Lebanon vs Singapore: What Makes an Asian Tiger

Introduction:

For decades, a virtual line has divided our world into two parts: developed and developing countries. However, many nations have imposed a change, turning this line into a waving curve. Singapore constitutes one example of a development success story. Following its independence in 1965, Singapore had a limited market extent, people suffered from unemployment and poverty and lived in overcrowded neighborhoods. Through persistence and good planning the government succeeded in attracting foreign investments and became the center of attraction. Nowadays, the country enjoys a high GDP per capita, $85700, and a stable growth rate after it succeeded in overcoming all the obstacles, cultural and economic to end up with a prospering status. On the other hand, a Middle Eastern country, Lebanon, facing similar cultural and economic problems, has a different development trajectory. It is lacking behind suffering from horrible policies, corruption and mismanagement, not to mention the poor standards of living translated into an $18600 GDP per capita. Following the civil war that ended in 1990, the country was supposed to grow fast just like any post-conflict country, but in fact, it ended up in a worse situation and the so-called Horizon 2000 plan was never executed.

A comparative study will be conducted for Lebanon and Singapore to discover the reason behind the divergent results reached by these countries given that they both started from the bottom and had harsh economic conditions. In other words, why is Singapore very developed and advanced while Lebanese people are still fighting for a respectful life style?

Common aspects:

Before going into the differences between the two countries, it is important that we go into the common aspects that made them comparable in the first place: location, social issues and economics.

Geography in both countries serves as a comparative advantage. Singapore is a small island in the center of transport paths, controlling the gateway between Indian Ocean and Chinese sea. It also enjoys a natural harbor allowing the provision of port facilities at low costs. On the other hand, Lebanon is also considered as a gate in the Middle East. It constitutes a boarding pass for all trade transactions and transits, it also enjoys a moderated weather giving it a touristic advantage over its neighboring countries. Moreover, social issues are very common in both Lebanon and Singapore whereby religious and ethnic problems come into the picture. Lebanon carries the burden of 18 sects present within its borders which caused a destructive civil war, and Singapore suffers from massive ethnic issues where Chinese dominate by 74.2% of total population, followed by 13.3% of Malay, 9.2% of Indians and 3.3% of different minorities.

In the economic context, both countries applied a market-oriented plan. The axioms of Laissez- faire defined by Gaspard (2004) in his book “A political economy of Lebanon” were respected. Consequently, the individual is a basic unit constituting a part of the society whose utility considerations are valued and his right to freedom is well-preserved. Furthermore, governments intervention is considered to be counterproductive turning them into charitable institutions that weaken the incentive to produce and hence isn’t welcome. In other words, the laissez-faire was a program aiming at releasing human potential using decentralized and competitive markets as instruments. Therefore an efficient allocation of resources required 3 major determinants: capital accumulation, human capital and research and innovation. Having set the game’s rules now we can go into the implementation process.

Case of Lebanon:

Starting with the Lebanese case, the country entered a new era characterized by a promising economy following WWII. It has promoted trade and free exchange among economic agents, attracted foreign investments and secured property rights. The economy was nearly at full employment. Back then, Lebanon suffered from mineral and natural resources shortage unlike Singapore which used its resource abundance to trade and generate revenues. Agriculture was common reflecting the labor intensive nature of the economy. The government acknowledged its role in maintaining monetary stability and providing infrastructure, law and order, education, social security (medical insurance, family allowances and pension) and defense and its intervention was minimal allowing for elastic movements of labor and capital. The focus was on industrial activity preparing for a manufacturing boom and private businesses were highly encouraged. So, Lebanon had all the features to witness an economic sprint, and was “aiming for European living standards and could be easily compared with a European country in the lower income bracket” according to a 1975 World Bank report.

Unfortunately, the civil war prevailed for 15 years and teared the country apart destructing all the capital that was accumulated over the previous years, not to mention the population outflow and illegal activities. Afterwards, in 1990, the Taef agreement was reached to call off the street fights and a recovery plan was put to rebuild the country. The Horizon 2000 plan was expected to work and render better economic and social status relying on empirical and theoretical evidence. Solow dissected this subject assuming that a post-war economy will be far below its steady state levels which will allow it to develop in a faster trend to meet its original steady state level again as shown in the graph below.

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So the plan was set and the funds were provided from Paris 1 in form of loans and foreign aids. The plan worked in compliance with the Solow model witnessing high growth levels up until 1994. Afterwards, our situation became even worse (Dibeh, 2005)

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Many reasons are behind this growth trap. Authorities did aim for capital accumulation, they adjusted monetary policies to attract foreign investments and granted high interest rates but it was headed in the wrong direction. We ended up with strong banking and services sectors that are subject to default given the instable political surrounding. Singapore outperformed in this context through its ability to integrate the banking sector into its economy and invested these gains to solidify the foundation of industrialization and reach sustainable growth.

Returning to Lebanon, any attempt towards industrialization was countered by a lack of productivity and mechanization which rendered obsolete all the accumulated capital, a result predicted by Pasinetti who investigated industrial evolution. In fact, the GDP share of manufacturing increased only by 1.7% during that period while other LDC’s experienced a 3.2% escalation (Gaspard 2004). This productivity deficiency was nothing but a reflection of the negligence of human capital which provides the specialized skills, and the adaptation of a finance biased economy favoring short-run output maximization over investing in productive capital and research to innovate. So, consumption was selected over investment and a deindustrialization took place where the economy experienced negative savings waving investment opportunities away. These inefficiencies resulted in a massive debt crisis where debt to GDP ratio equaled 148.7% (World Bank, 2015). Also education was disregarded. Literacy improvement with little cultural content was prioritized and slight attention was given to developing skills, not to mention the negligence of rural areas that suffered from cultural and economic poverty which is contradictory with the equal regional distribution agreed upon in the Horizon 2000 plan. Sectarianism arose to destroy any survival chances. It emerged in all 3 powers, legislative, executive and administrative where positions had to be evenly shared, civil service jobs were no exception leading to skyrocketing corruption. Here again we failed to deal with our social issues as opposed to Singapore that incorporated social equity to do so.

Case of Singapore:

On the other hand, Singapore has a different story to tell. It is true that it approximately shared the same features with Lebanon but the only difference is that it actually did grow. The East Asian country understood the game’s rule stated earlier and worked accordingly in order to prosper. The main focus was on social equity where they committed to incorporate the whole society in the growth process. Therefore, two features were prevalent in Singapore: economic growth and social equity which qualified the country to launch a second industrial revolution. The targeted productivity and technology were coupled with a cultural mindset endorsing cooperation and teamwork which was and continues to be absent in the Lebanese mentality. The ideology was simplified whereby the strategies applied on a firm level were brought to the national scale. They set goals to be met within time frames. Moreover, they abided by the satisficing principle aiming for the overall society’s welfare to avoid inefficiency and maintain the government credibility. Any dissatisfaction is expressed through elections under their democratic system as opposed to the power inheritance in Lebanon which left the country in a status quo and shrunk the opportunities to change. This has also given the economic power to the political elite putting their private interests as priority. The Singaporean ideology is stated best by Byrne a member of People’s Action Party: “the pressure of our growing population has been such as to make it essential that we do industrialize if we are to survive… we proclaimed our belief in a policy of industrial peace with justice”.

The Singaporean government worked on carrying the satisficing principle into the different aspects of the economy. First, they targeted moving under the people’s consent in order to fulfill their aspirations and this is illustrated in the GDP per capita. Also the redistribution wasn’t viewed as a target but rather a consequence of economic growth and industrialization which resulted in job creation and thus reduced income inequality. Progressive taxes contributed as well. Second, it facilitated the provision of public housing if not ownership recognizing the right of every family “to own its home”. A survey made on the satisfaction level in this area showed that 70% of people admitted an improvement of life standards (Choy 1982). However, inflation and high prices are considered to be the major obstacle in purchasing houses. In addition, public health was highly considered where they worked on making it accessible by all citizens and they succeeded in doing so. Infant mortality for instance dropped from 75.2/1000 in 1951 to 11.7/1000 in 1980. Education with no doubt constituted the most impressive achievement since the labor force quality has increased substantially allowing a smoother industrialization process characterized by skills and productivity leading to innovations.

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Third, the provision of utilities: electricity, water and gas was efficient and at minimal costs making it affordable by everyone. Fourth, the government has taken serious measures to stabilize inflation and prices in order to ensure a decent life-style. They considered consumption subsidies to be ruinous and promoting dependency limiting self-improvement so they worked instead on providing the population with the means to advancement: education and training. Fifth, they understood the need to gratify civil servants and authorities in order to prevent bribery and corruption.

Aside from the satisficing principle, the second industrial revolution put an emphasis on the scientific management focusing on the mechanization coupled with industrialization to ensure higher productivity without an increasing physical effort from the workers behalf.

Singapore started in the sixties as a third-world state, recently decolonized and possessing a $100B budget to level up the country. This budget was used efficiently to turn this startup economy into a manufacturing economy characterized by labor and technology intensive industries. The efficiency in allocating resources was prevalent in the ability of Singapore to maintain its profile in spite of the 1975 economic downturn. Today, it is outdoing itself by directing R&D into Robot Leasing Scheme, and biomedical science.

Conclusion:

Ultimately, a comparison between Lebanon and Singapore is a feasible, accurate one. They share the same characteristics of overpopulated small countries suffering from social problems yet aiming for economic growth under market-oriented strategies. Today, they are experiencing divergent growth strategies. We need to understand that Singapore had two major advantages that put it ahead: industrialization and human capital. A change is required in Lebanon if we intend to catch up. We need to incorporate science in the production process instead of the outdated rule of thumb, our community demands more coaching on team work and the integration of a new ideology where people start to tolerate each other and ditch the chaotic individualism and we need more skilled and knowledgeable people who are able to innovate and produce not only output but also ideas. This is why we need to prioritize education and its provision in all areas, it is the time we stop disregarding the rural areas and take serious measures towards developing these left out regions. Industrialization doesn’t lie outside the recovery strategy, an efficient, all-inclusive strategy that is able to satisfy people and promote a new ideology among them, the ideology of peace. Let’s make Lebanon a Middle-Eastern tiger!

References:

Huff, W. G. (n.d.). Trade, finance and development. Trade and Development in the Twentieth Century The Economic Growth of Singapore, 71-119.

Choy, C. L. (1982). Economic Growth and Social Equity in Singapore: A Managerial Perspective. Contemporary Southeast Asia, 4(2), 184-209.

Saad, W. (2012). Causality between Economic Growth, Export, and External Debt Servicing: The Case of Lebanon. International Journal of Economics and Finance IJEF, 4(11).

Ghassan, D. (2005). The Political Economy of Postwar reconstruction in Lebanon. World Institute for Development Economics Research, 2005/44.

Abosedra, S., Dah, A., & Ghosh, S. (2009). Electricity consumption and economic growth, the case of Lebanon. Applied Energy, 86(4), 429-432.

Gaspard, T. K. (2004). A political economy of Lebanon: The limits of laissez-faire. Boston: Brill.

World Bank Group. (n.d.). Retrieved April 13, 2016, from http://www.worldbank.org/

The Seventies. (n.d.). Retrieved April 13, 2016, from https://www.edb.gov.sg/content/edb/en/why-singapore/about-singapore/our-history/1970s.html

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