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)