Affluent Singapore Feels Pinch Of Inflation At 26-year Highs Sunday, Apr 27 2008 

by Martin Abbugao, AFP, 27 Apr 2008

SINGAPORE (AFP) – From taking fewer taxi rides to eating out less and shortening shower time, residents of affluent Singapore are trying to cope with inflation, which has soared to 26-year highs.

Rising costs of housing, food, and transport have eaten into family budgets of Singaporeans as well as the large number of expatriates working in the city-state, consumers and analysts said.

Except for the ultra-rich, the impact of the sharp price increases has cut across social classes in one of Asia’s wealthiest nations, they said.

Government figures show Singapore’s annual inflation was at 6.7 percent in March, the highest since 1982, boosted by higher costs of food, transport, communications and housing.

The figure is more than double the inflation rate in Malaysia and higher than that of the Philippines, Hong Kong and Australia. Unlike bigger countries in the region, Singapore imports most of its needs.

“When the inflation rate is high, it affects everybody,” said Serena, a businesswoman who lives near the prime Orchard Road shopping and would only give her first name.

Serena said even affluent families like hers have had to adjust to the rising costs by eyeing grocery prices more closely, using the car less and eating in fancy restaurants only on special occasions.

“You have to differentiate between needs and wants, what is necessary and what is not necessary. If you can get something cheaper, you don’t have to go for branded (luxury) items,” she told AFP.

While soaring inflation in developing countries, amid a global food crisis, has left many struggling to feed their families, Singaporeans are dealing with the impact of price hikes in their own ways.

For Janice Tan, 35, who works at a travel agency, the soaring prices have forced members of her family to shower only once a day to cut their water bill. Water used to rinse vegetables is recycled to flush the toilet.

To reduce the electric bill, Tan said she told her maid to iron only office clothes — and just the parts that are visible.

“It’s a big deal for Singapore in that we have never had inflation higher than three percent,” said Euston Quah, head of the economics division at Singapore’s Nanyang Technological University.

“It hits the poor badly because the poor spend maybe 40, 50 percent of their income on food,” he said.

Quah sees inflation eventually easing to around 4.5 to 5.5 percent this year, while the government has forecast 2008 economic growth forecast of 4.0 to 6.0 percent.

Amin Sorr, 65, who works with a shipping firm, said life has become harder, especially for those earning less.

With a monthly salary of 3,000 Singapore dollars (2,200 US), Sorr said he can cope, but friends pulling in 2,000 dollars or less are struggling.

“I know a lot of friends who have problems with their water bills… and even personal credit lines.”

Local charities say rising food prices are also driving more Singaporeans, especially poor senior citizens, to join queues for free meals.

Salamah Salim, 40, who runs a food stall on the fringes of the business district, said: “Our expenses on food and rice have more than doubled over the past year. Rice and oil have risen tremendously.”

Even expatriate professionals, particularly those with less generous housing allowances and other benefits, have been hit.

As apartment rents surged, some moved their families from condominiums that come with swimming pools, gyms and barbecue pits to cheaper government-built flats without such resort-style amenities.

“They raised our rent by 150 percent after our contract expired late last year,” said a Filipino computer engineer, who transferred from a gated condominium to a government-built high-rise in the suburbs.

“I know several friends who have also made similar moves or are planning to move out once their leases expire,” he said, requesting anonymity.

Dee Pritchard, who works at the Australian International School, said that except for being more careful with the grocery shopping and giving the children fewer treats, nothing much has changed in her lifestyle.

“I’m lucky I’m not in the lower income (group) which would be suffering a lot more than I do really. But at the end of the week, the cash is less. There is less savings.”


Longer Queues For Free Food In Wealthy Singapore Tuesday, Apr 15 2008 

AFP, 14 Apr 2008

SINGAPORE (AFP) – Rising food prices are driving more people in Singapore, the wealthiest economy in Southeast Asia, to join the queue for free meals, charities said Monday.

Thirty percent more people are turning up daily to fill their stomachs at the Singapore Buddhist Lodge, which serves free vegetarian meals, the temple’s president Lee Bock Guan said.

During weekends the figures are even higher, when about 5,000 people arrive for the free food compared to 3,000 three months ago, he told AFP.

“Food prices have gone up and for them, their wages have not gone up as much,” he said, adding the needy are coming from all walks of life.

“Their income is not enough to cope with the higher food prices.”

Lee said donations from some of the temple’s wealthiest members are still strong, allowing it to handle the rising demand.

The Care Corner Seniors Activity Centre, which serves free breakfast, lunch and afternoon tea, said inflation has led 10 percent more elderly citizens to turn up for meals, compared with two months ago.

Some of them have started to take more food at lunch and bring the extra home for their dinner, said a centre worker who declined to be named.

The Young Women’s Christian Association, which cooks meals and delivers them to the needy, said it is operating at peak capacity serving 200 people each day – despite a drop in rice donations.

“One of the possible reasons could be the increasing price of rice,” programme executive Han Shin Hui said, adding donations of other food items such as biscuits have increased.

She said the organisation has had to use its own funds to cover the drop in rice donations.

Singapore is an island state that imports virtually all its food needs.

Consumer price index inflation reached 6.6 percent in January-February, up from 0.8 percent in the first half of last year, the Monetary Authority of Singapore (MAS) said last week.

MAS announced it had tightened monetary policy in a bid to address the price rises.


The different faces of Singapore, Seah Chiang Nee, Insight Down South, theStar, 12 Apr 2008

The top 10% of the population are the rich, who live in wealthy districts, while the bottom 20% are the languishers who have difficulty coping with a high cost structured life. The third is the large middle class.

A SINGAPOREAN couple walked into a Lamborghini showroom and bought two units – his and hers – for US$650,000 (RM2.04mil) each.

“It’s amazing; young kids coming in and spending S$2mil (RM4.7mil),” the manager told a journalist. “I don’t think they were even 30 years old.”

Last year, 29 of these crème de la crème models were sold countrywide, beating Ferrari (26 cars).

In 2007 a total of 320 luxury cars including Rolls Royce, Bentley, Lotus, Aston Martin and Maserati, were sold to Singapore’s new rich.

As the nouveau riche basks in their newfound glory, more Singaporeans from the poorer quarters are approaching the government for food aid.

A growing number of homeless can be seen sleeping in void decks of buildings and, pressed by high living costs, more elderly citizens are working as toilet cleaners or collecting used cans for recycling.

Singapore remains largely a middle class society. The high number of shopping plazas attests to it. But the group may be decreasing as a result of globalisation and runaway prices.

The city-state of 4.7 million people has two – perhaps three – faces. On the top 10% are the rich, who live in wealthy districts, own yachts and blow S$10,000 (RM23,209) on a single meal.

At the bottom 20% of the population are the languishers who have difficulties coping with a high cost structured life in an international city. The third is the large middle class.

Take the case of Carol John, 27. She doesn’t own a bed, sleeps every night on thin mattresses with her three children. Hers is a one-bedroom flat that reeks of urine smell from the common corridor outside.

“I can’t save anything, it’s so difficult for me,” John, who is unemployed, told a reporter. She relies on her husband’s S$600 (RM1,392) monthly salary and S$100 (RM232) government handout.

She is luckier than others who are homeless – elderly and even entire families – who sleep at void decks or the beach and bathe at public restrooms.

In perspective, Singapore is the second richest country in Asia next to Japan, with a per capita GDP of US$48,900 (RM154,141).

Homeless cases are few, nowhere comparable in number to Osaka’s army of vagabonds or New York’s ‘bag ladies’.

In fact, nine out of 10 poor people in Singapore have their own home, and usually a phone and a refrigerator.

But in the local context, it is a potential minefield of unrest. The proportion of Singaporeans earning less than S$1,000 (RM2,320) a month rose to 18% last year, from 16% in 2002, according to central bank data.

The bad part is that life is often worse for the unemployed – compared to other countries – because Singapore has no safety net and no rural hinterland to cushion their suffering.

Unlike in Malaysia or Thailand, a jobless person who cannot cope with the global market has no countryside to retreat to so that he can live off the land.

The problem will get worse. In other words, the rich will get richer and the poor, poorer with the middle class remaining more or less stagnant.

The state’s Gini coefficient, a measure of income inequality, has worsened from 42.5 in 1998 to 47.2 in 2006, which makes it in league with the Philippines (46.1) and Guatemala (48.3), and worse than China (44.7) according to the World Bank.

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

This is one of the worst failures of the modern People’s Action Party, despite its ‘democratic socialism’ principles.

It was with these that its first generation leaders were able to turn a poor squalid society into a middle class success story.

Economists attribute the major blame to globalisation, which benefits the skilled citizens and the rich but makes it hard for the unskilled, the aged and the sick.

Even the highly educated are not spared.

The use of new instruments like company restructuring, relocation or out-sourcing of workers – unheard of before – is widening the gap and creating more income inequality.

For example, while the proportion of lower income rises, those who earn S$8,000 (RM18,570) or more increased from 4.7% to 6%.

This rising inequality could eventually undermine the bedrock of society – the broad middle class.

Some economists say that the feared erosion of Japan’s middle class, first enunciated by Japanese strategist Kenichi Ohmae, may already be happening here.

His country was emerging into a “M-shape” class distribution, in which a very few middle class people may climb up the ladder into the upper class, while the others gradually sank to the lower classes.

These people suffered a deterioration in living standard, faced the threat of unemployment, or their average salary was dropping, he said.

Gradually, they can only live a way the lower classes live: e.g. take buses instead of driving their own car, cut their budget for meals instead of dining at better restaurants, spend less in consumer goods.

And, Kenichi said, all this might take place while the economy enjoyed remarkable growth and overall wages rose.

However, the wealth increase may concentrate in the pockets of the very few rich people in the society.

The masses cannot benefit from the growth, and their living standard goes into decline.

The Singapore government, which relies on the middle class vote to remain in power, has vowed to make economic gap-levelling its top priority – for survival, even if nothing else.

How Sovereign Wealth Funds Were Left Nursing Multibillion-Dollar Losses Monday, Mar 24 2008 

by Richard Wray, The Guardian, 22 Mar 2008

· Investments in banking stock rapidly go sour
· Singapore group pours £9bn into leaking coffers

The financial crisis enveloping the world banking sector has left the sovereign wealth funds, controlled by governments from Singapore and China to Abu Dhabi and Kuwait, nursing multibillion-dollar losses after helping to bail out major western banks.

In recent months, banks including Citigroup, Morgan Stanley and UBS have turned to investment funds, including the Government of Singapore Investment Corp (GIC), its sister fund, Temasek, and China Investment Corp, for funding that western investors were unwilling to give as stockmarkets plunged.

But the dramatic fire sale of the US investment bank Bear Stearns and subsequent stockmarket run on HBOS this week have depressed banking stocks further and deepened the climate of fear in the world’s stockmarkets.

Singapore’s GIC, for example, which with funds of more than $330bn (£166bn) is one of the world’s largest sovereign wealth funds, spent more than £5.5bn on a 9% stake in UBS last year. Shares in the Swiss bank are down 46% so far this year. It spent a further $6.88bn in January as part of a $14.5bn funding round for the embattled US bank Citigroup,

Two months before, the Abu Dhabi Investment Authority (ADIA), which with assets estimated at up to $900bn is reckoned to be the world’s largest sovereign wealth fund, invested $7.5bn in Citigroup bonds that will convert to shares in 2010 and 2011 at prices from $31 to $37.

But since then Citigroup has become one of the most high-profile casualties of the sub-prime mortgage crisis in the US, and its share price has plunged as low as $20 – nearly 40% lower than when the ADIA made its investment.

The pain shows no sign of letting up. Two months ago, Citigroup announced it had plunged into the red over the past three months of 2007 and sliced its dividend almost in half as it wiped more than $18bn off the value of its assets because of exposure to sub-prime mortgages. But Wall Street analysts reckon the firm could record a further $15bn write-down for this financial quarter.

China Investment Corporation’s investment in Morgan Stanley, made just before Christmas, is also facing a significant loss. The securities it picked up for $5bn will convert to stock at $48 to $57 a share in two years’ time. At present, however, Morgan Stanley’s share price is closer to $42.

Another Beijing-backed money manager, China Development Bank, has also suffered as the stake in Barclays it bought in July has plunged in value. When it acquired the 3.1% shareholding, the bank’s shares were trading at about 680p each. On Thursday, they were at 429p.

The Singaporean fund Temasek is also nursing losses on the 2.1% Barclays stake it bought last year, although its investment in the London-listed bank Standard Chartered has fared better. The bank, which has little involvement in the US sub-prime crisis, has weathered the storm better than many of its peers.

The losses sustained by sovereign wealth funds are relatively insignificant when compared with the $3.2tr they are believed to have at their control. Morgan Stanley reckons that with the price of commodities such as oil set to remain high, this amount will balloon to $12tr by 2015. But the losses may dampen their appetite for further involvement in bailing out western banks.

Western politicians are increasingly concerned about the power of sovereign wealth funds in their markets. Earlier this week the US government agreed voluntary principles with ADIA and Singapore’s GIC to regulate their investments.

U.S. Treasury Slaps Sanctions On Asia World Co Ltd & 10 Singapore-Based Companies Tuesday, Feb 26 2008 

By David Lawder

WASHINGTON (Reuters) – The Bush administration, tightening pressure on Myanmar over human rights abuses, on Monday announced more economic sanctions against businesses and individuals linked to the country’s military leaders.

The U.S. Treasury Department said it was banning Americans from doing business with Asia World Co Ltd, a Myanmar company controlled by Steven Law and his father, Lo Hsing Han, who it said was a big figure in the international heroin trade.

The Treasury described both men as “financial operatives” of the Myanmar regime.

It was the fourth set of sanctions under an executive order issued last year in response to Myanmar’s military crackdown against protesters and included a freeze on any assets the firms and individuals may have under U.S. jurisdiction.

Myanmar’s junta in September crushed the biggest pro-democracy protests in nearly 20 years, killing at least 20 people, according to Human Rights Watch. Western governments say the toll may be much higher.

“The situation in Burma remains deplorable,” U.S. President George W. Bush said in a statement, and called for concerted international pressure on Myanmar to achieve a “genuine transition to democracy.”

“The regime has rejected calls from its own people and the international community to begin a genuine dialogue with the opposition and ethnic minority groups. Arrests and secret trials of peaceful political activists continue,” Bush said.

The Treasury said Law and his father, Lo, had a history of illicit activities that supported the Myanmar junta. It called Lo as the “Godfather of Heroin” who has been one of the world’s top traffickers of the drug since the early 1970s.

In 1992, Lo founded Asia World Co Ltd. a company that has received numerous lucrative government concessions, including construction of ports, highways and government facilities, the Treasury said.

Law now serves as managing director of the company, and the sanctions were extended to his wife, Cecelia Ng. The Treasury also blacklisted 10 Singapore-based companies owned by Ng, including property firm Golden Aaron Pte Ltd.

The Treasury designated two hotel chains owned by Myanmar tycoon Tay Za, who was blacklisted in an earlier round of financial sanctions, the Aureum Palace Hotels and Resorts and Myanmar Treasure Resorts

The sanctions have drawn a less than enthusiastic public reaction from Myanmar’s southeast Asian neighbors, including Singapore, a key financial center in the region. Impoverished Laos and Cambodia have denounced the U.S. moves.

Nonetheless, Adam Szubin director of the Treasury’s Office of Foreign Assets control, said some governments in the region were quietly cooperating.

“It’s incumbent on financial institutions and governments to take steps to keep dirty money out of their banks and their financial systems. We see indeed financial institutions and governments taking those steps, sometimes not in the public view,” Szubin told reporters.

(Reporting by David Lawder; Editing by David Storey)


Read the 1998 report titled The Burma-Singapore Axis: Globalizing the Heroin Trade

The Truth About Sovereign Wealth Funds; UBS Sub-Prime Losses Mount, Bank Deep In Red Wednesday, Jan 30 2008 

The Truth About Sovereign Wealth Funds by Anders Aslund, Foreign Policy, Dec 2007

Worried about oil-rich foreigners taking over your economy? You shouldn’t be. In reality, it is citizens of unaccountable, paternalistic regimes who stand to lose most when rulers play games with their national wealth.

The Arabs, the Chinese, and the Russians are about to buy up large swathes of Western economies. Or so the scare story goes. A frenzy of recent activity, including Dubai’s purchase of an undisclosed amount of Sony shares, Abu Dhabi’s acquisition of $7.5 billion worth of Citigroup, and China’s $3 billion stake in private-equity firm Blackstone, has many commentators fretting about so-called “sovereign wealth funds”—investment entities set up by governments to manage their surplus savings. According to an estimate by Morgan Stanley, sovereign wealth funds have poured some $37 billion since April into (mostly Western) financial institutions. One hyperventilating observer of these developments even bemoaned the onset of a “sharecropper economy” in the United States.

In truth, such funds are nothing for Americans or Europeans to fear. If anyone should worry about them, it’s the people whose governments are amassing them. That’s because governments tend to be terrible at managing money that is best left in the hands of private citizens. And locking away billions of dollars in wealth can have pernicious economic side effects. Maybe that’s why sovereign wealth funds are popular with dictators and semi-authoritarian regimes, which don’t have to answer for the consequences when they make poor economic gambles.

Sovereign wealth funds are nothing new, but they are growing larger. They emerged in the 1970s in oil-producing emirates, such as Kuwait and Abu Dhabi, as a way to accumulate current account and budget surpluses during the oil boom. Now, Abu Dhabi boasts the largest fund, sized at $600-700 billion, and other countries have followed its lead. Norway established a fund for its excess oil incomes in 1990. Singapore has accumulated two large funds that, unusually, are not based on oil income. And more recently, China and Russia have instituted large sovereign wealth funds of their own. Today, such funds hold as much as $2.5 trillion in assets, according to Ted Truman, a senior fellow at the Peterson Institute for International Economics. Some economists forecast they will grow to $12 trillion by 2015, an amount that roughly corresponds to the size of the entire U.S. economy.

The motives of the funds vary, and they don’t always make sense. Consider Abu Dhabi and Kuwait, which wanted to save their oil endowment for future generations, an admirable goal. But today these two bureaucratized emirates look like poor cousins in comparison with freewheeling Dubai, which has much less oil. Because the rulers of Abu Dhabi and Kuwait centralized their nations’ wealth in the hands of the state, their state sectors stifled their economies. Abu Dhabi’s fund may be impressive, but the entrepreneurial emir of Dubai has done a far better job of putting sustainable wealth in the hands of his citizens.

Another motive for the rise of sovereign wealth funds is to form a buffer against volatile commodity prices. In the 1970s, major oil exporters adjusted their expenditures to their enlarged oil revenues, but after 1980 the international oil prices plummeted, landing them in crisis. Learning this lesson, oil producers such as Russia have established “stabilization funds.” It may sound like a good idea, but the Russian deputy minister of finance responsible for foreign assets has just been arrested and accused of embezzling $43 million. Why trust the state with your money if the risk of theft is excessive?

A separate but related trend is the enormous currency reserves that Russia and especially China are amassing thanks to persistent large current-account surpluses. After the Asian and Russian financial crises of 1997-98, these governments realized that they could not rely upon the International Monetary Fund (IMF) to bail them out but needed sufficient reserves of their own. These reserves have since reached $450 billion in Russia and $1.44 trillion in China, corresponding to one third of Russia’s GDP and half of China’s.

But the low returns on international reserves make this arrangement costly. It is much more economical to reinforce the multilateral financial regime led by the IMF. Ballooning reserves, moreover, are a result of undervalued exchange rates, which are only tenable in the medium term. In the long run, inflation will eat up the competitive advantage. By purchasing foreign currencies and issuing domestic currency, central banks are boosting the money supply and inflation, which is becoming a major concern in China and Russia. Both countries would be better off letting their exchange rates appreciate to reduce inflation, which would slow their accumulation of reserves.

In short, sovereign wealth funds are often a lousy bargain for the countries that have them. That may explain why they have been developed mostly by authoritarian regimes in semi-developed countries, where citizens don’t have a chance to demand smarter economic policies. Take Singapore, whose economy depends on trade rather than a declining resource such as oil, and yet has locked up billions of dollars of its wealth in a fund since 1960. The government there has exceptionally managed to maintain its authoritarianism after the country became wealthy, but authoritarian regimes are more vulnerable to economic downturns than democratic systems. Singapore’s autocratic rulers need a reserve to pay off dissatisfied subjects to maintain power when economic times get tough.

In democracies, the politics work differently. The only democratic country with a large sovereign wealth fund is Norway. Since the Norwegian fund was established in 1990, every incumbent government has lost elections because the opposition has promised all kinds of popular expenditures from the abundant fund. Democratically, it is difficult to defend an excessive public reserve fund.

Certain international reserves are always needed, and exporters of commodities with highly fluctuating prices require larger reserves as a safety net. However, sovereign wealth funds are something different. They reflect a paternalistic—and economically illiterate—notion that the ruler knows best while citizens are so irresponsible that they cannot be entrusted with their own savings. It would be more economical and democratic to cut taxes and let citizens save and invest themselves.

Editor’s Note: The original version of this article characterized Singapore’s rulers as “unelected.” Technically speaking, they are elected, but neither freely nor fairly. Freedom House rates Singapore as only “partly free.”


UBS subprime losses mount, bank deep in red by Thomas Atkins, Reuters, 30 Jan 2008

ZURICH (Reuters) – Subprime-related problems at UBS AG mounted on Wednesday as the Swiss bank unveiled $4 billion in new write-downs in a surprise statement and sank deep into the red for the year.

The latest disclosure lifted the bank’s total write-downs from the subprime debacle to $18.4 billion and will likely increase pressure on chairman Marcel Ospel, at the UBS helm during its push into risky U.S. investments, to resign.

UBS, world banking’s leading wealth manager, posted a 12.5 billion Swiss franc ($11.45 billion) loss for the last three months of 2007 and a full-year loss of 4.4 billion francs, a grim closure to its worst performance in history.

UBS shares fell 1.7 percent in early trading as analysts puzzled over the new losses, but later pared most losses.

“One could become very emotional about UBS — continuously behind the curve in write-downs and hence always topping-up, exposure disclosure is poor to new write-downs, and management leadership vacuum,” said analysts at investment bank J.P.Morgan.

“This is certainly not good,” said analyst Georg Kanders at bank WestLB. “I had expected less.”

UBS is one of the hardest-hit banks worldwide from the credit crisis that has caused around $130 billion in losses, mangled balance sheets and forced some of the proudest institutions like UBS, Citigroup and Merrill Lynch into emergency capital-raising measures.

The surprise announcement adds to the sense of chaos in Western banking after Societe Generale last week shocked with a $7 billion loss it blamed on a lone trader — the worst trading loss in history by far.

UBS last month announced a 13 billion franc capital injection from Singapore and an unidentified Middle East investor and hopes to convince shareholders to approve the plan at an extraordinary meeting on February 27.

Resistance Mounting

But shareholder resistance to the capital increase is growing, with shareholder groups Actares, Profond and Ethos plus several pension funds urging others to oppose the move.

UBS is now struggling to restructure its investment bank and repair its credibility after the staggering losses, which have pushed its shares 40 percent lower over the past year.

UBS said in a statement the results reflect $12 billion in losses from the U.S. subprime market, plus $2 billion in losses from other U.S. residential mortgages and that weak trading income dragged performance lower as well.

UBS had been scheduled to report results on February 14.

The group said it managed to reduced its balance sheet and risk weighted assets during the quarter, which resulted in a loss, and that it will report a BIS Tier 1 ratio — a measure of capital safety — of 8.8 percent as of December 31.

The Swiss bank’s huge losses, which have prompted calls for it to spin off its investment banking business and concentrate on its highly successful wealth management activities, stem from a disastrous hedge fund venture into subprime mortgages.

In a sign that the subprime disaster may drag out for some time, the FBI this week said it is investigating 14 corporations over possible accounting fraud and insider trading violations in a crackdown on subprime lending. The companies were not named.

Switzerland’s banking regulator said last month it would probe major subprime losses at UBS while Merrill Lynch disclosed in November that the SEC was investigating matters related to its subprime business.

(Reporting by Thomas Atkins; Editing by David Cowell and Jason Neely)

Joseph Stiglitz Says GDP May Be Poor Indicator Of Economy Thursday, Jan 10 2008 

Normally, the economic well being of a nation is measured by its Gross Domestic Product (GDP). GDP assumes that if there were more goods in circulation, general welfare would automatically follow. At a conference in Cleveland, a recent survey of citizen’s perceptions of well being across countries by Gallop, surprisingly, revealed that Singapore, which is the richest country in Asia, after Japan, and one of the most efficient and least corrupt societies in the world, scores the lowest in the Well-being Index. Surprisingly, people in Singapore are less satisfied with their lives than much poorer and less efficient countries. Evidently, according to the survey, to be respected as a free human being and to have the freedom to make personal choices– parameters on which Singaporeans give their society a low score–contribute much more to people’s feelings of well being than economics – click here for full article

Stiglitz says GDP may be poor indicator of economy, AFP, 8 Jan 2007

WASHINGTON (AFP) – Joseph Stiglitz, the Nobel laureate economist tapped to head a new French study, said Tuesday he sees gross domestic product (GDP), the most often cited yardstick, as an imperfect indicator.

Stiglitz, named by French President Nicolas Sarkozy to head a panel to find a new method of economic calculation that will include quality-of-life factors, said the current yardsticks “only reward governments if they increase materialistic production.”

“If you improve the quality of life, but it doesn’t show up in more material consumption, it doesn’t show up in GDP, and you’ll be criticized,” the US economist told AFP in a phone interview.

Sarkozy earlier announced in Paris that Stiglitz and a fellow Nobel economics laureate, Amartya Sen of India, will participate in the project.

The 64-year-old winner of the Nobel economics prize in 2001 and currently a professor at Columbia University in New York, is to chair the panel.

Stiglitz, known for his outspokenness and criticism of globalization, said the French president had given him “a broad-ranging mandate trying to put together a commission study on the broad questions of how do you measure well-being.”

“Among the economics profession there has been a strong sense for a long while that gross domestic product is not a good measure. It doesn’t measure changes in well-being, it doesn’t measure comparisons of well-being across countries,” he said.

Thus, if political leaders “are trying to maximize GDP and GDP is not a good measure, you are maximizing the wrong thing and it can be counterproductive,” he said.

The former chief economist at the World Bank, who resigned in 1999 after accusing rich countries of not doing enough to help the poor, said he hoped the panel’s findings would go beyond the French framework.

“Hopefully this will have global consequence,” he said.

“It doesn’t necessarily mean that there will be a replacement of current measures, but maybe a construction of complementary measures,” he said.

He said there was some discussion about the possible participation of other countries in the project.

“Whether we will do it just under the auspices of the French government or whether there will be other partners is a question that is still open,” he said.

For him, measuring growth is a global issue made even more urgent by the problems caused by global warming.

“The standard measures of GDP do not measure the degradation of the environment, the depreciation of natural resources.”

And GDP growth can mask a sharp decline in individuals’ quality of life, he argued.

“It’s been particularly true in the US where GDP has been going up but actually most people not only feel worse off, their measure of income is actually going down,” he said.

Stiglitz said he had agreed to take on the project only after the French government assured him the new panel “will have complete liberty” to define the problem and to analyze it.

“I think that on all sides of the political spectrum there is a recognition of these deficiencies, and a recognition that it is important that we develop better metrics, no matter whether you are on the left or the right.”

Stiglitz said he had spoken with Sen, who would be a member of the panel and an adviser. Sen won the Nobel economics prize in 1998 for work on developing economies and on well-being in India.

Stiglitz said the timeframe for the project had not yet been determined, but he was aiming for a result in the “medium term,” or within the next 18-24 months.

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)

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.”

U.S. Tells Singapore To Cut Bank Ties With Burma Tuesday, Nov 6 2007 

Reuters, 6 Nov 2007

BANGKOK, Nov 5 – The United States told Singapore and its banks on Monday to sever financial links with Myanmar’s junta, widely believed to use the city-state as its main off-shore banking centre.

“We believe that there are regime officials with accounts in Singapore,” senior State Department official Kristen Silverberg told reporters in Thailand during a regional tour to drum up support for a tougher Asian stance against the former Burma. “We hope that they ensure that their financial institutions are not being used as sanctuary for Burmese officials,” said Silverberg, who is responsible for U.S. liaison with groups such as the Association of South East Asian nations .

ASEAN is one of the few international organisations to admit Myanmar but its current chairman – Singapore – expressed “revulsion” at September’s crackdown on monk-led democracy protests in which at least 10 people were killed.

Washington wants Singapore to go one step further and take action in the form of, say, financial sanctions or travel restrictions on members of the regime and their cronies, as the United States and Australia did last month.

Silverberg did not say whether “third party” sanctions, targeting non-U.S. businesses that do business with Myanmar, were among further measures being considered in Washington if the generals fail to embark on an acceptable path to democracy.

“Obviously, we’ve asked financial institutions and governments worldwide to consider whether their relationships with Burma are helping to facilitate this regime,” she said.

“We’re glad that both governments and private institutions are taking that request seriously.”

Singapore officials have publicly opposed sanctions, but in the last few weeks, its banks appear to have been quietly distancing themselves from Myanmar, analysts and bankers say.

The most concrete example is Air Bagan, a small airline owned by Htoo Trading, a conglomerate which recently appeared on a U.S. blacklist on account of its links to the junta, which is suspending flights to Singapore.

The city state’s Today newspaper said the final straw for the airline, which was struggling with declining passenger numbers after the crackdown, was Singapore banks deciding to “stop dealing with” it.

Despite Washington’s assertion that Myanmar’s generals park their cash in banks in Singapore – also their favoured destination for shopping and medical treatment – Prime Minister Lee Hsien Loong insists the financial system is clean.

“We don’t play dirty money. We don’t condone money-laundering,” he told CNN.

The Burma Campaign UK, a London-based activist group, list 10 Singapore firms on its “Dirty List” of those with links to Myanmar, including banks DBS Group Holdings , Oversea-Chinese Bangking Corp and United Overseas Bank , and conglomerate Keppel Corp.

“Singaporean Good Life” Doesn’t Come Cheap Monday, Nov 5 2007 

Gated Gardens: Singapore has basically two kinds of real estate—luxury, or state-run
By Sonia Kolesnikov-Jessop | NEWSWEEK
Nov 12, 2007 Issue

Located just 10 minutes from Singapore’s bustling docks, Sentosa Cove is a world apart. The road leading into the city’s super-posh residential complex runs past a championship golf course framed in tropical jungle. Four years ago much of the reclaimed land was barren; today a 117-hectare gated community with homes more than $10 million apiece has risen to become one the most select addresses in Asia, replete with waterfront boardwalks, meticulous landscaping and a yacht club. “These people who buy here have a choice to live anywhere in the world,” says Jennie Chua, chairman of Sentosa Cove Pte Ltd, “so it’s heartening that they’ve chosen to buy a home here.”

Singapore has long been a magnet for expatriates. It’s an ideal gateway for business people who travel regionally but want their families to enjoy a clean environment and First World amenities, including top international schools and state-of-the-art hospitals. The city’s emergence as a vital Asian financial hub has added to the lure in recent years, attracting hordes of well-heeled bankers and fund managers. Government policies have moved toward recasting the port city, with a population of 4.5 million, previously known for its buttoned-down uniformity as the Monaco of the East. To that end, two new casino resorts are under construction, and the city will stage its debut Formula One Grand Prix next year.

So what’s the problem? Admission to the “Singaporean Good Life” doesn’t come cheap. Singapore, perhaps more than any other expat hub, has a two-tier housing system. While 1 percent of the population lives in high-end luxury homes, like those at Sentosa Cove, 84 percent of the rest live in public housing as private spaces become more unaffordable.

“Public housing in Singapore is just not for the low-income. It’s for the middle-income and even the upper-middle-income,” says Mah Bow Tan, Singapore’s minister for National Development.

The situation won’t get better any time soon. Increasingly, the city’s competitiveness hinges on the arrival of ever more foreign professionals. Some 30 percent of its population today are foreigners, compared with just 14 percent in 1990. Singapore’s declining birthrate means this ratio will increase further. A bifurcated city is taking shape. On one side: a vibrant metropolis with tree-lined shopping arcades, fashionable bars and restaurants, gourmet grocers, art galleries and lavish condominiums. On the other: a public-housing heartland of small flats where most of the population resides, generally content, but without any real hope of escape as the price gap between private and public housing keeps widening.

Singapore’s public housing was conceived of shortly after independence as a means to elevate poor Singaporeans from slums. Households could purchase or rent subsidized flats, often with government loans, in developments that rank among the best-managed facilities of their kind in the world. Buildings are usually well maintained. Strict integration policies also prevent them from becoming ethnic enclaves, as did housing projects in France or the United States, for example. Indeed, they were a critical component in the government’s campaign to engineer a multi-racial society from a population consisting of Chinese, Malay and Indian immigrants.

Until recent years, the plan was to shrink the city-owned share of the housing stock over time, as owners who grew more prosperous sold their starter flats and moved into more-luxurious private digs, and fewer first-time buyers required subsidized housing. Now it looks like Singapore’s rising international stature and popularity among expatriates could undermine that plan. Exploding home prices recently forced the Housing Ministry to raise the maximum grant for first-time buyers by 50 percent and relax the qualifying criteria for lower-income households. “This is quite a significant shift from several years back, when the government indicated that the role of [the Housing and Development Board] may be down-sized,” says Chua Hak Chin, economist at Citigroup.

Efforts are also underway to spruce up the facilities. Recent designs look more like private housing; the architecture has become less utilitarian and more environmentally aware. One planned development even has a beach and a boat dock. Still, while such schemes might tamp down resentment felt toward the select few who can afford the gated-access lifestyle on display at Sentosa Cove, they don’t change the fact that in Singapore, one of the richest places in Asia, even the middle class are now risking getting off the private-property ladder.


Rapid growth at a high price by Seah Chiang Nee, Insight Down South, 3 Nov 2007

Singapore’s fast growth is beginning to be expensive. Increasing prices in just about everything has overshadowed the city state’s prosperity in the last four years.

THE city-state has been hit by an unceasing bout of price increases that has overshadowed the city’s prosperity in the past four years.

The latest series of price hikes came recently almost days within each other on household necessities like bread, noodle and live chicken (by an average of 20%) – and bus fares by one or two cents.

(This came only a year after fares of buses and trains were raised by one to three cents.)

Hardly had the public time to ponder the impact when the government dropped another bombshell. It substantially raised the Electronic Road Pricing (ERP) rates for the third time this year.

This will hit the pockets of some 800,000 car-owners, not to mention buses and lorries.

Under the system, they are charged electronically every time they use certain stretches of roads and highways during busy hours, according to places and times.

The peak charges will go up on Monday by $1.50 to $5.00 – or 43% at the worst point. Others are slightly cheaper.

Incredibly this is the third time in 2007 that ERP rates are raised, and the public protests have been uncomplimentary and loud.

Inflation is at its worst here in 12 years and has become the people’s biggest worry today. For many, the high costs are blurring the Singapore Dream.

Worst affected is the broad middle class, which is already paying dearly for the high oil price and a punishing five-to-seven per cent rise in the Goods and Services Tax (GST).

Since the beginning of the year, a wide range of products and services – including housing, hospital and medical care, education, electricity – has been skyrocketing.

Hardly a week passes without an announcement or two of some price or government fee going up.

There are two immediate effects. The value of money is dropping by the week, and savings are discouraged since consumer prices are rising faster than interest the banks pay on deposits

Some other recent price hikes:

> Electricity. Costs up by 4% between October and December. In the last quarter, they had been increased by 9%.

> Fees in certain schools up 10%-12%; university fees had been raised earlier. One special needs school doubled its fee.

> Average hospital bills were up by 10% to 30% with subsidised class C wards chalking up the highest percentage increase. Polyclinic charges were also raised.

> Cigarette prices went up by some 40 cents a 20-package to S$11.60, or 3.6%.

There were hikes on cable TV, car insurance, car parking and postal charges, as well as goods from milk to Milo, cooking oil to coffee, canned foods, processed foods, wheat products – and many other items at supermarkets.

The government appears unable to take action to stop the epidemic, a contrast to the first-generation government during such crises.

It launched NTUC Fairprice in 1973, a workers cooperative, to stem out profiteering on rice and other necessities.

And ministers and parliamentarians at the time would move around marketplaces and shops, appealing to shopkeepers to be sensitive to people’s financial needs.

Like previous inflationary times, this one is largely imported, the result of higher oil and other imported products.

The second cause is a robust Singapore economy, which has been growing at an average of 7.6% a year since 2004. This year 8% is expected. It creates demand.

Business has been relatively strong, salaries have risen (civil servants just got a 6% pay hike) and unemployment is the lowest in 10 years.

But so strong and persistent is inflation that many Singaporeans feel they are the poorer for it.

Part of the cause is the government, whose priorities are economic growth and asset accumulation (for foreign investments) – even at the expense of a higher cost of living.

To that end, it has increased GST from five to seven per cent and may eventually reach 10 per cent. Fees for public services are being raised to ensure no drop in Treasury collection.

Deficit budget, although not entirely unknown in Singapore, is a very rare happening.

Many young professionals who just start off in life are worried that the sharp run-up in property prices (a boon for 85% homeowners) has made it virtually impossible for them to buy a flat.

Some are putting off marriage or raising children.

The people see high prices as being here to stay – a new feature of life in a fast over-crowding city that wants to see a population of seven million.

Mr Lee Kuan Yew has said that Singapore is not only a developed country, but occupies ‘the top half’ of the First World.

Keeping it there not only brings wealth but also a new painful structure of expensive living comparable to the likes of Paris and Tokyo.

Understandably inflation has become a hot debate subject.

Blogger ‘Raul77’ points out that Singapore has neither land-size nor natural resources, so “it can either be a 1st World country or a poor one. No third way about it.”

As a result, life is always stressful, and those who can’t take it are leaving for quieter, bigger countries.

This is tough for the middle class and working class, which are just struggling for a living amidst the perceived wealth, unhappy and with few choices in life.

To which Nornan Lee replies: “If Singapore is not worth living, then nowhere is worth living.”

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