TR EMERITUS

From our Correspondent HDB will be launching 1,142 units of flats at Punggol Spectra for sale under the Build-to-Order (BTO scheme). The flats comprise 301 two-room units, 285 three-room units and 556 four-roomers. The prices range from $89,000 to $109,000 for the two-room flats, $151,000 to $179,000 for the three-room flats and $234,000 to $293,000 for the four-room flats. HDB claimed that the flats are affordable to first-time flat buyers as they are priced well below the 30 per cent international benchmark for affordable housing. However, it did not indicate the source or authority behind the benchmark. The rising price of HDB flats which has already hit a peak this year is a perennial concern for Singaporeans. Government ministers and HDB are adamant that HDB flats remain affordable to Singaporeans despite sentiments on the contrary. Punggol which is situated far away from the city centre, used to be an unpopular area of residence for Singaporeans. The new flats are now built in far-fetched places due to limited land. A four-room HDB resale flat in the prime district of Bishan cost between $280,000 and $320,000 only a year ago. The current prices of new flats in Punggol is a reflection of the steep rise in prices. While prices of new flats have risen by as much as $30,000 to $40,000 over the last 2 years, the median salary of Singaporeans has not increased by much. According to the latest 2008 figures from the Singapore Department of Statistics, the monthly median income of employed households living in 3- and 4-room HDB flats have increased by a mere 5%. (source: singstat) Under present HDB housing policies, the hardest hit will be the middle-income group who do not qualify for the housing subsidy. To buying a 3-room Premium, 4-room or bigger flat, one's gross monthly household income must not be more than $8,000. For 3-room flat, the monthly household income must not be more than $3,000. For 2-room flat, monthly household income must not be more than $2,000. (source: HDB) A couple with a combined income of more than $8,000 will have to settle for an overpriced resale flat or private condominium whose prices have hit a historical peak as well. Singapore's leaders have always insisted that rising HDB prices help to create wealth for the citizens, a thought which was echoed by Senior Minister of State for National Development lately when she said that the current market will result in higher "asset values" for flat owners. However, for first-time buyers who do not own any property, they are unable to capitalize on the "asset value". In fact, it is highly doubtful if they will be able to make a profit on their HDB flats in the future given the currently high prices. Should the property market crash as in 1996, they will be plunge into dire straits. HDB flats should not just be affordable. They must be "easily" affordable to all Singaporeans since they are supposed to be highly subsidized public housing. It is time that the government review the prices of new HDB flats and the amount of housing subsidies given to first-time flat buyers.   EDITORS' NOTE: If you like our work and would like to support us, please transfer your donations via paypal to our account ([email protected]). Any amount will be greatly appreciated! Alternatively, you can also help boost our advertising revenue by clicking on the ads displayed. Thank you! Join our twitter list at http://www.twitter.com/temasekreview for daily short updates. Add us to Facebook: www.facebook.com Our facebook email is [email protected]  Read More →

Background  Singapore has been severely affected by the global downturn. It was among the first countries in Asia to enter a recession and is now set for its worst economic contraction since independence. Nonetheless, economic fundamentals remain strong and provide an important buffer against the external shocks. As elsewhere in the region, Singapore’s financial markets experienced considerable turbulence in the fall of 2008, but the impact of the crisis has been felt mainly through the trade channel. The collapse in external demand has led to a sharp contraction in GDP, which fell by almost 13 percent (quarter-on-quarter, seasonally adjusted annualized rate) in the first quarter of 2009. Although export-oriented sectors have been hit the hardest, services, including in the financial sector, have also suffered. Unemployment has risen and wage growth has decelerated. However, employment of residents has fallen less than in previous downturns as the corporate sector entered the recession in a stronger position. The current account surplus has shrunk markedly as a result of the slump in exports. Foreign direct investment (FDI) and portfolio inflows have also fallen because of the deteriorating growth outlook and rising risk aversion. However, the decline has been more than offset by lower capital outflows owing to weaker corporate profits and concerns about asset quality in advanced economies. Outflows have also been mitigated by Singapore’s status as a safe haven. Singapore is a major funding center for South-East Asia and its financial market conditions are highly influenced by developments abroad. The equity market fell by almost 24 percent in October 2008, the biggest month-on-month decline in more than twenty years, and money and credit markets experienced considerable liquidity pressures. However, as concerns about the severity of the global downturn have eased in recent months, and risk appetite has improved, equity prices have rebounded, and the liquidity situation has also improved. The policy response to the crisis has been forceful and has included a large fiscal stimulus package, an easing of monetary policy, and a range of measures aimed at stabilizing the financial sector. The overarching strategy has been to lessen the impact of the external shocks, while ensuring that Singapore is well positioned to rebound once the global economy recovers. Executive Board Assessment Executive Directors noted that, given the openness of its economy, Singapore was among the first countries in Asia to enter a recession following the collapse of external demand. Nevertheless, strong economic fundamentals, coupled with the authorities’ skillful implementation of a broad range of policy instruments, have helped lessen the impact of the shocks. The focus now is to preserve financial stability and to ensure that Singapore is well positioned to rebound once the global economy recovers, taking advantage of the ample room for maneuver at the authorities’ disposal. Directors considered monetary policy settings to be broadly appropriate, supporting domestic demand without undermining exchange rate stability. They agreed that, barring a significant deterioration of the outlook for growth or inflation, monetary policy should stay the course until a recovery is clearly established. Further along the recovery path, a tightening stance would be warranted to safeguard price stability, through targeting a trend appreciation of the nominal effective exchange rate. Directors observed that the floating exchange rate regime has served Singapore well, and that the exchange-rate centered monetary policy framework has been an important source of stability in times of turbulence. They noted the staff’s assessment, though subject to considerable uncertainty, that the Singapore dollar in real effective terms appears to be somewhat weaker than its medium-term equilibrium level. The real effective exchange rate would likely strengthen, in line with fundamentals, once a global recovery takes hold. Directors agreed that the fiscal policy response, most recently the Resilience Package contained in the 2009 budget, should go a long way toward mitigating the impact of the recession on households and businesses, while also fostering the country’s long-term growth potential. They welcomed the authorities’ readiness to take further measures if the economy’s trajectory proves more fragile than currently expected. Directors emphasized that, over the medium term, fiscal policy will need to play a part in preparing the economy for shifts in the pattern of global demand. Higher public investment in physical and social infrastructure, along with flexible labor and product markets, would create an enabling environment in which Singapore could seize new economic opportunities. Consideration could be given also to strengthening the role of automatic stabilizers. Directors noted that Singapore’s financial sector has shown remarkable resilience and should be able to withstand an even deeper and more prolonged global downturn. They commended the authorities for proactively implementing a series of measures to safeguard the stability of the financial system. Directors stressed that, in the period ahead, priority should continue to be given to rigorous stress-testing as asset quality is likely to deteriorate, upgrading contingency planning, and strengthening cooperation with supervisors abroad. They welcomed the decision of the Monetary Authority of Singapore (MAS), the Hong Kong Monetary Authority, and Bank Negara Malaysia to coordinate the unwinding of deposit guarantees in their respective jurisdictions. Directors encouraged the MAS to continue to adapt its supervisory and regulatory framework as lessons from the crisis are learned. Given all members’ obligations to provide accurate data to the Fund, Directors welcomed the authorities’ intention to improve over time the currently incomplete reporting of the international investment position of Singapore. Read the table of economic and financial indicators for Singapore here  Read More →

From South China Morning Post Japan has changed course. Voters have turned overwhelmingly to the Democratic Party of Japan to give hope and bring change. Their decision came amid global economic turmoil and record unemployment. But prime minister-in-waiting Yukio Hatoyama has an equally important challenge: to help Japanese gain the political accountability and choice they have for so long been denied. Clearly, the Japanese want a better future and they see the best chance of this happening with the DPJ in government. Its election means regime change, but also a possibility that a perceived decline in standards of living can be reversed. While their first desire has been attained, the second is not as easily achievable. Faith in the Liberal Democratic Party, which had ruled virtually uninterrupted since 1955, had been lost. Arrogance and mismanagement plagued its ranks. The administrative and economic reforms Japan needed to escape two decades of stagnation were not forthcoming. Voters had no difficulty turning from its negative election campaigning in favour of the DPJ's positive message. That the DPJ has won a majority of seats in the lower house of parliament means it now controls both houses. But turning policies into law will be difficult. Its manifesto requires funding that may not be forthcoming. Compromise may be necessary. But it is not campaign promises that voters necessarily went for in choosing the DPJ on Sunday. In many respects, the platforms of the two parties were similar, although there were differences in approach on the environment, foreign policy and security. However, domestic issues received the most attention during campaigning. On election day, it was the offer of new leadership that counted in the eyes of many. There was hope in 1955 with the forming of the major parties, the LDP and the Japan Socialist Party, that parliamentary politics would evolve along Westminster lines. But no viable multiparty system was created and the LDP became deeply entrenched. Over the years, it abused its position of trust. The government's ear was held not by the majority of voters, but minority groups, big business and the bureaucracy. Eventually, internal dissatisfaction led to factions, which evolved into opposition parties such as the DPJ, but their leaders were cut from the same political cloth, sharing similar values and beliefs. Hatoyama, like his defeated opponent Prime Minister Taro Aso, is from Japan's elite. Both had grandfathers who were prime ministers and both come from families that became wealthy from industry. They joined the LDP after studying at top universities in Japan and the US. Outwardly, their biggest difference would seem to be that they head opposing parties. Tackling the economy is the DPJ's most immediate challenge. There are wider problems that are just as difficult, though, such as reform of the bureaucracy. The party has no guarantee of fulfilling its promises. But it can - and must - embrace the wider remit it has been given of offering choice. By making a concerted effort to move away from its conservative roots and differentiate itself from the LDP, it will give the nation a genuine two-party system. History was made at the polls on Sunday with the LDP's defeat. If the event is to have greater meaning for Japan, though, the DPJ must now reach out to the people. A break has to be made with one-party rule. The hope Japanese long for is best given through policies that give choice. Source: SCMP   EDITORS' NOTE: Temasek Review is a paid subscriber of the South China Morning Post  Read More →