Wednesday, July 08, 2009

Economy : Long hard slog.....

In April this year several forecasts were made by economists. The more optimistic ones forecasted a V-shaped recovery to occur in the 3 quarter of this year. The more pessimistic ones forecasted a U shaped recovery and the doomsayers predicted that we won't see any meaningful recovery until we are well into 2010.

Recently, US vice president said they underestimated the recession - unemployment which was expected to peak at about 8% hit 9.5% last month in the US[Link]. The US economic stimulus which was supposed to have created hundreds of thousands of jobs is coming under criticism. A large part of it was tax cuts demanded by Republicans and American families facing uncertain economic conditions basically saved a large part these tax cuts rather than spend it. The other part which was supposed to be infrastructure spending is stuck in bureaucracy only 10% has been given out for various projects. In the meantime, the US economy appears to be hemorrhaging jobs at a time when housing prices are declining and foreclosures go on unabated. In short, the US economy does not look good. The 'green shoots' touted by the Federal Reserve and President Obama are nowhere in sight. In past recessions, job losses were lagging indicators of the economy (economy recover first ahead of jobs) however this may not be true because between 2003-2007 many of the jobs created were service sector jobs (vs manufacturing), these jobs losses tend lead the economy.

So what is the economic future for Singapore?.....

Earlier this year and late last year there was an assumed demand collapse and a number of my friends were waiting for their pink slips because their companies lowered their production. However, companies ran down their inventories - demand did not drop to zero and production got ramped up in the 2nd quarter. That is our 2nd quarter manufacturing output shows double digit growth[Link]. But this growth is probably temporary because of the low base in the 1st quarter. There is no increase in demand. If we are lucky, we have a slow but steady recovery.

On Tuesday Finance Minister Tharman said this will be a 'hard slog to recovery' and he expects unemployment to remain high for an extended period. There is this very interesting paragraph from the article :

"He urged regional governments to work on microeconomic and social reforms to increase long-term consumption growth, such as developing social security and health insurance policies that would free Asian consumers to spend more and save less."

So what about universal healthcare for Singaporeans? What about taking care of uninsured Singaporeans? What about a social safety net? What about social security that works and provide more than one happy meal a day to retirees?

I completely agree with Minister Tharman that this is a long hard slog. It may take even take years for us to get back to the economy of 2006-2007. In the meantime, some transformation has to take place. Asians who have been underconsuming have to consume more ....but how to you make people consume more? You put in place certain social social and health insurance policies so that people can be sure that getting sick won't bankrupt them and there is a scheme in place to take care of them when they are old so they don't have to set aside so much of their income for healthcare and retirement. I would throw in a safety net so that people will be motivated to be entrepreneurs if they know the downside of failure is limited. Would you try the triple sumersault on the trapeze without a safety net? What about keeping the price of public housing affordable so that families can have more disposable income for consumption.

It is hard to imagine that we are going to sit around and wait for global economy to recover to reactivate our export-dependent economy. Do we want to go along the same economic direction we did for the past 40 years or are we going to see some reform. The past 20 years were a long slog anyway even when the economy was not in recession.......many were struggling and did not enjoy the quality of life of a 1st world country and many Singapore families became worse off in the past decade. This recession is a time to rethink and reinvent ourselves.....we shouldn't rush back to do more of the same.

22 comments:

Anonymous said...

"Do we want to go along the same economic direction we did for the past 40 years or are we going to see some reform."

Problem and Solution:

"Asians who have been underconsuming have to consume more ....but how to you make people consume more? You put in place certain social social and health insurance policies so that people can be sure that getting sick won't bankrupt them and there is a scheme in place to take care of them when they are old so they don't have to set aside so much of their income for healthcare and retirement. I would throw in a safety net so that people will be motivated to be entrepreneurs if they know the downside of failure is limited. Would you try the triple sumersault on the trapeze without a safety net? What about keeping the price of public housing affordable so that families can have more disposable income for consumption."

Lucky is so brilliant.

Own-self answer own-self. :)

Anonymous said...

Who says we do not consume. Just look at the restaurants, great Singapore Sale, condo launches, car showrooms. Queues and crowds!

So I believe most people still got lots of money. They are responsible for PAP in power for so long, recession or no recession.

Of course if you got no money, problem lah, whether in Singapore or not.

Anonymous said...

i don't know about consuming more. personally, it goes against my philosophy in life.

why consume more when you can be contented with what you have? why must we chase after the lastest model of handphone, tv, car etc etc???

sorry, count me out in this economic recovery plan

Anonymous said...

u've just described why taiwan has zoomed past singapore since the 80s.

because of the lack of social safety, we can at best be a nation of drone workers, no innovation, no risk taking.

while taiwan has moved on from high tech manufacturing to high tech innovation(htc,acer,tsmc etc etc)singapore life is still depending on other countries manufacturing their goods here.

sadly the old man will never allow the people to have social safety net. he has too low a opinion on 'lazy' 'lower mortals'.

Anonymous said...

Anon 8:29 PM are you some dumb ass?

If you can't read, don't try to be sarcastic to Lucky for nothing.

Lucky was responding to what Tharman's advice to regional governments to implement social security & health insurance schemes - schemes which precisely the PAP has failed to implement.

Tharman is a hypocritcal humbug for talking like that.

And you must a running dog of PAP and Tharman to come here and spit your vomit around.

Anonymous said...

I think the PAP ministers would need a hard slog to convince the ppl that we arent going to provide you with anything even though we have a few hundred billions in reserve, lost a few hundred millions here and there.

Hrmmmm...oh wait, they have their mouthpiece. But is that working? I dont think so. It's the ground that manifest the truths.

Somethings cant lie, and cannot last.

Clear eyed said...

Our Finance Minister truly deserves the multi-million dollar salary he pays himself. He is so talented he can advise other countries on what to do. But Alas, he forgets to practise what he preaches here. I think we need to do something, like using our vote, to cure his forgetfulness.

Anonymous said...

martin luther king once said...if you are going to be a street sweeper, be the best street sweeper you can be( from MJ memorial)

well, i would like to see our multi millionaire ministers(MMM) honor the street sweeper like they would Sim Wong Hoo one day - not only honor(lip service), sit down and have a regular and normal meal with these people

unfortunately, the reality is, psychophants have been promoting, honoring or should i say...empowering the elites( mostly defined as the wealth creators or generators) of society through the media

get real, there is no social economic reform until we honor the ordinary or the.....street sweepers

Anonymous said...

Lucky

PAP is rich.
They do NOT want successful entrepreneurs who they cannot control.

Tharman is doing a fine job. Believe it or not, our economy is doing better than ,say, HK.

Healthcare and such belongs to your precious Khaw and Vivian.

Anonymous said...

The US Govt/Fed are still talking about asking some parties to buy over the toxic assets from the banks. Is this real?

So, those toxic assets are still buried deep inside the banks' balance sheets and obviously not been written down much, otherwise how could the banks be reporting profits over the last quarter. They are really pulling wool over US taxpayer's eyes.

And Obama is still talking about needing a further stimulus package for the US economy. Didn't he said recently that recovery is already on track despite the bad employment figures? What is he getting at? Good news one day, bad news the next. What is real?

I think we have the making of another Japan in the US economy. The former had more than a decade of resorting to stimulus packages without making much headway.

It looks like the 'green shoots' are shriveling.

Lost Citizen

Kendy said...

Well done. Right.

When they increase their pay to levels way above those in the developed countries, they say it's because they are the best in taking care of our economy.

So the idea is, they are exceptionally good and will do a great job, therefore they deserve a high salary.

When the recession comes, they say they can't do much because we are very dependent on the external world.

Wait! There's a solution. why don't you guys slog. That's the best way to take care of the economy now!

Indeed, now we see the exceptional skills and intelligence of our greater mortals, demigods, princes and kings.

Getting obscene amounts of money due to EXPECTED exceptional performances, and when the problem comes, WE are expected to solve THEIR problems, which WE pay THEM for solving.

Sometimes I feel so insulted that I'm a Singaporean. I think we should also link the words Naive or AhDai to Singaporean in addition to the current KiaSu, KiaSee, KiaZengHu and KiaBor.

Anonymous said...

Haha...
Kendy, no need to link naive and ahdai to us, because these words were linked to us quite some years ago.

I worked in China a couple of years back and the Chinese already had that kind of impression of us. Of course, they tried to be diplomatic and said that we are honest and efficient aka follow what had been done and be safe.

I do not know what warrants people to say Tharman to be doing a good job. All I know is that his tenure at the MOE showed more acronyms to existing acroynms and regurgitating what LHL said or whichever/whomever said it first. Concerns in the teaching industry for the past 20 to 30 years; lack of teachers, class size, appraisal of teachers and assessing students potential. Perhaps he had already laid down the framework for changes, but in my opinion, no boat has been rocked.
I do not know if HK is doing worse than us but I do know that HK is very similar to us. I learnt from a HK friend that people in HK are doing the same things. They rather spend $$$ on food and tour than buying. One amazing thing that I learnt from HK friends is that while they complained about the same issues as in Singapore, they never thought of leaving of HK as they do feel emotional attachment to HK. They always regard that HK is very beautiful and is definitely the Pearl of the Orient.
I wondered is it because of the political system, they feel they do have a stake and say in HK which essentially makes them that they are truly at home. In Singapore, if the young people have the opportunity to go overseas and work, they will probably go and will not come back. The only thing that ties us back will most probably be our family and friends and definitly not Singapore.......of course some people will say that it is not that easy to differentiate

Anonymous said...

I think the issue about the pay of our ministers is not that it is too much. There is a moral and social perception attached to it.

How much is considered enough to attract a person of worthiness into the political arena.

In my opinion, many of us are incensed because inherently and intuitively, we are behaving according to Maslow Hierachy of Needs. (which personally is quite true, at least to me)

Given the fact that the political leaders of the world are not receiving such exorbitant amount of salary, it is therefore natural to feel aggrieved and a touch of incredibility of the amount we are paying our ministers.

Another reason for our incessant reference to the ministers' salary, is that we all know that no one person is indispensible in the organisation, especially in a large one. How much value is attached to a single individual unless it can be shown that this individual can bring millions or billions to a company? That is why people who are good in sales are renumerated accordingly.

But then again, serving the country and the greater good of the society cannot be associated with monetary objectives (these are conflicting in nature), surely their greater mortal minds can think of that or maybe greed has blinded them........

Thank you Lucky for letting me rant here (it may make incoherent sense... : ) )

Anonymous said...

To Anon at 7:36 PM

You do sound incoherent and from your comments you must be from the PAP elite group trying to justify the gahman's obscene pay !! We do not buy your lame excuses !!!

kwayteowman said...

I would throw in a safety net so that people will be motivated to be entrepreneurs if they know the downside of failure is limited.

You're clearly a worker 'cos you cannot understand how entrepreneurs think and you dunno what you're saying.

Those who need a social safety net WILL NOT make it as entrepreneurs. :-)

What about taking care of uninsured Singaporeans?

There's Medifund in Singapore. Also, people cannot pay, go see MP. There's a system. Dunno what you're complaining about.

Do we want to go along the same economic direction we did for the past 40 years or are we going to see some reform.

And you want some new economic direction? Tell us, what brilliant ideas do YOU have? Do you understand what's "wrong" with the present economic direction? Or is the only think you understand is this dunno what thing about increasing income inequality and the poor not seeing the wealth or something like that? Do you really understand what ails the economy? If so, tell us? :-)

To conclude, consume more my foot! Consumption is what has brought the US to its knees today. We jolly well save more (and encourage OTHERS to consume more :-P).

Clear eyed said...

kwayteowman

Lucky has more sense and morals and will do a much better job as Finance Minister than Tharman. And we need to pay him only a tiny fraction of what Tharman demands. Why are our supreme talents who are paid millions a year always asking us lesser mortals for ideas whenever they are clueless or have run out of ideas? Don't they feel embarrassed?

Anonymous said...

Part 1 in reply to Kwayteowman
---------------------------------------

Kwayteowman, from your comments I can see you are one hell of a supporter of the PAP system.

However I don't think you are correct.

:: You say that those who need a social safety net in entrepreneurship will not make it.

First you might have taken Lucky's 'safety net' proposal for entrepreneurs out of context. He was talking about the lack of social welfare system in Singapore and that given this there might be too much risk for Singaporeans to become entrepreneurs when they have to set so much aside for healthcare and retirement.

This especially real when the costs involved are spiralling out of control, thanks to PAP tweaking to extract the most from the people.

This is an issue that no true entrepreneur worthy of that name - because he would be foreward looking - can afford to ignore. Hence your concept that an entrepreneur is purely a risk taker is false.

Who says an entrepreneur succeeds by pure foolhardiness which you seem to impute?

Tell me kwayteowman, why are there so many business gurus, so many books, courses and instutitions including universities teaching people how to start and run a successful business if as you say business success is just a matter of daring to take risk?

All this great wealth of business knowledge is precisely to teach would-be entrepreneurs about the problems, the risks involved in business and HOW TO AVOID and MINIMIZE THEM!

But PAP has told you a childish story about entrepreneurship and keeps telling people that Singapore lacks entrepreneurs. Can't you see PAP leaders are all blind fools who cannot see that Singapore is what it is today because we have so many entrepreneurs all along.

Either that or PAP attempts to suggest to the people that Singapore is a success because of PAP and not because of Singaporean businessmen.

But these businessmen never called themselves with such a high-sounding name "Entrepreneur" which PAP tosses around to impress as though that is some new concept that only they came to know about recently.

----------

Now to the Medifund issue. Sure Singaporeans in need can apply with difficulty for this through the social workers (who by the way are paid by the public through Community Chest/NCSS) at the hospital or his MP.

The difference between Medifund and social welfare is that the former is a kind of aid that relies on the judgement of the government whereas social or state welfare is an infrastructural program completely worked into the overall national life.

But you might say such state welfare is expensive and would mean high income taxes for working Singaporeans.

And you would be right. Because right now, such a high tax - over 30% of one's salary - already exists in Singapore but it is called CPF contribution.

Both social welfare and CPF are fundamentally the same. They are both called SOCIAL SECURITY.

The only difference between them is that high income tax that results in assured healthcare and dole for the needy and old upon retirement is a collectivised saving scheme WHEREAS the CPF is a individualised saving scheme which PAP claims is better.

But with the spectre of a section of the populace - housewives, handicapped and unemployable, odd job workers - increasingly being left out this CPF social security program, can't you see that it is in fact a failure?

To make things worse, part or perhaps even a large part of the CPF funds - which is considered part of Singapore national reserves - are now no longer in PAP's hands but have been invested in all kinds of global ventures by Temasek and GIC over the decades.

Their performances have also been far from good - that I am sure you would also know through news reports - unless you insist on believing all the fairy tales spun by PAP after the $multi-billion losses just within the last few years.

Anonymous said...

Part 2 in reply to Kwayteowman

As for consuming more, to be fair you got to go back to the originator of this idea, Tharman himself not Lucky actually.

It is not an entirely wrong concept because the leisure class represents a fast if not very fast growing segment of the economy.

But that is actually old knowledge, first mooted by futurists 20 years ago. This trend become more and more pronounced starting some 15 years back - travel for pleasure, spas, beauty salons, fitness club, cybergames, car racing, concerts ... the list goes on.

So Tharman is trying to appear clever but I afraid he is late by 2 decades.

Sorry no point for him especially when his own PAP government insist on making people work until they fall dead.

LuckySingaporean said...

KTM,

Sorry I didn't notice your learned comments. Until I had time to look up comments on old articles.

The idea of a safety net and entrepreneurship came from American's founding fathers.

http://www.just-say-
why.com/blog/index.php/2009/05/24
/minimum-social-safety-net/

It is often said that true entrepreneurs are those than don't need safety nets. Like the French Spiderman who climbs tall buildings without any safety devices but there are very few such people around. When you have a safety rope, suddenly more people will climb tall buildings for the thrill of it. We had true entrepreneurs like Sim Wong Hoo etc but there are too few of them. We just need more people to be willing to start small enterprises and if the endeavour is the same as climbing mount everest without oxygen and safety rope...there will be fewer of such people.

As for medifund, the criteria set is too stringent and many are left out. This is the same for PAP subsidies in many areas.

Did you read this article?
http://theonlinecitizen.com/2007/12
/healthcare-costs-increase-the-
most-but-medifund-payouts-
declining/

There are many people who don't qualify for much subsidies,and many unsubsidised patients are uninsured with congenital health problems. Their savings are either drained off or the get into debt to pay for their medical bills. Hospitals subcontract these to debt collection companies who will then take over the debt. In means testing, they disqualify people at the admissions process and there is no limit to the bill the uninsured patient can incur. So is there any surprise people chalk up bills of $100-$200K and can't pay up? Take the case of Charmaine, the little girl with cancer, her NUH bill was said to be $80K half way through treatment - can her unemployed single mom pay this? ...Thank goodness Singaporeans open their hearts to help. I hope she makes it....With the PAP govt you always have to read the fine print in their schemes be it medifund, medishield etc they leave gaps the size of the Grand Canyon and many people fall through.

As for consumption, that was Tharman's idea. I was just reinterating it. There is some logic because it is believed Asians were UNDER-consuming. We will consume more when our lives improve anyway. The Americans OVER-consumed - that became a problem and we should not repeat this.

kwayteowman said...

Lucky,

Sorry I didn't notice your learned comments. Until I had time to look up comments on old articles.

No apologies necessary. Given the present economic conditions, we should all be working harder and not blogging (or replying to comments). :-)

The idea of a safety net and entrepreneurship came from American's founding fathers.

Really? Nice to know. The KTM's view is that America is all screwed up now. Do we have much faith that America's founding fathers are right?

We just need more people to be willing to start small enterprises and if the endeavour is the same as climbing mount everest without oxygen and safety rope...there will be fewer of such people.

Out of curiosity, what makes you think we need MORE entrepreneurs? Government said so? The KTM doesn't think so. We just need more people to do what they're best at doing and who know how to be contented with life.

If people dunno how to find contentment. Makes no difference whether they are an entreprenuer, politician or janitor.

As for medifund, the criteria set is too stringent and many are left out. This is the same for PAP subsidies in many areas.

Did you read this article?
http://theonlinecitizen.com/2007/12
/healthcare-costs-increase-the-
most-but-medifund-payouts-
declining/


What makes you say that? Just because Leong Sze Hian says so? The KTM doesn't think much of Leong and his opinions BTW. He likes to throw up numbers yes, but his analysis is often suspect. The KTM also wasn't happy with the numbers reported, but it's because they don't tell us enough, not because they necessarily suggest anything. :-P

There are many people who don't qualify for much subsidies,and many unsubsidised patients are uninsured with congenital health problems. Their savings are either drained off or the get into debt to pay for their medical bills.

You have made these claims before and the truth of the matter is that some cases must exist. We don't disagree that there may be some issues for those with congenital problems. Government also knows its a problem. Maybe you can ask your MP to ask Khaw in Parliament what's MOH's solution after deliberating on this problem for at least two years?

So is there any surprise people chalk up bills of $100-$200K and can't pay up? Take the case of Charmaine, the little girl with cancer, her NUH bill was said to be $80K half way through treatment - can her unemployed single mom pay this?

Quite certain Medifund will cough up money to pay if Singaporeans didn't donate. Imagine the political fallout if not.

Would however be hard for Medifund to cough up $500K to fund her US treatment. On what basis? The KTM is asking this question from a policy perspective. Medifund cannot only just pay for Charmaine. If it coughs up $500K for Charmaine, it would have to cough up $500K for all future Charlies and Johns who also want to go to the US to try experimental treatments.

With the PAP govt you always have to read the fine print in their schemes be it medifund, medishield etc they leave gaps the size of the Grand Canyon and many people fall through.

Rest of the non-congenital cases are supposed to be covered by MediShield. Still it's a sizable amount that could possibly be left to pay and the people who get stricken will be poorer at the end - but there's a balance that must be struck.

When it comes to medical costs, there are always two sides to the story. There are also people who chow kuan dun want to pay. You should talk to a medical social worker.

kwayteowman said...

(continued from previous)

As for consumption, that was Tharman's idea. I was just reinterating it. There is some logic because it is believed Asians were UNDER-consuming. We will consume more when our lives improve anyway. The Americans OVER-consumed - that became a problem and we should not repeat this.

Doesn't matter if it's your idea or Tharman's idea.

Anyhow you have to understand that there's a fine but important difference between asking others to consume more and taking your own medicine. In Tharman's shoes, the KTM will also encourage other countries to consume more.

The KTM's point is that we should just stick with an export-driven economy instead of trying to transform into an consumption-driven one. As you say, as the society ages, consumption will naturally increase. In fact, the KTM thinks we should take steps to encourage people to save even more to reduce the increase in net consumption. :-)

May not seem like it makes sense since this is contrary to popular opinion, but the KTM is not quite prepared to explain here. The KTM will write something about this. Actually already started, but dunno when he will finish the post. :-P

kwayteowman said...

Lucky,

Just remembered that was this article (yesterday?), which reported that the Government is asking the polys to try that unemployed PMETs to become entrepreneurs.

So yes, there is yet another method of "encouraging" people to become entrepreneurs. Basically, if people try but really cannot find jobs that perhaps the force of circumstances will make them become entrepreneurs (without your safety net).

In fact, the KTM contends that these people are somewhat more likely to succeed 'cos they know they cannot afford to fail. :-P If there's a social safety net then these people might think: fail also nevermind lah, 'cos Gahmen will feed me. :-)