Diary of A Singaporean Mind

Corruption - Many types and forms...

2012-01-26T07:27:00.007+08:00

Happy Chinese New Year !- say first, in case I forget.

Yesterday afternoon, we were all greeted by this rather shocking news that top officials are under investigation for "mis-conduct".. The Chinese evening papers reported that the cases involved "sex and money".....hmmm so what else is new? We shouldn't even be shock that such things happen except this is Singapore, the cleanest country on earth. Some of you may be tempted to link this to the recent salary debate - "pay top dollar still like that" but lets not be oversimplify the mechanisms involved in corruption and in many instances things are more subtle, unprovable and even legal in nature. I'm not privy to the details of the ongoing case but by the time it gets onto the papers, the authorities have probably collected plenty of evidence.

A few months ago an interest piece of information emerged in the US. A study in a book called "Throw Them All Out" showed that stock investments made by members of the Congress have out performed market averages over the long term and CBS' 60 Minutes did an expose[Link]. Its not just good investment performance but extraordinary performance - the congressmen did better than the best fund managers. Several plausible explanations have emerged - legislators make decisions that favor their investments, they have access to information not available to the public etc. Obama is now seeking legislation to prevent the congressmen from profiting from their positions[Link].

I brought up this example to show you the elements that is missing from our system to stop these more subtle forms of mis-conduct by those in office. Whether the congressmen have acted in a corruptly to fatten their pockets which cannot be proven in this case is secondary to importance of having system components in place to detect such problems. First, public access to information on the assets of office holders. This is extremely important and even Malaysia has recognized this and will require office holders to list their assets[Malaysian cabinet ministers' families may have to declare assets]. The 2nd element is good independent investigative journalism. Third is vibrant and democratic system in which the people have the power to press for change and the govt cannot hush up wrongdoing.

Singapore is viewed as one of the top few corruption-free country. This is the result of what looks like a "zero-tolerance" for corruption in govt and relatively few cases of corruption. There are places where "everyone" takes bribes especially in developing countries. Singapore and Hong Kong used to be quite bad. Good effective cleanups by anti-corruption agencies help to purge much of the corruption. However, in the past few years I notice that "traditional" under the table corruption started rising again. I follow such cases quite closely and, in many instances, by the time the CPIB steps in, the problem is quite extensive. Take the example of the case involving sea-food suppliers bribing chefs of top restaurants - the scale and widespread corruption surprised many. In the case that involved the famous loanshark "Ah Long San", numerous police officers were on the take. In the Citiraya case, the perpetrators were able to bribe everyone along the supply chain from store men, purchasers, managers etc to carry out their scam. My point is while people here don't go and look for bribes, many can be persuaded to take one "under the right conditions". While we like to believe that "Singaporeans are honest", the truth is they succumb to temptation like the people of other countries and they may more fearful than honest as they believe our police is very efficient at catching them. Recent years, however, the large influx of foreigners bringing with them the culture from back home and influencing workers here has help to undo some of positive traits in Singaporeans.

While the CPIB can go after a growing number of cases of traditional corruption, more subtle forms will prove difficult. One of these forms takes place through a "regulatory capture" in which industry hire regulators that leave govt paying them as consultants or hiring them into high positions in the company. The idea is to establish a relationship with regulators so that they are not so strict to the industry. This is hard to detect and prove because regulators acquire skill sets that is required by the industry so a certain level of such hiring is natural. Here are some examples : Revolving Door: From Top Futures Regulator to Top Futures, Regulators Hired by Toyota Helped Halt Acceleration Probes, U.S. Drilling Regulators Hired by Oil Companies. Such unhealthy relationships can build up between people doing acquisition in govt and suppliers especially in the defense industry. To detect these problems and know if an unheathy relationships are building up, the numbers have to be track. These unhealthy relationships are as harmful "women and money" type corruption. In the current case, these top officers appeared to have succumbed to lure of women and allowed a local IT supplier to circumvent standard procurement procedures. The same could have happened if an unhealthy relationship is formed, say, by the supplier routinely hiring top officers can result in influence in decision making. For the current case, it is not known who this supplier is right now but once that come to light, check its hiring record - does it routinely hire top people from govt?

A decade ago, the US implemented a law to make it illegal for US citizens give bribes when they are in other countries. This was to prevent US businesses from committing corruption in other countries in particular 3rd world countries. Businesses tried to lobby against that law arguing that they would be disadvantaged when they compete for business in some countries. Singapore businessmen learn how to get things done in China, India and Indonesia ...and very often they take those habits back home. Such practices also get here through the massive foreign influx. Our policemen are often tempted by foreigners who resort to giving money whenever they get into trouble - they come from countries where you have to learn to bribe as a matter of survival. Unless the CPIB can keep growing its capacity to combat corruption, this problem will keep growing along with more subtle forms that the CPIB does not address. We took a unbridled capitalistic approach to GDP growth and the rule of money has come to dominate our society and erode our core values. The importance of money in our society is clearly seen when a certain party finds itself unable to \find people to serve the public unless it pays the highest salaries in the world and argue that such high pay is necessary to prevent dishonesty. At some point unless we wise up, the benefits of unfettered capitalism will run out and its deleterous effects will cause decay in our society.

Man Jailed 12 months for stealing $32 to buy food for his mom....

2012-01-20T17:30:00.009+08:00

UPDATE: There is an update on the case in B5 of today's Straits Times. The article is entitled "Mosque: We tried to help man who stole $32". In that article, the judge explains why he did not give a harsher sentence for taking $32! The judge says he considers the offender suitable for harsher punishments because of his past offenses but gave him an ordinary sentence because of the small amount and the fact it was used to buy food -wow! The judge is saying he is lenient. The mosque explains that it has worked with him for 3 years finding him jobs and giving aid. The man was unable to hold down a job. The mosque eventually gave him a job as an assistant caretaker but the man "threatened colleagues, hurling vulgarities at them and acting aggressively". So they sacked him and left him desperate without aid ...that led to him committing the theft. The offender sounds like the toilet cleaner, we occasionally meet, who would hurl a barrage vulgarities at you for stepping into the toilet while he is cleaning or the overly aggressive security guard whose anger you cannot comprehend....and he "disappears" from the job after a few complaints. I can't tell for sure in this particular case but I always thought some of these people have "mental issues" - a combination of low IQ and/or uncontrollable aggression...manic depressive? Richer parents identify these disorders early and have them fixed by sending the child for psychologist treatment in early intervention programmes. Poorer parents cannot afford such treatment even at the subsidised rate and are sometimes not educated so they don't know what to do except to beat up the child for misbehavior. The child grows up unable to hold a job, ends up committing petty crimes and the solution today is to jail them for longer and longer periods. The safety nets and aid even for very clear cut cases of mental disability is pretty thin.....such cases that require early intervention and psychological treatment simply slip through and show up as criminal cases later on. In this tragic case, the mainstream media supplies information and bits of facts to encourage us to blame the criminal and view him as "recalcitrant" - but that approach is not going to improve our society and the well being of the underclass...we should look beyond the superficial and try to identify the root of the problem. Jailing someone for stealing $32 is not going to help us or the offender in the longer term.

One of the things I can't understand is the harsh sentences handed to people who commit petty crimes out of desperation. Here is one example. A man stole $32 to buy food for himself and his wheelchair bound mother because he was jobless and not able to get any help. His sentence was a jail term of 12 months (see report below).

A year ago, a homeless man set up a tent at East Coast Park because he had no place to stay. He was arrested and jailed[Link].
Surely hunger and homelessness should be sufficient grounds for mitigation.

In another case, a woman was jailed 11 years for steal some bangles and wallets[Link]. That was really harsh.

Then there are cases where the sentencing is not harsh. Like this case of theft of $13,000[Link] and forgery. The judge decided not to jail the criminal and let him off with a fine.
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Man jailed for stealing $32 from mosque to buy food

AsiaOne
Thursday, Jan 19, 2012

A jobless man was sentenced to one year in jail today after he had stolen $32 from a mosque.
The Straits Times reported that 40-year-old Noraizam Abdullah pleaded guilty last month to stealing the money to buy food for himself and his wheelchair-bound mother.
He also told investigators that he had stolen the money out of desperation as he was not able to get help from the mosque.

According to court documents, the money had been stolen from a donation box at the entrance of the Darussalam mosque along Commonwealth Avenue West on Dec 11, 2011.

Closed-circuit television footage revealed that he had carried the donation box to a staircase landing and removed the money in it after forcing the box open.

The Straits Times report also added that Noraizam had served six jail terms since 1997, which includes five years of corrective training in 2002.

Ministerial Pay : Why the man on the street is right and PM Lee is wrong...Part 2

2012-01-20T04:51:00.002+08:00

While members of parliament debated the issue of ministerial pay, a group of 6 economists published a paper, "Inequality and the Need for a New Social Compact"[Link]. The paper discusses the causes of rising inequality and the need for govt to counter the effects of rising inequality in our society. It is a good summary of many issues discussed in this blog. Those who think about miniterial pay and income inequality more deeply will know that both issues are linked.

"You have to pay the market rate or the man will up stakes and join Morgan Stanley, Lehman Brothers or Goldman Sachs and you would have an incompetent man and you would have lost money by the billions" - Lee Kuan Yew, 2007

Here is a video of Warren Buffett explaining how CEOs and top executives have become over-compensated in the past 2 decades:

Instead of fixing the underlying problems in our society caused by income inequality which has resulted in a 3rd world wage structure, the PAP has been using the salaries of over-compensated executives to set their own pay. This wages of this segment of high income earners much faster than the rest of workforce. most of the time, for "wrong" reasons given by Warren Buffett in the above video. Singapore adopted American style executive compensation without the corresponding disclosure practices.

"And Singapore is just such an example, according to the CFA Institute. It says that prior to Singapore adopting the Code of Corporate Governance, the Singapore Exchange (SGX) acknowledged that disclosure on an individual basis should be in line with global best practice and that share owners should have the right to know how directors are compensated.

'This awareness, however, failed to translate into policy because of considerations for directors' personal privacy ....... " - [Link]

Singaporeans have generally been very patient with the PAP. In any other country, the leaders would have been voted out if they demand the same compensation as our leaders. However as the income of ordinary Singaporeans stagnate, this patience is running out. The new pay structure is not going to bring our leaders closer to ordinary folks. You peg it to the top 1000 earniers whose income in rising the fastest relative to everyone else/ PAP ministers' high compensation will rise much faster than the wages of ordinary folks.

Over time the PAP govt eliminated the benefits of rank and file civil servants while expanding pay packages of the people on top. The ordinary Singaporean is made to shoulder heavier burdens for healthcare, housing and transport and faced increasingly uncertain and unstable employment at a the same time the PAP implemented parachute systems for its elites dropping them from, say, high positions in the SAF to top positions in the GLCs & govt. If you listened to PM Lee's speech on the ministerial salary he said that the high salaries are necessary to "sustain the system". This system in which elitism is entrenched in not one that can take us forward to a good future for ordinary Singaporeans. Extreme distorted policies like having a foreign worker influx that is among the highest if not the highest per capita to maintain the already high profitability of govt linked companies with cheap labor and expanded demand for their services has hurt Singaporeans in particular those earning lower wages. Corporate profits which are now at a high as a % of GDP are attained by exploiting policies that keep wages down by importing foreign labor. These high profits are then used to justify high executive compensation along with factors mentioned by Warren Buffett.

Chen Show Mao said in his parliament speech that public service is a privilege. Every where else in the developed world good capable people would step forward to contribute regardless of pay and serve the people with passion. The PAP claims it is harder now to find good people - fewer and fewer people are willing to step forward to join the PAP. But that is not true if you look at the opposition, they now have more people joining them and quality has also improved.....why the sudden motivation for these people to join the opposition in recent years?

The PAP says it is being pragmatic and the Workers Party is too idealistic in its approach. But this is not true. It is not pragmatic to expect ordinary citizens to accept its extraordinary "highest in the world" compensation when the quality of life for many Singaporeans has fallen in many respects. The PAP govt says this pay structure is necessary to help it continue to recruit capable people into govt but the truth is they need to do this to sustain their system of govt - a system that has become disconnected with ordinary citizens and incapable of putting their interests ahead of those of the power elite. This system has concentrated the wealth generated by our society narrowly in a small segment of the populace and the new pay structure aligns leadership with this small segment. The PAP govt has had these high salaries for more than 2 decades...has this extremely high salaries resulted in a high quality of life for the ordinary citizens.? ....The man on the street is able to see it does not correlate and will not correlate.

Ministerial Pay : Why the man on the street is right and PM Lee is wrong.

2012-01-18T07:37:00.007+08:00

I put up this video not because I want you to listen to the PM's same old argument that ministerial pay has to be high to attract capable people but to show you the empty seats next to Tin Peh Ling and behind her. Those PAP MPs didn't even bother to appear to listen to their own prime minister. You may take issue with MP Tin's intellect but she has been "on the ball" when it comes to attendance in parliament. The same cannot be said of other PAP MPs who have successful high flying careers and showing up in parliament is a part-time thing for which they are paid close to $200,000 in allowance per year.

One day as I got up a bus, I saw a somewhat familiar face. I couldn't figure out where I had seen the person but I took the seat next to him. He greeted me in Hokkien and started talking to me. It took me a while to recall the man in his late forties was working at a coffeeshop that I go to every Saturday morning. He was very happy because the boss allowed him to go off early that day and he was very chatty. He started talking about his life. He had a kid in secondary school and was looking for a job at a coffeeshop nearer to his home in order to save some transport cost - his pay was $1000 so every dollar had to be squeezed. He asked me what I worked as. My Hokkien was really rusty and all I could manage was to tell him was I worked with computers. He got really excited and said he heard that computer work paid very well - "$2000 a month!". I told him, "yes, a person can get $2000 working with computers". He had that "wow" look on his face - $2000 is a lot of money for someone paid $1000. At the back of my head, I was thinking how awkward it would be for me to tell him how much I was actually paid and didn't have the Hokkien vocabulary to explain why I have to paid that amount...then again even if I could speak in fluent Hokkien, it is hard explain and justify why I have to be paid a particular multiple of his salary. You think about it ....this guy turns up for work everyday works from dawn until almost mid-night and our MPs don't even show up at the most important parliament debate to give their 2 cents worth get paid 20 times what the guy at the coffeeshop gets - some of us would rather have that cup of coffee than some PAP MP supporting policies we do not want. The Straits Times published an article saying some 2nd tier executives are now paid $1M a year so we cannot expect to cut ministerial pay too much....so that is how much "wisdom" in the boardroom is valued at these days. PM Lee says they need to pay what looks like a hell lot of money to the "man on the street" to get capable people.

After so much debate, the PAP govt still cannot get people to see their point of view. They still cannot get people to accept their arguments. But why should the people accept something they see as unjust and incorrect?

"But my bigger concern is for the long term; for future Cabinets and potential office holders, people who have not yet come in, people who must make that decision and that commitment." - Lee Hsen Loong

I listened to all the PAP MPs arguments that their concern is for the country and that good salary is necessary to find good capable people. But all these arguments misses the central key issue in our society - that of high income inequality. You cannot justify such high salaries pegged to the highest income earners at a time when income gap is so large. Yes there a practical issues for the PAP because they cannot find dedicated people unless they pay out these skyhigh salaries. It also has an ideology unattractive to many capable people who don't anything to do with the PAP. But that is a problem the PAP created for itself by allowing the income gap to grow and the wages of a large segment of the populace to stagnate and fall. There is now growing evidence that influx foreign workers which the PAP euphemistically explains are here to create jobs for Singaporeans has suppress the wages of many Singaporeams. The whole system needs remaking[Singapore Inc needs rethinking] and the inability of the PAP govt to set ministerial salaries at a level acceptable to the man on the street merely reflects urgent need for change in this country.

We shouldn't accept the principles laid out for ministerial pay when the issue of excessive executive compensation and low worker wages remain unresolved. These high ministerial salaries are linked to bigger problems in our society and the more the PAP MPs argue with passion in support of their own compensation, the less we feel they are able to solve the real problems faced by Singaporeans. We never hear them stand up to talk with the same passion about better compensation for workers - minimum wages, better work benefits, greater worker protection.

DPM Teo : Don't compare S’pore ministerial pay with other countries

2012-01-17T07:26:00.003+08:00

In a country where so many citizens work full time jobs and cannot make ends meet, something has to be wrong when you need to pay the ministers the highest salaries in the world. You cannot understand the underlying problems unless you understand why this is so.

"He also explained that the option of benchmarking local ministers’ pay to that of foreign leaders was
rejected because salaries at foreign countries may not correlate to Singapore’s situation, and that it was more appropriate to peg ministerial salaries based on local factors." - Yahoo! News[Link]

After the salary review, Singapore ministers are still paid the highest salaries in the world. Teo Chee Hean tried to explain this:

"But Teo, who is also Coordinating Minister for National Security and Minister for Home Affairs, explained that salaries of foreign office-holders look smaller but exclude such perks or benefits that such leaders enjoy."

If you look at other developed countries, they too are very transparent about salaries and benefits. If they are getting anything they are not suppose to, their political adversaries and the independent media will be all over them. In fact the recent ministerial pay review reveal many things Singaporeans did not know about bonus, pension and benefits of our office holders. We should not be comparing ourselves with 3rd world leaders anymore where leaders do many things "under the table".

It is true the PAP govt cannot peg its ministers' salary to those of leaders in other countries but not for the reasons given by Teo Chee Hean. Singapore has a political economy and its scholarship system created a power elite structure from which the PAP has to recruit its ministers. We often hear our minister say they can get better pay "elsewhere" - this elsewhere is often a position in the GLCs, law firms or banks. You would think that years of investing in scholars and nurturing them would result in a sense of public duty and these people would like to "give back" to society but that has not happened. PM Lee has a difficult job persuading them to enter politics. Singapore faces numerous challenges and social issues yet he has a hard time finding capable people. A large number of these people don't want anything to with the PAP because they don't share its ideology and, until recently, they won't join the opposition due to fear of political repression. The rest would rather build their careers in "cushy" high paying positions in GLCs away from public scrutiny.

Gerald Ee and his committee try to solve PM Lee's problem by not going too low on ministerial salaries. Ee said he went around asking his friends and they told "under 1 million, don't bother me". The need to peg minister salaries to the top 1000 earners in a country with the biggest income gap among developed countries reflects the distortion in our society's wealth distribution. The imbalance needs to be fixed not mirrored. These high salaries along with corporate profits which are at historic highs as a percentage of GDP are build on top of low stagnant wages of the ordinary Singaporeans and the import of cheap labor from 3rd world countries that is pushing the bottom 20% of Singaporeans towards poverty.

We had good ministers in the past without having to push salaries to these astronomical levels. We should be asking ourselves how even ended up with this problem and why 4 decades with the scholarship system in place and sending thousands of our best minds overseas to the best universities has resulted in a dearth of good dedicated political leadership willing to serve without such sky-high salaries. Our situation is different from other developed countries but not for the reasons cited by Teo Chee Hean. The real reason is the PAP system which has resulted in a political economy with extremely unequal distribution of wealth. Elitism and a sense of entitlement has crept in to public service and selected talents believe they deserve their millions as much as they believe the bottom 20% of our society deserve their slide down to poverty. The belief that these high salaries are fair is as distorted as our income distribution....you accept it and you accept the widening inequality in our society and leaders with this belief will never be able to hold our society together.

My thoughts on the ministerial salary review

2012-01-07T10:53:00.014+08:00

If you want to throw a spanner to this whole review, the question to ask is why we can't peg the pay of our political leaders to those of political leaders in other countries instead of the highest paid members of our society. Before you start asking the hard questions, I suggest you listen to Gerald Ee's explanation on how he and his team came up with the new pay structure. I think we should all thank Gerald Ee for taking up this unenviable task. Remember this is the same feller who was called up to take sort out the mess at the NKF. We have all done our national service but Gerald Ee has to do extended national service many times. A review like this will not yield recommendations that will satisfy everyone and exposes Gerald Ee and his team to criticism. How much we should pay a person in the absence of a free market mechanism for political leadership is highly subjective and depend very much on your own value system. Ultimately, the system has to work effectively to attract good honest people who will can secure future progress for Singapore to enhance the citizens' quality of life. Progress means different things to different people and finding a set of perforamnce measures that is widely acceptable is not so easy. You can design a pay structure that looks fair and later on find out you cannot get good political talent.

What I want to do in this posting is not to go through all the findings of Gerald Ee's team but to look at the larger system in place. Why do we have to pay so much more to get good leaders? Are our leaders so much better? What is so unique about our system that leads to the current situation? Why are there so many SAF generals and rear admirals in the cabinet?

"When I made the decision to join politics in 2006, pay was not a key factor. Loss of privacy, public scrutiny on myself and my family and loss of personal time were. The disruption to my career was also an important consideration. I had some ground to believe that my family would not suffer a drastic change in the standard of living even though I experienced a drop in my income. So it is with this recent pay cut. If the balance is tilted further in the future, it will make it harder for any one considering political office" - Grace Fu on her Facebook

Grace Fu now says she was "mis-understood" but what she said is no different from what the PAP has told us in the past and what it believed or used to believe. One just has to look up old youtube videos on the ministerial pay debate [Link]to see that she is fully consistent.

How did we end up with such high pay for political office holders? The story begins many years ago.....

The war for talent which people talk in recent years began in very early in Singapore. The PAP govt strongly believed in good leadership which in itself was not a bad thing. However, it also had this highly elitist belief that ordinary Singaporeans will go nowhere without the PAP and this belief amplified the importance of leadership over the contributions of ordinary citizens. While good leadership is important, believing that success is primarily or solely due this leadership is another matter. Today all East Asian countries have succeeded under various styles of leadership even thriving under bad leadership for certain periods - one just have to look at Taiwan, S. Korea, Hong Kong, Japan etc. This "without the PAP, Singapore would have failed" belief drives Singapore's early war for talent. To capture the best talents, the PAP govt expanded the scholarship scheme to harness talent signing up the best "A" level students - not just the president and SAF scholarships but a long list of scholarships from PSC, various GLCs and stat boards. 30 years ago, ordinary Singaporeans couldn't afford to send their children overseas and these scholarships were the only way to get an education at top overseas universities. You take a quick look at the ministers who were scholars, top civil servants....even Straits Times reporters like Chua Mui Hoong, former Straits Times editor Han Fook Kwang, ...even the opposition now has ex-govt scholars ... Tan Jee Say, Hazel Poa, Benjamin Pwee. This system was already extensive decades ago but when Singapore became more affluent, the PAP govt expanded the war on talent by giving scholarship to foreigners. It even had civil servants going to China to get the best students to come here. With so much emphasis on getting top talent, getting the best, nurturing them and allocating resources and opportunity to selected talents, you would think that Singapore would be running circles around our competitors - but we have not, we grow by importing labor, having casinos ....our productivity has been falling , we appear to be less innovative than most developed countries, we seem to have fewer home grown industries per capita than our competitors.....what has gone wrong?

Along side this "talent war" was the growth of an extensive network of GLCs that own businesses ranging from supermarkets to transport services. Think about where you buy your groceries, where you do your banking, who owns the shopping mall next to your home, who owns the airline you take to go overseas, ...the taxi you take to the airport, the newspaper you read, the cable service you subscribe to, your telephone service, your power supply, your gas, your water supply....and so on. If you tabulate your family expenses, you will find the amount that goes to these companies is not small because the GLCs form a large part of our economy and many are monopolistic rent-earning businesses with little competition and/or had benefited from access to vast state resources. These GLCs crowds out local private enterprises and cut off market-based paths of upward social mobility.

There is spectacular social mobility for our elites in this system:

"My mom is a machine operator" - Chan Chun Sing., 1988

Minister Chan's humble background probably account for his folksy ("kee chiu") style. Recently, the Straits Times featured him as one of those with the potential to be our next Prime Minister[Faces of 2012: Chan Chun Sing - Next PM?]. There are many examples of such cases of social mobility among the selected elites. Their own success reinforces their belief that the "meritocratic" system and PAP ideology is the best for Singapore. That is why the PAP recruits from this power-elite structure - this is where they find people loyal to their system. If you look through the list of ministers, most, if not all, are recruited from GLCs, SAF, stat boards or the civil service. The reason why they have to be so highly paid is there are many opportunities in the network that are more financial rewarding and possibly more "cushy" than political appointments. For instance, Chan's fellow general in the SAF, Ng Yat Chung, transited to a newly created Temasek Holdings position ("portfolio management managing director") and he will leave Temasek this year to take up a CEO position at another GLC, NOL. Yes, our SAF generals are highly capable and can move one industry to another easily without any prior experience. So one cannot fault Chan Chun Sing for feeling he is making a sacrifice when he takes up a political position as minister of MCYS putting himself under the scrutiny of the public. Similarly, PM Lee has had a much tougher job than his brother, a former SAF scholar-general who became the CEO of SingTel. I'm sure many ex-SAF generals would rather take up a post in Singapore Power, ST Electronics or one of the many GLCs than be in poltics.

Cutting the high pay to "less high" is necessary to placate an increasingly angry public. The anger is at a level that hinders the PAP govt ability to lead. However, reviewing the high pay without looking at the whole system that drives the demand for high pay misses the big elephant in the room. Although it is always true that good leadership can elevate a country and make life better for everyone, the PAP has pushed the idea of grooming and nurturing selected talent to a detrimental extreme. Allocating disproportionate state resources and opportunities to a group of selected elites puts them on a virtuous cycle of upward social mobility at the expense of everyone else in the society. The close link between the ruling party and this network of businesses that form our GLCs and the PAP's links to the civil service & SAF has resulted in interests that diverged from those of ordinary Singaporeans. That our political leaders' salaries are not peg similarly to the political leaders of other developed countries, is the result of this skewed system... the basic architecture of which has to changed for Singapore to progress. For those who still argue that this system is good for everyone, the decades of talent war and talent grooming of scholar-elite should have elevated the quality of life of ordinary Singaporeans to superior levels not seen anywhere else in the world since no other country practises this extreme form of elitism....but that has not happened and for many ordinary Singaporeans quality of life has fallen. Today we see the best quality of life for ordinary people in egalitarian societies such as Finland which is also the most competitive economy in the world[Egalitarian Finland most competitive, too]....over there, the govt does the opposite and allocates the most resources to the weakest members of society to build a cohesive society the strength of which is the ability to compete as a team. Singapore has to find a new system structure for future success because we are starting to see the cracks in the current system and outcomes that are increasingly unacceptable to a growing number of ordinary Singaporeans.

Malaysia implements free outpatient care for seniors....

2012-01-04T06:51:00.004+08:00

Read this scoop from TRE.

Seniors referring to those who are above 60. For a long time, they charged a token amount of RM$1 but that has eliminated for the new year.

One should always be wary of free health care as it tends to lead to long waits and rationing at govt clinics. Having said that, our polyclinics which are supposed to be subsidized but are more expensive than many private clinics in Malaysia also have long waiting times.

"The circular, issued by ministry's finance division secretary Wong Foong Lai, stated that the exemption was in appreciation of the contributions made by senior citizens." - The Star

In Singapore, most seniors above 60 are expected to work - following the Retirement Age Amendment Bill passed early last year, they can only have access to the bulk of their own CPF after they reach age 65. There are however one group of people with pensions and free medical care - our ministers and top civil servants. These people are also the ones who earn so much money they don't really need these schemes.

Singaporeans are always leery about such schemes implemented in Malaysia. Quality of care, for example, is an issue. However, for the many seniors whose ailments are common like high blood pressure, gout, arthritis, the access to free medication will relieve their financial burden. The PAP govt still makes the sick pay GST. They also collect GST on the amount you pay for medical insurance[Link]. The Singapore govt expenditure on health care is the lowest among developed countries as a percentage of GDP. This is not achieved by being cost-effective or efficient but by passing the rising cost of medical care to the sick and their family members. Not having a universal health care system in which everyone is covered and can go to hospital for treatment without family members having sleepless nights worrying about medical bills amplifies the effects of income inequality in a society with the largest income gap among developed countries.

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Free outpatient treatment for senior citizens at govt hospitals and clinics[Link]

By LIM WEY WEN wwen@thestar.com.my

PETALING JAYA: Senior citizens can look forward to a healthy start to the new year - they can seek outpatient treatment at government hospitals and clinics without having to fork out a single sen.

Effective yesterday, the Government abolished the token RM1 payment senior citizens needed to pay each time they sought such treatment.

The Health Ministry announced in its latest circular that patients aged 60 and above would be exempted from making any payment for outpatient treatment at government hospitals and clinics.
This means that these patients will enjoy medical consultation, check-ups and medication at no charge at all.

The circular, issued by ministry's finance division secretary Wong Foong Lai, stated that the exemption was in appreciation of the contributions made by senior citizens.
Senior citizens would only have to pay a nominal fee if they required specialist care, treatment or hospitalisation.

Civil service retirees under the Employees Provident Fund pension scheme already enjoy free medical facilities at government medical establishments.
Health director-general Datuk Seri Dr Hasan Abdul Rahman said yesterday many senior citizens had chronic diseases that required regular hospital visits.

“If a senior citizen needs to see his doctor once a month or fortnightly, he could still make some savings. We must also bear in mind that X-rays, medication and several tests are already provided free for them,'' he told The Star.

Asked whether the ministry was considering a blanket waiver of hospital fees for the elderly, Dr Hasan said those who could not afford the hospital fees were already eligible for free medical care.
He said the latest exemption could cost the ministry an estimated RM2mil in revenue annually.
“Government hospitals and clinics receive an average of 40 million visits from patients every year and about 5% of these comprise senior citizens,'' he added.

Fomca president Datuk N. Marimuthu welcomed the Government's latest initiative.
Society of Active Generation of Elders (Sage) president Chin Sek Ham, 71, said the body had called for the RM1 exemption a long time ago.

According to the latest census report (2010), 1.5 million Malaysians (5.1% of the population) are over the age of 65.

2011 : A year of awakening....

2012-01-01T12:30:00.004+08:00

I spent some time to look through my own postings on the SMRT and what my fellow netizens have said about the SMRT. More than 5 years ago people have discussed the deteriorating service quality and how the tension between the need for SMRT to generate profits for shareholders and meet rising demand from a growing population would lead a serious trade off in service quality. 2 weeks ago, when the trains broke down, many quickly understood the flaws of the current system.

Similarly, the problems with the GRC system has been discussed for many years - how such a system allows new candidates to ride on the coat-tails of established ministers will not result in voters having the best people to represent them. In the 2011 elections, the flaws of the GRC system was clearly demonstrated when the PAP can't get its own foreign minister back into parliament while Tin Peh Ling rode on the coat-tails of ex-SM Goh Chok Tong into parliament. It remains to be seen whether the PAP govt wants to keep the GRC system. Without GRCs, new candidates will have to work the ground long before the elections to win support and trust. The public has already realised the flaws in the GRC system and most people, I believe, do not want it.

For the past 5 years, this blog discussed the rising income inequality in Singapore and around the world 2011 was the 'tipping point' that saw protests around the world against economic inequality. The Occupy movement that started in 2011 has not ended. In Singapore, there was much anger among voters surrounding this issue and the rising cost of living. While the Occupy movement did not spread to Singapore in the form of protests due to our political climate, income inequality continues to be a serious unresolved problem in Singapore.
Malaysia took a bold step to eliminate the ISA in 2011 as part of its political advancement towards greater democracy. It is hard to believe that Singapore was once among the most democratic nations in Asia where the rule of strongmen, military juntas etc was common. Today, the political progress in S. Korea, Thailand and our closest neighbor has left us far behind the curve. Why does one the most well-educated, well travelled and best behaved citizens anywhere in the world not deserve greater freedom , rights and democracy? Our men, committed to defend this country, deserve less rights than people in Taiwan, S. Korea and Malaysia?

2012 will be a critical year for the world as a number of serious political and economic problems have surfaced. The eurozone crisis remains unresolved and mis-steps can lead to negative implications for the rest of the world. Inflation remains high in Singapore even as our economy begins to slow. The US presidential elections will be conducted on 6 Nov 2012 and we cannot be sure it will be Obama as his popularity has suffered due to the economic conditions in USA. The global economy with the huge imbalances i.e. high debt, high income inequality may just crack leading to some serious economic pain but that will pave the way for change towards a more sustainable system. In Singapore, we have been put on this economic threadmill of GDP growth that no longer produce better quality of life as Singaporeans work longer hours, experience sharp rise in cost of living and have less ability to save for a proper retirement.

Going forward, Singapore needs to raise its productivity level instead of depending on cheap imported labor to spur economic growth. Singaporeans are now well aware that expanding the labor input to achieve GDP growth will not deliver a better quality of life but has numerous deleterious effects of widening income inequality, overcrowding, rising cost of living, structural unemployment etc. To make our economic growth more sustainable and to produce better outcomes for Singaporeans, our economy has to be restructured in the coming years.

2011 was a year when many Singaporeans were politically awakened to see that change is badly needed in our country. Many of the negative effects of PAP policies were felt by ordinary citizens and social contract under which Singaporeans gave up certain civil liberties in return for prosperity was broken. Ordinary Singaporeans today know they cannot simply trust a power-elite with diverse interests in businesses linked to it to undertake policies that will generate the best outcome for them and their families. A strong political alternative capable of taking on a larger role and an active citizenry with access to information can serve as checks on the govt. New emerging tools such as Facebook, blogs, internet forums and YouTube will help to overcome one-sided propaganda disseminated by state controlled media to allow citizens to aware of the change needed in this country.

Sim Ann : Tackling Inequality.... Charting our own path.

2011-12-25T08:08:00.018+08:00

Sim Ann, a former top civil servant who joined the PAP in the 2011 GE, wrote an article entitled "Tackling Inequality : Charting our own path". The article was published in the Straits Times on 22 Dec 2011 and appears on her Facebook[Link], I suggest you read her article in full before reading the rest of the posting to thoroughly appreciate what she has to say on the issue...also read all the comments on her Facebook page on this article. It is an intelligently written article but I will tell you where she is wrong and she is wrong where it matters the most.

"For example, one lady who approaches us for help regularly has an unemployed husband. He has been staying at home for years, and refuses to get a job, even though he is able-bodied and quite capable of working. On occasion, our volunteers have been dismayed to find people they have helped continuing to spend money on habits they can ill afford, like smoking."

In her article she cites the case of family asking for help but found to have an able bodied person in household. Her choice of example echoes the perpetual and paralysing fear (or excuse?) of abuse in PAP govt that is used to explain why it cannot do more for the poor. For every such case, there are also cases of people who fall through the cracks in the system that deserve help but find it hard to get any. Any good system in place will have to tend to the cracks and detect abuse. There are many cases of people falling through the cracks cited by Leong Sze Hian in his book and writings[Focus on help for families that need it] as well as this blog. Today, the reality is it is probably harder to get help than abuse the system. There are numerous cases in which the PAP's own MPs feel should get help but cannot get past the bureaucracy that sometimes look more like a firewall against abuse.

She also cite cases of those who can help themselves financially by giving up on expensive habits smoking - hmm..... but it is only expensive in Singapore because the govt tax it so much and prevents smokers from getting their fix from Malaysia. Smoking is bad for health and people should stop smoking regardless of their financial state.

There is another part of the article where she links the current European crisis to welfarism. I'm not a proponent of the welfare state but this view is incorrect[Krugman : Legends of the Fail]. It is ideologically attractive to simply point to the Europe and say that is the end result of having too much welfare but it is not true. Ireland and Spain failed financially because they rescued the banks when the housing bubble in collapse so the PAP govt should at least be equally worried about high housing prices. In the US, they had more welfare in the 70s and 80s but lower deficit and national debt because they also had high income taxes to pay for it. It is common sense that if a govt takes in less that what it spends it will have a deficit funded by debt. The US debt is caused as much by defense spending as it is by welfare entitlement but it is ideological to miss big elephant in Singapore called defense spending. Sim Ann talks about potential abuse of tax payers money by smokers and those who don't work but the sum total of social our safety nets is dwarfed by our spending on defense. We should also be asking how much defense spending is necessary but the PAP won't go there for ideological reasons. With globalisation and dependency on world trade the security threat has changed to all out war to low intensity conflicts, and the high income gap that weakens our social cohesion severely undermines our social defense changing the equation that justifies the tradeoff for high defense spending vs low social spending ...don't forget behind every weapon and platform is a service man with a stake in the socioeconomic system and severe inequality undermines what he has at stake.

The heart of the article and PAP's thinking can be found in this paragraph:

"That way we can evolve our own social model, one that emphasises enterprise and drive, rather than the redistribution of a shrinking pie; one that encourages self-reliance instead of welfare; and one that helps build a fair, just and inclusive society.

Our government spending will inevitably rise over the next decade, as our social needs grow and our programmes expand to meet them. But the government can only spend within its means.

We have kept taxes low in Singapore, especially direct taxes on income. This keeps us competitive and encourages our people to excel in their work, and to make the most of their abilities. For this reason, we must be cautious in taking on new state-funded welfare commitments."

Ideally, if the income gap is small, we can keep taxes low and everyone has the ability to be self-reliant. That is what most ordinary Singaporeans including myself would prefer. However, today we have the largest income gap among developed countries. We do not have a small problem we have a very big problem....and we have to recognise this. She blames globalisation for the inequality but if that is true, why does our income gap have to be larger than all of the developed countries we compete against? We will come to that later.

She says that we should emphasized enterprise rather than "try to redistribute a shrinking pie". But inequality itself is a hindrance to expanding this pie in a sustainable manner. We have to fix the income gap problem first in order to have sustainable growth (see video in previous posting). Redistributing wealth and expanding pie goes hand in hand. Sim Ann got her economics wrong. The US economy had the best growth when income gap was much smaller, the middle income families thrived and taxes were higher in the 50s and 60s. The notion of lowering tax to get economic growth and foster enterprise has a diminishing return when the income gap grows to a point when a large segment in society start to struggle financially - worried about healthcare, housing - you are going to have less drive and enterprise. If you want drive and enterprise, we can energise our SMEs by cutting rents, utilities cost, govt fees, and giving smaller company tax breaks while taxing our monopolies especially GLCs to level the playing field.

Simply growing a economic pie while keeping an income gap as large as what it is today without a fairer more equal distribution of wealth just make no sense. We have been seeing GDP growth but an increasing segment of the populace see their life getting worse. You cannot get people to buy-in to such a system over the long run - it is politically unsustainable and support will erode over time. Many people suggesting tax reform are not doing it because they insist on punishing the wealthy or enterprising individuals in our society. It is because we have waited for other solutions to narrow the income gap for far too long and nothing else the PAP has done has brought down our GINI index and the situation gets worse year after year. Economist Shiller puts it very well when he said that making tazes fairer does not "destroy capitalism" or the important aspects of capitalism (enterprise and drive) but it prevents the wheels from falling off and helps capitalism to survive - Warren Buffett, shares this view.

The PAP has to narrow the income gap even if it means reforming progressive taxes to produce a fairer outcome for our society. Today as the share of corporate profits as a % of GDP rises every year we finding an increasing number of Singaporeans who work full time and cannot make ends meet. In the 2011 GE and PE, the people sent a strong signal and perhaps a "final warning" of sorts to the PAP to get this fixed by the next elections. Today, the PAP is only stretching its safety net to catch an increasing number that have fellen to pverty levels .... It is equivalent to finding homeless people to put into shelters to make the most visible negative outcome of rising cost of housing disappear. The real problem runs deeper and wider - the Occupy movement in US calls it "the 99%" because it is hitting a growing segment of the populace. We have a wider income gap than in US where these Occupy protests have taken place and the income gap has become the key 2012 US Presidential election issue(Economic Inequality an Issue for 2012 Campaign).

The PAP insistence on maintaining the lowest corporate tax and lowest marginal tax rate for the rich among developed countries while at the same time having an income gap that is the highest among developed economies competing against us shows a huge imbalance in policy making. The PAP govt as recently as 2007 was cutting corporate taxes and raising GST which increases tax on the poor as the income gap grew to new highs. The PAP also pursued policies such as importing 3rd world foreign labor to keep wages low and grow the economy. Productivity was neglected and fell behind other countries. If the PAP wanted to maintain low taxes, it should have structured our economy to avoid this 3rd world wage structure.

Sim Ann's article shows an underestimation of the problem and if it remains unsolved when the PAP goes for the next GE, telling voters that the pie has grown and taxes has remained low to keep people enterprising is not going to be enough when most people find their lives getting worse as wealth concentrates in a small segment of society. Sim Ann's article contains no solution to narrow the income gap but merely explains why the govt is constrained by the need to avoid raising taxes for the rich and corporations which is already at the lowest in our nation's history. While the PAP "expands the safety nets" to catch the poorest who cannot make ends meet, the effects of the income gap is spreading to the middle class which is now seeing financial strain. The stresses are building up and the problem is deepening as the govt tackles only the worst cases while many more become worse off. Sim Ann's formulation of "our own path" is a path to a dead end in which the problem is not solved and the status quo is retained.

Singapore's inflation rate 5.7% in November...

2011-12-23T15:50:00.000+08:00

Inflation is up 5.7% in November (see report below).

This is the economy of the past 15 years. When the economy is strong, your wages go up but so does inflation and that eats away the increases. It is difficult for older workers to keep up with inflation and even worse for low skilled workers whose nominal wages have remained stagnant for years - I think you just need to compare the salary of cleaners 10 years ago with what it is today to see this.

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Shoppers in a retail mall in Singapore.


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SINGAPORE: Singapore's inflation rose 5.7 per cent on-year in November due to higher costs of housing, car premiums and petrol.

Data from the Department of Statistics (DOS) showed housing costs increased by 10.0 per cent on higher accommodation costs and electricity tariffs.

Meanwhile, transport costs rose 11.6 per cent due to increases in Certificate of Entitlement premiums and petrol prices.

Food prices also went up 3.6 per cent, as a result of costly prepared meals, seafood, dairy products and eggs, fruits, vegetables as well as chilled meat.

Not including accommodation costs, inflation was 4.4 per cent higher from the previous year.

Last month's consumer price index was higher than market expectations of a 5.4 per cent on-year increase.

The consumer price index in January-November 2011 was 5.2 per cent higher compared to the same period last year. Excluding accommodation costs, the consumer price index increased by 4.2 per cent during the same period.

-CNA/ac

System breakdown goes beyond the MRT....

2011-12-22T06:36:00.002+08:00

There is a lot of anger now with SMRT CEO Saw Paik Hwa and there are calls for her to resign. The Chinese tabloids fed the fury of the readers by publishing a photo of her dressed as Cleopetra carried by a few half naked men. She did that to raise money for charity but it doesn't matter - people are just angry and they will find reasons to be angry. Our MRT trains are 25 years old. Things breakdown due to wear and tear....and in an unpredictable fashion and perhaps maintenance cost have to escalate as the trains age but privatisation means a great pressure to increase profits and answer to shareholders.

SMRT's profits rose every year even as the quality of service fell due to overcrowding. Its CEO Saw received the highest pay package of any CEO in SMRT's history. Profits vs quality of service. High salaries does not mean the system delivers quality of service to the people and system reliability. But you think hard about what is happening at a larger entity better known as Singapore Inc. For years the leaders are paid record salaries pegged to GDP growth while the quality of life of the people declined. The system put in place in Singapore Inc to maximize GDP growth is headed for a breakdown like the MRT. Just like the unhappiness caused by deteriorating quality of service and overcrowding of trains, the unhappiness with Singapore Inc system has been rising...and an increasing number feel that change is badly needed and things are heading for a breakdown.

Here is the highly respected professor Robert Shiller explaining the dangers of the income gap and some ideas on how to maintain stability in an socio-economic system.

A few things to note about Professor Shiller. A few years ago, he became famous for coming up with the phrase "irrational exuberance" to describe the Nasdaq bubble and warned about its collapse. He also warned us about the US housing bubble and his index the Case-Shiller Index is now the most widely tracked index for housing prices in US. Professor Shiller research field is in behaviorial finance and when his conclusions are based on scientific evidence and his understanding of human behavior devoid of politics and ideological bias. He tells us simply that unless the income inequality is addressed, there will be instability in the economc system and our society. This video was made in Aug 2009....1.5 years later we see social instability around the world - the Arab Spring, protests in Israel, Occupy Wall Street movement etc. While there may be other issues like democracy and human rights involved, the common denominator in these protests is social inequality.

I explained in numerous postings that income inequality is one of the root causes of economic problems we see in the past few years. When wealth is unequally distributed, there is fall in aggregate demand which is usually compensated by increase of debt which then become the cause of crisis be it subprime debt in the financial crisis or the ongoing european sovereign debt crisis. Even if we stabilise these crisis in the short term, the current economic model is still not sustainable until the income gap narrows.

Income inequality we are seeing today has only been seen in the last 100 years on the eve of the Great Depression. It took a depression followed by a World War in the 1940s, to compress the income gap.

In Singapore, we have the biggest income gap among developed countries. There has not been a single protest in Singapore because we have very harsh laws - there has been no large scale protests in Singapore and Singaporeans over time have been conditioned not to participate in one. The lack of protest does mean there is no unhappiness or instability in our system. In fact, without a escape valve it the whole situation can be very dangerous. Leaders underestimate the problems and pressures build up. If you look at authoritarian states e.g Egypt, Syria and semi-authoritarian state e.g Russia you see complete calm 3 months before that there have been no major protests for decades and when trouble erupts regime change takes place. In places where people protest regularly like Israel, the system stayed intact because the govt there is forced to always adjust to avoid complete collapse. The strongest signal that something is not right is during the General Elections when Singaporeans feel some safety in numbers and turn up for rallies. After that things look calm again and you can't tell whether people are now happy with the policy tweaks, some downward ajustment of minister salaries and various measures to cool the property market, provide more beds in hospital, increase ComCare + Workfare etc. The superficial calm probably leads the PAP govt to think sufficient is done, they have "bent over backwards" .....people can see the PAP system generally works and the few glitches fixed, the PR improved...and then they fall back into the thinking that the PAP is after all the fantastic govt that took this iny country from t 3rd world to 1st world, people can be wildly successful because of social mobility and understand Singapore is a resource-less state so citizens have to right-size their ezpectations. The PAP looks like they are thinking along these lines based on the pace of change they are implementing. This is a gross underestimation of the inequality problem and will lead not just to election disaster for the PAP in 2016 but deep social problems for Singapore in the coming years. Our system is not generally okay - like those MRT trains that have been breaking down, our healthcare, retirement systen, education, housing ....all need major revamp due to the income inequality....they are all falling apart under the strain of income inequality.

The PAP govt has allowed the income gap to rise for too long and to grow too big to still maintain schemes that is consistent with its self-reliance philosophy. Take CPF as an example. If income gap is small, it makes a lot of sense to ask everyone to take care of their own retirment through CPF saving - you spend your own money. With the large income gap it means that that a large segment of the workforce will not be able to save enough for a proper retirement and many who can retire will not have a good quality of life. Even without all the modification to use CPF for children's education, housing and as loans to GIC for reserve building that drain off CPF funds, the basic schemes becomes inadequate because of the income gap, many in the lower income brackets cannot accumulate the minimum sum. The PAP solution is to keep pushing back withdrawal age in effect forcing aged people to take up menial work because most of the time that is the only work available to old folks. For a country with a reputation of being an affluent, tourists are sometimes shock when they see very old folks cleaning tables for a living. Our income gap means that in the coming years more people will have to retire later and the situation will worsen. The lack of shared responsibility for retirement at a time when income gap is so high makes it a hard buy-in for ordinary Singaporeans who work under intense competition from foreigners, depressed wages and cannot make it to a proper retirement. This is a mismatch with the level of commitment the state demands from its citizens in the form of conscription plus reservist duties and unequal sharing of responsibility. The implementation of CPF Life, increasing withdrawal age and restricting access to CPF through minimum sum rules is pushing and stretching the system that is already on its way to a breakdown in terms of its goal as a provident fund to deliver a decent quality of life to retirees....

What about our healthcare system? Stretched capacities, insufficient beds at public hospitals as the govt tries to turn healthcare into a profit generation center by turning Singapore into a medical hub for the rich in the region. Rising profits in healthcare sector, overcrowded public hospitals, rising fees....doesn't that start to look like the MRT system? You pay more, quality drops due to overcrowding, record profit is made ...and Singaporeans are worse off every year.

Our economic growth model which now depends on increasing the foreign influx to increase the GDP....how is this going to be sustained? We rapidly reached the highest population density in the world. Housing cost and the cost of living has shot up at the same time our income gap rose to the highest among developed countries. We are starting to see a rise in poverty, a growing underclass and the stresses in the system is building up....but we are caught in a vicious cycle because we are now depended on this model having neglected productivity for too long. Are we not heading for a breakdown here?

When the system is old, you sometimes have to revamp it...do an overhaul or you have to spend large amounts on maintenance to ensure it does not break down. You cannot keep pressing on and pushing the system along to keep it going so that your profits and GDP keep going up. Things can deteriorate rapidly and when the unhappy people who have been waiting for improvements see that trust is completely lost and nothing you do after that matters because they will never trust you anymore.

CEO Saw has all the profits generated over the years made from the pockets of ordinary Singaporeans. She had the choice to spend it to overhaul the system to reduce the risk of breakdown and failure but she is also the CEO of a listed company and shareholders demand profits to be paid out as dividends. Singapore as Singapore Inc faces a similar conflict - its success is measured primarily in terms of GDP growth leading to policies that benefit only big businesses. Our society is one now strained by rising income gap, falling quality of life and breakdown of trust between the govt and the people. If we don't bury the notion of Singapore Inc and bring back Singapore the nation and revamp the systems to deliver benefit to the people and long term sustainability ....this whole Singapore Inc system will breakdown like the MRT system...and people will be demanding leadership change at the top.

Dictator Kim Jong Il is dead....

2011-12-21T03:28:00.001+08:00

....and he is so loved by his people.

Here's a leader who kept his people ignorant for decades, make them live in utter poverty and deprive them of every single freedom. He lived in luxury while his people suffered, yet he is so loved by his people. If you have any doubt propaganda works, and can be use to completely deceive millions, you should see what is happening in N. Korea right now.
Today N. Korea's GDP is 3% that of S. Korea's. In the 70s, N. Korea's GNP was actually comparable to that of the south.....actually S. Korea's GNP only surpassed the N. Korea's in 1975. Since the 70s, North Korea has economy has deteriorated. While some parts his country suffered famine, Kim Jongcono Il had a institute with 200 cooks creating new cuisines for him. He was known to be a drinker and womaniser. The Chinese tried to persuade him to open up N. Korea's economy but he refused because he knew that once people have access to information his propaganda machine cannot work and he would lose power fast.
North Korea is officially known as Democratic People's Republic of Korea. This is a joke. It is clearly not a democracy but a dictatorial dynastic rule. It is more like a dictator's paradise than a "people's republic". Millions suffer to preserve the luxury lifestyle of a handful of elites that use nuclear weapons to threaten the world. Unfortunately, N. Koreans are too brainwashed to liberate themselves. They have no Facebook, no Twitter and no blogs because the govt has physically isolated the Internet so that only N. Korean sites can be accessed. This is known as the N, Korean intra-net. All it takes to topple this regime is to connect a cable from this intra-net to the Internet and deliver the truth to the N. Korean people. When a power structure built on propaganda, myths and lies, the system can be toppled easily when people have access to the truth.

Discrimination against poor Singaporeans with foreign spouses....

2011-12-18T21:56:00.009+08:00

UPDATE : Some people commented here and in TOC's Facebook that these rules are in place to prevent marriage of convenience when foreigners marry Singaporeans to get PRs. But how can it be?These spouses are denied after they have children and in this case the oldest child is 9 years old yet the mother is denied when it is clearly not a marriage of convenience. Others suggest that the rules are there to prevent foreigners from cheating our men - this does not make sense because it is applied to poor men only....there is more to cheat from richer men...clearly that is not the case for this lorry driver who has been married for 10 years. The only possible logic is the govt does not want poor men to procreate and is using these restrictions to discourage them - it is already bad enough that hard working men find it difficult to make ends meet because of the income gap...they are often made poorer because of govt policies often don't favor them e.g. importing cheap labor causing their wages to be depressed, having no minimum wage laws and rising cost of living. Yet, the govt put more obstacles to prevent them from making their own lives better ....this Jason Lim struggled for 9 years to raise his family working as a lorry driver and on the day he died he still couldn't get PR for his wife.....what does our society gain by making him go through his ordeal? This is unjust.

This is one issue that really makes me angry and I'll keep highlighting it until the govt changes its policy. What they are doing is downright unconscionable, highly discriminatory, unnecessary and harms a large number of poor Singapore families. If this is the first time you learn about this, I hope you can tell others what our govt has been doing so that everyone is aware that the people they elect as leaders are doing this.

A few days ago, a lorry driver by the name Jason Lim died when his vehicle rolled off a barge Pasir Panjang Terminal. Jason Lim is married to a Thai national and has 4 kids who are Singaporeans aged between 4 and 9. His wife may not be allowed to stay in Singapore because Jason is no longer around.

Our authorities pursue a discriminatory policy against low income Singaporean men married to foreigners. Their wives cannot get PR or citizenship and can only stay in Singapore by applying for LTVP (Long Term Visitor Pass) . Supporting a family when you're poor in Singapore is extremely tough given the high cost of living. For these poor Singaporean men with foreign wives, their problems are compounded because those on LTVP are not allowed to work, cannot get subsidised medical care and apply for HDB flats.

Singapore gives out PRs and citizenship to so many foreigners.... many of whom have stayed here only for a short duration yet PR and citizenship is denied for Jason Lim's wife who is also the mother of 4 Singaporeans who have to serve NS when they are older.

Making the poor struggle and undermining the well being of Singaporean children with foreign mothers, harms thousands of families in our country. It exacerbates the pain of poverty for these families without any gains for our society. If the PAP may think that they gained something by penalising the poor for getting married and having children, but they have not...they have lost the trust and support of these men and everyone in the country that feels that each Singaporean should be treated with fairness and dignity.

MRT breakdown and what is wrong with our transport system....

2011-12-17T12:53:00.009+08:00

UPDATE: I would like to thank everyone for their comments and the lively exchange in the comments section. As far back as 4 years ago, I wrote about the MRT privatisation trade offs and how the need to pursue profits wilwould result in trading off quality of service. Some may have given some thought to this but might not have fully appreciate the consequences of privatisation. A few months ago, shortly after Liu Tuck Yew took charge of the Transport Ministry, this debate surfaced again between Workers' Party and Liu. Liu and a few of PAP MPs offered their side of the argument. This series of breakdowns really woke everyone up and once the problems become severe people quickly understand the pitfalls of the current model. While it is unclear whether cost cutting to preserve profits resulted in the problems of the past few days many people now understand that the need to increase profits will lead to compromises. To me, the MRT breakdown is also symbolic of a larger breakdown that is starting...the breakdown of Singapore Inc and many of the systems put in place by the PAP govt. I will explain it in my next posting. As with the MRT situation, people quickly understand what has gone wrong only when the breakdown becomes obvious and the rpoblems become hard to fix.

I was once stuck in a train on the Circle Line for 15 minutes before a technical problem was rectified. The train was very stuffy and passengers were very frustrated ...and that was for a 15 minute delay so when you have a people stuck in a train for a hour without air conditioning and lights, you can expect people to be very angry with what happened.

You can't blame the people on the train for being angry but I feel much of the anger for SMRT's CEO Saw Piak Hwa is misdirected. Ultimately as CEO of SMRT, the buck stops with her but that does not mean she has been negligent or did not do her job well. The problems were caused by misalignment of the rails and an inquiry is being conducted to determine all the facts. The actual cause may be failure to check the rails because experts did not recommend SMRT to do so or checks were done but the technicians did not do a good job or it is really something that cannot be foreseen even with the best technical knowledge. However, Saw is presumed by many on the Internet and the general public to have done something wrong.

There was unhappiness with Ms Saw even before this latest incident and much of this is unjustified. People blame her for crowded trains, unpleasant rides and many don't like her for getting a high salary of several million for running a public transport system. You cannot blame Saw for the crowded trains because she does not control our foreign influx and when the trains became crowded it is not within the SMRT resources to invest in new lines or completely revamp the system. Only the govt can build new lines and Ms Saw is answerable to share holders she can't just throw in every penny to replace trains, and rebuild stations because SMRT is a listed company and bottom line is everything. SMRT did improve the signalling system to increase frequency and that upgrade cost $1B. I don't blame her for her pay because such high executive compensation is now common place among listed company CEOs and Saw is not an exception.

"SMRT must make this right...." - Minister Liu, Straits Times headlines, 17 Dec 2011

Singaporeans are unhappy with the whole transport system and Saw Piak Hwa, the well paid CEO of SMRT has become an easy target for their anger. She is not in charge of the transport system, Minister Liu is but I don't suggest you direct your anger at Minister Liu because he has been on the job for a few months and inherited the whole system with all its problems from Raymond Lim who inherited it from Mah Bow Tan....and so on. Raymond Lim and Mah are no longer ministers. There are so many issues that cause Singaporeans to be unhappy about transport that I doubt Minister Liu can fix them all. Our transport system may never get back to a state that Singaporeans find it satisfactory. When did our transport problems begin? ....Once you understand how it begins, you will have some idea how it can be fixed.

In Singapore we have the most expensive cars in the world due to the COE. We have the highest cost of using cars due to ERP, road tax and petrol tax. In many countries, a person working as a cashier in a supermarket can own a car so transport is not in issue but in Singapore a many professionals/degree holders do not drive due to the cost. But since Singapore is small and population density is high people can accept that not everyone can own a car. However, the distribution of COEs purely on the basis of the ability of people to pay mismatch the needs of people with this limited resource, cars. A lower middle class father with a real need for a car, say someone with children and parents with medical conditions (difficulty walking cannot take bus), is priced out by the teenage son of a millionaire who doesn't really need the car. Our income gap which is the largest in the developed world amplifies the mismatch. The alternative to owning a car is taking taxis that is why people are up in arms when fares are increased because it has become a necessity for some people. When people complained that it was hard to get taxis during peak hours the taxi companies increased peak hour charges to price poorer people out during peak hours. When traffic becomes heavy, ERP charges are increased to price 'poorer' drivers out - these mechanisms are fine if our income gap is not so big and we can compete more equally to pay to get scarce resources based on our needs. But that is not the case for Singapore and people are torn apart by their needs and ability to pay. The thing that can save us all from the unhappy outcome of this system is a good public transport system. That is why many cities without COEs have not fallen apart ....a COE-less system forces the govt to make the public transport system so good that people prefer not to drive their cars...with a quota system in place, the govt has less incentive to create public system that is good enough to compete with car ownership.

Our public transport system has been privatised and the tradeoff between operating profits and passenger comfort comes into play. What public transport companies like SMRT and SBS try to do is adhere to minimum standards and maximise profit margins. So the incentive for CEO Saw is to do no more than the minimum in terms of service quality because she won't lose any customers as a monopoly . The elimination of new long haul bus services which the transport ministry plans to force more people into a "spoke and hub" system in which the MRT forms the hub and short haul buses the spoke can only worsen the system. More direct long haul buses that connect major worker centers to major housing estates can relieve the congestion in our MRT system.

Our entire transport system is now in a very unsatisfactory state with middle class families struggling very hard to own and use a car that they really need and ordinary Singaporeans unhappy with the crowded public system and poor people completely priced out of taxis and cars when they urgently need them.

The Worker's Party suggests re-nationalising the bus and MRT so that more resources can put into them and the need for generate profit is taken away. This may sound like a bold drastic solution but I believe that the govt should go even further. Good public transport is essential to lift up the quality of life of the majority of people in Singapore and reduce the demand for cars limited by road capacity Worker's Party suggests to operate this system on a cost recovery basis - I would go even further to suggest that the govt should make the system as good as possible even if it means that they incur some operating losses in the form of subsidies to students, senior citizens and poor. After all the govt sinks in billions into defense without cost recovery.... and rightfully so for the long term security of the nation even though there are no direct and immediate threats. Similarly, we should think in terms of the gain in the quality of life of Singaporeans when we invest and operate our public transport system - it will help to alleviate some of deleterious effects of our large income gap and strengthen our social compact. In that sense spending on public transport system is part of security as one of our pillars of defense - social defense - depend very much on the cohesiveness of our society.

If people feel that is system is designed for the rich and their needs are not met when the time comes, the man behind the weapons, asked to serve his country, may have one less reason to die for his society ....

China\s Economy : Many problems, many bullets....

2011-12-17T08:37:00.001+08:00

In April 2010 Jim Chanos spoke about China being on a threadmill to hell[Link]. It turned out that it was Europe not China that was on that threadmill.

China is “on a treadmill to hell,” said Chanos, who saidin January the nation is Dubai times a thousand. “They can’tafford to get off this heroin of property development. It is theonly thing keeping the economic growth numbers growing.”

Actually the Chinese govt did have the foresight to cool their property market since 2010. Numerous draconian measures including increasing down payment, restricting buyers to only two properties, restricting bank lending etc. Measures that can only be implemented in a country like China. China's red hot economy caused inflation to rise and Chinese govt restricted lending by raising the reserve ratio slowly choking off credit to the economy. Between July 2006 and June 2011, China’s reserve requirement ratio was changed 35 times. This is the tool of choice for China's policy makers to control the liquidity in the system.

The estimated banking reserves today is 30% of its GDP which means China has the tightest monetary policy in the world today. At some point bank lending was so restrictive, small businesses couldn't get loads from the banks and went to underground lenders. Thinks happen quickly in China and by the time the authorities came around discover the lending it is estimated that as much as large US$600B[Link].

An economy slowing down is not in itself a problem if the central bank has bullets in its arsenal to fight it - and China has kept plenty of bullets due to its tight policies. The US economy is muddling along and still growing but the US Fed has pushed interest rates to zero and Bernanke is left with very little if a recession comes along. Why is all this important?

The Singapore economy is clearly slowing down looking at the export figures. Europe is going to into recession and the US will probably stay flat barring any economic shock from Europe due to the debt crisis - this is a big risk if Europeans can't stabilise the situation and some kind of disruption occurs. What happens in China will probably tip the balance.

China is in the midst of transforming its export-led economic growth to one led by domestic consumption. It will import more, get its domestic economy fired up and become less dependent on exports. We see some of this in its latest trade figures[China looks to bring in more imports, keep exports stable]/ China exports more to Europe than it does to any other country so it has to ram up its domestic economy to keep growing and creating jobs. The purchasing power of China is huge and exceeds that of US [China tops US as biggest-economy by purchasing power].

The Chinese economy is now slowing like the rest of the world and actually the policy makers wanted that because inflation was their biggest problem. Inflation appears to under control and the are starting to ease and put more liquidity in back with the first cut in bank reserve ratio on 28 Nov 2011[Link]. There is plenty of room to cut ..and if that does not do the job, they can reduce interest rates and reverse all the restrictive polices on the property market.
Despite Chanos dire predictions for China crashing into the abyss, China may end up being the sole rescuer of the global economy. While China has many problems, bad bank debts, excessive borrowing by local govt and over investment in infrastruture, it does not borrow money from foeign lenders and hence cannot be held hostage by the financial markets like Europe. There is also the positive side effect of not being a democracy, the guy on top can just give the command and things get done. Compare that with 17 democracies in the Eurozone - they have all the resources to end the crisis but just can't get it done. Before the Asian crisis, Chinese banks were asked by the central govt to increase lending to state own enterprises. When the Asian crisis hit close to $300B of these loans become bad and would have crippled the Chinese banking system. In the US, politicians will deliberate and debate for weeks and months as the economy sinks about moral hazard etc but in China they simply buried the problem. The Chinese govt set aside $300B to buy up all the bad loans to clean up the bank's balance sheet. A few years later, the same banks had successful IPOs and took in plenty of money from investors around the world.

You may have heard this advice from pundits and investment advisors a few years ago to invest in Chinese stocks because its economy is growing very fast. Well, as the Chinese economy grew in 2009, 2010, and 2011 rapidly, China's stock market has been sinking lower and lower. The stock market in China does not correlate with economic growth but with liquidity in the system. As the Chinese economy was growing, the govt was tightening by pushing up the reserve ratio and later on the interest rates. That kept money out of investments in the stock market even as the economy grew continuously for more than 2 years and the stock market went no where. Every major stock market rally in China's Shanghai Composite (and in Hong Kong?) coincide with the start of monetary easing in China. .Chinese stocks have fallen to the lowest levels in 2.5 years and while its economy slows from the problems in Europe, the govt will have to ease monetary policies to maintain growth which what is needed to give its stock market a boost.

For many resource rich countries, China's growing domestic economy will provide a backstop to the problems in Europe and slow growth in USA. In the previous crisis in 2008, a number of analyst spoke about decoupling but it did not happen because the shock to the global economy was too sudden and severe. Aggregate demand simply collapsed and plunge the world into a global recession. This time we have a crisis that has gone on for 2 years and policy makers appear to understand most of the possible ramifications including the Singapore govt that warned of dark days ahead. There are even radio adverts telling people their bank accounts are protected to prevent a run like in the 2008 crisis. I'm not optimistic about Europe given that they appear to be behind the curve all the time and are reactive to market stress. Some kind of economic shock may occur if the situation get so bad that some countries want to leave the Eurozone or default on the crippling debts. Italy is indeed on the threadmill to hell as it is paying more than 7% to borrow money unless something is done soon.. The outlook is uncertain but global recession is not inevitable. There are opportunities coming for those who can see through the fear but be careful of potential shocks from Europe.

Singapore : Why can't we seem to Innovate....

2011-12-15T10:55:00.002+08:00

Steve Wozniak Apple's co-founder said this yesterday[Link]:

Look at societies like Singapore where bad behaviour is not tolerated and can get you extreme punishments: Where are the creative people? Where are the great artists, where are the great musicians, where are the great writers?

All the creative elements seem to disappear. Though, of course, everybody is educated and has a good job and nice pay and a car.

Thinking for yourself is creativity and that's goes right down to what we were talking about dress, the clothing that you wear - you wear what you want to wear.

If you read Steve Jobs biography there was a time he had long hair and was some sort of later day hippie. In Singapore he would have been stopped at the airport in the 70s and disallowed from entering Singapore. The founders of Apple had a earlier business that created boxes that allowed people to make illegal long distance phone calls. They were in every sense rule breakers.

Over the years, there were calls for Singaporeans to be more innovative. Be more creative. Be more entrepreneurial. Some Singapore companies conduct "innovation drive" or "suggestion drive" to get workers thinking. But after a while it usually loses momentun because it is hard to build up the culture among Singaporeans and overcome the social factors outside the company that constrain Singaporeans to a pattern of behavior - the education system, the strict laws, various socio-economic factors.

The basic idea is this:

Wozniak is right to say that strict rules and heavy punishment for breaking rules is what stifles creativity in Singapore. I believe it starts with the political space. In the past, what happened to people with a different point of view had a chilling effect on the rest of society. Over time people became fearful of expressing their views and challenging authority. This behavior cannot be compartmentalised and over resulted in an obedience to all authority - students don't question their teachers, workers don't challenge their bosses, and people believe everything they read in the Straits Times. The govt exerted control through harsh laws and punishment ...everything is orderly and we have obedient citizens who learn all the rules and are afraid to break them. This is great if we make our living working at assembly lines, doing routine work and the world never changes. Unfortunately, that is not the reality we are in and we either innovate and out smart our competitors or we go on Lim Swee Say's strategy of doing the same things faster, cheaper and better than them which is getting very difficult with China playing the same game..

The PAP's "cheaper and faster" growth model is a race to the bottom for workers. How do our lives and living standards improve by making Singaporean workers cheaper? The PAP's idea of building an economy dependent on cheap foreign labor has so many deleterious effects but the main problem is it is not sustainable. We already have a population density higher than that of Hong Kong, housing and cost of living as a whole has escalated and Singapore is becoming increasing more expensive. To compensate for the rise in the cost of doing business, Singapore looks for cheap labor - we used to have mainly Malaysians but now we have to go all the way to get workers from China, India, Burma and Vietnam. As wages among ordinary Singaporeans become depressed, inequality rose.

If you look at how companies survive and thrive over time, the ones that succeed are able to transform themselves over time to deliver innovative products. The Appes, the Googles and the Facebooks...the ability to evolve companies like these is one key to sustaiinable economic growth without the "cheaper, better, faster" strategy. Much need to be changed for us to get there including our education system that puts so much emphaisis on exam scores that it forces students to focus on doing well for exams above everything else. Students are sorted according to PSLE scores into secondary schools that now lack diversity in the student population - each school taking in student from a narrow slice of PSLE scores.

We should all take a page from Apple's comeback strategy when Steve Jobs rejoined the company - Think Different about the way we do things, forget the rules, the punishment, the pressure to conform and suspend our fear of authority. Be open to alternative ideas, question everyting around you, remove the constraints on your thinking ....

Unfortunately we live in a country that has a dominant govt that is uneasy with alternative ideas. Ideas are censored and books are banned not for obscenity but because they give us another perspective of Singapore.. How are we to innovate when some one decides which idea we should have and which we shouldn't...and what information we should know and what we shouldn't. know. Unless we free up this great resource, the creative minds our people, we will stagnate and decline going the way of others who also try to preserve the status quo in a fast changing world.

Housing debt slavery : How it can occur....

2011-12-14T19:50:00.002+08:00

My friend who is an economist was terrfied when he bought a private condo. He and his wife were thrifty penny pinchers whoi paid down the housing loan as fast as possible. Why was he so fearful? Being an economist he knew a lot of economic history and knew that many things can go wrong when one has a large debt. Somehow these few years, people don't think too much about borrowing half a million or a million to buy a home - sometimes they do it because others are doing it. Sometimes they think they are okay as long as they stay employed.

15 years ago a friend of mind show me the terrible situation got in with his housing loan. He computed that he paid a total of $200K in instalments but the oustanding loan decreased by only $60K. How is this possible? During the Aisan crisis interest rates went up to 6-8% depending on which bank you got your loan. 8% on a 800K loan is a whopping $64K a year roughly $5K a month on interest alone. Not to mention the depreciation of the property during that time.Interest rates today are artificially low. They may be low for many years but if you look at a window of 2 decades chances are you will hit a duration of extremely high rates.

If you read the story below, it talks about housing loans in Hungary with interest of 13% and 6% in Switzerland. Because Hungarians can borrow from Swiss banks at 6% to buy a home in Hungary, many did so because many others have done so in the past saving plenty plenty of interest. Guess what went wrong for these Hungarians? /..read the story below. Think twice before taking a loan in a foreign currency.

Another situation that can arrise is negative equity. When the price of the home falls very quickly, the market price of the home can fall below the oustanding loan you have with the bank. When this happens, the banks can ask you to pay down part of your loan immediately so that you get back to positive equity. This clause I believe is found in all housing loan agreements today. It didn't happen in Singapore but home buyers in Hong Kong got hit by this during the Asian Crisis and were at the mercy of the banks that had the right to foreclos on the property,

During boom times, there is always this tempting strategy of buying a home then taking loan with a long tenure then servicing the loan with rental income. I've seen a number of people who get into trouble with this strategy - they can afford one condo but buy two thinking the 2nd property can pay for itself via rental income. To get into real trouble buy 3 condos. when you can only afford one. If your timing is perfect perhaps you can get away with it but many people do this during the boom time when poperty prices are high. When rental yields fall, they end up slaving away to hold on to the property.
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Austrian Banks Face Hungary ‘Debt Slave’ Revolt

QBy Boris Groendahl and Edith Balazs - Dec 14, 2011 7:01 AM GMT+0800 inShare0More

Business Exchange Buzz up! Digg Print Email Enlarge image

Austrian Banks Facing Payback Balint Porneczi/Bloomberg

Hungarian forint notes. because it may have to inject capital into its banks. Hungary’s banking association last month proposed a plan of its own that would include further losses for the banks of as much as $2.2 billion.

Hungarian forint notes. because it may have to inject capital into its banks. Hungary’s banking association last month proposed a plan of its own that would include further losses for the banks of as much as $2.2 billion. Photographer: Balint Porneczi/Bloomberg

When Hungary’s former central bank governor was buying a house two months before Lehman Brothers Holdings Inc. collapsed and the country sought an emergency bailout, he received an offer he couldn’t refuse.

Peter Akos Bod, now an economics professor at Corvinus University in Budapest, was given a choice of mortgages by his bank. The 60 year-old could select a loan in Hungary’s currency, the forint, at 13 percent interest, or one in Swiss francs at less than 6 percent. After crunching the numbers on a spreadsheet, he picked the cheaper franc loan.

“It was rational,” he said of his 2008 decision in an interview in the Hungarian capital. “I put it into a model.”

Three years later, Bod and about one million compatriots who took mortgages in francs are faced with a debt pile that has swelled to 4.9 trillion forint ($22 billion). The currency’s 40 percent slump against the franc has raised repayment costs, pushing mortgage arrears to a two-decade high and prompting Prime Minister Viktor Orban’s government to brand the loans “debt slavery.”

To help homeowners, Orban imposed currency losses on banks including Erste Group Bank AG and Raiffeisen Bank International AG (RBI) that may total 900 million euros ($1.2 billion). Faced with the risk Orban would impose further measures, lenders have offered to accept $2.2 billion of additional losses if the government promised to take no further action. If it doesn’t, banks are threatening they may withdraw from the country.

‘Too Risky’

“Against the backdrop of a potential western European financial crisis, this raises the risk that western lenders will just pull out of Hungary because it’s just too risky, which would be disastrous,” Neil Shearing, senior emerging markets analyst at Capital Economics Ltd. in London, said in an interview. “Hungarian banks are incredibly dependent on their western European parents for short-term credit lines. At the very least it means credit is going to remain very tight.”

Six of Hungary’s seven biggest banks have foreign parents, including Italy’s Intesa Sanpaolo SpA and UniCredit SpA (UCG) and Germany’s BayernLB. Only OTP Bank Nyrt., the country’s largest lender, is still domestically owned.

Almost 18 months after Orban was elected in April 2010, he passed a law allowing Hungarians to repay mortgages denominated in foreign currencies at discount of about 25 percent to today’s exchange rate. As long as a client applies before Dec. 31 and repays the entire loan before Feb. 28, the banks have to make up the difference.

“I paid it back last week,” Bod said. “I’m free of debt slavery,” said the former industry minister. The plan “is easy to explain from a political viewpoint. It’s cheap for the government, expensive for the banks, good for voters.”

Overseas Borrowings

While borrowers in Poland, Romania, Bulgaria and Croatia also took foreign currency loans, Hungary is unique because average household borrowing in overseas currencies is more than six times the region’s average, according to Barclays. In Poland, where more than half of all mortgages are franc- denominated, banks limited them to more affluent customers, and cushioned the franc’s advance against the zloty by cutting rates. Hungarian banks raised rates.

Every redeemed mortgage equates to a loss for the banks. Cristina Marzea, an analyst at Barclays Capital, said in a Nov. 17 report that banks operating in Hungary may lose 12 percent of their combined capital, or about 900 million euros, because of the early repayment plan.

‘Immediate Action’

Lenders responded by suing the government in the Hungarian Constitutional Court and asking the European Union in a Nov. 14 letter to take “urgent and immediate action” against Orban, adding they will need to reassess their commitments in Hungary. Erste and Raiffeisen, which signed the letter, have said they will cut lending in the country.

“Banks are having to make brutal decisions about where they deploy capital at the moment, and if policy makers make life too difficult for European banks, as in Hungary, then they will more aggressively deleverage in these markets,” Tim Ash, head of emerging markets at Royal Bank of Scotland Group Plc, said in an e-mail. It’s “obviously bad for credit and growth.”

Demand for franc mortgages rose from 2003, when Hungary’s government stopped subsidizing forint home loans. Foreign banks filled the gap, using their parent’s access to euros and francs to undercut OTP. (OTP) The profitability of the country’s banking industry soared, with return on equity jumping to between 20 percent and 30 percent annually from 2003 to 2007. When the government started to cut spending in 2006, Hungarians took out more loans secured on their homes to finance consumption.

Dual Monarchy

By June 30, Austrian banks had lent $42 billion to Hungarian borrowers, Italians $23 billion and Germans $21 billion, according to the Bank for International Settlements.

Orban’s bank policies have especially irked neighboring Austria, which until 1918 was Hungary’s partner in the Dual Monarchy of the Hapsburg empire and which re-engaged with the region through its banks after communism collapsed in 1989.

Austria’s central bank Governor Ewald Nowotny in October described the Hungarian law as “brutal” as well as legally unworkable and “economically nonsensical.” Nowotny last month ordered the country’s lenders to limit new loans in eastern Europe to make their business “more sustainable.”

When Erste (EBS) set aside an extra 450 million euros for Hungarian bad debt in the third quarter, Chief Executive Officer Andreas Treichl pointedly referred to “irrational populist measures in EU countries” and predicted that Hungary’s government would “continue to take action that will not be positive for the Hungarian banking system.”

‘Biggest Event Risk’

Moody’s Investors Service last week said that Austrian banks’ exposure to the central and eastern European region is “the single biggest event risk for the sovereign.” Austrian banks are also the biggest lenders in the broader eastern European region. Standard & Poor’s said Dec. 5 it may downgrade Austria, one of the six remaining euro area countries rated AAA, because it may have to inject capital into its banks.

Hungary’s banking association last month proposed a plan of its own that would include further losses for the banks of as much as $2.2 billion.

“What we want in exchange is that the government accepts the package we submitted in its entirety and there won’t be new regulations on this issue for two years,” Daniel Gyuris, deputy head of the association, said in a Dec. 5 interview.

The banks may yet be helped by Hungary’s move this week to tap the International Monetary Fund for as much as 20 billion euros of aid after spurning its advice last year. The EU and the European Central Bank have already criticized the debt-repayment plan and the program may form part of Hungary’s negotiations with the IMF. The IMF’s mission chief to Hungary, Christoph Rosenberg, declined to comment on policy issues relating to the country when contacted by e-mail.

“Any further attempts to unilaterally restructure foreign currency debt is off the cards,” said Capital Economics’s Shearing. “I can’t see how the IMF would sanction that. Any restructuring will have to be approved by the banks and the government.”

To contact the reporters on this story: Boris Groendahl in Vienna at bgroendahl@bloomberg.net; Edith Balazs in Budapest at ebalazs1@bloomberg.net

To contact the editors responsible for this story: Edward Evans at eevans3@bloomberg.net;

Eurozone Crisis :Stability or Spiral into chaos?

2011-12-14T07:52:00.007+08:00

UPDATE 18 Dec 2011: While Europe is not out of the woods and the crisis far from over, Draghi's backdoor operation that I mentioned in the posting does have some effect in relieving the stress in the system. Bond yields of Eurozone countries have fallen across the board and there is renewed demand for European debt [Spanish, Italian Notes Gain as ECB Stokes Demand; Bunds Advance] especially 2 year bonds since ECB is offering 3 year loans. Italian 2yr paper fell from 8% to 5%..

Several weeks ago, I wrote that I believed the ECB would start printing money at some point in time because there is no other way to get of this crsis. The ESFS and ESM,bailout funds created by securing guarantees and financing from already indebted nations, are just not going to work. The Eurozone govts owe too much money and creditors are not convinced they will be paid back unless the ECB steps in. A number of govts in the Eurozone have collapsed, severe austerity has been implemented in PIIGS countries and riots are now frequent in a number of countries. Last week's summit proposed to have a "fiscal union" to put in place checks to prevent govts from overspending in the future. However, it does not address the current sovereign debt crisis - how creditors are assured they will get paid when there is no lender of last resort.

A few weeks ago, I thought that German intransigence was just a ploy to get other countries to play ball - impose austerity, and suffer for their past sins. After they get what they want, the ECB will have a free hand to print some money and the whole world can breathe a sigh of relief. The Japanese prints money to pay its debts...same goes for Britain and US. I was corrected by a number of commenters who informed me that what the Germans are doing is not for show - they are dead set against quantitative easing and will never let it happen. I did some checks and it turned out to be true - despite the disastrous consequences of a default by a Eurozone nation which will ultimately cause more pain and damage, the Germans are hard wired by their Weimar Republic experience never to allow money to be printed to pay debts. The Weimar Republic printed so much money it caused hyperinflation and wiped out the savings of ordinary Germans. The risk of another Weimar Republic is very small with the new fiscal pact in place enforcing discipline. One suggestion is for the ECB to lend to IMF so that IMF does the lending - with its experience of imposing austerity and discipline, monitoring and ensuring lenders gat paid, the crisis of confidence can be resolved. This and other solutions that involved the ECB printing money are opposed by Germany and it is politically impossible for Merkel to get agreement from her party's coalition partners. Even contribution to a bailout fund results in enormous political opposition in Germany as Germans do not want to pay for the overspending of other Eurozone govt - even though they are part of a union and another member's problem will spill into the German economy by way of contagion.

The instability in the Eurozone prompted one Pentagon official to warn of widespread unrest and a collapse of the union:

"We are extraordinarily concerned by the health and viability of the euro because in some ways we’re exposed literally to contracts but also because of the potential of civil unrest and break-up of the union,’’ - General Martin Dempsey, chair of the US Joint Chiefs of Staff. [Link].

So is the Eurozone heading towards chaos?

There are a number of silver linings in this whole mess. One of them in the form of Mario Draghi who became the ECB chief recently. He is Europe's version of Bernanke in the current crisis. He cut interest rates twice and took a page out of Bernanke's playbook by allowing Europeans banks to borrow money from ECB at 1% for 3 years using almost any kind of collateral including sovereign bonds. This is the same backdoor Bernanke created during the financial crisis allowing banks to put up any kind of collateral to borrow money. This will help to stabilise European banks and buy some time. In theory the banks can also now use the 1% loan to purchase Italian bonds that yield 6-7% as an indirect way for ECB to fund Eurozone govts[explanation of this backdoor]. This is a clever way around article 123 of the Eurozone treaty and avoid enraging the German Bundesbank

"We have a treaty and Article 123 prohibits financing of governments. We shouldn’t try to circumvent the spirit of the treaty" - Mario Draghi.

....and he has cover because the move is also needed to stabilise the banking system.
The other silver lining is probably Christine Lagarde who replaced the scandalous Strauss-Kahn. She has been proactively looking for solution to the crisis. One that involves IMF may emerge.

There risk of something economically dire happening grows over time as this crisis remains unsolved. The guys at PIMCO describe the situation as a snowball rolling downhill, it gets bigger with every failed attempt to stop it. At some point, this crisis will spin out of control and become too big to fix. Europe is going into recession and their debts will become even harder to pay back when the economy slows. The longer this crisis drags out, the more confidence is eroded and creditors abandon the Eurozone one by one....if countries like Italy cannot roll over its debt properly, they will default and that will be really derail the global economy.

Pinnacle Notes : Morgan Stanley ordered to halt attempts to block lawsuit

2011-12-13T15:28:00.006+08:00

After DBS won its lawsuit in Singapore, Morgan Stanley wanted to block the Pinnacle Notes lawsuit in US using a Singapore court. A US judge in New York tells them they can't do that.

There are a number of reasons why they want the lawsuit to be fought in Singapore instead of US. SEC and others have won a number of cases involving mis-selling, mis-representation and neglect of fudiciary duties- the recent one mentioned in my blog involving Citigroup:

"The SEC had accused the bank of betting against a complex mortgage investment in 2007 -- making $160 million in the process -- while investors lost millions. The settlement would have imposed penalties on Citigroup but allowed it to deny allegations that it misled investors".[Link]

Citigroup was counter party that benefited from massive losses of investors to which it sold mortgage investments. Citigroup offered to pay US$285M to settle the lawsuit with SEC but the settlement was rejected by a judge because it allows Citigroup to get away without admitting fraud.

So who was the counter party that made from all the losses from Pinnacle Notes? Morgan Stanley...the same investment bank that sold these notes to investors. Now you see why they want to avoid fighting the lawsuit in USA. In the US the authorities took up the hard work of investigating the banks, gathering evidence and suing the bank to recover investors' money....so what did our 1st world govt do for Singaporean investors? ...These Singapore investors were left to fend for themselves against a powerful investment bank, they had to get their own lawyers, fork out their own money and do every thing themselves to get some justice. Where are the men and women who say they have to be paid well to serve the people?

In Singapore, according our ex-MM - they went in with their "eyes open" and signed on the contract so there is no case. This feels like an over-simplification of justice,,,and a case that cannot be won in Singapore has more than a fighting chance in USA.
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Morgan Stanley Ordered to Halt Singapore Suit

QBy Bob Van Voris - Dec 13, 2011 12:34 PM GMT+0800 inShare1More

Business Exchange Buzz up! Digg Print Email Morgan Stanley (MS) can’t ask a court in Singapore to block investors there from suing outside the country over their losses on $154.7 million in synthetic collateralized debt obligations, a judge in New York ruled.

The New York-based bank’s attempt is vexatious, U.S. District Judge Leonard Sand said yesterday, granting a request by investors including the Singapore Government Staff Credit Cooperative Society Ltd. to stop Morgan Stanley from seeking a Singapore High Court order.

Several Morgan Stanley units created a “classic bait and switch scheme secretly designed to benefit Morgan Stanley” at customers’ expense, according to the lawsuit filed in October 2010. The investors claim Morgan Stanley didn’t tell them it was a counter-party to the agreements, meaning that for each dollar the investors lost, the bank gained a dollar.

Morgan Stanley disagrees with the ruling and its Singapore court action was entirely appropriate, Hong Kong-based spokesman Nick Footitt said today.

“This dispute involved plaintiffs who are all based in Singapore, who purchased notes in Singapore, and who contractually agreed to the exclusive jurisdiction of the Singapore courts,” he said.

Morgan Stanley, which had sought to have the investors’ lawsuit thrown out because the Monetary Authority of Singapore investigated the sale of structured financial products and created a resolution system, this month denied any wrongdoing.

‘Fare Better’

Morgan Stanley has “a sense they would fare better in Singapore,” said Eugene Tan, assistant professor of law at the Singapore Management University.

Any alleged misstatements by Morgan Stanley on the notes “were mere puffery or were vague statements of optimism,” the bank said in a court filing. “Defendants had no duty to disclose the allegedly omitted information.”

In October, Sand dismissed some of the investors’ claims and permitted the rest of the case to go forward. One month later, Morgan Stanley asked the Singapore court for an order blocking the investors from pursuing the case.

“Rather than availing themselves of the remedies available here, defendants are attempting to require the plaintiffs to begin anew in Singapore,” Sand said yesterday in his ruling. He also denied the New York-based bank’s request that he certify his October decision for pretrial appeal.

Pinnacle Notes

The plaintiffs seek to represent a class of all investors who bought the Pinnacle Notes from Aug. 1, 2006, to the end of 2007.

A group of investors in Singapore last month lost a bid to recoup losses on Lehman-related products with an appeal court in the city state ruling that “the principle of caveat emptor applies equally to literates and illiterates,” using the Latin phrase for ‘buyer beware.’’

The Monetary Authority of Singapore banned 10 financial institutions from selling structured investments in 2009 following claims by investors that they were misled on products tied to Lehman Brothers Holdings Inc.

The authority lifted the ban last year after the institutions boosted internal procedures of their advisory services across all investment products.

Tan said the disputes surrounding collateralized debt obligations were unique.

“I don’t think investors are going to have a different investment climate in Singapore based on this lawsuit” against Morgan Stanley, he said.

The case is Dandong v. Pinnacle Performance Ltd., 10- cv-08086, U.S. District Court, Southern District of New York (Manhattan).

Obama in Kansas 6 December 2011

2011-12-11T10:32:00.001+08:00

Shared prosperity is not just the vital cornerstone of social stability and cohesiveness but the key to a sound and sustainable economy. The support for many govts today depends very much on how well they tackle the issue of income inequality.

Obama inherited the worst initial economic conditions since Franklin Roosvelt in the 1930s. If you can recall, the US and the world economy went into freefall in early 2009. Even before the financial crisis, the US economy had serious problems as the income inequality rose to levels that was only seen in 1929, the eve of the Great Depression. Obama was elected to office to address the income iequality problem and mitigate the effects of income gap by reforming healthcare. Howver, before he got around to solving the longer term problems, he had to find ways to stop the US economy from plunging into the abyss. The US economy has since rebounded but the recovery has been unsatisfactory because the financial crisis resulting from the birsting of the housing bubble seriously damaged a large part of US economy - the housing sector kept falling even as the economy recovered causing a drag on job creation limiting the magnitude of the recovery. Throughout his presidency, Obama was thwarted by the big business lobby that tried to stop health care reform and environmental protection policies by misinforming the American public. Impatient with the slow economic recovery, American voters compounded Obama's problems by voting a group of right wing Senators supported by the Tea Party who later blocked tax reform, measures to control waste in defense spending and attempts to regulate the financial sector to prevent future crisis. Much time is lost in the US political deadlock on issues for which the clock is ticking like climate change. The frustration has spilled into the streets with Occupy Wall Street movement spreading across the country.

There is only one developed country in the world where the income gap is higher. The only place in the developed world with a 3rd world wage structure where a man can work full time without minimum wage and cannot afford to raise his family ...and he is still required to support the hawkish stance of the ruling party by serving in the military as a conscript without in return getting the corresponding security of social safety nets and universal health care. Worse still, he is made to compete with a massive influx of foreigners that gives business and state owned corporations access to cheap labor from 3rd world countries at time when corporate profits as share of GDP is at historic highs. The frustration has built up but kept hidden by harsh authoritarian rules and a state controlled media ....but as the thresholds are crossed and the middle class declines, the demand for change will grow stronger with time and at some point accelerates and becomes unstoppable.

Once popular Putin faces uprising in Russia....

2011-12-10T19:12:00.003+08:00

I haven't kept up with news in Russia and recent news reports of the rapid political change in the country surprise me.
Putin's United Russia saw its share of popular votes falling from 64% in 2007 to just 48.5% in the recent elections. Opposition supporters are not happy with irregularities in the vote counts - some areas have more votes than eligible voters - and massive protests are expected all over Russia this weekend.

Recall that Putin a was powerful and popular authoritarian who was credited with bringing law and order to Russia and putting the economy back on its feet. He was so powerful at one time, he could ignore human rights and throw his opponents into jail without a dent in his popularity. The opposition which included former world chess champion was fragmented and weak with little support from the ground.

5 years was all it took for things to change in Russia.

Here's what has gone wrong in Russia according to Al Jeezera:

"The public's growing disillusionment with United Russia is concentrated among the country's intellectual elites, young professionals, urbanites and internet users. Their grievances vary from the stifling of freedoms to Putin's growing authoritarianism and the calcification of Russia's political life. "Our votes have been stolen long time ago," writes former world chess champion and now opposition leader Garry Kasparov. "They've been stolen together with our freedom of choice and with our right to express a point of view that is different from the one promoted by the official media."

But a growing majority of Russians say they are unhappy with the ruling party because it has failed to lift their standard of living, despite years of high oil and gas prices, over which Putin presided. "Our pensions are still low and our roads are still bad," says one Moscow resident. "The party of power could have done so much more in the ten years it's been in power," says another. Low salaries, small pensions, soaring inflation, a crumbling infrastructure and unreliable healthcare - these are the main points of dissatisfaction for most Russians. As a result, opposition parties - such as Russia's Communist Party, the Liberal Democrats, and Just Russia - are continuously citing these grievances in their election ads.

But perhaps the biggest problem United Russia faces is its status itself: the status of the party in power. Like the Communist Party of the USSR, United Russia has increasingly become the party of choice for Russia's elites. It boasts over two million members and counts among its own the country's crème de la crème. It includes not only regional governors and major business owners, but also Olympic champions, film directors, pop stars and even a pair of famous lion tamers. Some joined because they genuinely saw United Russia as a party of patriots driven to restore the country's glory after the tumultuous years following the breakup of the Soviet Union. But others sought access to power, privileges and decision-making that came with party membership.

United Russia's status as the ruling party, though, has become a double-edged sword. Ordinary Russians increasingly resent those in power, seeing their wealth while themselves struggling to simply get by in the world of consumer pleasures that now surrounds them. As revelations of corruption emerge and Russians learn about the ways members of United Russia misuse public funds, the party is now called "Partiya Zhulikov i Vorov", or "The Party of Swindlers and Thieves"."

Finally tough effective measures to rein in property prices....

2011-12-09T09:02:00.007+08:00

A few months ago, it was reported that a foreign investment firm was taking a Singapore developer to court over poor finishing of condos it purchased in Singapore. After the property bubbles in western countries burst, global speculative funds look for opportunities in Asia and they speculate with "cheap money" thanks to the low interest rates in the US and successive rounds of quantitative easing by the US Fed. We also know that if nothing is done, and the day of reckoning comes when the economy falters, this speculative money that flowed into Singapore bolster our property market will flee like Chicken Little and exacerbate the downside of our property sector. The latest measures by the govt, I believe, is late but it is still effective and better than nothing. 10% stamp fees for foreigners buying property will immediately stop all speculative buying of Singapore property by foreigners.

There is an interesting rule in Australia that a foreigner can buy a property from a local but has to sell the property to a local and not another foreigner. Wonder if the govt has looked at that idea?

As with all policies, there are unintended consequences like this case of a foreign national who works in Singapore and plans to buy a condo. He has to now wait until he gets his PR which may not be a bad thing since property prices are likely to soften and it is better to make a big commitment only when one is certain he can commit to staying in Singapore. His expectation of "equal treatment" and expressed disappointment is unusual for a foreigner in a host country. If you, as a Singaporean, were to go another country to work, you wouldn't expect laws and rules not to bias towards citizens of the host country. In Singapore where citizens have to serve national service and are expected to fight and die to defend our country and homes - the difference in commitment is huge. While Singaporeans may find such attitude somewhat arrogant and feel some dismay at this foreigner's expanded sense of importance, I actually don't blame the foreigners for their attitude. Lets not forget the PAP's frequent rhetoric to support its foreign labor influx policy - that Singaporeans "cannot punch above their weight" and how critical foreigners are to our economy. Since the 90s our govt has been aggressive in bringing foreigners to fill jobs and giving scholarships to fill places at our universities. To attract so many foreigners, it has to raise expectations on what Singapore govt will do for them. We cannot blame foreigners for their expectations and disappointment because these ideas have been sold to them.

Taxi fare hikes and what is wrong with the system.....

2011-12-07T09:01:00.004+08:00

Commuters are up in arms over the recent taxi fare hikes[Cabbies hope for higher takings, commuters see red]. This fare hike is supported by the National Taxi Association (NTA) that represents six driver associations. We have an inflation rate of 5% and taxi drivers like all of the rest of the wage earners in this country have mouths to feed and feel the pinch as much as anyone else. I'm not against the intent to improve the income of taxi drivers but raising fares is not the only way to improve the lives and working conditions of our taxi drivers. .The system within which our taxi drivers make a living is a microcosm of much that makes life difficult for many hard working wage earners.

There was a time when taxi drivers could really work for themselves being able to own the taxis they drive and keep much of the income for themselves. When Comfort was "NTUC Comfort", it operate the taxi service closer to that of a coorperative. Today, it is know as ComfotDelgro a listed company that has to answer to shareholders for its bottom line. Taxi drivers today can no longer own their own taxis and have to rent their taxis from a for-profit companies. Because taxis and the taxi licenses are limited in number the cost of a taxi together with a licence is among the highest if not the highest in the world. Taxi companies form an oligopoly since they cannot expand market share easily due to tight quotas on taxis and incenses. there is little incentive to set fares or rental competitively but merely follow the lead of ComfortDelgro.

Despite high rentals, long hours and "tough" work of being a taxi driver, there is no shortage of takers for these jobs because of our serious structural unemployment problem. In the past, taxi drivers had low education levels but today it is not uncommon to see degree holders and ex-professionals such as engineers driving taxis. We even have one driver with a PhD from Stanford who started a blog and gave us a glimpse of the trials and tribulations of surviving as a taxi driver in Singapore [Link].

"Twenty years ago, I could make $80 a day, and you could buy a lot more with that amount of money in those days" - Taxi driver, Henry Tan, in today's Straits Times.

The rising cost for the taxi driver in the form of rental and fuel and means that real income has not gone anywhere in the past 20 years as the fares for passengers increased over the same period. Much of the money goes to the profit of corporations (ComfortDelgro $228.5M profit in FY2010). govt revenue in the form of COE and licences. At the end of the day, much of what the passenger pays for goes to overheads and not the driver ....while we complain about taxi fares being too high, the taxi driver's life has not improved in the past 2 decades. What has happened to taxi drivers is a microcosm of what has happened in our economy as high costs push businesses to seek cheaper foreign labor to stay competitive and result in low or stagnant wages for Singaporeans.

I don't mind paying higher fares so that taxi drivers can live a better life but we know that the all past fare increases have been accompanied by rental and cost increases that take away the earnings of taxi drivers.

If you visit the National Museum, there is a video of a very young Lee Kuan Yew speaking to a large crowd at a rally in the 1960s. Half way through the speech, he pointed to a young boy in the audience and said "Look at this young boy, he needs an education ...otherwise he will grow up to be a taxi driver". Ironically, today we have highly educated taxi drivers forced to drive taxis due to structural unemployment as PMETs are pushed out of professional jobs by the large influx of foreigners.

There will be no progress for taxi drivers, workers and many Singaporeans unless the system changes significantly. Today, we have to compete with one hand tied behind our backs by the high cost of living and the high cost exacted by rent, overheads and the people and entities that contribute the least to our competitiveness.

The Planet at the mercy of politics....

2011-12-05T12:12:00.001+08:00

In this Online Citizen article "Will Durban extinguish all hope for the planet?", NUS undergraduate Ezra Ho wrote about how world leaders "indulge in Machiavellian machinations while the planetary doomsday clock inches away to midnight". If one looks at the science behind the warnings of global warming, there is little doubt now that we are on a trajectory that will likely lead to significant climate change and potential ecological disasters. The IPCC models predicting climate change have proven accurate with new data collected. A few years back when George Bush was president, in order to delay action and policies to address the issue, funded climate skeptics to cast doubt on the work of reputable climatologists. While skepticism and disagreement is an important part of the scientific process, we expect leaders to act based on the best scientific evidence. Scientific disagreement can go on and on until the IPCC predictions come true in which case it is too late for everyone. The number of honest skeptics has shrunk as new evidence comes in but political opposition to green climate policies has risen in the US. Why?

US politics has become so ideological in nature it does not matter what the scientists say. The pro-business lobby has successfully mis-informed a large number of voters to the extent that any right wing politician will find his campaign in trouble if he dares to say that something needs to be done to address climate change. Take Newt Gingrich, the front runner in the Republican campaign as an example. A few years back, he appeared in advertisement with Nancy Pelosi, a Democrat, to inform Americans of the importance of caring for the environment. This seemingly mild message became a liability in his campaign to be the Republican Presidential candidate and he was forced to admit that he "was dumb" and deny that he thinks human activity has anything to do with global warming.

Note that he said "I do not know whether global warming is occurring". Other candidates in the Republican party have said they are not sure if global warming is caused by human activity. The reason for this is simple. If they admit they believe the reports of the IPCC or US Academy of Sciences, they will lose their support base and campaign funding. Slowing global warming requires concerted action by govt and will result in more regulation for businesses....and in the short run may have a negative impact on the economy. We can't run away from paying some price for saving the planet. While we can debate what needs to be done to save the planet, denying the huge body scientific of evidence and their conclusion that action is needed puts the future of this planet and our children at risk.

The middle class squeeze...

2011-12-03T12:20:00.003+08:00

Inflation rate is above 5% [Singapore's inflation rate holds above 5%]which gives us a real income growth of roughly of less than 0.3%. [Tighter labour market sees income go up to $2,633 from $2,500]. Things have improved by a little bit for some people. However, you should be note that the CPI used to measure inflation is just a snapshot based on a basket of goods with a composition that is probably not what your family consumes. Your family's expenditure inflation rate is different from the CPI. Also, given the wide income gap which leads to vastly different patterns of consumption inflation as measured by the CPI becomes less meaningful. Prices of different categories of goods are moving sharply in different directions - 42" LED TVs have halved in price from one year ago while the price of homes and COEs have surged. If you are shopping for an LED TV you will be happy shopper spoilt for choice but if you're middle income family looking for a car, the COE inflation took away your ability to buy one. Today's paper reported that luxury cars - BMWs, Porsches, Audis, Mercedes, Farraris -have 46% of our new car market.

A new 1 bed room condo at Lorong Chuan goes for upwards of $538K. A quick calculation shows the cheapest 1 bed room unit in the development is sold at a price that is 17 years of a median income worker's total income. If he uses his income fully to service his condo, he will take 17 years...nothing left for food, clothing, utilities etc. What is prudent for someone earning the median income is a small HDB flat which is shrinking over time[Shrinking HDB flats due to need to maximise land and to adapt] and public transport which is now so crowded it is like a cattle ferry. There is also the problem of healthcare which is rising at double digits and outstripping median income growth. If you look at the Singapore worker in the middle earning the median income wage, his quality of life is not equal to a middle income worker in a developed country. Its gets worse as we go down the wage scale. When we get close to the bottom which is quite far down since there is no minimum wage, we have 350,000 workers who work full time but cannot make ends meet and depend on workfare to survive[Older, low-wage workers get Workfare bonus ] - these workers will never accumulate enough savings to retire and have to work their whole lives.

The PAP govt likes to proclaim its greatest achievement taking Singapore from the 3rd world to the 1st. The truth is a large number are left behind and many are falling behind as the middle class weakens.

"At the national level, we fight the elections starting now, getting our policies working, getting our organisation in place, getting our outreach strengthened, getting our communications modernised and mobilised, so that we have five years to prepare for the next time" - PM Lee, at the recent PAP convention.[Link]

PM Lee spoke about the need for PAP leaders to connect with the people and that future elections will not be so easy. While communications and interaction is important, they are a means to an end and at the end of the day, people will vote based on whether their lives have improved and whether they believe their futures will be better. The key to winning back the hearts and minds of voters is to make sure prosperity is shared, the income gap is narrowed and the middle class thrives. Right now the PAP is not even on the right track and they won't be unless they can overcome their ideological approach to policy making. Their insistence on "self reliance" and resilience from workers to escape from greater financial responsibility puts the onus on those who have lost the ability to do so due to the inequalities that is now built into our system and many have fallen into financial hardship and poverty through no fault of their own.

"The Government seems very reluctant it to take on a larger financial
responsibility for caring for our senior citizens. Instead, it hides behind the mantras of self-reliance and filial piety to justify its relatively low expenditure on healthcare for the elderly." - WP's Gerald Giam in Parliament.[Link]

The PAP ideology just like the US Republican ideology can work if income gap is kept low and responsibility can be pushed down individuals. However, the rising income gap and declining middle class means the PAP has to break out of its ideological constraints to find solutions to the problems we face today. PM Lee in his first few years as PM, implemented tax cuts for the rich and corporations and regressive consumption tax increases (GST) that will burden the lower income groups. He was very eager to increase ministerial pay at a time when most people saw problems with excessive executive compensation and expected the govt to set a good example. Unless the PAP can make major changes to housing, healthcare , transport, narrow the income gap or mitigate the effects of the income gap, the next election will not be about winning back Aljunied but how not to lose more GRCs.

The Worker's Party and other opposition parties has cleverly occupied the middle ground as the PAP drifted further to the ideological right in recent years. The PAP enjoys support for some of its past accomplishments but this support will fade over time if voters see no real progress in the coming years.

Minster Lim Swee Say on Structural Unemployment....

2011-11-27T16:04:00.002+08:00

Here is a report of what our Labor Chief Lim Swee Say said at a forum on Saturday:

"A big concern is a mismatch between workers' skills and what's demanded by
employers. Mr Lim said low-wage workers are vulnerable to structural
unemployment.

Another group is the Professionals, Managers and Executives
(PMEs).

He said the last 15 years have seen a concerted effort to train
workers better.

And the current focus on achieving sustainable and
inclusive growth is an extension of this goal." - Report in Today[Link]

Lim Swee say blames the structural unemployment problem on a "mismatch" of skills between job seekers and what employers are looking for. He then proceeds to conclude that the answer to our structural unemployment problems is retraining.

Structural unemployment has been a serious problem for the last decade and the severity of the problem is rising. Yet the PAP leaders refuse to see what is so plain and clear to everyone else and continues to prescribe a solution that had achieved so little results as the prblem grows.

Singapore underwemt great economic transformation in the 60s , 70s and 80s right up to the 90s. We moved from low cost manufacturing to electronics manufacturing to IT services and so on. We did not experience severe structural unemployment right up to the early 90s. While older workers were vulnerable during economic downturns as they are today, they are re-hired during economic recoveries when the labor market tightened up and employers had no choice but to tap the older workers to expand their businesses. Older workers got their chance in the good times and employers were willing to retrain them for job and kept them if they were able to perform. That was why structural employment never grew to become such a big problem in the past.

Since the late 90s, the PAP opened the floodgates to foreign workers. Employers have access to an unlimited pool of young workers from India, China and the Phillipines. When the economy picks up, employers don't have to hire older workers but young foreign workers that can be hired and retrenched easily.

Lim Swee Say's point that structural unemployment is due to a mismatched of skills if that isso, then why are the low wage workers most badly affected? These low wage workers have less skilled jobs and are the easiest to retrained to another low skilled jobs so why are they hit the hardest? The real reason is not skills but the availability of younger foreign workers.

For 15 years the PAP has perscribe retraining for people hurt by structural unemployment. After so much retraining, we find our structural unemployment problems has gotten more severe as time passes. The PAP refusal to face up to the truth and do what is right for ordinary Singaporeans and the continued denial means that the problem can only get worse. With a labor chief like Lim Swee Say, things can only get worse for older Singaporean workers.

Stock Valuation in perspective......Part 2

2011-11-26T08:00:00.002+08:00

Part 1 found here

Recently, in an interview on CNBC, the world's greatest value investor, Warren Buffett, said he was ready to buy stocks and the valuations are compelling. Last week Buffett took a US$10B stake in IBM[Here is a good explanation why he did it]. IBM has been around for more than 100 years and has been a blue chip company for the at least the last 40 years so Buffett would have tracked the valuation of the stock over a long period of several decades and only now he decides to buy the stock. You can actually do better than him because IBM stock has fallen a few % since his purchase. Buffett rarely buy tech companies - he owns a small stake in Microsoft. So why is he doing it now? Remember a few years ago when the tech bubble took the Nasdaq index upwards of 6000 in year 2000? The Nasdaq index today, 11 years later is 2440. If you look at the tech bellwethers like Intel, Cisco, Dell they went from P/E ratios in the range of 30-60 to 7-10. Dell today is a $14.22 stock that earns $1.94 per share. The market values the company at US$20B. It has net cash of $8B and annual free cash flow of $3.5B[Link to Dell financial statistics].

If you take the current financial statistics of many companies, you find that they are at their cheapest or close to their levels in history. All the speculative fluff in the dot.com era has completely disappeared and if companies like Dell simply maintain their current performance and do no worse, the stock price can double in 10 years because it would have so much cash in its bank account, it would be able to buy back every share at double the price.

Stock valuations are more striking if you look at what risk free (these days not so risk free) US treasuries are yielding and the current interest rate which is at their lowest in decades. Remember the main cause for the US tech bubble was the aggressive rate cuts by the Federal Reserve after the Asian crisis that drove money towards higher yielding assets such as stocks. So why hasn't the same happened?

An interesting study by Robert Shiller - the guy who coined the term "irrational exuberance", warned us about the tech bubble and housing bubble - shows why stocks may not be as cheap as what investors think. Looking at average earnings in the last 10 years, finds that stocks are actually expensive:

The reason why the average 10 year earnings for stocks are poor is because they include the year when we had the financial crisis. So basically you value stocks with the assumption that there will be an economic crisis within the next 10 years just like the last 10 years stocks, stocks are actually not cheap. If the next 10 years is as unstable as the last 10 years, stocks are not cheap.

However to make money investing, investors shouldn't be asking whether stocks are cheap or expensive but whether they will be going up or down.

So how useful is Shiller's work for making money in the next 5 years? If you look a Shillers' P/E ratio for stocks (see above), you will notice when it shows that stocks are really cheap and get to the bottom valuation of ShillerPE of 10, the stcok market is followed by rallies or stop falling. If valuations go above 30, stocks can go higher but a sharp correction or bear market tends to follow. One thing to note is the financial crisis did not the ShillerPE to below 10 - it stopped at around 13 in the bottom of 2009. That left many investors who were waiting for the market to go lower out of the subsequent rally. Also if you look carefully at the chart, there is a period in the 60s when the market exceed today's ShillerPE of 20 and continued going up for a few years.

I believe the ShillerPE overstate the "expensiveness" of stocks for 2 reasons.

Stocks are not priced in isolation or in absolute terms. When you have money, you can keep it in the bank, but a piece of property for investment, buy some US treasuries or commodities or gold or just keep it in the bank. Because stocks are an investment option and it has to be valued relative to other investments.

This is the first time stock dividend yields pay more than US govt bonds in our lifetime. The reason being investors are extremely fearful of holding any assets with risk so they prefer US treasuries even though the yield is so low. In that sense stocks are cheap because it is unloved by investors...and not for unjustifiable reasons given we are in the midst of a very crisis.

Companies have huge cash hoards (the highest in history) and profitability is at record highs when stock prices are way off their hights.

In my opinion, stocks are not as expensive as suggested by Shiller. However, they have not fully priced in the crisis in the worse case scenario. The outcome of the crisis is a complete unknown and much of the outcome depends on the actions leaders caught in the turmoil. Stocks are probably cheap enough to rally once there is some kind of stabilisation of the global economy. Where stocks will be in the coming months hinges on on whether the EU leaders would perfer a quick "kick the can down the road" approach or a more painful but more permanent fix or something in between. In the longer term, if stocks fall sharply from current levels, they are probably good bargains even if we go into a recession as long as the economic system is not too broken to recover in a few years. In the previous posting on stock valution[oart 1] I showed a valuation approach using book value - stocks become irrationally cheap when investors start selling below their book value....each time that happens stocks prices move up. Such below book value valuations tend to occur during a recessions and a rough estimate puts the STI at 2000 if our blue chips trade at book value.

The world of wild fiat currency fluctuations....

2011-11-24T08:57:00.005+08:00

The chart above shows the movement of the Australian dollar vs the US dollar. If you take a closer look, you will noticed that the Aussie dollar is 10% down from one month ago and one month ago on end-Oct it was more than 12% higher than in early Oct.

Imagine if you're a US company that closed a contract worth a few million in Australia after months of negotiations with a 10% margin for profits, one month later your profits are are wiped out if you don't hedge your contract in the currency market.

If you go through the annual reports of smaller companies listed on the SGX, you find that many don't hedge their contracts. A whole quarter or even one year of potential profits becomes losses due to large foreign exchange movement.

The large movement can also affect the competitiveness of a country. If a country's currency falls, it makes companies in the country more competitive. For export dependent countries like Japan, the govt intervene regularly in the currency market to make sure the Yen does not rise too quickly.

The movement of a currency can reflect the economic state of a country. If you have a troubled economy, your cirremcy would fall. However, forex markets do not merely reflect the state of the economy, they can amplify the weakness in the economy and make it impossible for govts to fix their economic problems. Mahathir once said forex speculation is evil during the Asian Crisis. He was ridiculed and laugh at by western commentators. Today, we see the problems in the Eurozone amplified not by the forex market but the sovereign bond market - speculators have driven the interest rates for the bonds of troubled countries to historic levels ...these countries may have been able to service their debt at lower interest rates now have a high risk of defaulting because interest rates are so high...because there is higher risk of them defaulting, rates move even higher in a self-fulfiling manner.

Of all the currencies, I choose to show the Aussie dollar because it most clearly reflects what speculators think of the state of the global economy. The Australian economy stands at the cross roads - it is a developed economy that export resources to emerging countries and a western country located nearer to Asia than the other Western countries. When the Aussie dollar goes up, speculators think the global economy is in the pink of health but when the Aussie dollar goes down, it is because speculators think the global economy is getting worse. Speculators can be wrong and constantly correct themselves. 1 month ago, they the Aussie dollar was 10% higher and they thought the global economy was back on its feet today they think the global economy will falter due to the Eurozone crisis. The wild swings in the Aussie currency reflects the uncertain outlook of the global economy.

So how will things unfold in the coming months? Minister Tharman thinks a severe slowdown will occur, the property speculators queuing up in Bedok think that good times for property is here to stay, Warren Buffett sees no sign of economic recession in USA. In the 2008 recession, there was clear consensus that the world economy will enter recession several months before the recession came - the reason was the economy was firing on all cylinders in 2007 with low unemployment and high capacity utilisation. When aggregate demand fell, there was plenty of fat to cut and it became clear a recession was on the way.

Today the US economic activity looks like this measured by the real time Ceridian Index

What has happened is despite making record profits quarter after quarter, US companies refused to expand payroll and invest for expansion due to the uncertain outlook and this has gone on form more than a year since the Eurozone crisis started. Today US economic activity is where it was in end 2010 and it spent one whole year zig-zagging going nowhere. It has not even recovered fully from the 2008 recession. Economists have speculated that the US will slip into double dip recession since mid 2010.

The US economy is largely domestic unlike Singapore's which is export driven and will go where our major trading partners take us. As the US economy struggle sideways, the homebuilding and construction sector has been falling for the past 3 years. The wildcard is when this sector recovers it might give some lift to the US economy. However, it is likely the Eurozone problems tip the US into recession before the US housing sector recovers. It looks like Germany is playing hardball with errant EU countries forcing them into economic austerity and capitulate to more monitoring by the EC authorities refusing any quick fixes such as ECB printing money to ease the problem. Delaying the solution framework to squeeze some fiscal discipline out or EU members is a risky business as the fiaancial markets go into a tailspin.

The falling Aussie dollar in Nov 2011 shows that collective speculators' expectation has completely turned around from a month ago. Contrast that with the relatively stable level of economic activity. Because speculators operate in a herd like manner sometimes with expectations running ahead of reality, some contrarian investors would position themselves against the herd to take advantage of these market "overshoots". The problem is speculators can get it right and their bets match up to reality and the markets go from one extreme to another. Speculators can also manufacture the reality they are betting on - a fall in a currency can cause investors to panic and take their money out of a country leading to more falls in the currency. Based on the Aussie dollar movement, we have again reached the point of high anxiety and fear in the financial markets - a point where the risk is high and so are the potential returns. While the global economy is certainly slowing, speculators seems to have bet on a more sinister outlook some kind of more severe global economic disruption drom the crisis in the Eurozone.

Help for parents with special needs children....

2011-11-22T19:43:00.004+08:00

First an explanation of the issue. Several years ago, a group of parents with kids with speical needs met with then MYCS minister Vivian Balakrishnan to discuss the type of help govt can give to these parents. One of the biggest concerns for these parents is how their child will be cared for when they are no longer around. The child with special needs may need various kind of care such as medication, some of them need help with their meals and so on. While the parents are still around, very often one of them will quit his or her job to take of the child (you can't really trust the maid who is not trained to do this). You can imagine the challenge even for higher income earniers. For low income families, they whose income is barely sufficient, they fall into poverty and need state help - state help isn't much, I showed a video some time back about a low income family cope with 2 disabled kids, the mother found it hard to go to govt agencies who insisted that she find work instead of getting financial aid from the govt [watch the video here]. If low income families find it hard to get help, middle income families will not get anything...these days with means testing, the last bit of subsidiy for special schools was removed for parents of these children.

These parents face enormous hardship caring for their children when they are alive - its a labor of love but very tough financially and emotionally. Concerned that nobody can care for their children properly when they are gone, they went to went to ask the govt for help. Perhaps they were hoping the govt set up good facilities and institutions where they can feel safe to leave their children when they are no longer around - since they have already spent their lifetime caring for their child. These caregivers know how tough it has been for them so they find it hard to ask relatives or siblings to do this when they are no longer around and some of them have nobody to turn to.

The govt response to the problem is this : while the parents a alive and working, set aside a part of their CPF (their own money) in a new Special Needs Savings Scheme. CPF will help to disburse this as a monthly instalment when the parents are no longer around. The Straits Times headlins for the article is "More CPF protection for children with special needs""

"The CPF Board is stepping in to help provide a measure of financial security for children with special needs, when their parents are no longer aaround to care for them" - Straits Times 22 Nov 2011.

All the govt is doing is administer some of your own CPF money to make out monthly instalments - thats all! Quite incredibly the article starts off saying the CPF Board "is stepping in to help provide a measure of financial security" as if the CPF is giving money to the child. What security is there for lower income parents who don't even have enough for themselves to retire?

To say the govt has fallen short and failed these parents is an understatement. In every developed country today, the govt get involved early to full support to parents because they are in such a tough situation. Here the parents have to make huge sacrifices when they are alive yet the govt is only willing to play administors to lock up their CPF funds in a special account and give it out in instalments.

There are very few Singaporeans who would oppose the govt doing more for these parents. The only people stopping the PAP from doing more is the PAP govt itself and its ideological preference not to help. This is a govt with the means to do it - it can give thousands of scholarships to school the children of foreigners but cannot do something for these children of men who served their NS.

$1250 psf condo at Bedok....

2011-11-22T10:11:00.003+08:00

Bedok used to have this bus interchange that has been there for more than 2 decades. The govt sold the land to private developers to build a condo project. It will be a good place to live because it is next to the MRT station and near a new bus interchange that will be build next to the project. I'm quite sure the location is good because I lived for more than 10 years in my father's 4-room HDB flat no more than 100 meters from this development. My dad's HDB? Something like $50 psf. My dad sold it to another owner for $80psf. While condos fetch a premium because they have facilities and a nicer build, I still find this $1250psf startling. A small 800 sq feet unit will cost $1M. It will take someone working as an enginner or software programmer decades to pay off his loan.

I met my dad for lunch over the weekend and asked him how he paid for his 4 room HDB flat. He did in 3 years because he already had some savings in his CPF before he bought the flat. My dad worked as a technician.

The PAP's mantra for workers is make yourself cheaper, better and faster. to be more competitive. But how does one compete when costs are so high. Workers elsewhere enjoy cheaper cost of living even those in Australia or USA, can get a home just outside the city for less than $150K and drive to work for the cost we pay for public transport. The responsibility for our competitiveness does not rest solely on the shoulders of our workers. The high cost of housing eats into everything - our competitiveness, our quality of life, our ability to save and retire ..and ability to start a family.. Ex-minister Mah explained that prices are high to fill the govt reserves - selling homes at lower price is equivalent to raiding our reserves.

Lets not forget the lessons from the financial crisises and property bubbles in Spain, Ireland and USA. When the debt builds up and prices come tumbling down, the negative effects will be long lasting. For Singaporeans, whose ability to retire, is linked to property ownership because our CPF accounts have been emptied for the purchase of HDB flats...when things go wrong, they can go very wrong.
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Business Times - 22 Nov 2011

Queues return for Bedok condo launch
By UMA SHANKARI

(SINGAPORE) CapitaLand will start the sale of its newest condominium Bedok Residences only tomorrow - yet a queue of more than 400 people had already formed at the project's showflat by last night.

The developer said that prices of the 583-unit project at Bedok Town Centre have not been finalised, but agents said last week that prices could start from around $1,250 per square foot (psf) for the smaller units and $1,150 psf for larger units.

CapitaLand, South-east Asia's biggest property group, confirmed yesterday that it would start selling units only tomorrow. But a queue started to form outside the project's showflat on Sunday, BT understands.

The 99-year leasehold development offers a mix of one, one-plus- study, two, three, and four-bedroom apartments, as well as penthouses.

The developer hopes that the project's location would ensure good take-up.

Bedok Residences is part of a 15-storey integrated development comprising homes, a shopping mall and a transportation hub linked to Bedok MRT station. CapitaLand is developing the entire project jointly with its retail unit CapitaMalls Asia.

Wong Heang Fine, chief executive of CapitaLand's Singapore residential arm, expects strong demand for Bedok Residences, 'given its strategic location in one of the most popular residential estates in Singapore and unparalleled connectivity to various parts of the island'. 'Sitting atop a shopping mall and transportation hub, we believe Bedok Residences will rejuvenate the Bedok residential estate and enjoy the exuberance and convenience of the lively Bedok Town Centre,' he said.

Nearby, UOL Group and Singapore Land intend to roll out their newest project, the 577-unit Archipelago @ Bedok Reservoir, within this week or next week, BT understands. The project is located on Bedok Reservoir Road.

DPM Tharman : Slowdown will test leadership....

2011-11-21T04:25:00.007+08:00

First I would like to show this short video from 2006:

Our ex-MM Lee tried to explain to MP Low why being in a "Europe situation" is highly advantageous and being surround by the type of neighbors we have our situation is a lot more difficult. Well, look at Europe now and the sa-called "European situation". I didn't dig out the video to show ex-MM's comprehension of the world but to show how uncertain the world is even for someone as wise as Lee Kuan Yew. How can ordinary Singaporeans prepare and become completely resilient in such an uncertain world with their limited resources? Anyway, the leaders in Europe are not asking for more pay because they are solving bigger and more intractable problems - in fact the situation today requires them to cut their pay to elevate the declining morale and earn the trust of their citizens. 5 govts in Europe have been replaced in the past few weeks so it is not easy to be the leader of a European country.

Well I guess Minister Tharman has a clearer assessment of the current situation given he is in the IMF and has access to data not available to analysts and commentators. IMF conducts audits on European countries that it bails out so they have the "real" picture. DPM Tharman tells us the situation can get quite bleak:

"We have to prepare for the possibility, the very real possibility, of rough
times ahead, a severe slowdown in the global economy," - DPM Tharman[Link]

Tough times are nothing new these days. In the last 12 years we have had 3 recessions and 2 major crisis. The one that is happening now will the the 3rd crisis and the impending recession will be the 4th. As we go through one recession after another and one crisis after another, the underlying situation for ordinary Singaporean families is not the same. We are entering each recession with bigger income inequality than the last one. We are going into each recession with more people at the borderline of poverty than the last recession and higher cost of living - medical care & housing costs.

""That has been the way we have dealt with past crises, not become all defensive, not retreat, but use the crisis as an opportunity to build up skills and build up competitiveness."- DPM Tharman

Each crisis should seen as an opportunity. However, these crisis are occurring at a higher frequency than ever before and the ordinary Singaporean is put in a highly unstable situation sometimes unable the build up his financial defenses given how fast things turnaround. For a large number of Singaporeans, they may be trained in sectors that go into secular downturns and slumps. It is easy to just say retrain yourself for another sector but much of the job experience is no longer applicable and workers have to start over. You superimpose this situation onto what we the system we have for housing, transport, healthcare and retirement, yuo can see why worries have started spreading to the middleclass. Even before our next recesssion, the bottom has already fallen out for the lower income group. This issue was discussed in today's mult-page feature in the Sunday Times describing how bleak the situation for those belonging to the bottom 30%. The cost of living incease has simply pushed many of these Singaporeans to a level where they are struggling to make ends meet and keeping their heads above wate - how is this different from living in a third world country?

The fear now is spreading to the middle class who are starting to experience the instability and insecurities that previously affected poorer Singaporeans. With the increase in healthcare costs and housing outstripping middle income growth and middle class comforts like a family car moving up the classes and out of their reach, the middle class is sliding down and falling towards a quality of life that the poorer classes are experiencing. A few days ago, it was reported that the best selling car in Singapoe is the BMW - with more people and fewer COEs, the quota now goes up to richer classes where wealth in concentrated. The COE goes not to the middleclass father who has to send his children to school and his wife to work but to the teenage child of one of our multimillionaires - a mismatch of needs so common in a society where the wealth distribution has become the most unequal in the developed world.

Minister Tharman says the challenge is for Singapore to bounce back from the slowdown. But Singapore recovers when the global economic demand picks up and the usual influx of foreigners will always boost GDP artificially. The real challenge is to contain the income inequality and poverty that expands after every recession. There is a growing number of families that are taken down after every recession and never make their way back when the economy recovers. There economic sectors that decline and don't recover when the economy recovers. Many will face a permanent loss of income and degradation in quality of life. While Singaporeans are told to be resilient, many of them are suffer from the consequences govt economic policies to always grow the GDP as fast as possible - sometimes shifts to industries that no longer require their skills but that of foreigners. While it often ideologically argued that any aid to Singaporeans in the form of subsidies and direct help should be avoided, the expanding inequality and rising poverty makes it unavoidable. Workfare, for example, is necessary in recent years because many low income Singaporeans work full time jobs but cannot make ends meet. We are not talking about a small number here but 400,000 Singaporean workers[Link] who cannot keep their heads above water. But for every Singaporean that has sunk below the poverty line, there are many heading down from the ranks of the mddleclass that will thin out as income inequality expands.

The real leadership test is not whether we can recover when the global economy recovers but whether the leadership is able to solve the real problems faced by Singaporeans. GDP growth is starting to mean very little to Singaporeans, if anything, more people are become very wary what is traded away to achieve this growth. We need leadership to think hard what was the purpose of having GDP growth in the first place - ultimately it is to better the lives of ordinary Singaporeans. But the high growth of past decade came a double digit rise in the cost of housing and medical care that outstripped the rise in income of most Singaporeans. The wealth creation was highly concentrated in the top 5-10% of the populace with the rest of Singaporeans sufferring from effects of high income inequality. For the ordinary Singaporean, what is the purpose of growth when it does not narrow the income gap and grow their income at a fast enough to make housing, medical care and transport more affordable? The frustration with the PAP in the 2011 elections showed up after the economy rebounded from the financial crisis when people realised they did not benefit much and many saw a marked deterioration in their quality of life.

Make housing affordable, make medical care truly universal, narrow the income gap and provide safety nets. The basic 1st world safety nets of good universal healthcare, unemployment insurance, affordable public housing and transport, aid for poor, sick, elderly and disabled....are the real benefits of becoming a 1st world nation. We arrived in the 1st world with a 3rd world wage structure and many did not benefit from the economic growth of the past 2 decades. With or without a slowdown, the leadership of this country faces a test whether they fix the imbalance in our economy and the real problems faced by Singaporeans today.

How I think the European Crisis will be played out....

2011-11-15T22:47:00.012+08:00

LAST UPDATE: With the Italian and Spanish bond yield spiraling out of control crossroads for the EU will be reached pretty soon. The only choices left are all bad - they will have to choose the least bad. This article puts the choices that confronts the EU very clearly Why Europe's Central Bank May End Up Printing Money or face a disintegration of the Eurozone. The Italian govt needs to maintain a budget surplus of 5% just to maintain its debt level - this is not going to happen. With bond investors demanding close to 7% yield on Italian bonds, Italy's debt burden will escalate and default become mathematically inevitable unless the ECB intervenes. As the indecisive leadership in Europe does the "wait and see", France, the 2nd largest European economy faces a downgrade of its debt and substantially higher financing cost destabilising the entire EU. Germany itself depends mostly on its neighbors to buy its exports Unless their plan is to simply refuse to allow the ECB to print money at all cost and take immense pain of a recession (some say depression) that comes, it make sense to act early - if they wait to be forced by the markets, like the 2008 financial crisis, the consequences will be terrible when the situation spiral out of control. If they simply refuse to do it (print money), they have to be prepared to watch their economy sink and the EU breakup. Going back to my original article, I was perhaps too optimistic that European leaders will act to arrest a predictable deterioration of the situation ....this crisis has gone on and on for 2 years, they do something when they are forced to do it and never got ahead of the problem. This is almost the best time for the Germans to nod their head and just get it done, their neighbors have been been punished enough by austerity, social unrest and collapsed govt - the issue of moral hazard is no longer there. But yet we see a George Bush in Merkel, Bush held out ideologically a "no bailout" until Lehman collapsed and he was forced to bail out everyone. Merkel confronts a situation that is similar and a "no-printing money" ideology resulting from bad German memories from the Weimar Republic hyperinflation ...but the situation is completely different now and the consequences of not acting will be devastating for EU and perhaps the rest of the world....Here's an interesting article by Jim Jubak on Germany’s Support Withers as Euro Panic Worsens. He wonders how long Merkel can hold out as pressure mounts on the ECB to do something.

FURTHER UPDATE: A few commenters correctly pointed out that ECB is bounded by rules of the EU treaty not to print money. The rule is in place to avoid moral hazard. However, the ECB has been buying sovereign bonds to contain the crisis but in a limited manner to keep sovereign debt interst rates from spiking up. The question whether ECB will be a lender of the last resort and use a "wall of money" to end this crisis or keep intervening in the secondary market until "something happens". If the situation spirals out of control, the EU itself will disintegrate so that is incentive for the ECB to act. There is a fuller discussion of all the options for the EU here : Waiting for deus ex ECB by James Saft. Relooking at all the information, I have to admit my original posting is too optimistic and naive. The stock market, currency market and bond market appeared to have taken different positions on Europe : Stock Making a risky bet on ECB printing money....the writer wisely points out there is no coherent or consistent view of how the situation will develop which explains the volatility we are seeing. If we go back to the prophetic book "Debt and Delusion" written in the 1990s, monetizing debt (printing money) is the least bad of all the bad options that confront a country that cannot pay its debts - so we see countries like US, UK, Japan printing to pay its debts. Some believe it is the most likely outcome for the EU and the question is when not whether they will do it.: Will The ECB Print Money? The Key Question For European Debt Crisis

UPDATE: After I made my posting, an article appeared in Globe and Mail exploring the same idea with some figures to show that it is feasible [:ECB could bail out Italy in a jiffy]. It shows that if the ECB is willing to print money at the same scale as the Bank of England, it will be able not only to cover Italy's budget deficit but its entire budget for they year and Italy would not need to go to the debt market at all for one whole year instantly defusing the crisis. The UK central bank has already printed £275B and it did not cause price instability there..

I've been watching the doom and gloom predictions of pundits on TV quite closely. These dire predictions include that of a 'Lehman moment' for the current crisis that describes a sudden catastrophic financial failure of a country or a major bank with reverberations reaching to every corner of the financial world. I also hear talking heads criticising Europe for the lack of leadership in particular the Germans (Angela Merkel) for failing to quickly defuse the crisis. My view of things are rather different. I actually believe the German leadership knows exactly what it is doing and is getting what it wants from everybody. ...let me explain....Lets start with a few questions and answers...

Which is the most indebted developed nation in the world? The answer is not Greece but Japan. In fact Japan has double the debt to GDP compared with Greece How come Japan is not in crisis like Europe or Greece? Japan is able to borrow money cheaply at 2% interest. What about USA? USA is also a highly indebted nation but investors are flocking to buy US treasuries (US debt) and they can't seem to get enough of it driving 30 yr US treasuries to the lowest interest rate in history. US is deep in debt but creditors are very eager to lend it money. Spain collapsed and needed a bailout very early on in the crisis at a point in time when its debt to GDP was smaller than that of Britain. Creditors did not want to lend money to Spain but are more than willing to lend to Britain. Why?

The answer to all the above question is Japan, Britain and US owe a debt denominated in its own currency so they can print as much money as they need to pay their creditors so it is not possible for these countries to default. During the Asian crisis, Thailand had a debt denominated in US$ so when the baht fell against the US$ it collapsed quickly because it could find enough US$ to pay its creditors. So the main difference between countries in trouble and those that are not is not the size of the debt but whether they are able to print money to pay down their debts.

How come the ECB (European Central Bank) did not print Euros and print its way out of the crisis? They were trying to at some point but the Germans opposed to it. Printing money has this effect of stealing a bit of money from everyone in the Eurozone (by way of inflation) and it is unfair for the Germans who have kept their deficits small by cutting entitlements for its citizens.Printing money to bailout these nations will result in a moral hazard ...these countries have to learn some important and painful lessons. So instead of printing money which was a relatively easy thing to do, the Europeans orgainsed a massive bailout package known as ESFS [Link]. If a financially troubled nation wants money from the ESFS, it has to play ball by implementing harsh austerity measures and promises to cut deficits something these countries refused to do before the crisis.. The Germans got what they wanted out of these spend-thrift nations using the ESFS as a big stick. Without ESFS money, these countries would have to default on their loans and the govt would collapse instantly because they have no money to keep the govt going.

With the political leaders in Greece and Italy thrown out and replaced by technocrats who previously worked in the ECB and EC, they will quickly pushed through budget cuts and austerity in the respective countries. Creditors who lent to Greece have been punished with a 50% haircut on the amount they loaned.

Now with every one who misbehaved painfully punished, I believe the ECB will start printing money and buying sovereign debt of troubled European nations. It had done so intermittently in the past but have just declared they print money and buy all the sovereign bonds they need to buy to stabilise the situation [ECB bond buys will go as far as needed: Kranjec], The Germans will not stop the ECB at this point because they have already gotten what they want in terms of austerity and fiscal discipline from nations that caused the crisis. Germany is highly dependent on these countries to buy their exports and cannot have the situation deteriorate. Printing money and buying bonds is an incremental process that does not affect significantly price stability (cause massive inflation) in the short term....it pushes the interest rate down and gives the ESFS more "bang for the buck" instead of giving high returns to creditors.

In short, despite what we see on TV and read in the news papers and our Prime Minister urging European leaders to put in more effort to "avert a global meltdown" (Focus on euro zone crisis, avert global meltdown: PM).....I believe the crisis has already ended. While there may be sudden kneejerk of financial markets reacting to various news from Europe, the worse part of the crisis, I believe, is behind us. The problems in Europe are long term in nature and will be morph from a crisis to a graceful degradation...they will can and keep kicking the can down the road spreading their financial problems over time..

"Smaller flats doesn't mean lower quality of living" : HDB CEO...

2011-11-12T19:53:00.004+08:00

I was a lazy buyer when I bought my property more than a decade ago just after Asian Crisis. Prices had fallen to the level that I thought would be prudent to buy. But the effort I put into selecting a property really left much to be desired later on. When I arrived at the development the day it was launched, I took a look at the show apartment for a 3 room unit, I thought it would be big enough - special effects of mirrors and interior decor aside. I spoke to the sales person who told me I was "late" and all the best units have been snapped up by buyers queuing overnight and only 20% of the units were left. The sales guy told me units are all differently priced - the facing, level, etc all affected the price. I didn't quite understand why lower floor units were priced cheaper but figured the facing was important but was okay as long as the unit didn't face the afternoon sun. I told the sales guy to help me pick a 3 room unit with the facing I wanted. 25 minutes was all I put into selecting my property.
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When I got the keys to my unit, I was quite excited and went to unit immediately to have a look. When I opened the door, I was very disappointed because the apartment was much smaller than the show unit. It turned out there were 2 types of units with 3 rooms and I bought the one with the smaller floor area. The unit was much smaller than the 4 room HDB flat my dad bought 20 years for one-tenth the price I paid for the apartment. This kitchen felt like it was half the size of the one in my dad's HDB flat. The children's room was smaller than my own room in my dad's flat. Inviting a few friends over and you feel the squeeze. When we have gatherings, we have to always trim down the list because place is too small. There are I things to want to buy to improve my life but cannot do so because the house is too small.

A few months ago, a friend came to my place to give me his wedding invitation card. He had just purchased an apartment and the down payment wiped out all his savings. When he came into my apartment, he said, "Wow! Your apartment is so big!". He was not being sarcastic, He bought an apartment much smaller than mine and paid double what I paid.

The incredible shrinking homes of newly married Singaporeans due to prices of homes rising much faster income is phenomena that has been with us for the past 25 years. A 5-room flat today is much smaller than the 5 room flat 10 years ago which is smaller than a 5-room flat purchased 20 years ago. Smaller homes affect the quality of life.

"Our families are smaller. In the old days, we have very large families living in a flat. Today, the family is two, three, four (people)." - HDB CEO[Link]

Actually for many Singaporean families, the inability to own a bigger place is the reason why couples have fewer children. It becomes extremely unpleasant to pack 5 kids and 2 parents into a typical 700 sq feet 3-room flat. Kids grow up and you will soon have 7 adults in that small space. Many Singaporean families have fewer kids because property is expensive and all they can afford is a small place comfortable only for a family of 3 or 4 people. The HDB CEO got is logic all wrong. In fact if you look at the places with the lowest fertility rate, it correlates with high home prices. The lowest fertlity rates are in Singapore, Hong Kong and Macau:

228	Singapore	1.10
229	Hong Kong (PRC)	1.04
230	Macau (PRC)	0.91

These are also places where property is so expensive people typically live in small apartments. Our nearest neighbor Malaysia has a fertility rate of 2.70. More than double the fertility rate of Singapore. Malaysians do not love having children twice as much as us. What they have is lower population density and larger homes. In fact studies in the past years have shown that higher population density leads to lower fertility rates:
"Where you have high amounts of high-density housing you have very low birth
rates ... where you have density, you tend to have very few children."- Professor Kotkin, fellow at California's Chapman University and London think-tank the Legatum Institute.[Link]

The HDB's idea of building smaller and higher density housing and PAP's policy to import foreigners increasing the population density on our small island is driving down our fertility rates. Instead of removing the causes of the low fertility rates, they use the outcome of lower fertility rates to justify the need to bring in import more people and build smaller homes for Singaporeans. This mixing up of cause and effect puts Singaporeans in a vicious cycle of falling fertility and increasing foreign influx. Expanding the population by importing people puts a enormous strain on the long term citizens of this country - our numbers will languish and we will end up a minority in our own country.

Video Clip from Meltdown

2011-11-07T09:41:00.009+08:00

Here's an interesting clip from Al Jeezera documentary on the financial crisis Meltdown. Part of the video discusses the case in which the SEC went after Goldman Sachs for selling complex financial products to ordinary American citizens ("widows and orphans") in which it was the counterparty to benefit. from the failure of the products. Goldman coughed out US$500M as fines and compensation. In a similar caserecently, the SEC went after Citibank for mis-selling US$285M mortgage bonds to investors[Link].

A group of Singaporeans who lost their money in High Notes 5 sued DBS Bank. The High Notes 5 was a product created by DBS Bank in which it was the counterparty should the

Other investors like retiree Tham Wai Wah, 60, also felt 'cheated'. She had
trusted the relationship manager who had explained to her last year that the
High Notes 5 product was 'very safe'.

She said that with only an O-level education, she could not fully understand
the prospectus. 'I told them I'm a conservative investor and that this was my
CPF money.'

She put in $125,000, part of her Central Provident Fund (CPF) savings she
withdrew upon retirement after working for 30 years as a clerk. Her husband is
also retired.[DBS 'High Notes 5' Investors:They pumped in life savings and now feel cheated ]

There were 1084 investors of High Notes 5. 873 filed for compensation, of that number, 669 received nothing[Link]. A total of 7.8% of the amount invested was returned to investors.

Because of the proactive involvement of the Hong Kong govt, Hong Kong investors received far higher compensation[Link]. The Singapore govt left it to the banks to decide who deserve compensation and how much. The Hong Kong govt negotiated a settlement with the banks in which investors would get back 96.5% of the money invested in Lehman Minibonds[Link].

DBS High Notes 5 investors in Singapore were left without any choice but to try to get their money back by suing DBS.. They lost the case and appealed against the verdict. They lost the appeal last week and reached the end of the road in their pursuit of justice. It is hard for private individuals to win a legal case against the bank because they are well covered by the terms in the contract. The Hong Kong strong-armed the banks into paying and the US SEC threatened a full blown investigation imless banks pay up. It takes a govt like the PAP to abandon ordinary citizens and leave them to fight alone for their own interests against powerful banks.

The video below also covers the real estate boom and bust in Spain and Dubai. There are many lessons here for us:

"Dubai in many ways, not to be too uncharitable, was a state pyramid scheme...a state ponzi. It relied on more people coming in to buy their property or even their deposits of people who were there earlier than them...and it had to keep on going"
- Christopher Davidson author "Dubai : The Vulnerability of Success", 19:10mins into the video.

The race to be the financial capital of the world was an important contributor to the crisis. This race is essentially a race to the bottom as govts deregulate to attract financial institutions:

"The real problem that we face going ahead is this same kind of pressure - where is going to be the financial capital of the world...is going to come back once the memories of the crisis has faded/ Certainly, Frankfurt and Paris are going to be back into the race....so is Tokyo so is Singapore so is Shanghai so is Hong Kong. And what I think may well happen at some point it is going to be Hong Kong and Shanghai combine ....its going to be regulatory arbitrage.....its going to be a race to the bottom" - Paul Martin, former Candian Prime Minister, 30:13min into the video

How did the toxic Lehman Minibonds get into Singapore and not other countries? Why are there 1000 investors in Singapore using MF Global wondering if they can get their money back? Why are banks calling you 2-3 times a day on your cellphone asking you if you want an unsecured loan?

We deregulated to attract banks and foreign financial institutions. The govt wants to keep the GDP growing by growing the financial hub. Lets be mindful that this is a race to the bottom and the collateral damage may be the lives and well being of ordinary Singaporeans..

You can watch all 4 parts of the documentary starting with Episode 1:

Discrimination against Singaporeans....

2011-11-04T11:42:00.002+08:00

Recent days we have seen some rhetoric from the govt about the need to prevent discrimination against Singaporeans by employers who advertise only for workers with work permits or holding PRs..i.e. foreigners.
"Speaking at a tripartism forum on Monday, Minister of State for Manpower, Tan
Chuan-Jin, stressed that discriminatory practices have no place in
Singapore." - CNA Report "Discriminatory practices have no place in S'pore: Tan Chuan-Jin"[Link]

So after telling us that foreigners create jobs for Singaporeans for the longest time, isn't it a big turnaround for the govt to now start talking about discrimination against Singaporeans? There are numerous reasons why employers hire foreigners including the reasons cited by a writer to the Straits Times (see below). Foreigners from developing countries have their families back home are willing to accept a lower pay compared with a financially stressed Singaporean breadwinner - after you hire him, you find that you're under pressure to increase his pay because you know his cost of living is high and escalating every year. For a foreigner, he is paid so much more than back home, you don't have worry about him being unhappy with pay...if he is not happy you simply send him home without burdening your conscience too much. Foreigners coming from poor developing countries are willing to accept all sorts of working conditions and lack of benefits that workers in a 1st world country find ridiculous. American employers like to hire Mexicans, the French employers like workers from poorer European neighbors like Portugal. ....our employers like to hire from Philippines, India and China.

It is a futile for the govt to talk about discrimination after opening the floodgates for foreign workers from developing countries. Tan Chuan-Jin's idea of warning employers not to advertise just for PR and Work Permit holders and to include Singaporeans is a superficial move that will not solve the problem. Employers will just get applications from everyone, select foreigners and toss the resumes of Singaporeans into the waste paper basket. The people who suffer the most due the govt's policy are the older workers who cannot find employment because employers have access to a large pool of young foreign workers. The main reason for employers to hire older workers in the past was a tight labor market when they had no choice but to tap the pool of older workers. By opening the floodgates, the PAP govt created a severe structural unemployment problem and many Singaporeans live with this fear of becoming a unemployed PMET or take deep pay cuts to stay employed when they are older.

I do not expect the situation to improve much soon. A few small changes to restrict the hiring of foreigners implemented by the govt early this year saw much resistance and complaints from employers. Many of them have over time become very dependent on foreign workers. The govt took the short cut to GDP growth by pandering to business demand for cheap foreign labor instead of investing to improve productivity and innovating to move up the value chain . We have walked too far down this road and it is now very difficult to turn back quickly. The high social costs makes this model of growth unsustainable and the price has been paid for mostly by ordinary Singaporeans who have to struggle harder to support their families.
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Employers want foreigners to avoid paying salary increment and CPF [Link]

It is very common for employers to recruit foreigners on a work permit or S-Pass for two years and at the end of the validity period, send them home and recruit a fresh batch of foreigners for the same tasks ('Don't discriminate against Singaporeans'; Tuesday).

By doing so, employers do not have to contribute to the Central Provident Fund for the employees, pay a yearly increment or bonus, plan a career path or provide employment benefits.

It is not surprising that Singaporeans are often passed over for such positions. Some employers even promise the foreign worker the maximum salary as indicated by the respective types of employment pass; and once the worker arrives here, he is told that a certain portion of the salary (in the form of a certain allowance and not part of the basic pay) will have to be returned in cash to the employer every month (to avoid leaving any evidence for subsequent investigations if a complaint is lodged).

The foreign worker has no choice but to accept the deal or be sent home. Although the levy and minimum salaries for the various employment passes have been raised, it is still cheaper to recruit foreigners than Singaporeans, and employers will continue to utilise the maximum quota of foreign workers allotted to them.

The average Singaporean worker is pickier about employment because he has more arduous responsibilities. The well-being of his family is at stake, compared with a foreign worker who is usually here alone earning a salary that will let his family back home live far more comfortably.

It is easy for employers to excuse themselves from recruiting Singaporeans by generalising that Singaporeans are not willing to take on low-level jobs.

But as long as employers continue to practice the 'cheaper' option, there is no way a Singaporean worker can compete with a foreigner. It is true that businesses exist to make money, and very few can survive on national pride alone (by recruiting citizens only). However, the Government has a duty to ensure there is fair play in the workplace for Singaporeans, and clearly, we need more bite in the current employment policies to ensure employers do not take advantage of such policies to disadvantage the Singaporean worker.

Edwin Lim

MF Global Collapse - Need for Caution....and wisdom...

2011-11-03T08:02:00.005+08:00

UPDATE: A few people wrote that MAS has rules to require brokers such as MF Global to seperate client money from its own. Having a law is one thing but ensuring that it is followed by effective policing is another. Also, are Singapore investors using MF Global in the situation as investors of defunct s-chips - the MAS unable to go after the wrong doers because they are not in Singapore even though the crime was committed here. It is useless to have laws when it is hard to go after people who break it.

MF Global a financial dervatives broker has collapsed and filed for chapter 11 bankruptcy. MF Global was allowed to operate in Singapore offering exchange traded derivatives, futures, options, forex and OTC (over the counter products) such as contracts for difference.

MF Global collapsed due to wrong bets on European sovereign debts but that is not the main problem. The CEO, a former Goldman Sachs executive, dipped into client money to pay for losses. Now it is not clear how much money can be recovered[MF Global accounts shock leaves clients scrambling]

MF Global has been operating in Singapore[Link] and signing up clients here. The number of clients is about 1000 . However, MF Global is not the only one operating here. Over the years our financial sector has been deregulated to the point, many such brokers of various sizes have set up shop here. It is very hard to educate investors on the risk of setting up an account with these firms as they weave into our financial system and many Singaporeans simply believe they are safe because they are allowed to operate here - many are not aware that the Singapore govt, out of its aspiration to be a financial hub, has been deregulating to attract investment banks and brokers to set up here. These firms are allowed put out glossy advertisements in local financial magazines, on our cable channels and set up booths in Raffles Place and at exhibitions to sign up clients and some offer free 'educational' talks on investing. It is quite easy for them to sign on clients as they make themselves appear legitimate and safe but they are not well regulated or monitored by the authorities. The PAP govt jumped onto the bandwagon of deregulation but how wise is it when you allow your citizens to be exploited with so little or no benefit in return.

Several months ago, I decided to visit the office of one of these 'major' international brokers who has been advertising in our papers. magazines and at various Singapore websites. This broker has signed up thousands of clients offering an OTC product known as 'contract for difference'. I met the customer service officer (a Filipino) and the nice lady told me that the firm has hired 5 or 6 people - so they don't create much employment here.

Economists who view the financialization of the US economy negatively believe that much of the derivative trading has turned into nothing more than gambling. In the past, derivatives were used to hedge and pass on risks for businesses to speculators - it has turned into large casino. Most of the trading activity produce no net benefit for the economy. Singapore wants a piece of Wall Street but we take the best and leave out the less regulated modern day 'bucket shops' that will certainly bring grief and harm to our people. It is not clear if the MAS and the PAP govt will learn anything from this episode (MF Global collapse) but it is certainly time for us to rethink 'deregulation' even though nobody has Occupied Raffles Place because the police warned people not to be 'misguided'....but who really are the ones 'misguided'?...The ones who deregulated our financial industry to the point that left thousands stung by losses in toxic products or rogue brokers....or the few brave ones who wanted to Occupy Raffles Place?

Singapore's high imprisonment rate....

2011-11-01T06:55:00.001+08:00

One of the comments to my previous posting pointed out Wilkinson shows that Singapore has the highest prison population per capita after USA among developed countries. I did a quick check and statistics show that we have the 2nd highest rate of incarceration in South East Asia - see the last column of the following table which shows prison population per 100,000 (Source: Link).

Our rate of imprisonment is triple that of Malaysia.

There is this poster that the SPF put up around housing estates that says "Low Crime Rate Does not mean no crime".

If our crime rate is low, why are there so many people imprisoned? The USA has a large prison population because the crime rate is high. Some of you may argue that our police force is very effective compared with the developing countries around us i.e. they are better at solving crimes. However, that does not explain why we have such high rates of imprisonment compared with other developed countries where the police is equally effective.

What is the cause of such a high rate of imprisonment? I have a few hypothesis. While crimes like robbery or theft may be low giving us a general sense of security i.e. can go out at night without fear of getting robbed, other crimes like loan sharking, smuggling of contraband (which is victimless?) and illegal prostitution occur at a much higher rate....and may have a causal relationship with social inequality The other plausible explanation is our laws are harsh and puts people behind bars for lesser crimes such as creation of graffiti, setting up a tent withou a license at the beach[Link]. inability to pay parking fines[Link] and jaywaking[Link].

Richard Wilkinson: Why Greater Equality in Developed Countries Makes Societies Stronger....

2011-10-29T02:10:00.005+08:00

I did a search of youtube and another video in which Richard Wilkinson discusses the effects of inequality in greater detail. Richard Wilkinson has co-authored a book with Kate Pickett entitled "The Spirit Level: Why Greater Equality Makes Societies Stronger" published last year.

In response to my previous posting there were a few comments that suggested that Singapore has managed to be an outlier that avoided some of the deleterious effects of inequality. I don't think that is true. The reason being Singapore became a very unequal society very rapidly and very recently. The ratio of income of the top 20% to bottom 20% roughly double from 1990 to 2000 and continued to worsen until 2011 when Singapore become the most unequal society among developed countries.

"During 2005-2007, the average income for families in the bottom decile of the income distribution increased just 3-4% while that of the topmost decile grew by 6-11%. As a result income inequality has grown markedly in Singapore, far more that most developing and developed countries which also experienced long periods of high growth."

- Income Inequality in Singapore : Consequences and Policy Options[Link]

Believing Singapore can avoid the problems associated with income inequality is analogous to a healthy man who suddenly takes up smoking and drinking....after one week he looks at the people with chronic health problems from these bad habits and wrongly concludes that he is immune. There is nothing in our social "immune system" that makes us invulnerable to the problems Richard Wilkinson talks about - if anything they are starting to hit us. Our society is becoming less cohesive, there is rising poverty and social mobility has declined markedly., ...and we are already suffering the highest stress levels in the world.. We are not immune...and we are foolish to think we are immune.

Richard Wilkinson: How economic inequality harms societies....

2011-10-28T03:21:00.001+08:00

Saw this video on The Online Citizen Facebook.

Richard Wilkinson presents some very compelling evidence to show why equality is more important than GDP to the well-being of a society.

The extreme inequality in Singapore shows up in 2min30sec into the video. Singapore has the worst inequality among countries Wilkinson analyses.

Why you should try not to sell your stuff through middlemen....

2011-10-26T14:32:00.002+08:00

In the book Freakonomics, the authors did a study of prices of homes sold by property agents for their clients and compared it with the price of homes when the property agent is acting for himself i.e selling his own home. They found that the property agents sold their own homes at a price significantly higher than the homes of their clients. The property agents' interest is to earn a commission and to do that they try to make sure transactions go through by persuading sellers to lower their selling price and buyer to up their bid. Many Singaporeans are not aware of this but you can sell your home quite easily without a property agent - the paper work is relatively simple. My father sold his HDB more than 20 years ago without an agent and it is easier to do it now because of the Internet which enables sellers to put up ads for free at various websites. (here is a forum on people sharing their experience of selling their HDB without an agent amd HDB itself conducts a regular seminar on how to sell your home without an agent[Link].

If you walk around the town central of a HDB estate, say Toa Payoh Central, what you will see is one 2nd hand phone dealer after another. Sometimes within an area of 50 meters by 50 meters, you can count up to 20-30 of such small shops. They exist because new hand phones models are introduced by manufacturers every few weeks and your iPhone 4 becomes yesterday's model when the 4S is released. Singaporeans get rid of their old phones through these middle men. The other day I was standing by one of these shop and a young men sold his relatively new phone for $80 to the dealer. I was very familiar with the model as I was thinking of buying one for myself and it was changing hands in the www.hardwarezone.com.sg bazaar[Link] at about $140 or higher. Without much hassle, the seller could have gotten an extra $60. People sometimes sell the stuff at Cash Converters or pawn shops because they need money quickly - the problem is they are actually throwing money away because they get far less than what they can get for their goods at a time when they need money badly. The lesson is not to get into a desperate situation when you have to "fire-sale" your belongings.The proliferation of pawn shops like Money Max [Link] perhaps tells us that more Singaporeans are getting into financial situations where they need cash quickly....and this is exploited by the numerous 2nd hand phone dealers, money lenders and pawn shops.

On History Channel, there is a TV show called Pawn Stars[Link]. The show follows the going ons in a Las Vegas pawn shop operated by a family. Given the subject matter, the show is surprisingly successful and has a large following since its debut in July 2009. The show sometimes gives you a hint of the economic malaise in USA as some of the people were pawning away their family heirlooms passed from one generation to another to make ends meet. People were selling their belongings to raise money for medical treatment, rent and so on. The Harrison family running the pawn shop makes a good living buying and selling....they are all overweight from sitting around in their shop ...here's a clip from the show:

A woman walks into the pawn shop asking $2000 for a Fabergé brooch. Mr. Harrison being a man of conscience knowing the real value of the brooch offers to buy it for $15,000. The truth is this :if the brooch is genuine Fabergé , it is worth something in the region of $80,000-$250,000. Either the woman walked in with a fake and cheated the pawn shop or the pawn shop just made something like $100K from a $15K sale. So even a middle man with conscience like Rick Harrison of Pawn Stars is not averse to making excessive profits off people who are ignorant and too lazy to double check the value of what they are selling. Next time think twice before you go to a middle man to sell something specially if you don't know how much it is worth!

Even if you are rich and don't need to squeeze every dollar from the 2nd hand stuff you're selling, you might want to consider selling it direct to buyers....you're doing a favor for them and yourself. If your price is good (still higher than what you can sell to the middle men) many buyers are willing to drop by your house to pick it up and that is more convenient than bringing it down to cash converters or to a 2nd hand phone dealer.

Websites on the Internet where you can offer your 2nd products for sale:

EBay : http://www.ebay.com.sg
Hardware Zone: Market Place : http://forums.hardwarezone.com.sg/forumdisplay.php?f=250
Phing : http://www.phing.com/
88DB: http://sg.88db.com/
ST701:http://www.st701.com/
Gum Tree:http://singapore.gumtree.sg/

Singapore Leads 'Occupy' rally Reluctance....

2011-10-23T12:10:00.008+08:00

It is always interesting to watch the reaction of Singaporeans when the same events/situation take place here as in other countries. Surely there are people concerned about the social inequalities, corporate greed and the global financial system - I've met many people personally who feel strongly about these issues. However, why is Raffles Place rather empty today and last weekend? Before I attempt to answer that question, I'll tell you a few "protest stories".

I have a friend working with a multi-national company who was sent to S. Korea . 2 weeks into the posting, he turned up at the office and found that workers have blocked the entrance. Rather baffled, he pushed his way through the blockage.When he got to the office, he asked around to find out what was going on. It turned out, to his surprise, that the small strike/protest was encouraged by the management. The S. Korean govt was about to sign an FTA( Free Trade Agreement) and there were some "minor" disadvantages for that industry. The protest ended after a few days. The goal was not to overturn the FTA but to send a signal that they (the industry) should be taken for granted and their interests traded away next time policies were made. For my firend who has never seen a protest in 3 decades living in Singapore, he exact words were "Like that also protest?!".

I was in LA many years ago when the cleaners (Americans call them janitors) went on strike and protested their working conditons- they were basically bullied by employers who sometimes underpaid them Most of them were Mexicans and many were illegal workers. The Californian govt had "close one eye" to the large number of illegals from Mexico that cross over the border to work. The protesters were taking a big risk because some of them could have been deported but they could no longer take the "injustice". After 2 days, toilets all over LA began to stink and public sympathy build up for these lowly paid workers - they were not asking for higher pay....only asking to be paid on time what the pay they were promised. Within a week, the LA authorities promised to enforce labor laws that protected both legal and illegal workers to ensure that these janitors were protected.

In the 90s, I did a self organised tour of Europe and stayed in Athens for 5 days. On the last day, I planned to take a cab or public bus to the train station. After I paid for my hotel stay, the guy at the hotel reception told me, "Bad day to travel today". I stepped out of my hotel and instantly understood why. Protesting workers blocked the roads preventing buses and cars from moving. Thousands of workers were involved in the protest. Stranded and unable to get to my destination and somewhat curious, I decided to move around and observe the protest more closely. The protestors seemed to be concentrated at the parliament house where it was most rowdy. I made my way to the parliament house to watch the protest. The protesters were shouting loudly but lets put it this way : it was all Greek to me! Suddenly the protesters got very excited, extremely rowdy and the shouting increased in volume. A Greek minister or MP was making his way out of the parliament. I could see the protesters were very angry and were trying to prevent the minister from getting into his car. The police and body guards were able to create a path to the car. However, when the car door opened and the minister was about to get in, more than a dozen raw eggs was thrown at him and his suit was really messed when he was driven off. I found out later that that protest was organised by labor unions who wanted better pay for workers.

The distrust among workers, govt and business in Greece continues until today. Greece was a poor country and when they switched to Euros in 2002, the govt borrowed heavily to spend creating an illusion of wealth and GDP growth. A few years later everything fell apart. The tension between workers and govt reignited and we see violent protests in Greece today. There is little anyone can do the change what is coming for the Greeks - rising unemployment and economic pain. At a time when unity is needed to overcome its problems, the society appear to be disintegrating and falling apart.

I put up 3 stories to show the good, bad and ugly side of protests. Is not having protests all good? Well, they don't have protests in N. Korea because the citizens know that protesters "disappear" very quickly after they show up and the disappearance is permanent! Over time fear becomes habit and it becomes a silly idea to protest there. Their brothers in S. Korea are their diametric opposites and fervent protesters. Those who argue that protests hurt a countrry's economic progress just have to look at N. Korea and S. Korea. Protests are an important part of the political process and when used by a populace applying the right values can lead to a better society e.g. civil rights movement.

Singaporeans were good at organising protests in the 50s and 60s. We protested against colonial rule. We protested for independence. We protested for workers' rights. Even in the 70s, some Singaporeans protested against the Vietnam War. Over time effiecient police action against protesters, tightening of rules on public assembly and control of the media to convince the public that protests are always bad, misguided and destablising turned this whole nation into non-protesters. At some point even the PAP thought it was not so good an idea for the population to be so obedient so they carve a a small place at Hong Lim which they called the Speakers Corner. People started going there to organise small protests when they feel that things were not done right in Singapore. I guess that the govt felt a bit uneasy when they discovered that using digital cameras and Internet tools such as YouTube, the small place has a bigger reach than expected. The govt decided to put up their cameras and people wondered whose entertainment those recordings were going to become (police? ISD?) and activities at Hong Lim started winding down.

There is no lack of reason for an "Occupy Raffles Place" protest. We have higher income inequality than most places like New Zealand and Australia where people turn up to protest income inequality. There is no lack of corporate greed and excessive executive compensation - the ratio of top executive pay to ordinary workers is higher here than in most places where people protested. The social contract here broken by the high cost of living and rising poverty have left many here feeling tehir sacrifices are not being repaid but still...there are no protests.

Singaporeans have over the years lost their ability to stand up for what is right. There is habitual apathy, mind your own business attitude and many Singaporeans under years of authoritarianism learn to leave solutions to the govt because political participation by ordinary citizens always comes with a big price - police action and humiliation. For those who will turn up, the fear is others won't and the few will be left holding the bag....ridiculed by media for being misguided and a segment of society that believes this govt can do no wrong and should be trusted all the time to solve our problems. The reluctance to protest is not the result of a lack of problems in our society but a deeply ingrained fear and many years of authoritarianism that resulted in an excessively apathetic and obedient society.
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Singapore leads Asia in 'Occupy' rally reluctance[Link]

KUALA LUMPUR -- Australia and New Zealand started the rolling global protests denouncing corporate greed but capitalist countries elsewhere in Asia were reluctant to demonstrate, with the turnout in wealthy Singapore almost zero.

Protesters gathered across the world on Saturday to denounce bankers and politicians over the international economic crisis, with violence rocking Rome where cars were torched and bank windows smashed.
Protesters had gathered in Japan and across Southeast Asia, but in the hundreds at most. Singapore didn't even manage that.

The pro-government Sunday Times appeared to take pride in the non-turnout after a call to gather at Raffles Place in the financial center failed to materialize.“What's missing in this picture?” it asked on its front page above a picture of three policemen patrolling an almost empty Raffle Place.
Speakers' Corner
An unidentified person had set up a Facebook page and Twitter account calling on Singaporeans to protest against income inequality and a lack of accountability in the country's sovereign wealth funds, prompting a police warning.
Singapore bars demonstrations, gatherings or speeches without a permit except at a tiny “Speakers' Corner” in a small park at the edge of the central business district

QE3 : Operation Twist...will the stock market rally again? ...Part 2.

2011-10-22T10:29:00.003+08:00

Part 1 is here

In late September I asked the question if the Fed Operation Twist will coincide with the next rally on the stock market.

Here is the schedule of treasury purchases by the Fed for Operation Twist :[Link]. The very first one is on 3 Oct 2011 when the Fed purchased $2.7B of treasuries from the market. Lets see what happened following the start of Operation Twist:

Despite the mainstream media focus on the problems in Europe and doom and gloom of the global economy, on exactly 3 Oct 2011 when the Fed started Operation Twist, the market bottomed. and rallied more than 10% in about 2 weeks.. This can be attributed to sheer coincidence but it is quite amazing coincidence if you go back to my article in Sep 2011 where there is a chart showing when the other QE started and where the market rallied.

It is strange that as the financial media harps about the disastrous downgrade of Spain, potential downgrade of France, contagion in Europe slowdown in China, rising frustration over the economy, rising unemployment, impending recession...and all the bad news, the US Dow Jones Index rose 10% in 2 weeks starting exactly on the day Operation Twist was put into action.....I looked around and nobody actually noticed or reported it in the media....

Citigroup to Pay Millions to Close Fraud Complaint.

2011-10-20T11:44:00.000+08:00

"As the housing market began its collapse, Wall Street firms and sophisticated investors searched for ways to profit. Some of them found an easy method: Stuff a portfolio with risky mortgage-related investments, sell it to unsuspecting customers and bet against it." - Article Below.

I brought up this case because what Citibank was accused of doing is very similar to what was done when the Pinnacle Notes and Lehman Minibonds were sold to Singaporeans. The products developed by American investment banks were linked to the US mortgage markets become worthless during the financial crisis. While the investment banks covered themselves legally in contracts pertaining to the sale of these products, the SEC went after them for fraud - if they knew these products will blow up and sold them anyway, no contract or legal document is going to stop the SEC from investigating potential fraud.

The Singapore govt took a different approach.

"But many went in with their eyes open. They're not old or uneducated. Now they are saying 'please include me too'. Well...we've got to go according to what's fair. " - MM Lee 8 Nov 2008.

While the Singapore govt did not go after investment banks for what they did in Singapore, a group of Pinnacle Notes investors have sued Morgan Stanley[Link]. It is important not to let these investment banks get away because it will send a strong signal that you cannot just come to Singapore and defraud Singaporeans by hiding behind a contract.

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Citigroup to Pay Millions to Close Fraud Complaint[Link]

By EDWARD WYATT

Published: October 19, 2011

WASHINGTON — As the housing market began its collapse, Wall Street firms and sophisticated investors searched for ways to profit. Some of them found an easy method: Stuff a portfolio with risky mortgage-related investments, sell it to unsuspecting customers and bet against it.
Robert Khuzami of the S.E.C. said the bank should have been more forthcoming.

Citigroup on Wednesday agreed to pay $285 million to settle a civil complaint by the Securities and Exchange Commission that it had defrauded investors who bought just such a deal. The transaction involved a $1 billion portfolio of mortgage-related investments, many of which were handpicked for the portfolio by Citigroup without telling investors of its role or that it had made bets that the investments would fall in value.
In the four years since the housing market began its steady descent, securities regulators have settled only two cases related to the financial crisis for a larger sum of money. This is also the third case brought by the S.E.C. accusing a major Wall Street institution of misleading customers about who was putting together a security and about their motive. Goldman Sachs and JPMorgan Chase & Company both settled similar cases last year.

The settlement will refund investors with interest and include a $95 million fine — a relative pittance for a giant like Citigroup. On Monday, the company reported that in the third quarter alone it earned profits of $3.8 billion on revenue of $20.8 billion. The settlement may also have trouble getting approval from Jed S. Rakoff, the federal district judge in New York who must ultimately sign off on the fine and who has taken a hard line on S.E.C. settlements.

Neither the S.E.C. nor the Justice Department would say whether the case raised questions about whether Citigroup had been involved in any criminal wrongdoing. But the case highlights a growing frustration felt by foreclosed homeowners, investors and Wall Street protesters alike that few, if any, senior banking executives have faced criminal charges for losses growing out of the financial crisis.

Citigroup has settled one case stemming from the crisis. Last year, it agreed to pay $75 million to settle federal claims that it hid from investors vast holdings of subprime mortgage investments that were losing value during the crisis and that ultimately prompted the federal government to rescue the bank.

“The securities laws demand that investors receive more care and candor than Citigroup provided” to investors in the security, said Robert Khuzami, director of the S.E.C.’s enforcement division, referring to Wednesday’s action. “Investors were not informed that Citigroup had decided to bet against them and had helped to choose the assets that would determine who won or lost.”

The complex amalgamation of investments known as Class V Funding III produced $126 million in profits for Citigroup’s brokerage subsidiary, and another $34 million in fees for putting it together. All of that, including interest and the $95 million fine, will now be going back to the investors; the government will not receive anything.

In a statement, Citigroup noted that the S.E.C. did not charge it with “intentional or reckless misconduct.” Rather, it settled charges that its actions were negligent and misleading to investors. Despite its profits on the current deal, over all Citigroup lost tens of billions of dollars on its holdings of mortgage-related investments.

“We are pleased to put this matter behind us and are focused on contributing to the economic recovery, serving our clients and growing responsibly,” the company said in a statement. “Since the crisis, we have bolstered our financial strength, overhauled the risk management function, significantly reduced risk on the balance sheet and returned to the basics of banking.”

The S.E.C. on Wednesday also brought a case against Credit Suisse, which played a smaller role in the transaction, and against one individual at each company. But those individuals were midlevel employees in each company’s investment and trading departments; no senior executives at either company were charged

Unemployment Truth.....the real statistics...

2011-10-19T06:12:00.001+08:00

One of the most peculiar things about our unemployment statistics is that it has always been released for the "resident" (PR+citizens) population so we don't know what the numbers are for Singaporeans. However, some light shed on 11 Oct 2011 when MoM finally released the numbers for citizens and here they are (extracted from the report "Singaporeans in the Workforce":

"Singaporeans have one of the highest employment rates internationally. The unemployment rate amongst citizens declined to 3.1% in June 2011, down from a high of 4.5% in 2009 during the recession."

"Singaporeans have one of the highest employment rates internationally. With nearly eight in ten (77%) Singaporeans aged 25 to 64 employed in 2010, our employment rate surpassed that in the other Asian NIEs and many advanced economies. This has occurred because, although our citizen labour force participation rate is not higher than in many advanced economies"

We have to be careful about unemployment rates because if the situation is so bad that people give up looking for a job, they do not go into the unemployment numbers. There are also various criteria used to count people considered unemployed so many people have no jobs but are not considered unemployed. For countries that give out unemployment benefits, there is more incentive for the unemployed to get themselves registered. In Singapore you probably can't get any financial help if you're unemployed so it is possible for you to go below the radar and the govt assumes you're in early retirement! When the mainstream media talk about unemployment in other countries we sometimes get the impression that Singapore is spectacularly better because we have unemployment of 3% and some European countries have unemployment of 14% so our situation here is much better - this however, is not the real picture.

The preferred number to look at for some economists is the employment rate and this too came out in the Oct 11 report. Our citizen employment rate is 77% of the employable population. 23% of the employable people are not working. How does this stack up?

When you look at employment rate, the situation in Singapore still looks good but the difference is smaller than if you look at unemployment rate. Now lets throw in another aspect to consider when looking at the numbers. Most if not all the countries in the table have minimum wages so people who have jobs in those countries found one that paid decent wages. We don't have minimum wages in Singapore. If we now minus those who don't make enough for a decent living from the 77% we end up with a number much smaller. There are 400,000 workers on workfare[Link] who are considered employed but earn less than $1700 (generally less than the minimum wage in developed countries)....you take that out from the 77% employment rate and you find we drop quite far down. I've often written that it is meaningless to look at employment without looking at wages - forcing a large segment of the populace into low wage jobs menial jobs can make our employment numbers look good but masks the structural unemployment and various problems faced by Singaporeans - the difficulty in finding jobs that pays decent wages is as high if not higher than in other countries.

For many years, the PAP govt has tried to paint a rosy picture to Singaporeans on employment when the real situation on the ground has deteriorated badly especially among older Singaporeans.

Occupy Raffles Place?.....Where got?

2011-10-16T20:11:00.004+08:00

"Although the movement isn’t exactly catching fire in Malaysia, Saturday’s gathering at least was bigger than a similar meeting called for Saturday in Singapore that mainly was made up of journalists and photographers wondering where all the protesters....." - WSJ[Link]

We cannot interpret the no show by Singaporeans at Raffles Place as a lack of problems in Singapore. We have the highest income inequality among developed nations - higher than many of the countries where there were protests. There is serious structural unemployment and deep unhappiness with the large foreign influx. We know from the Lehman Minibonds saga - an event that affected people in Hong Kong and Singapore - people here are subdued in their response and most will not get involved if it is not something that affects them directly. When we had political detainees, we don't see people protesting their decade long detention because people were afraid of becoming detainees themselves.

The police issued a very clear statement that any gathering at Raffles Place is unlawful [Police warn against unlawful Occupy Raffles Place protest]. The police warns the public not to be "misguided". There is a real danger for those involved in such protests that they will be labelled as anarchists by the mainstream media and humiliated as instigators who disrupted public order when they have legitimate concerns about the current system like those of citizens else where in the world.

Nothing happened at Raffles Place today. A sad reflection of the repressive political climate, draconian laws, and a citizenry that has capitulated to the belief that they cannot change, shouldn't try to change, shouldn't be bothered to change what is not right about our society today.

World Charity Index - Where we stand....

2011-10-15T07:59:00.003+08:00

I will tell you where Singapore is later...after you listen to all my stories.

When I was young, there were many Hong Kong soap operas showing on Media Corp and Hong Kong movies showing at the cinema that I enjoyed watching. They all portrayed Hong Kong as a capitalistic selfish society a place where some people would sell their friends for money - an "every man for himself" society where the love for money overwhelms the humanity in people. It turned out those movies and dramas were not so accurate and the ugly side of people were played up for dramatic effect. The Hong Kong people are big donors and many volunteer to social work. Their billionaires leave their fortunes not to relatives or children but to foundations. Li Ka-Shing pledge half his wealth to charity and will leave behind the biggest charity in Hong Kong. Nina Wang, once the Asain\s richest woman, left her fortune to a charity in her will. Even Jackie Chan will leave his entire fortune to charity[Link]. Chow Yun-Fat will leave his entire fortune to charity [Link]. It turned out people in Hong Kong are big givers and rank 18 on the Giving Index ahead of Germany and Denmark.

The people in US are also big givers (rank 5). The richest man in the world, Warren Buffett, will give away his entire fortune. Together with his good friend Bill Gates, Buffett formed an organisation that persuades the richest Americans (billionaires) to pledge half their wealth to charity. Facebook billionaire Zackerberg signed up so did many others. Buffett is also the proponent of the Buffett Rule for proper progressive taxation to narrow the inequalities that has emerged in American society. Buffett known to some as the greatest American capitalist knows that a system based on capitalisam cannot work well if people hoard money and exacerbate the rising inequality. When Buffett and Gates appeared in China and hosted a dinner for The Giving Pledge organisation in China, not a single Chinese billionaire turned up out of fear they will be asked to donate their money :

" Strikingly India ranked at 134 and China at 147 - with Chinese people among the least likely on the planet to volunteer" - [Link]

A few years ago, when Goh Chok Tong was promoting philanthropy in Singapore, he urged the wealthiest Singaporeans to consider giving away 0.5% of their annual income to charity[Link] - a very modest goal compared with the The Giving Pledge.

So where does Singapore stand in area of giving?

Right in the doldrums with a rank of 91 (compared with Malaysia ranked 76 and Hong Kong ranked 18) [Extracted from Charities Aid Foundation Report].

I wonder if this dismal performance has something to do with the PAP turning welfare into a dirty word in Singapore. Charity and giving is after all about welfare - giving to the needy, helping the poor, treating the sick. The PAP approach of making the sick shoulder as much financial burden as possible, giving as little as possible to the needy to keep taxes for the richest Singaporeans low and insistence that the inequality in our society is acceptable (as long as there is social mobility?). The PAP leaders themselves too set the wrong example - taking as much salaries as they could justify (and sometimes couldn't) when they are in public service. It could also be elitism where the belief that "some are more equal than others" dominates the upper echelons of our society - remember what Wee Shu Min was brought up to believe?

Are we turning in the Hong Kong portrayed in the dramas and movies? A society in a never ending pursuit of wealth and GDP growth at all cost where social cohesion and values are traded away for money?

Special Treatment does not earn respect....

2011-10-13T14:18:00.000+08:00

Several years ago when PM Lee Hsien Loong and his wife, Ho Ching, visited his son who was in Tekong doing his NS , he took the same ferry to Tekong as all the other parents. When he arrived at the island, there was no colonel or any officer standing at the jetty specially assigned to greet him. He had to find a seat on the bus at Tekong bus like all the other parents to get to the camp. At the camp, he ate at the cook house, queuing up with all the other parents to get his food. He then sat with his son for lunch on an ordinary seat at an ordinary table like every other parent that day during the BMT open house. How do we know all this? One of the parents who was there that day wrote to the ST Forum about how great an impression he had of PM Lee. Whatever differences in thinking or political disagreement we may have with PM Lee, what he did that day was commendable. Given what usually happens in Singapore, he probably took the trouble to indicate to the organisers he did not want special treatment that day.

A few years ago, I was at Holland Village queuing up for chicken rice and the retired minister for law, the late EW Barker, came and queued up behind me. The chicken rice seller instantly recognised him and asked him for his order. He replied that the other people were there 1st and he would wait for his turn. He probably understood that people wouldn't be impressed and would lose some respect for him if he had been given special treatment.

Here is an example (see story below) of how not to do it. While old folks and children had to eat at an open tent, VIPs were put in the comfort an airconditioned room. The special treatment was not well received by one of the attendees of the event.

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http://www.straitstimes.com/STForum/Story/STIStory_722690.html

Undoing community bonding

LAST Saturday, a friend invited me to an event organised by the People's Association (PA) at Cheng San Community Club.

The ticket cost $12 per person, and a high-tea buffet was included. In attendance were Ang Mo Kio GRC MP Ang Hin Kee and PA chief executive director Yam Ah Mee.

While I appreciate the efforts of the PA and community clubs in organising such community-bonding events, it left me with reservations.

I was flabbergasted to discover that the organising committee, judges, sponsors and other VIPs enjoyed their high-tea in a closed air-conditioned room while the rest of the guests had theirs outside under a tent.
Why was there a 'divide' for an occasion aimed at community bonding?
On the same day, across the road from the PA event, Prime Minister Lee Hsien Loong was officiating at an event marking the completion of an upgrading programme.

According to press reports, he emphasised that the Government was determined to improve citizens' lives, and this included community bonding.

What happened was unfortunate because the grassroots leaders who organised the community-bonding event were undoing what the Government is trying to achieve.

Lum Yan Meng

CPF : New Face, New Media, Old Ideas....

2011-10-12T08:52:00.003+08:00

This is a critique of what Tan Chuan-Jin wrote on on his Facebook on CPF [Link]. Before you think of me being too harsh on him, I actually think he is one of the more promising young leaders from the PAP. It is rare that I praise someone from the PAP but I think he has a natural flair for leadership. The problem is ideology - his article on CPF illustrates the problem. As a new leader in the PAP, he appears to be constrained by old ideas and can't seem to get out of the box (my comments in RED)
-----------------------------
Looking at CPF from the other side...[Link]
This is one of the significant responsibilities in MOM. DPM and myself spend a fair bit of time on this, and rightfully so. Sometimes, I wonder if my job would be easier if we just let people withdraw their CPF totally.
(It is their money and earlier promised to them for withdrawal at age 55. I agree early withdrawal would create other practical problems. But shouldn't the PAP have pursued a course of action to fulfil that earlier pronmise?...we will get to that a little later).

It would make things easier...for awhile. But it would be wrong.

Life expectancy is going up to 82 and beyond. One is likely to live for a good 20 years after retirement. There is a strong likelihood that many may not have saved enough.
(Here again we fall into this trap in thinking. Just like the PAP justifying the large foreign influx using low fertility rates. A large part of the inadequacy is caused by liberalisation of CPF for housing, and money set aside Medisave programs so that the govt can lower its own expenditure on health care (lowest in the developed world as a % of total expenditure). If CPF is kept strictly as a provident fund and HDB live up to its mandate is to provide affordable housing without touching the CPF, Singaporeans would have a better retirement if public housing is more reasonable priced and does not drain our CPF which is kept strictly for retirement. .

CPF pay outs would help to ensure some form of regular income stream for individuals. With an ageing population, this becomes more critical because the burden on our children's generation will be significant if older Singaporeans are not providing for themselves.

(In the ideal state, we have each generation paying for its own retirement. The issue here is not whether the those who are retiring have paid - they were setting aside 20% of their income for CPF...so did they end up with insufficent to retire on? ...We will go to the other factors later on. However, each generation paying for its retirement is a good principle to go by to we don't end up in a vicious cycle of either heavier taxation or debts with each generation. However, within each generation and the current generation,. there is income disparity. When you have disparity as large as those we have today, some people cannot have a proper retirement due to this inequality - that is where progressive taxation can help to bring some equality and provision for those who cannot afford to retire. How long do we Singaporeans have to endure the sight of 70 year old cleaners - it is a human rights issue. The PAP insists on an every man for himself system but creates a system with the highest income gap in the developed world without minimum wages and extremely pro-business policies that makes it hard for many Singaporeans to "provide for themselves").

As a citizen, I did not really bother too much trying to understand the CPF construct. (Okay, generals in the SAF are well paid so they don't have to worry about CPF). Like many, I wondered if the returns made sense, especially a number of years ago (seems like a long time ago actually!) when bank interest rates were high. Why can't I withdraw my OWN money when I retire?

Things look quite different now that I am on the other side of the fence. CPF is an important part of retirement provision for our people. For an almost risk free profile, the returns are reasonable. This is worth reading to understand how your CPF returns have fared given inflation rates over the recent years.

http://mycpf.cpf.gov.sg/CPF/News/News-Release/N_9Oct2011_MF3.htm

(There are numerous pension funds around the world that invest stakeholders money for higher returns so that it grows and beats inflation. From Chilean pension fund that return an average of 10% to Calpers to the Malaysian EPF, the people properly managed pension funds means that workers can set aside less money and still enjoy a good retirement.

What he said about reasonable return for "risk free profile" is not true. He should reflect on this. Our CPF money is loaned to GICs at a fix rate. GIC then uses this money to make risky investments. Its ability to pay us and the fix return depends on how the risky investments turn out. Hence we incur a very high risk but GIC keeps the extra return when their investments does well. It is a very bad deal. If GIC falters all the way, our CPF money will be risked and since the PAP is the govt, they might try to legislate their way out of it by delaying withdrawal age and reducing the amount we can withdraw.

Locking our money at a fix rate makes us vulnerabe to sudden increase in inflation rate (esp imported inflation) is in fact a highly dangerous strategy.

Singaporeans are only asking for their pension funds to be managed based on how successful pension funds around the world are managed.)

Higher returns would always be nice but it would entail greater risks. The challenge of any portfolio that includes equities is volatility. At point of withdrawal, you may be right in the throes of a downturn. (Pension funds manage this volatility by smoothing out over longer durations.) To provide for some balance, we had opened up the space for individuals to invest part of their CPF monies via the CPF Investment Scheme should they wish to do so. Hence, one should therefore treat the 'untouchable' part of the CPF monies as the very stable and low risk component of your portfolio.

A guaranteed floor of 2.5% on your Ordinary Account, and 4% on your Special, Medisave and Retirement Account or SMRA, and an additional 1% to the first $60,000 of the SMRA monies, represents a reasonable return for such a portfolio, especially in an increasingly volatile environment (and the current batch of retirees missed out on the spectacular investment returns of the past 25 years based on GIC's own record it is 6% per annum).

A big plus of our CPF construct is that it helps facilitate our owning our own home. This is important not just from a home ownership perspective but housing is a decent hedge against inflation. Meaning that instead of keeping our CPF monies as cash, part of this is now 'saved' in the form of housing. If needed, this can be monetized (lease buy back, rental of rooms, or adjusting accommodation to smaller units like studio flats) to release the monies. Some analysts tend to leave out this component of our CPF savings; it is actually an important feature of our savings.(Mixing retirement with housing means people have to monetise their homes to retire properly. It is better to keep the 2 separate. Home prices can also crash as we have seen in Japan, USA, Ireland, Spain. If you link retirement to housing, it is a disaster when housing prices crash down. If the PAP keeps public housing prices through its policy artificially high, it burdens our next generation.)

Some seem troubled by the CPF Minimum Sum Scheme, especially when we announce the increase. No, we have not run out of money! :) This scheme has been articulated before and the increases have been announced. At 55, you can withdraw your monies but must retain the minimum sum. Why?

The CPF Minimum Sum Scheme provides members with a monthly income to support a modest standard of living during retirement. The Minimum Sum left with the CPF Board currently earns 4% interest per annum. The interest rate is revised every yearly.
Upon reaching 55, you will be able to withdraw a portion of your CPF savings based on your available CPF balances. Setting aside the Minimum Sum when you reach 55 ensures that you have some regular income from the current Draw-Down Age (ranging from 62-65) to live on in your retirement.

The Minimum Sum was set at $80,000 in 2003 and will be raised gradually until it reaches $120,000 (in 2003 dollars) in 2013. These amounts will be adjusted yearly for inflation. If you are unable to set aside your full Minimum Sum in cash, your property, bought with your CPF savings, will be automatically pledged for up to half of your Minimum Sum. You will receive a monthly income from your Draw-Down Age until your Minimum Sum is exhausted. You may wish to start your monthly payouts later. It benefits you as your payouts will last longer.

There is probably more to talk about this in the coming months and years as we see how best to improve the system. I have not talked about the medisave component. There is also CPF LIFE which is an annuity that provides life long payouts instead of the present one which will stop when your CPF savings run out. This is important with life expectancy increasing.
(The CPF Life is an application of PAP ideology that simply refuses to move slightly away from an "every man for himself" approach. In doing so they insists on individual stretching the CPF even further to cover unexpected(unplanned) longevity. During the parliament debate, the Workers party proposed that individuals fund their retirement up to a certain fixed age and the govt starts a fund to take care of the small minority who live beyond that age. This scheme is simple and practical sharing the burden between state and individuals. Pushing CPF further using CPF Life to cover ultra-longevity, stretches and complicates the CPF making it less adequate for those who have normal or below normal lifespan. In an already unequal society, we make things even more unequal for the person who dies one yr after enrolling CPF Life - he dies younger and loses his CPF funds to others who live longer).

Please see the following links to provide a better understanding of our considerations behind this important scheme.

Check out the CPF website. Its a good site with useful explanations...try it!
http://mycpf.cpf.gov.sg/Members/Gen-Info/mbr-Gen-info.htm

Speech at Ee Peng Liang Memorial Fund Forum at NUS on 22 Aug 11
http://www.mom.gov.sg/newsroom/Pages/SpeechesDetail.aspx?listid=344

Speech at the launch of the "Are You Ready" campaign on 9 Oct 11.
http://www.mom.gov.sg/newsroom/Pages/SpeechesDetail.aspx?listid=349

Speeches from CNBC.com Speaker's Corner

2011-10-11T06:43:00.001+08:00

These are ordinary Americans speaking up against inequality amd the financial system in America at a speakers' corner set up by CNBC at the Occupy Wall Street protest.
A few weeks ago I went to the Borders closing down sale. I walked around for an hour but was unable to find anything to buy - my fellow 'kiasu' Singaporeans had bought trollies full of interesting books leaving behind stuff that few people would buy. Just when I thought I wasted my time going to the sale I found a book that only people like me would be interested in reading. The book is "Going to Extremes" by Barbara Ehrenreich:

"Over the past decade America has become increasingly divided between gated communities on the one hand and trailer parks and tenements on the other between the super-rich travelling by private jet and low-paid workers making multiple bus trips to get to their jobs, between a wealthy minority consuming cosmetic surgery, and the many too poor to afford basic healthcare for their children"
- "Going to Extremes"

The part about workers in US taking buses to work. I'm quite sure those buses are not packed like cattle trucks. In the last 10 years, in Singapore, we see prices of expensive homes crossing $2000 per square feet and the demand for good class bungalows rising to record levels at the same time the segment of the population too poor to afford their own homes has grown to record levels:

A few weeks ago, I saw a little ang moh kid at a playground near my home - I teased the hyperactive kid as he ran around the playground. They family has been here for several months and the mother came over to ask me where she can the parks and places to cycle, camp ..and so on. . After she was done with her queries, I asked her what she "thought of Singapore so far". Before she got to anything else, she said she was quite stunned by what she saw "so many rich people with big cars" and so many poor people..."poor old people working". Coming from France, she said has never seen anything like this. I've asked many foreigners how they find Singapore and this is the first time someone responded by talking about the inequality in our society before anything else. Very often they will say how impressed they were with our airport, how clean and green we are and so on before they sometimes asked why there are so many old folks working.

America is the only other developed country with comparable income inequality. But you have to remember that America is a big place with rural, sub-urban areas and top cities. Their inequality is spread over a vast territory many thousand times bigger than Singapore. Our inequality is concentrated on a piece of land 700 sq km in size where extreme wealth and poverty exists side by side.

Unless there is political change, the situation can only get worse. Today our parliament is dominated by the elitist PAP party. While they promise changes in response to poor election results, they are not ideologically inclined to address the huge and growing inequality in our society. This is the same govt that eliminated healthcare benefits and pension for rank anf file civil servants while preserving these benefits for themselves. They imposed GST to cut taxes for the rich and corporations. They increased their own pay as poorer Singaporeans saw falling incomes and marked decline in the quality of life. They richly reward a small select power-elite with scholarship and opportunities in the network of GLCs. Our inequality is manufactured by political strructure that preserves a system ideologically shaped for the benefit of a few. This ideological extreme has led to the extreme inequality and the situation will not improve unless Singaporeans wake up, speak up and stand up for what is right.

Unstable Employment and fall in fertility...

2011-10-08T08:59:00.006+08:00

Recently, after I gave a talk to a group of university students on technology, a student walk up to me and asked if he took up a job in the company I worked, what is the length (how many years) is the employment contract. I told he there is no contract if people are hired, we prefer them to stay forever until they choose retire because we are working with high tech stuff that require extensive and continuous training. Unfortunately, the company where I work is fast becoming a rarity in its hiring policies. I've interviewed many young people in the past few years and became quite familiar with what employment is like for engineers and IT professionals in Singapore today. It is easy to find someone who had 4 different jobs in 6 years. One applicant came with a pile of certification and list training courses he attended, he told me he paid for every one of those because the short term nature of employment means that employers are reluctant to spend too much on training. Some companies hire people for the duration of one project and retrench them when the project is over. Increasing numbers are hired in temp jobs lasting a few months as employers are unwilling to commit to hiring full time.

While this phenomena is something that has occurred world wide, it is has become far worse in Singapore because having a large foreign influx means there is always a ready pool manpower available and employers do not hold on to workers during the bad times because they don't have to fear that they will have difficulty hiring during the good times. In good times, they have manpower from the foreign influx so they don't have to hire older workers creating a structural unemployment problem in Singapore.

This rising phenomena of "unstable" employment has been linked to falls in fertility (Job Insecurity and the Timing of Parenthood). So far all govt measures have failed to improve fertility and a few of the measures fail by design. Take the example of financial incentives in the form of tax rebates that has to be claimed within a limited time frame. This is clearly aimed at higher income individuals who need little financial assistance in the first place - how was it suppose to improve fertility rate by targeting certain segments of the population instead of all families? Here the govt mixes its social engineering goals with the measures to improve fertility. In the 80s, they wanted to implement the graduate parents scheme providing incentives only to graduate mothers to have more children. It is no surprise they can't make a dent on the low fertility problem because they are boxed in by one man's "hard truth" belief that graduate parents have smarter children. There is little wonder why we have made no progress to improve fertility rates in Singapore.

Today, the govt uses the low fertility as a justification for the large foreign influx. The large foreign influx results in increased competition for jobs and housing as well as rise in structural unemployment. It puts Singaporeans in a vicious cycle of lower fertility and increased foreign influx. There is little doubt if things continue, Singaporeans will be a minority in their own country. It would be fine if we are not a nation with little aspiration to become one. If Singapore is just an economy where people are free to come and go based on where they can find the best opportunities, we go back to what we were before independence when we were a trading post somewhere in the British Empire. Today we have Singaporeans who are the 3rd or 4th generation here. There is something worth protecting for the young men who serve their NS - that something is eroded away with each passing year....

Steve Jobs : The Amazing Turnaround....and Spirit of Innovation

2011-10-07T05:33:00.002+08:00

Its sad that he is gone. Like many in the IT and computer business I have seen the ups and downs of the companies in the industry that took place as a form of creative destruction. Once big names like Silicon Graphics, Sun Microsystem, Motorola and Atari fade away or disappear altogether from the landscape. New companies such as Google and Facebook emerge from almost nothing to become giants within a few years. New technologies come replace old ones that become obsolete quickly dragging down the companies that were offering them. No other industry in history has seen such rapid transformations and upheavals as the computer business. Perhaps no other industry has seen such intense and continuous competition - competition that brought great products at great prices. Today after 20 years of IT shows & Comdex type events, they are still bringing in the crowd. People are happy to be buying because IT products are one of the few things in this world that fall in price - your cup of coffee price goes up, housing price goes up but IT products go down in price. This is free market competition at its best bringing innovation and affordability to masses. There are few companies as innovative and creative as Apple.

In 1995, I remember reading about the demise of Apple Computers in Business Week magazine. The prediction was very believable. Apple has lost most of its market share to WinTel (Windows + Intel computers) and was burning up its cash at a rate that would put the company in peril within a year. When Michael Dell, the rising star in 1995, was asked what he would do if he was running Apple, he said he will just close it down and return the remaining cash to shareholders. It was believed that few consumers would buy Apple's proprietary hardware + operating system because momentum had shifted to Windows based computers and the bulk of applications were written for Windows. In the 1990s, I took a management course and one of the case study was Steve Jobs ouster from Apple. The case study painted a negative image of Jobs being an autocratic stubborn leader - I was taught not be like Steve Jobs but to learn from his rival John Sculley who won the support of the board of directors to force Jobs out of the company. At around that time, there were several books out on Steve Jobs that painted him as a "snake-oil" sales man who took shareholders money to start NeXT and lost $200M in the hyped up venture. If Steve Jobs had decided to retire in the 90s and take it easy with the millions he made as a founder of Apple, he would have left only s small footnote in IT history as the co-founder of Apple who foundered....but he did not and came back to dazzle the world with fantastic beautiful products. He leaves the world as a great visionary who transformed our lives and touched billions of peole around the world.

In 1997, Apple has a campaign called "Think Different". Critics pointed out that it was gramatically incorrect and should be "Think Differently". Steve Jobs, however, went with his instincts to use "Think Different" because there was this "edge" to the sound of the phrase. It was a highly successful advertising campaign to convince consumers they should break away from the convention, "think different" and try Apple's products instead of the mundance stuff rivals were churning out. Steve Jobs' own life epitomised this "Think Different" spirit. Here are a few extracts from Wikipedia to illustrate this point:

Although he dropped out after only one semester,^[35] he continued auditing classes at Reed, while sleeping on the floor in friends' rooms, returning Coke bottles for food money, and getting weekly free meals at the local Hare Krishna temple.^[15] Jobs later said, "If I had never dropped in on that single calligraphy course in college, the Mac would have never had multiple typefaces or proportionally spaced fonts."^[15]

Jobs then traveled to India to visit the Neem Karoli Baba^[36] at his Kainchi Ashram with a Reed College friend (and, later, the first Apple employee), Daniel Kottke, in search of spiritual enlightenment. He came back a Buddhist with his head shaved and wearing traditional Indian clothing.^[37][38During this time, Jobs experimented with psychedelics, calling his LSD experiences "one of the two or three most important things [he had] done in [his] life".^[39] He later said that people around him who did not share his countercultural roots could not fully relate to his thinking.^[39]

Jobs also has a daughter, Lisa Brennan-Jobs (born 1978), from his relationship with Bay Area painter Chrisann Brennan.^[89] She briefly raised their daughter on welfare when Jobs denied paternity by claiming he was sterile; he later acknowledged Lisa as his daughter.^[89]

It is hard to say for sure if his creativity and innovativeness came from his unconventional life but Steve Jobs believed it was the case. Apple's founders the 2 Steves (Steve Wozniak and Steve Jobs) started Apple with money they made from an illegal "blue box" that allowed users to make distance telephone calls (across states) for free. They were rule breakers if not law breakers. In Singapore we struggle to promote innovation and creativity - we even try to "teach" this in school and "encourage" students and workers to be "more innovative". Companies hold talks and courses on innovation but we still find innovation lacking in our society. Why is this so? Singaporeans more than people of other countries are conditioned to be obedient because breaking rules comes with heavy consequences. You distribute a few (political) news letters on the streets and the authorities come after you for illegal hawking. You are not allowed to speak and gather openly to protest. We have extremely harsh laws enforced rigidly so that obedience pay off e.g hefty fines for litering and spitting. Companies constantly kill off innovation by imposing rules, processes and checks out of fear of making mistakes. Several prominent researchers left Singapore recently and hinted that "bean counting" was starting to get in the way of their work. The strait-jackets in our society and companies - too many rules, procedures, processes - stifle innovation and keeps everyone "thinking the same" rather than "think different". We can perhaps learn something from Steve Jobs' amazing life and wonderful accomplishments:

"Don’t be trapped by dogma, which is living with the results of other people’s thinking. Don’t let the noise of others’ opinions drown out your own inner voice, heart and intuition." — Steve Jobs

Yes, and there are no hard truths....let us, the new generation, not be trapped in another man's thinking...lets us not believe we cannot think for ourselves and lets us not be shackled by somebody else' "hard truths". We must and can progress if we break free from those who want to box us in.

Healthcare : An Enlightened Move...

2011-10-02T15:21:00.002+08:00

I will tell you a better policy idea than the $2 health screening announced for the poor today later on in the posting.

There is one area that there is little doubt that govt should play a big role and that is healthcare. All we have to do is look at the mess in the largely privatised healthcare system in USA. The cost of healthcare there is growing at 22% every year and if you do quick calculation, it won't take long for healthcare cost in America to reach a point that it devours half the GDP - every other person would have to be a doctor to treat the other person! Of course that is just a hypothetical mathematical possibility, before it reaches that point the US govt will have to do something or most people will have to live without healthcare - these people will keep throwing out incumbent politicians until something is done even if it means re-nationalising the healthcare system. Having an expensive healthcare system is a big drag on the US economy and its competitiveness healthcare insurance as one of the major business cost.

I'll use this $2 screening to illustrate why a healthcare system that keeps most healthcare resources under the govt rather than the private sector will lead to a system that has lower overall cost for a nation and society.

Most of us go for health screening after we get past age 35. I would recommend you go every year even if you're younger. The basic checks that consists of blood pressure, cholesterol, sugar level, uric acid levels etc costs between $30-$45 at a private clinic. For many working Singaporeans the cost is not really an issue - in fact in many companies there is reverse welfare, the higher your position and your pay, the more checkups and medical care you will be entitled to. For the low income workers, their package usually don't cover annual medical checkups. These workers along with the unemployed, retirees and the poor will skip health screening because they have little money - it is just human behavior that is impractical to change. We cannot expect charities to fill the gap because of the large number of people and charities have to priorities their resources. Only the govt can take care of these people - so they have to decide whether to do or not. Suppose they chose not to do it and a poor person with high blood pressure goes untreated until he gets a stroke and has to be rushed to the hospital. At this point, the govt choose do the inhumane thing of not treating the person because he has no money - we will have to rule this out because this is simply unacceptable. The person gets surgery costing maybe $30K-$50K but because he is poor can never pay for it even if it is heavily subsidised. The person might suffer from permanent disabilities and has to be care for the rest of his life. Instead of spending $30 to screen the person, the govt ends up paying more than $30K of tax payers' money.

By spending small amounts in perventive care on the poorest members of our society, the govt can lower the overall cost to society. It is a very practical pragmatic thing to do but why did it take the PAP take so long to do this? We can go back in time to understand why by recalling the incident that resulted Lim Hng Kiang acquiring the nickname Hairdo Lim. During a parliament debate on whether the Medisave should be allowed for use for breast cancer screening, Lim Hng Kiang argued that the $50 for the screening can be easily be borne by women by saving on one hairdo. Ideologically, the PAP wants people to take as much responsiblity for their own health as possible so that govt can keep its expenses down by making people shoulder as much healthcare burden as possible. But Lim Hng Kiang's expectation of human behavior does not result in the best policy outcomes. Singaporeans are no different from the people anywhere else in the world when it comes to preventive care. People will skip it because will always make the mistake of viewing it as an unnecessary expense.At the end of the day, it will end up costing tax payers and society more money when the person fails to get early treatment.

If you look at the top healthcare systems in the world, most of them are single-payer systems with the govt playing a central role. France has the number one healthcare system in the world and treatment is paid for by the state at a overall cost far lower than the US where a large part of the system is in private hands - insurance companies, private hospitals etc. The problem is some govts are not so good at running such a system and ended up high costs, long queues and rationed care - even so, most are still considered better than what they have the US for the average person.

In the past few years, the PAP govt has allowed the private healthcare sector to expand hoping to turn Singapore into a medical hub for the rich. So much of our healthcare resources are now in private hands, the govt has to seek help from the private sector to reduce the load in its public hospitals (Read : Govt turning to private sector for healthcare). The aspiration to be a medical hub and growth of private sector that draws doctors and nurses from public healthcare has resulted in a cost spiral that has reduced the affordability of healthcare in Singapore.

There is a lot more to be done to take healthcare costs off the minds of average Singaporeans. Universal single payer systems like those in France, Australia & Finland are ideologically hard to accept for the PAP govt and some segment of the population to accept because it leads to higher taxes although it may have lower overall costs and ensure great equality among Singaporeans.

I have a suggestion that builds upon the $2 health check up proposed for the poor and elderly - extend the scheme for everyone above the age of 40. Here's why:

Such checks unlike other treatment cannot be abused or overconsumed so that overcomes a common objection to providing free or subsidied care.
Some might object because people who can afford it like Wee Chaw Yaw might turn up for one of these checkups. But it is fair because he pays much more taxes. Chances are the ultra-rich won't bother they will just go for their private hospital $1000 checkups. Many in the higher income category will skip it because their corporations provide something better than basic screening.
Economies of scale when the govt set up clinics that specialise in these checkups so there is overall cost savings (individuals + govt expenditure)
There incentive created will lead to almost 100% screening for common illnesses and overall cost savings and better outcomes -less undetected illnesses = fewer emergency cases.
Making checkups so highly subsidised for everyone may be hard for the PAP to accept but this idea is reasonable and middle-path compared to govts that provide everything free of charge.

If you take away ideological thinking that Singaporeans must always shoulder as much healthcare burden as they can afford, there is a one objection is that the expediture might shift from individuals to govt although there is a good chance there will be savings from early detection.

"Individual resident taxpayers will enjoy a personal income tax rebate of 20% for Year of Assessment 2011 (YA2011), capped at $2,000. The PIT rebates will cost the Government $580 million.
Taxpayers do not have to apply for the rebate. The Inland Revenue Authority of Singapore(IRAS) will take into account the rebate when computing the tax bill for YA2011. The amount of rebate will be shown in their income tax bill."

Instead of always thinking about cutting taxes especially one-off cuts before elections, there could be ways to put some of this money to better use. $580M can provide check ups for Singaporeans for those over 40 for maybe the next 10 years to achieve better outcomes. There are numerous ways to find money for this probably we don't even need to forego those middleclass tax rebates - the govt probably has enough annual surplus to do this - the issue is not money. The only real problem is ideology - Hairdo Lim ideology....that gets in the way pragmatic beneficial approaches to healthcare. Shifting expenditure slightly from individuals to govt for a govt that already shoulders the smallest % healthcare burden among developed countries to achieve overall better results and cost savings cannot be wrong. Many positive changes in Singapore requires the Singapore govt to compromise and shift. Many at the other end of the political spectrum are asking for single payer universal healthcare system to erase some of the inequality in our society - this is a big change that will require far more debate. However, the overall benefits of the govt playing a bigger role in preventive care is quite clear and pragmatic for the angle of cost and efficiency. Still I'm a little happy that the PAP has decided to provide $2 for the poor and elderly - they are slightly more enlightened today than they were yesterday.

The China Hype...Part 2 : Dangers ahead...

2011-10-02T09:46:00.004+08:00

China Hype Part 1 (Jan 2010):
http://singaporemind.blogspot.com/2010/01/china-hype.html

When an economy grows as fast as that of China, the growth can mask problems beneath the surface. From time to time, the financial press will play up these problems but the lack of transparency and information makes things very unclear. Even when there are credible assessments, the issue of timing and final day of reckoning is hard to pin-point. Take the example of Jim Chanos in my earlier article who warned about an "impending Chinese real estate collapse" in Jan 2010. Nothing much has happened since ...the action if any is in Europe and USA where economies have been weak.

Lets recap what has happened in China:

In 2009 facing the threat of recession, the Chinese govt implemented a stimulus package to avert a sharp slowdown. This money went mostly into infrastructure development and the private sector saw a boom in real estate. State govts and real estate companies borrowed massively from the big banks to invest.

"The manic and chaotic development of infrastructure projects after the 2008
financial crisis, costing more than 20 trillion yuan, has driven the economy at
a booming pace, but at the cost of speculation and inflation. Most local
governments have borrowed massively from banks to support their own plans, but
this has occurred without even the limited level of public scrutiny and openness
that exists in ‘democratic’ capitalist countries.

This has also led to serious debt problems for the Chinese economy. The Railway Ministry has come to
symbolise this problem. While a total of 2.35 trillion yaun has been invested in
the rail system since 2008, it has accumulated debts of 2.09 trillion yuan (USD
308bn), which accounts for nearly 60 percent of the total assets of the
ministry. The ministry’s loss in the first quarter 2011 is over 3.76 billion
yuan (USD 578 million). Its debt accounts for almost 5 percent of China’s GDP,
which is forecast to increase to 7 percent by 2015. This is also why the central
government intervened and removed former minister Liu and his team."

- Report on the recent Railway Crash in China[Link]

While the Central Chinese govt is a net creditor, regional govts and various ministries have borrow heavily to fund these infrastructure projects. These debts are guaranteed by the Central Chinese govt and effectively makes the Chinese govt an indirect debtor. That is not a problem if the amount is small as the Chinese govt has massive reserves. But the total amount of debt is estimated at 200% of China's GDP.

There is a large potential risk," said Zhu Min, the deputy managing director of
the International Monetary Fund and a former Chinese official. Mr Zhu said China
had doubled the loan ratio from below 100pc of GDP before the Lehman crisis to
roughly 200pc today. The danger is that this excess could start to unwind just
as the West goes into a sharp downturn, and possibly a double-dip recession.
China and emerging Asia are fundamentally in weaker shape this time, having used
up their "fiscal cushions", leaving them with little leeway to cope with a fresh
global shock - Link

The canary in the mine for potential problems in the debt market is the CDS (Credit Default Swap) market where investors insure themselves against debt default. This has started rising sharply last week.

The third act is happening in China. In the three years since the first act started, credit in China has mushroomed from 100% of gross domestic product (GDP) to 200%, at a time when GDP itself has been growing at a fast lick.Property prices as a ratio to incomes are more than 22 in many of the coastal regions, a bubble far, far more precipitous than that which engulfed the US. There are very clear warning signs that the asset bubble in China is going to burst with considerably more venom than it did in the West.

China is not immune to economic cycles; the same economic principles apply there as anywhere else.
China has not magically found a miracle panacea that enables it to dodge economic bullets and realities - Link

The Chinese govt has US$3.2B in foreign reserves and had the foresight to tighten and control the real estate market to prevent the real estate bubble from becoming bigger. China has been tightening credit for past 2 years to ward off inflation which is very high. All these give the Chinese govt policy tools to do something when need arises, however, it is it has far less firepower than in 2008 when Lehman collapsed vs the current situation which is potentially more serious and longer lasting than in 2008.

There is an uncanny resemblance to what occurred in in Japan and USA. In 1980s, Japan was the miracle economy of the world and about to top US as the world's number one economy. The Japanese has 2 bubbles than mark the end of its time on top, first a stock market bubble from which it never recovered and later a housing bubble that burse in 1989. The US economy made a remarkable comeback in the 90s under President Clinton and that boom ended with 2 bubbles - a stock market bubble (dot.com bubble) in 2000 and a housing bubble than peaked in 2007. The Chinese had a stock market bubble in 2006 that took the Shanghai Composite to 6000 (today 2350). That bubble burst and a property bubble took its place. This twin bubble phenomena looks like a pattern that recurred around the world when economic participants become very optimistic and think that the country is destined for never-ending secular GDP growth...proceed to borrow too much and saddle themselves with a debt problem that takes years to solve. The product of these bubbles in Japan, US, Europe and now China is this cumulative mountain of debt and this debt will stall the global economy. That is the reason I posted the "Debt as Money" video earlier this week. Negative factors are starting to converge rapidly in a situation when you have slower growth but a debt mountain that has expanded - as this dynamic situation unfold it will become very apparent that as govts try to eliminate this debt with austerity or printing money - deflation (falling asset prices) or inflation (cost of living rises). I think we might have reached a point of intractability - where there is no economic path ahead without some amount of pain. If you still haven't read it, I strongly recommend this 1999 book by Peter Warburton called "Debt and Delusion" (Amazon Link) that foresaw the sovereign debt crisis and predicted every method that central bankers will use to fix it including printing money.

I would like to add one more point. China's form of authoritarian capitalism has led to great social inequality - far higher than, say, in Japan when the Japanese emerged as a global powerhouse from the ashes of World War 2. The rampant corruption and the constant need to repress, censor and control the people means that there is plenty of social forces building up beneath the surface. Given this system fundamentals in place, the China Premier and top leadership has done an outstanding job to contain all these problems. But we know from the Asian Crisis, this superficial stability under authoritarian rule can breakdown quickly when the economy falters. That is one reason for such govts to accumulate vast amounts of reserves in case something happens. During the Arab Spring, as social turmoil threaten to spread to Saudi Arabia, the Saudi king announced an economic package worth US$400B funded by its reserves to take care of every man, woman and child with any cause to be unhappy. The Chinese govt has the reserves to keep the country going for some time should the economy falter and unemployment rises. However, the poor economy might persist given Europe is China's largest market and would be in the doldrums for a long time might result in the demands for change in China growing louder. Very often we get unusually shocking news from China ranging from reports of fraud, food scares, hopeless poverty, extreme immorality, rampant corruption and human rights abuses. All these don't matter and goes on year after year when the economy is booming, but when the economy falters - that's when real changes come. What happens to one party authoritarian rule when the economy no longer does well? We only have to look at Indonesia, S. Korea and Thailand to know the answer. Even in Japan where the people are culturally reluctant to go for change. They eventually threw out the LDP - the party that engineered its economic miracle. It is hard for a one party system because one-party rule concentrates the power and control in a small number of people and when serious problems occur these people have to shoulder the blame, lose credibility and the masses quickly reject their leadership.

"Occupy Wall Street" and the our political awakening...

2011-10-01T11:01:00.004+08:00

We will never be able to get enough people here to "occupy" Raffles Place but I suspect in the coming months events will occur around the world and perhaps in Singapore that will get people thinking more about the world and system we live in.

2 postings ago I showed a video called "Money as Debt Part 2" that attempts to explain the banking system we have today. While there are some flaws and oversimplification in the video, it is popular on YouTube because people have began to ask about the system we live in and the recurring economic crisis we have to face every few years. There is also great unhappiness over the rising income gap and pressure on the middle class.

Remember when Obama ran for president, his campaign slogan was "Change We Can Believe In". When he took office he was faced with a mountain of economic problems left by 2 decades of unbridled capitalism. The financial crisis threatened to turn into a depression and Obama didn't have much of a choice but to bailout the banks and in effect rescue the some of culprits of the economic problems America was facing. To get the economy going he spend a ttrillion or more on a stimulus package. He tried to address the problems with the healthcare system, the widening income gap and the US budget deficit. However, there were just too many problems that coverged during his term as president at a time. Severe problems began showing up in Europe - again related to banking and debt. Thesee problems that took years if not decades to get to their current magnitude will not be solve in a year or two. The current approach to print money (QE1 & QE2) and kick the can further down the road only serve to postpone the day of reckoning. In the 1930s, it was the severity economic pain that brought about an acceptance of complete revamp under The New Deal. Today, post Great Recession, with economy sluggish and unsatisfactory, but still holding up it is hard to follow through with major disruptives changes - USA's financialised economy has to be restructured. However, high unemployment persists groups such as "Occupy Wall Street" start to emerge and grow.

At this point, some readers might be asking "What has all this got to do with Singapore?". actually plenty...Singapore has done many things similar to the US. The housing bubble for example - even at the height of the US housing bubble, the median price of a US home is lower than what it is in Singapore today. We accept idea of 20 or 30 year mortages as if they are as natural as the sunset. However, these are capitalistic creations ...remember "money as debt". In the 60s and 70s, people bought homes with cash. Even if you allow such mortgages, you would rein in the free market by making sure that housing prices do not outstrip median income gains. Strangely, our esteemed govt saw little problem with rising home prices....and defended it, just after the problematic collapse housing bubbless in Ireland, Spain, US crippled their economies and we always have the classic example of Japan that saw a drag on its economy from the 80s housing bubble that lasted for decades. We deregulated our banks just like the Americans. We merged our banks believing that the bigger they are the better - now the lesson learnt from the American financial crisis is not to have entities that are "too big to fail". We allowed the expansion of consumer lending - credit cards, unsecured loans, money lenders (licensed and unlicensed). The govt brought in Las Vegas in the form of 2 casinos euphemistically called IRs. The income gap in Singapore is larger than USA and we don't have the corresponding social programs to address the rising poverty we are seeing in our society.

People everywhere don't think much about the system they live in as long as things are going smoothly. It is when problems start to start to show up that people begin thinking and checking what goes on in the system. For years, Singaporeans have been apathetic about the political and economic system they live in but problems are starting to show up - income inequality, poverty, structural unemployment, rising cost of living - and we are seeing a political awakening among Singaporeans. The relentless import of people to keep the GDP growing stretches the transport and housing resources overcrowding the island - we now have the highest population density in the world after Hong Kong and Macau. Singaporeans are asking why is necessary for us to bring more people per capita than anywhere else in the world - is the system sustainable? A some point, just like those Americans occupying Wall Street, we too will come to realise we cannot continue as we have done so for the past few years. All the imbalances in our system will one day coverge to heighten our desire for change,

ISA : Interesting Video from the past...

2011-09-30T08:21:00.001+08:00

As countries around us move further away from the authoritarian regimes of the past, the difference in terms of political progress between Singapore and other countries starts to increase and the desire for change among an increasing segment of the populace will increase. 2 decades ago, Taiwan & S. Korea were under martial law and dictators so were Indonesia and the Philippines. Today these countries are full blown democracies and citizens have greater freedom of speech, right to assemble to speak up against injustice and free press. Their govts have also undergone several peaceful transitions. Economic development has continued at the same pace if not faster after these countries move away from authoritarian rule. Corruption and crony capitalism in general declined in these countries. As these countries move ahead, Singapore tries to preserve its political system with little change. The refusal to repeal the ISA and replace it with a more suitable anti-terrorist act is symbolic of this refusal to change.

This old video (courtesy of The Online Citizen) from 1990 is interesting in several ways. Lee Kuan Kew explained that the detention of the Marxist conspirators was decided by the next generation of leaders led by Goh Chok Tong. He than praised them for it by saying "Singapore would have been a different place" if they had not acted. A very young James Gomez then stood up to ask if the Singapore would consider abolishing the ISA given the region had become much more stable. Lee then tried to justify the ISA by saying that it was recently used on a group that was hoarding firearms - this is a bit strange as a justification because firearms are illegal in Singapore and these people could have been arrested and jailed under some other law. Lee then went on talk about how we were not yet a nation and hardly a community so these powers were needed to stifle "destructive" groups before they gained so much influence and power before they become mainstream groups.

Whenever laws are enacted to for the purpose security, there is a reluctance to repeal them because some people will argue that society will become less secure. That is why Malaysia's move to repeal the ISA is perceived as a bold step even when most countries provide a safe environment for their citizens without such a law. Most fringe groups are intercepted and stopped through intelligence operations that will yield sufficient evidence for a court case. There is a real risk of the ISA being abused by a bad govt to stifled legitimate opponents and used to preserve a power structure no longer beneficial to the ordinary citizens. Psychologically, the existence of such laws that are closely associated with police states, creates a climate of fear among citizens. 21 years ago, a young Arts and Social Science student in NUS asked Lee Kuan Kew about the need to keep the ISA. Today, many more young people are asking the same question. ISA symbolises the refusal of the present govt to begin moving away from our authoritarian past now that times have changed. For the hundreds of thousands of Singaporeans who want political progress, the existence ISA symbolises the frustrating lack of political progress. At the end of the day, as we fall further and further behind other countries support for the PAP will simply erode. The PAP has to remember that one-off economic transformation that made the people accept some form of authoritarianism is over.

Fiat Money System : Money is Debt Part 2.

2011-09-28T11:39:00.002+08:00

UPDATE: Today a group of protesters known as Occupy Wall Street[Link] frustrated with the workings of the current financial system protests in USA. One commenter wrote that the video unfairly vilifies banks and bankers when they play an important role in the economy. While that is true, the video warns us not to fall into the trap of de-regulation and always monitor and regulate our financial institutions strictly. When Franklin D. Roosevelt spoke during his inauguration speech[Link] after the stock market crash of 1929 and the subsequent economic depression, he warned of bankers and their system and how it led to despair in the 1930s - the greed will do us in. 70 years later look around you in the past 4 years - Goldman Sachs,, Lehman Brothers,, the sub prime crisis, the sovereign debt crisis - which one is not caused by debt...and money is indeed debt.

When you go out to buy your next television set, it is likely that you end up with something better than your existing TV sold for the same price. Like many things around us, man made systems tend to improve over time - if you take Boeing's newest aircraft, The Dreamliner, you will expect that to be build with more safety features than the old Boeing 747.

There is however one exception, our financial system - it seems to get less stable with each passing year and generates crisis, turmoil and recessions much more often that in the past yet we seem to accept this all encompassing system because most of us are born into or do not really understand what goes on in the banking system. Here is an interesting video that explains quite clear how money is created, how it drives the economy and why we are seeing so many crisis and so much in stability in the current system.

PSLE : The Great Sieving Machine....

2011-09-27T06:07:00.003+08:00

For parents with children that are 12 year old this must be a period of anxiety as the PSLE starts this week.

When I took the PLSE many years ago, students only had pass/fail results. There was no score. The better students were broadly identified as belonging to the top 8% - I was not one of them and it didn't really matter. Many of the students in the top 8% chose to go to average secondary schools so you get a mix of good and bad students in the same secondary school - you sometimes have both good and not so good students in the same class. Today we differentiate primary school right down to the fine resolution of 1 in 300 points. You pass by a tuition center these days and you will notice they put up a list of top students - score of 280 for the top student...anything below 250 and you won't get on anybody's list. Competition starts young and differentiation starts young. Using their PSLE and reference entrance score from past years students usually choose the best ranked secondary school possible with their score. In the secondary school the students will again be sorted .with the best students going to the best class and so on. By the time the student walks into his first class in secondary school - every thing is sorted out based on PLSE scores. You have the best class in the best school and the bottom class in the worst secondary school. Other than differentiation using PSLE scores, we have NUS High which picks out gifted students so they can get out of the regular system and be educated in NUS High for direct entry into NUS.

What we have done is intensify the competition between people at an early age and accentuate the difference in outcomes for these people - the NUS High gives the best training and highest quality of education to those who make it there and neighborhood schools typically get the average teachers teaching unmotivated students who discourage each other from doing well.

Our current president, Dr. Tony Tan, completel his primary school education 60 years ago chose to go to a lesser known less prestigious secondary school called St Patrick's Secondary School rather than Raffles Institution like the rest of the presidential candidates. I thought that was a selling point he could have used in his campaign because he would have mixed, mingled and made friends with children who later move on to various strata of our society. We did not have so much differentiation of children at a young age and in a typical secondary school you would find a good mix of students. Today's system is completely different.

Our education system has turned into the great sieve machine and it sorts students obsessively. Once every few years we get 12 year old children leaving the exam hall crying because the maths paper is so difficult they couldn't do many of the difficult questions[Link] - if you pick up a PSLE maths paper, I think many of you will be baffled by the some of the questions. All this to try to differentiate between students so some will get A* and others just A.

We should really roll back to the basics and ask ourselves what is the purpose of an education system? Is the main purpose just to sort students based on exam scores? What happened to the joys of learning? What happens to childhood and friendship? Is it healthy to put students through such intense competition at such a young age? What does such a system achieve at the end of the day?

Strangely, after putting our own children through such a tough education system, the govt is very happy to have foreigners from England, Australia and Phillipines take up some our best jobs. It looks like the tough education system does not give you too much of an edge when you join the workforce. Based on what was reported in WikiLeaks, the govt does not even encourage all Singaporeans to reach their full academic potential if they are able to get degrees. So what does all this energy and time spent on doing well for exams achieve for our society as a whole? For individuals it is very clear, you try to beat the others to get into better schools and later on scholarships that lead to opportunities in govt and SAF. But collectively will our society do better with such a system when it comes to differentiating oiurselves from economic competitors and giving our people a better quality of life?

Many Singaporeans being in this type of system for so long can't even imagine that there other forms of education system that work well. If I suggest we go back to the system of my time when students are just award a pass grade instead when they clear their PSLE exams, I'm sure many parents will say that system is no good because it doesn't help their children get ahead of others and secure the best secondary schools and so on. Singaporeans have come to believe competition is inevitable and intense competition is unavoidable.

To understand the alternatives, we have to look at systems that work well and are at the other end of the spectrum.

"The basic compulsory educational system in Finland is the nine-year comprehensive school (Finnish peruskoulu, Swedish grundskola, "basic school"), for which school attendance is mandatory (homeschooling is allowed, but rare). There are no "gifted" programs, and the more able children are expected to help those who are slower to catch on." - Wikipedia, Finland's Education System[Link]

The number one education system in the world is the Finnish education system - an egalitarian system in which tremendous effort to taken to provide high quality pre-school to everyone. Contrast that with Singapore's approach where pre-school is not compulsory and poor students skip pre-school while richer parents send their children for pre-school that cost $20K per annum. Our govt's idea of levelling the playing field is to give some poor students 1 month of pre-school that cost their parents $10 (read Stark contrast between pre-school.education of the rich and the poor...). Richer Singaporeans would even buy property next to a prestigious primary school known for training students to get good results so their children have better odds of getting into these schools.

"The Fins adamantly oppose any form of divisions or ranking, and 'advanced' or 'elite' divisions are major taboos. Separation into different classes is also not practiced in the system. Heidi, a 28 year-old employee at the University of Helsinki, recalls that she was good at math in primary and middle school, but the teacher never praised her work in front of anyone else, only stealthily handing her more advanced texts to read on her own." - Secrets to Finland's World Topping Education System

In Singapore's elitist system where the best resources are allocated to the best exam-scoring students who later on secure the precious prestigious overseas scholarships and later on the best jobs and opportunities in the SAF and civil service. This system elevate the importance of exams over learning, amplify the inequality in our society and emphasizes competition over co-operation.

The strength of a society is build on the arms of the strong pulling up the weak so that no one is left behind. Children at 12 should have a childhood spending time making friends, cultivating the love of learning, learning to help one another and building core values....much of these important developments fall into the background when young children believe that they are better than someone else because he scored 10 marks higher for the PSLE. All the energy we spend to sort our students then later allocating disproportionate resources to a small number identified as the elite weakens what can really make us competitive - a cohesive workforce able to work closely as a team and not individuals perpetually trying to get ahead by breaking away from others. The one reason the MOE gives for all this sorting and sieving is they want to best develop each student based on their ability. If you believe that you have to believe that neighborhood schools like Bedok Green Secondary have better teachers than ACS(I) or Raffles Institution because they have weaker students that need better teachers to guide. The Finnish approach is to put everyone in the same school and teach the material at a pace that everyone can learn and give additional attention to those who are slower. If we want a cohesive society, we have to start with the young and teach them that to work to help each rather than against each other.

MHA Statement tells us why we should abolish ISA....

2011-09-25T16:37:00.013+08:00

MHA responded to a statement by former detainees calling for ISA to be abolished by attempting to justify the arrest those detainees. Please read the statement for yourself and think about what the MHA is saying.

MHA statement found here.
"Nine were actively involved in Communist United Front (CUF) activities in
support of the Communist Party of Malaya (CPM), which was committed to the
violent overthrow of the constitutionally-elected governments in Singapore and
Malaysia. They infiltrated legally-established organisations like trade unions
and student associations, and instigated illegal strikes and demonstrations to
cause mayhem and civil strife, to complement the CPM's armed revolution.
The saboteur had been conveying a bomb for an attack in Singapore, and was
travelling along Still Road (Katong) when it detonated prematurely, injuring him
and killing his two accomplices. Such was the volatile and dangerous security
situation then prevailing in Singapore. Following the CPM's call in 1968 to its
underground networks to return to armed struggle, new CPM organisations were
formed in the 1970s which included killer squads to carry out sabotage,
assassinations and other acts of violence."

In the past it was very easy to accuse people of being communists unless they were on the side of the colonial govt. Trade unions, student unions and people fighting for independents were hauled up and locked up by the Special Branch. During this tumultous period, the working conditions for workers were poor and strikes and demonstrations often broke out . MHA assertion is that these people were communists who instigated workers to strike amd demonstrate - strikes and demonstrations were common in developing countries and they still break out very often today in developing countries. There are laws to handle labor strife without resorting to something like ISA. Even in developed countries such as USA we often see strikes when workers are badly exploited by employers - the most recent on involving 45,000 workers from Verizon[Link]. Countries that ban strikes without strong legislation to protect workers expose their workers to abuse and poor working conditions. Those strikes, whether they were legal or illegal, instigated or not - can a strike ever occur without 'instigation'? someone has to call for a strike and lead it - is besides the point and does not help to support the retention of ISA because many countries handle strikes without the ISA. The MHA then says that these 'instigators' were linked to the CPM (Communist Party of Malaya) - surely if these people were linked of CPM, the evidence can be produced - otherwise the ISD can just haul up anyone and accuse them of being linked to the communists when they are just peaceful socialists with good intentions. Let me ask you....where is the CPM today? It no longer exists! So why should we retain ISA for a threat that no longer exists?

In the 1980s, seven of the sixteen ex-detainees were involved in a Marxist plot
to subvert and destabilise Singapore. The plot was part of the CPM's renewed
efforts to rebuild the united front by penetrating and manipulating
legally-established organisations. Three of them infiltrated and manipulated several religious organisations and, exploiting the religious cover, pursued
activities towards subversive ends

The Marxist Conspiracy was 24 years ago and I'm still trying to figure how Vincent Cheng and Teo Soh Lung were supposed to be able to subvert the govt of Singapore by defeating the SAF, SPF and hoodwink the entire nation into a violent revolution to overthrow their beloved PAP govt. Vincent Cheng the alleged mastermind of the plot must have handwritten his entire plan on a piece of paper somewhere otherwise how could the ISD have known about such a plan? Vincent must have swallowed the paper prior to his arrest because no evidence (no weapons, no paper) was ever produced to prove this allegation. The MHA now justify Vincent Cheng's arrest simply by repeating the allegation against him. That allegation was all it took to detain him and that is why people want the ISA abolished. What is there to stop another govt some time in the future from using against its political opponents by making accusations it does not need to prove?

I suggest you go through the entire MHA statement and think about the issue but I will leave you with a simple counter argument against what MHA has said.

Why do we need such a law when all other developed countries can ensure the safety of its citizens without it? Do you feel insecure in Japan, Finland, Sweden or Australia?.....We spend far more on defense, intelligence and the police per capita than most of these countries. Many of them are bigger in geographical size than Singapore with a bigger population to look after yet they do not need such a draconian law.

The PAP govt is very unwise to keep such a law that it cannot justify because its existence links the PAP to an ugly past. The PAP govt with the help of the British eliminated an entire generation of prominent socialist opponents including the likes of Lim Chin Siong and members of the Barisan Socialis using the ISA when they were conducting a legitimate constitutional struggle and getting ready for elections they were likely to have won. The PAP then ran this place with authoritarian leadership and its brand of authoritarian capitalism. 4 decades of unbalanced policies later we find we have the most economically unequal society among all developed nations. By retaining the ISA, the PAP reminds us what it has done in the past including holding the world record for the longest period of detention for a prisoner of conscience - Chia Thye Poh was detained by the ISD for a period longer than Nelson Mendela without a single charge or trial - how does one justify the detention of a 25 year old physics professor for a period of 32 years?

Economy : Unsatisfactory until The Great Revamp....

2011-09-25T08:25:00.003+08:00

The above chart shows the income inequality in the US from 1918 until today. If you plot the chart of income inequality of countries around the world, you find the pattern of rising inequality in the last 30 years. Among developing countries, Singapore and USA have the highest income inequality. The only time during the last 100 years when the income inequality is as high as it is today was in 1929. The global economic system fell apart after the stock market collapsed in Oct 1929. There are numerous similarities between 1929 and 2007, the consumer debt was extremely high as individuals borrowed to spend because the income gap means that ordinary workers make too little to generate the aggregate demand for the total goods produced in the economy. Household borrowings help to close the gap i.e. the economy depended on rising debt levels to keep it going.

After the US economy fell apart in 1929, Democratic president Franklin Roosevelt implemented The New Deal empowered labor unions and ethnic minorities. The 3 decades after World War 2 are known as The Great Compression - the income gap became compressed as the US govt allowed labor unions to wield more power, implemented high progressive tax on the rich and implement major social programs. As wealth became more evenly distributed, the middle class expanded, unemployment fell and the US experienced sustainable growth withour significant rise in the household debt. However, that began to change roughly when Reagan took office.

The policies to reverse what The New Deal policies - weakening of labor unions, tax cuts for the rich, together with the spread of free market capitalism, globalisation and deregulation combined to erode the middle class. While there were other economic benefits of the new directions, income gap grew and much of the gains concentrated in the top 10% of the income earners.

.If you look across countries, there is a general trend of rising inequality:

A few things to note from the above charts. Among developing countries, the income gap is falling as they become more developed with the notable exception of communist China. With the exception of socialist Fracne all developed countries have seen a rise in inequality.

Based on the latest data from the CIA factbook here's where counttries stand:

For the US, you have to go back all the way to 1929 to find an income gap as high as what we see today. There is only one developed country with worse or comparable to the US depending on when you measure inequality and that is our tiny island of Singapore. The other place with higher inequality is Hong Kong which is technically not a country - at their level of inequality despite the perceived economic success of Hong Kong, the incumbent govt is almost certain to lose if free and fair elections are conducted tomorrow - that is why they have postponed direct elections there until 2017 so that social programs can kick in and mitigate the effects of the inequality.

In recent months we have seen rising protests around the world, authoritarian govts falling and increasing number of incumbent govt voted out of office in democratic countries. The current economic model is not just unsustainable in purely economic terms, the masses are forcing govts out to bring about change. From Israel to Australia, we see rising frustration among ordinary citizens.demanding change. Today we are facing the 3 economic crisis in and on the verge of the 4th recession in 14 years. The global economic system is clearly not stable and does not produce outcomes that ordinary citizens around the world want to preserve. In many countries the people will keep voting out govts until they get what they want. We are seeing similarities with 1930s and the whole system will be in a flux until we see the income gap compressing.

So how did Singapore achieve the highest inequality among developed countries at a time when income inequality is at the highest in the last 70 years? You don't end up here when you implement fair and balnced policies that benefit as many of your citizens as possible. PAP's ideological extreme has led to this situation .Cutting corporate tax rate and taxes for the richest and increasing GST to tax the poor. Weakening the bargaining power of unions through something euphemistically called tripartism - over the years workers' benefits such as retrenchment benefits disappear along with job security. Importing cheap labor to depress wages of the lowest wage earners. Elitism that concentrate the state resources and allocate the best opportunities to a small number of people. Pro-business policies that pandered to the demand for workers to be cheaper, better and faster. The people of Singapore sent a very clear signal to the PAP govt that they want change. The PAP won most of the seats in parliament not because people feel that its policies are correct. The PAP was helped by a combination of other factors. The fragmented Opposition is generally perceived as not ready to take over as govt and the PAP still enjoy the support of older folks who lived through the great transformation took Singapore from a poor developing country to developed one. The PAP still enjoys favorable but bias coverage from the MSM. These advantages will diminish by the time the next election comes.

Having a GINI index of 48 means an inequality much larger those that motivated massive protests in so many countries. Singaporeans are just as unhappy. However, we have a culture of fear and obedience, Singaporeans do not protest to show their unhappiness. The unhappiness festers and grow internally ...hidden in individuals and families. The govt will start to interpret this quiet response as an acceptance of the status quo just as it did before the 2011 elections. The image of huge opposition rallies and collective show of angry will fade and the PAP will go on a path of 'least resistance' guided by the interests of the power elite. We are beginning to see the PAP in 'explanation mode' again - they are explaining why we need more foreigners, explaining why we need the ISA to keep us safe[Link], explaining why they cannot adhere to UN human rights recommendations[Link], explaining why the govt cannot do more for the poor, disabled and elderly. The best we can hope for is some tweaking of PAP policies as we move on from here.

Economic inequality will drive demand for all sorts of change because when people'\s lives are not getting better they are less amenable to various aspects of authoritarian rule still preserved by the PAP. Even the govt of Malaysia knows that there is a need to get ahead of the curve with important changes. The PAP needs an ideological shift and revamp the current socio-economic system to compress the inequality. Telling the people that things are acceptable because there is 'social mobility' will not address their unhappines with their own economic situation. Trying to make as little change as possible to get by and leaving the income gap as it is and unhappiness to fester below the surface will simply compel the people to bring about change by voting for the opposition. Shortly after the 2011 election, our PM said 'nothing is sacrosanct'. However, watching the PAP in the past few months what we see is an inability to change as denial begin to overcome the post-election realisation that the people are very angry and want change.

The role of peaceful protests in society...

2011-09-24T14:52:00.002+08:00

The picture above is that of a protest that occurred in Philippines. The protesters were 'planking' using a new, somewhat crazy, phenomena that has swept the world thanks to the Internet and YouTube.

"Planking" (or the "Lying Down Game") is an activity consisting of lying face down in an unusual or incongruous location - Wikipedia.

They were doing it for what you can call a good cause. The Aquino govt had decided to cut education spending and that made university professors and students unhappy[Link]. Perhaps the protesters were thinking it would be better if they produce more graduates because there are always jobs in a neighboring country which does not believe in encouraging more of its own people to pursue a university education and rather import graduates from other countries to fill jobs. For the purpose of this article it is not relevant whether the Aquino govt is right or the protesters are right because much of it is a judgement call that has to be made because state does not have infinite resources and either side can be correct depending on how the local economy evolves and how wide one of the neighboring countries will open its doors to graduates from Philippines.

My main point is Philippines used to be ruled by a strongman that disallowed protests, controlled the media and ran undemocratic elections. In facts, 20 years ago, Singapore was far more democratic than the Philippines. Singapore was also far more democratic than S. Korea and Taiwan. Today, these countries are fully democratised. Our immediate neighbor Malaysia is moving along the same direction to abolish ISA and allow public assembly so that peaceful protests can be conducted. Where is Singapore today relative to these countries? Is the Philippines or S. Korea worse off after they moved from authoritarian govt to become democracies?

Peaceful protests allow like minded people to get behind a social cause to get together and express their views more strongly. It levels the playing field for the masses as the monied class and corporations influence decisions in govt. One thousand people separately writing to the Straits Times expressing their unhappiness are not be equal to the 4 property tycoons expressing worries about how they will make a few million less next year due to the slowing economy.

"The more successful you are, the wider your sphere of influence"

- LKY to NTU PhD student, Joan Sim

In LKY's Singapore it is not the more morally correct you are influential you will be. He likes to keep his hierarchical authoritarian system in place. If ordinary Singaporeans cannot assembly and express their views, it is much easier to manage away their concerns and ask them to be more resilient and live with it. A few weeks ago, 500,000 Israelis peacefully marching together to express their unhappiness over the cost of living and the rising inequality in society moved their govt to act with greater urgency. The right for people to assemble to support each other for a worthy cause brings about a more cohesive society, motivate govts to put the interests of ordinary above everything else and accelerate the positive changes to society.