Singapore’s Economic Boom Widens Income Gap Monday, Nov 12 2007

by Melanie Lee, 9 Nov 2007

SINGAPORE (Reuters) - Carol John, 27, doesn’t own a bed. Every night she sleeps on thin mattresses which she shares with her three young children. Outside her one-room flat, a smell of sewage lingers in the common corridor.

Just a few kilometers away, on Singapore’s Sentosa island, Madhupati Singhania relaxes on his $435,000 yacht berthed at the city-state’s swanky One 15 Marina Club.

Income inequality is nothing new in free-market Singapore, but two years of blistering economic growth and a government policy of attracting wealthy expatriates have created a new class of super-rich, while a string of price increases for everything from bread to bus fares have made life harder for the poor.

“I can’t save anything, it’s so difficult for me,” John told Reuters. John, who is unemployed, relies on her husband’s S$600 (US$420) monthly salary and a S$100 government handout.

“We don’t benefit at all from the economy. As far as I know, my husband’s pay hasn’t gone up,” she said.

Singapore’s economy is firing on all cylinders, with a booming construction sector, record tourist arrivals and a fast-growing financial sector all contributing to a gross domestic product set to grow nearly 8 percent in 2007.

But the rising tide is not lifting every boat.

The proportion of Singapore residents earning less than S$1,000 ($690) a month rose to 18 percent last year, from 16 percent in 2002, central bank data released late last month show.

At the same time, the proportion of those earning S$8,000 and above rose from 4.7 percent to 6 percent in the same period.

“When a country becomes richer, you tend to see a widening of income inequality. Over the last few years it has been worse,” said econometrics professor Anthony Tay at SMU university.

Despite sporting a first-world GDP per capita of $29,000 - second only to Japan in Asia - Singapore has an income inequality profile more in line with third-world countries.

Singapore’s Gini coefficient, a measure of income inequality, has worsened from 42.5 in 1998 to 47.2 in 2006, and is now in league with the Philippines (46.1) and Guatemala (48.3), and worse than China (44.7), data from Singapore’s Household Survey and the World Bank show.

Other wealthy Asian nations such as Japan, Korea and Taiwan have more European-style Ginis of 24.9, 31.6 and 32.6.

Fast Cars, Big Boats

CIMB-GK Research economist Song Seng Wun believes that growth itself partly explains the widening income gap.

“In an environment where growth is huge, there are lots of opportunities for risk takers, and inevitably, you will get this widening (of the income gap),” he said, adding that those in stable jobs will also benefit, but to a lesser extent.

Opportunity is what attracted Singhania to Singapore. He intends to buy a new 47-foot yacht for $1.3 million.

“You’ve got everything you want in Singapore. You want to buy a fast car, you want to buy a big boat, you want to buy an aeroplane, whatever you need, you can get in this country.”

Singhania, who runs a business consultancy firm, was originally from Mumbai but decided to move to Singapore and become a Singapore citizen, citing its first-world comforts.

The Asian Development Bank blames the widening income gap in Singapore and many other Asia countries partly on globalization, which it said favors the well-educated, and recommended policies to create more equal opportunities and wealth.

Singapore’s government has made the reduction of the income gap a priority, but argues welfare should not be a crutch, and rules out unemployment benefits or a minimum wage.

While the ruling People’s Action Party is in no danger of losing its stranglehold on parliament, the growing income disparity has hurt its credibility.

“There is definitely envy, but this is not enough for civil disturbance,” said sociologist Ho Kong Chong at NUS university.

“These emotions of despair and desperation are missing in Singapore because of the government’s housing policy and transfer payments,” Ho said.

Singapore’s extensive housing program provides owner-financed flats in government-built blocks and the state also provides modest income supplements to those in low-income jobs, although there are no unemployment benefits.

Carol John, who left school when she was 15, does not know much about support schemes. “In the years to come, I’ll just leave it in God’s hands, whatever he gives me, I’ll take it.”

($1=1.448 Singapore Dollar), ($1=.6894 Euro)

(Editing by Geert De Clercq and Jacqueline Wong)

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Singapore Feels Heat Of Anti-Burma Drive Monday, Nov 12 2007

by John Burton in Singapore and Amy Kazmin in Bangkok, Financial Times, 11 Nov 2007

With Burma’s state-controlled banking system crippled by stifling regulations, Burmese business people – and others with access to hard currency – have for years looked to Singaporean banks to hold their assets.

Singapore has a much more developed financial services sector than other south-east Asian countries.

The city-state, as an international finance centre, is relatively open to deposits from overseas, and its banks have an enviable reputation for service and efficiency. “Leading entrepreneurs in Burma regard Singapore as their refuge from the chaos of Burma’s monetary and financial system,” says Sean Turnell, a professor at Australia’s Macquarie University and Burma specialist.

But as the US leads efforts to increase the financial pressure on Burma’s ruling military junta and its supporters, that practice has put Singapore in an uncomfortable spotlight.

Visiting the region last week, a senior US official called on Singapore and its south-east Asian neighbours to crack down on Burmese funds parked in their banks.

“We believe that there are [Burmese] regime officials with accounts in Singapore and other countries and we hope that governments will ensure that their financial institutions are not being used as sanctuary,” said Kristen Silverberg, the assistant secretary of state in charge of co-ordinating US diplomatic policy with the UN and other international organisations.

The statement was one of the most explicit the US has made about the possible role of Singapore, its closest ally in south-east Asia, in sheltering the assets of Burma’s military leadership.

Bank secrecy laws prevent the Monetary Authority of Singapore from commenting on whether Burmese officials have accounts in the city-state, but it has said that any suggestion that junta leaders may be using it as a “financial haven” are “completely baseless”.

It says it acts strictly against money-laundering of illicit funds, such as earnings from “criminal conduct”, and funds linked to terrorist groups or regimes targeted by UN sanctions – which Burma has not been.

But Prof Turnell says the source of the generals’ money – if not actually illegal according to Singaporean law – is still of questionable legitimacy. For years Burma’s generals have been accused by opposition groups of exploiting a monopoly on profits from Burma’s extensive natural resources.

“If anyone looks at any of the entrepreneurs, or any business in Burma that makes any money at all, it makes money in rent-seeking on the state in various forms,” Prof Turnell says. “Thus, one might regard any of the money of the regime as somewhat ill-gotten”.

The US request for Singapore to restrict its banking ties with Burma comes as Singapore promotes itself as a regional offshore banking centre with some of the world’s strictest bank secrecy laws.

Singapore has quietly co-operated with the US previously on similar issues. When the US imposed tougher financial sanctions on North Korea in 2005, funds deposited by the Pyongyang government in Singapore were removed under US pressure, according to an intelligence official with knowledge of the issue.

Rangoon-based diplomats say the example of US financial pressure against North Korea has rattled the junta, already shaken by recent financial sanctions imposed by the US and Australia.

Banks in Singapore are required to identify “politically exposed persons”, defined as senior officials from foreign governments, who might deposit funds in the city-state, according to MAS guidelines.

Singapore, which currently chairs the Association of South-East Asian Nations and is host of next week’s annual gathering of the group, has argued that formal economic sanctions could backfire on efforts to push the military junta into talks with the democratic opposition, though George Yeo, the foreign minister, has promised the city-state would comply with any UN-mandated sanctions.

Irrespective of government policy, Prof Turnell says Singaporean banks may be quietly re-evaluating or cutting their ties with Burmese elites.

“They are extremely jealous of their squeaky clean image – and the idea that they uphold more internationally accepted norms than other places,” he says. “This has the potential to embarrass Singapore and tarnish that competitive edge.”

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