Singapore-Privatization

Privatization was the long-term government policy that ultimately could have the most effect on the structure of the economy and the lives of Singaporeans. At one level, privatization represented the government's decision, articulated in the 1986 Report of the Economic Committee, that the economy had sufficiently matured for the private sector to become the primary engine. Since government-owned enterprises had "been successful in their respective areas of endeavor and should continue to be so," the government no longer needed to continue running them. In 1987 a government-appointed committee, the Private Sector Investment Committee, issued a report recommending the sale of shares in 41 of the approximately 500 state-backed firms, ranging from Singapore Airlines (SIA) to the national lottery, while retaining more than half the value of the share. SIA shares subsequently went public, although the government retained control. Sale of four statutory boards, including the telecommunications monopoly, was also recommended in the proposed ten-year divestment plan.

At another level, privatization meant that, over time, Singapore intended to divest itself of the loss-making functions of government--chiefly the responsibility for subsidizing housing and health care--the burden of which would increasingly be shifted to private employers and the workers themselves. Examples of the likely trend were the addition of Medisave and the topping-up plans to the Central Provident Fund package. The government was increasingly unable, given escalating costs, to provide subsidized social services to match the ever-rising demands and expectations of the population. The result might be called a shift from "state welfarism" to "company welfarism."

Singapore's younger leaders seemed particularly in favor of privatization. Although they approved of the near-monopoly on political life maintained by the People's Action Party (PAP), they expressed fear that Singaporeans were growing far too dependent on the government and expected it to solve their problems.

Through privatization the state was changing its role from that of direct provider of social and business amenities to that of director and overseer of a much wider range of private, social, and business institutions. The strategy was not without problems, however. One of the most difficult questions was what effect privatization would have on the management of the divested companies and on the statutory boards. Since the government had absorbed the "best and brightest" into the civil service, there was a critical shortage of private-sector top-level entrepreneurial talent. Moreover, even if the plan were carried out fully, the government would still maintain control in many areas of industry and services because more than half the value of shares of state firms would remain under government control, a partial divestment at best.

Economist Linda Y.C. Lim had suggested in 1983 that, despite the success of its state development policies, the government itself had succumbed to the free-market ideology and believed that its so-called Second Industrial Revolution in the mid-1970s-- upgrading technology and moving upmarket--required dismantling much of the state apparatus rather than divesting itself of its profitmaking functions. She also warned that the shift would likely also mean more interference by the government in companies' internal production and employment decisions. The new policy, Lim contended, could also inhibit rather than enhance free-market adjustments in the labor market: labor and management would be locked into benefits derived from a particular company, which in turn could adversely affect productivity. Singapore's spectacular economic success, Lim asserted, was the result more of state intervention than of the free market. "Privatization--the reduction of the state's responsibility for social welfare--will further limit free market adjustments and personal freedoms, and possibly pose a threat to continued economic success while undermining the government's political support on which both political stability and labor peace--the strongest investment attractions of Singapore- -were based."

Economist Lawrence B. Krause suggested in 1987 that Singapore needed less government control of the economy, which could come about through the government's restraining itself from absorbing new investment opportunities and encouraging local private entrepreneurs to undertake the new investing. In time, this would likely produce a more vibrant economy.

Data as of December 1989