13 November 2011

Businesses, Politics and Economics

Business people expressed their admiration and concerns for Singapore in three separate articles recently.

'S'pore Has Done What the West Failed to Do' The Business Times (19 Oct 2011)
Businessman and economist Charles Ormiston, Bain and Company's Southeast Asia chairman, is impressed with how the Singapore government has addressed the country's economic issues.  The government, according to him:

Has twice in the past year instituted measures to slow the rate of growth of property prices to reduce the size of the bubble.

Runs budget surpluses when other countries are in deficit.

A government may need to run a budget deficit if the economy requires fiscal stimulus to help to get it grow out of a recession or to serve as a catalyst in the face of anaemic economic conditions.  For such contingency, it is better to draw on reserves accumulated from budget surpluses to fund an occasional budget deficit than to rely on borrowings.  Nevertheless, oversized accumulated reserves resulting from persistent large budget surpluses may imply that the government has been collecting too much tax and other revenue, or not spending enough on its operating or development expenditure, or both.

Established a good and affordable healthcare system.

The affordability of the healthcare system is subjective.

Has attracted investments.

Allowed integrated resorts to be set up, despite some segments of the society not being receptive to them.  The integrated resorts have catalysed growth in the tourism sector and other commercial and property sectors.

The casinos should be considered in their entirety, beyond their economic benefits.  Casinos may give rise to, or exacerbate, gambling addiction and gambling related problems among our citizens, permanent residents or foreign workers.  They may be associated with crime including but not limited to money laundering.  Ask Singaporeans whether they are proud of the two casinos.  The jobs created by the casinos are not the skill intensive jobs that the economy needs nor many workers are proud of.  To what extent have Singapore citizens benefited from casino jobs?  Instead of casinos, what other projects could have been promoted?

Why did the government not allow any casinos to be set up here for so many years?

Moved towards more consumption taxation (GST) and lower income tax burden.

Higher GST and lower income tax rates benefit the wealthy and shift the tax burden onto the middle and lower income people and retirees.  Singapore's personal income tax rates for the wealthy are too low and should be raised.  At the very least, they should not be lowered any further; see also discussion [link].

Singapore's Success: an Observer's Concerns The Business Times (25 Oct 2011)
Mr David Mason, a consultant and formerly a partner with Price Waterhouse Singapore expressed concern with the lack of discipline in Singapore.

Singapore started and sustained itself through the efforts of its people.  The government was tough and restrictive.

Discipline was key.

Younger Singaporeans lack an understanding of how modern Singapore evolved, and think that the country has always been, and will continue to be, like this.

Discipline is fading now.

There is dissent and a growing sense of unease.  The haves and the have-nots are getting further apart.

There is much dissent about the apparent unchecked immigration from Asian sources, despite the agreed need for it on macro-economic grounds.

Singaporeans are in danger of losing the Asian tradition of respect for their elders.  They are putting the country at risk.

Immigration.  Businesses want unfettered access to as much labour as they need and at as cheap as possible.  Profitability matters.  Who suffers most from the following: social friction resulting from hordes of foreigners flooding the nation and resulting in the citizen core rapidly shrinking from 74 per cent of the population in 2000 to 63 per cent in 2011 (how striking this change is may be seen when it is expressed as follows: for every one non-citizen in the population, there were 1.7 citizens in 2011 down from 2.9 citizens in 2000), with non-residents accounting for 27 per cent in 2011 (non-citizen residents, i.e., permanent residents, accounted for the remaining 10 per cent); strains in the infrastructure such as accommodation, public and private transportation, publicly funded universities, polytechnics and schools, recreational facilities, prisons etc.; inflationary pressure when the infrastructure or physical supply cannot cope; competition from foreigners for jobs in Singapore; and allowing non-citizen residents to enjoy rights and privileges that in some instances are perceived to be not very different from those enjoyed by citizens?

Economic growth, though important, is not everything.  Singapore does not need to, and cannot, grow at 10 per cent per annum or even 7 per cent per annum over extended periods of time.  Both the Economic Review Committee in 2003 and the Economic Strategies Committee in 2010 acknowledged that 3 to 5 per cent per annum growth is sufficient to generate the fiscal resources for social investments and national security.  The economy can grow 3 to 5 per cent per annum, which is healthy for an economy at Singapore's stage of development.  This can be achieved — not by continuing the high rate of immigration of recent years, but by raising productivity 2 to 3 per cent annually over the next decade, which is more than double the 1 per cent rate in the past decade.  Productivity improvements will have to account for about two-thirds of Singapore's GDP growth, compared to just one-fifth in the past decade.

Productivity (or more precisely, raising productivity) is not a mantra, the function of which is to adorn the wall in the corporate office.  Productivity is not a slick political slogan to placate a unhappy and restless electorate.  Productivity is not a by-product of some other, more important corporate goal.  Productivity — like environmental and social responsibility — can no longer remain a discretionary or secondary activity or an afterthought, but must be institutionalised as a core corporate goal.  Businesses have to come to terms with the fact that immigration has gone too much for too long and they have to make do with much slower immigration in the years to come.  Businesses will not like restrictions on their access to imported labour.  Some may consider curtailing expansion plans or leaving.  All have to adapt, and most will because they know and acknowledge that the past immigration policy cannot be permitted to, and simply cannot, continue.

Singapore may lose some degree of economic growth because of slower, more measured, more sensible immigration, but the country and its economic structure will be better for it and the people will be happier for it.

Discipline and respect.  A people who blindly or reverently obey authority might have brought economic development in the past, when factories engaged in low valued-added assembly of radios and TV sets, for example, and few individuals possessed even a Higher School Certificate (equivalent to an "A" level certificate now).  A culture that questions anything and everything — including but not limited to authority — probably is crucial for success in the new knowledge economy because no manager or government official knows everything nor is right all the time.  For those who are not used to it, having their authority questioned may be embarrassing or awkward or result in a loss of face, but it hardly constitutes indiscipline.  Lawful trade disputes are not acts of indiscipline.  Riots and violent demonstrations and protests are acts of indiscipline, and most people do not participate in, advocate nor tolerate them.  Questioning authority is not showing disrespect for elders or political or organisational executives; on the contrary, not allowing their authority to be questioned is disrespectful of the other person.  In any case, political leaders are not the masters of the people who elected them into office.

The widening income divide noted by Mr Mason may be attributed to the immigration policy of the past decade.

Excising the Cancer of Global Corruption The Business Times (26 Oct 2011)
Mr Frank-J├╝rgen Richter, founder and chairman of Horasis, a global business community, praised Singapore's exemplary legacy in curbing corruption.

Former Prime Minister Lee Kuan Yew had three main concerns: national security, the economy, and social issues.  Preventing corruption was required to achieve these goals.  As Mr Lee said, "The moment key leaders are less than incorruptible, less than stern in demanding high standards, from that moment the structure of administrative integrity will weaken, and eventually crumble."

In following its own approach to dealing with corruption, Singapore paid market-based salaries to officials, which has reduced, if not eliminated, the temptation of rent-seeking that is so common in the developing world.

Mr Lee Kuan Yew did an excellent job in ensuring that holders of political office and civil servants were incorruptible and demanded that their subordinates be incorruptible.

Paying government officials very low remuneration may, though not necessarily, tempt them to be corrupt.  But just what is a reasonable level of remuneration to stamp out corruption?

What is the market-based remuneration which Mr Richter referred to?  Is it the remuneration of political leaders in other countries at a similar stage of development and entrusted with similar scope of work?  Is it the remuneration of the top businessmen and professionals in the country, which may or may not be truly reflective of the fair economic value of their contributions to their organisations?  Why is the remuneration of businessmen and professionals in the 90th percentile, for example, not considered market-based remuneration?  Why is the remuneration that gives government officials a reasonably but not excessively comfortable, above-average lifestyle not sufficient?  Why are political leaders elsewhere prepared to accept remuneration which is just a fraction of the remuneration of top businessmen and professionals, and are they corrupt?

What is public service?

By how much has corruption declined since the 1980s, the period before market-based remuneration was introduced?

Would corruption have declined less if the remuneration had not increased as much?

It is very likely that our officials had high ethical standards and conduct even in the 1980s, and the incidence of corruption was low then and is low now, thereby debunking the contention that officials need to be paid super salaries to fight corruption.

2 comments:

  1. Isn't there ALREADY corruption in Singapore despite high pay to civil servants? Two SLA staff who corrupted $12.2 million were sentenced to 22 years' and 15 years' jail.

    The Singapore media reported the whole case through out as "cheating the government". If such case can be considered as "cheating", then all corruption cases can be considered "cheating" and there will be zero-corruption.

    This is just a game of words.

    The truth is that high pay does not at all prevent corruption. Realistically speaking, obscenely high pay is a form of "legal corruption".

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  2. Having raised own salary and approving it with their own dominant parliament without people's consent is already a form of corruption. Abuse of power is a form of corruption. The SLA case is just a tip of an iceberg. Without accountability and transparency, corruption free concept is just a myth. See how many people get brainwashed and believe what the MIWs said by assuming their words are also right. What is the logic?

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