Singapore is set to overtake Malaysia as the third largest economy in Southeast Asia by the end of the year, for the first time in the history of the two countries.
Citing their respective governments’ forecasts, Bloomberg reported that Singapore’s gross domestic product (GDP) is expected to reach US$210 (RM658) billion with 15 percent growth – Singapore’s highest since independence – while Malaysia is projected to grow by 7 percent to US$205 (RM642) billion.
Analysts say the above underlines the need for Malaysia to step up efforts to raise competitiveness and undertake wider reforms.
For a country that is 478 times the size of Singapore, foreign investors and other observers have noted that Malaysians remain inward-focused and preoccupied with how to divide the economic pie among themselves.
Other Southeast Asian countries, meanwhile, are in a flurry of activity as they seek ways and means of gaining an edge over their neighbours.
Singapore has grown 189-fold in the 45 years since gaining independence from Malaysia and seen its GDP per capita grow from US$512 (RM1,609) to US$36,537 (RM114,818) last year.
During the same period, Malaysia’s economy expanded at one-third the pace, with GDP per capita rising from US$335 (RM1,053) to US$6,975 (RM21,919).
Singapore has also topped a list of 183 countries in a recent World Bank survey of business conditions, which looked at property rights, taxes, access to credit, labour laws and regulations on customs and licenses.
Malaysia was ranked 21.
In this connection, former Prime Minister Dr Mahathir Mohamad has commented that Singapore’s rapid expansion was due to the fact that it only focused on growing the economy.
Singapore will overtake Malaysia, he predicted, because it did not have any “social restructuring goal” such as equitable distribution of wealth between the races.
Whatever the reasons may be, Singapore will be the fastest growing economy in the world this year after undergoing a phenomenal recovery from its worst recession in 2009 due to the global financial crisis.
It saw GDP growth of 13 – 15 percent, one of the lowest unemployment rates in its history when employment reached 97.9 percent in September.
It has had recently record-level tourist arrivals. Corporate tax were cut to 16 percent.
An economic dilemma
Arguably, Singapore’s GDP growth has been fueled primarily by the huge influx of predominantly low-skilled foreign labour.
Some of the problems that such open labour policies may have contributed to are:
– declining real wages for lower-income Singaporeans (Singapore does not have a minimum wage, which the Malaysian Government has recently given the go ahead),
– relatively higher unemployment for citizens,
– rising public housing prices and rentals,
– over-crowding of infrastructure (the total number of hospital beds in Singapore did not increase in the last 10 years, despite the population growing from 4 to 5 million),
– declining productivity, etc.
‘Over my dead body’
A very long time ago, Singapore’s former prime minister Lee Kuan Yew said the city-state would have a casino only “over his dead body”.
In 2004, however, Lee and the Singapore government changed their mind, reportedly because:
– Las Vegas and Macau have developed gambling to great entertainment cities, that have world class concerts, world famous chefs, fine dining, theme parks, etc
– Singaporeans were gambling by way of floating casinos that operated “cruise to no where” packages, as neighbouring Indonesian islands have casinos, neighbouring Malaysia has a casino, and budget airlines can fly you to Macau for as little as US$200 (RM626).
After extensive public consultations and vigorous debate in the Singapore Parliament, the law was passed in 2005 to allow the operation of ‘integrated resorts’ (IR) with casinos as a central feature.
International experts were consulted, and bids for two ‘integrated resorts were invited from all over the world. The criteria of selection were architectural design, concept, investment value, and the potential for multiplier effects to the Singapore economy and tourism enhancement, etc.
The two successful bids were by Resort World Sentosa (Genting Bhd Malaysia and Universal Studios USA) and Marina Bay Sands (Sands Corporation USA).
Despite the unexpected global financial crisis, the outcome of the experiment was the greatest building and construction industry boom in the history of Singapore, a booming property market, thousands of highly-qualified, skilled and salaried foreign talent who came to Singapore to build and operate the IRs.
The targets
Up to S$10 billion (RM24 billion) of foreign investments went to building the two IRs. Among the targets of the ambitious plans, forecast to contribute S$1.943 billion (RM4.7 billion) to the Singapore economy are:
– the estimated creation of 55,000 jobs when they become fully operational
– the first IR projects profits of S$5.6 million (RM13.5 million ) per day
– the second IR projects profits of S$280 (RM677) million net revenues in the first 65 days
Revenues from the casino entry fees, corporate and individual income taxes, etc, it is said, will rake in more than S$1 billion (RM2.4) . The casino entry levy fees of about S$500 million (RM1.2 billion) a year reportedly will be used to help the poor in Singapore.
Some of the rising healthcare costs and other subsidies for the needy may be lightened by the direct injection of revenues from the IRs to the government and, indirectly, towards overall growth of GDP, jobs, incomes, consumption, etc.
Addressing gambling’s social effects
How did Singapore try to address the social ills of gambling?
– The government established the Casino Regulatory Authority and the National Council on Problem Gambling;
– Five sub-committees (public education, youth gambling, service delivery and research, public consultation, responsible gambling) were formed to research, deliberate and make recommendations;
Some of the recommendations and measures implemented were:-
– Almost daily TV advertising over a four-year period – the time it took to construct the Irs – have been dedicated to bringing home the call for “responsible gambling” (the most famous of which was one which had a gambling addicted father trying to persuade his little daughter to give him her piggy bank for that “one last bet”).
– Families can apply to exclude their family members from entering the casinos
– Individuals can also apply for self-exclusion
– A 24-hour per entry fee of S$100 (RM240) for Singaporeans and permanent residents
– A S$2,000 (RM4,800) annual membership fee per casino for unlimited entry
– No entry rule into casinos for bankrupts
– Gambling counseling services in the casinos, off-site counseling, 24-hour hotline, etc
– Former gambling addict volunteers set up support web sites for gambling addiction, offering online and face-to-face counseling
– Casino staff are trained to look out for, and offer gambling counseling
– No ATM machines in the casinos
– Small maximum withdrawal amount imposed on ATMs near the casinos
– Strict guidelines on the granting of credit
– Very strict regulations pertaining to casino crime (e.g., two years’ jail for betting after hand)
– Free ‘responsible gambling’ freebies like fans, tissue paper, coaster, bags, hotline cards, given out at public events in Singapore
– Junkets licensed by Casino Authority
– No vice in or near casinos
Where no one has gone before?
There has been widespread criticisim and debate in Malaysia about the 10th Malaysia Plan and the over-focus on mega projects.
So, perhaps what Malaysia needs may be the “miracle” which worked for Singapore – IRs through PPP (Private Public Partnership)? Perhaps like the TV series ‘Star Trek’, Malaysia may need to go boldly where no man has gone before?
Who knows – maybe changing the law to allow another IRs may be the spark to ignite the the Malaysian economy?
