TR EMERITUS

OPINION In the parts 1 and 2 of this article, we compare the similarities between Japan in the 1980s and Singapore now. Despite signs that public housing is becoming more and more expensive to ordinary citizens, prices of HDB flats continue to rise, fueled by demand on the ground from both new citizens and PRs. Given Singapore's over-reliance on the global economy, it is only a matter of time before another crisis happens and precipitate a burst of the property bubble. The political ramifications of such a crash will be disastrous for the ruling party. Either way, it cannot escape responsibility from causing the housing inflation with its ill-conceived policies in the first place. A crash akin to the 1996 housing crisis which threw Singapore's property market into the doldrums for a decade or so is well on the cards except that this time, the pain may be harder especially for some to bear. Singaporeans have been fed with the illusion by the ruling party that HDB flats are "pots of gold" whose values will only appreciate with time which is further exacerbated by the use of estate upgrading as a carrot canvass for votes during elections. In a speech made at Kim Keat ten years ago, then Prime Minister Goh Chok Tong told the residents unshamedly that it was the PAP government who was responsible for the rise in their asset value through various upgrading programmes. During the 2006 general elections, residents of the two opposition-controlled wards Hougang and Potong Pasir were offered a $100 million upgrading package if they voted for the PAP. Unlike in the past when housing inflation is caused by a combination of GDP growth and limited land, the present bubble is created artificially by increasing the demand via immigration and limiting the supply of new flats by HDB. As an indication of how serious the housing shortage is, there were over 20,000 applications for about 2,100 balanced flats released for sale by HDB last week. A sudden and precipitous drop in housing prices will plunge many home owners, especially those who bought during the peak period between 2007 and 2009 into financial distress with dire consequences rippling to the rest of the economy. A mini-subprime crisis is not an unforeseeable result with banks repossessing flats due to unpaid mortage loans and bankruptcies hitting a record high. The anger, angst and frustration arising from such a catastrophe will naturally be directed at the ruling party. Already, there are some quarters who are blaming HDB for its lack of foresight in building more new flats to meet rising demand between 2004 and 2006. The number of foreigners arriving in Singapore has increased dramatically over the last few years and yet the number of flats built by HDB have not kept pace with the increase in population, leading to the present situation right now. Having witnessed their parents and grandparents owning their HDB flats, young Singaporeans expect themselves to be beneficiaries as well, but flats are relatively cheap then unlike now when loan tenures have to be stretched to 35 years in order to accommodate more borrowers. Naturally, Singaporeans are aghast at having to fork out a substantial portion of their monthly income to finance 99-year leasehold public housing which are obviously over-priced. For those who are forced to buy a home at today's prices because they have nowhere to stay, they will surely be peeved with the government should they make a loss subsequently following a property downturn or even worse, a crash. Burdened with debts and a property which they cannot offload, they will be inclined to cast a protest vote against the ruling party in subsequent elections. The real impact at the polls will depend on the number of disgruntled Singaporeans who feel hard done by the government's housing policies. In narrowly contested wards, it may tip the scale in favor of the opposition enabling them to snare a few seats and even one or two GRC. However, it is improbable that the incumbent will be voted out of office given its relative strength in comparison to the opposition's weakness. The ruling party is aware of rising dissatisfaction on the ground which explains shotgun measures introduced by HDB lately to address concerns of Singaporeans such as the release of balanced flats and the building of BTO flats. Unfortunately, these are unlikely to stem the rise in prices at least in the near future. With more and more PRs and new citizens popping up the demand and BTO flats not ready till three years later, the housing shortage is likely to get worse before it stabilizes. HDB has predicted that prices of resale flats are likely to grow by another two to three per cent till the end of the year. Singaporeans who need a place to stay urgently will have little choice but to purchase a flat now. Even for those who can afford to wait, they may be unwilling to do so out of fear of "missing the boat" and having to pay more should prices continue on the upward trend. Even for existing home owners who bought their flats at low prices years ago, they will be devastated by the depreciation of their asset values for HDB flats have become the Singaporeans' primary source of wealth over the years. The backlash against the ruling party will be predictable but manageable unless a credible opposition emerge to challenge its authority. For a long time, the ruling party has claimed its mandate from the people by generating wealth consistently in the form of asset appreciation though its claims had been debunked by a recent study done by two NUS economists. Many Singaporeans continue to believe that the ruling party is primarily responsible for rise in flat values despite evidence on the contrary. The false premises offered so liberally by the ruling party to garner and consolidate support for its rule will return to haunt them in the event that the prices decline or even crash. As we have seen from the examples of Japan, Iceland, Ireland and the Baltic states, Singapore's inflationary market is untenable in the long run. It is not a matter of if, but when it will be brought back to earth. Singaporeans may not be overly concerned about the lack of civil liberties, but they are surely obsessed with material possessions especially their flats. When the crunch comes, they will have no qualms deserting the ruling party in droves and casting a protest vote against them. The opposition should start studying and formulating an alternative public housing blueprint to replace HDB's profit-driven one to win support from the masses. More rules and subsidies should be provided to safeguard the interests of first-time home buyers. HDB must be completely transparent about its building, land and operating costs to allay public concerns that it is making obscene profits at the expenses of citizens. PRs should not be permitted to profit from the sale of their flats in the future when they leave Singapore. A capital gain tax can be imposed on their profits which can be directed to help less well-off Singaporeans afford a home of their own. HDB flats have now grown to become a necessity in land-scarce Singapore. As the largest landlord and property developer in Singapore, the government is well placed to ensure that public housing remains affordable in Singapore not by some arbitrary benchmarks, but in real terms according to public perception.  Read More →

Authors: Mukul G. Asher (Lee Kuan Yew School of Public Policy) and Amarendu Nandy (NUS Department of Economics). Title: Singapore’s Policy Responses to Aging, Inequality and Poverty: An Assessment Publication Details: International Social Security Review, Vol. 61, No. 1, pp.41-60, January/March 2008 Poverty and Income inequality Singapore has no official poverty line. The absolute poverty measure is based on Minimum Household Expenditure, defined as actual expenditure for subsistence budget x 1.25. While no precise estimates are available, absolute poverty incidence is low. The incidence of relative poverty, defined as half of the median per capita household income, is likely to be higher, though again no official estimates are published on a regular basis. In policy discussions, a working assumption used in Singapore to define the low-income group is the bottom 30 per cent of households. There are several indications of rising income inequalities in Singapore. First the share of wages in GDP has declined from 47 per cent in 2001 to 41 per cent in 2006; while the share of capital has increased correspondingly. As capital income is more unequally distributed, its increasing share implies rising inequality and constrained consumption capacity among low- and middle-income households. Public policies, particularly centering on a reduced tax burden on capital income and reduced mandatory contributions by employers to the CPF, have been partially responsible for the declining share of wages. Second, the ratio of disposable income of the top 20 per cent of households to that of those in the bottom 20 per cent has increased from 11.4 in 1990 to 20.9 in 2000 (Kamimura, 2006). According to official statistics, nearly 40 per cent of the households experienced a decline in real income between 2000 and 2005. Third, the Gini coefficient for income, which is the traditional measure of inequality, has increased from 0.43 in 1990 to 0.52 in 2005, ranking Singapore as 105th in the world (Kamimura, 2006). In contrast, fellow Asian high-income countries Japan and Republic of Korea ranked 2nd and 25th respectively. Rising income inequalities in Singapore suggests that its current policies of promoting equality of opportunity are insufficient to bring about the requisite degree of socio-economic mobility. The smaller the identification between companies and their employees, the less willing or able the employers will be to provide health and retirement benefits and perhaps even training. Resistance by currently employed citizens and permanent residents in all occupations to job losses and restructuring also increases in the absence of social risk-pooling in health and pensions. It is estimated that the cumulative impact on average wages of the CPF cuts (in employers' contribution rate and salary ceiling) during 2003 - 06 was minus 3.6 per cent and that of income tax cuts during 2002 - 07 was plus 0.8 per cent (Chua, 2007a). The overall net impact was significantly negative, particularly for the middle-income groups. The personal income tax base has also been reduced in recent years in a manner disproportionately benefiting the higher income groups. This is exemplified by the exemption of interest income from income tax. The CPF and income tax changes have therefore contributed to the rising inequalities. As the above discussion suggests, high and increasing income inequalities are an outcome of the particular set of policies adopted by Singapore, and not due to the general effect of globalization alone. Some analysts have explicitly raised the issue of whether high growth is worthwhile if it is leading to such high inequalities, and to uneven distribution of gains between citizens and non-citizens (Bhaskaran, 2007). The rich-poor gap in Singapore has become a political issue (Trofimove, 2007b). If left unattended, this gap could undermine the support for Singapore's current strategy of managing globalization.  Read More →

From our Correspondent The Singapore media, whose editorial independence is a constant source of jokes among the country's bloggers, has climbed up 11 places from 144th to 133th position on the latest world press freedom index released by international media watchdog Reporters without Borders (RSF). The index reflects the degree of freedom that journalists and news organizations enjoy in each country, and the efforts made by the authorities to respect and ensure respect for this freedom. It is assessed using a questionnaire of 40 criteria to assess the state of press freedom in each country including every kind of violation directly affecting journalists (murders, imprisonment, physical attacks and threats) and news organizations (censorship, confiscation of newspaper issues, searches and harassment). The 175 countries ranked are those for which Reporters without Borders received completed questionnaires from independent sources. RSF did not explain the reasons for Singapore's improved ranking. Though Singapore has climbed up the rankings, it is the only developed country in the world which is ranked outside the top 100 positions along with the likes of Chad, Nigeria and Zimbabwe. In Asia, Japan is ranked 17th, followed by Hong Kong (48th), Taiwan (59th) and South Korea (69th). There seems to be a correlation between the degree of press freedom and economic development which Singapore defies. The top ten positions are occupied by European countries including the Nordic states of Denmark, Finland, Sweden and Norway. Singapore's press freedom ranking does not quite commensurate with its lofty status as a modern developed country. The ruling party has consistently dismissed the findings of RSF on the grounds that "western-style" journalism which is inherently "antagonistic and confrontational" in nature does not suit Singapore's interests. The Singapore media has long been relegated to become a mouthpiece for the government. All the print media in Singapore are under the control of one single company - SPH, whose Chairman is always a former PAP minister. The incumbent is Dr Tony Tan, an ex Deputy Prime Minister. By virtue of its undisputed market monopoly, SPH is able to continue riding roughshod over its readers by churning out half-baked myths, spins and propaganda on a daily basis to glorify the regime. Criticisms of government leaders and policies are unheard of in the mainstream media. Even the Straits Times Forum has been abused to serve the nefarious interests of the ruling party with frequent letters from foreigners singing its praises. Few Singaporeans are aware of the fact that they have been misled and deceived by the state media all along. In a survey conducted recently, nearly 70 per cent of the respondents indicated that the mainstream media remains their primary source of information to which Minister Rear-Admiral Lui Tuck Yew declared triumphantly that it is here "to stay". Unless Singaporeans wake up from their slumber and start protesting against SPH's gutter journalism with their spending prowess, it is highly likely that Singapore will retain its dismal ranking on the world press freedom index, be it 133th or 144th for some time to come.  Read More →