Hi Mr Jeyaretnam,

Nice article, looking forward to seeing more from you in the future.

But I wonder, how much will boosting domestic demand help? We have barely 4.5m people. How much consumption can our population provide to stimulate the economy? Especially a manufacturing-oriented economy driven heavily by electronics and petrochems?

China and India are gearing up to be the world’s next big consumer bases, perhaps it might be wiser to orient our economy towards them?

the irony @ #1: That is a mere hypothesis. The reality is the current government, repeatedly fails to implement measures that would fuel more domestic consumerism. My thoughts here: http://singaporesocialactivist.blogspot.com/2009/03/dont-hide-behind-mere-hypothesis.html

The doubting idea about NOT doing anything to boost domestic consumption shares its roots in mercantilism. My opinion is it’s not always about upping domestic consumption to save the growth rate but to ensure there is a good flow of activity distributed amongst the domestic economy. It’s a damn fact that Singapore’s economy is plugged in tightly with the global economy, and this means that there will be ‘outflows’ no matter the global economic condition. Continuance of enforced high saving rates only helps to ensure there is a cheap source of funds for the financial market players.

Ravi, what should the average Sporean do to add to domestic consumption? Buy petrochemical products and charter ships?

The concept of stimulating domestic consumption in a global recession as there is little opportunity for stimulating export demand as other nations are facing similar economic difficulties and there will be a tendency towards protectionist measures. Obviously the issue is not to make Singapore overly dependent on domestic consumption as that would be dangerous as shown by the US.

Personally I feel that being both small and export oriented, and having a single party government, will give us the adaptability and cohesion to have a good chance of overcoming the recession. The issue will obviously be how effective the government and central bank are at stimulating the economy through both fiscal and monetary measures.

The issue with having a minimum wage is that a socially optimum minimum would vary across different job classes which makes deciding on a general minimum wage difficult. It would be important that the minimum wage not be applicable to the young (<18 or preferably <21) as otherwise it would have an adverse affect on education which may result in an averse affect on income distribution. Additionally a minimum wage could increase unemployment of low-skilled labour and while this can be overcome with improvements to the education system it also has potential to aversely affect income distribution. I think there would have to be a set of minimum wages for various job classes

Gd stuff.

Idea for future piece. The PAP has been living off Goh Keng Swee and Wismus insight of serving the MNCs

At the time, this was considered neo-colonalism etc. So S’pore had few if no competitors. And we were efficient and hardworking. We did well.

With the opening up of China, the reopening of Eastern Europe and the “end of History”, the second and third world wanted to prosper via the support MNC route.

We had cheaper competitors.

S’pore’s answer — Go upmkt. Biomed etc

Anyway, here’as hoping to see more gd stuff.

Actually we have already had a lost decade.

1998 — 2008. 1998 — 2004. We had three or four slowdowns, if not recessions.

The Reform S’pore paper in 2002?, has not resulted in a more resilient and diversified economy.

Singapore’s financial institutions should take the stress test too. Singapore’s GIC and GLCs as well. Then we will know if Singapore passes the stress test. Tie the Cabinet’s salaries to their performance in bringing S’pore out of the deep rut. As the pay packets of CEOs all over the world have dropped due to the recession, the Cabinet Ministers ought to re-calibrate their pay levels with a further discount due to bad performance.

The lost decade that KJ talks about is still in front of us.

The lost 2 or 3 decades in social development is behind us, ie already down the HDB waste disposal chute. LKY bemoans the fact that Singaporeans are not entrepreneurial. Entrepreneurship and creativity thrive in the right kind of environment, much like truffle.

Take the push to make our schools THINKING schools. On the one hand we bring in De Bono at great expense to the tax-payer to make our principals and teachers think and teach creatively, and to teach creativity. On the other hand, the ONLY focus in town is on test and exam results. (Creativity cannot be taught anyway. It just germinates and grows with the right cultural environment. In the arts, for example, unfortunately for Singapore, a good number of the highly creative are gay.)

If the MOE were to say to principals and teachers that their performance indicators and bonuses are linked to how well their students think, create, solve problems and how much of a social and environmental conscience they have, the principals and teachers will have a very different mindset and focus. Say to them that test and exam results are the be all and end all then that becomes the ONLY game in town. Nothing else matters.

This is where the lost 2 or 3 decades lie – in the lost opportunity to develop and grow a whole generation of Singaporeans who are capable of independent thinking and are street-wise, if nothing else.

In terms of Singapore’s economic sustainability, is it better to have one corporation run by the political elite (and I include the scholars here regardless of whether they belong to any political party or not as they have been suitably “trained” and influenced to think in a particular mode) or is it better to have 10,000 budding entrepreneurs and risk takers at any one time. Even if out of 10,000 only 10 or 20 become big time successes it will help to continue the country’s forward momentum.

Think of technology. Singapore still only has Creative Technologies.

I fear that the tried and tested economic strategies which have taken Singapore to where it is today are no longer viable. A fundamental re-think is necessary. But, do we have the intellectual fire-power anymore to undertake the necessary thinking? Are we now simply too flabby?

We even recruit table tennis players from overseas to represent us. What has happened to out national pride and honour? Are we admitting that locals will never be good enough? Do we care? We have totally devalued the intangibles which make life meaningful and instead put all our emphasis on $s, cars and condos. I have said before, all Ah Tong’s rhetoric about graciousness, compassion and EQ are just that – a whole bunch of meaningless words. Where is the action? Where is the beef in the burger? Indeed, Ah Tong, where is the burger?

Aiya, doesn’t matter what lost decade, lost this , lost that.

The most important thing is to ensure political power is never lost. Make sure everytime there will always be 50% walkovers, 66% mandate and 98% seats at every election for PAP.

And nobody protest on the streets in large numbers. Smaller numbers like 10 or 20 people which Chee Soon Juan is good at, no problem. Just charge all the buggers in court. Sue them to bankruptcy if necessary.

So this is all that matters. This has been so for the last 40 years, so no reason why cannot be for the next 10 or 20 years.

The Sing Gov are taking a short cut to expand the Economy, thru reclaimed lands and influx of foreigners workers to target populations of 6.5 millions rather than the expensive ways of encourge local enterprises and increased birth rates.

This could have adverse consequences in Singapore for the future.
Singaporeans are desperate to get out here and foreigners are desperate to come in earning strong Sing Dollars. Singaporean are staying singles to keep their cost down and everything is measure by economic sense.

Among the 4 tigers we are already at the losing end and hope the IRs can succeed.

Dear Sir,

2 tumbs up to you, this is the way Singapore should go as in the past the country was rich the people poor, not it seems that the country might be poor and the people poorer.

The article brings out some very salient thoughts but I do not agree with a few of Mr J’s comments and remedies

Firstly, our Personal Consumption Expenditure (PCE) was compared to the USA’s PCE of 70%. That figure are the current figures and way off the historical average of 60%. Economists have repeatedly pointed out that that USA consumer is overreaching him/herself at 70% and a more ideal figure would be below 60%. When you compare our 41% to the mighty USA’s 60%, it is not as big a quantum. Another country that we should perhaps compare our self to is China. Their PCE is 33% of GDP. Our consumption in relation to our economic development is about right in my view. I would also agree with “the irony” . Our 4.5M is too small to move the needle on consumption.

Secondly, I don’t see how a minimum wage is going to prevent the lost decade. In the first place, Singaporeans don’t want to do the manual labor so it’s not so much an issue of wages rather than culture. Moreover, these jobs that require minimum wages are low value added. Encouraging our workforce to go into these unskilled jobs may boost our short term well being but will lead to a Lost Century.

I want to point out though that some of MR J’s recommendations should be looked into seriously. We cannot continue to rely on electronics export manufacturing. We need to find new sources of development. Singapore is in serious need of reinventing itself and needs to make a firm commitment to reinventing the the industry (much akin to the way we were in the late 1960’s when we invited the MNC’s).

One avenue which Mr J points out is the investment in green technologies. These are still in the young days of both R&D as well as manufacturing. Singapore needs to seize the opportunity to both develop its brain trust in this area as well as a capable green manufacturing base.

aiyoyo

why this country come to this state?

any of the elites come out with the root cause/solutions?

not sure why there’s so many elites & still come to this state?

why things so expensive, why so much $ stuck in cpf etc..?

sad story again

aiyoyo

Considering that we are a service and financial hub with little emphasis placed on manufacturing, how is boosting domestic consumption going to help when we consume mostly imports?

Also considering that we are also based on re-exportation with our history in entrepot trade and all, shouldn’t the best way to boost SMEs and manufacturing be expansion overseas since the domestic market is too small to fuel any substantial growth?

our living cost is world class but we do not have any world class policies for citizen ie. education, salary etc. Singapore citizens is living in the first world, having second world pay and benefits.

this article is good and pointed our a number of good policies that the government should consider. gst at 7% is too high for a country whose citizens are still having low pay and benefits. and primary school education should at least should be compulsory and free.

our government should move back to being a citizen’s employee, just like in 70s-80s. the current government has become mercernaries and moving away from being a people’s government.

ultimately, it is us who chose the government. so i advise people who vote for it, dont complain in any forum if you have decided your vote.

People like Kenneth and Tan Kin Lian have written a lot of articles about the spending/expenditure side. What about the revenue/saving side? Prudency with our finance’s what has brought S’pore to what we are today compared to the ’60s and ’70s.

China also has a very high saving rate and it’s managed to survive on a much lower income base than S’pore. Are we going to squander our savings, capital base and national reserve, and subsequently incur huge national and household debts?

In a time where govt around the world is trying all they can to revitalize their economy, we had a very interesting strategy by our high paying govt. That is “to wait for the recovery of US”. This is a super passive strategy that has no timeline to talk about. What happen if the US goes into a “lost decade”, that means we will also goes into a “lost decade”. This is very unacceptable for a “high-grade” policy maker.

Agree with lactobacillus.

But then it is acceptable to Singaporeans, what!

So that’s why Singaporeans are called “stupid” by some smart ass in Taiwan and said to have “no respect” by some philandering and out-of-shape gong-fool star from Hong Kong.

KJ talked about about green technologies and that’s the way to go but how much attention is being paid to this here? People like PY and the government only understand building factories, biomed and pharma because they have been able to get geriatric from the west to set up shop come here, attracted by huge sums of money, and they think they have struck a coup!. Look at Japan and companies like Sanyo and GD Yuasa and amount of R &D they are putting into developing batteries which will drive the cars of the future. This si the sort of reas we shd be in. Singapore’s multi million dollar leaders are really out of touch and out of their depth now. They are still chasing yesterdays dreams… sad..

Me thinks that the most effective and fastest way to make SIN the most economically improved country is to do the followings:-

a) Rid the poor and weak, how is this to be carried out ? It is too SINful for me to suggest, maybe increase the GST to speed up the weeding. BUT do leave some to serve the elites and the wealthy.

b) Invite and let in as many foreigners with fortunes for safekeeping in our safe and politically stable society. Ensure the safety of these ‘imports’ and they will flock here and spend on properties and consumables and the economy will pick up beyond any competition.

With the above ploy, SIN will be the richest country in the World within the shortest time and there will be no Singaporean suffering from poverty anymore.

Okay, above is the thinking of a simple layman. The Talented and Elites of our society is definitely far more capable of better, efficient and equitable methods/ways to improve our live. I guess they(leaders) may unveil them before or during the coming election campaigns, expect to be promised of good livings in the coming golden era. However, whether or not, we, the people get to enjoy the golden period shall depend on our ‘karma’. So please ask oneself if You are deserving.

patriot

You want economic growth?

It’s actually very simple. Provide even more funds for startups and entrepreneurs. Create a culture that motivates people to start their own business.

These will be the businesses that will provide employment and economic growth to the country.

Of all the people I know, those who are enthusiastic about becoming entrepreneurs I can count with a single hand and I come from a business school (for goodness sake). Apparently the government isn’t doing enough to promote entrepreneurship. Not enough.

the irony@4: The question should not be “what the average Singaporean can do to increase consumerism”, because quite frankly what can be done when the environment to consume is not right? But rather, what can be done to create an environment where more consumerism can be encouraged. Living wages, unemployment insurance and GST voucher schemes are all good measures to create such an environment.

26/4/09

Hi Kenneth-Your article simply shows you are advocating for a Welfare State which must not be allowed at all costs. Welfare State is bad for all nations as they don’t have deep pockets and even the world’s biggest economies have done away with Welfare State and our Modern Singapore must not adopt the Welfare State, and existing systems have worked ver y well for both Modern Singapore and ordinary Singaporeans and they only need to be fined tune.

Ordinary Singaporeans like me don’t need the Elite to whether in PAP, PAP government of the day or people like you, to tell us what to do and when comes next General Election, we shall use our votes via the Ballot Box. Majority of us Ordinary Singaporeans want the more voices of our own as we have had enough of Elites (now we are seeing Elites in Oppositions-perhaps calling oneself an Elite can gain more respect and this is not true). Time for Modern Singapore and Ordinary Singaporeans to run our own nation and our own lives.

Regards
Andrew Chuah

*I am the same Andrew Chuah who has been posting articles on TOC since day.

To #21 Patriot:

I think that post is meant to be sarcastic (I hope). However, it is alarming that the younger generation of ‘elites’, like in the Wee Shu Min case, probably see things in that way. Essentially, what is being proposed is a “final solution” to deal with the perennial problem of the “parasitic poor”.

I certainly do not want to live in such an uncaring Singapore, where people who are dealt with life’s terrible hand are treated as untermensch. No one chooses to be borned into a poor and/or dysfunctional family.

Back to topic, I do not think Singapore’s current growth strategy is sustainable. We cannot possibly build our GDP on the back of cheap labour for MNCs indefinitely. It is only delaying the inevitable when other countries catch up in terms of price competition. Furthermore, the seemingly impressive GDP growth is merely a fig-leaf which masks the increasing redistribution of wealth to the rich and foreigners, while the rest of Singapore are condemned to stagnating or decreasing real wages.

I find the article has good intentions but I’m sorry to say that the economic reasoning is half-baked.

It is almost impossible for any country with small population to rely on its domestic consumption (like big nations) and not overly depend on exports. With total exports around 200% of GDP and consumption about 40%, putting cash in workers’ hand is not enough to create enough jobs to go around. What we must do is to reduce the pressure of companies to retrench workers, and yet there is no way to mandate this under a non-communist state. Even Malaysia is giving up its bumiputra affirmative action in the midst of this downturn for a good reason. Some things are just hard to accept.

I think we have to be ask ourselves what we are really driving at, what is the bottom line. If you are trying to justify more social welfare, don’t use the economy as a vehicle unless you have very solid reasons to back it up.

The economic situation in Singapore is a very tough one. If we don’t continue to make ourselves economically relevant to the rest of the world, it is very easy for us to be left alone and regress into a cosy kampong. Who needs Singapore anyway.

There will be people who says that due to lack of resources and been a small nation aka , we can only rely on export for our GDP growth, hence relying on other nation,aka mr WWW on post 26…and our dear MIW shouldn’t be blame for the downturn…aka repeating what the dear MIW has been saying

“What we must do is to reduce the pressure of companies to retrench workers” so what with the handout to reduce the pressure? the current scenario right now is that there is a sharp drop in demand for our export, and without the demand for these, companies will not be interested in retaining unneeded staff even if the handout is been given…cabish? so what you are trying to do is, saying the JCS is the right way to go Mr WWW? mr WWW, as what TOC has commented to your other post, even if you try to retain the staff, with no customers to buy your product, are you going to maintain production and get stuff with a warehouse full of unwanted goods? so in the end, without demand, there is no point in retaining the staff. at least boosting consumption has a multiplier effect that will be more useful in our scenario….but i guess people will only look from one perspective, the perspective that their mind is lock in.

“If we don’t continue to make ourselves economically relevant to the rest of the world, it is very easy for us to be left alone and regress into a cosy kampong. Who needs Singapore anyway.”

and mr WWW, you are right about the last part, who needs Singapore anyway…however, you are wrong about the first part. even if you try to make yourself economically relevant at the expense of your citizen, the developing nation will still surpass us and we will become obsolete…what you are advocating over here is again what our dear MIW has been saying “accept life as it is with minimum pay increment etc so that we can become more competitive” and doesn’t this recession teach you anything? even if you try to make your country economically relevant, when recession hits, it will hit you even harder.

however, the impact could be minimize by shifting the focus to less dependence on export. depending on export to boost GDP growth is the easy way out, and the growth is attributed to our dear leaders and their capability, but during this recession, the drawback is clearly evident, which some people still can’t seem to learn from the mistake. the best solution is to shift the equilibrium to another state.

To #26 www:

The argument here is not to ONLY rely on domestic consumption. The argument here is to improve domestic consumption. The export part has to carry on too

Reducing pressure on companies to retrench worker when there is no customer/demand…companies won’t be willing to keep the workers to produce products and services to stock up in a warehouse and let it get moldy. even with supplements to ease employer’s contribution, when there is no sales, there is no point in keeping unneeded workers…however boosting domestic consumption by cash/voucher handout helps as it provides some form of domestic demand that is lacking in the global market, and the knock-on effect can be felt gradually.

why is it possible for big nation to experience growth through consumption? it is not because that amount is totally use for current consumption, but they invest it to boost future consumption. please do not assume that consumption means spending money for current stuff, it could also be spending money for the future.

for the pass few years, singaporeans has been keeping themselves align with the rest of the world, through accepting minimum pay increment to boost our competitive advantage…however, this can’t be kept up as other nations are offering even lower cost and will surpass us one day in other aspect. you can keep trying the same method to boost economical relevance to the world, but one day, it will cease to work, thus a shit to another desirable equilibrium state is needed.

Re: Andrew Chuah on April 26th, 2009 12.15 pm

Andrew,

Have you even read KJ’s article? I have been following this website and you have a tendency to miss the forest for the trees.

He is advocating a reduced reliance in the export based model, especially if such a model — that is susceptible to swings due over-reliance on a country (US) that has unsustainable growth model, is not implemented with the right social safety nets, which KJ mentioned are the minimum wages and the unemployment benefits. So in fact, KJ is merely stating what he thinks must go hand in hand with the export based model. Should we have another model, perhaps, the same welfares need not be essential for sustained growth.

IMO, he was not advocating this country to be turned into a welfare state– he merely states the present model is flawed. In fact, even if we do implement the above-mentioned welfare state, I would hardly consider a country, which practices compulsory national services being a welfare state, afterall, we contributed to the country, when we are down, ensuring we survive (min wages, 3 basic meals and medical when retrenched) is certainly beneficial to the country, for when war comes, they need the reservist to be defend this land. This is more symbiotic than welfare.

To discuss your points could you let me in on your opinions and positions on the below questions?

1) Does having any welfare result in a welfare state? All governments have an obligation to take care of their citizens, esp in times of need. This is a fact. So at what point does a country becomes a welfare state? Bear in mind in Singapore, we pay taxes, do NS, pay GST, pay market rates for utilities, transports, public housings. In fact, even passports are priced to ensure cost recovery. If everything is at cost recovery and there is no welfare? Why the need for so much tax? For Merril Lynch and Citigrp bankers via GIC?

2) “even the world’s biggest economies have done away with Welfare State and our Modern Singapore must not adopt the Welfare State”

Please back your claims with examples please. Yes, many countries are trying to move away from giving too much welfare (not no welfare) due to budget deficits. However, such welfare would actually be sustainable, if some countries use their budget wisely, i.e. dun start 2 wars at the same time in Iraq and Afghan. So how did you come to your point? Was it based on factual reports?

3) “existing systems have worked very well for both Modern Singapore and ordinary Singaporeans and they only need to be fined tune”

Please do not try to speak on behalf of all Singaporeans.

Not everything that worked well in the past requires minor improvements to stay competitive. The world changes and there are many times where an overhaul is the only way to survive. That is the reason why you made your post using a computer and not an upgraded typewriter that was working well in its time that had undergone minor tweaks. They buy computers and dump their typewriters

#27: “at least boosting consumption has a multiplier effect that will be more useful in our scenario”

In what ever wild way you want to imagine it multiples, the end result is that the total domestic consumption contributes only 40% to GDP. That is it. 40%. All we want to do is to try the best way to keep jobs regardless where the stimulus directly goes to. If you are asking about social welfare (which is a valid issue by itself), don’t claim how it can help the economy when there isn’t evidence to support it.

I don’t want to repeat myself over again. Just be frank to yourself on what you are really after. If you can’t stand PAP no matter what they do, then be honest.

Voting out them is the easy part, but just don’t fantasize your life will be improved magically without overcoming the challenges we are facing. But if you are interested in finding out real issues then you have to put your emotions aside.

Personal income tax and GST contribute less than 20% of the total fiscal revenue (see documents at MOF webpage). If you can cut the reliance on the government, you can easily satisfy your emotional needs at elections.

“In what ever wild way you want to imagine it multiples, the end result is that the total domestic consumption contributes only 40% to GDP. That is it. 40%.”

40% of that, yes, may seems like a small amount to you, but it does help and that is the most important. so what if export contributes 200%, don’t forget you still need to minus off the import cost before you get your net export which is the one that contributes to our GDP. furthermore, with the tremendous drop of export demand, from where do you plan to get your 200% worth of export, the air? as long as our export market doesn’t recover, depending on export is meaningless as they won’t buy even though the “price” of the product may have drop. due to competitive production cost

I am not asking for social welfare, in fact i don’t need it and most of use don’t need it. what we are trying to suggest is a boost of consumption through some form of net transfer payment. however as in evidence to support claim that social welfare will help the economy, please read up on economics>GDP > government expenditure > net transfer payment and see how that will contribute to GDP growth, before you stand there and keeps saying that social welfare doesn’t help. Mr WWW, you imply that people are going about in a wild way, however you may be going about in a blind way, with all due respect, oblivious to other alternatives out there, limiting your thoughts. just because you feel that the implication of government expenditure from net transfer payment has not much significant impact, doesn’t mean it may not work.

“All we want to do is to try the best way to keep jobs regardless where the stimulus directly goes to.” that’s what we are trying to do here. you are trying to boost through job retention, which is highly unlikely to work, as again we have repeatedly explain, due to lack of demand. while the other party has been trying to boost consumption, which will have a more immediate impact on our economy.

Just like what post 28 has said, “The argument here is not to ONLY rely on domestic consumption. The argument here is to improve domestic consumption. The export part has to carry on too” so maybe after a few more post Mr WWW, have you digest this part? we are not trying to totally remove off the export factor, but just a shift towards a more desirable equilibrium….minimizing the risk however, for your case, you have been trying to stick to the same old formula…have you ever heard of this phrase ” the paradox of success is that success set the stage for failure” if you keep trying to follow the winning formula, you may become disabled and in the end, obsolete.

now now, please don’t put words into our mouth here, what we want, no matter who lead us, is for them to make the right and proper decision….and we are just making suggestion on how to improve. however, to those who are only willing to accept their own ideas

unless the Government recognises that the old model is broken and that we must reorientate the economy away from exports and saving towards higher domestic consumption and investment.
====

As Lily Rahim has said almost 10 years ago, our decision to rely on exports and MNCs/GLCs instead of local firms is purely political.

Until PAP is willing to share political power, which we all know its impossible unless it is taken from them by force, it is quite impossible for there to be higher domestic consumption

I would suggest that we take a completely different approach with regards to economic growth. Ask ourselves: can economic and population growth continue indefinitely in a finite world with finite resources? Mainstream (neoclassical) economists who have a total disregard for biophysical limits say ‘yes’, but most scientists will disagree. The arrival of peak oil heralds the end of growth. Unless we recognise this fact, we will continue to make unsound economic decisions and policies.

Revisiting the Limits to Growth After Peak Oil
http://www.esf.edu/efb/hall/2009-05Hall0327.pdf

“An economy is often likened to a machine, though few economists follow the parallel to its logical conclusion: like any machine the economy must draw energy from outside itself. The first and second laws of thermodynamics forbid perpetual motion, schemes in which machines create energy out of nothing or recycle it forever. Soddy criticized the prevailing belief of the economy as a perpetual motion machine, capable of generating infinite wealth — a criticism echoed by his intellectual heirs in the now emergent field of ecological economics.”

Mr. Soddy’s Ecological Economy
http://www.nytimes.com/2009/04/12/opinion/12zencey.html

Kenneth I disagree with you that Singapore Economy can be stimulate by fiscal policy or Kynessian Method cause our Internal Consumption are too insignificant.

The problem is our Gov Education System only produce Exam Smart’s but non Innovative Scholars that drive our Industries into hell.

I wonder how a English speaking Country can lost the Taiwan who are Chinese Speaking and Korean who doesn’t had the language of Technology.

It is a myth that countries with small population cannot rely on its private consumption like bigger nations and have to overly depend on exports. Norway’s private consumption stands at 45% of GDP (it has a population of 4.8 million – same as Singapore). Ireland’s private consumption stands at 59% (It has a poplation of 4.5 million – less than Singapore). Finland’s private consumption stands at 50% (population is 5.3 million). If the right environment is created, private consumption can be a great source of GDP expenditure growth in Singapore.

LoL @ www

Your economic reasoning is half-baked.

The concept of boosting domestic consumption differs fundamentally from reliance on domestic consumption. The idea is to boost any aspect of expenditure demand if there is room for growth in that aspect. Singapore’s consumption demand has room for growth, as does its levels of government expenditure and investement.

Ideally we should use our high savings to smooth consumption in a downturn which would result in consumption as a percentage of GDP increasing. Since there may be insufficient opportunities for investment, having high savings would otherwise lead to excess supply unless these savings are re-channelled back to consumption.

Reducing the pressure to retrench workers is ridiculous since that would only prevent the redistribution of labour from under-performing firms/sectors to out-perfroming firms/sectors. The prevalance of a mindset that one will not be laid off even if the firm under-performs significantly will lead to reduced production and efficiency. This is a key contributor to the catastrophic demise of the US auto firms.

The key issue is to determine how to best boost expenditure demand. This needs to be done through consumption smoothing via savings reductions to boost consumption demand, increased educational and infrastructure spending by the government to boost government expenditure and possibly monetary stimulus to improve credit channels which would boost investment expenditure.

Additionally there must be a focus on redirecting the economy towards out-performing sectors and as difficult as it may be we must prevent the dependence on under-performing sectors

As the saying :

No news is good news, thus

No Action is good action, thus

No policy is GOOD Policy. So..

Take no action and wait and see !!

Gov also taking this approach what to do!

They got no solutions just wait for US!

To: Que #25, thank You sincerely for your response.

My Post 21 was not intended for sarcasm, i perceived, though i maybe wrong, that the strategy i mentioned have been implemented for decades, initially in a slow, selective and careful manner. But now the practices are open and common, the reason for the presence of many foreigner inhabitants in our land.

Personally, i would not include the younger generation such as students like Wee Shu Min in the Scheme of our State Governance. Our pragmatic leaders from the First Generation to the Latest are the Perpetrators of the State Policies from economy to population growth. The younger generation will have to response and react when they are mature and are in positions to do so.

To Ravi Philemon #36:

You mentioned Norway, Ireland and Finland, Countries which i think other than the similarity of population size, Singapore is very different from them in terms of landmass, geography and culture. These Other Countries have strong primary productions including fisheries, national high tech industries, common national identities, common belief and national (indigenous) cultures. And to top it all, homogenous national ideologies, the last item, vital as it is, is lacking in our state and our leaders have to date failed to achieve.

Anyway as a local born layman, i see damage done beyond repair. maybe if SIN had reduced and maintained its’ population to 1.5 to 2 million with the Stop at Two Policy, we should have less survival problems today. BUT since money was(is) the only object pursued at the expense of non-tangible ideals such as humanities, since independence, THE IRONY IS THAT AFTER SOME MANY YEARS MAKING THEM(money), WE ARE FACING ECONOMIC DIFFICULTIES. Big joke.

patriot

Singaporean is really pathetic lot and keep saying that it cannot be done this and done that because Singapore is too small, too this and too that.

Singaporean should stop using too much logic and take risk. Why cannot increase own consumption in Singapore ? Never even try already condemn. The answer is just like the government, we are just waiting for thing to happen oversea so that we can replicate other countries, as a result, we only follow what other countries are doing, and what other countries are facing , we use it as a example.

Ask why Singaporean can’t think out of the box ? Why can’t Singapore develop product and service customize for Singapore first, and then later port it to other country ?

For example, Singapore is getting hotter (not sexier, I mean damn freaking hot), why can’t Singaporean create compact mobile air-con that can be carried around ? Why can’t Singaporean invent something portable that can create send a huge gust of cool icy air to cool the sweat ? Why can’t Singapore invent compact electricity car since oil so expensive ?

) patriot on Your comment is awaiting moderation. April 26th, 2009 11.35 pm To: Que #25, thank You sincerely for your response.

My Post 21 was not intended for sarcasm, i perceived, though i maybe wrong, that the strategy i mentioned have been implemented for decades, initially in a slow, selective and careful manner. But now the practices are open and common, the reason for the presence of many foreigner inhabitants in our land.

Personally, i would not include the younger generation such as students like Wee Shu Min in the Scheme of our State Governance. Our pragmatic leaders from the First Generation to the Latest are the Perpetrators of the State Policies from economy to population growth. The younger generation will have to response and react when they are mature and are in positions to do so.

To Ravi Philemon #36:

You mentioned Norway, Ireland and Finland, Countries which i think other than the similarity of population size, Singapore is very different from them in terms of landmass, geography and culture. These Other Countries have strong primary productions including fisheries, national high tech industries, common national identities, common belief and national (indigenous) cultures. And to top it all, homogenous national ideologies, the last item, vital as it is, is lacking in our state and our leaders have to date failed to achieve.

Anyway as a local born layman, i see damage done beyond repair. maybe if SIN had reduced and maintained its’ population to 1.5 to 2 million with the Stop at Two Policy, we should have less survival problems today. BUT since money was(is) the only object pursued at the expense of non-tangible ideals such as humanities, since independence, THE IRONY IS THAT AFTER SOME MANY YEARS MAKING THEM(money), WE ARE FACING ECONOMIC DIFFICULTIES. Big joke.

patriot

That’s a good one BD @ 37…however, i guess someone *you-know-who* will come and reply saying that your ideas won’t work and retaining jobs is the way…since that person has been doing that in past article and now.

now, for this article,looking at changes in Singapore, i am afraid that it is something that is hard to achieve. Sometimes an organization has their mind deeply set and become out of touch with the environment, becoming learning disabled, they will either not response to the symptoms that’s screaming at them until it is too late or they will not listen to the better ideas out there, as they consider theirs as the one and only solution. so we can wish for the right changes, but will it happen?

The US is basically buying the whole world out of poverty, and now she stops buying. Small countries suffer the most. What to do? We need to see how small countries without natural resources do it, although I think exports is still going to be the major component of growth. We also have to look at their trading partners. This may limit how much we can copy their strategy. If I am not wrong, Norway has oil.

This trick about developing local economy lies not in just the immediate consumption. we will do well to remember that almost everything that is exported is concieved for local use, be it a car or a handbag. It takes time, I agree but we should do it because we are more educated, more informed and more intelligent than most countries. To start we have to analyse our strength and opportunities. We are strong in engineering and manufacturing.

One opportunity that present itself is our aging population. Instead of sending old folks to JB, we should keep them here close to their families but develop the technologies and services to support them. These technologies and services can later be exported to, for example, China. Chinese people have only 1 Child, so their aging problem will be many times worse than us. We have lost the opportunity to capitalise our other opportunities such as our clean image (to develop cleaning industry) and our green image(to develop environment products and horticulture), we must not miss this one.

Regarding wage levels, we should stop blaming ourselves for not wanting the manual work. The wages we pay for these work just simply cannot support a Singaporean committed to living in Singapore. For example, a skilled labour is paid $80 a day and it had been the same since the 1990s. Who will want a job that does not increase pay for almost 10 years? In Australia, I realised that Australians are sick of the shoddy work performed by foriegn workers that they are willing to pay $200 per day. many young Australians now says that a trade is better than a phD.

Our government should not be too afraid to spend. With our reserves, how long will it take for us to end up in a debt situation? After all, what are our reserves for. Nobody had ever tell us what our reserves is for. And or these purposes, do we have enough? Should we stop accumulating or even to help the poor with some of the money we taken from them in the first place. Sorry, but with a population of 4.5 m I simply cannot think of a scenerio when we need a reserve as big as what we have.

12249.14 in reply to 12249.1

excellent insights from our potential future PM..

It thoroughly exposes the broken export economic model which the PAP govt has failed to transform since the 1980s..

We are still competing with our Asian neighbours on costs, which are fast catching up with us in terms of infrastructure and worker skills. Importing cheap foreign labour (which depresses wages of the semi-skilled workers) is only delaying the inevitable shake-up.

The high-beta economy as well as the lack of economic stablisers, e.g. PAYE income tax system, has led to a highly volatile economy for the country.

Given the high risk of unemployment and the lack of a social safety net, Singaporeans can’t plan ahead, e.g. getting married and having babies etc.

It is just a matter of years before the incompetency of the PAP economic policies will thoroughly exposed.

The PAP govt claims that stimulating consumption doesn’t help to boost the economy due to high leakages. This is not necessarily true as a significant portion of consumer expenditure is in domestic services, eg restuarant dinning, spa services etc. The weak domestic demand will also be strengthened by the suggested measures in the article to address the uneven distribution of income.

KJ,thanks for a sensible article.

I would urge you also to examine using the income components of GDP.it is clear that Singapore has the highest ratio of corporate profit as component of GDP,at least among the developed countries.And corporate in Singapore means GLCs and MNCs,at least 80%,that is how the money returned to PAP government,

STATISTICS SINGAPORE – Income Components of GDP: Trends and Analysis
http://www.singstat.gov.sg/pubn/papers/economy/op-e8.pdf

Thanks you and best wishes

It seems that everybody seems to like to talk about macro-economic stuff, but fail to realise that real change comes NOT ONLY from “great vision” but from improvement in the “nuts and bolts” on the ground.

What is lacking here right now is what I term as “domestic innovation”. Investment in technology that solves problems unique to Singapore. We also spend little in developing technology that enchances our unique advantages.

Why are we focusing so much on bio-technology when we still have to hire foreign labourers to do cleaning up for us?

I did not pick anyone commenting on the competition from the GLC, STs’ etc.
True the education system has not help us to be creative and killed generations of would be enterpreners, unless the policies be revamp the economy I see it will not only go down the next few years but will be such a hinderence to business , we will see more companies closing and more jobless citizens.The present government have no answers or solutions, the days of wealth generation through the ERP, GST revenue, price increases of basic services etc are ancient history. Unless we voice out and present our views, or better still vote the PAP out at the next election, the present generation will continue to struggle from the failed policies from the past and our children will have no future.

Yes, learning more about the statistics is the way to go (but you may want to look at more recent ones). There is a lot of information on the internet that will help us understand things better.

By the way, personal income tax and GST in total contribute less than 20% of the govt revenue last year (refer to revenue statistics from MOF website).

somebody is repeating again…however, i do must agree that the internet provides us with a lot of information, however people *or some* tends to only digest what they want to see and won’t accept other perspective, typical of a group-think.

however, statistics isn’t the way to go in every situation. rules and procedures gain from statistical situation can usually only be use in recurring situation. however when it is an unexpected situation, creativity and judgment is needed. past statistics won’t be effective in solving this crisis as it is the past that leads to the present, and if depend on the past again that lead us to success and the current scenario, it will be going through a death spiral aka trap of success and this type of events will still hit us hard.

it is said in the death spiral, one of my fav, that period of success leads to the success syndrome, which consist of arrogance, complacency, inward focus, codification, conservatism, greater complexity and because of that, an “organization” becomes learning disabled and lost touch with the external environment. then when performance decline due to environment disturbances, the “organization” goes into denial and will try to do the same to achieve back the past result. and the spiral will go on and forth.

so in the end, what i am trying to say is that statistics won’t get you out of every scenario

To Patriot@40: landmass, geography, culture, strong primary productions including fisheries, national high tech industries, common national identities, common belief, national (indigenous) cultures and even homogenous national ideologies, have very little to do with private consumption.

The truth is, that it is a myth that countries with small population cannot rely on its private consumption like bigger nations and have to overly depend on exports.

I think Singapore focuses too much on foreign exports rather than making domestic demand its main pillar of strength. I believe that since we’re still a young nation, we should focus more on strengthening our infrastructure and foundation and not spending too much resources garnering foreign investments and foreign talents.

“By the way, personal income tax and GST in total contribute less than 20% of the govt revenue last year (refer to revenue statistics from MOF website).”

Yeah, cos the rest come from ERP, alcohol tax, cigarette tax, road tax, petrol tax, COE etc

Hi Parka, I come from a business school too. Of all the people I know (in my class), those who are enthusiastic about becoming entrepreneurs I can count with a single hand. And they are all foreigners :-)

Apparently the government isn’t doing enough to promote entrepreneurship… is not true. Creative and Osim thrived w/o gahmen’s help and wilted when they came in. there is plenty of money. The problem is that the funds are controlled by … inexperienced folks who know nuts about business. so the easy way to make money is to …

Anyway, Singaporeans not willing to take up menial jobs is … bullshit. The problem is the pay is too low and not viable. And by employing cheap foreign workers, the employers simply pass the hidden social costs to the average Singaporean. so a min wage would indeed help… by creating decent paying jobs for SINGAPOREANS.

Finally, if we want low lying fruits, we can start off with NS. Lets face it. Recruits, Reservists are useless in a battle. And wages are a small component of the cost. Peanuts. think iceberg. Soldiers need to be feed, housed, equipped, trained, etc. Real money. We can have a equally effective professional army with 1/3 the numbers at probably half the cost. 20k real jobs that can feed a family.

Is there not a disproportionate % of savings (via compulsory CPF) being channelled to property? Which in itself does not have a great multiplier effect in the current scenario where raw materials and labour are both imported !
Even more foreingers working here pay rent which goes back to the landlord to repay his loan !
Not to mention, nowadays you have to Serve your Service Providers because they can’t even understand our Orders!

hmm…the minimum wage wouldn’t work…..that would encourage people with higher valued jobs to complete with people who lower valued jobs of the same pay….providing no economic benefit….domestic consumption should be boosted..even a 1 percent increase of domestic consumer spending can provide a stimulus to local industries which can keep more people in jobs.

“hmm…the minimum wage wouldn’t work”
Why not just try and see if it works ? The government can try job credit scheme but yet cannot try minimum wage.

It’s time Singaporean wake up their own ideas. After all Singapore is known as city of possibilities, what cannot be possible ? Try first and then criticize, don’t criticize and whine even before trying especially it is for benefit of employees.

choonway,
agree with you. Singaporean has always look outwardly for innovation and creativity. When US popularize the trend like web 2.0 and social network, tech savvy citizens capitalize on their popularity, and when the hype dies off, so is the enthusiatism. If Singaporean has been looking inwardly, we wouldn’t be mercy of outside countries, and we will have create innovation capability and motivation for more sustainable innovation, technology and business for local consumption. Needless to say, the main culprit is the Singapore government who control everything and go by profitability and chasing money first, and still look upon itself as leader, resulting in singapore going nowhere because the core competency is never build by following and moving whatever money-making trend. Worse still, the government is still living in the past, thinking what works and make money in the past can still be milked but then Singapore government is all about short term not long term, just take at the nonsense of old fart who justifies 30 years frailing investment. Why is this still old fart and his families of mercenaries still around sprouting nonsense and holding Singapore back ?

Kenneth,

At lot of what you have presented in your essay is not new. Many commentators ranging from the well-known economists (Paul Krugman, Alywin Young and Linda Lim) to non-professional, blogger types have already said essentially the same thing. The question is why has such views not sunk in?

I don’t have an aswer but as far as I can tell, it seemed that much of the Economics debate about Singapore seemed to revolved around a set of self-fulfilling prophecies that seemed to have grip (local professional economist) and the electorate in the main.

(a) Singapore is too small — this is often used as a convenient counter argument to shut any rationale alternative. For example, when the spector of increasing “consumption” is mooted, you will see the classic counter argument “economy is too small”. Somehow the notion of economic sustainability is often left out.

(b) High tech == good (success), low tech == bad (backward) — the high tech-ness of Singapore is often presented as proof of success of the economy or as some kind of means to the nation’s survival. So low tech activities are often overlook as “growth” potential. For example, BioTech at one time was seen as the growth engine and low tech like Shipbuilding sunset. Yet during the BioTech investment boom largely by the government, Shipbuilding was booming driven by demand rather than investment but seen as low tech left to wilther.

(c) Welfare bad. Another one of the classic counter argument used to put down alternative economic policy. In any rationale debate, all policy instruments including those that seemed to be “Welfare” in nature should be judge on cost-effectiveness basis. But in Singapore it seemed that anything smack of welfarism or is labelled so by old man LKY and his PAP stooge becomes a taboo.

(d) Saving is good, spending is bad. I supposed this attitude towards economic policy seemed to flow from the view that managing a household account is the same as managing a national account. Yet, in economics term, money is worthless when one talk about a national economy unless money is recycle for a purpose. Saving and debt are basically two side of the same coin. Neither is good or bad. Yet, the magic counter argument often deployed by people with wants to demolish alternative policy is the “so-you-want-to-deplete-the-reserve”!

(e) Economics is only for the people with economics degree. This is often the case when someone come up with alternative policy the first thing to attack is whether the originator of the policy has an economics degree or not, rather than whether the policy itself has merit or not. A useful insight about whether having a economics degree is helpful in understanding the economics is Alan Greenspan himself a train economics and a PhD holder admitted to not knowing what CDO was about. And non-economics or even university trained financial traders were able to understand CDO and implications for the economy. But I guess in Singapore, paper qualification is more important and the message itself.

If my gut feeling about these self fulfilling prophecies are indeed true, the really the key questions raised by you is how do we get the message of an alternative model to the people especially the powers-that-be and the electorate (those that can vote)?

Answers anyone?

Superb article. KAJ should now focus more on the Reform Party website & post more information there. Not much had been done when it was managed by the Ex Chairman NTS.

Whats wrong with Elites joining the Opposition as commented.? Its getting better informed. This is a media revolution.

Lets hope KAJ have some Prayers for Prosperity.

There’s nothing inherantly wrong with a moderate form of welfare state, one which education, food and healthcare are provided fully by the state.i feel that one of a good reasons why people in western countries / japan etc are so creative and entrepreneural is that they know that their basic needs are taken care of by their government.

pancake, what you say may be quite True, just like Maslow has said, “humans are wanting beings” and those motivation theories may differ in terms of what are the needs and how it is trigger, but if we put it in singapore context, most Singaporeans can’t even fulfill the bottom two needs which is psychological *food,shelter” and safety “security,stability”, so perhaps that’s why the motivation is at this level. some people will say that shelter as a need has been fulfilled, as they have a HDB home to stay in, but how true is it? with the current cost of housing.

Were you being ironic, Andrew? Your post is puzzling, taken at face value. Many countries have a system of social security. China is looking to reinforcing its own. In Europe, these systems have slowed and cushioned the effects of the recession thus far. The crisis wasn’t caused by state welfare, either. Without de facto state welfare, the financial sector in the US would have gone thermonuclear last september.

We need to examine all possibilities to get ourselves out of this hole we have dug ourselves into.

GO KJ! i wish you all the best in the upcoming GE! :D

Great article Ravi.

I quit Singapore and I am now living in Indochina.

Everything in Singapore reminds of my unhappy past and during this recession time there are too many sad faces in Sing to brighten my life.

Though 69 years old I plant sugar cane and sell them at the local prices and hope to own an ethanol factory to turn out green energy.

Ravi, come and see my farm. I will give you VIP treatment.

[...] sense that he understands the usefulness of an online media platform in supplanting his campaign. As a contributor to a prominent citizen journalist platform such The Online Citizen, he has articula…1) A minimum wage for old and young workers to prevent companies from importing cheap labor from [...]

Being a small island state with a population of about 4.5m, local consumption alone will not support the local economy. Release the fund in CPF to the citizen will offer short term help but in the long and medium term, USA economy is the key. China and India may not be able to offer much as they are focus on manufacturing as well. Low consumption and high saving rate in China do not offer us a easy ride into that market. This recession had opened up cracks in the gahment policies both domestic and export strategies. There is no quick fix solution unlike China which could could use its large reserve to build large capital projects as many part of China lack basic infrastructure . Sinkapore uses that strategy during the last recession hence the MRT. It is sad, the gahment had no fallback strategy other then reactive actions to mend small local issue. Long term planning for political succession to ensure famiLee (PAP) continue stay in power was actively pursued.

Maybe for once instead of worrying about GDP and moneygrubbing , we should start having new ideas on economies and finance , which seem to have gone off the rails in recent years,
Also countries like Singapore that make large use of low paid foreign labour should have import taxes imposed on them in developed countries . They are making use of other countries populations , do not have a minimum wage , even for Singaporeans , so do not have the same overheads or restrictions as other countries.