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SPEECH BY MR LAURENCE LIEN, CEO, NATIONAL VOLUNTEER & PHILANTHROPY CENTRE, & NOMINATED MEMBER OF PARLIAMENT

AT DEBATE OF POPULATION WHITE PAPER 2013, SINGAPORE PARLIAMENT, ON 7 FEBRUARY 2013

Madam Speaker, I would like to commend the Government for raising a topic that is important and quite clearly not winning them brownie points at the moment with the public. But I would like to say that the White Paper has missing and wrong ingredients, and I do not agree with the population projection numbers. Hence, I am unable to endorse the paper. One key issue for me is that I am having a major disconnect. How did we go from fearing ageing and depopulation to having a potential population explosion? Where does this dependence on growing GDP through increased immigration end? If we continue the 1.4% total population growth projected for 2020-2030 in the White Paper beyond 2030, our population size will double every 50 years. This means it will hit 9.8m in 2050 and 19.7m by the end of the century. I hope the Government would reassure that doubling our population every 50 years is a “no case scenario”. If the Government says, alright, they agree that we need to stop this population growth at some point, and stop relying on workforce growth as one of the key means to boost our GDP, the question then is why can’t that point be brought forward? Why can’t we do the adjustments earlier? On the economic front, are we making the transition to be a knowledge-based, innovation economy? Exactly 10 years ago, in February 2003, the Economic Review Committee (ERC) outlined key recommendations to remake Singapore into a creative and entrepreneurial nation. Have we failed? Seems like we have, and we need to examine the reasons for the failure. In the ERC report, it projected a sustainable growth rate of 3-5 per cent per annum, with productivity growth of 2-3 per cent and labour force growth of 1-2 percent. Instead, we had labour force growth between 2000-2010 of 3.7%, almost double the upper bound target and with about two-thirds of this made up of immigration. The productivity growth of 1.8% was below the lower bound target. Interestingly, this target has never changed. In February 2010, exactly 3 years ago, the Economic Strategies Committee (ESC), again reaffirmed the same targets – 2-3 percent productivity growth, GDP growth of 3-5 per cent, and by implication, a labour force growth of 1-2 percent.

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Despite saying that we must “moderate the future growth of the foreign workforce” in the ESC report, we saw a growth of non-resident labour force of 6.3% from 2010 to 2011, and 7.4% from 2011 to 2012, and a total labour force growth of 3.2% and 3.9% respectively. In the Population White Paper, there is déjà vu. Exactly the same targets. Why is the Government saying then the White Paper is proposing a major shift to slowdown our rate of workforce and population growth, as if it were a major policy shift, when the policy and targets have stayed exactly the same from 2003 to 2010 to today? If the policy did not change, the infrastructure problems today seems less because of the lack of forward planning but because the original plan was not adhered to. Is this Government now able to boost productivity and is it serious about moderating the growth of the foreign workforce, when it has failed to do so previously in the previous two attempts? I am also not sure how 6.9m is a “worst case scenario”, and that they hope that the actual figure would turn out to be much lower. The Government can at least indirectly control both the demand for foreign labour and supply of the foreign population. And if so many large infrastructure projects lined up and all the investment promotion activities, by economic agencies like EDB and MAS, going on with full force, would the large increases of foreign labour become a fait accompli? And if infrastructure is built and not fully utilised, won’t they be unnecessarily wasted? These would be monies that can be better spent to address social concerns. Building excessive infrastructure will also only put more pressure on the need to bring in yet more foreign workers into the construction industry. And to clear land required to cater to a 6.9m population, heritage and great nature reserves would be taken away at great loss to the legacy that we provide to our children, and simply wasted away for economic immigrants that we would not have. More Moderate Population Growth

Let me suggest that the long term policy should be to cap the total population by 2030 at 6m. This will require only allowing roughly a 1% annual workforce growth between now and 2020 – which can be mostly achieved through an increase in resident labour force growth – and around 0.5% thereafter. We should also slowdown the intake of new naturalised citizens to 10,000-15,000 of new births. Otherwise, the impact on social cohesion and the building of our social identity will be too adverse. In fact, having a lower workforce growth would have a positive impact on productivity. If labour is scarce, firms will substitute labour for capital, skills and technology.

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We also need to raise the wages and skill levels of foreign workers so that we can attract the more skilled ones here. In fact, the rising foreign worker levies have ironically dampened productivity. Where companies have to reduce wages of foreign workers to cope with the painful escalating costs, they end up only being able to attract lower and lower skilled workers with a lower reservation wage, and who are less productive. Too many of our companies are addicted to cheap, less-skilled foreign labour. If we continue to feed them with cheap labour, it will only feed the addiction. These companies need restructuring, or rehabilitation, not more drugs. Apart from having immigrants to simply replace our non-replacing population, the government seems to go beyond that because it believes that for Singapore to be a first-tier, dynamic city like London and New York, it needs to have a large population. PWC’s 2012 Report on Cities of Opportunity’s1 ranking of the top cities of the world had smaller cities, like Toronto (2.6 m population in 2011) and Stockholm (870,000 population in 2011) ranked among the top 5. Singapore is ranked 7th. In an increasingly virtual world, beta cities like Toronto, San Francisco, Stockholm and Sydney – all with city populations smaller than Singapore – challenge the traditional cosmopolitan centres like New York, London, Paris and Tokyo. Interestingly, the same PWC report did a baseline projection numbers of all the cities for 2025; it projected a 3.6m employment and 5.7m total population for Singapore in 2025. You may say Singapore is not just a city; it is a country. But if you look at the 2012-13 Global Competitiveness Report2, 4 of the top 5 most competitive countries, including Singapore, have populations under 10 million. Finland is just as populous as Singapore. The 4 top 5 countries, apart from Singapore, had a total population annual growth rate of 0.6% from 2001-2010, which is below the OECD3 average of 0.7%, well below ours of 2.5% between 2000 and 2010, and that projected for the next 2 decades. The OECD average for labour force growth was only 0.7% per annum from 2000-2010; ours was 3.7%. Fundamentally, I think that the population concerns are serious, but unnecessary pessimistic. Yes, we have a low TFR, even if we can increase TFR to 1.5. The conventional wisdom is that economic dynamism will wane as citizens of prime working age shrink and the healthcare burden increases. The knee-jerk response hence is then to increase immigration.

1 Source: http://www.pwc.com/us/en/cities-of-opportunity/assets/cities-opp-2012.pdf

2 Source: http://www3.weforum.org/docs/CSI/2012-13/GCR_Rankings_2012-13.pdf

3 Source: http://stats.oecd.org/; Author’s analysis.

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I think we can live with a cap of the population at 6 million by 2030 and still be dynamic. Many vibrant economies among the OECD countries are already below an old-age support ratio of 4, and are moving towards a ratio of 2 as a long-term sustainable rate4. In fact, I believe Singapore is well-equipped, compared with most OECD countries to cope with population ageing. First, Singapore is a high savings country, nationally and individually, unlike many developed countries which are mired in debt. Dissaving helps smooth out consumption over time. Economist Ryan Herzog from Gonzaga University in a March 2012 paper5 showed that the effects of population ageing on growth is weakened as saving rates decline and trade openness remains high. In other words, Singapore would need to save less and consume more, to sustain our growth rates. In Singapore, we need a deeper discussion on an orderly and sustainable use of the nation’s reserves and people’s savings to maintain economic vitality. One measure is the use of reserves to invest in new strategic industries. Temasek Holdings, in particular, instead of focusing just on generating high financial returns from overseas investments that have no positive spin-offs for the local economy, ought to be vested with this mission. New Economic Model But I do think there is much to do still in other areas to maintain our competitiveness. We need a more compelling economic model that includes how we can execute well those economic strategies that promote productivity and innovation. Obviously, we need a lot more than the Productivity and Innovation Credit. We need to reinvent how we see ourselves doing business and creating value in future. We need to invest in disruptive innovations, producing not just the highest end goods, but the lower end products and services that are demanded in emerging Asia. We must stop simply flogging the higher productivity horse, if productivity is merely about doing the same with less. What we need to do is to do things differently, and this depends on people driving innovation. We need to revamp our education system to focus on young people who are enterprising, can think out of the box and have the passion. We should stop having high PISA scores as a target.

4 Source: http://www.oecd.org/berlin/47570029.pdf

1. 5 Ryan W. Herzog (2012) A Dynamic Panel Model of GDP growth, Saving, Age Dependency and Trade Openness”

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In the short term, I know that many companies are suffering labour shortages which are affecting operations. I work in the non-profit sector which feels the brunt probably even more severely than the private and public sectors. I know business owners too. For us to go up the value chain, we need to continually restructure. We need creative destruction, and many low value-adding businesses would need to exit. In the older days, we worked with our neighbours to develop the Sijori growth triangle, and we would actively identify and negotiate the closing down and relocation of low value added manufacturing plants to our neighbours. What are the equivalent plans today? Why do we express great alarm today when some firms leave, when it should naturally be expected that some will do so? What we must do better is to help them exit and adjust. Delaying would only postpone the pain, and reduce our ability to transition to a knowledge-based economy. There needs to be industry-specific, microeconomic policies and programmes to deal with the unique context of each industry. We also need strong social safety and transitional programmes for workers who are dislocated in the process. SMEs must also consider merging for greater scale economies. We must also upgrade jobs, especially blue collar jobs. Such jobs should be respected and they deserve a decent living wage. This will attract more Singaporeans into such jobs. In Australia, the blue collar workers are the new rich; they earn more on average than those sitting behind a desk. Construction workers there earn an average S$58,000 a year, and their total construction costs are only marginally higher than ours. However, I do accept that in the short term, it will take some time to adjust. Hence, I think the Workers’ Party position is too drastic as there needs to be some net foreign labour growth in the short term for companies that are still restructuring, and for us to import people with skills that we may not have enough of. Social Concerns But well beyond the economic issues, there are the social concerns, which I believe are at least as critical as the economic ones. These have not received sufficient attention in the paper, even if the proposal to moderate the population increase to 6m in 2030 is adopted. In the first place, why the obsessive focus on GDP, even as a tool? A recent Bloomberg editorial, reproduced in TODAY, makes good points about how GDP is an imperfect measure of progress.

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GDP only measures output which has a monetary value and makes no claims on the

value of that output to the human person or society. It includes things that are

profitable and not very beneficial to society like cigarettes, excessive litigation, and

excessive tuition; and excludes things that are not profitable but beneficial, like the

work of the homeworker or the volunteer. GDP also undervalues the work of people

working so hard in the charity sector, where workers typically take a passion discount.

If we are talking about what benefits Singaporeans, why are we focused mostly on economic, physical, material and financial indicators? Singaporeans are saying that people want broader measures of success. Singaporeans are reacting strongly to the White Paper because many are questioning how the high average GDP growth over the past few years has benefited them. And I am not even talking about whether higher order needs, such as self-actualisation, are being met. GDP also only measures average income, and as we know, our own high GDP growth has been positively correlated with widening income disparity. We need to pay much more careful attention to this, and in this regard, I would urge the government to reconsider the Minimum Wage, which has been implemented well in some economies, with little adverse impact on employment. Otherwise, we would be in the company of only a handful of countries like Yemen, Somalia and Tonga. Redistributing income to low income earners is never the same as being able to earn a fair, living wage in the first place. The former affects one’s sense of self-worth, while the latter preserves the dignity of the human person. For the lower income and the middle income, life continues to be a struggle. On the ground, the issues of the escalating cost of living and physical infrastructure squeeze are well enunciated. I have argued previously that we need two Singapores in term of costs to cater to the widening income disparity. In the past, I could say that we had cheap options in Singapore. Nowadays, cheap options are increasingly being eliminated. The increasing on-the-ground perception among the middle and lower income is that the Government is pro-business and pro-rich. Indeed, Singapore is one of the best places in the world to live in, but only if you can afford it. We have just been ranked the 6th most expensive city in the world in one survey.

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I believe that Government needs to do more stabilise costs, as it is difficult for many households to deal with high and unexpected cost increases. Unfettered free markets do not produce the best outcomes. In fact, are markets really free in Singapore, when Government intervenes and controls so many policy levers? In general, the Government needs to intervene more to ameliorate the effects of economic policies, which include the population policies. Identity, Values & Belonging But I think well beyond the issues of income equity, costs and personal well-being, there are the issues of identity, values and belonging. We might be a nation of immigrants. But the reality before and after the independence of Singapore are quite different. Before independence, we were a British colony. The issue of building a national identity did not arise. In the early days, there was preoccupation with immense social problems as immigrants flowed in. Later, after the war, the focus was on meeting basic needs and catering to the demand for more self-governance. After independence, we are trying to forge a Singaporean identity, even as we try to meet the basic needs of all Singaporeans. We are now not yet 50 years old. In nation-building age, we are mere teenagers. As teenagers, we are still unsure about our own identity. It is fluid and evolving. There is a lot of angst, as manifested perhaps in us finding our voice and expressing our view strongly. There are also, of course, many real concerns, of the stresses of living in Singapore. But just as teens find comfort in friends who are like them, Singaporeans too want to engage with other Singaporeans in the common purpose of building a shared identity, and dealing with common problems. As a people, Singaporeans welcome diversity and have always been welcoming of foreigners, because we ourselves are diverse. But if we are mixed with too many people who are too different from us, this crucial part of identity building goes awry. And even while we argue about the exact numbers, let us make sure we continue to treat migrants well. They are persons with their dignity too. But at the end of the day, Singaporeans also need to feel that they are truly valued as persons, with unique interests and desires, and that they are not just a factor of production. They need to feel that they are the ends. That they matter as a group, with a shared set of values, shared heritage and shared experiences that build that common identity.

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We want to build a home, not a hotel. A hotel room may be more luxurious than our home and have more services; but we couldn't possibly afford to stay there forever. When we live in a home that we are proud of, we can then be more welcoming of foreign guests to stay. And maybe then we feel in a happier frame of mind to have more babies.