How forced CPF savings help PAP to generate ‘high’ growth rates

The Singapore Miracle, page 21

When first introduced under British colonial rule in 1955, the CPF required total monthly contributions of 10 percent of an employee’s wages from both employer and employee, with each paying $5 per cent.

By 1971 the contribution rate had risen to 20 percent, then 30 percent in 1974; it finally hit 50 percent in 1985. But with the 1985/6 recession, the employers’ contribution was cut to 10 percent to help business recover.

Since then employer/employee contributions have fluctuated. By July 2007, the total contribution was 34.5 percent, with employers contributing 14.5 percent and employees 20 percent.

Being a compulsory scheme, the CPF has been a form of state-imposed forced savings. CPF contributions have been a major source of national development capital and have also done much to increase national savings dramatically.

Singapore’s savings soared from negative 2.4 percent of GDP in 1960, to 15.7 percent of GDP in 1966, to 41.6 percent by 1985, to 51.5 percent by 2000.

Such stupendous savings rates had given Singapore savings uf US$25,614 a head by 2000, the highest per capita savings by far in the world. This was almost double its nearest rival, Hong Kong, whose per-capita savings were US$13,748. By comparison, Switzerland’s were US$5,189, Norway’s US$5,100 and Taiwan’s US$4,827.

The preceding measures, especially the open-door policy towards foreign capital and the expansion of the CPF scheme, did much to generate high growth rates.

Spawning of GLCs and statutory boards under the PAP to control Singapore’s economy

The Singapore Miracle, pages 20 – 21

Statutory boards were wholly-owned government bodies created to produce the community goods and provide the economic and social infrastructure that the private sector could not supply.

By the end of the 1960s, Singapore had statutory boards for industrialization, telecommunications, utilities, port development, public housing and industrial training.

In the 1970s and the 80s, they moved into monetary and financial activities, productivity, research and development, tourism, urban renewal, broadcasting, trade, construction, mass rapid transit and aviation.

By 1998 there were over 80 statutory boards. These included the CPF, HDB, EDB, PUB and MAS.

The boards also began to spawn Government-Linked Companies (GLCs) to fulfil specific functions. The GLCs themselves are companies in which the boards had a controlling interest, usually one quarter or more equity.

Often the GLCs would become sizable entities in themselves and breed their own groups of GLCs. The Ministry of Finance oversees them through holding companies.

GLCs first appeared in the manufacturing sector. They started with food, textiles, and garments and progressed to petrochemicals, biotechnology and aerospace. In the service sector, GLCs began with trading activities and later entered the financial, property and development, transportation and warehousing fields.

Over the decades GLCs have rapidly proliferated along with their holding companies. GLC figures hit 720 by 1994 but declined to 592 by 1996.

Political reasons are likely also to have prompted the government to rely on MNCs and GLCs to develop Singapore. MNCs must depend on government approval to operate in the country. They, along with the GLCs, are much easier to control than independent local enterprises.

Better to have the economy run by compliant MNCs and GLCs than by private indigenous concerns that could provide strong backing for anti-government parties.

Lee and his team have never forgotten the support that the Singaporean magnate Tan Lark Sye and the Chinese business community gave to the PAP’s left-wing opponents, the Barisan Sosialis, in the early 1960s.

Singapore has second highest GDP in Asia in 1968

The Singapore Miracle, page 11

Singapore had one of the highest living standards in South East Asia, boasted by the PAP government in 1963.

Living in one of Asia’s most developed centres, Singaporeans were more affluent than most other Asians, as per capita income and other statistics reveal.

In 1968, Singapore’s per capita income was US$751, second only to Japan’s, which was US$1,405. Indonesia’s per capita income for 1969 was US$80, Thailand’s US$165, South Korea’s US$191, Taiwan’s US$304, Malaysia’s US$326 and Hong Kong’s US$680.

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Singapore was a thriving Asian city before PAP took over in 1965

The Singapore Miracle, pages 7 – 8

While Singapore’s progress has been impressive since 1965, it was already one of Asia’s most developed centres at the time, along with Japan and Hong Kong – a fact usually ignored by Singapore’s propagandists.

In 1963, a Singapore government publication painted this rosy picture of the island:

“Singapore is one of the few cities in South East Asia where everything keeps ticking – and on time. The roads and streets are broad and filled with orderly traffic.

They are well lit at night – in fact better than most major cities of the East. The city is packed with well-laid out modern public buildings and office blocks. And the telephones, the water taps, the electric and gas fittings and modern sanitation work as they should – without any nasty surprises.

The city works efficiently as a centre of world communications and trade. Its port facilities, its international airport, its banking insurance and commercial facilities are the first in South East Asia.

The standard of living – one of the highest in Asia – is visible in the people on the streets, the shopping centres, the satellite towns and in the villages.”

Malaysian prime minister Tunku Abdul Rahman echoed these sentiments in a December 1964 speech when he described the island as the ‘New York of Malaysia…..Singapore is a great city. It is the pride of Malaysia. Here trade, commerce and business flourish.’

Singaporean academics Tan and Lam note:

“….there were many factors that have contributed to Singapore’s remarkable economic growth. They include: the strategic location of Singapore as an international port, access to relatively open global markets and thus the ability to adopt an export-led growth, a regional balance of power maintained by the U.S., the deterrence offered by the Five Power Defense Pact (Singapore, Malaysia, Britain, Australia and New Zealand), peaceful relations with its neighbours, a reliable state bureaucracy inherited from the British colonial masters, and a hardworking population.”

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