Breaking out from the cycle of cheap labor and low productivity by Lucky Tan (here)