The Rule of Law and Economic Performance – Speech by Jamus Lim

Delivered in Parliament on 4 November 2020

Mr Speaker, my colleagues have discussed, at length, why the experience of many Singaporeans with respect to the justice system may differ from our aspirations for fair and equal access to justice as a society. I wish to take a step back, and ask the question of not so much where some areas within the system appear to fall short, but why we should care about the overall efficaciousness of our judicial system, which goes far beyond the events surrounding Ms Parti Liyani’s case.

As I will share with this House, the concerns my colleagues have raised aren’t just a matter for jurisprudence. It is also a bread-and-butter issue that has implications for business competitiveness and the economic viability of our nation. Over the past decade, there has been an erosion in the rule of law worldwide, for which Singapore has not been exempt. Because the success of the rule of law relies on the confidence of those who participate in it, it is critical that our judicial system does not merely provide for its reliability, but actually be perceived to be so.

A tale of one city

Let me begin with a story of a fence. This fence divides the city of Nogales, in the state of Sonora, from the city of Nogales, in the state of Arizona. Up till the First World War, Nogales was essentially one city. In 1918, armed conflict between the army and militia led to the construction of the first permanent border.

Despite the shared history, culture, and geography, the fate of those who lived on either side of the Nogales fence could not be more different. In Arizona, household incomes amount to about $30,000 a year, most teenagers are in school, and life expectancy is relatively high by global standards. Residents are able to go about their daily activities with little fear for their lives and property. Just a few feet away in Sonora, however, most teenagers do not complete high school, and most adults do not possess a high school certificate. Health conditions are poor, with mothers worrying about the survival of their infants. And in contrast to their neighbors in the north, the rule of law is weak, with endemic crime, and significant risks involved in starting and running businesses.

This story, retold by economist Daron Acemoglu and political scientist James Robinson in their book Why Nations Fail, underscores the importance of legal- political institutions, such as the rule of law, in shaping economic outcomes. In particular, the authors argue that when institutions are inclusive—when decisionmaking is shared by many, and the system is subject to robust checks-and- balances—human flourishing is allowed the room to succeed, thereby bringing about progress and prosperity for nations that subscribe to such quality institutions.

Global erosion in the rule of law

Singapore has, historically, distinguished itself by being an island—literally and figuratively—of institutional stability in a sea of tumultuous institutional change. As a Crown Colony, we inherited a sophisticated legal system, and chose to adhere to this conception of the rule of law following independence. This choice has generally served as well, both from the perspective of natural justice, and because the rule of law has been an important cornerstone that has underpinned our business and commercial activities.

We must guard against taking this inheritance for granted. Globally, the rule of rule is in retreat. According to the World Justice Project, adherence to the rule of law has fallen for the third consecutive year since 2017. 1 The World Bank’s Governance Indicators documents an erosion in the rule of law, since 1996, for developed and developing countries alike.2 Countries in Central Europe have experienced particularly marked declines in their adherence to the rule of law, and closer to our neighborhood, a number of nations in ASEAN have also experienced reductions.

Singapore has, likewise, seen a decline in indicators of the rule of law. The WJP’s assessments of the quality of civil and criminal justice fell to the lowest it has ever been since scores were first compiled in 2012. Our judicial independence, as adjudged by the World Economic Forum, continues a slide from its peak in 2008.3

The rule of law succeeds when people believe that it works

Mr Speaker, although documenting the rollback in such quantitative indicators of the rule of law may seem like an abstract exercise, they are in fact the lived reality for many. Indeed, these different measures of the rule of law are often constructed from the reported perceptions of the public—and society at large—of the quality of the day-to- day interactions of citizens with the legal system: their sense of whether contracts are enforced, whether property rights are respected, and whether the police and judges are trustworthy.

This is why careful reviews, such as what this motion is calling for, are so important: because they can restore the confidence of the public in the inherent fairness of the legal process. The objective is to ensure that there is consistency between the intent of existing laws on the books—what is sometimes referred to as the de jure system—and the perceptions of how the law is practiced: the de facto system. If the gap in perceptions becomes too large, the rule of law risks becoming disconnected and hence discounted by the public, to the detriment of much more than just justice per se.

Economic performance relies on the rule of law

When the rule of law is compromised, economic performance suffers. There is abundant empirical evidence that asserts this relationship. Deteriorations in the rule of law affect, in particular, domestic4 as well as foreign5 investment activity, as well as productivity6 and growth.7 Put simply, when people feel insecure about the rule of law, they invest less. They produce less. And even when they work and invest, they are less productive.

Mr Speaker, most of us are keenly aware of the enormous success of South Korea over the past half-century. We drive Kias and Hyundais, we watch movies on LG and Samsung TVs and smartphones, and many of us—including my dear mother and sister—go crazy over K-Pop and Korean TV dramas. What many may be less familiar with is that, at the time of partition in 1945, it was North Korea that was the more prosperous half, the more industrialized part of the peninsula. Yet today, the city of Seoul itself produces more than 10 times the economic product of the entire economy of North Korea.

Now there are, of course, many reasons for the ultimate difference in economic outcomes of the two regions. But one major factor was that the North chose to pursue an institutional path that failed to respect the importance of the rule of law, while the South continued to do so.

So when we flag concerns with perceptions of fairness, access, and independence in Singapore’s justice system, we are not merely talking about alleged judicial missteps in the Parti Liyani case. Or about the other cases of potential lapses in the fairness of the justice system, which my colleagues have mentioned. It is also about the divergent fortunes of the Nogales and Koreas of the world. And when we underscore the importance of the rule of law, we are not only trafficking in the realm of our shared notions of justice, but in our common economic future, as well.

With that parting thought, I assert my support for the motion.