Wednesday, June 12, 2013

It is the govt that has to be regulated not the online news ...

It is almost a month since my last posting. It is a bit hard to explain why I have not written as much as I did in the past. There are no major changes in my life except that I'm getting older. Since I started blogging in 2005, the Internet has enabled Singaporeans to have  deeper understanding of the system they live in. It allowed the underlying causes of problems faced by Singaporeans to be discussed objectively and trade-offs in govt polices to be seen with greater clarity.  This deeper understanding does not help the PAP to maintain its dominant position.

Despite having the whole mainstream media on its side,  the PAP has struggled to explain the benefits of the system it has in place and convince the people that old policies and schemes should remain as they are.  The less democratic aspects of the system of govt is becoming less justifiable and less acceptable to Singaporeans. Even as the aspirations for progress and change builds up, the PAP wants to maintain its dominance making as few changes as possible. To do so,  it has to control the Singaporeans' access to information. The PAP wants control and influence over the online news media that has increased in popularity in the last few years. The new MDA regulations gives the PAP govt broad powers to do this.

Under the code, prohibited content includes "material that is objectionable on the grounds of public interest, public morality, public order, public security, national harmony, or is otherwise prohibited by applicable Singapore laws."

The MDA on Tuesday said websites that have at least 50,000 unique visitors from Singapore every month and publish at least one local news article per week over a period of two months must obtain an annual licence.

The MDA said the licence guidelines will "apply to all content on the news sites, including readers' comments on the news sites".

The maximum penalty for illegal broadcasting under the Broadcasting Act is a fine of $200,000 or three years' jail or both. But for sites that are licensed, failing to comply with conditions could result either in financial penalties or the licence being suspended or revoked.[Link]

What worries me is not just the use of harsh laws to limit the freedom of Singaporeans and disable them from effecting change but what the PAP govt can does under a cloak of secrecy due to absence of laws protecting the privacy and freedom of Singaporeans.  

Singapore has a weak legal regime to protect privacy and has deployed extensive surveillance systems.[Link]

You may have missed the news 2 days ago about a  US NSA (America's agency that does surveillance)  technician leaking information about the NSA's PRISM system that allows the US govt to access all servers of major US infocomm companies including Microsoft, Google, Facebook, Yahoo! etc giving the US govt the technical capability to spy on its own citizens. PRISM gives the US govt access to all emails, VoIP,  files and messages of Internet users.

"The government has granted itself power it is not entitled to. There is no public oversight. The result is people like myself have the latitude to go further than they are allowed to" , Whistle-blower Edward Snowden[Link]

While the technical capability exists to spy on its citizens, the NSA is bounded by American privacy laws that limits its surveillance activity to "any customers of participating corporations who live outside the United States, or American citizens whose communications include web content of people outside the United States."[Link].

According to the Director of National Intelligence James Clapper, PRISM cannot be used to intentionally target any Americans or anyone in the United States. [Link].

Unfortunately the laws protecting Singaporeans from such surveillance is weak and there agencies such as the CSIT (Centre for Strategic Infocomm Technologies) that operate in secrecy and are known to be involved in surveillance activities from the type of equipment it procures. Without a strong regulatory and legal framework in place, there is a big risk that the interests of Singaporeans will be compromised.

Singapore, where authorities keep a close eye on opposition groups and political commentary, some people use encryption programs to avoid surveillance.

"If you are concerned about electronic eavesdropping, you can use pidgin IM - it has an encryption module for instant messaging," said Donaldson Tan, editor of socio-political website New Asia Republic.

"There is also Tor client for online anonymity," he said, referring to two popular free software programs developed by volunteer programmers to guard against network surveillance.

Asked if he was concerned whether the U.S. government would share surveillance information with Singapore authorities, given the friendly ties between the two countries, Tan said: "The U.S. is really hard to read".

A Singapore government spokesman did not immediately respond to requests for comment.

Several people in the region said the reports of government access to e-mails and phone calls were not surprising.

"This latest revelation, if true, is really no more than putting proof to suspicion," said Howard Lee, a blogger who often writes about political and social issues in Singapore.

"As citizens of democracies, our response should not be fear, but a concerted voice to demand accountability and transparency. I believe this is the current aim of civil society groups in Singapore."[Link]

The existence of secret organisations operating in the absence of regulation that protects the privacy of Singaporeans from surveillance by the state creates fear among those who legitimately oppose the govt because they hold a different point of view.  There is no reason to govern Singapore with such repressive measures that does not exist anywhere else in the developed world except to maintain dominance at a time when there is a growing desire for change.

Tuesday, May 14, 2013

Sylvia Lim drops the bombshell on AIM issue!

When the AIM issue emerged a few months ago,  PAP's Dr. Teo explained that the move to have an open tender to sell the town council software was recommended by consultants. Several software companies collected the tender document but nobody responded so AIM wanting to help the town councils decided to bid for the contract.

"The TCs advertised the tender in the Straits Times on 30 June 2010. Five companies collected the tender documents. These were CSC Technologies Services Pte Ltd, Hutcabb Consulting Pte Ltd, NCS, NEC Asia Pte Ltd and Action Information Management Pte Ltd (“AIM”). 

I am aware that NCS considered bidding but in the end, decided not to do so as it was of the view that the IP rights to software developed in 2003 on soon to be replaced platforms were not valuable at all.

Another company withdrew after it checked and confirmed that it was required to ensure renewal of the NCS contract without an increase in rates. The company did not want to take on that obligation. The others may also have decided not to bid for similar reasons.In the end, only AIM submitted a bid on 20 July 2010." - Dr. Teo's statement[Link]

The Worker's Party has rejected MND findings that resident's interests have not been compromised

"On the tender, she suggested no software company here could fulfil it other than AIM, because it required all directors to have town council experience. She also said there was no reason given for the need for the one-month termination clause - and added that the MND report did not address this issue." - Report on WP's rejection of MND report[Link]

In her parliament speech yesterday, MP Sylvia Lim said:

"In this light, I cannot help but recall the Parliamentary debate in 1988 when the Town Council Bill was first presented for the Second Reading. At that debate, the then First Deputy Prime Minister Goh Chok Tong justified the introduction of Town Councils as providing political stabilisers to the political system. He said there was a need to protect the public by ensuring that political parties which aspired to be government should first prove that they could run a Town Council for a constituency. He said: “If a new party finds itself unexpectedly in government, it would be like an aspiring pilot taking over an SIA jumbo jet in mid-air before he has flown solo in a Cessna. This cannot be in the interest of passengers in the jumbo… TCs are the Cessnas of our political system”. He also highlighted that some PAP MPs had expressed a fear that opposition MPs could win “some seats, prove themselves” (able to run the Town Councils) and thereafter “fan out to other constituencies in subsequent elections” (Hansard, 28 June 1988)

Is this what this whole AIM episode is about – ensuring that the passengers in the Cessnas have bumpy rides or even crash land? Does the government even care about the passengers in the Cessnas, or are they simply collateral damage in a bigger political game.

........ In our view, the PAP TCs had unjustifiably risked a disruption to public services and that this should not be allowed to recur. I am relieved to read that the MND recognized the need to preserve continuity of public services as a paramount priority"

For a democracy to function properly, the choice of the people has to be respected. When they choose a new govt, power has to be handed over smoothly so that the people do not suffer disruption for exercising their vote. It takes at lot of arrogance for a group of leaders to believe that they are the only ones who can lead the nation. It takes some amount of  hubris and elitism for them to believe that they are the only ones with the right to leadership. It takes a lot of disregard for the rights and interests of the people to want to see them suffer when they no longer want you as their leader. After getting paid the highest salaries in the world, not planning for a smooth handover should the people express a desire to be led by another party based on a different ideology is just irresponsible. It is not just AIM but the entire civil service and SAF has to be independent from the PAP - it is not right and very dangerous for a political party to put its own power above the interests of the people....doing so undermines the stability and security of the country.

Monday, May 13, 2013

Foreign wealth widens inequality in Singapore - Report....

Foreign wealth widens inequality in Singapore - Asia-Pacific - Al Jazeera English

"The influx of money is making Singapore one of the richest cities in the world. But the low tax rate also means no social security net, given the plummeting wages among the poor as foreigners take up blue-collar jobs" - [Link]

Some time back statistics released show that the average household income of Singapore Indians has increased significantly:

"Indians overtook Chinese as the ethnic group earning the highest income. Last year Indian household earned a median income of $5370. This compares with $5100 for Chinese families and $3844 for Malay families"
- [Link]

As a Singaporean, I thought "wow, this is fantastic" for our fellow Singaporeans to have made so much progress. Later I found out how this "progress" was achieved.  Singapore opened its doors to wealthy Indians from India causing the average income of this ethnic group to go up. The "long time Indian Singaporean" did not make much progress in recent years and like all other Singaporeans suffered from the rising cost of living as Singapore became more crowded.

If we bring in rich people to the country, the rest of the population can benefit if the rich is properly taxed to provide a source of money for social spending or if they invest in businesses that create better paying jobs for Singaporeans.  In Singapore our tax rate is very low and we do not tax wealth but income. A person shifting his wealth to Singapore pays very little in taxes and we attract wealthy people with the wrong motivation -many are because they want to avoid high taxes back home. If they don't want to contribute to the society that made them rich, they are not here to benefit our society as a whole except a few private wealth managers and our already wealthy banks.

In the US, President Obama increased minimum wage[Link] several times, increased taxes for the rich[Link], gave more people access to college education. He has also gone after the banks and rich people who evaded taxes by shifting money off-shore[Link].

The Singapore govt is not only doing little  to address the inequality that is polarizing our society...our deregulated banking system, low taxes and citizenship schemes for the rich thwarts the efforts of other govts to fix this problem by allowing rich individuals to escape their responsibility back home. The money that has flowed here into property investments has made life difficult for the ordinary Singaporean by raising his cost of living and worsening the inequality problem in Singapore.

Sunday, May 12, 2013

Malaysians Overseas Protest : Different countries, Different reactions....

It is always interesting to step back and see what happens when similar events take place in Singapore and in other countries. How the authority reacts and what Singaporeans think of it. Malaysians around the world have reacted negatively to the election results and the rising use of racism among those in power to maintain their hold on the country. There is always hope for a country where the citizens are willing to overcome difficulties to bring about positive change

People in many other countries can identify with the basic human yearning for freedom, justice and democracy.

In Melbourne, the most livable city in the world, Australians express their solidarity with a group of young Malaysians in black protesting in Federation Square.

The same thing happened in Singapore and the reaction is somewhat different. I'm not talking about the police who first warned the protesters then later arrested 21 Malaysians for gathering at the Merlion Park  yesterday - the police had little choice, they had to enforce Singapore's law otherwise they will be accused of double standards. The police had to do what they did. 

Before we jump in and discuss this further, lets be clear about what the Malaysians did at Merlion Park. They gathered there at 5pm yesterday wearing black t-shirts, holding up a few signs and later sang the Malaysian anthem. There was no rowdy behavior, shouting or anything like that. Here is a picture of some of those involved in the protest.

The police had to arrest them because they have broken Singapore laws and Singaporeans have been arrested for lesser offenses of similar nature. I think the Malaysians who had been warned earlier expected to be arrested given the Singapore Police is known for its efficiency. These young people probably felt that it was worth doing even if they were arrested, sent to jail and expelled from Singapore.

Here's a sample of reaction from a number of netizens[Taken from Straits Times website] typical of the reaction from Singaporean netizens.

Most of Singaporeans' comments resemble one of the following... If they want to protest, please go back to Malaysia. We cannot allow this kind protests because it will destabilise Singapore. They should be taught a lesson. Lets not be soft to foreigners.

"The Malaysians protesting and breaking our laws should be thrown into jail and barred from entering Singapore immediately.

Singaporeans is not involved in your domestic problems Malaysians must learn to respect the law of each countries in which they do business, live, works or travel."
- Arami Chong, Straits Times Reader.

A small number Singaporeans did say that the authorities shouldn't be so harsh a group of people who gathered peacefully and caused no damage to public property.

Does allowing people to protest peacefully undermine the security here? How many of you would hesitate to go to Melbourne because the allow both citizens and foreigners to protest there? Thousands of Singaporeans send their children to Melbourne for their studies every year....and they are not worried protests are allowed there.

Few Singaporeans bother to ask what is the intention of those involved in the protest at Merlion Park. This is the first thing you have to do before you jump in to condemn and accuse them of anything. Their intention is not to challenge our laws or our authorities or to disrupt the peace in this country. They feel strongly that there is a need for change in their home country and like all young people around the world they want a better future for themselves and their fellow countrymen. The response of many Singaporeans is we should treat these people as criminals and apply the harshest punishment. We must not forget that positive change comes from people standing up for what they believe is right and those who want to preserve the old order will use laws to suppress change for the better. The laws used against this group of Malaysians can also be used readily against Singaporeans when the time for change comes ....we have to look beyond the our harsh laws designed to limit our freedom to think about what is morally right and what is morally wrong. What is right is always worth supporting no matter how repessive the environment.

Wednesday, May 08, 2013

Malaysia's elections holds many lessons...

Finally it is over and the results are out. The opposition won more than half the votes counted but did not get enough seats to form the govt. The opposition support is concentrated in Peninsular Malaysia where they won 53.3% of the vote vs 45.7% for BN.

While the ruling party in Malaysia is very different from the PAP, there are several common traits they share. One is the control of the traditional news media. I always pick up a copy of the English newspapers whenever I go to Malaysia  - there is plenty of coverage for govt programmes, the leaders and nothing about the opposition - if there is something, it is usually negative. The Malaysian opposition has been able to overcome the state controlled media using the Internet and social media for its campaign. 

"The mainstream media is completely controlled by the government and denied access to the opposition. Malaysia ranks 145 on Reporters Without Borders Press Freedom Index and has dropped in the ranking every year since 2003. During the campaign period countless hours of airtime and dozens of pages of newsprint are dedicated to promoting lies and misinformation about the opposition without providing any opportunity for rebuttal. There can be no real democracy with such a lopsided and biased media environment. Throughout the last five years Malaysian authorities have arrested bloggers under charges of sedition and treason." - [Link]

Singapore's mainstream media is ranked 149 compared with 146 for Malaysia's. 

Another issue in this election is the lack of independence of the Election Commission. This election, the Malaysian EC;s reputation is completely ruined. Opposition supporters who are now the majority of Malaysian voters are suspicious of the election results. 

"It's electoral fraud, the Election Commission's complicity in the crime, attempting to steal the elections from the people," - Anwar [Link]

There are many issues associated with the Malaysia election process - these include postal mail in votes, phantom voters, etc. In this election, there were accusations that foreigners were flown on chartered flights to closely fought seats to vote for the ruling party, vote buying, ballot stuffing, problems with indelible being washable. While it is not clear if these incidents were widespread, the social media reported many of these showing video evidence like this one below of foreign workers brought to polling centers.

"Based on the voter list gazetted in March 2013 the following has been identified:

- Postal voters who by definition are engaged in national service with a national origin from Pakistan, Bangladesh, or Indonesia
- 28,000 Philippinos and Indonesians designated as voters based in
Sabah but casting ballots in Kuala Lumpur and Selangor state
- The Malaysian Electoral Roll Analysis Project has identified countless examples of dubious registrations in the voter file including instances of 100s of registered voters residing in a single home, foreign nationals listed as registered voters, individuals registered doubly as regular and postal voters,

The Election Commission acknowledged many of these problems but failed to take adequate steps to resolve them." 
The Election Commission falls under the purview of the Prime Minister's Department and incidents of possible fraud gets linked quickly to the Malaysian Prime Minister completely eroding the trust of people in the system. The Election Commission should be completely independent and the members should not be elected by leaders of a political party so as to command public confidence. When elections become closely fought, the public can be extremely suspicious of various actions of the EC if it is not an independent body.

The drawing of boundaries of constituencies has a potent effect on the number of seats won by a party. In Peninsula Malaysia, the opposition won 53% of the votes but it lost many closely fought seats because the ruling party could examine previous voting patterns in sub-districts and adjust the boundaries according to get as many seats as possible and to deny proper representation for people who oppose them. These boundaries should be drawn objectively so there is equal weight for each vote.

Najib Razak now says he wants "reconciliation" . It is for Malaysians to decide whether they accept him as their leader after what happened in this election. The majority of Malaysians wanted real change and voted for it. They now feel rather "short-changed" after participating in an election process that left so many unanswered questions. I know a few Malaysians who went back home just to vote from faraway places such as Australia and England. 300,000 Malaysians working in Singapore rushed home last weekend to cast their votes. They knew the importance of this election and how it could have changed the course of the country.

Saturday, May 04, 2013

Malaysia's hotly contested elections....

In order to win the Malaysian elections, both the ruling party and opposition have resorted to highly populist manifestos to win the votes.

Here's a Malaysian opposition candidate promising the people free education all the way to university, cheap patrol, money for those over 60 and many other goodies.

Najib himself had already implemented free outpatient healthcare for the elderly, free health screening and welfare programs for the poor. To get re-elected, it was reported he had to 'copy' parts of the opposition manifesto so that he would not lose out in the 'goodies for votes' game.

All this highlight one often mentioned problem with democracy. In order to get elected, politicians make all sorts of promises that cost the country billions. Once they start handing out goodies, the country start to have budget deficits, borrow from international lenders and end up like Greece and Spain. This however is just one side of the story - that dire outcomes are linked to giving too much to the people is just one interpretation of the story...convenient interpretation for those who are against social safety nets. Spain's problems are caused by the govt bailing out banks after its property bubble not welfare. Greece's problem is messier - it ran a bloated govt sector and the govt cheated on the budget accounting with the help of Goldman Sachs.

So what is going to happen to Malaysia if the opposition wins and start its free education program. Will it go bust? According to the politician in the video,  under the steady hand of the opposition, the state of Penang tripled the reserves in 5 years by running the place more efficiently and getting rid of corruption....all of the opposition controlled states have healthy finances.

In Singapore, for some reason, Singaporeans think of free education as a bad idea. But free education has existed in many countries like Germany for a very long time. Without going through the maths, we have been led to believe that something given out free is just not sustainable and will strain the govt finances. The strange thing about Singapore is the govt happily provide free university education through scholarships to many foreigners but insists on reducing the subsidy for own citizens by hiking tuition fees every few years.

But lets go through the maths to see how much is needed to make university education completely free in Singapore. Every year about 30% of a cohort enter university - roughly 12,000 students. On average they pay something like $8K in tuition fees [Link]and each university course is 3-4 years. So making university education completely free will cost the govt roughly 12,000 x 8000 x 3,5 = $336M more in its budget. The total amount is about 2-3% of our defense budget or 0.6% of our total budget. To put things in perspective the 2012 increase in defense budget was by $504M [Link]to $12.24B - there is no urgency to increase our defense budget which is already far in excess of what is needed to defend Singapore but they chose to do it over something else for the citizens. What I'm getting at is the issue of free university education has little to do with financial prudence and more to do with ideology - they refuse to do it not because the money is not there but they prefer to do something else with the money.

The Malaysian stoy is far more complex and intriguing. Under the Najib administration, Malaysia has a debt to GDP of 52% - making it the most indebted nation in South East Asia. All these promises the opposition has made to the people on the surface appear to be populist and designed to win votes. However, there is another dimension to this. The spending is only possible if they can get rid of corruption and unlock the billions lost in govt contracts and crony capitalism. In other words, the promises made can only be fulfilled if the opposition runs a clean govt and stay away from practices that has hindered progress in Malaysia.

Here is Anwar explaining his vision with great clarity and charisma.

For Malaysians it a choice between maintaining the status quo which they are familiar with or taking a chance with a new govt. The power structure in the ruling party makes it hard to rid itself of corruption because corruption ad cronyism has become entrenched. Taking a chance with the PR coalition involve risking your future with an new govt without experience. The opposition has chalked up a decent track record in 5 states that they won in the 2008 elections and shown that they can get things done. For the Malaysia voter, the only way ahead and the only way to get real progress is to dismantle the existing power structure which is riddled with corruption ...but that cannot be done without taking some risk with a new govt....

Thursday, May 02, 2013

Info-graphics : Income Inequality in Singapore....

I haven't been writing for a while. I think it is the big overhang from the White Paper that incensed Singaporeans and intensified political discussion at all levels of our society. Singaporeans today are much more aware of the challenges in our society than any other point in the last few decades. While the govt tries to fix the problems we have with housing and transport, the real hard problem that our society face is that of inequality. The PAP seem to avoid all the hard decisions on taxes, minimum wage and healthcare - preferring to keep the status quo...but the middle ground is very much eroded.

The problem of severe inequality makes solutions for all other problems harder. Inequality in itself creates an unlevel playing field for Singaporeans and when a large segment find it so hard to overcome their  disadvantages they will stop supporting the matter how good your transport system is or what you try to do in public housing.

We have never seen the kind of extremes we see in the wealth distribution today. It is the highest in the developed world (we sometimes share this dubious honour with the United States). A dominant govt like that PAP cannot say it is not due to its policies is clearly an outcome of its policies. Policies that amplify inequalities by continuous pursuit of pro-business policies almost to the point of neglecting the plight of the working class. The PAP now alters its policies to limit foreign labor growth and increase the ratio of Singaporeans in the workplace. But this is a shift from an extreme position and there is only so much it can do because businesses have grown dependent on imported labor. Telling Singaporeans they are "doing something" is not going to satisfy the ordinary working citizen that is fast losing his patience because he senses the PAP govt is unable to make fundamental changes...and perhaps it can't because it has painted itself in the corner by going down the same path for far too long.

Watch the Malaysian election closely because it is going to tell us something. Politicians such as Najib knew he had to make changes when the citizens voted in large numbers for the opposition. He did go ahead to make numerous changes like eliminating the ISA, implementing minimum wages, providing free healthcare for the elderly and he did run the economy relatively well - decent growth and low unemployment. But what he couldn't do was to get rid of cronyism and corruption which Malaysians today simply cannot accept. It remains to be seen if he has done enough but my sources tell me they are heading towards further losses.

Leaders sometimes know that they need to change after they overcome their own denial but underestimate the rate and magnitude of change. I think leaders in Singapore have underestimated the effects of income inequality. From their Ivory Tower they can philosophized and think that people should just accept the extreme inequality as a consequence of their "meritocratic system". This is a mistake. It is an easy mistake to make when you experience the favorable outcomes of the system as an elite showered with opportunities and high wages - you justify your own success as the result of meritocracy and by that token see the failure of others as the result of their lack of ability and effort. But they forget that meritocracy does not exist in isolation - the inequality is amplified by policy choices of our leaders and not just dependent the talents and effort of individuals. Our relatively extreme inequality is simply the result of extreme policies adopted by the PAP govt....and the PAP govt has made no fundamental changes to move from its extreme.      

Thursday, March 14, 2013

Video on the Income Gap...

This video about the income gap was released late last year and has gone viral. It shows how bad the income gap is in the USA by taking the ratio of the wealth and income of the top and comparing it with the bottom.

If you find it shocking how bad the income gap in USA has become, you should be aware that there is only one developed country worse than the USA when you measure income gap as a ratio of the income of those on top vs those at the bottom. That country is Singapore.

Tuesday, March 12, 2013

Documentary : The One Per Cent...

Here's a documentary made by Jamie Johnson heir to the Johnson & Johnson pharmaceutical fortune. He explores the effect of the wealth gap on American society discovers how it leads to stratification and resentment.

IIn Singapore we often hear that that the income gap is the result of meritocracy. Nothing can be further from the truth. The wealth gap represents an unlevel field rather than the superior talents of some to contribute to society. The PAP govt exercise extreme parsimony in helping the poor, sick and disabled but gives handouts to big businesses in the form of low taxes, cheap foreign labor and pro-business policies. At the same time the govt reduced the benefits and protection of our workers and force them to struggle by importing cheaper labor to compete against them and making them endure the rising cost of living. This is how we end up with such a large income gap and an un-meritocratic system.

Meritocracy is destroyed by the advantages of wealth and an unlevel playing field. Workers at the bottom 30-40% in Singapore have the lowest wages in the developed world, live in a city that is 6th most expensive in the world, and have no independent collective power to improve their situation.  The system has so many obstacles in the way of people making their way up:

Mr Chan said the Government, however, does not have data to track relative social mobility, which is the proportion of people who have moved up or down the socio-economic scale relative to the rest of their cohort over time.

"This reflects the churn amongst income groups in our society. We do not have data on such churn as it requires longitudinal studies over a long period of time," said Mr Chan.
He added that while the Government has tried to track inter-generational movements for social mobility, it has not found any studies to be "particularly complete".  [Link]

The PAP often says that social mobility is one redeeming characteristic of its system. But when asked for data on this by an NMP, they admit that they have no data to track social mobility. They are actually in denial of the facts.
The Great Gatsby Curve is a chart[Link] plotting the (positive) relationship between inequality and inter-generational social immobility in countries around the world. It shows a strong correlation between income inequality and lower social mobility.

The PAP has tilted the playing field so much, Singapore is now a "haven for the rich" (see previous article). But we should not blame the rich for being rich and resent them for coming here -  most of us aspire to be ultra-rich too. If you are rich, you might do the same to move to a place the favors those in the richer classes over the other classes. They are only acting in their own interests and not here to disadvantage any of us - that is not their intention. However, we do expect enlightened leadership to act in a balanced manner so that the system is fair  If our income gap remains where it is, Singaporeans with lose faith in the govt and our society will become polarized as trust is eroded. That is a bigger threat to our society than the one we spend $12B to defend against.

Sunday, March 10, 2013

WSJ - Wealth Over the Edge Singapore...

"....Singapore has some of the lowest taxes in the world, including none on capital gains and most foreign dividends. But it also has relatively secretive private banking laws and zero harassment from paparazzi or protesters, whose activities are narrowly proscribed by Singaporean authorities, further creating an aura of order and stability."
- WSJ [Link]

If you're unable to play the above video click Here

"Singapore's "Gini coefficient"—the best-known economic measure of income disparity—is the second highest in the developed world. Wealth-X, a private consultancy that provides intelligence on the world's uber-rich, estimates some 1,400 ultra-high-net-worth individuals now hold more than $160 billion of wealth in Singapore. Even upper-middle-class natives find themselves unable to afford houses in some parts of the city-state, such as Sentosa Cove, where more than 60 percent of the houses are owned by foreigners. Some are put off by flashy displays of wealth, particularly when it is the wealth of foreign nationals."- WSJ [Link]

While ordinary Singaporeans find life getting tougher and tougher with every passing year, Singapore has become a favorite destination for the ultra-rich. The movement of wealth to Singapore did not benefit Singaporeans at all except for the lucky few involved in wealth management and property.  The income gap ballooned so did the cost of living causing Singaporeans to feel that the quality of life has deteriorated over the years.

In the past we attracted entrepreneurs who came to start businesses that created jobs for Singaporeans. These days Singapore has become a playground for the rich...the rich that are here because they see Singapore as a haven that protects their wealth from taxes and protects them from scrutiny. The excessive conspicuous consumption in the form of Ferraris, nightclubs with thousand dollar cocktails, and the expensive brands dominating shops along Orchard Road have become painful reminders of the large polarising income gap in our society, The PAP has pursued policies that turned Singapore into a magnet for the rich. Policies often have to favor one section of the society over another ...and Singapore becoming a haven for the rich shows which segment of society PAP policies have leaned towards and all this is the outcome of the choices the PAP govt has made.

"Public expressions of anger or dissatisfaction with Singapore's transformations are limited, since protests for the most part are prohibited. Yet signs of unhappiness are multiplying. The city-state's ruling party retained power with its lowest percentage of votes in Singaporean history in 2011, and a thriving blog culture is prodding officials to consider some changes to the country's economic model, including the creation of a bigger social safety net for the poor, which likely would require higher taxes."- WSJ [Link]

As Singapore becomes a favored playground for the rich, life here has become a much harder struggle for the middle class and below.

Thursday, March 07, 2013

Free public transport and other public transport ideas....

If you go to Melbourne, there is a "circle tram" that goes round the perimeter of the heart of the city. Rides on the tram is free[Link].  If you were a tourist, you save a few Aussie dollars out of the thousands you spent there but you leave the city with such a great memory of going to so many places taking free rides on this circle tram, you go home and tell your friends what a great city Melbourne is. This free public transport service adds to the charm of this city which is voted the most livable city in the world and it does the equivalent of millions of dollars spent on advertising to promote tourism.   Giving something free can result in plenty of indirect payback for a country or city. However, to do this, you have to break this principle of no freebies, no "cross subsidy"  and think of system and nation level benefits.
The PAP govt has always had a problem with giving out something for free because they imagine that people will abuse it so it is refreshing to hear one of the PAP MPs suggesting:

"On Tuesday, MP for Pasir Ris-Punggol GRC Dr Janil Puthucheary suggested free travel on public transport before peak hours to ease peak-hour congestion and change commuter travel patterns." - [Link   

A few days ago MP Puthucheary suggested making public transport free just before peok hours to reduce rush hour load on our trains.

 Today's public transport problems cannot be fixed quickly by spending of billions of dollars on transport infrastructure because it will take years to build the new infrastructure. The PAP is opposed to freezing the number of foreigners here so the pressure on our current infrastructure will keep rising. If nothing is done, there quality of service will remain right about where it is or gets worse while we wait for new infrastructure to become operational. Last year Minister Liu requested for a billion to be spent to help bus operators because they won't improve unless this money is there. Minister Liu hinted last year that fares would have to increase for operators to improve their service. This is an unpopular move among Singaporeans who are struggling with rising cost of living and several MPs have suggested that fares should be increased only after the quality of service has been improved.

What we need is to get out of all these constrained arguments and look for breakout ideas. Making public transport free for the period before peak and after evening peak hour is an example of breakout idea that should be examined more closely. The govt is ready to spend billions on new infrastructure and this idea looks a lot cheaper to implement and will yield faster results. The scheme can be ended once new infrastructure become active. We should change our mindset and look at overall savings and benefits instead of money spent giving something away for free.  By shifting a a significant number of commuters that contribute to the rush hour crowd, our transport infrastructure has to cater to a small peak for rush hour. The idea may result in overall cost savings....and better overall allocation of resources to meet the needs of the people - those who need to save money get up earlier and those who want to save time pay for it. We should view these free rides as incentive given to people who help to reduce strain on our infrastructure ..and the need to keep adding infrastructure.

A far more radical idea I have in mind for sometime is to use the full amount collected in COE to fund public transport infrastructure and fares. When the COE scheme was started, the PAP govt told us that was not intended to be a revenue raising scheme i.e. we should not expect COE revenue to cover any part of govt expenditure....if necessary, the govt should fund any increase in expenditure by raise taxes preferably progressive taxes on high income earners and corporations. If you think about it, COE goes up when people find public transport inadequate ...creating an aspiration for car ownership. There are places in the world like Geneva and Munich where the public transport is so good, it makes little sense to use your car for most purposes - hence it is often said that a true 1st world country is one where even the rich happily take the public transport with everyone else in the society. We are not there yet and we are not on the path to get there. High COE prices represent a hindrance in the path to the middle class only because we view public transport as "peasant transport" due to the poor quality of service. We find the solution by using high COE prices to reverse the situation and make public transport more desirable reducing the demand for cars bring about a virtuous cycle of net happiness for our society ...instead of the vicious cycle of overcrowded strained public transport and never-ending rise in COE prices.

Another idea I have in mind is to emulate the mini-bus system in Hong Kong. These small buses that complements to the govt operated buses and trains to provide a convenient alternative for commuters. Everyone has a seat on the mini-bus that can stop for a passenger to get down at any point along a route not just at the bus-stops. The govt can help make such a complementary mini-bus system viable by giving tax incentives, take out requirements for COE but control them with licenses as they help to relieve the present bottlenecks in the system. Such buses deployed along the most heavy routes for public transport can quickly relieve our existing problems.

Whether we re-nationalize the public transport, pump in money or try some other ideas, something has to be done to break out of the current vicious cycle of over crowded public transport feeding the demand for cars causing a rise in the COE. In the end nobody's happy due to unmet needs and the high cost of cars. Recent moves to limit financing for cars can force down the price of cars but it also forces many who were willing to over-leverage just to avoid taking public transport back onto crowded trains and buses they really do not forces people to be prudent but in the end creates no "net happiness"...because their needs are not met.  

Friday, March 01, 2013

Budget with changes in the right direction.....several years late!

"In a nearly two-hour speech, he detailed plans to make the tax system more progressive and further increase subsidies for lower-income and elderly workers in order to help improve social mobility.

He also disclosed measures to mitigate the country's reliance on foreign labour and to improve productivity.

He acknowledged that society is facing widening income disparity. "We must take further steps to temper inequality," he said.

Our strategy for achieving higher quality of growth and an inclusive society are bound together, he stressed.
While fixing these problems, Singapore has to shift gears for an economy and society in transition, he pointed out" - Yahoo Report on DPM Tharman 's Speech

Minister Tharman started his budget speech by acknowledging the problems faced by our society.  Here is a summary of measures taken by the govt in this year's budget:
  • Dependency ratio ceilings in the services sector will be cut. The overal DRC will come down from 45 per cent to 40 per cent, and the S Pass sub-DRC will go down from 20 per cent to 15 per cent.
  • Government will also introduce a tiered salary system based on age and qualifications of the applicant to level the playing field for local workers in the same jobs.
  • Health subsidies to be boosted. Medifund will be increased by $1 billion to $4 billion and Eldercare to go up by a quarter million to $3 billion.
  • It will also provide subsidies of up to 80 per cent of lower-income elderly's consumables.
  • To help older Singaporeans with their healthcare expenses, there will be a $200 top-up to the CPF Medisave Accounts of all Singaporeans aged 45 and above.
  • Government will more than double spending in pre-school sector to over S$3 billion over the next five years. It will expand capacity so pre-schools are closer to homes and bring more operators to the anchor operator scheme. Salary grants will be given to the AOPs so that all their pre-school teachers will be graduates or diploma holders, up from 80 per cent today
  • An additional $72 million will be put into Opportunity Fund for students from less advantaged backgrounds and will be extended to polytechnics. $300 million top-up to Edusave fund.
  • Tharman also unveiled enhancements to Workfare Income Supplement (WIS) starting from January this year. Coverage will be broadened to those earning a monthly wage of up to $1,900 per month, up from $1,700. 
  • He bared  a three-year co-funding package under a new Wage Credit Scheme. The government will co-fund 40 per cent of wage increases to Singaporeans with gross monthly wage up to S$4,000.
    WCS payouts will be paid out to employers automatically and annually over three years. No application needed. The scheme will cost government $3.6bn over 3 years.
  • The concessionary foreign domestic worker levy will be reduced from $170 to $120 per month. This will mean that a family will save an additional $600 a year'
  • Businesses that invest a minimum of $5,000 per year of assessment in the productivity and innovation credit (PIC) qualifying expenditure will receive a dollar-for-dollar matching cash bonus.
Before I go into  various interesting aspects of the budget, I will give a general comment.

If this was the 2004 or 2005 budget, I would have applauded the govt for anticipating the problems we were facing in years ahead and doing something about them before the problems became too numerous and too big. Unfortunately, this is the 2013, our income inequality has grown, our dependence on foreign labor has worsened, our productivity has fallen over the last decade, and the cost of living has escalated to a point that we see middle income families facing enormous strains and poorer families struggling. The budget speech by Tharman started off by correctly identifying the major problems that plague our society and economy and the measures taken in the budget are steps in the right direction but this is a budget almost a decade too late and we are now dealing with huge gaps not fine cracks in the system. While fundamental changes such as revamping our healthcare system does not come from the measures in the budget, the 2013 budget tells us about some of the tweaks the govt has in mind for the problems we face.

One of the most talk,(. about move is the decision by MAS to restrict the car loans:

Beginning on February 26, the central bank said consumers will be limited to borrowing 60 per cent of the purchase price of a motor vehicle when the open market value (OMV) is S$20,000 or less.

A tighter limit of 50 per cent will be imposed when the OMV is more than S$20,000.

The MAS is also capping the tenure of a motor vehicle loan at five years.

While some people wanting to buy cars are unhappy that their ability to borrow as much as they want is curtailed,  I think the move by MAS is a good one. However, it is also an example of a measure that has to be drastic because the MAS allowed easy credit for car loans and unsecured loans to go on for too long. There is now a consumer credit bubble and such measures are necessary to bring down the level of debt. Some people are unhappy because they believe the rich will now have an advantage over the "poorer" people who need to borrow to buy cars. The rich will always have an advantage as they don't need to borrow.  By pushing out people who are going to get heavy debt just to own a car, you bring down the COE and Singaporeans pay less for the same thing so there is overall benefit - unfortunately some people who need it badly now have to accumulate savings for the down payment but overall the measure will encourage people to be more prudent with their money. The intention of the govt cannot be questioned here because the move is likely to reduce their revenue from COE. The problem with these measures is there are loopholes like the availability of unsecured loans from banks and money lenders that allow people to circumvent these measures, The other possible problem is the rise in COE is largely caused by the rich who are not affected by these measures - if this the case, these measures will not bring down prices to benefit the middle class families. The MAS has probably done the modeling from the income distribution of car buyers when it came up with these measures and the success can be measured by how much the COE falls.

I will end up paying more in property tax with the introduction of progressive property taxes. This is another move in the right direction to tax Singaporeans who are wealthier to fund social spending. Many Singaporeans, like myself, benefited from the rise in housing values seeing our wealth in the form of property double in the last few years. The problem with this measure is there are many retirees and older folks living with zero or low income in old private housing who will be affected - they have no intention of selling their property and have nothing to gain from the rise of their assets because they have not intention of monetizing it. Given their age, they may want to stay in their present homes for various reasons. For younger working people, the rise in property tax is probably manageable so long as they did not over leverage.

The WIS (Wage Income Supplement) to subsidize the wage increase of Singaporean workers for 3 years looks like a derivative of  Workfare - instead of subsidizing wages, they subsidize wage increments. Like I have said in the past, Workfare & WIS are non-ideal solutions to very bad problems....they involve subsidizing businesses who do not pay workers well. They do provide some help for workers in the short term using tax dollars, but the root cause of low wages remains.

 I generally welcome govt moves to restrict foreign workers despite the outcry from the business community. There is a issue now to be resolved - which category of workers to restrict? Construction workers who don't compete with Singaporeans or PMETs that have more value add to our economy but compete with Singaporeans for jobs. Businesses have persistently claimed  that they need foreigners to fill positions because they cannot find Singaporeans. If what businesses say is true, then it is inconsistent with data we have showing structural unemployment and the feedback from ordinary Singaporeans who say they experience intense competition from imported labour. There is support now for a market test - businesses need to show that they are unable to recruit Singaporeans - for businesses that want to hire foreign workers. Since businesses claim they have tried and are unable to find Singaporeans for the jobs, they should be able to furnish proof to support their claims. The problem is businesses are so used to easy access to foreign labor, they find any form restrictions tough:

“Increasing productivity is good, but we’re a labour-intensive market, We will always need people to man the store, so what can done to reduce our reliance on manpower? Also, space constraints make it difficult for us to deploy automation equipment like dishwashers.” -  Mr Darren Lee, owner of Wafflicious Cafe[Link]

With foreign labor businesses could expand easily, say, in the F&B sector. But the expansion is not without casualties. The demand for space by mid-size businesses and use of cheap foreign labor to compete makes it hard for smaller family run units to survive. The hiring of foreigners creates a chain effect. One business using foreigners to compete causes its competitors has to do the same. When foreign workers come for jobs in our restaurants, they need housing, medical care and various services. The rise in demand leads to more demand for foreigners and the cycle never stops unless disruptive measures are taken. Businesses will always want more foreigner workers and many are unable to expand with restrictions. Unfortunately, it is something that has to be done and because the govt has allowed this to go on for so long without doing anything. If nothing is done now, the dependence will worsen and it will be even harder to act.

The measures to improve pre-school education are important. The variance in quality of pre-school and lack of pre-school education has disadvantaged many Singaporean children at the start of their education. These problems have been discussed for more than 5 years and finding solutions here shouldn't be too difficult as social mobility and access to good education is the cornerstone of the PAP system. While the rest of us also believe in social mobility and access to good education, the difference is the PAP believes that having social mobility addresses the problem of a large income gap and social inequality and we still have a healthy meritocracy. The 2 problems are interlinked and a healthy meritocracy cannot exists when we have such a large income gap - the power and advantage of wealth in an unequal society inhibits social mobility and cripples our meritocracy.

With every passing year, with every budget, we see more  problem emerging as we start to solve the older ones. The leadership never gets ahead of the curve and problems deepen over time. This budget clearly recognize the problems Singaporeans face with the income gap, low wages, foreign influx and rising cost of living but these problems have been with us for more almost a decade and have deepened over the years. This budget is a step in the right direction but much more needs to be done. After tracking all these problems for 7 years on my blog, I believe that despite the measures in the budget, most of our problems will continue to deepen because there is a lack of will to pursue fundamental changes in the system. This 2013 Budget should have been the 2004 Budget or the 2005 Budget...a budget that fixes problems quickly as they emerge rather than one that tries to fix old problems than have turned serious over time. The success of this budget and the actions of our govt today will be measured by improvement in the quality of life a year or two from now. Ordinary Singaporeans who have shown so much patience in the past, today find themselves overwhelmed by a multitude of problems causing a sense of insecurity about their future and a fear of displacement in their own country.

Sunday, February 24, 2013

The road to higher quality of life and a stronger nation...

The Worker's Party released its Population Blue Paper yesterday proposing an alternative approach to PAP\s Population White Paper. Based on the WP's approach our population size will be in the region of 5.8M in 2030 from today's 5.3M.  You can read the Blue Paper here.

Parts of the proposal was attack by PAP ministers during the parliament debate:

"The Workers Party's proposal to stop taking in additional foreign workers until 2020 is drastic and very risky, Second Minister for Trade and Industry S. Iswaran told Parliament on Thursday.
It will speed up business closures and cause Singaporeans to lose their jobs. The economy could spiral downward, and result in a loss of the country's reputation in the business and investor community."
-  BT Report on the Parliament Debate[Link
The argument that a freeze in the influx of foreigners will cause business closures is absurd. When businesses cannot get new workers easily, they may not be able to expand as quickly as before but why would they close existing business that is profitable and has already workers. By allowing easy access to foreign workers in the past, we saw the economy over-heating during periods of expansion. Rentals and other business costs shoots up and wages come under pressure and businesses demand even more cheaper foreign labor to stay profitable. Singaporeans have seen all the deleterious effects of cost of living shooting up and wages falling behind - for this reason, Singaporeans find strong economic growth painful rather than beneficial.

As for the "loss of the country;s reputation",  I think you should ask what we have promised businesses coming here. Right up to the late 80s early 1990s, Singapore attracted foreign investments because Singaporeans were the number 1 workforce in the world i.e. they came here primarily to hire Singaporeans.  The world changed when China was plugged into the world trade in the late 90s.  At that time, there were choices to be made on how to restructure the economy, how to be less dependent on FDI and  we will compete in the world. We are here today because the PAP chose to open the floodgates to foreign labor to keep the FDI coming. None of our competitors took the same path, at least not in the same extreme way it was done by the PAP - these along with financial sector deregulation are simple brute force approaches that our competitors chose not to adopt due to foreseeable problems for its citizens in the longer term.  When Minister S. Iswaran spoke about the "loss of  the country's reputation", it is our reputation to allow businesses to easily hire  workers from anywhere they want, retrench them easily, minimal regulation to protect workers' rights, pro-business govt controlled unions and extremely business friendly policies. All this builds up in cycle of rising dependence on FDI and foreign workers. The question for Singaporeans is whether we want to go further down this path and worsen the problems of income inequality, declining quality of life, structural unemployment, stagnant wages and poverty.

"The bottom line is that Singapore can survive economically, even prosper, without further large increases in foreign labour and immigration. A reduction in both will also deliver compensating benefits, such as lower housing costs, higher domestic consumption, lower income inequality and a less congested, more environmentally friendly city whose residents may even be willing to have more children."
 - Professor Linda Lim,  the Stephen M. Ross School of Business at the University of Michigan in the United States [Article Below]

The Worker's Party Blue Paper was quickly attacked by the business lobby.

"With no growth in foreign workers, the impact on the economy and Singapore's competitiveness would be disastrous. The livelihood and well-being of Singaporeans will be compromised,"
- SBF [Link]

None of our economic competitors compete with us by importing foreign labor on such a massive scale so why do we have to resort to such extreme policies for so long? The demand by businesses for foreign workers is unquenchable. When a business becomes more competitive by hiring foreigners, its competitors have to do the same in order to compete. As more foreigners come, the pressure on our infrastructure will increase and we need more foreign workers to come to build the new infrastructure. Unless there is a freeze or severe reduction, the cycle can never be broken and the dependence of our economy on foreigners will keep growing to a point we will not have any control. As for the point that well being of Singaporeans will be compromised,  let me asked what happened to the well being of Singaporeans in the last 10 years?  If the well-being of Singaporeans has not been hurt, you think you can get thousands of Singaporeans to stand in the rain demanding change from the govt on 16 Feb 2013 at Hong Lim Park. Doubling of the cost of housing, stagnant wages caused by the foreign influx does not hurt the well-being of Singaporeans?  The SBF is so obsessed with protecting interest of its members, it has become blind to the plight of Singaporeans.Throughout the last 10 years, the SBF was perfectly alright with Singaporean workers’ well being compromised so long as .its members benefited from govt policy ..for them to say they are worried about us when their real intention is to protect the short term interest of its members is pure hypocrisy.

There is constant rhetoric from the PAP that the WP's proposal to freeze the number of foreign will stall the badly needed build up of housing and transport infrastructure.  If you read the WP's Blue Paper, it proposes not just a simple freeze in the foreign labor force, but a reallocation to sectors that need them the most such as construction from sectors where jobs are taken away from Singaporeans - this will reduce the stress on our infrastructure faster than adding 90K more each year to our population as proposed in the White Paper. If you analyse what the PAP has done last year, the measures including raising the levies of Work Permit holders for lower-skilled workers and raising the salary criteria for Employment Pass actually tightened the influx of low skilled workers to construction jobs that Singaporeans don't take and kept the influx of foreign PMETs  that compete for the same jobs as Singaporeans.

We know that alternative approaches exist and can work because many countries have found alternative approaches that work - these include big and small countries with low fertility (almost all developed countries have this problem) in Asia and Europe, with or without natural resources, all competing in the same global market place as Singapore. The PAP approach cannot work for the simple reason that the majority of Singaporeans understand clearly the deleterious outcomes and will stop it in 2016 or earlier before we get to 2030.

"Of course we do acknowledge that the businesses do need to adjust and as in any economic restructuring there will be certain pains and there will be certain businesses that can restructure to meet this new environment. There will be certain businesses that are very dependent on cheap foreign manpower and they cannot survive.

"I think this is an adjustment that Singapore will sooner or later go through and we are asking for an alternative - to look at the scenario, what happens under this proposal, what is the eventual population target and then we have to look at what we have to do to help these companies make that bridge if we believe that it is important for us to have a sustainable Singapore. Then we will all have to work together to look at how to help the companies, who can adapt to this environment over a period of time. It can also be through policies, it may not be only through manpower numbers, because there are a lot of things hurting companies."
- Non-Constituency Member of Parliament, Yee Jenn Jong

The real choices are for us to make the change now or to go down the further on the trajectory proposed by the White Paper which will result in  even more disruptive changes when the dependency on foreigner workers increases further and ordinary Singaporeans force a change through the ballot box because they can no longer accept the outcomes.  Singaporeans have no illusions that changes now will come without pain to anyone but its is better to do it now than to pay a bigger price latter on. The PAP can continue to sell its White Paper, day in, day out on the papers and TV media that it controls can keep telling us the virtues of its approach to our problems. But all the talk and all the propaganda cannot overcome what ordinary Singaporeans know from what they actually experience in their lives...that is the ultimate truth for Singaporeans .

Can slower growth lead to a stronger nation?

Feb 22, 2013


Reducing Singapore's dependence on foreigners won't affect living standards if productivity and wages rise.

By Linda Lim For The Straits Times

THE current debate about Singapore's population policy seems to assume that fewer foreign workers and lower immigration levels will hurt economic growth and businesses - and thus Singaporeans as well.

Other affluent economies with low fertility, ageing demographics and small populations have managed to achieve continued if modest improvements in living standards without importing large numbers of foreign labour and talent. There is no reason why Singapore cannot do the same, by borrowing from technological and business process innovations that are already implemented elsewhere.

Higher productivity (more output per worker) can substitute for more workers in achieving a particular gross domestic product growth rate.

Lower aggregate growth is not just inevitable for a mature economy, given diminishing marginal returns to added inputs of labour and capital. It may also be desirable, when real income (discounting for inflation) and total well-being (reduced congestion, environmental degradation, income inequality, social unease) are considered.

Locals fuel the economy

ECONOMICALLY sustainable activities that may generate lower growth but employ a higher ratio of Singaporeans will also contribute to higher wage and domestic shares of GDP (Singapore's are currently among the lowest in the world). Simply put, a higher proportion of a given dollar of GDP will accrue to Singaporeans, so local living standards can be maintained or increased with slower growth.

Policy instruments to achieve this could include: investment incentives tied to the hiring and training of Singaporeans, and awarding work permits and employment passes only after a process ascertaining that there are no qualified Singaporeans for the jobs (standard practice in the United States).

Higher wages would encourage employers to improve productivity and attract more Singaporeans into particular jobs, giving both an incentive to invest in upgraded skills (since there will be a higher income payoff).

Businesses that cannot afford the higher wages would exit, releasing workers for those businesses that remain. A reduction in demand would alleviate any labour shortage. Fewer foreign workers would also ease pressures on the housing market and on commercial rents, so businesses may benefit from lower or more slowly rising rents even as they pay out higher wages.

Reduced foreign capital inflows to purchase property, and other investments, would mitigate asset inflation and Singdollar appreciation, thus helping to maintain cost competitiveness.

Higher wages with higher productivity together with moderating rents do not necessarily mean higher costs. But if they do, these are costs Singapore's consumers will have to pay. As consumers are also workers, their real incomes may increase with higher salaries, lower rents and mortgage payments. If those enjoying higher wages are Singaporeans (rather than foreigners with higher savings rates and remittance outflows), the multiplier impact of their local spending will be greater - their higher costs are other Singaporeans' higher income, most of which is spent in Singapore.

Better productivity, different mindsets

MANY high-income economies have trodden this path of increasing productivity before Singapore.

However, emulating their market-derived solutions requires mindset and values shifts among Singaporeans. Consider three sectors in Singapore that are labour-intensive, and usually considered low-wage, low-skilled and low-productivity jobs that "Singaporeans don't want to do".

First, the construction industry: in no other high-income country is this associated almost exclusively with foreign labour from neighbouring countries.

In the US, this is a high-wage, high-skill, capital-intensive industry employing mostly unionised native workers, with high safety standards, sophisticated equipment and processes. Construction workers earn at least twice the median national wage in the US state I live in; their hourly wage is probably three times higher.

Some Singaporeans would be willing to work in this sector if adequately compensated, while construction firms would employ them at high wages if productivity was sufficiently high.

Second is the food and beverage (F&B) industry. In even high-immigrant big cities and on the coasts of the US, most restaurant workers are Americans. They include students or mature individuals (mothers, retirees) working part-time for extra income or social interaction, as well as seasoned professionals for whom this is a full-time, long-term career. Skills in conversing, understanding customers, knowledge of the menu and wine list are required and rewarded, with tips that average 20 per cent of the bill and can be much higher. There is a strong monetary incentive to develop skills and even a personal brand, and aspiring job candidates often queue up for months and even bid (pay) for the privilege of waiting tables at expensive restaurants. In the kitchen, much food preparation has been automated and outsourced to specialist food services such as Sysco.

In Singapore, the use of temporary foreign workers and the standardised service charge has kept wages and upward mobility low, thus discouraging the participation of Singaporeans in this sector.
Third is the domestic service industry of household help, care for children, the elderly and disabled.

This is a heterogeneous sector, but nowhere in the rich world is the dominant mode of operation that of the individual maid bound to a single individual or household. Rather, professional services of house maintenance, cleaning, food preparation and delivery, child and elder care and transport are the norm, compensated at hourly rates many times the minimum wage. Many self-employed workers in this sector simultaneously serve multiple clients, some for many years at a stretch or to work part-time, while private enterprises employing such workers provide a range of customised services.

Many offering child and elder-care services are personally dedicated to helping others, or are training for careers in teaching or nursing. Foreign workers in both this sector and F&B are usually new long-term immigrants, not temporary guest workers, so integration into the majority society is only a matter of time.

Improving wages, status

IN ALL three sectors, much higher wages would both attract more workers and encourage investments in higher productivity methods.

But there is also a mindset shift required, which is the social status and value collectively ascribed to such occupations.

In the US, social barriers are highly permeable and there is respect for hard work, enterprise and professionalism even in "blue collar" or manual service occupations, helped by the fact that they may pay better than many "white collar" jobs.

A social egalitarian ethic in Europe, and national group solidarity in Japan, both regions with limited income inequality, fulfil the same role. More money alone cannot compensate for lack of respect, which in Singapore is inordinately directed by and towards those with academically based credentials and professional achievement.

This analysis could be extended to many other occupations, such as highly compensated "skilled trades", and personal services (such as the beauty and wellness industry), which are particularly attractive to self-employed entrepreneurs.

Many solutions are possible but businesses will be motivated to innovate only if the easy alternative of importing low-skilled, low-wage foreign labour is restricted. Innovations could be accelerated by temporary public subsidies that would not cost more than the investments in the housing and transport infrastructure required to accommodate a larger population.

Slower growth, stronger nation

THE situation at the higher end of the labour market is more complex, given the global or regional role many companies fulfil from their Singapore base and the geographically mobile talent that they may require.

Employment passes should be flexibly awarded according to the need and value to the nation of a particular company. Businesses should professionalise human resource practices to maximise recruitment of Singaporeans, for example through school or university partnerships and campus recruitment efforts.

The bottom line is that Singapore can survive economically, even prosper, without further large increases in foreign labour and immigration. A reduction in both will also deliver compensating benefits, such as lower housing costs, higher domestic consumption, lower income inequality and a less congested, more environmentally friendly city whose residents may even be willing to have more children.

Businesses and people can adjust to slower labour growth as they do in other countries. The nation - which is more than its GDP - will be the stronger for it.

The writer, a Singaporean, is professor of strategy at
 the Stephen M. Ross School of Business at the University of Michigan in the United States.

Saturday, February 23, 2013

Frontline Connects《前线开讲》: Whitepaper on Population

If you have been away for 2 months and have not kept up with what has happened in Singapore and you get back to watch this show on Channel 8 yesterday , you will get the impression that most people in Singapore support the White Paper. The programme started by saying that the White Paper by the govt has created plenty of "interest" among Singaporeans. It does not say anything about the anger it has caused and not a word about the biggest protest in Singapore for several decades against the White Paper.  They showed a segment in which every man and woman t hey interviewed on the street before the show supported the White Paper. The panel consisted of members who generally supported the White Paper with some  concerns such as transport and housing that the govt has already admitted are problems.

Good old fashion propaganda.

The one thing they cannot control unless they cheated was the live online poll that asked the question:

"If there is a reduction the number of foreigners , will you accept a slowdown in the economy?"  : Vote Yes or No.

92.5% voted "yes" and 7.5% voted "no".

After the result of the poll was announced, Grace Fu did an incredible thing. She reinterpreted the question to mean : "If there is a reduction in the growth in number of foreigners in our population , will you accept a slowdown in the economy?" and concluded t he poll showed that most people agree with the White Paper which proposes a growth in foreign workforce smaller than that of recent years.

Amazing. If most people had voted "no" y ou can retain the original question and say the people agree to growth in the foreign workforce as proposed by the White Paper in exchange for economic growth. So whether they answered "Yes" or "No", by reinterpreting the question you can choose to conclude that most people agree with the White Paper.

I guess being a minister is not easy because it takes a lot of effort to block out genuine feedback and reinterpret opposing opinions. Of course with an elitist system that build Ivory Towers higher than the Empire State Building, understanding what is happening on the ground is difficult. Pain and frustration is just an abstraction one person away - you may not be able to understand it even if you sit next to the person or talk to him everyday.  Empathy is not so easy...and especially difficult if your mind is cluttered with ideology.

A few days ago, it was report that our income inequality has risen to the highest level (GINI, OECD scale) ever.

"For the lowest 20th percentile of employed residents, their real gross monthly income rose 0.1 per cent each year from 2002 to 2012 and 2.2 per cent a year from 1996 to 2002." -Incomes at bottom continue to rise, says Chan Chun Sing

It is incredible denial when a minister says "incomes at the bottom continue to rise" when it has risen an imperceptible 0.1% a year for a decade - if a worker earns $800 a month we are talking about an increase of $0.80 per year. Anyone one else looking at the same numbers will be shocked and asking why the income of 1 in 5 Singaporean workers has been stagnant for 1 decade and what can be done about it - most normal people will say this is not an acceptable outcome and drastic action must be taken. But the minister who is the highest paid minister in the world among his peers doing the same job looks at the same data and has a completely different interpretation.

Singapore is now the 6th most expensive city in the world. It is a really bad place to be earning a low income but we have 450,000 workers with income below $1500 a month and 300,000 earning less than $1000 a month based on data from the CPF Board. How did things get so bad? Year after year they deny there is a real problem and refuse to make fundamental changes to the system. ..that is why we are in such bad state today.