Let’s Use Our Brains

One of the reactions to my post “NO NEED TO SAY SORRY –JUST DO SOMETHING ABOUT IT, was from a friend of mine who asked me what I thought would happen to the Singapore economy if:

1.      What will happen to the Singapore economy if we reduce migrant workers to 10 percent of the current; and

2.      If migrant workers accommodation is regulated to no more than four per room, air conditioned with proper private cooking and sanitary area and the quantum reduced to 50 percent of current. What will be the impact?

The answer to both his questions is painfully obvious, namely the economy would take a hit and Singaporeans who are currently feeling the pinch would be asked to take a lot more pain. At the most basic, the mom and pop section of the retail industry would take a hit with less consumers. As at December 2019, Singapore’s population of foreign workers in the constructionsites numbered at around 293,300 and cutting that number would reduce thepotential consumers for basic retailers considerably.

Secondly, the industries that rely on a steady supply ofcheap manpower would suffer. Construction, which accounts for three-point sevenpercent of GDP would take a hit as would manufacturing, which makes up about 20.9percent of GDP and transportation and storage (six-point seven percent of GDP).If you added the accommodation and food services industry, which would add afurther two-point one percent of GPD to the picture. The industries that dependof cheap labour account for nearly a third of our Gross Domestic Product (GDP)and it goes without saying that cutting down or raising the costs of “cheap”manpower will have an effect on the economy.

As such, one might be inclined to argue that we should not push up the costs of employing foreign labour as it would hurt the economy. As a fawning follower disguised as a “Critical Spectator” pointed out – Singapore has benefited from a supply of “cheap” labour and the economies of India, Bangladesh and the Philippines have benefited from the remittances sent back by domestic workers and construction workers working in Singapore, the Arabian Gulf and other parts of the world.

However, if you look at our recent growth figures, you’d realise that they’re not what they used to be. Even before Covid-19 struck economies around the world, Singapore already experiencing slower economic growth and as someone who worked in the insolvency business for half a decade, most of the industries that have been hurt are the industries that depend on “cheap” labour. 

Singapore’s economy needs to restructure and while nobody denies that tourism, food services and manufacturing are important to an economy, shouldn’t we focus less on industries that require vast numbers of manpower and more on the quality of manpower.

While Singapore has generally done a good job on the economic front, the shine of our so called “stellar” record is starting to wear thin. The strategies that worked so well in the 1960s are not working in the 2020s and unfortunately, the government seems to view moving away from old strategies as a sin against a moral code rather than a matter of practical survival. Heavy industry and construction worked in the 1960s. We merely had to provide the multinationals with secure environment and a compliant workforce and price ourselves just bellow the Westerners and Japanese. This helped create mass employment and helped rise prosperity.

However, Singapore can no longer depend on heavy industry based on price. China, India and  the rest of Asia will always be able to do things more cheaply. If anything, China, which epitomizes heavy manufacturing, was even before the trade war with the US moving away from heavy industries. Today’s Chinese business heroes are people like Jack Ma of Alibaba and Ma Huateng of Tencent who built their fortunes in high end technology – the industries that require a certain level of brains. If a Communist country known for its ability to repress can produce people who build fortunes in brain industries, why can’t Singapore?

We need to look at “brain industries,” as the way of the future. Our advantage lies not in being cheap but in being good. We always talk about how good our universities are, so why can’t we use them to spur high technology industries? We have the legal infrastructure to encourage innovation.A Singaporean has just been chosen to head World Intellectual Property Organization(I am not related to Daren Tang), which should be a testament to the quality of our intellectual property infrastructure.

Our population is educated and the infrastructure is there. Today’s technology means that we don’t need to rely on industries based on large numbers of cheap labour. There is no excuse as to why we cannot have a “brain” economy.

We need to go through the pain and restructure away from 1960s thinking. Let’s understand that our real assets are brains and the ability to attract brains. Singapore needs a brain economy for the 2020s and not a 1960s heavy labour economy.