SINGAPORE & ADAM SMITH

Singapore is one of the most free economies in the world - usually coming in second or tying with Hong Kong in most surveys as the world's most free economy. But it's not without problems or potential pitfalls, Tech Central Station in an article called Get Adam Smith into the Lion City notes:

...there are worrying features about Singapore's economy. Sixty percent of productive activity is accounted for by businesses owned by the State and the public sector. Singapore Airlines, Chartered Semiconductor, SingTel, PSA Corp, Singapore Technologies , Changi Airport, DBS Bank, Keppel Corporation, Singapore Press Holdings, and Raffles Corporation, for example, are all state-owned and owned by either Temasek Holdings (owned by the Singapore Government) or by the Government of Singapore Investment Corporation (GIC).

These businesses displace private business. In Singapore, private and small and medium sized
enterprises generate 20 percent of economic activity. In Taiwan and Hong Kong they generate 75 percent. Nevertheless, private business would claim to do well in Singapore. In times of recession, the Government invariably acts to reduce costs controlled by government to ensure profits remain buoyant.

The state-owned businesses in Singapore, while profitable, are generally not producing returns comparable to privately-owned businesses in other markets. And the value of their publicly-traded shares is marked down by the inevitable weighting markets attach for the risk inherent in government control of a company.

The Straits Times, which is never rarely critical of the government, in an op-ed piece argues that Singapore is likely to see faster liberalization under the new prime minister (while oddly arguing that this means we still need strong government):

Government has been rolled back, so that people can learn to become more self-reliant and there is room for more individual initiatives.

Contrary to the end-of-the-nation-state pronouncements by the likes of Japan's management guru Dr Kenichi Ohmae, less government requires a strong, not weak, government.

The people, the foreign talents and the cross-national corporations - all of them - still want to see and feel, clearly and palpably, that there is a government in charge, that it is not leading from behind, and that it is sovereign and accountable.

Expect Mr Lee to push for less government, even as he strives to build a stronger government which can reach out to the post-independence generation, who will form the majority of the population come 2007.

The pace of change may be quicker under his watch, for the temper of the times demands it, and it is also in his nature to move fast.

For me the proof is in the pudding. I doubt the younger Lee will make any backward steps, but I haven't seen any indications that the government plans to quicken the pace of social or economic liberalization.

Still, the Straits Times - while not a truly independent press - often seems to be a place where the government floats trial balloons before implementing policies. So, optimistically, it may be a good sign that faster liberalization is being mentioned at all.