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“Decisive” budget does not address long-term inadequacies in the corporatist model

http://208.79.203.2/~wayangpa/?p=4648

Written by Eugene Yeo and Jeremy Koh | 28 January 2009

PRIME Minister Lee Hsien Loong has described the $20.5 billion Resilience Package as a ‘very decisive Budget’ that aims to help see Singaporeans through the difficult economic times ahead.

Much has been said about the Budget lately with most PAP ministers and MPs, labor union leaders, employers and ordinary Singaporeans echoing the Prime Minister’s words.

The package consists chiefly of measures to help companies save jobs, retain workers and to keep them afloat during the economic downturn. Measures to help households include doubling of GST credits and a personal income tax rebate of 20% which was unchanged from last year.

The government had argued that the most effective way to help Singaporeans cope with the recession is to save their jobs through supporting the employers. However, it does little to address glaring long-term deficiencies in our corporatist economic model.

The S$20.5 billion ($13.7 billion) package — a whopping 8% of GDP — looks like past stimulus plans instead of a forward looking economic blueprint to retool our export-oriented economy.

Why does Singapore suffer the most from the global economic turmoil as compared to our nearest neighbor Malaysia ?

For far too long, we have been overly dependent on external trade while certain government policies like the compulsory CPF saving scheme and the high prices of public housing squeeze the middle class dry and dilute their spending power in the domestic economy.

Singapore’s economy would be more resilient if it were better balanced. Consumption composes only about 40% of GDP — far less than other developed Asian economies, nearer to 55%. (read Wall Street Journal’s commentary here)

The best way to prevent companies from retrenching workers and shutting down is to provide a steady flow of businesses for them. Only when there is demand will there be supply. The government’s incentives to the business sector are only temporary measures to tide them over these hard times and does not generate a demand for their services or products.

Why is our domestic consumption so low as compared to other developed Asian countries like Japan, South Korea or Hong Kong ?

Take the example the average Singapore worker earning a median pay of $2,500 a month to support his family of four – his wife and two children. He takes home $2,000 after contributing 20% of his pay to his CPF. Assuming his CPF is enough to pay for his monthly mortage, all he has is $2,000 for the living expenses of his entire family. How much spare cash does he still have to spend ?

The limited spending power of Singapore’s middle class is the real scourge of the current malaise pervading every sector of our economy and we will be able to shower the storm better had we have a greater domestic consumption.

The GST credits and personal income tax rebates provide more relief to the lower-income group who does not spend much anyway than the middle income group.

We propose two measures which will put extra cash in the pockets of the middle class almost immediately:

1. Decoupling the price of newly built HDB flats from the resale market:

New HDB flats are currently sold at 70% of the resale value of neighoring flats. With the HDB resale market being popped up artificially by downgraders from private homes and foreigners, this impose a heavy strain financially on newly-wed couples looking for their first home.

Public housing must be kept cheap and its prices should reflect current economic realities on the ground. Singaporeans should not be allowed to spend more than a certain percentage, e.g. 15% of their monthly salaries on servicing their housing loans. Those whose incomes failed to reach the benchmark should be offered rental flats instead.

The prices of new HDB flats should be pegged to the median pay of the average Singapore worker, calculated based on the amount the average worker will need to fork out over a 30 year period. For example, 15% of $2,500 gives us a monthly installment of $375, and a loan of $135,000 which middle-income households can afford easily.

2. Reducing employeers’ CPF contribution to 10% or less:

An extra 10% cash for each Singapore worker to bring home monthly will translate to greater spending power beyond basic subsistence levels.

Less Singaporeans will need cash handouts which the government can redirect to give more to the lower-income groups to lift them out of poverty.

Upon the recovery of the economy, Singaporeans can be encouraged to buy life annuities and health insurances from private insurance firms to supplement their CPF and medisave.

CPF has already failed in its original function of serving as retirement funds for Singaporeans. How many of us can afford to depend on our CPF when we retire ? The government should stop meddling in the personal finances of its citizens and allowed them to manage their own hard-earned savings.

Singaporeans have one of the highest saving rates in the world at 34.5%. We are also home to the richest sovereign wealth funds in the region with Temasek and GIC amassing assets of more than $100 billion dollars combined. Why then do we have less spending power compared to our counterparts elsewhere ? Why can’t we retire comfortably in our golden years and instead have to continue working for as long as we can ? Why are there still homeless Singaporeans with no roofs over their heads in a developed country like ours ?

There is something fundamentally wrong in our corporatist model and it is time we rectify it. Singaporeans from three generations – our grandparents, parents and now ourselves have contributed immensely to build up these SWFs through our CPF contributions and HDB flats purchases and yet they can afford to lose billion of dollars in failed overseas investments with impunity.

Reducing both the employees’ CPF contribution and prices of new HDB flats will benefit every Singaporean far more than GST credits and cash handouts. It is time we reduce our contribution to Temasek and GIC unless they are made to be accountable to the people like the Norwegian Pension Fund which publishes an annual statement of account for every Norwegian with a stake in it.


My Dear Government, Why Do You Treat Me So?

http://gangasudhan.com/blog/2009/01/my-dear-government-why-do-you-treat-me.html

Written by Ganga Sudhan | 25 January 2009

As a (second class) Singaporean, I am deeply saddened today to discover that my government is trying to enact changes to the law that will effectively give itself (too much) power in controlling the freedom of normal Singaporeans in using their camera-phones or video cameras to capture protests, acts of activism and such on film.

My friend alerted me to this by exclaiming that
“Will recording or filming of events which are considered illegal in law now itself be considered illegal?”
and I responded by saying
“I think the issue is with the ‘live’ streaming of films and not video recording per se. It would not be feasible to ban the recording of illegal events altogether because this would effect media reporting as well…”
He then replied with further information saying
“…it seemed to say that this amendment was going to give powers for police to confiscate the cameras or stop the filming of protests by people who were not journalists by profession.”

I thought to myself, this was quite alarming and distatseful if it were to be the case – but I still did not believe it could be true. So I went searching for the original documentation on these changes and relied on the Singapore Statutes Online and the Films (Amendment) Bill as posted on the Singapore Parliament website.

Of the 3 changes that have been proposed in the bill (a local copy on my server, just in case), 2 are merely cosmetic changes (IMHO) which allow for an advisory board to influence decisions (section 4) and paraphrasing the section to allow for more comprehensiveness (Section 26).

The (shocking) point of contention, however, for me is the 3rd proposed change which refers to the definition and interpretation as per the provisions under the Films Act (Chapter 107), Section 2:
2-(2) For the purposes of this Act, a film is directed towards a political end in Singapore if the film —

(a) contains wholly or partly any matter which is intended or likely to affect voting in any election or national referendum in Singapore;

(b) contains wholly or partly either partisan or biased references to or comments on any political matter, including but not limited to any of the following:
(i) an election or a national referendum in Singapore;
(ii) a candidate or group of candidates in an election;
(iii) an issue submitted or otherwise before electors in an election or a national referendum in Singapore;
(iv) the Government or a previous Government or the opposition to the Government or previous Government;
(v) a Member of Parliament;
(vi) a current policy of the Government or an issue of public controversy in Singapore; or
(vii) a political party in Singapore or any body whose objects relate wholly or mainly to politics in Singapore, or any branch of such party or body.
2-(3) For the avoidance of doubt, any film which is made solely for the purpose of

(a) reporting of current events; or

(b) informing or educating persons on the procedures and polling times for any election or national referendum in Singapore,

is not a party political film.
After (and not if) the changes have been implemented, this section will read as follows (changes in red):
2-(2) For the purposes of this Act, a film is directed towards a political end in Singapore if the film —

(a) contains wholly or partly any matter which, in the opinion of the Board, is intended or likely to affect voting in any election or national referendum in Singapore;

(b) contains wholly or partly references to or comments on any political matter which, in the opinion of the Board, are either partisan or biased; and any “political matter” includes but is not limited to any of the following:
(i) an election or a national referendum in Singapore;
(ii) a candidate or group of candidates in an election;
(iii) an issue submitted or otherwise before electors in an election or a national referendum in Singapore;
(iv) the Government or a previous Government or the opposition to the Government or previous Government;
(v) a Member of Parliament;
(vi) a current policy of the Government or an issue of public controversy in Singapore; or
(vii) a political party in Singapore or any body whose objects relate wholly or mainly to politics in Singapore, or any branch of such party or body.

The most critical change of all is Section 2-3(a) which changes from ‘reporting of current events’ to ‘…reporting of news by a broadcasting service licenced under any written law’. This in itself places anyone filming an ‘illegal event’ who does not have a press pass in the cross hairs of the authorities (which include the Police) who, under Section 34 of this act, can search and seize any film and equipment used.

Subsequently (upon conviction) such equipment and film ’shall be forfeited and shall be destroyed or otherwise disposed of in such manner as the Minister may direct’ as well.

I am deeply saddened that in the proposed Bill, where explanations and justifications were provided for all the changes, this critical change was explained away as the expansion of the original list without referring to the change in terminology – ayone can report on current affairs but only a select few may be part of ‘a broadcasting service licenced by any law’.

It seems as though this telling change is being sneaked in without any forthright explanation. Honestly, I cannot accept the change or the manner in which it has been included. As far as I am concerned, it is truly a sad day for Singapore as a modern city when (and not if) this section comes into play.

Then, not only will protesting be illegal, so will filming it. My God! What’s next? Turning your head to glance becomes an offence? Or will reading the placard/banner/t-shirt lead to being indefinitely detained under the ISA?


Singapore’s Limits – It’s time to rethink the corporatist model.

http://online.wsj.com/article/SB123264905073306835.html

Excerpts:

The export-led economy is falling on its face.

Singapore’s economy would be more resilient if it were better balanced.

The government could unleash more productive, sustainable growth by trimming back its public sector and allowing the economy to diversify on its own.

The best help for Singaporeans would be expanded, permanent opportunities to work, save and invest with more of their own money, rather than relying on government to do it for them.


Budget : Where are the safety nets?

http://singaporemind.blogspot.com/2009/01/budget-where-are-safety-nets.html

Written by Lucky Tan | 24 January 2009

The day after the “Resilence Budget” was announce, Straits Times was filled with articles on how it will save jobs and help Singaporeans during the impending hard times. The budget attempts to save jobs by giving companies a wage credit. The govt will subsidize up to 12% of the first $2500 of wages. This was reported as an innovative new idea to save jobs. I figured this is probably a rehash of an old idea – in the 1980s recession, employer’s CPF contribution was slashed to lower the wage bills of companies. The lower wage bill helped to save jobs in the 80s recession. This time the govt probably wanted to do the same but cutting CPF is not possible because there is not much left to cut and many depend on it to service their HDB loans. The only way to lower the wage bill was for the govt to subsidize wages. However, this move will not save as many jobs as it did in the 80s. If you recall the 80s recession was caused in part by the loss of competitiveness due to the NWC recommending wages to be increased too quickly, the cut in wages helped Singapore to restore its competitiveness thereby saving jobs. This recession is very different. It is triggered by a massive abrupt collapse of external demand. Wages are not the issue – they are losing jobs by the tens of millions in China where the wages are the lowest in the world. Cutting wages will have a limited impact on retrenchments. Companies need to shed capacity because there is no demand for goods produced- Intel, Nokia, Microsoft, DBS etc etc have decided to cut jobs and these are companies that are still cash rich and competitive. When Lim Swee Say “scolded” DBS for retrenching staff instead of cutting pay, DBS replied that cutting pay is not the answer because certain segments of their business will not be revived for years and they just don’t need headcount.

What is going to happen is quite predictable. There will be widespread retrenchments and our unemployment rate will rise because the measures in the budget will have limited impact. A few months ago, Alex Au wrote that it is time for safety nets to be in place. I agree with him completely. These can be removed once the crisis is over and jobs are plentiful again. A survey done recently showed that 30% of Singaporeans are worried about retrenchments …they believe they will be retrenched. The last time something so abrupt happened was during the Asian Crisis. People simply queue up around the block at the MP office to seek help because they don’t know what to do when they become desperate. The MP had to decide what help to give on the spot. It is all very unsystematic and haphazard. Its the worst way to dispense help. This is a crisis people need to clear about where to seek help, how they will qualify for help and what help is given so they can at least plan when the situation deteriorates. Many Singaporeans will become jobless through no fault of their own and many have no savings because of the rising cost of living made it difficult for them to save. We will face a problem for which the budget offers no solution.

I have long thought there will be a serious situation which will cause the PAP govt to overcome its aversion to giving help to Singaporeans when they really need it. When the crisis came, I thought “this is it”…they will have to do it. Afterall, Singaporeans contributed to the massive reserves which are meant for rainy days. The crisis we are seeing is a once in a lifetime event….for once in our life, our govt has a chance to lift you up when you go down. But the PAP helped to recapitalise Western banks with our reserves instead. There was no scrutiny when tens of billions are lost in those banks but when it comes to helping Singaporeans directly with the reserves the PAP just can’t do it. Our PM recently brought up his fear of Singaporeans cultivating a sense of entitlement and dependency when the govt gives help – that is why there is no direct help for Singaporeans?! It is like not sending the fire fighters when someone’s home is getting burnt because you think that the people will abuse the fire engines by not taking measures to prevent fires in their own homes. But this time someone threw a lighted match into our backyard, it is global systemic crisis and ordinary Singaporeans will get into trouble through no fault of their own. This is not a time to teach your citizens lessons about being self reliant or worry about entitlement mentality. The last time our PM was very worried….it was about he and his minister colleagues being not paid enough and he fought hard for the pay he believed they were entitled to. Isn’t it time to worry about jobless Singaporeans who cannot afford the basic necessities? ….When will he fight for us?


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Happy Lunar New Year

The following seasons greeting, sent by Mr Tan Kin Lian, is forwarded to us by one of the volunteers.


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