Archive for the ‘Economics’ Category

Mr Lui should just shut up

December 14, 2012 8 comments

That is my kind advice. Repeated attempts to explain something that sounds wrong only made it sound even worse.

If raising fares also meant improving service standards, can the Minister of Transport explain how is it that service levels continue to deteriorate after all these years of fare increase? Since past increment in fares actually translate into worsening service standards, history obviously shows that a rise in fares will not improve service standards. Service standard is also not simply achieved by paying bus captains more. It is a combination of reasonable fares, timeliness of buses, training, bus captain’s personal service, efficient planning of bus routes etc.

If the minister is concern about ‘keeping transport operators commercially viable’, he need not worry. SMRT and SBS continue to earn great profits and even manage to generously give out dividends to shareholders after a year of breakdowns and accidents; thanks to it’s monopolistic position and PAP’s generous transfer of $1.1 billion from the tax payers’ pockets (that could have been used for public projects) to capital owners, investors and of course, the bulk of which goes to Temasek Holdings. And can someone remind Cambridge educated Mr Lui commercially viable does not equate huge profits (with the cheek to hand out dividends after a government bail out)?

Then Mr Lui goes on to say that having leaving the public transport operator privatized would meant more efficiency and depend less on tax-payers’ money. Is it any more efficient now? Has it not also depended on tax payers’ money? So despite government subsiding the public has to pay even more? Ever heard of double taxation? Is there any difference in money coming directly from the tax payers’ pockets and indirectly as subsidy from the government? Either way it’s financed by the public. The only nightmare is taxpayers are paying it BOTH ways. How is the current situation of the government subsidizing $1,100,000,000.00 any different from being nationalized?

What this smart minister said doesn’t seem to make much sense: “He said taking the populist approach of avoiding fare increases completely and pushing it onto public transport operators will give the operators no incentive to be efficient and provide better service for commuters.” In order to survive, the operators have to think of other ways if fares are not increased. Sometimes creative ways. Sometimes it may simply be a reduction in costs in other aspects, such as drop out some useless board of directors (see link, and think for yourself how has that entourage of government linked personnel contributed anything constructive in ensuring the past failures did not happen) and use that millions in director fees saved to increase the pay of the bus captains. I’ll tell you what would not give the operators any incentive to improve standards–Government guarantee of survival and profitability. Not just being ‘commercially viable’, but ‘huge profits’. Being a monopoly in train transport and free money from the government going into the billions, why should SMRT has the motivation or incentive to become better?


And let the troubles roll

December 12, 2012 2 comments

The SMRT saga continues and all I see are denials and denials and denials. Where are the transparency and conversation the government sought to have? Where are the substances in all these conversation?

Touching down back to this sunny (or rather, rainy) island, the first thing the taxi driver yanked about is the failure of SMRT. Never mind that the recent sagas had created a deep distrust in the government handling of a private transport operator that had conflicting invested interest by the government itself, the transport minister goes on to showcase his EQ deficiency and insensitiveness in announcing the need to raise fares in order for SMRT to offer higher pay to attract Singaporeans to work as drivers.

And to the great embarrassment to any citizen of this ‘fine’ country, we have $15,000 a month MPs (see link) who are incapable of stringing logical answers and statements, flabbergasting in a stammer of nonsensical and heavily Singlish flavored replies that speaks zero confidence, absence of factual evidence, and simply devoid of intelligence. One can easily sense the great denial going on. When you can’t convince, you try to confuse, even though that’s a rather bad job done. I would rather hire Sarah Paulin as an MP. At least she knows the simple logic of Russia and Alaska being pretty near one another. How on earth did the great PAP ended up with minions like these?

Firstly, SMRT got someone who had not a single day experience in transport management to head a major transport company that offers public bus services. How is that risk assessed or approved is anyone’s guess. A few years down the road, it became obvious that Singapore Mass Rapid Transport is turning into SuperMaRkeT Inc with all that focus on retail rather than the core business in transport. Sure, revenue increased, which is a good thing for shareholders, notwithstanding that fares were still being raised in the face of “ever increasing cost in fuel and wages” despite increasing profits. Consequentially, failures of the train system came one after another, another after another.

The answer provided by the Ministry of Transport, which seems to have been sleeping on for years, is to spend more tax payer’s money in creating some random council to assist an entire ministry in solving SMRT’s problem. Why then do we even need a ministry for in the first place? Are all these people working in the ministry so useless they have to get additional resources to remedy something that they should be overseeing all this while? Lawyer fees were incurred, effort and thousands of hours later, it simply culminated in a muffed blaming game; in the hope of boomeranging the responsibility on the already guilty transport operator away from the government.  What I see is simply a show, a boring show by script writers who slaved away in MediaCorp’s cubicle box paid for by tax payers.

Turning back to an ex-military 3-star general to solve the current issue signified the depth of buried head the government had. Further stepping up on the bureaucracy ladder, this ex-general intend to rope in his soon-to-be-retired colleagues in the military. Isn’t it funny yet somehow familiar at how the military becomes the magic pill that “should” set things right. It’s simply a matter of going back to how things used to work before all that drama. Since things were fine headed by an ex-military honcho in the past, it must work in today’s time right? I’m baffled by the simplicity solution the government sought to create.  Anyone who had experience in the military will know that it is not the most efficient organization around. Appointing people who used to direct tanks and heavy vehicles to manage a nation-wide transport system isn’t really the wisest thing if you ask me. To be fair, time should reveal how capable our military is.

While the government stands by the view that public transport operators should be left privatized in order to achieve ‘efficiency’, they are slapping themselves in their face by indirectly admitting that the government, as a public serving body, is not efficient. Well, that’s pretty obvious going by the waste of tax payer’s money in the recent Procurement saga where there’s no logistical expert, no due diligence and no controls on spending money on the various ministries and statutory boards. How privatize is SMRT in the first place when the government is free to insert their own people as and when it deemed necessary? If simply being privatized equates efficiency and profitability, maybe the ministers, with their highly decorated accolades and degrees from prestigious universities care to explain the reason SMRT failed, or any other privatized firms such as the major banks failures in recent years.

Although “privatized”, the government goes on to use $1.1 billion of tax payer’s money to assist these transport operators to upgrade their infrastructure and procure new vehicles. $1.1 billion, that’s 1,100 million. It’s not a small figure mind you. It is equivalent to more than 8 years SMRT’s profit. How is such a huge amount approved so easily and so fast amazed me. All the more amazing when the PAP has always been reluctant to spend even an additional couple of millions more on healthcare and aid for the unfortunate.

In another showcase of efficiency, or rather, the lack of thorough debate and discussion with a fast approval in Parliament, the citizens of this island state are coerced to bail out a company that feeds profits to the government. In theory, privatized companies do perform better as they have a bottom line to take care of. By taking away that urgency to take care of bottom line, the government is signaling that SMRT will be guaranteed survival. Well, not only survival, the government goes an extra length to signify their willingness to guarantee profitability, even at the expense of the real shareholders—the citizens funding the entire infrastructure upgrade and bus procurement. The issue is not a matter of market failure and treating it with a useless tagline of ‘privatization’ when it is in essence heavily subsidized by public funds. The real issue is a Principle-agent problem, exacerbated by common interests between the government’s investment arm and the problematic company in question.  In essence, tax payers are paying for their own buses and bus captains and paying on top of it extra premium to ensure shareholders (ie Temasek Holdings) get their fatty pay check and bonuses. What choices do the common man and woman down the street has?

P.S. At the time PAP experienced WP’s episode of ‘unfaithful MPs’, we see Low Thai Kiang reacting to crafty interview questions (read between the lines how those questions posed are designed to bait certain answers) with ease and style. Why can’t the PAP ever learn their PR skills?

Just a thought: Economists; argumentative and combative

May 2, 2012 3 comments

I am in no position to debate the finer economics in Dr Lim Chong Yah’s ‘drastic’ proposal. But I do resonate with his desire in combating and arguing for the greater cause, a common trait among economists I dare say. In case you missed the article on Dr Lim’s rebuttal of those who claimed his proposal as ‘unfeasible’:


SINGAPORE: Former chairman of the National Wages Council Professor Lim Chong Yah has issued another statement to clear up what he describes as “fallacies” over his wage restructuring proposal.

He said the “Shock Therapy” between 1979 and 1981 in fact, resulted in a higher GDP growth rate for Singapore.

“Official statistics show Singapore had an average of 6.4 per cent real growth rate per year from 1974 through 1978, the quinquennium before Shock Therapy I. They also show that the quinquennium that followed, covering the three years of Shock Therapy I and the two years following it, the average real GDP growth rate was 9.2 per cent per annum, a figure which is much higher than the preceding five years of 6.4 per cent per annum,” said Prof Lim.

“Do not the comparative figures indicate the overall economic success of ER I or Shock Therapy I? No doubt about it.”

He added it is also wrong to say that the 1985 – 86 recession was triggered off by the Shock Therapy of 1979 – 81.

Prof Lim said his research showed that “the recession was regional, not national, Singaporean only”.

He said his hope is that “future discussion on Singapore’s recent economic history will not repeat the above two fallacies now used to oppose the wage adjustment advocacy” of his wage restructuring proposal.

Prof Lim had proposed that the pay of low income workers be raised by 50 per cent over the next three years and that the pay of high income earners be frozen during the same time.

He had explained that this will narrow the income gap and force companies to raise productivity.

Several government leaders have raised concerns over his proposal, saying that wage increases should be in tandem with productivity gains.

– CNA/cc


When the past old guards of Singapore like Dr Lim and even the former Permanent Secretary Lim Siong Guan Ngiam Tong Dow (read up his book “A Mandarin and the making of Public Policy” if you have time) speaks against the current policies helm by the PAP government, it speaks great volume.

On one hand, we have a government who don’t have the vision and courage to implement ‘drastic’ moves to help those who were left behind. On the other hand, the government has no qualms allowing the cost of living in basic needs like housing and transportation to rocket and to deteriorate. How does the government expects to yield better results if they are always doing things the same way?

How much can assisting the lower income cost? Let’s say 10% of the Singaporean population (excluding PRs, if you will) belongs to the poor category, that would translate to an estimated 300,000 people, and they earn $800 a month. A 50% increase would mean increasing $400 to $1,200 over 3 years. Even if the government is to pick up the tab, it’ll only cost $120 million over 3 years to help those in need—-a fraction of the $1,100 million (and I am not even adding on the ‘shared $900 million tab to repair and maintain the railways’) given away to SBS and SMRT. While I do not advocate freely giving away money, I don’t understand why are the government ministers so stingy on small expenditures like these while they are gambling hundreds of millions upon billions away in Temasek and GIC.

The productivity argument by the government is fine. I have argued for pushing up productivity in my other post. However, we need to be realistic on low-skilled work like drivers or labor workers (thus my support for minimum wage in my other post). There are certain jobs that productivity is contained by the nature of the job.  Take for example, bus drivers. How on earth do you expect bus drivers to be more productive? Drive longer hours and risk death? How about creating auto driving bus or robots that drives?

The fact that SBS pays such a low wage of $1100-1300 basic for their bus captains for 12-13 hour work days for the past few decades is a joke. In typical PAP fashion, they push the blame on Singaporeans saying they are unwilling to work for that wage in order to justify hiring from China (why China of all places??? are the wage so low that even Malaysians are avoiding them?). After the government shamelessly used tax payer’s money to buy new buses and trains, hire new bus/train captains from some country side in China where the natives can hardly spell ‘Singapore’, and even throw in more cash to repair and maintain the railways, SMRT has the cheek to announce dividends. Doesn’t dividends signify the well-being of the company? If so, why are tax payers’ money used again and again to bail these government controlled ‘private’ companies? If they are able to generate profits and dividends, I don’t understand why is the PAP government so bent on transferring national wealth to these companies without consultation with the citizens. Can this be considered abuse of power?

Categories: Economics

Improving living standards

February 22, 2012 2 comments

Current Economic model

The government raved about the country’s phenomenal economic growth. But why are Singaporeans not satisfied? Many point to the ever increasing Gini coefficient and the seemingly absence of increase in economic well being (real income growth). While Singapore could boost to have the most number of millionaires per capita, the sad fact is, while the rich becomes richer (and faster), the rest of the society is not. Why is that so?

The key ingredient to drive improvement to quality of life

Not surprisingly, the key reason why many people don’t feel better off even with economic growth is simply the P word – productivity. A study by McKinsey Global Institute concluded that productivity coupled with free competition drives higher real wages and improves quality of life even among developing countries with incomplete infrastructure. While Singapore’s economic growth had been impressive for the past few decades, the ranking of Singapore workers’ productivity level has been dismal. For those without basic economics background, let me explain using an over-simplified illustration:

Let’s say Company A hires 10 workers and pays each worker $1 a month. Each worker can produce 2 goods maximum monthly that can sell for $1.50 each. For simplicity, assume no capital cost or any other cost. So input is $1 x 10 workers = $10 and output is $1.50 x 10 workers  x 2 goods = $30. The owner of Company A earns $20 as gross profit per month.

Now the economy is booming and there are more demand for Company A’s products. Demand for the goods increase from 20 to 40 per month (100% increment). The owner expanded production and hires 20 workers. As each worker continues to produce 2 goods monthly, the marginal increase in input is the same as the marginal increase in output. Company now pays $1 x 20 workers = $20 as input in order to earn $1.50 x 20 workers x 2 goods = $60. Input increased by 100% and output increased by 100% because demand increased by 100%. The owner of Company A thus now earns 100% more at $40 as gross profit per month.

We see that just because demand increase does not mean the company will pay more to each worker. The ones most proficient in using resources and capital (ie the ower of Company A/ business owners/ capitalists) are the ones that stand to benefit the most from economic growth. On the other hand, the typical workers are not paid a much higher wage since the owner of the company can simply hire more workers to increase output.

When we factor in labor mobility and demand-led inflation, we can see how the picture starts to get real ugly. Higher inflation erodes real wage (or purchasing power) of the workers. The influx of cheaper labor supply from another region adds downward pressure on real wages and contributes to higher displacement rate of local workers. In fact, cheaper labor supply would only benefit Company A more. Business owners and companies don’t discriminate workers. If they can only pay $0.50 per worker to get the same amount of output, they will only get to gain more.

In order to be better off, each worker must produce more than 2 goods a month. Let’s say each worker can now produce 4 goods a month, Company A can continue to hire just 10 workers and can also afford to pay each worker more. In fact, the company can now pay up to $2 per worker each month. Input would be the same as hiring 20 workers whose productivity is only 2 goods a month and output will still increase from 20 goods to 40 goods. The owner will still enjoy an increase in gross profit. The only difference is workers now also enjoy a higher wage. Even if the owner is to increase the wage from $1 to $1.50 instead of $2, output would be the same and the workers will still be better off. The rise in real wages will also increase new demand for goods, giving rise to consumption led demand increment rather than population led demand increment.

One might argue that there are many other complex factors but it is not difficult to see how productivity is the key agent behind a higher quality of life. The fundamental idea is very simple. With more output at a given level of input, there is more to go around. One produce more means one can now consume more.

The current economic model in Singapore that still prioritizes labor input rather than improving productivity will only create a country that distorts social harmony. Having attracted so many MNCs to set up operations in the island with low tax and political stability, the government is compelled to let in foreign labor to anchor those good companies in Singapore. But without a corresponding increase in productivity, it creates a cycle of self-feeding system of labor demand.

More companies mean more demand for labor. The authorities are unwilling to see a tight labor market for fear of companies deciding to uproot to other cheaper countries. So they yield to the request of increasing labor directly through allowing more foreign workers into the country. Having allowed a large population of foreign labor to the local population creates more demand for other companies’ products and country resources. Capital and resource owners enjoyed a windfall and wanted to hire more because productivity did not improve. So they demand the government to let in even more foreign workers. End result? More inflation, more stress on country infrastructure and resources, more social divide, stagnating of real wages among the lower and middle income, increasing disparity between the rich and the poor, and ultimately, unhappy citizens who do not feel that they are not better off even with all that hyped up media announcements of a fantastic economic growth in the country. It is no wonder Singaporeans are an angry lot in recent years.

Productivity can be improved in many ways. Technology is one. Education or training is another. Let’s not forget about creativity as well. But productivity may also be expensive and time consuming to generate and it can be easily replaced by additional inputs of labor and/or capital. Allowing more labor does not give the companies any incentive to improve productivity. In my opinion, it is better to swallow the bitter pill while the country is still relatively rich and stable. Restricting the option of labor would force companies to improve productivity in order to make business sense in such an environment.

Of course, this is an opinion of someone with limited economic training and I am not expecting many business owners to welcome such an idea. I would actually expect business owners to haul vulgarities into my face and reasoned that operating a business is a much more complex process. I am no business guru but I do believe having to do with less labor and improve productivity is quite possible. Productivity does not have to be high-tech. Good training and hiring the right people often pays much more dividend. How many times have you seen workers dilly-dallying away in shops waiting for business to come in instead of actively approaching customers or create more compelling marketing tactic? A perfect example of productivity as witnessed from my previous travel in France is a single waiter serving a café of 10 tables while it would usually require 3-4 workers in a café of similar size in Singapore. In the United States, you won’t see a legion of workers working on the construction sites, unlike Singapore where we compensate productivity with thousands of foreign labor workers.

Categories: Economics

PM Lee needs to be less narrow minded and look further into the future (as what he always claim)

October 31, 2011 4 comments

Yahoo News: PM Lee draws lessons from Qantas fiasco

Once again, PM Lee is telling the entire Singapore that limiting foreign workers equates to lower economic growth. It’s akin to saying ‘hey, you guys want less foreigners, so it’s not my fault that you are going to suffer slower economic growth.’

After being paid millions and receiving an elite education, and as someone who always claim that the government is always looking far, it’s such an insult to the profession of economics to depend so much on the sole factor of labor for economic growth. Economic growth can be created via 3 factors, labor, capital and productivity (or technology). This over-emphasize on labor seems to insinuate that the government does not think much of the other 2 factors.

Increasing capital investment is as important as labor, and admittedly, the PAP government had done a relatively good job in building infrastructure, hubs like Biopolis and invest R&D expenditure, even though more can be done. A quick wiki-check shows that Singapore stands at 26th position in world ranking in terms of expenditure of R&D as a percentage of GDP (source from

Productivity, or technology is the one important factor that Singapore is truly lacking; if the reports of how unproductive Singapore workers are compared to other advanced economies are any indication. As an economy approaches maturity as in any advanced country, this factor becomes the most important factor in improving GDP growth since there is only so much labor and capital you can invest.

With their pay scale and bonuses tagged to GDP growth, it makes rational sense that the ruling government and civil service would tend to chose the easier way out by increasing labor input instead of increasing productivity. Moreover, the results of productivity takes some years to show. PM Lee himself mention about productivity ( but the importance is somehow not communicated clearly relative to the importance of bringing in external labor.

Increasing labor is the easiest and the fastest way to increase GDP, but not entirely the best option especially in land scarce Singapore with limited breathing space. A pretty obvious decision to make for our highly educated ministers isn’t it? As it turns out, it seems that the government preferred this option, going by how they love to advocate the link between foreign workers and economic growth. It’s almost like Singaporeans don’t deserve any credit for the country’s stellar GDP records.

I am voicing this out because in too many forums have I seen foreigners using the exact same logic the ruling party advocates (that foreign workers contribute to Singapore’s impressive growth) to rebut so-called-xenophobic views of the locals. Such perpetual self-belief among the foreigner community in their ‘superior’ contribution as the main reason why Singapore is progressing so well is worrying, made worse by the (whether deliberate or not) unofficial endorsement from the PAP government.

Of course, I am not saying all foreign workers think the same way. However, I feel that the government could do some good in encouraging their own demoralized citizens instead of overplaying the importance of foreigners in their own country. It’s no wonder that Singaporeans are feeling that their own government is taking care of foreigners more than their own citizens.



Just when I posted a post on foreign workers, the local media finally broadcasted something we knew all long–the blatant discriminatory hiring practices most notably in the banking and IT sector. It’s a joke it has taken so many years for the local media to pick up this news. I won’t be surprised if the ruling party won’t intervene, even after this report. The frustration of Singaporeans is true, going by the comments posted.

I am not going to be coy in pointing out that the India Indian race tend to be heavily hired in fields I mentioned. Logically, there’s no link between Banking skills and IT proficiency and being born as an Indian in India, although the perception may be so. For certain companies that assert Indian professionals are better, it’s just a convenient sweeping statement to hide behind the vile of discriminatory hiring practices. I am not stereotyping but if my sample size is any measure, my own experience with Indian banking/ IT professionals (whether in Singapore or in India) have almost always include a major factor of frustration. Maybe it’s cultural difference, maybe it’s different working styles. But I would expect professionalism to be universal. All that hype about them being really good throws up too much promise on their ability which doesn’t quite measure up in the final results at the end of the day.

Categories: Economics

Local media self-promoting the goodness of the government

October 11, 2011 Leave a comment

Median income of S’poreans increased over past 10 years
By Saifulbahri Ismail | Posted: 11 October 2011 1935 hrs

SINGAPORE: Singapore has one of the highest employment rates internationally and the median income of workers also increased 11 per cent in real terms, over the past 10 years.

These were some key findings in a paper released by the Manpower Ministry on Tuesday.

Singapore faced three recessions in the past 10 years, yet Singaporean workers are earning more.

But almost all of the income growth occurred in the later half of the decade.

From 2001 to 2010, the median monthly income grew 11 per cent in real terms, or 29 per cent in nominal terms.

However, income for households at the bottom 20th percentile grew only 8.1 per cent in real terms, or 34 per cent in nominal terms.

The government has pledged to raise average Singaporeans’ median incomes by 30 per cent in real terms over the next 10 years. To achieve this, the median income must grow by threefold from the current level. Analysts said this is not something that is impossible.

“What we need to do is to try and aim for growth of between 5 to 10 per cent over the coming decade before we can actually achieve the aspiration that has been set. Singapore’s economic condition is actually determined to a large extent by circumstances beyond our control. So, this really has to depend on the global economic climate that would allow such an ambitious growth performance,” said Associate Professor Randolph Tan, head of the Business Programme at SIM University.

There were also more Singaporeans working over the decade. The number grew by 1.8 per cent per annum.

There were 1,712,600 Singapore citizens in the labour force in June 2010, making up the majority or 58.3 per cent of the labour force.

This is faster than the growth in citizen population aged 15 & over of 1.6 per cent per annum over the same period.

Government transfers had a redistributive effect on household income.

In addition, Singapore has one of the highest employment rates internationally – with nearly eight in ten Singaporeans (aged 25 to 64) employed in 2010.

This employment rate surpassed economies such as Hong Kong, Taiwan, South Korea, Japan, the US, Canada and the UK.

The ministry explained that although Singapore’s labour force participation rate is not higher than in many advanced economies, the unemployment rate amongst those in the labour force is low.

With the strong economic recovery, the unemployment rate declined to 3.1 per cent in June 2011, down from a high of 4.5 per cent in 2009 during the recession.

The unemployment rate was lower among better educated citizens, as well as older citizens.

However, once out of work, older Singaporeans were more likely to stay unemployed longer.

The long-term unemployment rate of older citizens aged 50 & over was 0.8 per cent, compared with 0.7 per cent for all citizens in 2010.

With continued emphasis and investment in education and training, more Singaporeans are also holding higher skilled jobs.

In 2010, 23 per cent were degree holders, up from 14 per cent in 2001.

Including those with diploma & professional qualifications, the share was 41 per cent compared with 28 per cent in 2001.

Forty-nine per cent of citizens employed in 2010 were in professional, managerial, executive & technical (PMET) jobs, up from 42 per cent in 2001.

– CNA/cc


Sometimes I laugh at how the local media loves to self-congratulate their masters on how well they have done and tried to propagandize the community. I would like to point out some technicalities in this report:

First question some of you who have taken basic statistics might ask: Why use Median and not Mean? The simple answer is, it depends on the distribution. If the distribution is symmetrical, using mean would be better. But if the distribution is skewed, using mean would be meaningless as large outlier, such as a relatively larger increase in wealth in the top 10% of the population would artificially push the average beyond the rest of the distribution. The average figure therefore does not truly reflect the entire population.  Using median would be more meaningful in a skewed distribution as it solely reflects the ‘middle value’ of the entire range.

In this case, we clearly knows that wealth distribution is highly skewed in Singapore going by the extremely high Gini coefficient we have in the country. Thus, the median method is employed in this article, confirming that the country is indeed divided along uneven economic distribution. I am not saying that there should be highly equal distribution. In any capitalistic model and just to quote the grossly over-used explanation of globalization (seriously, i think we are giving too much credit to this argument of globalization. But that’s for another post), there are bound to have people who can’t catch up as fast as certain groups. However, I believe that there is a line, a limit, to how much we should allow this uneven distribution to grow in order to rein in social order.

Then we know from this article that the growth in the median wage grew by 11% in real terms and 29% in nominal term, giving us an estimated inflation rate of 18% over the past 10 years. 18%? Over the past 10 years? Really? Look at the food you paid for 10 years ago and how much you are paying now. Look at the items that make up major spending decisions in life– flats and cars you paid 10 years ago and look at how much you need to pay now. While I don’t have the figures to back my argument, I definitely don’t feel that my expenses had only went up by 18% on average. Congratulations to those who don’t feel that way, you must be privileged. One thing is for sure though; the population in Singapore has definitely increase more than 18% over the past decade. On the sideline, and just to throw in some figures, according to DoS, the entire population grew by more than 22% from 2001 to 2011 while the Singaporean population only increase by close to 14% (and it includes new citizens).

We also know from this article that the government is ‘a genius’ to generate so much jobs that unemployment rate is consistently low. I would like to bring up the facts that while unemployment rate continues to be low, the labor force participation did not increase significantly. How do I know that? Well, the report stated that the figure is not higher than most developed economies. Being developed economies, the labor participation rate is usually pretty stable. In addition, I have looked up at statistical figures from DoS and it confirms that. So what does all that mean?

Let’s throw up some boring connotations and simple mathematics. I apologize to those who are new to economics but please bear with me:

Labor force participation rate (LFPR) = Labor force (LF) / Labor force population (LFP) (generally referred to all healthy males and females within legally working age range)

Labor force (LF) = Employed (E) + Unemployed (U)

Unemployment rate (UR) = Unemployed (U) / Labor Force (LF) = U / (E + U)

Given the government’s stance on the need to bring in foreign talents to help the country’s economic growth, supported by population growth figures, it is obvious the labor force population (LFP) and Labor force entering the market (LF) must increase. A relatively unchanged LFPR would mean that the change in LF and LFP must be positive and similar in magnitude. This in turn means that E and U must have increased at very similar rates to LFP. Since the UR is consistently low, U and E must have also increased at similar rates. In other words, while we have more people getting employed in absolute terms, there are also more people being unemployed in absolute terms.

Another point to take note is when a person is out of job for a long period of time, he or she can be classified as ‘not actively looking for a job’ and excluded entirely from the LFPR computation. The actual unemployment rate could jolly well be much higher.

To put it even more simply, the scenario goes like this: The government creates a lot of jobs to drive the economy so they use this excuse to bring in more foreign workers. More foreigners come into Singapore to work. At the same time, there is an increase in people being unemployed as well, probably due to frictional or structural unemployment. Rationally, foreigners who cannot find a job will have no choice but to return to their country. Staying on serves no purpose and being out of work means he or she can’t possibly support himself or herself in a foreign land. Singaporeans, on the other hand, who did not benefit and was retrenched (either due to structural changes in industry or under-priced by the cheaper foreigner workers), will get kicked out of the labor force and has no where to go unless they cross a bridge to nearby Malaysia so that their savings might last them a bit longer. Guess what? The older workers are exactly the group most susceptible to get retrenched or fired. To rub in more salt on the wound, older workers will find it harder to get re-employed, as what was stated in the report.

In a nutshell, this report has cleverly boasted all the ‘good things’ the PAP government had done but skillfully avert the real issue that matters. There are only 58.3% of working adults who are Singaporeans even though the article used a misleading word ‘majority’. A sad majority, I would like to add. And most importantly, more people are getting unemployed and those unemployed Singaporeans, usually older ones, are the ones that suffer the brunt of the nation’s economic growth strategy.

P.S. To make my point clearer: I illustrate how the segment of employed gets larger and larger fueled by foreign ‘talents’ and some young, educated Singaporeans benefiting from it, but at the same time the segment of unemployed gets larger and larger and would largely consist of old Singaporean workers who are usually not highly educated. Non-singaporeans that belongs to this segment of unemployed should rationally leave the workforce (or rather, the country) due to the lack of means to continue living in the island city. Therefore, the unemployment segment will make up of mainly Singaporeans.

Categories: Economics

More money lost via Temasek

July 5, 2011 6 comments

Temasek Holdings has once again taken huge money losing positions (via many sub-hedge funds) in ‘they think it’s stable stocks to ride on China’s economic growth’:

Source: Bloomberg

Temasek Holdings Pte, the Singapore state-owned investment company, is seeking to raise about HK$28 billion ($3.6 billion) by selling stakes in China Construction Bank Corp. (939) and Bank of China Ltd. (3988), two of the country’s three biggest banks.

The Singapore-based investment company is selling about HK$18.7 billion of shares in Bank of China and about HK$9.3 billion in an offering of China Construction Bank stock, according to term sheets obtained by Bloomberg News.

Shares of China’s four biggest banks fell in Hong Kong trading today after Moody’s Investors Service said banks’ loans to local governments may exceed official estimates by more than 3.5 trillion yuan ($540 billion) more than official estimates and the credit outlook for the industry could decline.

The extra liabilities, coming on top of the national audit office’s findings last week of 10.7 trillion yuan in local government debt, may fuel concern that banks will be unable to absorb losses on defaults should property prices drop.

Bank of China shares slid 0.3 percent to HK$3.86 in Hong Kong today while China Construction Bank dropped 1.2 percent to HK$6.48. Industrial & Commercial Bank of China (1398) Ltd., the world’s most profitable bank, fell 0.5 percent to HK$5.93.

Morgan Stanley (MS) is managing both sales, the terms show. Jeffrey Fang, a spokesman for Temasek, declined to comment.

2006 Investment

Temasek’s Fullerton Financial Holdings Pte. Ltd. unit is offering about 5.2 billion shares in Bank of China for HK$3.60 to HK$3.67 each, according to a term sheet. That’s as much as 6.7 percent less than today’s closing price.

Temasek owned about 10.5 billion shares, or 12.5 percent, of Hong Kong-listed Bank of China, according to a Dec. 31 filing. The fund paid about $1.5 billion for a five percent stake in the lender in 2006.

Cairnhill Investments (Mauritius) Pte. Ltd. and Crescent Investments (Mauritius) Pte. Ltd., both controlled by Temasek, are also selling about 1.5 billion shares in China Construction Bank for HK$6.22 to HK$6.35 each. The Singapore fund holds seven percent, or 16.9 billion shares, of China Construction Bank, according to company filings.

Temasek, set up in 1974, bought $1 billion of stock in China Construction Bank’s initial public offering in 2005. It also purchased an undisclosed stake in the Chinese lender from China SAFE Investment Ltd. the same year.

To contact the reporter on this story: Zijing Wu in London at Cathy Chan in Hong Kong at


This is obviously a desperate move to dispose off questionable chinese national banks with high links with a corrupt chinese government. It’s appalling how the Financial Crisis had not taught the two megamoths GIC and Temasek that bank stocks are not exactly the best stocks to own. And they obviously takes up very risky positions (looking at how Temasek can be purchasing the same stocks via 2 other hedge funds). So who are the management of Temasek accountable to at the end of the day? The citizens deserve a clear answer and some responsibilities taken.