Wednesday, February 27, 2008

What is your problem, Sylvia Lim?

See what happens when you let one of these opposition members into parliament. Now you understand why it is important to stop them from entering parliament and making baseless, irrational and unreasonable assertions and insinuations. NCMP Sylvia Lim is out to mislead the public with her speech in parliament during the budget debate. Her remarks are not honest mistakes but deliberate attempts to undermine the credibility of our esteemed govt.

If you have no time to read the speech, here are the most harmful parts:

"I think it is quite clear that the government has chosen to raise the GST from 5 to 7% last July without compelling reasons, and this increase has compounded the inflation pressures on the people."

Our esteemed PM Lee has already said the GST hike is to help the poor. Isn't that a compelling enough reason to hike the GST?! Given Sylvia is from the Worker's Party which claims it is concerned about the poor, can't she see that the GST helps the poor and removing the GST will hurt the poor.

"Adding on another 2% on a higher base price has increased the cost of some items by more than 20%. Only very few people’s incomes have risen by 20% since last year."

We should be glad that our elites and ministers have received pay hikes of more than 20%, preventing a painful sacrifice by them that is caused by inflation. Does it matter at all for ordinary citizens that prices have increased? Probably not! Our leaders have already come up with innovative solutions to beat the price hikes. Eat at hawker center instead of restaurant. Take bus instead of taxi. Buy Sunny1 bread instead of Gardiner and so on. Our brilliant leaders have already found the solution for inflation for the ordinary folks so it doesn't matter if their wages have not risen 20% to catch up with inflation. Inflation can be solved by substitution.

"he other reasons cited were the hike in GST, and the revision of annual values of HDB flats. Both these reasons were not external but were the government’s policies."

Is Sylvia trying to blame the PAP govt policies for inflation? Oh come on, this is so ridiculous. The PAP govt has already explained the need for these price hikes. Raising taxi fare is to help Singaporeans by improving the availability of taxis. Revising the HDB prices upwards will help to shorten the HDB queues. GST is to help the poor. ERP hike is to smoothen traffic during peak hours. All the price hikes by the govt is done for the benefit of Singaporeans. The PAP has the interest of ordinary citizens close to its heart it is doing everything it can to help them.

“Singapore’s budgetary accounting system is among the most conservative in the world, as the fiscal balance is obtained by subtracting both operating and development expenditure from the government’s operating revenue alone."

What is wrong with that? Having surplus is a happy thing for the PAP govt. We should be happy for our govt when they make a surplus. Many people doing back of envelop calculations believe that CPF Life will also generate a surplus for the govt. Surpluses are a good thing - they help to fund investments in troubled banks, investments in troubled childcare businesses, and so on. ...Singaporeans get to work harder and longer as they service their mortgages for the most expensive public housing in the world while generating a surplus for HDB. Surpluses help to motivate Singaporeans to work harder and not become lazy.
lvia Lim's Speech in Parliament

Mr Speaker Sir,

In last year’s Budget debate, the Workers’ Party was criticised for asking the question of whether the GST hike of 2% was needed in the first place. We had highlighted that, according to the government’s own estimates for FY 07, there would be enough alternative sources of revenue to fund the additional social spending of $2 - 4 billion per year.

At last year’s Budget debate, I had pointed out that based on the government’s estimates for FY 07, increases were already projected in personal income tax and statutory board contributions. I noted that it was also likely that stamp duty collections would rise due to recovery of the property market. The prospect of the Constitutional amendment to broaden the definition of Net Investment Income (”NII”) would also yield additional funds. I had asked if the corporate tax cut would result in revenue loss of $700 m as the government claimed, because the experience elsewhere showed that such cuts “paid for themselves” as they were stimulative in nature, resulting in more business activity which would yield higher tax collections. The question of whether land sales should be included as revenue to fund expenditure was also raised.

In short, the indications were already there last year that the GST hike was probably not needed.

Today, we see that the government estimates can hardly be called “estimates”! The government coffers are bulging at an estimated $6.4b surpluses, revised from a deficit of $0.7b projected last year. That’s off by more than $7b. Indeed, commentators have noted that the surplus estimate of $6.4b is still a provisional figure, which will only be finalised after FY 07 ends, after Mar 08. There is expectation that the surplus will “almost certainly” be more than that. This is because the government has provided for a large deficit for the final quarter of FY 07, which in their view is probably an over-provision. (BT 16-17 Feb 08, PK Basu). It should be noted that the overall budget surplus was achieved without the benefit of the broadened NII definition which is still not ready. Neither does it include land sales, which in FY 2007 is a whopping $10.5b.

Leaving aside the higher than projected GST collections, significant under-projections were seen in Corporate Income Tax, Personal Income Tax, Statutory Board Contributions, Asset Taxes and Stamp Duty. Without the additional 2% GST, conservatively, the surplus would still have been about $4b.

In a Citigroup report released on 28 Jan 08 (ST 29 Jan 08), Citigroup economist Kit Wei Zheng noted euphemistically that “the fiscal year 2007 assumptions were overly conservative”. He went further: “In hindsight, the GST hike may have been unnecessary or could have been delayed or staggered…the GST hike has contributed to the unexpected bulge in government revenues, while exacerbating inflation pressures”. Finally, Mr Kit expected that the government would probably not reverse the GST hike in any way “as it would be tantamount to admission of a mistake”.

Both the Prime Minister and the Finance Minister have cited 3 reasons for the rising inflation. Global price hikes in food and oil was only one of the 3 reasons. The other reasons cited were the hike in GST, and the revision of annual values of HDB flats. Both these reasons were not external but were the government’s policies.

Sir, with prices of food, transport and other essentials rising, Singaporeans have found that the addition of increased GST has had exponential effects. Adding on another 2% on a higher base price has increased the cost of some items by more than 20%. Only very few people’s incomes have risen by 20% since last year.

Going forward, should GST be at 7% in the coming years? We must assess whether there is a need and the impact on the people. Here, we come again to the government’s budgeting policies and practices.

For FY08, the government has once again projected a deficit of about $0.8b. In a commentary in the Business Times Weekend Edition 16-17 Feb 08, Chief Economist at Daiwa Institute of Research (Singapore), PK Basu, wrote a Commentary entitled: “Deficit Next Year? Just Don’t Bet On It”. It was observed that “Singapore’s budgetary accounting system is among the most conservative in the world, as the fiscal balance is obtained by subtracting both operating and development expenditure from the government’s operating revenue alone. The government’s ample investment income is not counted as government revenue, (though) in recent years (it has made) a “small concession” by using up to 50% of investment income to fund special transfers”. The writer also notes that since the government is starting FY 08 with a larger surplus as a base, next year’s fiscal balance will also be stronger, assuming budgeted increases in revenue and expenditure. Coming back to his initial question of whether there would actually be a deficit in FY 2008, he writes: “A betting man could do worse than place a large wager on actual revenues comfortably exceeding the Budget’s projections next year too!”

I note that there are signs that the government expects the economy to still do well in FY 2008. It has projected increases in statutory board contributions and personal income tax. It has even projected an increase in corporate tax collections, when the cut in corporate tax would have kicked in. It also expects strong collections from land sales, projecting land sale receipts to be nearly $10b.

Sir, I think it is quite clear that the government has chosen to raise the GST from 5 to 7% last July without compelling reasons, and this increase has compounded the inflation pressures on the people. Given that the increase was not necessary, the government should do the following to alleviate the suffering of the people:

a)Reverse the GST rate back to 5%.
b)Additionally, since food inflation is exceptionally high, zero-rate GST on essential food as other countries have done.

If the government did these, the people would appreciate it. They would be better off than having to live with ever increasing prices, long after the one-off giveaways have been spent.

Tuesday, February 26, 2008

Inflation, Inflation, Inflation......

Our inflation rate is now at a 25 year high of 6.6% for January. This rate is among the highest in the world. Malaysia's inflation rate will come in at about 2.5-3%, 3.2% in Hong Kong and CPI figures in US came in at about 4.3%.

Where did the "extra" inflation come from? A large part of "extra" came from HDB's decision to hike prices causing the housing component to rise, the other part came from transport fare hikes and the lingering effects of the 2% GST hike.Some of you might be tempted to blame the govt because most of these hikes were initiated by them or are under their control. This is wrong....judging from the enormous concern shown PAP MPs in yesterday's parliamentary session, the govt has the interest of Singaporeans in their hearts. The govt probably didn't realize that hiking prices and fees can cause inflation. The GST hike was intended to help the poor. The transport hike in the form of ERP increase was intended to smoothen traffic and public transport fare hike was meant to improve service quality. The recent hike in HDB prices was intended to shorten the long queue for flats. See the PAP govt was hiking prices out of concern for Singaporeans to improve their quality of life.
I'm totally shocked by opposition MP Low Thia Kiang's suggestion in parliament to reverse the 2% GST hike. We can see the evil that lurks in the heart of Singapore's opposition, the hypocrisy is obvious as they try to pass themselves champions of the people. Everyone in Singapore knows that the 2% GST hike is meant to help the poor - our PM Lee said so himself. The PAP always match their words with action, that is why they are known as the People's Action Party.

Sunday, February 24, 2008

Obama is not fit to lead!!!

I'm so surprise that he is gaining so much support from American voters. This Barak Obama feller is not even qualified enough to be Singapore's President - a presidential candidate in Singapore is required to have had experience as the chairman or CEO of a statutory board, or of a company with a paid-up capital of at least $100 million. Obama would have been disqualified in Singapore yet Americans are considering for leadership of a country 100 times our size.
Americans should learn from Singapore and have a preselection process for their presidential candidates based on a set of stringent criteria so that unqualified people can be weeded out and not waste the time of voters. Better still make the criteria so stringent that only one person can qualify and do away with the election process altogether...that would really save alot of time.
This Obama guy is just a 2 term rookie senator who has not undergone rigorous grooming to ensure that he fits into the political establishment. He is not only threatening to change America, he is threatening to change the world. Lets look at what changes Obama is aiming for (most of the text is taken from his campaign website and you have my comments in red:

1. Labor.
Ensure Freedom to Unionize: Obama believes that workers should have the freedom to choose whether to join a union without harassment or intimidation from their employers. Obama cosponsored and is strong advocate for the Employee Free Choice Act, a bipartisan effort to assure that workers can exercise their right to organize. He will continue to fight for EFCA's passage and sign it into law.

Protect Striking Workers: Obama supports the right of workers to bargain collectively and strike if necessary. He will work to ban the permanent replacement of striking workers, so workers can stand up for themselves without worrying about losing their livelihoods.

[Oh this Obama guy really has alot to learn from Singapore! We (in Singapore) all know the main role of unions is to persuade workers to accept collective wage cuts during recessions and to moderate their demands when times are good.]

2. Tackling Poverty. Obama will raise the minimum wage and index it to inflation to make sure that full-time workers can earn a living wage that allows them to raise their families and pay for basic needs such as food, transportation, and housing.

[Minimum wage is an idea repeatedly rejected by our esteemed leadership. Having no minimum wage allows a govt to boast that it has created numerous jobs that does not pay enough for basic living and to berate its citizens for being fussy when they reject these jobs. Come on.... people who cannot make a decent living because there are thousands imported from Bangladesh willing to do their jobs cheaper should be taught to accept inevitable fate instead of trying to raise a family on their low salaries.]

3. Shine Light on Earmarks and Pork Barrel Spending: Obama's Transparency and Integrity in Earmarks Act will shed light on all earmarks by disclosing the name of the legislator who asked for each earmark, along with a written justification, 72 hours before they can be approved by the full Senate.

[I hope that Mr. Obama understands that spending our national estate upgrading budget selectively on constituencies based on political support does not amount to pork barrel politics. It serves to educate voters on the importance of their votes.]

4. Open Up Government to its Citizens. Making government data available online in universally accessible formats to allow citizens to make use of that data to comment, derive value, and take action in their own communities.

[I think Obama has alot to learn when it comes to dealing with govt information. Singapore as gone on the other direction by use of the OSA (Official Secret Act) to prevent govt data from ever getting to the hands of the citizens. Singapore has no Freedom of Information Act (FOIA)which means you can only get data that the govt chooses to release to you..... data that will help you understand that your govt is doing a great job and that you should be grateful for their leadership. All other forms of data is considered harmful, confidential and against national interest. All you need to know is how great your govt is.]

Looks like Barak Obama has alot to learn about leadership, good governance and integrity from Singapore leaders. His lack of grooming really shows up in his desire to bring drastic change to his country. Singapore leaders carefully selected and groomed for the job knows the importance of promoting harmony and acceptance rather than change. They harmonise the goals of the power elite with the amount of hardship ordinary Singaporeans can be made to endure to perpetuate a system they have created to give themselves the highest remuneration in the world. Singaporeans are lucky to have good leaders.

Saturday, February 23, 2008

Lucky to be a citizen of an affluent island....

Sad to say I've been sent overseas again. When I got home I couldn't wait to get my hands on the all the copies of Straits Times that I missed while I was away. Yes, "budget to help the poor" again. ....amazing performance by our govt they told us they had to increase GST to offset the loss from corporate tax cuts and ended up with a fiscal surplus of S$5.4B (instead of projected deficit) last year. Wow!
These days when you tell people you're from Singapore, they give you that look - "oh you rich bloke...". I think it has something to do with our govt pumping billions into troubled western banks - that piece of news made its way around the world and everyone knows that Singapore is rich. If you want to bargain, don't let people know you're from Singapore otherwise you end up paying double.

Remember that last year's budget was also intended to help the poor. This year more has to be done as the income gap has widened and inflation escalates. It is strange but true, as our GDP grows, the number of poor people increases so does the income gap. Last year the govt felt compelled to reduce corporate tax despite corporate profits being at a record high as a % of GDP and increase the GST to offset that cut. This year there will be topups for the old and poor - but can these topups catch up with the rising cost of living? Electricity, transport, medical care, govt fees and public housing all rising at an accelerated pace and all these under the control of the PAP govt. So the PAP have these price hikes to take place in 2007, then craft a budget for 2008 to "help the poor" who cannot keep up with inflation. I'm sure there will be more such price hikes in 2008 and when we get to 2009, the govt will need to do even more to help the poor. Last year's price hikes have already eaten this year's budget topups for the poor. In other countries, govt gives the poor special rates for utilities, transport etc and keep these rates low to make sure the poor can afford it, in Singapore these are hiked every year and the govt then help the poor with topups later to cope with last year's price hikes. Its the same every year, HDB grants that does not catch up with rising prices of HDB flats, topups for the poor that does not catch up with the price hikes initiated by the govt itself........helping the poor is a mantra uttered by the govt on every Budget Day but the reality is the poor cannot afford a govt as capable and brilliant as the PAP. The PAP is far better than what the poor deserves. The poor people in Singapore (which comprises close to 30% of the population) should be thankful that they have such excellent leadership. They should be thankful for the ever increasing challenges they face in the PAP economy without which their work ethics would be undermined.
We are all lucky citizens of an affluent little island. As our govt invests tens of billions in troubled banks, the poor folks in Singapore can learn to live with less every year. If we attract enough rich Indonesia PRs and expand our population we can perhaps dilute away our poor.

Friday, February 15, 2008

I hope Refund-80 is enough for McDonald's Happy Meals!

The first batch of people living on minimum sum + CPF Life under the Refund 80 will be getting $610 per month. The 1st batch on this scheme will hit 65 in 10 years time and 80 in 25 years time.

A Happy Meal today costs $4.60 with inflation running at 3-5% in 15 years time, the Happy Meal will cost about $10. To live on 3 Happy Meals a day will cost $30 per day and $900 per month. $610 is not enough for 3 Happy Meals a day. Of course you can opt to eat something else and stretch your money....this is just an example to give you a feel of the buying power of $610.

Actually, CPF Life is very interesting - it is so flexible, you can almost avoid the annuities scheme by opting for Refund 90. Refund 90 simply stretches the minimum sum in your RA until you reach 90. The annuities kick in when you reach 90 and you pay for this with only 6% of your minimum sum. The 6% is refundable but you forego the interest on that amount - the interest is used to fund annuities scheme.

Locking up the minimum sum so that it earns a nominal interest of 3% only guarantees inadequecy at the point of retirement. Almost all other govts that have retirement schemes take up the challenge of investing the money for higher returns and giving it back to citizens when they retire. Be it the Malaysian EPF scheme (4.5-8%)or the Indian version which returns 9.5% or the Norwegian one (6.5%) or Calpers (8.9%) or the Chilean retirement scheme (10%) govts running retirement funds understand the importance of beating inflation to provide adequate retirement funds for the people who put their hardearned money in their care. In Singapore things are different. It is easier to tell our old folks to live with less, work longer and eat 2 Happy Meals a day instead of 3. Work ethics and thriftyness among ordinary citizens can always overcome inadequacy. As for higher returns, the GIC borrows your CPF funds at the 3% nominal rate, invests to make an average 6% or higher then keep the extra. Now you see why your govt deserves to be paid the highest pay in the world? They are really smart at making money.

Sunday, February 10, 2008

Slippery Slope : Means Testing + Healthcare Insurance

Means testing..... Does it make sense when it is conducted upon admission to a hospital without knowing what the final bill is?....
Most people think the answer is to get insurance and that will protect them. Insurance in the form of MediShield used to be administered by the govt....but it is now put in the hands of private "for profit" insurance companies. While many think that insurance is cheap today and give sufficient coverage when they are ill, one just have to study the American system and see what happened to their system based on insurance and that will be what will happen to us 10 years from now.
Here's Professor Elizabeth Warren explaining how a system based on insurance and privatisation to seek the best profits evolves:

Prof. Warren has other interesting works such as the documentary "Maxed Out" that exposed the problem of credit card debt among Americans - this problem (among others) is threatening to sink the US economy into recession.

U.S. Presidential Elections through S'porean Eyes.

Americans are having a really hard time trying to replace this guy:

Now the race is down to one Black guy, one woman and a war hero. It is strange that everyone I met and asked during Chinese New Year knew the names of the 3 candidates for US president but when I asked them who the MPs for their GRC were, they were able to name only half the GRC MPs. Unlike Americans, we don't really have to worry about who we vote for - as long as they come from a particular party, they must be good. Americans have a hard time figuring out who should be their next president, they go through numerous speeches, debates, town hall meetings, rallies just to figure out who should lead them costing the country plenty of time and money....and does not guarantee the best results (just look at the guy the elected the last time). If they save all that money and use it to pay the salary of the President, they might be able to hire someone like Jack Welch to run America like a big corporation.
I really don't understand why Americans are attracted to Obama. All he talks about is CHANGE - changing the political process, changing their healthcare system, etc etc.

Americans have a great system all they need is someone to tell them so and remove that urge for change. I guess the media there is not doing its job and the end result is this strong desire for change. They should have some media regulation or select their reporters and their output more carefully to give the citizens a greater sense of satisfaction for the system.

I got this bad feeling that this Obama feller is going to beat Clinton soon and McCain later to become the US President and put Americans through alot of troublesome change. Change they probably won't want if they have better newspapers.....

Sunday, February 03, 2008

2007 Worries about price hikes...2008....

"Road to Recession.....", Newsweek Cover Feb 2008

Frankly speaking guys things don't look too good. The only good thing is the good years weren't too good anyway with those price hikes so how bad can it get when things turn nasty. At least we're not Americans. Here's what the average American household is facing:

Debt at 138% of household income. What is happening in America is something like the Asian crisis - falling currency, troubled banks, collapsed property market and high debt levels. I was in a Mediterranean city on a job assignment last week- the local handmade candy store which I have visited many times before and happily accepted my US$ as a substitute for the local currency....this time the shop keeper gave me that disappointed look when I presented my US$ and said, "Ah...US$ why is it always falling, you know why?". I don't think he will be keeping those US$ for more than a few days.

"What we are not sure about is whether this will worsen into a depression...",
Newsweek Pg 3, Feb 2008

""Is the Fed trying to devalued the US$ to solve the problems, what will happen to the pensioners" - Senator Ron Paul.

People don't ask too many questions on whether an economic system is equitable until they wake up one day and find themselves destitute and without a job or when their retirement savings isn't enough for basic living. As the profits for corporations rose sharply to record levels, wages remained depressed and the American consumer simply borrowed more and more to keep some of them have decided to make the banks pay by defaulting on their credit cards. It is no fun being an average American these days. Many are asking why they are punished for the 'sins' of subprime lenders - the biggest of whom Countrywide Financial CEO, walked away with millions in compensation. Pensioners are asking why the inflation is escalating and eroding their savings as interest rates are cut to bail out Wall Street and its banks.
Your well being as a Singaporean is not just a matter of how hard you work and save but how much bad paper some faraway American bank issues, how one 35 year old "low level" trader can build up $74B worth of stock index futures causing your unit trust to plunge 10% in 2 days when it was dumped and whether Joe in California decides to pay for his credit card bills or defaults on its payment. Unfortunately the global economy means subprime in US results in a subprime economy in Singapore. Last year was indeed a Golden Period, while your bread price climbed 20% and taxi fare escalated to inaffordability, most of us got some kind of pay hike (albeit not enough) and bonus (also not enough). this may be the year we will be glad to have jobs to go and a pay package to live on every month.

BREAKING NEWS: GIC Buys Tokyo Westin !!!!

TOKYO (Nikkei)--The Government of Singapore Investment Corp. (GIC) will purchase, probably late this month, the Westin Tokyo luxury hotel for about 77 billion yen from Morgan Stanley, it was learned Saturday.
Congratulations Singaporeans!! You are now the proud owner of Westin Tokyo, a luxury hotel that is sometimes described as 7-star in luxury. Remember this next time you visit Tokyo. Isn't it great that your CPF money is funding all these wonderful buys? GIC 'borrows' your CPF money at about 3% interest rate to buy this luxury hotel in Tokyo.