After enjoying two decades of post-independence economic boom, Singapore was jolted by its first recession in 1985.[1] The economy was affected by both external and internal factors, including falling oil prices, a slump in global trade as well as rising labour costs in Singapore.[2] Early warning signs of an impending recession were already seen in the beginning of 1984, but that did not prevent the crisis from “occurring so rapidly and with so little apparent warning”.[3] During the recession, the media carried gloomy reports of businesses going bankrupt, workers’ retrenchment and the high unemployment rate. However, the incident that caused the greatest impact to the economy was the collapse of Pan-Electric Industries Ltd. in November 1985, which resulted in the suspension of trading activities and closure of both the Singapore and Kuala Lumpur stock exchanges from 2 to 4 December 1985.[4]
The severity of the recession prompted the government to appoint an Economic Committee on 8 March 1985 [5] to review the “economic restructuring policy and the performance of the economy”.[6] The committee, headed by then Minister of State for Defence and Trade and Industry Lee Hsien Loong, was tasked to analyse factors leading to the economic slump and to propose policy changes to reclaim Singapore’s competitive edge.[7] The committee held its first meeting on 29 April 1985[8] and released its full report in February the following year (also see footnote 1).[9] The recommendations proposed by the committee to make changes to the Central Provident Fund (CPF) and wage system provoked strong objections as many in the government and bureaucracy had regarded these as “sacred”.[10] The committee also supported the privatisation of state-owned enterprises, which meant scaling back state control of the economy to encourage private sector initiatives.[11]
The Singapore economy made a swift recovery in mid-1986 and proceeded to a “totally uncovenanted boom” in 1987. The recession was the first test for the second- generation leaders led by Goh Chok Tong, who was appointed First Deputy Prime Minister after the 1984 general election.[12]
References
1. Report of the Economic Committee: The Singapore Economy: New Directions [online report] (executive summary, p. 1) (1986, February). Retrieved August 25, 2013, from the Ministry of Trade and Industry website: http://www.mti.gov.sg/ResearchRoom/Documents/app.mti.gov.sg/data/pages/885/doc/econ.pdf
2. Ueda, H. (1995, March). Wage/foreign labour policies and the performance of Singapore's manufacturing in the early 1980s (p. 2). The Bartlett Development Planning Unit Working Paper No. 68. Retrieved August 25, 2013, from University College London (UCL) Faculty of the Built Environment website: http://www.bartlett.ucl.ac.uk/dpu/publications/latest/publications/dpu-working-papers/WP68.pdf; Rigg, J. (1985). Singapore and the recession of 1985. Asian Survey, 28(3), 345–349. Retrieved August 26, 2013, from JSTOR.
3. Rigg, 1985, p. 344.
4. Chan, H. C. (1986, February). Singapore in 1985: Managing political transition and economic recession. Asian Survey (A survey of Asia in 1985, Part II), 26(2), 165–166. Retrieved August 26, 2013, from JSTOR; KL market stunned by the shutdowns. (1985, December 3). The Straits Times, p. 21. Retrieved from NewspaperSG; Arrests start in wake of Singapore’s crash. (1986, February 2). Ocala Star-Banner, p. 11c. Retrieved from Google news: http://news.google.com/newspapers?nid=1356&dat=19860202&id=S6NPAAAAIBAJ&sjid=PgYEAAAAIBAJ&pg=3527,518752
5. Gen Lee to head economic council. (1985, March 9). The Straits Times, p. 17. Retrieved from NewspaperSG.
6. Ueda, Mar 1995, p. 2; Chan, Feb 1986, p. 165.
7. Rigg, 1985, p. 349.
8. Economic Committee holds its first meeting. (1985, April 30). The Straits Times, p. 38. Retrieved from NewspaperSG.
9. Ong. C. C. (1986, February 13). “Like an exercise at Harvard”. The Straits Times, p. 14. Retrieved from NewspaperSG.
10. Rigg, 1985, p. 350.
11. Rigg, 1985, p. 351.
12. Daniel, P. (1988, August 23). How the team of seven got the economy back on track. The Straits Times, p. 20. Retrieved from NewspaperSG.
The information in this article is valid as at 2013 and correct as far as we are able to ascertain from our sources. It is not intended to be an exhaustive or complete history of the subject. Please contact the Library for further reading materials on the topic.