Tuesday, March 31, 2015

Comparing Malaysia With Singapore

I probably shouldn’t bother, but from TMI (excerpt):

When the success of one nation casts shadows on the failures of another

...That Malaysia, with her bounty of natural and human resources, has failed miserably to keep up with Singapore is a sad reflection of the policies we’ve undertaken in the last 50 years. Where one has chosen unwavering pragmatism and a merit-based administrative policy to push its nation forward, the other is still proclaiming the supposed inherent superiority of one race over others.

Singapore is able now to move beyond focusing entirely on economic policy, to addressing problems such as social mobility and a rapidly ageing society to further better the quality of life of its citizens. Malaysia seems to be obsessed with proposing-debating-and-proposing-again the implementation of hudud, instead of fighting the deeply-rooted disease of corruption and inefficiency which leads to the billions of ringgit that slip out of our country’s coffers every year.

I hate repeating myself, but:

The Paradox Of Plenty

There’s this somewhat understandable idea that because Malaysia is rich in natural resources, we are…well, rich. Or at least we should be, if the government had handled things properly....

...But there’s a slight problem with this mindset – the empirical evidence suggests that natural resources alone do not beget wealth or prosperity, that focusing on developing such assets actually undermines the foundation of long term growth and prosperity. In fact, in development circles, it’s more common to speak of natural resources as a “curse”, not a blessing....

…In Malaysia’s case, it’s probably more pertinent – and accurate – to wonder not why we aren’t rich when we have abundant natural resources, but rather how Malaysia has managed to grow so far and so fast despite the handicap of having abundant natural resources.

In addition, three links on my series on corruption and growth (here, here and here), or if you want the whole series, you can start from here. From Part III of the series (excerpt):

The idea that corruption has a dampening effect on income levels and/or growth is intuitively appealing, yet the data doesn’t appear to support any causal relationship of any kind. In fact, the conclusion appears to be that the relationship is technically spurious – corruption affects neither the level or growth of income, nor does income affect the level or rate of corruption (or should I say, the perception of corruption).

The difference in growth between Singapore and Malaysia really boils down to volatile commodity prices before Malaysia’s economy was fully diversified beginning in the 1990s. There are a few other things, which I won’t get into right now.

Natural resources are not a blessing. Anybody who watched oil prices plunge last year can certainly attest to that. Long term, any country relying on natural resources is not on a path to prosperity.

The statement that Malaysia is “…staggering behind most of her Asian peers,” is sheer hyperbole. Since 1965, the only countries to have overtaken Malaysia in real GDP per capita in East Asia is Korea and Taiwan – despite the fact that both had had institutionalised corruption during their highest growth phases. This also ignores that we have been making steady gains on both, as well as against developed country standards, in the last decade.

Lastly, on the (de)merits of pure meritocracy, try here, here and here.


  1. So, Hisham - what are your conclusions?

    If we use 1957 as a starting point (that's the year of Merdeka) or later 1965 (when Singapore gained its independence), it is accepted that per capita income- and GDP-wise, Malaysia and Singapore started off from different bases.

    The two countries subsequent political and socioeconomic strategies also diverged, and this is where Singapore's lack of natural resources and land came into play as a key factor in its early push into industrialisation via the MNC route.

    What came after that has been well-documented and reported upon.

    Its basically each country playing the cards it was dealt.

    The jury is still out as to who, long-term (say over the next 20 years) will make a better job of it.

    But if the future is going to be governed by technology and services, it should give some pointers as to which countries will come out on top, and which will fall by the wayside.

    1. @anon 11.29

      "Its basically each country playing the cards it was dealt."

      Spot on.

      I'd note that Malaysia's success over the past three decades has largely come from diversifying away from mining and agriculture, and moving into manufacturing and services.

      I'd also add demographic factors as well. Singapore very early on decided to implement family planning (only too well as it turned out), while Malaysia went the other direction.

      Malaysia's demographic profile is starting to level out, so we're likely to see higher per capita GDP, as the labour force ages and matures (older more experienced workers earn more, and the proportion of working aged workers will be growing relative to the total population). Singapore is already well pass that stage.

    2. #hisham 5:36 PM

      According to index mundi (www.indexmundi.com), respective GDP compositions for Malaysia & Singapore are as follows:

      - agriculture 11.2%
      - industry 40.6%
      - services 48.1%

      - industry 29.4%
      - services 70.6%

      (note: 2013 est)

      Based on the above, for Malaysia, it appears that agriculture & industry combined have a bigger share of GDP than services.

      I don't have the up-to-date stats for 2014 though.

      On this basis, is it fair to conclude that Malaysia is transitioning to a services-led economy?

      It doesn't look like it.

      Also, for industry, what is the value added per capita or per investment dollar for Malaysia & Singapore respectively?

    3. @anon

      You can't see a transition from just one year's data, and certainly not from comparing with another country at a different stage of development.

      To do that properly, you'll need the time series, which can get here.

      Malaysia went from primary industry (agriculture plus mining) share of 33% in 1987, to 19% in 2000, to 13.6% in 2011. Services during the same period went from 43% to 46% to 55.6%.

      The latest data (2014) can be gotten from DOSM (you'll have to register first though). The numbers are 14.8% for primary and 55.3% for tertiary.

    4. Sorry, about that last question, that's just another way of saying what's the difference in GDP per capita.

  2. If Malaysian leaders are as kiasu as Singapore's, we'll be ahead of them by now. It's that simple.


    1. Malaysian leaders aren't "kiasu"?

      What, then, is their modus operandi? Gasak buta and hope something works? Throw oodles of money (public funds) into things that hopefully will get traction?

      Anyway, this Malaysia vs Singapore thingy is getting boring.

      There are those who see it as a zero sum game.

      And there are those who believe that this particular game is over, done and dusted and who have moved on to the "next big thing"?

      Big data and data analytics, anyone?



  3. Most people don't really care about corruption until it effect us directly or indirectly.

    There is a saying, the end result matters. As long as there are growth and progress, people will be more than happy to be the frog in a boiling pot.

  4. The author can't really be serious with this posting? Corruption doesn't affect growth? Really? Like really really? Singapore is miles ahead due to the various policies they've implemented and the discipline in seeing them through. You really ought to separate economics from politics. Cringe worthy.

    1. @anon 7.54

      Because I don't subscribe to the popular conception of corruption, I must have a political agenda?

      You should really read the series I wrote, it's almost pure stats, not rhetoric. The data doesn't support the argument that corruption is necessarily anti-growth. Just for example, the data on Malaysia's corruption score has been slowly rising, but so has growth (i.e. a positive correlation, not a negative one).

      I'm hardly alone in this either - the serious economics literature on corruption and economic growth is inconclusive. A few find a link, many do not. Part of the trouble is that there are many forms of corruption, and not all of them are harmful for economic growth.

      The only solid conclusion I found in my own investigation is that higher corruption levels are correlated with higher variability of growth, but not the average growth rate.

      I see corruption as really an equity and fairness problem, and as a distributional problem (i.e. someone gets something they do not deserve), not a growth issue.

    2. Google Baldung's world and see the essay on singapore

    3. I meant to say Balding's

  5. In my view, the GDP/capita does not always provide a good picture of a country's economic wealth. In case of Singapore, its per capita income is in the world's top 5 (exact place depends on which list you refer to).

    However if you are familiar with Singapore (as I am), you would know that the reality if very different. Singapore's (and many other countries) data is skewed because of the profile of their GDP. In case of Singapore, much of its income is from being the hub for trading, banking and oil processing. In reality the numbers do not represent the actual value of economic activities being generated there.

    The 2nd big difference when compared to Malaysia is that due to the nature of their economy, the govt reaps most of its income via corporate taxation rather than personal income tax. This allows the govt to channel the money to increase the standard of living of its people while keeping personal tax to a minimum. This income also allowed the Singapore govt to invest vast sum of money into superb physical and transportation infrastructure.

    Also its proximity to Malaysia allows it to enjoy an unique advantage that no other country in the world has - that is to get cheap and plentiful labor (thus keeping cost of living down) while avoiding the socio economic issues related to huge migrant population such as social tension, infrastructure, integration, etc.

    Singapore had decided diversify their workforce by getting more cheap labor from China, India, Indonesia, etc. And they made huge mistake here because unlike Malaysians, these migrant workers needed to stay in Singapore (unlike Malaysians who travel daily). This has created huge issues and certainly the biggest concern of Singaporeans today.

    I don't think any Singaporean will claim to enjoy First World standards of living.

    There are some Singaporeans (and Malaysians) who still claim that the Lion City was poorer than Malaysia at 1965, which is a total nonsense.

    As for Taiwan and Korea, it is highly misleading to say that we were richer than them in the 50s only to be overtaken. Let's admit to the fact that they have done incredibly well. But they were far more advanced than us well before the world wars. Only after the world war and also the Korea War did their income fell. Obvious if you compare the data for that particular period we were better off.

    1. @calvinsankaran

      No disagreement on most of your points except the last:


      The Maddison Project has GDP per capita estimates going back to year 1. Even in the interwar period, Malaya was ahead of both Korea and Taiwan.

  6. Been following your blog for quite sometime; a real pleasure and insightful. You mentioned, real gdp growth only exceeded by Korea and Taiwan. How is that this fact is not well reflected? Apologies if it sounds ignorant.

    1. @anon 10.28

      Not sure what you mean by well reflected? Just to clarify what I said, Taiwan and Korea overtook Malaysia on a relative basis. That doesn't imply that only Taiwan and Korea grew faster. Most East Asian economies grew faster than Malaysia during the commodity busts. That however didn't change the relative income rankings.

  7. @anon 10.53

    "cloying worshipper"?

    That was respect for the dead and his very real accomplishments, however tarnished they might be, as well as a gesture of acknowledgement for my Singaporean acquaintances. Or is that too passe?

    If you've read my previous notes on Singapore, I'm hardly a fan of Singaporean government policy, tax, transfer pricing and all i.e. the "...other things, which I won’t get into right now" that I wrote in the post above.

    We could cover half our fiscal deficit tomorrow based on the tax revenue we lose to Singapore from MNC profit-shifting. And profit-shifting equals GDP-shifting. The detailed FDI stats show very clearly how closely Singapore resembles other tax havens:


    For the last, I have no idea - he might be seeing data I'm not. There's still fundamental reasons to oversell the Ringgit (Fitch downgrade, 1MDB, impact of oil prices on O&G equity valuations). I'm not expecting a reversal until after the Fed actually starts hiking the FFR.

    Market's thin. Anybody placing big positions will move it a lot.

  8. Thanks,Mr Blogger. My sincere apologies for the presumptuous language. I did not mean to stir the hornet's nest there. Honest.

    As for the last,shall we just say he might be more perceptive of certain data not available to public eyes and therein lies the rub.

    Thanks anyway.

    1. blah blah big words blah blah

    2. I cannot fathom what I said that should give rise to inane reactions like @anon 12.59pm's. I sincerely hope the visitors to your blog are not of the @anon 12.59 variety.I trust that given the nature of exchanges which have so far been excellent and informative,@anon 12.59 must be an aberration being more of the 'empty vessel making the most noise' variety out to get some attention in the bargain.

      Anyway,spoilsports and sour pusses aside, thanks for the great link you provided,Mr Blogger. A bit old hat to me but still very useful and informative. Back then,the joke at our bankers club during after work sessions whenever this Singapore vs Malaysia comparisons cropped up, was why in the world Singapore was not compared with the Caymans, HK or even Switzerland,all countries without resources. And the unanimous concord amongst us back then was such comparisons were indeed the most valid and realistic.

      It seems clear that a couple of your commentators above,barring anon 12.59pm of course, have cottoned on to that. You see the reluctance to take that tack is born out an exasperated realization that there would be no comparison anyway, that Singapore lags behind those countries with the exception of Johnny come lately,Caymans.

      But my banker friends and me always came to an armistice of sorts that Singapore vs Malaysia was just 'ego trip' banter of no consequence.Those were the days indeed!!.Come to think of it, mostof that gang have left Singapore for better pastures,elsewhere save a couple of insiders in MAS, DBS and OCBC whom I still keep in touch with.

      Regarding your earlier assertion about your misgivings about Singapore,as a newcomer to this blog,I am not aware of those reservations,so that is news indeed. Thanks for the tip as I will surely spend some time poking around to satisfy my curiosity.

      Thanks for the umpteenth time!

    3. Sorry.....@anon 1.29pm and NOT @anon 12.59pm

    4. @anon 12.59

      No worries. Enjoy the poking around.

      I take a fairly liberal stance towards comments. This is after all a public forum. All are welcome, within certain boundaries.

  9. anon @ 2.00pm questioned why it has to be a zero sum game.... Indeed, I don't think it does...

  10. This comment has been removed by the author.

  11. "The only disappointment in the cogent piece above is the lack of any in-depth analysis of the Singapore financial architecture,particularly its birth and how subsequently it would contribute substantially, I may say "humungously", to its current prosperity."
    Please allow me to say a few words on this point not as an economist but from a business perspective.

    Much of this is not due to some clever or innovative policy making but rather loose regulations & oversight. Much of the money in the Singaporean banking system is from corrupted politicians and businessmen from Indonesia, China, Mynamar, India and even Malaysia. These shenanigans use the Singaporean banking system and the housing market to hide & launder money. If not for these monies, Singapore would not be where it is now. The 2 casinos too are another convenient conduit for the same purposes.

  12. This may be adding fuel to the fire, but I read this morning that S&P has "affirmed Singapore's sovereign credit strength with a top AAA unsolicited rating and a "stable outlook"".

    By "unsolicited", I assume that the Singapore authorities did not request for the rating and that S&P did it of its own volition.

    It is interesting that S&P views the AAA rating as reflecting "Singapore's extensive fiscal and external strengths, effective policy-making and political stability".

    S&P has estimated "Singapore's general government surplus to have averaged 6.8 per cent of GDP between 2010 and 2014".

    It "expects the (Singapore) Government to keep running Budget surpluses over the next three years, albeit at lower levels than in the past, as it addresses the country's ageing demographic profile and expands its social safety net".

    However, S&P also noted that "given Singapore's high export exposure and status as a financial centre, the country is vulnerable to shocks, such as a sharp and protracted downturn in the advanced economies or rising credit costs".

    It however qualified this by stating that Singapore's "extensive reserves and its flexible policy responses can act as a buffer against such shocks, and the probability that the ratings would be lowered in the next two years is low".

    1. It is common to receive unsolicited ratings from Credit Rating Agencies (CRA) as ratings for sovereigns are unsolicited anyway. If I am not mistaken, Malaysia received one recently from Moody's.

      In any case, S&P is merely rehashing the standard formulaic spiel regarding Singapore. As an ex-banker once employed there, I would say the comments are nothing new as Singapore has garnered similar comments and rave reviews in the past. Rating agencies hardly if ever sow panic by either downgrading or lambasting vital OFCs and tax havens by virtue of the fact that OFCs are generally perceived to be resilient fortresses anyway. In any case, CRAs would know the score if they notice funds beating their way for the exits or previously incoming money rerouting elsewhere.

      I guess the same applies as much to Switzerland, HK, the duchy of Luxembourg etc. As such, triple A ratings are nothing to be surprised about and you should rest easy as Singapore is assured of the Triple A unless the sky starts falling in tomorrow! .

      If anything, the comments affirming the ratings just underscores @Calvinsankaran above given the fact that the immediate environment around Singapore and beyond (read China) is not all that rosy at the moment.

      In fact, S&P's references to Singapore's reliance on the external environment vis-a-vis its status as a financial centre somewhat echoes what I came across reading in Mr Hisham's blog here about Singapore through the links he graciously provided yesterday. I found one commentator, (if I recall correctly the rather crude and reprehensibly racist Warrior 231) particularly intriguing, given his/her allusions to Mr Andy Xie.

      I recall, we at the Banker's Club had a whale of a time taking the mickey off Mr Xie, before he departed Singapore following his rather awkward and if I may say 'totally unsolicited' views regarding Singapore which by the way is redolent of @CalvinSankaran 9.11 am above:


  13. @Calvinsankaran.

    Thank you very much for those perceptive comments. I do agree that those undesirable elements do have a major role to play in the greater scheme of things.

    The UNCTAD figures on flows provided by Mr Hisham does provide valuable insight as to Singapore functioned as conduit for global flows.

    While not trying to whitewash our roles, speaking as an ex-banker in the Republic, we are often put in a moral quandary when accepting deposits from dubious sources but the "no questions asked' principle is an overriding veto as business pragmatism and the bottom-line is our primary concern.

    You may have noticed that in "Tears for Singapore" below, a commentator challenged another on the prresence of the scandal tainted BSI in Singapore and that is precisely what I am alluding to. In fact, most of the major delinquents in tax evasion such as HSBC, UBS, Credit Suisse also have their regional operations in Singapore.

    Mr Hisham's 'transferred GDP and UNCTAD data and your insightful comments all probably explains a significant portion of Singaporean prosperity. However, it would have been immensely useful if the blogger had provided us an indepth analysis of the financial architecture that allows for such prosperity whether hard earned or ill gotten so that it could be replicated elsewhere to yield similar outcomes. My experience shows that much of it is derived from the Swiss model and later the Cayman Islands innovative Mutual Fund Law model.

    Of course the property sector and the casinos are other avenues that leveraged on the opaque financial architecture and generally laxly enforced regulations.

    However, I have noticed a modulation in contemporary Singaporean socio-political discourse which has shifted away from maximising profits to a more nuanced "managing success" narrative. I suspect this comes about with recent global moves to reign in tax evasion and other similar shenanigans. Maybe the good times will cool awhile.

  14. @Mr Banker

    The inflating of Singapore's GDP has more to do with tax laws and customs practices than it does with finance, at least over the past ten years e.g.


    However, banking secrecy is certainly a large contributory factor. I certainly agree that the more moderate approach being practiced now has a lot to do with growing international concern over such practices e.g. FATCA, GATCA and BEPS.

  15. Dei Banker boy, I bet you are an effing mofo fuckhead who has got no class having a go at me like that. What sort of “reprehensible” racist am I, shithead? Where did I say anything racist in my posts? If calling a sliteye a ching is racist then I dare say calling out a pariah as a chakilliyan pundek is also one.

    You see banker boy, ‘racism” is one of the most misinterpreted and twisted words in contemporary times that even White supremacists are quavering in their boots. Everybody plus their gramps are racists if they speak the truth in this perverted Brave New World. I bet you are a chingshit who is offended cos I called you lot out with facts and you cunt take it, twatlick of a cumsucker cos it cuts too close.

    Dang you moron for implying that I am racist when I am not even remotely one. I stand for truth and if it hurts bad scram up yer mummy’s panties and hide in her nether orifice. You certainly said the right things about Singapoo (to give you credit for that but all that is pretty obvious to right thinking sane people everywhere anyway ) but don’t forget your manners while calling out that effing island. I suggest you remove your chingshit blinkers and smell the air for a change lest one fine day you tangle with me in the streets and get your ball kicked in and your arse kicked off. For I don’t take put downs from POSeur scums like you lying down. Now get outta my face, filthy dickhead of a chingkscum and don’t you ever repeat that absurd and slanderous shit again…understand!

    What a useless, piss swilling, john juicing stupid fellatist!

    By the way, to all dingbats going ga ga and sob sob over the cockshit LKY’s death, look at what a true blue yellow fuckhead has to say:

    Ouch!! Must have hurt the deluded dingbats here real bad….

    Now Mr Blogger …Howdy dude…. You are in my sights next. You see I didn’t swallow ‘your MYR aint fixed’ hogwash entirely. I suggest you flip to page 1192 of Barry Eichengreen’s Globalizing Capital: A History of the International Monetary System. Princeton University Press, 1996, ISBN 0-691-02880-X; 2. Auflage ebd. 2008 and get intimate with how rogue fiends like Soros and gang fuck up currencies for fun.

    And Eichengreen clearly contends that they don’t need truckloads of moolah to start a run.
    By the way dude, me quoting World Bank definitions are not absurd as you put it the last time around. You see they more or less match the IMF definitions, so you don’t have to twist in your knickers trying to split the hairs of two self-same stuff just to counterpunch me. The fact that Farid of Maybank talks of greed is evidence enough to vindicate my call for the need for an investigation as to whether the MYR was fixed by something shady. But I guess that doesn’t cut ice with you mate cos money has made up your mind and your conscience got to lie on it anyhow……Sad dude…You were really a good fella once. Go back to being that and look at this whole thing as a lesson well learnt. Cheers till the real you turns up after you banished the fake imposter off these parts.

    Warrior 231

    1. And yet Maybank (and CIMB and RHB) are increasing their presence in Singapore!

      Malaysia Boleh south of the Causeway?


    2. Your response was rather amusing and petty,Mr Warrior 231. You assailing me for stating the obvious is not going to change the fact that you are indeed racist. In fact, you merely affirmed that fact with you branding me a 'Chingkie' in despicably uncouth language. In any case, rest assured that I will not be tempted to stoop to your level. I doubt any civilised person would!

      Yes, I am Chinese and mighty proud of being one but that does not make me repulsively blinkered like you. Perhaps you should reflect upon your actions in a more sober manner and stop being touchy for a change. By the way,those threats of bodily harm do not bother me. You should be more concerned about reeducating and reforming your good self before you take on others and berate them in such filthy prose when they have done you no harm.

  16. This morning I read about the controversy on how big Aussie companies such as BHP, Rio Tinto and others have moved billions to Singapore in an attempt to profit-shift. This just goes to show what we have been discussing here. This I believe a mere tip of the ice berg. I remember reading a report in Indonesia that tens of billions have been moved to Singapore by crooked politicians and businessmen.

  17. Yes Mr Calvin, I read the same at the link below:


    It is evident that such shenanigans play an immense part in Singapore's prosperity although certain people continue to deny the obvious for certain reasons. I would like to think that with the Internet and access to all sorts of information, people would be disabused of myths,prejudices and the like. But the trenchantly blinkered and grossly lopsided views on Singapore's so-called economic marvel being expressed here and elsewhere merely convinces me that even a surfeit of facts cannot disabuse a deluded fool off his stupidity.

  18. Islam and development can't come together in one country.
    Islam blocked Malaysia.