Manufacturing vs Services

Manufacturing favours economies with huge land mass and large labour supply. Small island economies such as Hong Kong and Singapore have little comparative or competitive advantage for manufacturing to flourish as land, labour and skills are in short supply. Both prospered as cheap, labour-intensive, low-technology production centres for about twenty years or so. But manufacturing is now virtually non-existent in Hong Kong where factories had moved across the border to neighbouring colossal China since the latter opened up to foreign enterprises in the 1970's. Hong Kong turned to developing the services industry; she has not looked back. Today she is a thriving services and distribution centre for the east Asia region. Singapore, on the other hand, continued to develop and support manufacturing with subsidized factory space and a liberal inflow of cheap foreign unskilled and low-skilled workers. Dependence on cheap foreign workers is so high that factories cannot survive without them. In some industries such as shipyards, three-quarters of the workforce are foreigners. They have created immense social problems such as overcrowding in buses and trains, shopping malls, food centres, open parks and other public places, escalating housing prices, and strange cultural habits that the foreign workers bring with them. These were hot-button issues in the recent Singapore General Election which saw a big swing in voter sentiments against the ruling party.

I have urged the Singapore Government to de-emphasize manufacturing and instead promote services going forward, with the aim of turning Singapore into a vibrant knowledge-based regional services hub. (Please see my essay "Creating Jobs and Enterprise in a New Singapore Economy - Ideas for Change", available at www.tanjeesay.wordpress.com/About) My proposals were widely debated in the recent election. Government ministers poured scorn over my ideas. Even former Prime Minister and Minister Mentor Mr Lee Kuan Yew joined in the debate and questioned my qualifications. My rebuttal to him was voted by Yahoo as the best rebuttal of the Singapore General Election ( see http://sg.news.yahoo.com/blogs/singaporescene/best-worst-moments-ge-camp ). The ruling party suffered a significant drop in the popular vote and lost several more seats. Following the changed environment, Mr Lee stepped down from the Cabinet.

Tan Jee Say
28 June 2011