Mil:tlllwxCIf 'IE_'1,l ,, jXS |.fiX 5!ii-__________=ie.r ... .... ... ............... % RMi iJE; _ _____ 1 SE.DI rl n= D~~~~~~~~9 111 Public Disclosure Authorized EaiMi .>~ ~ ~ ~ ~ I'~ ~ GJlN~ l f ______1..MFg EIIn~~~~~g-km. ...... w DI[, t_i _ :... _ _ _,, 3,i,, _i ii_i4i_. Ji T T. Public Disclosure Authorized iS~' ~ ~ I I' ' I A' 4,,,,1,,',I |n~~1 A _ _~ -- =V Public Disclosure Authorized strsjsi li l1le > flill julj 11' ; 1Ci1:llil 3E 81 gt¢W4t jtlu l--:-:------------ .. ~ ~ . = ~1 _ .. _ .. ._ ........................UU....N...IIEIHI. _=__ft!JII!tl lEIIIUh_.,,,_B=I,iJJIIhUEIlJU ,__=IIII3EUIUIIIflII!1I.................................z==_ Public Disclosure Authorized ,~ _.=~ ~ _ _ _== = ,, THE LESSONS OF EAST ASIA Singapore Public Policyand Economic Development Teck-Wong Soon C. Suan Tan The World Bank Washington, D.C. Copyright © 1993 The International Bankfor Reconstruction and Development/THEWORLD BANK 1818H Street, N.W. Washington, D.C 20433,U.S.A. All rights reserved Manufachtred in the United States of America First printing October 1993 The-findings,interpretations, and conclusions expressed in this paper are entirely those of the author(s) and should not be attributed in any manner to the World Bank,to its affiliatedorganizations, or ;,o members of its Board of ExecutiveDirectors or the countries they represent. The World Bank does not guarantee the acCuracyof the data included in this publication and accepts no responsibilitywhatsoever for any consequenceof their use. Ary maps that accompany the text have been prepared solely for the convenienceof readers; the designations and presentation of material in them do not imply the expression of any opinion whatsoever on the part of the World Bank,its affiliates,or its Board or member countries concerng the legal status of any country, tenitory, city, or area or of the authonrtes thereof or concerningthe delimitati of its boundaries or its national affiliation. The material in this publication is copyxightedcRequests for permission to reproduce portions of it should be sent to the Office of the Publisher at the address shfownin the copyright notice above. The World Bank encourages dissemination of its work and will normally give permission promptly and, when the reproduction is for noncommercial puiposes, without asking a fee. Permission to copy portions for classroom use is granted tfrough the Copyright Clearance Center, 27 CongressSteet, Salem, Massachusetts 01970,U.S.A. The complete backlist of publications from the World Bankis shown in the annual IndexofPb)ficatons, which containsan alphabetical title list (with full ordenng nformation)and indexes of subjects,authors, and countries and regions.The latest edition is availablefree of charge from the DistributionUnit, Office of the Publisher, The World Bank, 1818H Street, N.W., Washington,D.C 20433,U.S.A., or from Publications, The World Bank, 66, avenue d&ita, 75116Paris, France. ISSN: 1020-0924 Teck-WongSoon is senior lecturer in the Departmnt of Economicsand Statisticsat the National University of Singapore. At the time of writing&C Suan Tan was an econonmistin the International Trade Division of the World Bank's IntemrationalEconomiucs Department Library of Congress Cataloging-in-Publication Data Soon, Teck-Wong. Singapore : public policy and economicdevelopment / by Teck-Wong Soon, C Suan Tan. p. cmL - (Ihe Lessonsof East Asia) Includes bibliographical references. ISBN0-8213-2612-0 1. Industry and state-SLngapore. L Tan, C Suan (Choo Suan), 1945- . L itle. IL Series. HD3616.S423S66 1993 338.95957-dc2O 93-30940 cm CONTENTS FOREWORD ................................................. v ACKNOWLEDGUIENTS................... D ..... E...T......S... vii ABOUTSNGAPoRE ............................ ix EXECUTIVES UMMRY Y.........................................xi 1. DEFINING SUCCESS .. 1....................I Stnuctur Change andSuccess ................................ I The Re-ExportEconomy and WorldTrade ........................ 5 Economic Preonditions for Success ............................S IL INDUSTRLALPOuICY .......................................8 PhaseI: Labor-ntewive Import-Subsuion (1959-63) ................ 8 Phase U: Labor-IntensiveExport-Oriented Manufctring (1966-73) ......... 10 Phase m: First Aempts to Upgrade (1973-78) ...................... 12 Phase IV: Economic Restructuring(1979-84) ...................... 14 Phase V: Ranwchmetad Further Diesificaion (195-1990) . ......... 17 What Consttae Singapores IdusariPlicy?P ....o................. 18 m. GOVERNANCEAND INSTU TUTONALFRAMEWORK ... ........ 19 The Civil Service ........................................ 19 Statutry ......................................... M StadOwned Enterprses (SOEs) and Govenmno-Linked Corporatins (GLCs).. 22 Economic DevelopmentBoard ................................. 25 Drastic nof Govement Agencies ................... 27 Integating and CoordinatingMechanisms ......................... 28 Tnpartite Arrangemes ................................... 28 Iv. DESIGNAND IMPLMENTATION OF VITAL POLUCJS ............... 29 hfluence of the Leadership's Characteristics ....................... 29 Vita Policies . ..........................................30 Costs and Benefits of Policy Changes ............................ 39 V. POLICY CONCLUSIONS ......... ............................40 The Role of Govnment ................................... 40 Lessonsfrom Japan and Other IndustrializedCountries ................. 43 Relationshipbetwen Devel-opmentSuccess and SocialnAui ............ 43 Policy Lessons from Singapores Experience ....................... 44 BBLIOGRAPHY ........... 51 ... FOREWORD Policymakers everywhere are searching for lessons from East Asia's enormous success in economic development A number of recent cross-countryand thematic studies have sought to identify and analyze the policies behind this success. Among them is The&ar: Asian Mirack, a recent World Bank publication, which draws in part on the Lessons of East Asia projecL Study tms, including in- country nationals, examinedin some depth the experiencesof the highly successfulEast Asian economies and the public policies underpinningthem. Several clear contributionsemerge from this set of country studies. The research: e Highlights considerable variation in approaches within the group of East Asian economies. For example, some economieschose a substantialdegree of government intervention; others did not. The studies dispel the notion that there is a single or uniform East Asian model of success. v Demonstrates that a core set of good economic policies - such as macroeconomic discipline, outward orientation, and human resource development - laid the foundationfor East Asia's success. Pragmatic policymaking- understood as being nonideologicaland reversible - seems to be at the heart of these policies and merits replicationl * DDispelssome of the myths about the more idiosyncratic interventions, such as "picking winners' in industry, which sometimes produced the desired result and somctimes did not. Because presence or absence of institutional features seems to have affected the outcomes of these interventions, applications to other regional conexts must be approached cautiously. A dominant finding of the studies is that serioas diversions from macroeconomicequilibrium were largely avoided, even by strong interventionists. At the same time, the later generationof industrializerswere more successful when they avoided these industrial policies. A question not easily answered is why East Asian governments adopted fundamentally sound policies and were apparently able to achieve beter results from their active policies and to incur lower costs from errors. In this connection, the studies touch on such dimensionsof policymakig as the role of the state, leadership, and the bureauraacy. k is one thing to describe the institutional featr accompanyinga succesful episode, however, and quite another to know why and how those feaus came about. For instance, why did East Asian leaders apparendtl hold themselvesmore accountablefor economic performance than has been the experience elsewhere? How did the governments manage to gain sufficient national consensusto put difficult policies into effect? These aspects of political economy cannot be ignored. Our analytic tools, however, are severely limited in penetrating these issues, in assessing their impacts, and in assigning credit to them. These country studies are only one step, altough a significant one, in deepeningour understandingof the experience of East Asia. It is hoped that they will prompt additional work on the institutionalfoundations of rapid growth. Gautam Kaji Vice President East Asia and Pacific Region v -7.. ACKNOWLEDGMENTS This paper and all the papers produced as part of the country studies project have benefited from the insights and observations offered by discussantsand commentatorsat a conferenceheld at the East-WestCenter in Honolulu, November 19-21, 1992. Tbe participants includedthe followingregional and country experts: Duck-Soo Han, Hal Hill, ChalmersJohnson, Wolfgang Kasper, Hyung-ki Kim, Paul Kreisberg, Chung H. Lee, Manual Montes, Seiji Naya, Takashi Nohara, John Page, TambunlerthchaiSomsak, Wanda Tseng, Wing Thye Woo, Ippei Yamazawa, and Zainal Aznam Yusof. The papers also benefited fiom a Bank-widereview of the project in August, 1993. The country studies team included Amar Bhattacharya, Leung Chuen Chau, Scott Christensen,Carl Dablman,David Dollar, KIimKlhwan, Saha DhevanMeyanadtan, Mad Pangestu, Peter Petri, Ismail