Confronted with its biggest economic challenge in almost four decades, Singapore has spelled out a 15-year master plan aimed at preparing the island for what the government sees as a tough road ahead.
The Economic Restructuring Committee's (ERC) 199-page blueprint stressed the need for the city-state to keep business costs down, strengthen links with regional economies and diversify into fields such as biomedical sciences.
Singaporeans enjoy one of the highest living standards in Asia but the economy, traditionally dependent on export manufacturing and dominated by government-linked companies, is facing increased competition now that it has graduated to a mature phase.
Layoffs are mounting in a society that used to take virtually full employment for granted, and many jobs are unlikely to come back because other countries can do the same thing at a far lower cost.
"Realising the fact that the economy is maturing is one thing. Taking the necessary step is another," said Nizam Idris, an economist from IDEAglobal research house who felt "the ERC may have slightly fallen short."
Idris said the ERC could have emphasised more on the need for the government to play a less active role in the economy.
"Basic economics teach us that privatization will actually improve efficiency," said Idris.
The government has an extensive presence in the economy by holding equity stakes in several of the island's biggest companies, from utilities to media and telecommunications.
In the ERC blueprint announced last week, Singaporeans were also told to brace for an average three to five percent annual growth rate in the next decade, which would be much slower than the average 7.3 percent expansion they had enjoyed since 1985.
"Singapore is going through a major economic transition, possibly the most far-reaching since independence in 1965," said Deputy Prime Minister Lee Hsien Loong, who headed the ERC.
"The economy is maturing. The environment has changed radically. Globalization, the emergence of China and the problems in Southeast Asia all affect us," he said.
Singapore has yet to fully recover from its worst recession when gross domestic product shrank two percent in 2001. The pain was compounded as regional economies benefitting from lower costs emerged to challenge the island, particularly in the manufacturing arena.
"The competition is much more at our doorstep, and we have to be very conscious of it in all our policies," Lee said.
"We have endeavoured to strike a balance between boldness and realism, between what is theoretically ideal and what is practically feasible," he said.
One of the key recommendations aimed at containing cost is to defer for two years any restoration of employers' contributions to the national pension scheme, which is now pegged at 16 percent of employee salaries.
Employers used to contribute 20 percent but that was reduced when the Asian financial crisis struck in 1997. The employee share remains at 20 percent.
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