As Singapore turns 50 it and its government, the People’s Action Party, face a mid-life crisis. Support for the government fell to a historical low at the 2011 General Elections where a number of contentious issues emerged.
What does the government have to address for the people of Singapore?
High cost of living: Singapore remains a very expensive place to live in, according to the Economist Intelligence Unit and other surveys. More importantly, this is the view of the Singapore people. The government will have to address the high cost of living.
Population. Singapore is overcrowded and congested. Singaporeans are of the view that their country is overpopulated and that there is acute competition for resources. Transport is a particular example. The MRT system is overburdened and operated above capacity leading to breakdowns and service disruptions. The roads are congested despite a car ownership quota system augmented with a road pricing system.
Xenophobia. Singaporeans have developed an acute sense of xenophobia. This is related to the overcrowding problem. Foreigners are seen as taking up resources and taking up jobs.
Inequality. Singaporeans are envious of the wealth and luxury around them but which they struggle to attain. Inequality of wealth and income has grown if not in substance than in perception in Singaporean’s eyes. That much of the wealth is of foreign origin adds to the xenophobia.
Rule of law. Singaporeans have been trained to be law abiding and generally are. They perceive foreigners as being less law abiding. Foreigners have not grown up under Singapore’s well-ordered society and may treat laws as guidelines as opposed to rules. Littering is prevalent in HDB estates whereas private property is relatively clean. This amplifies the feeling of inequality in the country.
Government being out of touch with Singaporeans. Comments by government officials and civil servants have sometimes displayed a lack of empathy and fostered a sense that the government is elitist and out of touch with common Singaporeans.
What other challenges does Singapore face?
Labour shortages. Businesses face a shortage of labour and escalating labour costs. Singaporeans are unwilling and sometimes unable to do certain types of jobs. Businesses have to fill these jobs with foreigners. Unfortunately, Singaporeans often complain that these jobs are being taken up by foreigners. Another complaint is that foreigners have a better deal than locals, they have the freedom to send their children to international schools
, decide if their male children register for national service or not, generally get paid more than locals, live in better conditions than locals, and have the luxury of leaving the country with their CPF funds if they choose to leave and never return.
Singaporeans are human and it is human to seek to be unique and exclusive. This is not a case of vanity but a practical evolution. It is rational to want immigration to bring in more people of lower wealth to do the jobs one needs doing without competing for one’s job. It is also rational to want immigration to bring in more employers. What the Singaporean doesn’t want is competition, a perfectly rational desire, that is people who are of similar ability and wealth who neither do anything for them nor employ them. Of course the more subtle effects are often not immediately felt even if they may be understood, and that is immigration brings increased demand and employment which is good generally for the population as a whole. In the brief history of the species, trickle-down economics has an even shorter history and is certainly not well understood outside of economic circles. Trickle-down economics has been widely sold in most modern capitalists economies although the success of the model is questionable.
Retirement planning 1. According to a study by a local bank published in 2014, the savings of the average household in Singapore, including their CPF savings, will be insufficient to fund retirement. This problem is not unique to Singapore. Many western economies have even more acute retirement funding problems compounded by complex systems and policies. CPF is unique and efficient in its defined contribution nature. Households do need to save beyond CPF for their retirement needs that much is clear. Another complaint among Singaporeans is that they do not feel their CPF monies are secure. Better investor education can go a long way to allaying their concerns. Investors need to understand matters like credit risk, investing in equities and bonds, how the CPF funds the interest rates it pays out on deposits, whether the CPF is a custodian of their money or a debtor, what the CPF does with their money, where does the CPF invest and why, is there concentration risk, how diversified is the CPF portfolio etc etc.
Retirement planning 2. The CPF is a defined contribution scheme. What happens to those who have contributed little or nothing? What form of social security do they have? The defined contribution CPF is the envy of many developed nations facing unfunded or underfunded pensions. That said, a defined contribution scheme is insufficient and has to be augmented by a social security scheme providing defined benefits. In a mature and compassionate society, social security is needed. Defined contribution schemes only serve those who have contributed and contributed sufficiently. A National Insurance should be established which would be part funded from existing reserves and part funded by either a more progressive tax system or a distinct national insurance tax. Such tax would ideally be designed to apply at higher thresholds. The actual marginal rates should initially be low and adjusted to increase with income earned. The National Insurance could ensure a basic level of medical insurance, pay unemployment benefits or fund workfare, and fund a pension. The total tax burden will rise but it is a necessary evil. It is a fantasy to expect more benefits and social security without someone shouldering the burden. That burden should be shared by the more fortunate among Singaporeans. A national insurance scheme augmenting CPF will mean that the retirement age of CPF need not be extended since it is always fully funded. The risk of frivolous spending after retirement is mitigated by the introduction of national insurance. CPF contribution rates can be adjusted down to manage cash flow and also because CPF will not be the sole asset at retirement.
The funding of more discretionary spending and investment:
Singapore has been a pioneer in the establishment and management of sovereign wealth funds. It should extend this pioneering spirit to better define sovereign assets and sovereign debt. The opportunity exists to create a priority of claim among sovereign liabilities, from the unsecured to the secured. State assets should be transferred to the sovereign wealth funds. The GIC and Temasek should be merged. The Singapore government can borrow through the issue of Singapore government bonds, a sovereign security, or it can issue unsecured and secured bonds as well as covered bonds and asset backed securities from the sovereign wealth fund. All projects and expenditures must be specifically funded by defined revenues or liabilities on the sovereign’s or the sovereign wealth fund’s balance sheet. This promotes transparency and an innovative mode of funding.
With time, outright expenditures as opposed to investments will also be able to be funded through the sovereign wealth fund against specific funding routes.
To reiterate: The Singapore People’s To Do List For Their Government:
High cost of living: Bring down our cost of living. In particular please address food, shelter and transport.
Inequality: We the citizens of Singapore are grateful for the roof over our heads. The next challenge is to have better dwellings. That means, not so many, not so close together, lots of greenery, less congested roads, trains and buses, make our HDB flats of a higher (not lower) quality and closer in look, feel and quality to private property. For 50 years we supported you and you gave us home ownership. But 80% of us are in HDB and we all still strive for private property. Either only 20% can live this dream or you can make the 80% of HDB close enough to private property that the difference doesn’t matter so much.
Population: Singapore is too crowded. We do not want any more people than we absolutely have to have. We know it’s a balance between bringing in more workers and employers and its difficult to strike that balance.
Immigration: This is a difficult one. We want more of the type of people who add to our society and less of those who don’t. Adding to society is more than spending or keeping money here, it means engaging with the community, providing meaningful employment and investment in productive assets. We the people do still have unreasonable requests, such as not wanting to do certain jobs yet not wanting foreigners coming here to do these jobs. You will need to educate people on the harsh reality. Pandering will only postpone the problem until one day you get total misunderstanding.
Transport: We want MRT trains and buses that work and are efficient and cheap. We probably don’t know how much it costs to build, buy and run public transport but we just want it cheap and efficient. Congestion is a big problem on our roads which COEs and ERP hasn’t solved, at least not sufficiently. Cars are where we need a more progressive tax. Politically you can get away with that provided interest groups don’t get their way. Each household only needs one car. We need more cabs, buses and trains and we need the cabs to be more evenly distributed by location and time.
Rule of law: We really feel that respect for the law has dropped. Don’t worry about antagonizing people by tightening up law enforcement. The people want to see Singapore as a safe, green and clean Garden City as it once was. Even if it means tougher enforcement of laws.
There are probably a lot of other things that are also important but which Singaporeans aren’t complaining about. Yet. Don’t forget those.
Racial harmony is sometime taken for granted in Singapore. The government has been and remains paranoid about maintaining racial and religious harmony and creating a Singaporean identity strong enough to subordinate racial and religious distinctions. This paranoia is well placed. A quick survey around the globe finds racial and religious antagonism confounding rationality. The Singapore identity must be maintained and strengthened to combat any risk of fracture. Race and religion are but two factors which can divide a people. Rich and poor may be a new distinction which arises not just in Singapore but across the globe.
Singapore’s economic and business model. The world is becoming a more contentious place. Countries are becoming less willing to trade and cooperate. The reason is that global growth is slowing, mainly due to the accumulation of debt over the last few decades which in 2008 was shuffled from private to public b
alance sheets, mostly in the developed world, and which remains a drag on growth. An example is Ireland which went bust bailing out its commercial banks. In such a contentious world we see China seeking to be less reliant on US consumers, and the US trying to be less reliant on Chinese factories. We see a US less reliant on OPEC and oil retract from the Middle East with serious geopolitical consequences. As the tectonic plates shift, where does Singapore find itself? How does Singapore see the economic and political development of ASEAN and South East Asia and Asia and China and India, and how will she position herself not only to prosper but to persist, to exist.
And finally a word about politics…
I myself have been critical and laudatory of the PAP. And I will give them this: it is a difficult job and very often a thankless one. 40% of the electorate do not thank them, nor do some of the 60%, some of whom vote out of pure utilitarianism. Call it 50% in all, conservatively.
Yes, the pay is high, but Singaporean’s tax drag is well below any of the developed economies who struggle to pay their bills and their politicians. And yet a politician is a public servant and the office is an office of honour and duty, not just another job. It is good that they should sacrifice some monetary reward and not draw the same pay as the high flying itinerant manager for hire. I’m not smart enough to tell anyone how much an MP should be paid.
The job is tough. It was tough in 1965 and its tough now. In 1965 it was the local topography that was shifting; today it is global tectonics. You really want the job of running the country and navigating through these waters?
And finally, could we have more debate about the issues in this election please? And less personal issues whether laudatory or critical. Thanks chaps.
Oh. Sorry, I forgot. Just one more thing. There is the little question of transparency over a whole host of issues. I am sure everything is fine but just to satisfy your citizens could you please just publish all the relevant data to the standard one would expect of a first world country. Its not such a big deal except when the queries are met with silence.