Monday, June 16, 2008

Singapore: The Global Schoolhouse

This is what the state can do to create a high-value knowledge based economy. Singapore, which is considered as a state that successfully engineered its economy to the path of sustained economic development by reforming itself into a global commercial hub (obviously, following the unorthodox policies to create the orthodox outcomes), has now drawn up plans to transform itself into a global hub of education and medical services. It has formulated the Global Schoolhouse, a policy (with an initial funding worth US$8 billion) designed to attract top notch international students to Singapore based public and private institutions, remodel education system, and establish high class universities in Singapore. It is reported that elite universities like MIT, Yale, John Hopkins, Duke, etc were funded to run graduate-level programs and research activities. Similar policies were implemented by Saudi Arabia, Romania, Ireland, and Malaysia.

Singapore's government formulated the Global Schoolhouse, a policy platform based on three pillars: investing financial support with an identified group of "world-class universities" to establish operations in Singapore; attracting 150,000 international students by 2015 to study in both private and state-run education institutions; and remodel all levels of Singaporean education. The Global Schoolhouse articulates with policy reforms in education, research, urban redevelopment, taxation, immigration, and intellectual property.

Bringing in foreign expertise to contribute to Singapore's knowledge-economy agenda resonates with earlier state-led industrialization policies. The government's aphorism, "build it and they will come," was translated into the provision of state-of-the-art facilities and tax concessions and grants for foreign companies. This enabled Singapore to build capacity in key industries and integrate itself into the capitalist economy, at a time when the newly independent states were deeply suspicious of capitalism. The prime minister noted that Singaporeans were "learning to do a job" from foreign companies, something they may not have otherwise learned. The issue of "whether or not we were exploited" was less relevant to him.

This is yet another example of how the state can play a crucial role in promoting economic growth, engineer such growth methodologies, and provide incentives to achieve the growth goals.

By the way, this is how the Singaporean government support the education system:

The government offers resources and opportunities to do less administration and more research, including scientifically proactive research unencumbered by short-term commercial imperatives. Expatriate faculty also express appreciation for the professional freedoms provided by a forward-thinking, scientifically literate leadership that prizes intellectual achievements and a setting without any urban violence. Despite the limitations in democratic freedom for its citizenry, Singapore is not considered a police state. It is described as well governed, with impressive public-good achievements in infrastructure, health, education, and redistribution exceeding those of its neighbors.

...Singapore continues to use foreign companies, universities, and knowledge institutions to build capacity in key knowledge industries and to exploit new and emerging expressions of knowledge capitalism.


Lessons from the South African electricity crisis

In a one pager published this month by the IPC, Kate Bayliss from the Center for Development Policy and Research argues that the South African electricity crisis is a result of the failure of the private sector to respond to an ambitious electricity restructuring and privatization program beginning early 1990s and the lack of public investment in this sector. Bayliss maintains that though power sector is open to the private sector in other countries as well, there has been a decline in investment, implying that just making arguments on investment gap by following the orthodox restructuring economic models of the 80s and 90s would not work.

During the recent power cuts, a very high proportion of generation capacity was out of service. During January 2008, for example, this reached 23 per cent, mostly due to unplanned maintenance.

The Eskom plant is under severe strain due to factors such as poor coal quality, staff shortages and a high load on its capacity. A vicious circle has developed: a high proportion of plant is out of action, so further strain is placed on the existing plant, which becomes even more likely to break down.

Because of this additional strain on the system, frequent outages are inevitable. Similar reform packages have been repeated in much of sub-Saharan Africa. But the ‘unbundling’ of the electricity supply industry to facilitate private sector participation has failed to elicit the critically needed investment.

SA power investment

Across all developing countries, private sector investments in the power sector declined from US$ 47 billion in 1997 to US$ 14 billion in 2004. However, international advisors have continued to adhere to the orthodox package of restructuring policies, claiming that obtaining private sector investment is unavoidable because of a widening ‘investment gap’ in the power sector.

Bayliss concludes that in the wake of private sector's failure to tap into the opportunities in the power sector, the state must fill in the tap by investing more in the sector.

The electricity crisis of South Africa demonstrates that the widespread efforts across developing countries to encourage private sector investment in the electricity industry are unlikely to succeed. So the government and state utility must continue to scale up public investment in order to maintain and expand electricity capacity.

Of course, concerns against corruption and malgovernance in the public sector, where ever it might be, would run very high. This does not mean that the state should completely privatize power sector. Both the state and the private sector need to work together to harness untapped resources and opportunities. The state can kick-start the process through initial lump sum investment while keeping in mind that crowding out of private investment is eschewed. Keeping this balance in investment requires good policy work.