Singapore Must Change To Grow

Can Singapore move its economy into the Information Age? Led by Lee Hsien Loong, Deputy Prime Minister and central bank head, the government of the island nation is trying to encourage entrepreneurial vigor and innovation, while at the same time not dramatically loosening political control.

The stakes are high for Singapore, and for the rest of recession-wracked Asia as well. The Asian model of export-led development, based on low-cost manufacturing, worked well enough in the 1980s and the early 1990s. But now, any country which does not participate in the Internet and the Information Revolution is dooming itself to economic irrelevancy.

The question for the Asian nations is how to make the transition. Singapore, which was one of the pacesetters for the Asian model, has a chance to show the way again. Moreover, Singapore's experience will be especially important for China, which is trying to find the same combination of high-tech growth without an open society.

But Lee, son of Lee Kuan Yew, founder of the modern Singapore, may find it harder than he thinks to command creativity. True, he has taken a wide variety of steps to boost the vigor of the economy. These include reforming government-linked companies, improving graduate business education, trying to lure skilled foreign managers and workers, and increasing the availability of computers to students. Lee is also taking measures to strengthen the financial system, which proved to be the weak spot of other Asian countries.

Still, the innovative and freewheeling spirit of Silicon Valley and Wall Street seems to thrive on openness. At least so far, the government has only been willing to gingerly loosen some restrictions on political debate. But tight control still remains: An opposition politician was sentenced to jail twice this year for making a public speech without a permit. As long as the government keeps people and companies guessing about what is permitted and what is not, it will be difficult to unleash the entrepreneurial energies of the country.

Compared to its neighbors, Singapore still has an enviable prosperity. But turning Singapore into a knowledge-based economy may require a lot more openness and change than the government has so far shown itself willing to accept.

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