Singapore Deputy PM seeks urgent reforms to ensure demographic dividend does not turn into crisis

India’s labour laws are anti-employment, Singapore’s Deputy Prime Minister Tharman Shanmugaratnam said on Saturday

Terming jobs as the country’s biggest challenge that must be addressed urgently in order to avert a demographic crisis, he suggested giving real authority to cities and states to ‘move the boundaries’ of contentious labour and land legislations.

‘Biggest challenge’

“India’s biggest challenge is jobs,” he said. The country has lost a lot of time because you have legislation that is really anti-employment, an education system that has not prepared people for the needs of the modern economy – (both at the school and tertiary levels) – and it’s now a race against technology, which we all face,” Mr. Shanmugaratnam said.

He was delivering the inaugural address at Delhi Economics Conclave.

Warning that the window of opportunity for labour-intensive economic activity is narrowing, he said the pace of adoption of artificial intelligence and robots in the manufacturing process will accelerate and robots are already being deployed in Indian speciality chemicals and automobile industries.

“Robots may cost more capital now, but in return, you get high quality and productivity as unfortunately, robots don’t take breaks, and [there is] high certainty of future costs. And they are getting cheaper so this is a real challenge,” he said.

While lauding the country’s recent efforts in skill development the Singapore Deputy Prime Minister said the link with jobs and placements is weak and the tertiary education system is divorced from market realities.

“Academic training is useful, but skills give jobs. India faces this more acutely, because you have a larger discord between education and the markets,” he commented while calling for measured and concerted efforts to ensure that the country’s demographic dividend of a young workforce doesn’t become a demographic crisis in the years to come.

Level playing field

“Whether it is services or manufacturing, India has a problem of far too many small scale enterprises unable to move up to a higher level,” Mr. Shanmugaratnam said and called for special efforts from the government to ensure that there is a level playing field for businesses and incumbent players aren’t protected.

“The firms that already have the lead have a way of capturing regulation so that their lead is preserved and new entrants are deterred. The task of government – local and federal – has to be level the playing field,” he said, adding that this could, in fact, be the biggest benefit of the Goods and Services Tax (GST) regime over time as producers in different States can now compete more effectively.

While lauding India’s infrastructure building efforts and macro-economic stability in recent years, the Singapore Deputy Prime Minister said there is still a long way to go and pointed out that the gap between laggard and advanced States, for instance, was becoming wider.

“This is the failure of domestic and local strategies and it can be fixed,” he said, after referring to a global trend where people’s trust in domestic institutions, be it governments, Parliament or media is eroding faster than their trust in global institutions.

The fact that India is now the leader among large countries in universal digital identification and providing a unified payment interface is really impressive. You have leapfrogged the rest of the world,” Mr.Shanmugaratnam said.

“The intangible change in the culture and building political support for good economics is the main lesson from India in recent years. The job’s not done yet, but it’s impressive how the culture is changing, how corruption and invisible money is being tackled,” he said.

Reacting to a query on reports about Singapore proposing restrictions on movement of temporary workers, he saidthe country’s deputy PM said they were the strongest proponents of liberalisation for goods and services but movement of people across boundaries was not a services trade issue per se.

“Let’s take a step back and understand – we are very clear of the benefits that come to society from free trade of goods and services. There are also benefits from movement of people and capital, especially long term capital. The movement of people has to operate within some framework of constraints – this is a reality not just because of Trump in the U.S. or Brexit in the U.K., but all over the world,” he said.

“When you talk of a society like Singapore, which is small geographically, with 5.5 million people of whom 3.5 million are locals and the rest are already foreigners… it would be mindless to have an open border without any policy framework to restrain the flow of people into your job market. It would be wrong politics and wrong economics as well. Singapore will never be Dubai, let me put it this way,” he remarked.