For twenty-five years, Singapore has had the fastest growing economy in the world. In so doing it has also prevented all of the major downside costs that often accompany high growth, such as rapid inflation and chaotic use of land. That achievement is substantial and deserves the recognition that it has received. However, success breeds complacency, and for the future of Singapore past successes may be more dangerous than past failures. Policy formulas that worked in the past risk becoming so sacrosanct as to constrain needed adjustments for the future. Preventing this from happening is the challenge now facing Singapore.

Like the end of federation with Malaysia and the abrupt British pull-out, the recession of 1985-86 may in retrospect turn out to have been a watershed for Singapore. The recession has shocked both policy-makers and the business community out of a feeling of self-satisfaction born of success. It has shown up some of the weaknesses of the economy in stark relief. It has called forth a re-examination of issues which in the past, due to success, were either taken for granted, or had been unquestioned and had taken on a status of political invulnerability — almost like a sacred cow.

This investigation was undertaken very much in the spirit of wanting to contribute to the re-examination of issues. Thus, we raised many more questions than we were able to answer. Some policy suggestions have been put forward without searching analysis. Nevertheless, we think that the questioning and policy speculating itself is worthwhile. We have analysed the past and assessed the present in the hope of drawing useful implications for the future of Singapore.

Challenges to Singapore

We have identified five major challenges to Singapore. They are managing external dependence, building a more robust domestic economy, reducing the role of government, improving the macroeconomic management of the economy, and understanding (and accepting) the implications of slower growth.

Managing External Dependence

As documented in Chapter 2, Singapore is heavily dependent on foreigners in many ways and with complex consequences.