Singapore Economic Policy Forum 2010 – Opening Address

Dear Mr Ravi Menon,

I refer to your opening address at the Singapore Economic Policy Forum 2010 as reported by Straits Times on 25 Oct 2010.

Singapore’s effort to address asset price inflation is an example of the government’s lack of foresight which necessitated the address of an issue that ought to have been prevented in the first place.

Describing the various steps involved in picking winners doesn’t make our industrial policy any more than just picking winners.

The IT revolution that not only transformed the US economy but the economy of the entire world as well didn’t stem from any concerted US government action but from the laissez faire actions of a multitude of US entrepreneurs that included Bill Gates, Steve Jobs and many others. This is the clearest example which shows that you don’t need government action to develop an industry, you need entrepreneurs.

While taking pride in our growing of the petroleum refining industry in the 1960s and 1970s, do not forget to mention the influential Dr Albert Winsemius who was instrumental in helping to bring in big oil companies like Shell and Esso.

The amalgamation of the seven islands through land reclamation is no more innovative than the other land reclamations to increase the size of the Singapore island. The innovation involved in all these land reclamations lies with the technological know how to reclaim land which belongs to the individual or company who invented or discovered it.

The success from our government’s activist role in developing the petrochemical industry does not imply that a laissez faire approach would not have succeeded. For every government promoted success in Singapore, there is a laissez faire nurtured counterpart in Hong Kong which shows that government activism is not the only path to success.

While your illustration of the history of our electronics industry reads like a continuous success story, in reality, there has been at least one instance where the government failed to read the signs of change in the electronics industry and our country suffered as a consequence. In between our success with hard disk manufacturing and our recent foray into solar manufacturing was the mass exodus of electronics firms to China in the early part of this decade which you forgot to mention.

The assertion that the government has never subsidised or bailed out firms is debatable. In the aftermath of the 1997 Asian Financial Crisis, all commercial banks suffered heavily. The merger of DBS and POSB at that time certainly helped to improve the overall financial position of DBS.

There is nothing exceptional with the fact that our credit schemes worked during the Global Financial Crisis given that many nations around the world adopted similar schemes that worked too.

It is not true that the government intervened substantially to make home ownership affordable to the vast majority. The vast majority of Singaporeans slogged for a lifetime to pay for their HDB flats. Until recently, the government did absolutely nothing even as HDB flat price shot up by more than 50% in just three years. The supposed subsidy of $30,000 or $40,000 cannot even cover the price increase over the last three years. To the country as a whole, housing as an appreciating asset does not promote social mobility, financial security or a sense of belonging. An appreciating asset is also an inflating liability for future buyers. While the social mobility and financial security of the house owner improve, those of the future house buyer deteriorate. The house owner’s sense of pride and belonging comes at the expense of the future house buyer’s sense of helplessness and wretchedness.

Housing cannot be viewed as a social safety net. As the name implies, a social safety net is a safety net provided by society. The house is an asset owned by the individual, not by society.

The mistakes and failures exemplified by the recent Global Financial Crisis show that the government is simply not brilliant enough, not forward looking enough to understand the complex and uncertain world that we live in.

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