Is it time for Singapore to shed its successful state-driven growth model?

Market forces should shape the next half-century, argues Morgan Stanley.

Singapore's highly successful state-driven growth model is a key factor behind the city-state's unprecedented economic progress in the past fifty years. But as Singapore marks its Golden Jubilee, Morgan Stanley argues that it might be high time to leave this model behind.

"This strategy has worked well in the past. However, we think it is vulnerable to policy groupthink, which could result in wrong bets on sectors, incurring high opportunity costs in terms of the resources used," Morgan Stanley noted.

Instead, Morgan Stanley believes that Singapore should rely on market forces develop a vibrant and competitive private sector.

"Developing a vibrant domestic private sector and relying on market forces to efficiently allocate resources and drive economic and sector development from the bottom-up would act as a nice counterbalance to the state-driven growth model and allow growth risks to be hedged," Morgan Stanley said.

The report highlighted that Singapore should turn to Silicon Valley's thriving startup ecosystem to drive growth for the next 50 years.

"In this context, the case study of Silicon Valley suggests that factors such as a large pool of experienced and diverse talent in a decentralized system, which allows experiences and ideas to combine and recombine in different settings, strong university and industry relations, strong social and professional networks and active angel funding are required elements for a vibrant and competitive private sector to develop," the report stated.