Singapore’s policymakers catch up with economic reality

Emblazoned on the front page of today’s Straits Times was the bold headline Grow Productivity, not just GDP: PM:

Even the WSJ gets it

Coincidentally, a day after my previous post the WSJ published this article which confirms what many have been saying for a long time.  But don’t expect the Singapore government to take note. Some excerpts:

Between 2005 and 2009, Singapore’s population surged by roughly 150,000 people a year to 5 million—among the fastest rates ever there—with 75% or more of the increase coming from foreigners. In-migration continued in 2009 despite expectations it would collapse because of the global recession.
…
By some estimates, a third or more of Singapore’s 6.8% average annual growth from 2003 to 2008 came from the expansion of its labor force, primarily expatriates, allowing Singapore to post growth more commonly associated with poor developing nations.

At the same time, though, foreign workers have driven up real estate and other prices and made the city-state’s roads and subways more congested. Their arrival has kept local blue-collar wages lower than they would be otherwise, exacerbating Singapore’s gap between rich and poor.

Some economists say the most damaging effect of the immigration is that the influx appears to be putting a lid on productivity gains, as manufacturers rely on cheap imported labor instead of making their businesses more efficient. Labor productivity, or output per employee, fell 7.8% in 2008 and 0.8% in 207—a phenomenon that could eventually translate into lower standards of living.
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Relying on foreign labor to help boost growth is unsustainable, adds Choy Keen Meng, an assistant professor of economics at Singapore’s Nanyang Technological University. He says a better model would involve the reining in immigration and accepting that Singapore is becoming a more mature economy like the U.S. or Europe, with a long-term growth rate of 3% to 5% a year.

Productivity and Singapore’s economic growth model

In 1994, 2008 economics Nobel laureate Paul Krugman penned an article titled The Myth of Asia’s Miracle in Foreign Affairs, an American magazine founded by the CFR.  In the article, Krugman lambasted the East Asian economic growth model, characterising it as input-driven primarily by increasing capital and labour contributions rather than growth in total factor productivity (TFP).  The East Asian nations the Western press was so fond of as hyping as the industrious Asian Tigers, Krugman warned, was at risk of a protracted economic slowdown not unlike what transpired in Japan in 1989.

Spoiling the vote as an electoral strategy?

I was quite surprised when I saw Alex Tan Zhixiang’s post on his Facebook group VOTE THE PAP OUT.  In the post, Alex Tan says that he does not endorse any opposition party or candidate and his group is solely dedicated to pushing the dominant People’s Action Party out of power rather than voting in the opposition.  To achieve this end, he claims that one need not vote for the opposition, but may also opt to spoil his/her ballot so long as the vote is not cast for the PAP:

Evidence that housing prices in Singapore are unaffordable

Over the course of the past few months, I have encountered people (some of whom are friends) who for some reason either were unaware or in denial of the fact that housing prices are becoming increasingly unaffordable for Singaporeans. This is something which is well-known and documented to the extent I do not believe it is rational or reasonable for anyone to deny it should they be aware of the facts.  In writing this post, it is my hope that I may be able to prove to these individuals that housing prices have been spiraling out of control and are rightly considered unaffordable.  To make the case, I present three pieces of evidence to substantiate this claim.

Singapore’s ill-thought population policy

Acknowledgements: This post would not have been possible if weren’t for the assistance of a friend whom helped to read through and provided useful suggestions for content.

Much attention in the past few years have been focused on the Singapore government’s liberal and generous immigration policies designed to attract foreign talent and labour which the government insists is necessary to maintain a sizeable workforce, given Singapore’s extremely low fertility rate. The influx of immigrants have caused depressed wages and sky-rocketing property prices. Lesser attention has been paid towards the causes of low fertility, although Lucky (among others) has written about it here.  Both the Temasek Review and The Online Citizen wrote about this as well.

Back to blogging

I’m finally back to blogging, though I’ll be away for the next week or so for a vacation. It has been a very tiring and busy last few months for me, when I was deeply pre-occupied by both my work and studies.  My apologies to those who kept checking my blog every now and then hoping to see updates and finding nothing.

Temasek sells Chartered to Abu Dhabi

Recent news reports that Temasek Holdings is selling Chartered Semiconductor to Abu Dhabi for S$2.5bn. Judging from company reports Chartered appears pretty battered. It’s continually declining share price forced it to undergo a reverse 1:10 stock split on May 21st to prevent its stock price from falling below $1 over the forseeable long term.

According to the report Abu Dhabi paid only 2 cents higher than Chartered’s last closing stock price per share on Sept 4. Was Temasek so desperate to sell Chartered it wasn’t willing to drive a hard bargain?

I can’t be certain but it seems that Temasek didn’t lose money on this and may instead have made a profit by underwriting Chartered’s rights issue back in March this year. Indeed Google Finance shows that Chartered Semiconductor’s share price has risen three-fold from its March lows this year:

It’s rather ironic that Temasek is preparing to sell Chartered just as the company announced that it was upgrading its revenue forecast for 2009 due to improving economic and financial conditions:

Chartered today also raised its third-quarter forecasts for revenue and earnings. Sales will range from S$405 million to S$415 million, up from a forecast of S$382 million to S$394 million, according to a statement. The company now anticipates the result will range from a net loss of S$8 million to breakeven, an improvement from a loss of S$27 million to S$17 million.  Chartered’s reported losses in the past four quarters.

So goes Chartered Semiconductor, no longer a Temasek-owned company.

Who’s (not) on the Economic Strategies Committee?

Some time back, the Singapore government formed a committee to study possible economic strategies the country could pursue in the long term. The Economic Strategies Committee consists of a main committee which is staffed by 25 members and various subcommittees. The composition of the main committee may be viewed here. As written earlier, Alex Au criticised its composition as devoid of academic staff, noting that only 1 out of 25 members was an intellectual. The rest were government ministers and business leaders; CEOs and chairmen:

I glanced at the list of names that accompanied the news story. Indeed, 24 out of 25 were either government leaders or people from the business world. Only one was an academic — Prof Bernard Yeung, dean of the National University of Singapore Business School. There were no fulltime economists or intellectuals (other than perhaps Yeung).

One has to wonder whether the composition of the committee serves its putative purpose. Without meaning to belittle their intelligence and capabilities, the fact remains that the non-government members are (a) already busy with their fulltime jobs running businesses, and (b) will tend to see the future through the perspective of the industry they are in. They are hardly going to tell the committee that theirs is a sunset industry, or one in which Singapore has no hope, and we should abandon it.

On top of that, we have nearly half the committee made up of government ministers, whom one can expect to get highly defensive should one criticise the very economic model that we have operated with. Can anyone expect truly counter-orthodox ideas to surface in this committee and be fairly considered?

A curious observation on unemployment trends in Singapore

Recently a friend highlighted to me an article in Foreign Policy journal which pointed out that the current global downturn has largely affected men as traditionally male-dominated key employment in sectors such as housing construction and manufacturing fell precipitously, whilst the more female inclined services industry contracted less sharply. The article is worth reading for a global and American perspective on this issue. Investopedia even featured a neologism which captures this idea here.