S'pore may win by a nose in M'sia GDP photo finish

Singapore will win, not now, then next year. But nothing is for free. It has paid a price for this. Published November 12, 2010

S'pore may win by a nose in M'sia GDP photo finish Its economy looks set to surpass Malaysia's US$205b (SINGAPORE) The economy of Singapore is poised to go past Malaysia's in absolute terms. Singapore's gross domestic product (GDP) will cap its fastest annual growth this year since independence, rising as much as 15 per cent to about US$210 billion, while the economy of Malaysia, a country 478 times its size, will expand 7 per cent to US$205 billion, government forecasts show. The nations are scheduled to release their 2010 data by February. The island that former economic adviser Albert Winsemius once said was considered a 'poor little market in a dark corner of Asia' is now ranked by the World Bank as the easiest place to do business, has the world's second-busiest container port, and boasts the highest proportion of millionaire households, according to the Boston Consulting Group. 'Singapore kept on moving to the next level as the world economy evolved and adjusted to market demands and investors' interests,' said Lee Hock Guan, senior fellow at the Singapore-based Institute of Southeast Asian Studies. 'Malaysia was struck by the curse of resource-rich countries: It didn't optimise its human capital.' Singapore's economy has grown 189-fold since independence in 1965, helping boost GDP per capita to US$36,537 last year from US$512. Malaysia's economy expanded at one-third the pace during the same period and had a GDP per capita of US$6,975 in 2009, up from US$335 in 1965. Malaysia's growth fell to an average 4.7 per cent a year in the past decade, from 7.2 per cent in the 1990s, when former prime minister Mahathir Mohamad wooed overseas manufacturers, built highways, and erected the world's tallest twin towers. 'Development is like a marathon and all policies geared toward it must be sustainable and continuous,' said Thomas Lam, chief economist at OSK- DMG, a venture between Malaysian securities firm OSK Holdings Bhd and Deutsche Bank AG. 'Malaysia runs the marathon like a 100 meter event, so you see the initial spurt but not continuous progress in the race.' Much effort has gone into Singapore's growth. 'Economic development does not occur naturally,' said Ravi Menon, a senior official at Singapore's Ministry of Trade and Industry. 'This is where free marketers are disenchanted with Singapore. The government has never hesitated from guiding the development process or intervening in markets where it believes such intervention will lead to superior outcomes.' The government invested about $500 million in its Biopolis biomedical research hub after attracting drugmakers including Pfizer Inc and Novartis AG. It cut corporate tax rates by nine percentage points since 2000 to 17 per cent, compared with 25 per cent in Malaysia. The Malaysian government unveiled an economic transformation programme in September aimed at attracting investment, including US$444 billion of programmes this decade ranging from mass rail to nuclear power, led by private and government-linked companies. Singapore beat 182 economies to take first place in the World Bank's annual ranking of business conditions, which looks at property rights, taxes, access to credit, labour laws, and regulations on customs and licenses. Malaysia climbed two steps to 21st, according to the Nov 4 report. -- Bloomberg