Chapter 5 - Crisis as Opportunity

Summary

The misfortunes that befell Singapore in the first decade of her existence, from a self-governing state to a fully independent republic, are forgotten by observers who believe that ours has been a smooth and easy transition to self-sustaining growth. The truth is quite the reverse…First, the economic strategy was set in motion right from the beginning. It achieved some limited results. But more important than what we did, was the generally favourable background of the world economy.

— Goh Keng Swee (“A Socialist Economy that Works”, 1976)

The withdrawal of British forces by 1971 necessitated long-ranging plans to secure for the island, firstly a viable defence force and secondly a string of institutional measures that would push its economy beyond mere defensiveness.

When final details of the withdrawal became known to Singapore's leaders, the Americans were reducing their forces in Vietnam, the confrontation with Indonesia had just ended, and problems caused by the separation from Malaysia were far from solved. How the country planned to minimize the negative effects of the withdrawal on the economy can be observed in two appearances Goh made on radio and television, on 30 March and 16 April 1968.

THE CRUCIAL YEARS (1968)

In the first talk in the series, appropriately titled “The Crucial Years”, he forecasted a reduction in British spending of $900 million over the coming four years. In order to counteract this drop in expenditure, three areas where spending could be increased to a total of that same amount were identified by Goh. These were “Additional public sector building & construction”, “Additional defence expenditure, mainly local cost”, and “Additional induced private investment”. The timing of these expenditures would be scaled according to the calculated annual rate of reduction in British military spending on the island (“Counter-recession strategy”, 30 Mar 1968; ST 17 Apr 1968). An explanation for how money would be raised for this purpose was also provided, which included a reduction in the government's overseas assets, increased taxation and local loans, and official overseas aid and loan.