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Singapore The Government's Economic Role
Singapore had achieved economic success with an economy
that
was heavily managed by the government
(see Budgeting and Planning
, ch. 3). The state owned, controlled, or regulated the
allocation of
capital, labor, and land. It controlled many of the market
prices
on which investors based their investment decisions and
was the
exclusive provider of social services and infrastructure.
The 1985-
86 recession, however, stimulated discussion of
impediments to
economic performance and of dysfunctional aspects of the
government's role in the economy. A 1987 report by the
governmentappointed Private Sector Divestment Committee recommended
that the
state dispose of most of its interest in private companies
over a
ten-year period. It recommended privatizing forty-one of
ninetynine government-controlled companies and investing the
proceeds in
high-technology companies.
Throughout the 1970s and 1980s, the government
controlled wages
through the annual wage guidelines set by the National
Wages
Council, a body in which representatives of employers,
trade unions
(which were controlled by the PAP), and the government
reached a
consensus on wage levels for the coming year. The
council's wage
guidelines were in the form of macroeconomic projections
and were
applied across the board in all sectors of the economy. In
December
1986, the cabinet approved a National Wages Council report
calling
for a revised wage system that permitted greater
flexibility, (the
flexi-wage policy) with more use of bonuses and wage
increases
linked to increases in productivity. It was, however, not
clear how
the productivity of white-collar workers and civil
servants, who
constituted an increasing proportion of the work force,
was to be
measured. The call for wages to reflect the productivity
and
profitability of particular industries and firms implied
more
bargaining between workers and employers and a diminished
role for
the government, which could not impose a single rate on
hundreds of
distinct firms.
Although there was general agreement on the need for
changed
economic policies and modes of administration, significant
tensions
remained between those who favored greater flexibility and
liberalization and those who wanted government direction
of the
economy. For Singapore's leaders, the challenge was to
devise more
sophisticated means of ensuring overall control while
permitting
greater autonomy and flexibility at lower levels.
Data as of December 1989
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