Monthly Archives: February 2011
Reform Party Response To The Singapore Budget,
Written by Kenneth Jeyaretnam
Friday, 26 February 2010 01:10
The Reform Party has already set out its response to the report by the Economic Strategies Committee in its press release dated 3rd February 2010. We said there that “there must be serious doubts about the government’s ability to deliver given that the track record in this regard (of raising productivity) of the last ten years has been so poor and whether anything more than lip service is being paid to weaning the economy off its dependence on cheap foreign labour.” The 2010 Budget has done nothing to allay our doubts. In fact it has increased them. The Honourable Minister talks about the need to raise our productivity growth rate to 2 to 3% per annum from its current level of less than 1% p.a. However, given that productivity fell by 1.1% in 2007, by 7.8% in 2008 and by 4.7% in 2009 (for a cumulative fall of 14%), we require at least six years of productivity growth at 2% p.a. to get back to where we were in 2006. In the meantime most of the advanced economies continued to perform better than Singapore. This was particularly the case in the US where productivity has risen by 5% over the last four quarters. In manufacturing alone our productivity grew by an average of 0.7% p.a. over the period 2000-08 whereas South Korea, Taiwan, Sweden and the US managed 7.4%, 5.2%, 4.8% and 4.6% respectively over the same period. Out of a group of 17 economies we were second from bottom. So even if we manage to double our productivity growth rate over the longer term we will still be unlikely to close the gap that has grown much wider over the last ten years. We will undoubtedly see a jump in the productivity growth rate in the short-term provided our output recovers rapidly on the back of global economic growth. That may allow the PAP to proclaim the short-term success of their strategy on the basis of what would have occurred anyway. However once the global economy slows down or goes into renewed recession (unlikely but still possible) productivity growth is likely to stagnate once more.
The same faulty reasoning is evidenced in the Honourable Minister’s assertion that the foreign worker policy raised wages for Singaporeans. He justifies this by pointing to a rise in median income per household member, after adjusting for inflation, of 20% in the period 2005-2008. However, using the government’s figures, the rise over the whole decade appears to have been more like 18% because median incomes fell in 2008 and 2009. The Minister has claimed that this demonstrates the success of the government’s policies. However this could have occurred without any rise in the living standards of the median Singaporean citizen. A plausible explanation is as follows. Firstly though he omits to tell us, he probably means residents (which include PRs) and not just citizens when he talks about Singaporean households. Over the past decade the resident population grew by 15% while the resident labour force grew by approximately 25%. This was undoubtedly due to the surge in new citizens and PRs as a result of the government’s liberal immigration policies. The majority of these new residents did not have dependents (hence the much faster rise in the resident labour force than the resident population) and all of them would have had jobs so the proportion of working adults in the average resident household would have risen. As a result we would have seen an increase in real median income per household member without any real increase in the median incomes of Singaporean citizens who were already here before this period began, i.e., the majority of us. Another reason why the Minister’s figure is misleading is that it excludes households consisting solely of non-working persons over 60. If their incomes fell during this period or their numbers increased as a proportion of total households), due not only to the aging population but also because of the diminished employment opportunities for senior citizens as a result of the government’s open-door foreign worker policy, then excluding this group would distort the figure for median income per household member and make it look better than it really is.
So the Minister has painted an exaggeratedly rosy picture of the government’s failed economic policies of the past decade while at the same time not even beginning to grasp the enormity of the transformation necessary in the economy if Singapore is to prevent the productivity gap with the advanced economies continuing to widen. However the Reform Party has serious doubts as to whether the measures set out in the Budget will have the effect of achieving even an increase in the productivity growth rate that will take us to the bottom end of the range that the other major industrialized economies are achieving. Taking each of the Minister’s major initiatives in turn, our comments are as follows:
Continuing Education and Training
The Reform Party supports substantially increasing the amounts spent on continuing education and training. In fact we have been saying for some time that Singapore invests too little in education and human capital and drawing a direct correlation between rates of productivity growth and amounts invested in public education. It’s no coincidence that Sweden invests nearly 8% of its GDP in education and had one of the highest productivity growth rates. The neglect of investment in our education system and our own workers by this government for an extended period of time is a major factor in our poor productivity record and also the need to import so many foreign graduates and skilled labour. The Reform Party intends to increase substantially the amounts spent on education at all levels and not just on continuing education and training. In any case $500 million p.a. is probably too small an amount given the scale of the productivity problem and the size of Singapore’s GDP. In addition only the sketchiest details are provided as to how this money will be spent. For instance, the maximum grants given under the related Workfare Training Scheme are far too small to realistically cover the cost of retraining older workers.
At the same time the Reform Party would want to make sure that the funds were not wasted as so many other of this government’s schemes seem to have been. For instance why do we need a new National Productivity Council when we already have SPRING? The government’s answer to everything seems to be just to create more bureaucracy at increased cost to the taxpayer.
Productivity and Innovation Credit
While the Reform Party supports in-principle the idea of tax breaks to boost productivity this measure is not targeted enough to achieve the desired effect, while at the same time inviting creative accounting on the part of companies to reclassify expenditures to fall within these categories. The Reform Party would like to see the tax breaks restricted to specifically productivity-boosting investment. We fail to see the benefit from extending the scope of the tax break to other types of investment. We already have one of the lowest corporate tax rates in the world and invest nearly 30% of our GDP (a share that has risen substantially over the last few years) so it is hard to see that more broad-brush tax breaks are the answer. Just as with the Jobs Credit Scheme which was a wasteful and ill-conceived labour subsidy which contributed to the dramatic fall in labour productivity, the Productivity and Innovation Credit is likely to lead to wasteful over investment which will depress profitability, ultimately leading to stagnation as the reliance on exports and investment to drive growth rather than consumption becomes more pronounced.
National Productivity Fund
This is only a fund and not actual spending and represents a commitment of only up to $1 billion for the first five years, or $200 million p.a. As the fund is to be disbursed by the National Productivity Council for specific productivity initiatives the risk must be that it is wasted and not properly accounted for. In the example cited, construction, productivity improvements are much more likely to come about if the supply of cheap labour to the construction industry is reduced. The gradual nature and relatively small size of the increase in foreign worker levies mean that this is unlikely to come about. In fact the cost of foreign workers may not rise if employers have enough bargaining power to ensure that they do not bear the cost of the increase. There may be a role for a National Productivity Fund but the Reform Party believes that it is more likely to lead to the waste of taxpayers’ money and is no substitute for using the price mechanism to achieve economic goals. This is a government that rightly is opposed to the development of a welfare state as far as individuals are concerned but seems always prepared to make an exception for business.
Increase in Foreign Worker Levies
As pointed out above, the increases will be too gradual and of too small size to radically affect the demand for foreign labour. In fact depending on employers’ bargaining power and their ability to turn to cheaper sources of labour, there may not be any rise in the total cost of labour and thus no incentive to raise productivity. This is why the Reform Party has consistently advocated the use of a minimum wage instead which would apply to all workers and thus force employers to cut back on the least productive and low-skilled workers first. It is worrying that the Minister says that the growth target is still 3-5% p.a. when the target for productivity growth is only 2%. Assuming that our domestic workforce (excluding new citizens and PRs) is shrinking, this means that the government still intends to allow the foreign workforce to grow, possibly by considerably in excess of 3% p.a. This is the clearest signal that this Budget does not represent a change in the failed policies of the past that have not benefited the average Singaporean. We will continue to see a rise in the foreign worker population despite the government’s statements to the contrary.
In addition the Reform Party would like the Minister to have provided some estimate of the additional revenue to be raised from the increases. Given that the average foreign worker levy is expected to rise by $100 by 2012, it seems reasonable to expect more than $1 billion p.a. in additional revenue to be raised by 2012. So while it may be true that the government is committed to up to $1.1 billion p.a. in extra spending to boost productivity and encourage innovation the effect of the increased taxes will mean that the Budget is revenue-neutral and possibly contractionary if spending under the various schemes is less than anticipated.
Growing Globally Competitive Companies
Naturally the Reform Party supports this aim but it is difficult to see how creating another set of new acronyms and promising yet more spending is any different from the numerous other initiatives announced by the government in previous Budgets. The Reform Party believes that it is high time that the plethora of schemes be audited for efficiency and to ensure that they are not just providing jobs for under-employed bureaucrats without any market experience.
The Reform Party is fully supportive of the commitment to increasing R&D and of the National Research Fund. However it would like to see Singapore concentrate on areas such as the commercialization of innovation rather than trying to duplicate what is being done by the big boys-the US, EU, Japan and China. Also this government fails to recognize that the restrictions on freedom of expression as well as the system of rote-based learning have to be changed if Singapore is to become competitive as a “knowledge” economy. This government fails to recognize that those countries which consistently top the charts for innovation are those that also have the highest levels of human freedom as measured by several objective indices, i.e., Finland, Sweden, Denmark, the US, Canada, Japan and the UK. Singapore ranks in the lower half of the table on most of these indices. Is it any accident that South Korea and Taiwan, which have out-performed Singapore by a wide margin on measures of productivity and innovation, also have considerably freer political systems?
Including All Singaporeans in Growth
Despite impressive-sounding phrases about the government’s achievements in this area, this Budget’s initiatives do very little to achieve this objective. The social safety net is very meagre compared with other economies at a similar stage of development yet far from improving our economic performance this has damaged it. Singapore is one of the most unequal societies in the world (a higher Gini coefficient than the US) despite being only a small city. There is increasing evidence that very high levels of income inequality are correlated with undesirable outcomes in terms of a whole range of indicators of a society’s well-being. Whilst we are not in favour of redistributive taxation, these are some of the measures the Reform Party would introduce if elected to power to ensure a more inclusive society:
1) Reduce taxes and fees on the less well-off
2) Introduce a minimum wage
3) Invest in creating a system of basic universal health insurance to replace the inadequate Medisave and Medishield schemes. This government needs to recognize that public health is an investment good rather than a welfare drain. This can be funded by earmarking part of CPF contributions
4) Create a system of limited unemployment insurance to be funded from CPF
5) Introduce a basic old age pension again to be funded from CPF contributions
6) Allow individuals to decide how much they wanted to put into CPF once the above three objectives had been met.
7) Introduce universal, free and compulsory education from pre-school to secondary level
8) Expand tertiary enrollment substantially and provide assistance for people at all stages of working life to complete degrees or further education as part of an expansion of the Continuing Education and Training Initiative announced in the Budget
9) Privatize Temasek and GIC and distribute equity to Singaporean citizens
10) Dismantle the GLC structure and adopt a more pro-active competition policy
11) Release more land for low-cost housing and inject more competition into the low-cost house building process by allowing private sector to compete with HDB
12) Ensure that NS burden was fairly shared by new citizens and PRs
13) Adopt a more rational immigration policy where the growth in the labour force is driven by genuine skill shortages rather than by a desire simply to expand the size of the economy
It is difficult to follow the government’s reasoning here or to obtain any kind of clarity. The Minister talks about the basic deficit (the balance of Operating Revenues and Expenditures) being 2.6% of GDP. However, after the Net Investments Return Contribution and before top-ups to trust and endowment funds, this is reduced and becomes a surplus of 0.2% of GDP. There is no reason in economic terms not to include the whole of the income from our investments, rather than 50% and in that case we are running a considerable surplus of around 3% of GDP. Also top-ups to trust funds does not represent actual spending so has no effect on the government’s overall fiscal position. The Reform Party would have liked to see further tax cuts or increased spending of at least 3% of GDP to advance the objectives above and to stimulate our economy in a weak global economic environment.
Despite acknowledging what the Reform Party has been pointing out for some time, the government has set undemanding targets for productivity growth that are likely to be met anyway as the economy recovers from recession. Singapore is in danger of slipping further behind the advanced economies with all the consequences this entails for real incomes. Yet the Budget fails to address this and instead we get another round of wasteful corporate subsidies and tax breaks rather than targeted incentives to raise productivity. The government has ducked the opportunity to introduce a minimum wage as a means of forcing business to use labour more productively and instead opted for a relatively painless rise in foreign worker levies. These are not likely to have much effect and may even be absorbed by the foreign workers themselves. The Reform Party supports the additional amounts allocated to Continuing Education and Training and to boost public R&D. However this can only be part of a big boost in investment in education which we have called for for some time. While the government pays lip service to building a more inclusive society, this is unlikely to happen until they adopt the Reform Party policies outlined above. Only by investing more in our own people instead of allowing easy recourse to cheap foreign labour are we likely to get a sustained jump in productivity growth.
Released by Kenneth Jeyaretnam on behalf of the Reform Party, February 25th 2010
Today the Department of Statistics issued a press release* stating that the median monthly income from work among resident households had increased by 3.1% in 2010. They state the real increase as being 0.3%. Similarly median monthly income from work for employed households was reported as having risen by 5.7% in nominal terms and by 2.8% in real terms.
I would like to point out that the Consumer Price Index (CPI) was 4.6% higher in December 2010 compared with December 2009 and that if this figure is used median monthly real income for all resident households actually FELL by 1.5% instead of rising as claimed. Also median income for employed households only rose some 1% in real terms instead of 2.8% as claimed.
In my article on inflation I pointed out that the CPI for average and lower income households may diverge considerably because of the greater proportion of the budgets of lower income groups taken up by food, transport and housing. In Singapore’s case the high level of income inequality means that average income is considerably higher than median income and thus the CPI may be failing to track the real erosion in their purchasing power.
So median real incomes for resident households actually fell during a year in which Singapore enjoyed record-breaking growth of 14.7%.
Two hundred years ago already an economist named David Ricardo ** produced a theory where he wrote about how increasing population pressure coupled with lack of technical progress in agriculture would lead to the increasing transfer of wealth to the owners of fixed factors of production, in particular land. This he warned would be at the expense of those who worked on the land who would suffer growing impoverishment. His theory gained much credit as indeed this turned out to be the situation in China and India and elsewhere for several centuries before industrialisation and land reform.
This government’s policies seem to be aimed at recreating the conditions and events that prompted Ricardo’s theory. Are we in fact living through some form of Ricardian experiment in modern day Singapore. We already have the increasing population pressure he spoke of and the lack of technical progress in agriculture is, in modern terms, our poor productivity. The only noticeable difference is that the principal landlord is the government.
These policies need to be reversed because they are clearly not in the interests of most Singaporeans
A mind in chaos and the power of love
Raymond Anthony Fernando -Model Caregiver 2007 and Mental Health Champion 2010 shares his true story about his wife’s battle with schizophrenia and depression and arthritis
“Twenty years from now you will be more disappointed by the things you didn’t do than by the ones you did do. So throw off the bowlines. Sail away from the safe harbour. Catch the trade winds in your sails. Explore. Dream. Discover.”
– Mark Twain –
The captioned words above of Mark Twain had long ago set me thinking as to whether I should take the road less travelled and become a voice for the thousands out there who are struggling with the stresses of life. I brushed away this thought, only to see it resurrected again during my journey as a caregiver to my wife, Doris Lau Siew Lang who has to struggle with schizophrenia and depression, amongst other health ailments.
My intention in raising the plight of the mentally ill and their caregivers over the last six years in the media was to seek understanding and support from the Government and society as a whole. I have also made some suggestions to improve our mental health care and I am encouraged that some progress has been made. However, we still have a long way to go before as far as mental health is concerned.
Many people in society, even educated ones, are still indifferent to the mentally ill. A large number of people choose to remain indifferent because of fear. Their fear and lack of understanding of mental illness often leave the afflicted shunned and discriminated against. This fear, when left unchecked, will continue to obstruct moves towards a more compassionate society, in which we care more humanely for the mentally ill within our community.
Though the story of my life with Doris is a touching one, caregivers do not need sympathy. What they need is support and understanding
Some data on mental illness. Worldwide, an estimated 800,000 sufferers of mental illness kill themselves every year. Another startling revelation: worldwide, mental illness strikes one in four people, and two-thirds go without treatment.
In Singapore, more people die from suicide than in road accidents. Of the more than 1,700 suicides between 2000 and 2004 (an average of 340 a year), up to seven in ten victims had some form of mental illness. Earlier studies indicate that one in six people suffer from some form of mental illness.
What is schizophrenia? Schizophrenia is one of the most distressing mental disorders. The illness first struck Doris at the tender age of 17. Today, my wife has to cope with several other chronic illnesses – severe arthritis that leaves her mobility impaired, diabetes, high cholesterol, incontinence and stomach problems. Managing Doris’ medication and taking her to see several doctors can be very stressful. She takes 43 tablets a day- 21 of these tablets relate to the control and treatment of the schizophrenia. During our 37 years union, my wife has suffered 11 relapses of her schizophrenia, and the price is just too high- financial, physical and emotional.
Schizophrenia alters the way people think and feel, so that perceptions may be changed and thinking can be disturbed. This is very disabling for them and very distressing for their families, who often become the primary caregivers.
One of the cruellest aspects of the disease is that the sufferers so easily alienate those closest to them before anyone knows that they are ill. It effectively robs them of the love and support that are vital in dealing with the devastation wrought by mental illness.
Additional Pain and misery brought upon by physical ailments. Even though Doris is currently coping well with her mental illness and many others can also be helped to control the condition with the right support, a relapse of her schizophrenia is always possible. It’s like walking in a mine field – you never know when the bomb will explode! This is because of her struggles with arthritis, which often leave her in severe pain and misery.
People with mental illness can relapse if a severe physical illness is not properly managed. Doris worries a great deal that one day she might not be able to walk. I have to constantly assure her that despite all her ailments, I will continue to care and love her to my last dying breath.
Caregiver strain and burnout. The strain of looking after my wife for more than three decades is badly affecting my own long term health I am experiencing nerve and eye problems. I worry a great deal. If my health suffers, who is going to look after my beloved wife, and I certainly do not want her to end up in a nursing home? This is why it is imperative for Government-led support for the mentally ill and their caregivers. I have suffered burnout countless times. The reality: When you are looking after a family member with mental illness, you are all alone in this world. Sitting in support groups has also made me realise that there are many caregivers who are suffering in silence. Some caregivers are looking after more than one person suffering from mental illness. This is the main reason why I have been pleading for support for caregivers. Many a time, the focus is on helping psychiatric patients and the caregivers are completely forgotten. When caregivers of the mentally ill do not get the vital structural support which they so badly need, they too can develop mental illness. It happened to me.
In 1995, stressed out by family life and work, I attempted suicide. I was fortunate to have been saved. But just imagine what would have happened to Doris if I had lost my life.
Stress on marriages. Often marriages are put to the test when couples are confronted with financial problems or if a spouse is stricken with chronic illnesses. Divorce cases are going up In Singapore and are expected to rise as the stresses of life find people simply giving up. Many couples don’t have the resources physically, emotionally or financially give their troubled marriages as fighting chance. I have seen the rewards of sticking by my wife through thick and thin. Strange as it may seem, I have grown to love Doris more and more as I see her suffer and struggle with so many illnesses.
Embracing hope. Despite facing adversities, I continuously look out for new directions and opportunities in my life and that of my beloved Doris so that I will have the financial means to support my wife, and for her to break free from schizophrenia and depression which has ravaged more than half of her life.
I hope that our love story will inspire, motivate and encourage caregivers not to give up in caring for their own stricken family members.
I am a regular contributor to the forum page in the newspapers and I have been putting forward informed proposals for improving the mental health care system in Singapore. To-date, I have written 102 letters to the press on mental illness and other social issues. In addition to the obstacles and hardships I have personally experienced in caring for my wife I have also personally come across cases where families live in dire straits and read of others in the media. The culmination was that I felt a calling to speak out on issues that may improve their well-being. All these efforts, I hope, will translate into giving our marginalised communities the support, which they are in dire and urgent need of. I hope in the future others will not feel as helpless as I do when I see Doris in pain – both physically and mentally.
Certainly, our journey will definitely be made much easier if Singapore has a good caregiver structural support system in place. If we aim to be the leading mental health care system in Asia by 2012, then we must also have this good caregiver support system in place. This is an area which I hope the Government will give more attention to.
Even though I had to give up my job ten years ago to care full-time for my wife I did not allow such circumstances to dictate my life because I fervently believe that, “Sometimes something good can come out of something bad.”
In 2004, I managed to bounce back, and decided to write about my wife’s struggle with schizophrenia in a novel entitled, “Loving a schizophrenic”. This is a true story written by me about my wife who suffers from depression and Schizophrenia. (The names have been changed to protect the characters in the story from prejudice and discrimination). A heart-warming story of the healing power of love, this book chronicles the trials and tribulations of our courtship and 30-year marriage. It also provides an insightful peek into caring for a loved one stricken with mental illness. This is the first time that a caregiver in Singapore has written such a book and it is intended to raise awareness of mental illness.
This book eventually went on to become a best-seller and moved hundreds of readers, including those from overseas.
Later, I went onto author ten other books. Then another “window” was opened. With much emotional support and love Doris, has been helped by me to become an author herself of not one, but five successful books. This is truly a remarkable achievement for someone suffering from a serious mental disorder.
Readers who wish to purchase this book and help me find the means to support my wife and I, can do so via my blog spot, see below, or at the Reform Party Open House and other events. The book costs $15.
Charting new directions
This novel was the turning point for me. From here, I went on to chart new directions in life.
I have counselled troubled youths and adults on FACEBOOK and even invited caregivers and patients into our home to encourage them to go for treatment by using my own wife’s coping skills to motivate them.
To give people who face challenges in life, hope, I give motivational talks all over Singapore encouraging my audience to walk the journey if and when they are confronted with difficulties. I would like to reach out to the heartlands where many cases of suicide and persons suffering from mental illnesses are troubling.
As a further means to encourage people to stay resilient and happy despite facing adversities, I have shared our life story on national television 6 times, 3 times on radio and in many occasions in the press.
My wish list
I hope that my plight, as with journey of other patients and their caregivers will help bring about more support for us, and here’s part of my wish list:
( a ) Raise funds for the mentally ill on a national level
We must understand that those with mental illness and their caregivers face great challenges: stigma, financial and social support, employability, housing difficulties, crisis intervention and high rate of relapses.
This is why I have been pleading, through the media, for the Government to raise funds for the mentally ill and their caregivers on a national level. If we can raise funds on a national level for physical illnesses such as cancer, heart diseases, kidney ailments etc, then why can’t we do so for mental illness, given that it is never easy for persons with mental illness to secure jobs. Caregivers too may have to give up their full-time jobs to look after their stricken ones. This means a loss of income.
(b ) Clause on declaration of mental illness on job application forms
I strongly feel that the clause requiring job seekers to declare that if he/she has/had any mental illness on the job application form is outdated and places those who are seeking treatment for depression and other forms of mental illness, at a clear disadvantage. If we want to give every citizen equal opportunity, then such a clause, inherited from the colonial days, should be removed.
( c) Provide tasty cooked meal delivery service for caregivers and their stricken ones
Until today, I cannot secure some tasty cooked meals for myself and my wife. When I was warded in Tan Tock Seng Hospital (TTSH) a few years ago for a prostrate operation, I was given some delicious nutritious meals at the C class wards. So, nursing homes can learn the skills of the cooks at TTSH. There are also far too many regulations, restrictions and obstacles that make home delivery for cooked meals impossible to secure. If I can get proper cooked meals delivered to us for just 3 times in a week, it will help me to find some respite, given that my wife can no longer do cook and do housework because her arthritis condition puts her at fall risks.
( d ) Transport costs
My wife who is unable to take the MRT or bus depends on travelling by taxis because as I mentioned earlier, she is at fall risks. On the average, her medical appointments, blood tests, X-rays etc., can be as much as 4 times in a single month. Quite a number of her medical appointments fall within the peak hour period- leaving me to incur additional taxi fee payments when the taxi surcharges and ERP charges set in. Given that I do not have a full-time job, I hope that people with disabilities can be exempted from these additional taxi charges. I have made appeals, but my repeated cries for help have been unsuccessful.
As Singapore journeys towards becoming an inclusive society and caring nation, it must bear in mind that there will always be people who may need more help. And undoubtedly, the mentally challenged, the lonely elderly and their families are some of those who need a great deal of help.
Many people have asked me why I willingly married Doris despite knowing of her mental illness. My answer to them is simple: “If schizophrenia and arthritis is part of the life of the woman I love, then it must surely be part of mine too. I do not necessarily like what the illnesses do to her, but it is her that I love. And that has, and will always be, the guiding, motivating force of my life.”
Raymond Anthony Fernando
Raymond’s blog: http://rayhope8.blogspot.com
See above for details on ordering Raymond’s books.
Whilst I attempt in this blog to raise awareness of the state of our rice bowl through economic and political analysis, I have not forgotten the personal stories. These stories form the backbone of the rationale behind everything I do. They demonstrate how easily a porcelain rice bowl can be cracked, robbing our people of their livelihoods, dignity and humanity. But they also demonstrate how far we still have to travel to become an inclusive, tolerant and caring Singapore.
I call this section, “stories from the stairwell” because of the impact that the people I meet on my grass-roots outreach activity has had on me. I conduct outreach twice a week, door to door, stairwell to stairwell and have been doing this consistently for nearly two years now. Additionally most Sundays I go to Food Centres where I meet hundreds, if not thousands, of people at one time. When time permits we sit down with them and hear their stories too.
Outreach activity has altered many of my perceptions and strengthened my determination. The stories are often heart wrenching and the urge to offer immediate succour seems overwhelming. But it is even more important not to attempt sticking plaster solutions to a deep malaise. The conditions on the stairwell only deepen my conviction to affect real long term change through political pressure and Reform .
I will be sharing my experiences and those stories here. Do email me if you have a stairwell story of your own that you would like to share.
The first article here is written by Raymond Anthony Fernando. Raymond is a model citizen, literally. He has received two outstanding awards for his advocacy on the changes needed in Mental Health Care and support for the caregivers.
Model Caregiver in 2007 – Award given by the Asian Women’s Welfare Association (AWWA) Centre for Caregivers.
Mental Health Champion 2010 – Award given by Silver Ribbon Singapore and the Health Promotion Board.
Some of you may know him through his regular contributions to the forum page in the Main Stream Media on facebook and through his blogspot, Raymond’s blog: http://rayhope8.blogspot.com.
H is also a motivational speaker a trainer for caregivers, counsels troubled youth and has shared the story of his life with Doris on national television 6 times, 3 times on radio. He is the author of 11 books to date and has helped his wife to write 5 telling her own story. You can find details on how to purchase Raymond’s books here.http://rayhope8.blogspot.com/2011/01/next-book.html
His story is touching and illuminating. As he says, he doesn’t want sympathy but a proper support structure. I would only add that raising money for another charity or NGO would not be my preferred solution. We are already a rich country . What we need is reform of the system and that will only come about through political pressure that allows the will of the people to be heard.
Please do read his article.
First they give you oranges, then they squeeze them.
In my article on Budget sweeteners entitled, “Why Accept Carrots When You Own the Farm”, I said that it was hardly surprising that the PM hinted at a good Budget in his CNY speech since the government had been running a surplus of around 10% of GDP this year. This was part of a fairly unbroken trend and that was before accounting for the surpluses of Temasek and GIC or the profits from land sales
The PM’s hints at a generous budget were closely followed by Deputy Prime Minister Teo Chee Hean’s grim warning to the people, “to be realistic in their expectations of Budget goodies as, even in good years, it is important for the Government to save in readiness for future uncertainties”?*
Are the Prime Minister and The Deputy Prime Minister singing from different hymn sheets? Or is it just a way of managing expectations so that people are taken aback with the government’s generosity later on? The right hand comes out and talks of giveaways during traditional Hangbao time. Then the left hand comes out and talks about uncertainty, the need to tighten belts and expect the worst.
Of course the incumbents may simply have given up on any attempt to win the electorate over with giveaways. Not only because I have suggested it would have been possible to cut taxes or increase spending by as much as $10,000 per Singaporean man woman and child in the last budget without running a deficit. But also because every time they offer to give us our money we respond that it is our money, thank you! Having realised that their attempt to demonstrate how generous the government is has been foiled by my exposure of the statistics and the new awareness, they may have decided that talk about Prudence will play better.
In any case another article in the ST Online entitled “Overcoming inequality and the income gap”** ironically highlights how little is done to help the lower income groups despite the massive surpluses. In the case cited a mother hopes for help with her three daughters’ education expenses. While the government would no doubt claim that the fees are nominal, I would beg to differ. To a family on or below the poverty line these fees probably deter them at the margin from investing in as much education as they otherwise would if it were completely free.
I have visited many of these families myself doing my rounds during walkabout. My economic beliefs are further supported by the evidence of my own eyes I have made it one of the central planks of the Reform Party’s education policy to make education completely free up to secondary level. It strips these families of their dignity to suggest that in our economy they should rely on charity or the philanthropy of strangers. Especially when that charity, in the case of the ST pocket money fund, gains its revenue from being a State owned monopoly.
Investment in education has been demonstrated in countless economic studies to generate a high social rate of return. Most, if not all, countries that have reached our level of development provide free education up to secondary level. It is the founding rock of an advanced and civilised Nation.
Yet our government considers it more important to hold down productive spending on our citizens to generate an extra few billion in surplus. It should be a truism that each succeeding generation is richer than the one preceding it It is hard to see the justification for saving such a high proportion of GDP when the returns would be higher from investing it at home.
I for one am confident that the rate of return from investing our budget on our people will far exceed what we can hope to earn on the surplus.
Recently there has been much concern over rising inflation in Singapore. Looking at the Consumer Price Index (CPI) the average figure for the year 2009-2010 was 2.8% (shown in blue). More alarming the CPI figure in December 2010 was up by 4.6% (shown in red) from December 2009. So inflation is clearly rising and furthermore the rate is accelerating. How much should you be concerned and is inflation the biggest problem we are facing in our economy?
Housing, transport and food were the main contributors to the rise in CPI. As they form a larger proportion of household expenditure for those on median incomes and below, the true rate of inflation for these income groups is much higher. As always the effects will be magnified even more for the bottom 20% of the income distribution. What really matters therefore is where you are on the income distribution.
The government line would be that this was beyond their control. They will say that inflation has been rampant everywhere in Asia and particularly in China and India (at least 5% and 10%p.a. respectively). No doubt the incumbents will blame poor harvests and extreme weather for the surge in food costs coupled with the leap in oil prices back above US$100 that has occurred as the world economy recovers.
However as usual this is to only tell half the story. That is why we must re-examine the contents of our rice bowl. Is it the surging economies of China, India and the rest of Asia cracking the porcelain of your bowl? Or is it domestic inflation caused by policy decisions of our own government? It is relatively simple to measure the contribution of external factors to inflation by looking at the index of import prices. Last year the Singapore dollar rose by 9% against the US$ (shown in red). This meant imports priced in US$ became cheaper when converted to S$. As a result the import price index in 2010 was up only 0.7% compared with 2009 (shown in blue). You need no further demonstration that it is in fact domestic factors which have played the major role in inflation. Further supporting this, in 2009, the import price index fell by 8% yet the CPI was still positive.
Therefore most of our inflation is being generated domestically.
In Singapore this government’s policies have allowed companies to bring in a virtually limitless supply of cheap labour from the rest of Asia thus ensuring that there is continuous downward pressure on real wages. This, together with low corporate taxes and generous subsidies for new foreign investment has been a recipe for rapid growth. However productivity growth over the last fifteen years has not kept pace. In fact it can only be described as abysmal.
In 1994 Paul Krugman, the Nobel Prize laureate, pointed out that there was little qualitative difference between the Singapore model and the Stalinist one of the 1930s Soviet Union and predicted that as Singapore ran out of labour inputs ( declining birth trend) its growth rate would fall sharply.
Our government mistakenly thought that had found an escape route from this trap. By opening the floodgates to foreign labour while having no floor on wages, it seems they thought the economy could grow indefinitely. At the same time Singapore’s population could expand without limit. In fact MM Lee recently came out to warn us all that if we wanted slower population growth through immigration we would have to accept lower GDP growth rates. Clearly the only solution the incumbents have for producing GDP growth is by increasing the importation of labour through immigration.
The result has been a big fall in the proportion of GDP going to wages and relentless upward pressure on the factor of production in (virtually) inelastic supply, namely land. This has suited the government just fine as it owns nearly 80% of the land and thus benefits from the rise in land prices.
Of course rising food prices globally play a big part in the rise in food costs locally. But the competition for land is undoubtedly playing a significant role in the rising cost of meals at food courts, hawker centres, supermarkets and wet markets as rents rise. I hear these complaints from stall holders continuously as I go about my walkabouts several times a week.
Another domestic factor contributing to rising inflation is government and GLC policies that favour the creation of oligopolies such as integrated food court operators. Make no mistake! GLCs are not in the private sector, they have virtual monopolies and no real competition to their power to pass on costs by putting up prices. The government’s ownership of most of the transport system, from the MRT to taxis, and the lack of an effective regulator, also means that the transport companies have been able to more than pass on the rise in energy costs stemming from higher oil prices. The result is further pressure on your wallet.
Here’s one for the students of economic history. Back in 1926 before he published his general theory, Keynes warned against a type of inflation that transfers income from workers to profits. Are we seeing that inflation here and now? The economy is overheating but the benefits are going to profits and not to working Singaporeans.
Certainly we can see this effect in the CPI index. The HDB resale price index has risen some 340% in the last twenty years while median nominal household income has risen by only just over 100%. Even though The Department of Statistics uses an archaic method of calculating housing costs the effects are still apparent.
With such an elastic supply of foreign labour it is no surprise that average nominal incomes have lagged behind inflation over the last three years and median real household incomes have essentially remained unchanged for nearly thirteen years. And despite years of strong economic growth consumption has fallen to just over 40% of GDP.
The incumbents will try to divert you with a bit of hype about fertility rates. (The downward trend in birth rates is for another article.) But this is merely an attempt to shift the blame on to you for not having enough babies so that our minsters to continue to support the current immigration policy.
Don’t let them scare you with those simple GDP figures either. I had already dispensed with that bogey in my previous articles. What we need from our GDP is quality not quantity. We need policies that achieve economic growth by raising the productivity of our inputs (workers) and not by just increasing the inputs themselves (importing foreign workers).
The lack of a raise in real median incomes, our appalling productivity figures and the strain on scarce resources like land should be more of a worry to you than inflation. Only by shifting focus and reducing the strain are we likely to get a slow-down in inflation accompanied by rising real wages. Your rice bowl will be all the happier for it.
I recently found the following article on the popular alternative political website The Temasek Review. Written by blogger Gen Ji, it deals with Dr Chee’s conviction.
“….. the deafening silence from the other local opposition parties with regards to the verdict. Unlike the chorus of condemnation and messages of solidarity that one might expect to find in other countries, the lack of response from the other local opposition parties is a testament to how poisonous the relations are between the opposition parties in Singapore. So far, only Kenneth Jeyaretnam, the youngest son of the illustrious and noted democracy advocate J.B Jeyaretnam (who was himself extremely close to the SDP Secretary-General) and current leader of the Reform Party has spoken out against the ruling and pledged funds to keep him out.” *
On January 31st, I had written a post on my personal Facebook page entitled, “Here’s why I’ll be contributing to Soon Juan’s fund!” **. I had expected that this would act as a catalyst for other Opposition leaders to follow suit but I was wrong. Unlike the blogger quoted above, I see no evidence that the silence is a testament to how poisonous the relations are between the opposition parties. However, the failure to respond clearly opens the opposition up to criticisms of poisonous behaviour and is damaging to all of us in many ways.
The motives for the deafening silence are a matter for speculation but we cannot rule out the fear factor. There is of course an ever present, substantiated fear that by showing unity and commenting on the sentence we will be accused of questioning the integrity of our judiciary or even of scandalising them. Alan Shadrake’s recent conviction is a perfect example of why you wouldn’t want to do that.
Action for defamation is also a very powerful whip for authoritarian governments to crack. It is a line drawn in sand on the beach. With each tide it becomes harder to see where that line is drawn but it is there and we prefer not to move rather than to risk unwittingly crossing it. The penalties are too severe.
My own father was very familiar with those penalties. He lost his profession, his place in parliament and was subsequently bankrupted, despite a Privy Council ruling reversing the judgement. After his death and at his funeral thousands of people expressed their regret and feelings of guilt at not standing up for him when he was alive. We seem to have learnt nothing from our history.
Even the so called free and independent press of advanced democratic nations succumbs to this fear of defamation suit and self censors rather than run foul. The governments of Sovereign Nations are usually swift to act when restrictions are placed on the free flow of their goods across borders, contrary to the rights enshrined by the WTO. Restriction on the free sale of newspapers and their advertising is a basic restriction on trade yet the media corporations receive no support from the trade delegations in their respective governments. Is it any wonder then, that we find it so hard to combat the restrictions?
One reason Parties may be silent is the hope that if they shut their eyes and hide under the bed covers, the bogey man may pass them by. This is a foolish hope. One thing we know from history is that when you sit silently by whilst the authorities take your neighbour away, they will come for you next. Each time there will be less resistance, fewer voices to speak out.
It matters not a jot whether you support the SDP, (Dr Chee’s Party) or whether you like or dislike him personally or indeed whether like me you are a fiercely competitive political rival. What matters is that we have free and fair elections here in Singapore and to do that we need to uphold the principles of Voltaire often paraphrased as “I may not agree with what you say, but I will defend to the death your right to say it.” ~
We must continue to demand those basic freedoms of expression guaranteed in nearly every other advanced Nation in the world. Absolute, unchallenged authority leads to a government of ‘yes men’, flabby thinking and decisions hurried through parliament without proper debate. And without freedom of expression we are prevented from putting up an effective challenge to those ‘yes men’.
So if the rest of the world is silent, if the foreign Press self censors, if our own Press is State controlled, who will speak for us? We must speak for ourselves. We cannot rely on International NGO’s. Our only defence is openness and strength in numbers. We must show that the will for democracy comes from within. If the other Secretary Generals and Party Leaders were to join together and donate to the fund thereby keeping Dr Chee out of jail, we would send a very clear message indeed. I also call on my colleagues to come together and to pen and send out a joint statement. Before it is too late! This is a golden opportunity for all The Opposition parties to demonstrate unity of purpose whilst maintaining our individual ideologies and present a real challenge to the behemoth that is the PAP.
012: What’s up Doc? Or who needs a carrot when you own the farm?
In a report in the ST dated 5th Feb 2011*, PM Lee is quoted as saying, ‘I think everybody will be hoping for bigger hongbao and I’m sure the Finance Minister will know what to do.’
I’m also sure the Finance Minister will know what to do. The PM has told him to give the people pocket money, maybe an orange or two and he will obey. After all what’s a billion dollars or two in the context of a budget surplus of over 10% of GDP and a net asset position of hundreds of billions of dollars.
With elections around the corner, the incumbents are obviously confident that the electorate will be swayed by a dangling carrot on a stick and that the carrot will not only induce good night vision but also amnesia.
I hope through the articles on this blog to show you why you don’t need the carrot as you own the land on the farm in which it was grown. That land was tilled and fertilised with your toil and sweat.
As I pointed out in an article on 4th December 2010**, if interest and investment income is included, the total Government surplus for 2010 is likely to be over $30 billion. In fact surpluses of around 10% of GDP have been racked up regularly over the last ten years. And this probably excludes the gains on Temasek and GIC investments as well as not counting the gain in value of the 79% of Singapore’s land ultimately owned by the SLA. In fact this year the government could afford to give a tax rebate or extra spending of $10,000 per Singaporean while not dipping into reserves. But they’d need a bigger red packet.
Next time your government talks about giving you something, remember that you own the farm. Our sovereign wealth funds have been built up by our people scrimping and saving and going without services that are taken for granted in other rich countries. You never received a proper explanation for how much money was lost in 2008 in Temasek and GIC. No heads rolled and you never found out why Chuck Goodyear resigned. The farm land is surrounded with three lines of razor wire and KEEP OUT signs for Singaporeans. Time that we had a Freedom of Information Act, I think.
I have previously proposed privatizing Temasek and GIC and listing them on our stock exchange whereupon they would be required to be open and transparent about their performance. Shares would be distributed to all Singaporeans which you would be encouraged to hold for the long-term. After all their assets ultimately belong to you!
It is time to hire a new manager for your farm. One with your interests at heart.
The question I’m most asked by Journalists is, “What are the issues this coming election?” The answer I most often give is that they haven’t changed that much from the previous election. There is really only one key issue this coming election. It is housing, it is immigration, and it is the cost of living. They are one because they are all part of the same.
When you take a closer look at supply and demand as it relates to HDB housing it becomes clearer that the issues remain the same because the government is a behemoth incapable of reacting fast enough to changing circumstances that it is itself responsible for. An analogy might be a brontosaurus with several primitive brains in different parts of the body so that there is no central coordination. Immigration and housing are specifically two sides of the same coin. In its simplest form we have too many people and not enough housing.* According to Singapore in Figures 2010 ** the stock of HDB flats rose by only about 11,000 units between 2004 and 2009. At the same time the Singapore resident population rose by 461,000 between 2000 and 2009 and the total population rose by nearly a million.
Another journalist asked me for my opinion on the statistic, widely disseminated around the web, that 85% of Singaporeans own HDB housing. That figure originated with a senior civil servant responding to The Reform Party’s proposals for easing our HDB woes. Crucially it was that 85% live in HDB housing not own it. I re-educated that journalist who corrected the mistake but the wider public don’t make the distinction and a myth is peddled.
At this moment the resources are not available for me to calculate the exact statistic but the number of HDB managed units at end 2009 was 888,143. If we divide this by a resident population of 3.7 million this comes down to roughly 25% ownership. Then you need to factor in children and joint ownership and we don’t know what the actual percentage of that 888,000 is rental. The actual ownership percentage is probably below 50% of adults. So the majority of Singaporeans would benefit from lower prices as it would enable them to gain a foothold on the property market or move to a bigger property.
However falling property prices can have serious consequences for the economy if they lead to curtailed consumption and negative equity. We therefore need to be cautious about the release of new land and new building so as not to cause too rapid an adjustment.
So who is responsible for the high prices that the government is failing to cool? Well, the government is directly responsible. The government is the owner of the bulk of the country’s land and could therefore be said to have a vested interest in keeping prices high and rising. The government is also the owner of the HDB and furthermore through CPF it is the provider of the bulk of the nation’s housing finance. The HDB is directly responsible for not having coordinated its policies with the other government ministries responsible for immigration. It has been too slow to react to the imbalance in supply. It is not as though they could claim that it is an honest mistake and they could not see it coming. They only need to wait for a bus or attempt to get on an MRT as I do every day, to see how crowded we are!
This imbalance between demand and supply has been exacerbated by the government’s previous decision to allow 100% of CPF ordinary account balances to be used for housing together with the provision of subsidies in the form of the Housing Grant and the Additional Housing Grant. In August 2010 the government announced a number of cooling measures for the property market. They could not however, resist extending the Housing Grant to buyers of DBSS and EC who have a monthly income of up to $10,000PM. In the longer term as well as reviewing some of the subsidies to housing we should seek to reform CPF and give people more choice over their savings.
It is difficult to believe that the government’s policy architects could demonstrate such basic economic illiteracy by trying to control demand for an asset while at the same time subsidising its purchase. Allowing 100% of CPF to be used for housing is effectively a subsidy since CPF savings are not taxed. This is undoubtedly a contributing factor to the rise in prices
On the other hand as said previously, the government as the major land owner has a vested interest in seeing house prices rise. I would liken the government’s cooling measures to pressing on a hosepipe to flatten a bulge only to see it pop up somewhere else in the pipeline. In fact it’s worse than that, since at the same time the government is constantly pumping more water into the hosepipe thereby increasing the pressure by giving first-time buyers more money to buy HDB flats and by allowing in so many foreign workers.
Any projected benefit from these subsidies for these first-time buyers is illusory since prices of new and resale flats have risen much faster than the subsidy. While it must be questioned why the government allowed owners of what is supposed to be subsidised public housing to own private properties in the first place, as an economist I do not see how stopping this will affect the real as opposed to speculative demand for housing. It is the former that is driving housing price increases. This stems from the increase in the population and will be true whether people buy or rent. If they cannot buy they will be forced into the rental market which will push up rental yields and this will push up prices. There’s that hosepipe again! It is economically nonsensical to argue that the demand for HDB housing can be controlled by measures restricting HDB ownership while the ability to rent flats to foreigners has not been curtailed. We have seen our population rise by over 25% in the past ten years. While the supply tap was reduced to a trickle, the vast surge in the number of foreign workers undoubtedly pushed up prices since they have to live somewhere and thus pushed up rents. HDB owners would be able to arbitrage between high rental yields and low loan rates. The government’s measures do nothing to address this.
However some of the measures will make the situation worse for a whole section of the population. Reducing the LTV ratio will merely create pent-up demand and mean that young people have to wait longer to get a foothold on the housing ladder. I probably shouldn’t mention possible solutions to the problems that young people have as that has created a whole generation of politically aware youth who in previous elections were apathetic. We already have a birth rate that is so far below replacement levels that our population would halve within a lifetime if we did not have immigration.
The solutions to the housing issue are complex in isolation but more so being intertwined with other issues. You cannot look at HDB in isolation from the issue of immigration and manpower policies and CPF. We have had over a million new people come to live in Singapore in the last ten years with very little increase in the stock of public housing so it is inevitable that prices have risen sharply. I have said that we need to slow the intake of foreign workers and concentrate on raising the productivity and incomes of Singaporean workers instead. At the same time we should increase the supply of housing by releasing more land and allowing more private sector competition with HDB. And we need to question why foreign workers and foreign students are being housed in HDB stock.
The whole question of subsidies is moot anyway because we have no market in land. With government owning such a big percentage of the Nation’s land and being by far the biggest housebuilder there is no such thing as a free market. As a liberal free market economist, I believe that greater competition leads to more consumer choice, better quality and lower prices.*** In the longer term we want to create a genuine free market in land by giving HDB owners the right to buy out the freeholds of their properties.
Because it is a monopolist the HDB has failed dismally to keep up with the increase in population and the inevitable trend towards smaller families in the same way that they have failed to meet the needs of young couples. For a long time HDB insisted on phasing out the construction of three-room units and concentrating on four- and five-room units where the profit margins are higher. Clearly we need to return to building 3 room units in greater numbers. If these can be built at lower cost (through private sector competition and the release of more land), then they would enable first-time buyers to own their own flat at a younger age and hopefully have a positive impact on our falling birth rate. At the same time we need to increase the percentage available for renting while restricting the rental of smaller HDB flats to foreign workers. By increasing the rental supply and allowing existing owners to buy out their freeholds (whereupon they would be free to rent their flats to foreigners) we could over time peg the HDB back to being a provider of rental and low-cost housing to those on low incomes. We could lower the age at which single people can own HDB’s and we must push young couples with babies to the top of the queue. We could also experiment with part-ownership part-rental schemes like those in other countries. Measures such as these will have an effect on young people giving them the stability and financial security they need which will have an impact on fertility rates.
So the gap between supply and demand looks more like an ever expanding unbridgeable gulf. The government measures come down to giving with one hand and taking away with the other. It is also no good pretending that what happens in one market (rentals) will not affect another (house prices). An economist would say that buying and renting are almost perfect substitutes. Over a longer time period Singapore needs to return the role of public housing to providing housing for the population at the lower income levels. There is no reason why at our relatively mature stage of development 85% of the population have to live in government-supplied housing. This is completely out of line with other advanced countries where the ratios are generally between 20-40%.
Will the affordability of HDB be a big enough issue to swing the electorate this election? We’ll just have to wait and see.
*This theme of how the rapid increase of the population driven by immigration and the foreign labour policy (combined with not enough babies) has not been in the interests of Singaporeans is one I will keep returning to in future blogs.
***In later blogs I will return to competition in the political arena where it is as important as it is in the business one. And I will demonstrate why Freedoms are also a vital part of the equation in creating prosperity.