Govt encourages fund flows into Singapore to build up the fund management industry.

The question is whether such funds are channeled into the loan sector and affect the lending rate. Banks justify their high lending rates by saying this follows global interest rate hence the widening gap between lending and deposit rates. How true this is, I leave it up to the MAS. What I do see is higher loan rates and historical lows for deposit interest rates.

However, I don’t see how such flows can be reversed without affecting the fund management industry.

There is however, a point that many miss. Whilst foreigners are not restricted from bringing funds into Singapore, neither are Singaporeans restricted from investing overseas.

For myself, I think Singaporeans should learn to invest outside of Singapore. Singaporeans aren’t taxed on overseas income (unless remitted and even then there are certain exemptions). If one can manage the overseas taxes and exchange rate risks, one can achieve far greater returns then <1% deposit rates.

So its not so much a question of too much money in Singapore but not enough Singapore money going out.

http://www.nationmaster.com/time.php?stat=eco_dep_int_rat-economy-deposit-interest-rate&country=sn-singapore

Govt encourages fund flows into Singapore to build up the fund management industry.

The question is whether such funds are channeled into the loan sector and affect the lending rate. Banks justify their high lending rates by saying this follows global interest rate hence the widening gap between lending and deposit rates. How true this is, I leave it up to the MAS. What I do see is higher loan rates and historical lows for deposit interest rates.

However, I don’t see how such flows can be reversed without affecting the fund management industry.

There is however, a point that many miss. Whilst foreigners are not restricted from bringing funds into Singapore, neither are Singaporeans restricted from investing overseas.

For myself, I think Singaporeans should learn to invest outside of Singapore. Singaporeans aren’t taxed on overseas income (unless remitted and even then there are certain exemptions). If one can manage the overseas taxes and exchange rate risks, one can achieve far greater returns then <1% deposit rates.

So its not so much a question of too much money in Singapore but not enough Singapore money going out.

Another source of inflow is from the foreign investors who are encouraged to bring their money into Singapore under some tax incentives arranged through EDB.

Are we getting too much money that is not required to be used in Singapore?

With too much money in Singapore and too little investment opportunity, interest rate remains depressed. This is a disadvantage to the local people, who get a low interest rate on their savings. The interest rate cannot keep up with inflation.

Even government bonds pay interest below inflation rate.

I hope that some economist can make a study into this situation. Does it help Singapore to haev a lot of money parked here? Or is it just being wasteful, as the money is not being put to good use. Is it detrimental to the citizens?

Firstly, imposing minimum wages makes the labour market less efficient. In other words, if a business entity has to pay more than what a worker is worth, then additional costs has to be passed onto the consumers, or excess workers have to be laid off to reduce business costs. This applies to both low and high wage labours. Rigid labour regulations hurt businesses and they in turn hurt the economy and everyone in the longer run.

Secondly, increasing the labour supply, for example by importing foreign workers, does reduce wages. However, whether the alternative of barring foreign worker is better is still questionable. Both cases are economically equivalent if the productivity and the quality of work remains the same, i.e. it is detrimental to have a protectionist labour policy at the expense of quality and quantity of work.

I’m not entirely sure of the whole picture. I have the impression that we can hardly replace many of the low-skilled foreign workers. Most low-skill foreign workers around me are construction workers, domestic maids, and cleaners. (I don’t consider healthcare workers as low-skilled labours since they require at least a professional diploma degree.) I already see that there are many senior citizens working as cleaners. I kind of feel that locals aren’t particularly attracted to work as domestic maids given how demanding we are towards our maids. Also, the construction sector doesn’t seem to be an popular industry, and it is definitely not suitable for senior citizens.

I have to admit that this is a particularly difficult problem to tackle.I hope we can brainstorm more ideas, but I certainly do not advocate imposing minimum wage before due consideration.

I suggest that we express our opinion. I hope that more people can come forward to say that they like higher income tax and lower GST. Or that there should be a minimum wage. Or that interest rate should be increased.

We can let the Government make their decision separately. Let us take one step at a time

Be very careful , our government will most likely accept suggest 1 and reject 2 and 3 and then claim that they implemented at least 30 % of your suggestion….

The question is: will insurers adjust premium when means testing come into play?

btw, I don’t sell insurance or work in the insurance industry.

I think those who can afford private house = not poor. Can always sell, stay in HDB. Yet, as above, some people’s face = more important than life. This type of face protection, I think we can ignore.

Removing healthcare subsidy for rich people doesn’t mean denying access to basic healthcare. In UK, rich or poor have free access to healthcare.

For me, if means testing affects whether rich people should pay for any service = ok. If means testing affects whether service is provided or not = not ok.

If hospital say ward class B2 only for poor people, rich people cannot stay, then wrong. If hospital say ward class B2, rich people pay full rate, poor people pay full rate = fair. But if Govt want to help poor people pay part of full rate = good. But if Govt want to use public money to help rich people pay part of full rate = not so good.

I think Kin Lian also raises a good point. Hospital shouldn’t charge super high rate for rich people just because they can afford to pay more. I think hospital rates should be benchmarked to demonstrate that prices are indeed reasonable market rates. This is not addressed.

The worry is means-testing means hospital will set much higher full rate to support that Government give very high subsidy. Then that affects whether service is provided or not = not good.

Now doctor happy cos medical council no longer control price. Will that become an issue? The middle class worry cos they are the worst hit. No subsidy & cannot afford.

Most countries in the world has a minimum wage, including the low income and high income countries. Even the USA, which is the worlds biggest proponent of the free labour market, has a minimum wage.

A minimum wage may not increase the business cost significantly. It just reduces the huge profit earned by the business owners, salaries of the top management and the rental costs. The share of business cost of the minimum wage earners is probably not significant, except for labour intensive industries.

There is less economic pressure for a minimum wage policy in a big country. If necessary, a person can move to live in a low cost part of the country. Some people can go back into farming, for example.

But in a small country like Singapore, the choices are limited. So a minimum wage policy is necessary.

The argument against a minimum wage is that it will drive jobs to other countries. Let us look at the facts. Are our jobs going overseas? Hardly!

We have the opposite situation. Many jobs are created in Singapore, that have to be filled by low wage workers from other countries.

I am surprised at the large number of these foreign workers. They increase the demand on our public infrastructure and facilities and increase the congestion in Singapore. Is this good for Singapore?

These low cost foreign workers compete with our local workers. Many of our local workers cannot find jobs and have to be unemployed. The unemployed are criticised for being “choosy”. Is this true? Many of our elderly are willing to take menial jobs as cleaners just to survive. I respect them. I hope that we can give them a decent wage for their work.

We must remember that there is a high cost of living in Singapore. The cost is higher, if the worker has a family to feed. We cannot expect them to accept the lower wage that is adequate for foreign workers who feed their family in a low cost country.

* Subsidies are meant to provide a need at a lower cost. Examples of needs, include medical care and education.

* Other social benefits aims to improve the qualify of life of the general population. Examples includes better transportation and a more beautiful environment. But I have to admit that there are some fuzzy areas, like good education.

Noone, rich or poor, should be denied of basic needs. But the poor should be entitled to them at lower costs because they need it, not because they, by virtue of being poor, should get a larger share of the fiscal budget or more benefits. Everyone should have equal benefits and opportunities.

For example, both the rich and poor must be able to have very specialized medical care if required. But poor should pay less. Everyone should be able to attend the very best school (as long as he or she qualifies), but those who can’t afford should pay less.

Therefore, I support the principle of means testing. My main concern is whether it can be implemented effectively and efficiently. If it can be done, I urge everyone to support it. If it doesn’t, I hope that the Ministry is willing to let it go.

If you want fairness, you need some sort of a declaration model that allows the Government to know your networth.

For example, you allow the Government to know your bank account balance, your investment portfolio, your income (they already know this, but they still need permission for this purpose), the properties that you own and expensive goods (such as cars). The Government will then work out how much to give you.

You may choose to keep some parts secret, like your investment portfolio. However, it means much less rebates will be given to you.

Note that you don’t give the Government the information yourself. You give them permission/authorization to find out these information from various sources.

I find it difficult to pass the judgement on who should be entitled or denied the social benefits, according to their type of housing or ability to “prove that they are poor.”

Sometimes, I am puzzled at why my fellow Singaporeans are so good at making these kinds of value judgements. It must be the result of our education system.

And the filthy rich in Singapore, which include many middle class Singaporeans driving their BMWs, many of them are really filthy in their manners. They will always clamour for getting their fair share of the pie. And they know the tricks too. Mr Tan should know this well, after all, this was what happen to the recent motor insurance debacle.

So a welfare state will not work here, because of the lousy and pathetic attitudes of Singaporeans and PRs alike.

Problem of abbr applies in the above case to industry lingo or jargon. The writer or author is obviously not targeting the message at the masses.

btw, I received an unofficial response…

pay more income tax = earn more
pay less GST = spend less
minimum wage = work harder
higher interest rates = save more and learn to invest

On income tax, it might interest readers to note that the individual income tax collection will invariably increase. The reason is:

- Wage increases will happen.
- Income tax threshold are sticky (ie tax brackets are fixed).
- Reliefs are also sticky.
- So as time passes, more people will move up the tax bracket and hence pay higher rates of income tax. it won’t apply to the 21,386 persons (in 2007) who are already above the highest tax bracket though…

Rather than insulate ourselves from global price changes, we must learn to adjust our consumption in accordance with these price changes. This is the same with all goods and services – to let prices act as a signal of market demand and supply and to adjust our behaviour in response to these price changes. The fact that there is a tax on petrol should not make our response to price changes in petrol any different to that for other goods and services.

It appears that the increase in petrol price in recent months is due to the higher price of oil, and that petrol tax is not affected.

I read in Today paper that the tax is 40 center per litre. It does not increase according to the pump price.

I checked the Internet and found the following FAQ from Shell’s website:

What is the retail price of fuel made up of?
The price of fuel at the retail station is called the “pump price” . It comprises the product cost, government excise and taxes, Shell marketing, distribution and retail share.

What taxes are applied to fuel?
Petrol – Excise tax of 44cpl is applied on every litre of petrol. GST is applied to all fuels (petrol and diesel) as it is purchased at the retail station.

I wonder what “cpl” stands for. I guess it must mean cents per litre. If this is the case, then the tax is a flat rate that does not change with the pump price. In other words, the Government does not collect more petrol tax when the price of oil goes up. They are likely to collect less tax, as motorists are likely to use less petrol.

On another matter, I think that the Singaporean habit of using abbreviations, such as “cpl” is quite bad and is confusing to the general public. They could have used “cents per litre” without lengthening the FAQ considerably.