S’pore’s economy set to be bigger than M’sia’s
After the World Bank report on Wednesday confirming Sabah as Malaysia’s poorest state, more shocks are in store for Putrajaya.
A foreign agency report from Singapore, carried by Sabah newspapers yesterday, says that its economy will be bigger than Malaysia’s before the year is out.
The final figures will be confirmed in February when both countries release their 2010 data, according to the report which notes that Malaysia is 478 times the size of the republic and its population, at 27 million, much larger than its tiny neighbour’s 4.8 million.
The betting is that Singapore will show an economy in GDP terms of US$210 billion – US$251 (RM653 billion- RM780 billion) last year in purchasing power parity (PPP) terms — while Malaysia’s, at US$205 billion (RM637 billion) (PPP last year US$ 383 billion or RM1,191 billion) will be smaller by RM5 billion.
The PPP is goods and services produced in the country being valued at prices prevailing in the United States. Singapore’s GDP last year at the official exchange rate was US$171.1 billion while Malaysia’s was US$191.5 billion.
The gap which is opening up is expected to widen in favour of Singapore in the years ahead. It’s anybody’s guess when Malaysia will ever catch up, if at all, with its rival. Last year, the island’s GDP per capita was US$36,537 (up from US$512 in 1965) compared with Malaysia’s US$ 6,975 (US$ 335 in 1965).
“Malaysia’s growth fell to an average 4.7 percent in the past decade from the 7.2 percent in the 1990s,” the report points out. “Singapore’s economy has been growing at 15 percent this year.”
Former prime minister Mahathir Mohamad has been quoted by the report as saying in an emailed response that “Singapore will overtake Malaysia because its focus is on economic growth”.
The better off cousin
This was a reference to Malaysia’s New Economic Policy (1970-1990) which pledged eradication of poverty irrespective of race, the sharing of the pie within the context of an expanding economy – “Peter will not be robbed to pay Paul” — and the elimination of the identification of race with economic function and place of residence.
“There is no social restructuring goal such as a fair distribution among the races as we have in Malaysia,” added Mahathir in ignoring the fact that the man in the street in Singapore is better off than his cousin in Malaysia.
The report attributes Malaysia’s smaller economy to the very reason why Singapore was booted out from the new federation in 1965 i.e. Kuala Lumpur’s policy of claiming that the Malays had special privileges under Article 153 of the federal constitution.
The Article speaks of training privileges, the special position of the Malays and natives, and the reservation of a reasonable proportion for them in four specific areas viz, intake into the civil service, intake into institutions of higher learning owned by the government and training privileges, scholarships and government-created business opportunities.
Under its second prong, Article 153 provides for the legitimate aspirations of the non-Malay communities.
The report notes that Prime Minister Mohd Najib Abdul Razak pledged last month during the 61st Umno general assembly to roll back key policies of ethnic favoritism while insisting that the “social contract” – Article 153 – “that gives benefits to the Malays” cannot be repealed.
Elsewhere, the report attributes Malaysia’s smaller economy vis-a-vis Singapore to a failure to optimize its human capital, a failure castigated as “the curse of resource-rich countries”; and the creation of inertia by the protection of certain industries under the import-substitution phase of its industrialization policy.
Protectionism = getting hamstrung
Apparently playing a key role in the emergence of Singapore is the presence of nearly 400,000 Malaysians including 150,000 who commute daily to the republic from Johor. The list includes 386,000 Malaysians who have become either permanent residents or citizens, among them Health Minister Khaw Boon Wan and Overseas Chinese Banking Corporation chair Cheong Choong Kong.
Meanwhile, there are nearly two million Malaysians working abroad, a figure which Najib has pledged to lure back with various incentives.
There are lessons in Singapore for Malaysia, the report points out, in that the city state, among others, followed the export-led industrialization model and became a base for foreign manufacturers.
“Singapore has kept on moving to the next level as the world economy evolved and adjusted to market demands and investors’ interests,” the report cites Lee Hock Guan, Senior Fellow at the Singapore-based Institute of Southeast Asian Studies.
“The government has never hesitated from guiding the development process or intervening in markets where it believes that such intervention will lead to superior outcomes,” said Ravi Menon, a senior official at Singapore’s Ministry of Trade and Industry. “This is where free marketers are disenchanted with Singapore.”
Something that will be difficult to duplicate or emulate is Singapore’s emergence as the world’s fourth largest foreign exchange centre with a nearly US$1 trillion (RM3 trillion) asset management industry. Banking, needless to say, is the world’s most profitable industry and Singapore has jumped on the bandwagon.
Malaysia is promoting itself as the world’s leading Islamic financial Centre. Islamic banking globally ,however totals, only one per cent of the US$100 trillion (RM311 trillion) conventional banking industry.
The report notes that Najib has set a goal of tripling Malaysia’s gross national income to US$ 550 billion (RM710 billion) by 2020 and creating 3.3 million jobs. The economic transformation programme (ETP), unveiled in September, aims to attract US$444 billion (RM 1,380 billion) worth of programmes this decade ranging from mass rail to nuclear power, led by private and government-linked