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  • Experts Point The Way Forward For Singapore Economic Growth

    Experts Point The Way Forward For Singapore Economic Growth

    Economists, government leaders and opposition politicians all agree Singapore must jettison its development model of “extensive growth” based on factor accumulation – the addition of more labour, talent and capital to the singularly scarce resource, land, that defines our territorial space.

    We must, like other developed countries whose ranks we supposedly lead on many metrics, rely on productivity increases to deliver output growth at a much lower but more sustainable rate of 1-3% per year.

    From our own experience and that of other rich countries, we know this is a difficult and long-term task requiring considerable behavioral adjustments at the individual and household as well as business and government policy levels.

    Our recent survey of numerous labor market studies* shows low labor productivity has characterized Singapore’s economic growth as long ago as the early 1970s and as recently as the last several years. The heavy reliance on imports of foreign labor has depressed wages for low-wage citizen workers, contributing to our higher income inequality (income-only Gini of 0.46, not including wealth inequality which is typically higher) and poverty rates (20 to 22%) compared with other rich countries.

    Cutting back on labor imports can deliver productivity increases in sectors such as construction, retail and F&B where our productivity greatly lags that in other rich countries. But the cutback will be painful for businesses and households whose profits and consumption have been subsidized for too long by cheap labor imports. Our capacity for imitation, flexibility and innovation should help us adjust at least as well as other developed countries.

    Productivity increase – producing more with less – is not the only way to income (not just output) growth and higher living standards and better consumer welfare for Singaporeans. The shares of our GDP derived from wages and devoted to household consumption are very low (35-40%) compared with other developed countries, where they typically range from 55% (Korea) to 75% (U.S.). Rebalancing our economy away from export-and investment-driven growth to consumption, and from state-to market-driven development (as China is also trying to do) will mean that a higher proportion of income from GDP will flow to Singaporeans.

    Domestic demand can also be increased through more social transfers, which in Singapore is again very low compared with other rich countries. Public spending as a proportion of GDP in Singapore is half that of many developed countries – 20% versus over 40% – and lower than it was in our first three decades. Recent budgets have increased government subsidies for health care (Medishield Life), training (SkillsFuture) and the elderly (Pioneer Generation and Silver Support). But these are narrowly tied to specific expenditures, many occurring primarily in the public sector, and so do not promote spending by a broader base of consumers (the majority who are neither poor nor elderly nor likely to need or want skills training) that could create demand for a wider range of goods and services to be provided by private entrepreneurs.

    Besides directly improving citizen welfare, social transfers reduce inequality and increase domestic demand as net recipients are mostly lower-income earners who have a higher marginal propensity to consume than the wealthy. More transfers are affordable given Singapore’s large accumulated public sector surpluses—which represent decades of transfers from households to the government chiefly via CPF mandatory contributions, annual budget surpluses, and off-budget user charges by statutory boards and GLCs.**

    In Singapore’s early decades, these transfers enabled the rapid construction of world-class infrastructure, provision of efficient public services and, most importantly, affordable housing for 85% of the population, without incurring government budget deficits and public sector debt. They also arguably contributed to citizens’ over-investment in housing relative to other assets, and relative to the consumption of other (non-housing) goods and services.

    As a result, Singaporeans are “asset-rich but cash-poor”. This phenomenon poses problems for the support of a rapidly-ageing population as well as the housing and living standards (and perhaps fertility and emigration rates) of younger Singaporeans.

    Restructuring the Singapore economy requires not just microeconomic resource reallocation to increase productivity at the firm level. Macroeconomic rebalancing and institutional change to boost domestic demand are critical too. Cost reduction must form part of this transformation – with reduced property prices and rental costs as a necessary component, as well as reduced fees and user charges for transportation, utilities and other basic needs. Together with productivity increases, this rebalancing will preserve and even enhance Singapore’s international competitiveness.

    Reducing the numbers – and we recommend an absolute reduction and not just a slower inflow – of foreign workers will remove this longstanding disincentive to increasing productivity, and also reduce excess demand pressures on property and infrastructure congestion. Wages of lower- and medium-skilled Singaporeans will rise, boosting consumer demand. The selective importing of foreign talent should continue, focusing on permanent immigrants who will stay with us for the long haul to build our nation.

    There is much that Singaporeans need to do to ensure a smooth transition to becoming a fully First World nation. In terms of labour, we could revert to doing more for ourselves – like “keeping Singapore clean” which we used to do without armies of short-term low-wage foreign cleaners picking up after us. Equalising gender relations within the family could raise our female labor force participation (58%) to the higher rates (65%) prevailing in many other developed countries. We could also reap what some call the “gender equity demographic dividend” of higher fertility found in developed countries with better gender equity.

    In terms of capital, we could invest our savings in productive assets and entrepreneurial ventures (including enterprises catering to the services needs of our fellow Singaporeans such as working parents and the elderly) rather than devote them disproportionately to property speculation in the hopes of earning monopoly rents and unproductive capital gains.

    Slower GDP growth with an absolutely falling number of foreign workers can improve the welfare and quality of life of Singaporeans. The challenge is to adopt a development strategy based on realistic expectations of productivity gains, reduced non-labor costs, higher market wages and consumer spending, and larger but sustainable social transfers.

    *Pang Eng Fong and Linda Lim, “Labor, Productivity and Singapore’s Development Model”

    ** Mukul Asher, Azad Singh Bali and Chang Yee Kwan, “Public Financial Management in Singapore: Key Characteristics and Prospects”

    Both in Singapore Economic Review Vol. 60 No. 3 (2015), Special Issue on A Fifty-Year Retrospective on the Singapore Economy

    Pang Eng Fong is Professor of Strategic Management (Practice) at the Lee Kong Chian School of Business, Singapore Management University. Linda Lim is Professor of Strategy at the Stephen M. Ross School of Business, University of Michigan.

     

    Source: https://sg.news.yahoo.com

  • The Singapore Exception

    The Singapore Exception

    AT 50, ACCORDING to George Orwell, everyone has the face he deserves. Singapore, which on August 9th marks its 50th anniversary as an independent country, can be proud of its youthful vigour. The view from the infinity pool on the roof of Marina Bay Sands, a three-towered hotel, casino and convention centre, is futuristic. A forest of skyscrapers glints in the sunlight, temples to globalisation bearing the names of some of its prophets—HSBC, UBS, Allianz, Citi. They tower over busy streets where, mostly, traffic flows smoothly. Below is the Marina Barrage, keeping the sea out of a reservoir built at the end of the Singapore River, which winds its way through what is left of the old colonial city centre. Into the distance stretch clusters of high-rise blocks, where most Singaporeans live. The sea teems with tankers, ferries and container ships. To the west is one of Asia’s busiest container ports and a huge refinery and petrochemical complex; on Singapore’s eastern tip, perhaps the world’s most efficient airport. But the vista remains surprisingly green. The government’s boast of making this “a city in a garden” does not seem so fanciful.

    Singapore is, to use a word its leaders favour, an “exceptional” place: the world’s only fully functioning city-state; a truly global hub for commerce, finance, shipping and travel; and the only one among the world’s richest countries never to have changed its ruling party. At a May Day rally this year, its prime minister, Lee Hsien Loong, asserted that “to survive you have to be exceptional.” This special report will examine different aspects of Singaporean exceptionalism and ask whether its survival really is under threat. It will argue that Singapore is well placed to thrive, but that in its second half-century it will face threats very different from those it confronted at its unplanned, accidental birth 50 years ago. They will require very different responses. The biggest danger Singapore faces may be complacency—the belief that policies that have proved so successful for so long can help it negotiate a new world.

    In 1965 Singapore was forced to leave a short-lived federation with Malaysia, the country to its north, to which it is joined by a causeway and a bridge. Lee Kuan Yew, Lee Hsien Loong’s father, who became Singapore’s prime minister on its winning self-government from Britain in 1959, had always seen its future as part of Malaysia, leading his country into a federation with its neighbour in 1963. He had to lead it out again when Singapore was expelled in 1965. By then he had become convinced that Chinese-majority Singapore would always be at a disadvantage in a Malay-dominated polity.

    Mr Lee’s death in March this year, aged 91, drew tributes from around the world. But Mr Lee would have been prouder of the reaction in Singapore itself. Tens of thousands queued for hours in sultry heat or pouring rain to file past his casket in tribute. The turnout hinted at another miracle: that Singapore, a country that was never meant to be, made up of racially diverse immigrants—a Chinese majority (about 74%) with substantial minorities of Malays (13%) and Indians (9%)—had acquired a national identity. The crowds were not just mourning Mr Lee; they were celebrating an improbable patriotism.

    Lee Kuan Yew himself defined the Singapore exception. As prime minister until 1990, he built a political system in his image. In line with his maxim that “poetry is a luxury we cannot afford,” it was ruthlessly pragmatic, enabling him to rule almost as a (mostly) benevolent dictator. The colonial-era Internal Security Act helped crush opposition from the 1960s on. Parliament has been more of an echo-chamber than a check on executive power. No opposition candidate won a seat until 1981. The domestic press toes the government line; defamation suits have intimidated and sometimes bankrupted opposition politicians and hit the bottom line of the foreign press (including The Economist).

    Singapore, it is sometimes joked, is “Asia-lite”, at the geographical heart of the continent but without the chaos, the dirt, the undrinkable tap water and the gridlocked traffic. It has also been a “democracy-lite”, with all the forms of democratic competition but shorn of the unruly hubbub—and without the substance. Part of the “Singapore exception” is a system of one-party rule legitimised at the polls and, 56 years after Mr Lee’s People’s Action Party (PAP) took power, facing little immediate threat of losing it. The system has many defenders at home and abroad. Singapore has very little crime and virtually no official corruption. It ranks towards the top on most “human-development” indicators such as life expectancy, infant mortality and income per person. Its leaders hold themselves to high standards. But it is debatable whether the system Mr Lee built can survive in its present form.

    It faces two separate challenges. One is the lack of checks and balances in the shape of a strong political opposition. Under the influence of the incorruptible Lees and their colleagues, government remains clean, efficient and imaginative; but to ensure it stays that way, substantive democracy may be the best hope. Second, confidence in the PAP, as the most recent election in 2011 showed, has waned somewhat. The party has been damaged by two of its own successes. One is in education, where its much-admired schools, colleges and universities have produced a generation of highly educated, comfortably off global citizens who do not have much tolerance for the PAP’s mother-knows-best style of governance. In a jubilant annual rally to campaign for lesbian, gay, bisexual and transgender (LGBT) rights on June 13th, a crowd estimated at 28,000 showed its amused contempt for the illiberal social conservatism the PAP has enforced. Younger Singaporeans also chafe at censorship and are no longer so scared of the consequences of opposing the PAP.

    The PAP’s second success that has turned against it is a big rise in life expectancy, now among the world’s longest. This has swelled the numbers of the elderly, some of whom now feel that the PAP has broken a central promise it had made to them: that in return for being obliged to save a large part of their earnings, they would enjoy a carefree retirement. And it is not just old people who have begun to question PAP policies. Many Singaporeans are uncomfortable with a rapid influx of immigrants. These worries point to Singapore’s two biggest, and linked, problems: a shortage of space and a rapidly ageing population.

     

    Source: www.economist.com

  • Survey Finds That Local Muslim Respondents For The Donning Of The Hijab In Schools, Autonomy Of Madrasahs

    Survey Finds That Local Muslim Respondents For The Donning Of The Hijab In Schools, Autonomy Of Madrasahs

    Between 6th to 13th March, we ran a survey to identify Singapore Muslim community perceptions on several socio-political issues. The survey was based on the Suara Musyawarah report, responses to the report and several AMP studies of the Malay community.

    Summary

    The survey indicates strong concerns on the cost of living, perception of discrimination and the community’s legal and education standing.
    Study

    The online survey was published on Almakhazin.com. Surveygizmo.com provided the engine.

    Five broad categories were addressed: socio-legal, Leadership, Foreign workers/ demography, economy and education. Responses are based on the Likert system with respondents indicating on a 5 point scale from “Strongly agree” to “Strongly disagree”.

    This survey is by no means a comprehensive study of the Muslim community. It serves as an indication on several specific issues. Over the next few months, we plan to expand and deepen the understanding of community preferences through with more community surveys. We hope that it will provide a little insight as to how sections of the community perceive various issues.

    We used social media to gather respondents for the survey. Invitations to participate were placed in several Singapore Muslim pages such as Suara Melayu Singapore, Almakhazin SG and Singapore Muslim Students Overseas. None of the groups are based on any political or religious persuasion.

    According to ShareThis count, the survey page was shared 603 times. It was shared through Facebook 578 times, by Twitter 18 times, once by email and Liked 235 times. 6 shares were unaccounted by ShareThis.

    Caveats

    As is inherent in any online survey tool, we rely on respondents’ self identification (religion, gender, age etc) and responses. There is no way to determine if what they declare for themselves are true. However, this is not a unique problem. It exists in online and offline surveys.
    There was also initial concerns of multiple responses from the same person. To minimise the possibility of such behaviour, we filtered responses through IP address. Only the last response per IP address is recognised.

    Responses

    Total number of responses: 334
    After filtering repeats through IP address: 314
    Muslim respondents: 313
    One respondent identified as Christian. Since the survey is on the Muslim community, we had to remove the response.

    Demography
    Age
    The youth age group (defined here for those between 18-35) makes up a slight majority of respondents. However, there was strong representation from 35-54 year olds at 38.7%.

    Gender
    There was an over-representation of male respondents. 2/3 of respondents identified as male. The survey did not seek specifically male or female groups or participants.

    Highest qualifications
    About a third of respondents have tertiary qualifications with Bachelors degree making up a quarter of respondents. A further 34.5% have diplomas.

    Race
    As expected, a large majority of respondents (78.6%) identify as being Malays. 10.2% as Indians.

    Categorisation
    The survey was set up into 5 categories:
    1. Socio-legal
    2. Leadership
    3. Foreign workers and demography
    4. Economy
    5. Education

    In this analysis however, we will recategorise the survey. There are five categories that make up our analysis:
    1. National issues
    2. Community concerns- government
    3. Social contract
    4. Community concerns-Internal
    5. Autonomy

    National issues

    Economy
    In terms of the economy, there appears to be uncertainty in the way the government is managing it even as the respondents tend to believe it is not going very well. There are also concerns with the way the CPF is managed. However, there is a strong concern with the cost of living in Singapore.

    96.8% of respondents are worried about the cost of living in Singapore with 76.4% stating they strongly agree with the statement “I am worried about the high cost of living.”

    However, slightly less than half of the respondents believe the government is not managing the economy well. 30.4% are neutral and about 20% think the government is managing it well.

    62% are concerned about the way CPF is managing their funds with 33.9% indicating they “strongly disagree” with the statement “I am confident with CPF’s management of our funds.”

    Foreign workers
    There appears to be concern on the number of foreign workers and as it relates to the percentage of Malays.

    59% disagree with the statement “I believe the government is right in its foreign worker policies.” 77% feel there are too many foreign workers in Singapore.

    About 63% are “concerned that the number of foreign workers will result in a reduction in the percentage of Muslims in Singapore.”

    Concerns-government
    Policies that affect the community negatively appear to get a strong response.

    There is strong support among the respondents for hijab to be allowed in school and at the workplace. In reference to the ban of hijab in school, 90% of respondents “believe that Muslim students should be allowed to wear hijab in school” with 68.1% saying they strongly agree. 8.6% were neutral to the question. Only 1.3% disagreed and no one strongly disagreed.

    A stronger response was received for question on whether anyone should be denied employment because of hijab. About 98% believe that no one should be denied employment due to hijab with 87.9% believing strongly. 1% were neutral and only 0.6% (even split) believing they can be denied employment due to hijab.

    89% “believe that Muslims should be allowed to enlist in any branch of the armed forces.”

    Further to the concerns of discrimination, 93% “believe that Singapore should enact an Anti-discrimination law to ensure no one is discriminated.”

    Social contract
    Article 152 of the constitution states:
    “Minorities and special position of Malays
    152.
    —(1) It shall be the responsibility of the Government constantly to care for the interests of the racial and religious minorities in Singapore.

    (2) The Government shall exercise its functions in such manner as to recognise the special position of the Malays, who are the indigenous people of Singapore, and accordingly it shall be the responsibility of the Government to protect, safeguard, support, foster and promote their political, educational, religious, economic, social and cultural interests and the Malay language.”

    Signifying the strong sense of the existing social contract 75% of respondents believe in retaining Article 152 of the constitution. Only 3% believed the Article should not be retained.

    About 20% believe the government is living up to its responsibilities as specified in the Article. 34% are neutral about the government’s performance and 43% believe the government has not lived up to it.

    We received several queries in the comment section indicating the respondents’ unfamiliarity with Section 152.

    Community concerns- Internal

    The Malay statistic for imprisonment and educational underachievement has been a disconcerting discussion in the community for some time. Another issue that has received some attention is of the erosion of Malay language use in Singapore.

    With 79% being concerned about the over-representation of Malays in prison, it indicates not only the concern of the severity but also the recognition that the Malays are over-represented.

    Similarly, the perception of Malay educational underachievement is strong with 83% indicating their agreement that it is a concern. Only about 4% are not concerned about the over-representation in NA/NT streams and ITE and the underrepresentation in Universities.

    However, it should be noted that with a growing recognition of the value of ITE education, respondents may have indicated their lack of concern due to their acceptance of ITE as a viable and valuable educational pathway.

    There is also a strong position taken on Malay language. 80% are concerned about the erosion of the language in Singapore. 14% are neutral.
    The concern however may also be due to the greater public statements and campaigns encouraging the use of the language. With enhanced recognition, the belief in its lack and improper use may have become stronger.

    Autonomy
    There is also a strong sense of the necessity of community autonomy from government control. About 80% of respondents believe madrasah should be independent of government control and for the highest Islamic authority to not be appointed by the government. About 63% also believe that community leaders should not be involved in politics.

    Discussion
    There appears to be disenchantment within the community in various government policies. There also is a strong sense of communal concern among respondents. This can be due to the possibility that those who participate in such surveys to already be concerned about the questions asked, that the issues are current and significant or there is a socio-political alignment among those who participate in such community based surveys.

    It may also be due to respondents who participate in social media based discussions to be more concerned about the issues in the survey.

    The demographics indicate a wide variety of respondents. If this can be taken as a cross section of Malay community response, then it indicates a substantial disagreement with current policies especially with regard to community-government relations.

    There appears to be a greater sense of disenfranchisement between members of the community and the government. Discrimination, control and high cost of living apart from community underachievement are real concerns that need to be resolved.

    This survey provided the broad strokes in community perception. We will follow up with surveys that go in depth on the issues discussed above with special attention on community-government relations.

    The survey results can be viewed at:
    http://app.surveygizmo.com/reportsview/?key=345590-4188929-4606949383d247e91eebedc49140b4e8

     

    Source: http://almakhazin.com

  • More Non-Residents Retrenched Amid Restructuring

    More Non-Residents Retrenched Amid Restructuring

    Amid ongoing business restructuring, last year saw a 40 per cent jump in the number of non-resident workers retrenched, figures from the Ministry of Manpower show.

    A total of 12,930 workers received the pink slip in 2014, 12 per cent higher than in the year before. This represented 6.3 lay-offs per 1,000 employees, up from 5.8 in 2013.

    Last year’s higher redundancy numbers were caused by more non-resident workers being let go — 5,690 versus 4,050 in 2013. In comparison, the number of residents made redundant fell from 7,520 to 7,240.

    These led to resident workers making up 56 per cent of retrenchments, the lowest since 1998 and the first dip in three years. In 2013, the proportion of resident redundancies was 65 per cent.

    Resident workers laid off also found new jobs more quickly, with half of them finding new bosses within one month. The percentage of residents who re-entered the workforce within six months of redundancy also rose for the third straight quarter to 59 per cent in December last year.

    The services sector — mainly wholesale trade, financial services, legal, accounting and management services, and retail trade — accounted for most of the retrenchments (56 per cent). Manufacturing as a whole made up 31 per cent of the lay-offs, while construction was responsible for the remaining 13 per cent. The increase in construction lay-offs was caused by a decline in private sector construction output.

    Despite forming the majority of those retrenched, PMETs comprised a smaller share of the lay-offs last year (51 per cent) compared to 2013 (56 per cent).

    The top reason cited for lay-offs was “restructuring of business processes for greater efficiency” (32 per cent), followed by “reorganisation of businesses” (24 per cent) and “poor business or business failure not due to recession” (22 per cent).

    Commenting on the statistics, analysts said the higher number of retrenchments was caused by a combination of modest economic growth last year, tightened foreign labour supply and economic restructuring.

    The higher Dependency Ratio Ceiling — the maximum ratio of foreign employees permitted — in the services and construction sectors led to increased redundancies, said DBS economist Irvin Seah. “The services sector finds it difficult to find more local workers to support that additional one foreign worker. As a result, companies have to downsize operations, trim their headcount and increase productivity,” he said.

    Higher foreign-worker levies could have caused a shift in preference towards retaining resident workers, said UOB economist Francis Tan.

    OCBC economist Selena Ling said the higher redundancies are “not too alarming for now”. “As restructuring continues, and as companies and industries try to adapt to the new normal — improving productivity and making do with less manpower — you could still get a fair bit of churn,” she said.

    Noting the low unemployment rate and high re-entry rate for resident workers, she added: “If overall unemployment rate is still fairly low, then a certain amount of churn is not a bad thing because it means there is labour mobility, which is what you need for a fairly efficient, market driven economy.”

    Experts said they foresee redundancies rising further in the near-term. The services and construction sectors will continue to be vulnerable this year due to weak productivity, which could affect firms’ overall business performance, said Mr Tan. “If a company in a particular sector is not seeing growth, then naturally they may shut down. Then, there will be increased redundancies,” he added.

     

    Source: www.todayonline.com

  • Standard & Poor Provides Singapore Unsolicited AAA Rating

    Standard & Poor Provides Singapore Unsolicited AAA Rating

    Standard & Poor’s Ratings Services said today that Singapore’s 2015 budget continues to show the strength of the government’s institutional and governance effectiveness. This factor is a key support for their sovereign credit rating on Singapore (unsolicited ratings AAA/Stable/A-1+; axAAA/axA-1+).

    “The Singapore budget focuses on longer-term fiscal challenges even as it addresses the immediate capacity constraints in transport and health services, areas that will see significant increases in spending,” said Standard & Poor’s credit analyst Yee Farn Phua.

    Policies announced in the Singapore dollar S$68.2 billion budget aim to boost the country’s economic growth potential, retrain Singaporean workers, and ensure increased funding to meet the needs of Singapore’s aging population. Investments in these areas significantly outsize the S$705 million transfers to households. These measures should help maintain Singapore’s credit strengths even as the population ages at one of the fastest rates in Asia.

    After accounting for revenue not reported as part of the Singapore budget, S&P estimates that the general government account will remain in surplus over the fiscal years ending March 2015 and March 2016. The government projects a budget deficit of S$6.7 billion (1.7 per cent of GDP) in the fiscal year ending March 2016 after a nearly balanced budget in the current fiscal year.

     

    Source: www.businesstimes.com.sg