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Will this be Singapore’s Lost Decade?

S’pore needs to re-orientate its economy. Kenneth Jeyaretnam.

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15 years ago

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Kenneth Jeyaretnam

Recently there have been quite a few articles in the international press speculating that the recent financial crisis and ensuing severe recession may lead to a lost decade of growth for countries such as Germany, (which have relied on exports rather than domestic demand for growth). The German economy is characterised by high net exports, a high savings rate and low domestic consumption.

But this is also true of the high-growth Asian economies, such as China, Korea and in a particularly exaggerated fashion, Singapore. The Singapore government has long relied on exports and on the U.S. to be the ultimate driver of demand to provide the stimulus for Singapore’s growth. Domestic saving has been increased through the forced saving mechanism of the CPF, government budget surpluses and curtailing domestic wage growth through the import of low-cost labour from overseas. This model is no longer viable.

In 2008 net exports were 19% of Singapore’s GDP (however this was down from 32% in 2007 due to the collapse in external demand)**, the current account surplus was close to 15% of GDP (down from 23% in 2007), while domestic saving was 47% of GNP. Personal consumption expenditure was about 41% of GDP in comparison with countries like the US where personal consumption expenditure is around 70% of GDP.

The U.S. Administration has stated that the US cannot continue indefinitely to be the world’s consumer of last resort. President Obama recently called for America to consume less and export more. Here, despite a fall in first quarter GDP of close to 20% at annualised rate, the government’s policies mainly consist of waiting for a revival of U.S. growth whilst announcing limited measures to cut business costs. Whilst a package of S$20 billion may appear large, the actual budget deficit was much smaller and after taking account of the income from overseas investments smaller still.

It must be remembered that Singapore lacks many of the automatic stabilisers, such as unemployment benefits, which increase spending in a recession and mitigate the multiplier effects from declining exports and falling demand. Cutting costs through wage reductions and other domestic income-reducing measures may work for one country but cannot work for the world economy in aggregate; a point which I thought was conclusively settled with the publication of Keynes’ General Theory. Lower wage costs (which are in any case likely to be a relatively small proportion of the costs of production) are unlikely to stop firms here from laying-off workers when their export sales have fallen off a cliff.

In my view, the government should be much more aggressive in taking steps to boost domestic demand to offset the contractionary impact arising from the export sector. It is completely unnecessary for Singapore to be saving 47% of GNP when the returns from our foreign investments have been so low. I would like to see the following steps (the list is not meant to be exhaustive) to boost domestic demand adopted as a matter of urgency:

· A minimum wage with exemptions for both old and young workers. This will also have the effect of discouraging employers from just importing cheap labour from poorer Asian countries which has depressed wages and led to declining productivity

· A reduction or suspension of the GST which disproportionately impacts lower-income households

· Higher tax credits for lower income households which will be clawed back as income rises

· Reductions in fees and service charges, including total elimination of school fees at the primary and secondary level

· Reductions in Employee CPF

· Massively increased investment in education and infrastructure, particularly aimed at increasing energy efficiency and developing new “green” technologies along the lines of the recent US stimulus package

Given the magnitude of the falls in GDP year-on-year we need a total stimulus (tax reductions plus additional spending) of the order of 8-10% of GDP, instead of 3.5% of GDP which is what was projected as the Overall Budget Balance in the Government’s 2009 Budget. It should be pointed out that whereas the Budget says S$5.8 billion will be spent by the government on stimulating bank lending this is not actual spending but is in the form of loans or loan guarantees. There will only be spending and losses to the taxpayer if the loans have to be written off. Therefore the actual stimulus arising from this scheme will only be a small fraction of the headline number. This is much less than the other central banks, such as the US Federal Reserve and the Bank of England, are doing on a massive scale already.

All this can be done without raising taxes on the higher earners and without raising the low marginal tax rates that make Singapore an attractive place to invest and do business in.

To conclude, Singapore risks a lost decade of economic growth akin to that suffered by Japan in the 1990s or even worse 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.

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* ‘Germany’s Policy of Containment’, Financial Times, 6th April 2009

**Economic Survey of Singapore 2008

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Hotel Properties Limited suspends trading ahead of Ong Beng Seng’s court hearing

Hotel Properties Limited (HPL), co-founded by Mr Ong Beng Seng, has halted trading ahead of his court appearance today (4 October). The announcement was made by HPL’s company secretary at about 7.45am, citing a pending release of an announcement. Mr Ong faces one charge of abetting a public servant in obtaining gifts and another charge of obstruction of justice. He is due in court at 2.30pm.

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7 hours ago

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4 October 2024

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SINGAPORE: Hotel Properties Limited (HPL), the property and hotel developer co-founded by Mr Ong Beng Seng, has requested a trading halt ahead of the Singapore tycoon’s scheduled court appearance today (4 October) afternoon.

This announcement was made by HPL’s company secretary at approximately 7.45am, stating that the halt was due to a pending release of an announcement.

Mr Ong, who serves as HPL’s managing director and controlling shareholder, faces one charge under Section 165, accused of abetting a public servant in obtaining gifts, as well as one charge of obstruction of justice.

He is set to appear in court at 2.30pm on 4 October.

Ong’s charges stem from his involvement in a high-profile corruption case linked to former Singaporean transport minister S Iswaran.

The 80-year-old businessman was named in Iswaran’s initial graft charges earlier this year.

These charges alleged that Iswaran had corruptly received valuable gifts from Ong, including tickets to the 2022 Singapore Formula 1 Grand Prix, flights, and a hotel stay in Doha.

These gifts were allegedly provided to advance Ong’s business interests, particularly in securing contracts with the Singapore Tourism Board for the Singapore GP and the ABBA Voyage virtual concert.

Although Iswaran no longer faces the original corruption charges, the prosecution amended them to lesser charges under Section 165.

Iswaran pleaded guilty on 24 September, 2024, to four counts under this section, which covered over S$400,000 worth of gifts, including flight tickets, sports event access, and luxury items like whisky and wines.

Additionally, he faced one count of obstructing justice for repaying Ong for a Doha-Singapore flight shortly before the Corrupt Practices Investigation Bureau (CPIB) became involved.

On 3 October, Iswaran was sentenced to one year in jail by presiding judge Justice Vincent Hoong.

The prosecution had sought a sentence of six to seven months for all charges, while the defence had asked for a significantly reduced sentence of no more than eight weeks.

Ong, a Malaysian national based in Singapore, was arrested by CPIB in July 2023 and released on bail shortly thereafter. Although no charges were initially filed against him, Ong’s involvement in the case intensified following Iswaran’s guilty plea.

The Attorney-General’s Chambers (AGC) had earlier indicated that it would soon make a decision regarding Ong’s legal standing, which has now led to the current charges.

According to the statement of facts read during Iswaran’s conviction, Ong’s case came to light as part of a broader investigation into his associates, which revealed Iswaran’s use of Ong’s private jet for a flight from Singapore to Doha in December 2022.

CPIB investigators uncovered the flight manifest and seized the document.

Upon learning that the flight records had been obtained, Ong contacted Iswaran, advising him to arrange for Singapore GP to bill him for the flight.

Iswaran subsequently paid Singapore GP S$5,700 for the Doha-Singapore business class flight in May 2023, forming the basis of his obstruction of justice charge.

Mr Ong is recognised as the figure who brought Formula One to Singapore in 2008, marking the first night race in the sport’s history.

He holds the rights to the Singapore Grand Prix. Iswaran was the chairman of the F1 steering committee and acted as the chief negotiator with Singapore GP on business matters concerning the race.

 

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Current Affairs

Chee Soon Juan questions Shanmugam’s $88 million property sale amid silence from Mainstream Media

Dr Chee Soon Juan of the SDP raised concerns about the S$88 million sale of Mr K Shanmugam’s Good Class Bungalow at Astrid Hill, questioning transparency and the lack of mainstream media coverage. He called for clarity on the buyer, valuation, and potential conflicts of interest.

Published

2 weeks ago

on

23 September 2024

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On Sunday (22 Sep), Dr Chee Soon Juan, Secretary General of the Singapore Democratic Party (SDP), issued a public statement on Facebook, expressing concerns regarding the sale of Minister for Home Affairs and Law, Mr K Shanmugam’s Good Class Bungalow (GCB) at Astrid Hill.

Dr Chee questioned the transparency of the S$88 million transaction and the absence of mainstream media coverage despite widespread discussion online.

According to multiple reports cited by Dr Chee, Mr Shanmugam’s property was transferred in August 2023 to UBS Trustees (Singapore) Pte Ltd, which holds the property in trust under the Jasmine Villa Settlement.

Dr Chee’s statement focused on two primary concerns: the lack of response from Mr Shanmugam regarding the transaction and the silence of major media outlets, including Singapore Press Holdings and Mediacorp.

He argued that, given the ongoing public discourse and the relevance of property prices in Singapore, the sale of a high-value asset by a public official warranted further scrutiny.

In his Facebook post, Dr Chee posed several questions directed at Mr Shanmugam and the government:

  1. Who purchased the property, and is the buyer a Singaporean citizen?
  2. Who owns Jasmine Villa Settlement?
  3. Were former Prime Minister Lee Hsien Loong and current Prime Minister Lawrence Wong informed of the transaction, and what were their responses?
  4. How was it ensured that the funds were not linked to money laundering?
  5. How was the property’s valuation determined, and by whom?

The Astrid Hill property, originally purchased by Mr Shanmugam in 2003 for S$7.95 million, saw a significant increase in value, aligning with the high-end status of District 10, where it is located. The 3,170.7 square-meter property was sold for S$88 million in August 2023.

Dr Chee highlighted that, despite Mr Shanmugam’s detailed responses regarding the Ridout Road property, no such transparency had been offered in relation to the Astrid Hill sale.

He argued that the lack of mainstream media coverage was particularly concerning, as public interest in the sale is high. Dr Chee emphasized that property prices and housing affordability are critical issues in Singapore, and transparency from public officials is essential to maintain trust.

Dr Chee emphasized that the Ministerial Code of Conduct unambiguously states: “A Minister must scrupulously avoid any actual or apparent conflict of interest between his office and his private financial interests.”

He concluded his statement by reiterating the need for Mr Shanmugam to address the questions raised, as the matter involves not only the Minister himself but also the integrity of the government and its responsibility to the public.

The supposed sale of Mr Shamugam’s Astrid Hill property took place just a month after Mr Shanmugam spoke in Parliament over his rental of a state-owned bungalow at Ridout Road via a ministerial statement addressing potential conflicts of interest.

At that time, Mr Shanmugam explained that his decision to sell his home was due to concerns about over-investment in a single asset, noting that his financial planning prompted him to sell the property and move into rental accommodation.

The Ridout Road saga last year centred on concerns about Mr Shanmugam’s rental of a sprawling black-and-white colonial bungalow, occupying a massive plot of land, managed by the Singapore Land Authority (SLA), which he oversees in his capacity as Minister for Law. Minister for Foreign Affairs, Dr Vivian Balakrishnan, also rented a similarly expansive property nearby.

Mr Shanmugam is said to have recused himself from the decision-making process, and a subsequent investigation by the Corrupt Practices Investigation Bureau (CPIB) found no wrongdoing while Senior Minister Teo Chee Hean confirmed in Parliament that Mr Shanmugam had removed himself from any decisions involving the property.

As of now, Mr Shanmugam has not commented publicly on the sale of his Astrid Hill property.

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