Growth years (1981-1990): A recession, political changes and drive for excellence

The stock market hit a low of 600 points in March 1986. Singapore encountered its first post-independence recession in 1985 after years of rapid growth. PHOTO: ST FILE
In the 1980s, the Town Councils Act was tabled to provide MPs with autonomy over their town councils. PHOTO: ST FILE

A crippling recession in the 1980s resulted in the economic playbook of the earlier years being discarded. Terms such as adaptability and flexibility became the order of the day.

The year was 1985, when Singapore encountered its first post-independence recession after years of rapid growth.

It was partly caused by a high wage policy introduced in the late 1970s which, with an overvalued currency, snipped away at Singapore's international competitiveness.

The recession was described by fourth president Wee Kim Wee as a "watershed in our economic development". He said in his address as the sixth Parliament reopened after a mid-term break in 1986: "It marks the end of an era of high growth and relatively easy progress. It shows the uncertainties and dangers of an economy that is overwhelmingly dependent on international trade."

But even as Singapore recovered from the economic doldrums, it was already harbouring ambitions towards becoming a "centre of excellence" in education and health.


By 1981, Dr Benjamin Sheares, Singapore's second president, raised a matter that today's readers are coming to grips with as well - the spectre of slower growth and some unemployment.

To weather this, productivity had to be increased, and waste and inefficiency reduced. "Our workers must be trained, and retrained, to higher levels of skills and professionalism to prepare them for the jobs that will see us through the 1980s," said Dr Sheares. "To survive, we have to upgrade our economic activities."

But this was not enough to stave off recession in 1985, which led to more painful measures to cut business costs and restore competitiveness, such as slashing employers' Central Provident Fund contribution rates from 25 per cent to 10 per cent, imposing a two-year wage restraint and reforming wage structures.

"But the recession cannot be solved by the Government alone. These measures will only work if we have the full support of the people," said Mr Wee. "This means that we must all hold, and if need be reduce, our standard of living. For the first time in many years, things will not be better this year than last."

This was necessary to keep unemployment down and put Singapore on the right track when conditions pick up, he said.

Mr Wee called on Singapore to adapt, noting that other "Asian Tiger" economies had already made adjustments: Hong Kong with a free market economy, and Taiwan and South Korea with new export and investment strategies.

Weaker societies had encountered strife during trying times, and Mr Wee called on Singaporeans to "hold together, renew our common bonds, and emerge tested, tempered and strengthened".

The way forward, he said, was to ensure that business conditions were ripe for companies to profit if they set up shop here.

"If new companies cannot make profits in Singapore, or if they cannot make larger profits here than elsewhere, they will simply not come," he said. "Jobs will be lost, the economy will shrink and Singaporeans will suffer."

Singapore also needed to establish itself as being able to make products of high quality, and embrace "excellence (as) our way of life".

Mr Wee called on the private sector to take the lead. While the Government could provide the preconditions of growth, it would be up to the "enterprise and initiative of our people" to spot new openings or opportunities, he said.

"The Government, no matter how efficient, cannot move as fast as can an individual or a company," he added. This would prove to be crucial to Singapore becoming an international business centre.


The 1980s was when Singapore saw a slew of key political changes.

Among other things, the Town Councils Act was tabled to provide MPs with autonomy over their town councils, and the Group Representation Constituency (GRC) system was introduced, while the Elected Presidency system was first mooted.

Devolving control of town councils on MPs and community leaders, said Singapore's third president, Mr Devan Nair, in 1985, should lead to "speedier response to local problems and needs".

He said: "Shared responsibility is good for neighbourliness and community solidarity. Each new town can develop its own distinctive character."

Meanwhile, the Elected Presidency system, which was eventually written into law in 1991, was introduced to add a further check and balance to the system.

Mr Wee noted in 1989 that the Government had large reserves and savings, which might be used up quietly if left to an unscrupulous government. With an elected president, the Government must first seek his agreement before spending any reserves it did not itself earn, and get his agreement before making key public service appointments.

"Such a safeguard will minimise the damage a dishonest, opportunistic or profligate government can do, and create a two-key system to protect our national reserves and the integrity of our public service," he said.

Mr Wee also reflected on the 1988 General Election, the first to introduce the GRC system to "prevent politics in Singapore from polarising along racial lines". Under this system, at least one minority candidate must be fielded in each GRC team. The results of the election showed "clearly that the change was both necessary and workable", said Mr Wee. "The danger of minority communities being under-represented in Parliament is a real one."


President Devan Nair, in his head of state address before the financial crisis of 1985 struck, focused on a series of social goals.

He pledged that the Government would pay particular attention to those finding it difficult to keep up with the pace of change, in particular the 15 to 20 per cent in the lower-income group and the aged.

Another goal was to achieve 80 per cent home ownership by 1989. And for those who needed help to buy their flats, the Government would "offer self-help schemes which, with an extra effort in thrift and self-discipline, can enable them to own their homes".

More well-run nurseries and playschools would also be built, while senior citizens would get better facilities to keep them socially active and healthy, he said.

He noted unequal rates of progress among different communities, singling out the Malay community. Mr Wee said the Government must help all low-income families regardless of race, but would provide special education and training opportunities for Malays. "But such a policy can only yield results if Malay Singaporeans resolve to make the hard choices and overcome the basic problems themselves."

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A version of this article appeared in the print edition of The Sunday Times on January 10, 2016, with the headline Growth years (1981-1990): A recession, political changes and drive for excellence. Subscribe