The Singapore Government has accumulated vast reserves and Singaporeans think we are rich and some politicians have called for spending some of our reserves. Presidential candidate (2011), Tan Jee Say, for example, once said that $60 billion was 'small change'. He said he was prepared to spend $10 billion to give away to any young Singaporean who wanted to start a business. Here's what he said:
"PMETs like yourselves, (if) you want to start a new industry, ask the government to give you one million dollars each and you do it for the next few years."
And his mathematics is really very simple. It goes like this:
"With S$10 billion, divided by S$1m, then you could have how much ... 10,000 firms. 10,000 you multiply by three or five staff per company, (and for a) small company, you could have 50,000 jobs".
That easy huh? $1m and 'hey presto!' Jobs are created. What if the business fails? But of course it is not Mr Tan's money.
Singapore may have accumulated large reserves, but are we very rich?
Singapore's national reserves, or net assets (i.e. total assets minus liabilities of the Government and other entities specified in the Fifth Schedule under the Constitution), are a vital strategic resource for the country and strictly protected by the Constitution.
Specifically, the portion of reserves protected by Constitution are the past reserves, that is, reserves accumulated by previous terms of governments. Any draw down on past reserves requires the President's approval.
As Ex-Minister George Yeo said at the LKYSPP 10th year anniversary lecture, "But in fact, we have nothing. We are only a small island. We have no natural endowments. And what we have – I don’t know how many hundred billion dollars we have, even if you double it, what is that, compared to what others have, in the ground, in land, underwater? And in a crisis, if we have nothing, how do you sustain a diaspora?"
Many of us will remember the Asian Financial Crisis when currencies came under speculative attacks. The crisis hit Thailand first in 1997 and then spread to many other countries including Malaysia, Indonesia, the Philippines, S Korea, Hong Kong and China and subsequently to Russia and Brazil as well. For a timeline of the crisis, you can read it here:http://to.pbs.org/QA9Qrx
Singapore's official foreign reserves (OFR) has helped to maintain confidence in the Singapore dollar in times of such crisis, and defend the currency against speculative attacks.
Singapore dipped into a short recession during the Asian financial crisis. In 1999, then President Ong Teng Cheong said that he would approve the government's request to draw on past reserves to finance recession measures if asked. Fortunately there was no need to as then Prime Minister Goh Chok Tong said there was enough fund accumulated in the current reserves.
The global financial meltdown of 2008 shows how crucial financial reserves were to a small nation without natural resources like Singapore, that is heavily dependent on international trade and finance
The first time the government had to dip into the past reserves was during this crisis.
To shore up confidence in Singapore's financial institutions in the midst of a deepening credit crisis that was world wide, the government announced in October 2008 that they would guarantee all bank deposits from October 2008 till the end of 2010.
The guarantee covered all Singapore dollar and foreign currency deposits of individuals and non-bank customers in banks, finance companies and merchant banks licensed by the Monetary Authority of Singapore (MAS). The government backed this guarantee with $150 billion from our financial reserves.
Without a strong reserves position, would the government have been able to do that? So our national reserves ARE a vital strategic resource for the country.
This move by the government was not an actual draw on the reserves. The funds would be used only if a depository financial institution failed. Fortunately that did not happen.
Then in January 2009, because of a fast deteriorating global economic environment and facing the prospect of a deep and prolonged recession, the government finally sought the President's approval to take out S$4.9 billion from past reserves to fund two one-off measures to boost the economy, namely, the Jobs Credit scheme and the Special Risk-Sharing Initiative (SRI).
The Jobs Credit scheme was designed to encourage employers to retain their workers by giving them a cash grant for every local employee on their payroll and the he bulk of the S$4.5 billion went into this. The remainder was for the SRI, which was aimed at encouraging banks to lend to companies by bearing a larger share of the risks. As a result unemployment did not rise very high.
By 2011, the Government had put back into the reserves the amounts drawn down to fund the extraordinary measures taken during the economic crisis.
http://eresources.nlb.gov.sg/infopedia/articles/SIP_1489_2009-03-20.html
The Nimby (not in my backyard) syndrome is used in a pejorative way to describe residents' opposition to proposals of developments close to where they live. Such developments are seen as needed but should be located somewhere else. The opposing residents are sometimes called Nimbies.
Well, the Nimby Syndrome has manifested itself once again. Some future residents of Fernvale Lea are upset that a columbarium housed in a temple would be built close to their future homes. Some have asked HDB for a refund.
Residents said that HDB should have been more upfront about the columbarium even though it was clearly indicated in the HDB brochure that a temple in the vicinity may include a columbarium, albeit in fine print.
Here is the brochure. Zoom in to read the fine print.
http://bit.ly/1zNN0MN
In their confusion, some residents wanted to know why the Chinese temple was being developed by a private company. But just how relevant is the developer of the temple to their objection of a columbarium? Does it mean to say that if the developer of the temple and columbarium is not a private developer, the columbarium will be acceptable to them?
Back in 2012, there was also an outcry over the Ministry of Health's proposal to build a nursing home on an empty grass patch in Bishan St 13. There was also a petition submitted to MOH.
Can anyone understand the objection to the building of a facility to take care of the elderly infirm among us?
Among the reasons given by residents at that time for their objection:
One resident said his children would have to play football in the void deck and stain the walls.
Another said he would soon have the sound of old people groaning right into his home.
Is the Nimby syndrome a sign that we are becoming a more selfish nation?
As it is, Singapore's total fertility rate stands at 1.19.What's the big deal, you say. We are already so crowded! We don't need any immigration. We just want to maintain the true, blue core.Can we?
Let's take a look at Japan, a country that is very resistant to immigration, where citizenship is based on the principle of jus sanguinis, that is, acquired through shared blood and not by location of birth. Closely associated with this principle are the Japanese theories of ethnic distinction espoused in the nihonjinron literature. Such is the distinction that even Japanese Brazilians who returned to Japan have difficulty integrating because of their cultural differences.
Well, the population of Japan is on the rapid decline and that is a fact. Between 2012 and 2014, it has lost more than half a million people.
In May this year, an interim report released by the Sentakusuru Mirai, or “deciding the future,” panel ( appointed under the cabinet’s Council on Economic and Fiscal Policy), chaired by Japan Chamber of Commerce and Industry head Mimura Akio warned that by 2060, the Japanese population will fall from the current 127 million to 87 million and by 2110, it will be just 43 million, a third of what it is today.
Not only that, 40% of the 87 million will be 65 or older. And 41.3% of the 43 million in 2110 will be 65 and older.
That's an incredible shrinking and hyper-aged population. In fact Unicharm Corp. (8113)’s sales of adult diapers in Japan exceeded those for babies for the first time in 2011. And Japan's total fertility rate at 1.41 births per woman is HIGHER than Singapore's 1.19.
So where are we? Do we have a population so large as Japan as to take comfort in numbers, if at all there is any comfort in numbers?
At our current birth rate and assuming no immigration, by 2050, we will have an inverted population structure, just like Japan, where the proportion of older people will be greater than the proportion of younger people.
The effect of a population decline will be felt in the labour force. That goes without saying. A smaller proportion of younger people means a smaller workforce.
In the case of Japan, the rapid population decline means the size of the workforce will drop by 40% from 65.77 million in 2013 to 37.95 million in 2060 in a worst case scenario. Such a rapid decline in the size of the workforce means that the country will have great difficulty maintaining positive growth as indicated in the report.
Japan is a country that is highly resistant to immigration. The Japan Times reported in 2013 that the percentage of foreign residents is just 1.54% of the population in Japan.
Franco Modigliani won the Nobel Prize in Economics in 1985 for his "Life Cycle Hypothesis" which states that the spending and savings pattern of people are predictable over the course of a lifetime and these patterns are mainly a function of age demographics. In other words, the health and robustness of an economy are determined by age demographics.
More specifically, it means that the basic health of an economy is driven largely by the number of its citizens who are in the peak of their spending years. Countries with a large percentage of elderly people and a small proportion of productive workers will have a smaller productive output and a larger demand for social services. Obviously this will tend to drag down the economy.
Our citizen population today is 3.34 million. With controlled immigration rate, the citizen population is projected to be between 3.6 million and 3.8 million in 2030. This is a projected increase of between 260,000 and 460,000 over a period of 16 years, with the increase coming from BOTH births and new citizens. On average then, the population will increase by around 16,250 and 28,750 per year, assuming linear increase. Do these projected increases look very big to you? The planned intake of new citizens is just about enough to prevent the population from shrinking. Take away the controlled intake of new citizens and where will we be?
Can we be highly resistant to immigration like Japan?
We are 3.34 million. Japan is 127 million. Japan's TFR (total fertility rate) is 1.41 while Singapore's is 1.19. When our population starts to shrink, it will shrink faster than Japan. The Japanese can perhaps settle for 40 million and make do with a much diminished economy and domestic market. Can Singapore settle for a much reduced population and survive on a domestic market?
To believe that we will be different from Japan and we can defy the odds of an ageing and declining population and maintain a true blue core at current birth rates without immigration is like believing that we can defy gravity.
In any case, what is that true blue core?
Some people have continued their call for a minimum wage.Minimum wage purports to lift people out of poverty. But does it? If minimum wage is the solution to poverty, then poverty in the US should be on the decline because they have had many years of minimum wages since statutory minimum wages were introduced nationally in 1938. Over the years, minimum wages have risen in the US. So have poverty and unemployment.
Australia has the highest minimum wage in the world. Yet poverty is on the rise according to the latest report by the Australian Council Of Social Services (ACOSS). It rose from 13% in 2010 to 13.9% in 2012.
So what drives minimum wage? It's mainly politics.
This is not to say that minimum wage has no role to play. Where there are unscrupulous employers, it can help to protect workers from being exploited.
But to implement a minimum wage in the hope of reducing the income gap and to lift people out of poverty is akin to treating the symptoms without addressing the causes. It is almost like a cosmetic change that looks good on the outside but changes little on the inside.
Every revision to the minimum wage without a corresponding rise in the worker's productivity adds to the cost of doing business and renders the worker with little skill more vulnerable.
For people to get out of poverty they must have jobs. They must be encouraged to seek employment. In this regard, Workfare Income Supplement WIS) does just that. It REWARDS regular and productive work, thus helping to maintain the 'work ethic' which is the bedrock of our success.
To complement WIS, Workfare Training Support (WTS) Scheme was introduced. While WIS rewards productive work, WTS encourages the worker to go for training to improve his skills and employability and earn more!
Workers who are sent by their employers for training enjoy 95% course fee subsidy while the employers enjoy an absentee payroll of 95%.
Progressive Wage Model
The Progressive Wage Model rolled out by NTUC recognizes that workers must be paid fair wages. Thus it has a minimum wage feature incorporated into it. At the same time, it also recognizes that the way for a worker to earn more after the entrant wage is to be more productive and not by a revision of that minimum wage. There are therefore provisions for training for the worker so that he/she can progress up the wage ladder through higher productivity.
Home ownership
For anyone to focus on his job and further training to enhance his job prospects, he must not have to worry about a roof over his head. This brings us to housing. In Singapore, the affordability of housing is such that if you earn $1000, you will be able to afford a new 2-room BTO in a non-mature estate just using your CPF contributions alone.
This is because there are the CPF Additional Housing Grants and CPF Special Housing Grants which adds up to a maximum of $60,000. These grants are not merely discounts on the purchase price of the flats that people buy. These grants are money for you to keep. Should you decide to sell your flat, these grants will be credited into your CPF account.
There are a host of other schemes to help people in the lower and lower middle income group including financial assistance for their children's education.
It takes more than a minimum wage to lift people out of poverty and policies must not be viewed in isolation. It takes a whole lot of schemes and policies to help people.
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