Thursday, February 23, 2012

State Capitalism - S'pore, China

Hybrid regime S'pore, Authoritarian regime China & Russia practises State Capitalism. Government linked-companies in S'pore take up around 60% of the economy which is unhealthy like that of China's. If China risks economic crisis if no reforms wouldn't it be the same for S'pore as well?

With GLCs dominant at around 60% of the economy, its bidding process tendered out to SMEs are usually if not always awarded out to the lowest bidder as what the 2 chiefs of Civil Defense Force & Central Narcotics corruption case has revealed.

Govt bureaucrats run the GLCs instead of entreprenuers. As such their mentality is dominantly very risk averse to cover their backside in their cushy jobs. How to have innovation with such mindset? How does ex-generals & scholars who are parachuted into GLCs know about starting & running a business from the ground up?

What free market is there in S'pore when Telcos & privatised public transport(again GLCs) are like monopolised cartels? Taking the Telcos as example, isn't it a waste with 3 sets of board of directors, 3 HR depts, 3 investor relations dept etc when all 3 companies are controlled by govt? There's duplication of resources which are a waste in this form of state capitalism.

China's govt state capitalism style is obsessed with high gdp growth to create jobs for their citizens to be employed & happy. S'pore's govt state capitalism is also obsessed with high gdp but this is where it ends. Difference is that S'pore state capitalism is used to create jobs the bulk of which are for foreigners & more & more citizens displaced/underemployed & of course unhappy. See the difference?

The opening of 2 casinos here is a prominent sign of a lack of SMEs(suffocated by GLCs) to drive the economy forward. Unless the current ruling party/regime loses its 2/3 majority in parliament, don't expect any major reforms to avert the coming economic crisis.

China risks economic crisis if no reforms

China could face an economic crisis if it does not implement major reforms in the next 20 years, the Wall Street Journal said on Thursday, citing a report by the World Bank & Chinese government researchers.

The "China 2030" report - to be released on Monday - warns economic growth is at risk of a sharp & sudden slowdown, which could trigger a severe downturn in the world's second-largest economy.

The report makes a number of recommendations for restructuring China's economic growth model, including scaling back its vast & powerful state-owned enterprises & making them operate more like commercial firms.

It also urges Beijing to overhaul local government finances & promote competition & entrepreneurship, the newspaper said, citing half a dozen people involved in preparing the document.

The report, to be presented by World Bank President Robert Zoellick at a conference in Beijing, is aimed at influencing the next generation of leaders in China, who will begin to take power at the end of this year during a major transition, the paper said.

"The report lays out the recommendations for a development growth path for the medium term, helping China make the transition to become a high income society," Zoellick said earlier this week in a statement announcing his visit.

The report, prepared by the World Bank & the Development Research Centre under the State Council, China's cabinet, has been criticised by the Chinese regulator of state-owned companies, which is expected to try to block its adoption, the paper said.

Beijing prohibits or restricts foreign investment in strategic sectors such as auto, energy, finance, banking & telecommunications, drawing criticism from overseas competitors over the lack of market access & unfair treatment.

Domestically, privately owned firms often complain about the lack of competition & the fact they cannot access financing from commercial banks, which prefer to lend money to other major state-owned enterprises.

Chinese leaders frequently talk about the need to reform the country's economic model, partly by reducing its heavy reliance on exports & increasing domestic consumption.

But significant reforms have been slow as stability-obsessed leaders try to maintain rapid economic growth seen as essential to create enough jobs for the country's 1.3 billion people & keep a lid on unrest.

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