Economic development is not rocket science
The rarity of manned expeditions to the moon is a testament to the complexities involved in achieving such feat. Till date, the United States of America is the only country to have successfully accomplished this, despite the fact that the first manned expedition happened as far back as 1969. As of the last count, which was carried out today, no African country is classified as developed. Although the United Nations Statistics Division notes that the designations “developed” and “developing” are only intended for statistical convenience, and do not necessarily express a judgment about the state of development reached by a country, coincidentally, the structure of those economies classified as developed are dominated by the tertiary and quaternary sectors.
With the absence of any African country on the developed economies’ honours roll, one can be forgiven for imagining that countries need to first send manned crafts to outer space before they can earn that elite designation, developed. Amazingly, it is the consistent, conscious implementation of the basic principles of economics that lifts any economy out of the dungeons of pervasive and prevalent poverty into the marvellous light of economic prosperity. There are a number of success stories in recent past, of countries that have successfully navigated that elusive path to development. Prominent amongst them is Singapore, a country that was able to achieve this within a single generation, and without any natural resource endowment except its human capital. What can we learn from this near-impossible feat? How can we bring it home?
Singapore’s phenomenal economic achievement over the last five decades is hinged on three essential levers- the government’s strategic role, mobilisations of its human capital, and continuous development of infrastructure. Their key strategies have been to adopt a pro-business, pro-foreign investment, export-oriented economic policy framework, combined with state-directed investments in strategic business enablers. Once the vision for the country was birthed, variations of the above-enumerated factors were deployed, depending on the needs of the economy at every point in time.
In the 1960s, the main problem confronting Singapore was how to overcome the menace of high unemployment. The government realised that the only way to increase employment was through extensive growth in its manufacturing industries, for which capital was also needed. One of the first initiatives was to establish an institution that would ease the process of foreign investment on the island by allowing the foreign investors to by-pass a lot of the government bureaucracies. The government also went on to provide a manufacturing base with the development of an industrial town and its ready-to-move-in factories. These initiatives were complemented by the existing relatively low wages, and newly minted pioneer status tax incentives. As a result of these initiatives, many of the foreign investors realised that their production costs were lowered by as much as 20%. All these attracted many foreign corporations to Singapore.
By the end of the 1970s, unemployment was as low as 3.5%, and manufacturing sector had expanded from 10% to 25% of GDP. Singapore was confronted by a different set of problems in the 1980s. Due to the increasingly high pressure on workers wages, Singapore lost that edge of low-wage workers, and had to change strategy. To remain competitive on the global market, a shift into the development of high value added industries was conceived and implemented. The government realised that for this to be attainable, they needed an upgraded workforce with improved skill level that would allow the country transit from manufacturing into the service industry. Thus, the National Computer Board was formed, backed by significant government spending (three times the size of foreign direct investment into the economy), with the mandate to train highly skilled, IT-savvy workforce aimed at attracting global IT companies that will produce and sell their softwares through Singapore.
The result was an increase in the proportion of skilled employees from 11% in 1979 to 22% in 1985, while the amount of domestic and export IT sales had increased more than tenfold by 1990. One of the most strategic initiatives of the 1990s by Singapore was the agreement entered into with Malaysia and Indonesia, their neighbours with low-wage and low skilled workers. This allowed the relocation of Singapore’s manufacturing investments to these neighbouring countries, while remaining the main financial centre of this growth triangle. By the end of 1990s, Singapore was on course to producing high-technology products, while share of financial services had risen to 30% of GDP from 20% in the 1980s.
As I write this piece, Singapore is on the verge of becoming the first smart nation in the world, one where people are empowered by technology to lead meaningful and fulfilled lives. They are also positioning to become the petrochemical hub of South-East Asia. All these wouldn’t have been possible without visionary leadership, starting with the founding father, Lee Kuan Yew, through to Goh Chok Tong and Lee Hsieng Loong, who embraced meritocracy as guiding principle. Do these leaders have track records of excellence? Lee Kuan Yew graduated from Cambridge University with double-starred first-class honours in Law, Goh Chok Tong earned a first degree in Economics with first-class honours from the University of Singapore and a masters degree in Development Economics from Williams College, while Lee Hsieng Loong graduated with first-class honours in Mathematics and at the same time earned a Diploma in Computer Science (equivalent of an MSc.) with distinction, both from Cambridge University. He also completed a Master of Public Administration at Harvard University. Coincidence?
Singapore has demonstrated that with conscious, deliberate effort, development can be achieved in a single generation, but it starts with visionary leadership. We need visionary and intelligent leaders with track record of excellence that won’t sacrifice meritocracy on the altar of religion, tribalism and nepotism. We need a leader that can comprehend not only the challenges we currently face, but also proffer solutions for the future we desire. Let us start by measuring our leaders against the standard of the elected leaders of the developed countries, after all, that is what we aspire to achieve. If they don’t have similar qualities, the likelihood that they can set us on the path to development is greatly diminished.
Olugbenga A. Olufeagba