What’s the big story about Singapore these days? Heckle and Jeckle? Sorry, that’s my term for Han Hui Hui and Roy Ngerng who were yesterday charged with being public nuisances – something that their lawyer, the indefatigable M Ravi says he won’t fight against. What he will argue against is whether they were demonstrating without a licence and whether the Commissioner for Parks and Trees really has the power to regulate assemblies and public speeches – because he is supposed to be protecting parks and trees…
So interesting. But not earth-shaking unless there’s a court decision leads to Hong Lim Park being off-limits to any kind of assembly. Still, as Heckle and Jeckle showed over the weekend, whether you have a permit or not, you can picnick on the green.
Methinks it’s the economy which deserves some attention.
Truth to tell, it’s been a bit disconcerting to read gloomy reports of the state of economic restructuring that we’re going through – with no less than the International Monetary Fund making a comment. It said Singapore’s policy of slowing the increase in foreign workers could hurt the country’s potential growth and lower its competitiveness . Cost of labour is going up and it’s being fed into prices. Yup, eating hawker food is more expensive now as CASE showed.
This is how BT reported it: The policy could usher in a “new era of sustainable growth”, but how and when desired productivity gains materialise is unpredictable. For now, growth and competitiveness will fall below potential, with the prospect of higher costs with no productivity gains opening a Pandora’s box of risks: business closures, layoffs and a rise in non-performing loans, should unemployment rise, cautioned IMF.
This was how Sunday Times commentator Ignatius Low put it: So what the IMF was saying is that in the interim, all we may get from the restructuring is higher costs and higher prices – with little or no real growth. And Business 101 tells you that if you make your customers pay more for something but don’t give them any real added value for it, then all you have really done is make yourself more uncompetitive.
I am not an economist so this is my dumbed-down version of some of the issues
So should we ease up on the foreign worker policy?
PM Lee Hsien Loong has already said that there would no major change from now. So we’re not going to turn the water off and will continue to let it run like it is now. Foreign workers pumped into the economy was what kept it moving so quickly in the past decade. Without the added water pressure, we’re looking at a slower rate of growth. The prediction is 2.5 to 3.5 per cent growth but PM has said we should be content with 2 to 3 per cent.
Businesses would want more workers which I suppose, is one reason the retirement age is being pushed up and more women are being wooed back into the workforce. (I also think that the recent change allowing foreign spouses to be exempt from being part of the foreign worker quota is one way.)
If they don’t get them, business would have to pay more for workers because there are fewer of them to go around. If workers don’t get more productive, the cost of hiring them would go into the final product – so everything gets more expensive.
Then why is our productivity so low?
Labour productivity growth averaged just 0.1 per cent from 2011 to Q2 2014, and 0.4 per cent if construction – often cited as a productivity laggard – is excluded. The target announced in 2010 was for productivity growth of 2-3 per cent a year.
Economist Augustine Tan has hit out at the disconnect between aspiration and reality. Where did the G get the figure from, he asked, according to a TODAY report.
The report continued: The cause of this is a lack of macro-vision in attaining productivity growth while ensuring economic competitiveness, Dr Tan said, adding that “one arm of the Government does not know what the other is doing” in deciding restructuring measures, such as the tightening of foreign labour quotas.
“If I had my way … I’d target sectors capable of more productivity increases and give them more leeway,” Dr Tan said, referring chiefly to manufacturing. “But you’re tightening the quotas so much, we’re not hitting (the 2-3 per cent productivity target). What you get instead is wage effect, cost effect, and the economy becomes uncompetitive.”
Ouch! Is that true? Left hand don’t know what right hand is doing?
Well, the G, in the form of Minister of State (Trade and Industry) Teo Ser Luck, said Singapore’s economic restructuring journey was coming along relatively well despite the strain on firms. He cited a rise in the take-up of government support programmes such as the Productivity and Innovation Credit (PIC) scheme, under which about 40,000 firms claimed PIC last year, up 50 per cent from 2011.
I wish we had an idea of whether all that money given away was amounting to anything. Everybody thinks PIC is way to get money from the G, rather than something to build upon
So what about cost of living? That’s the thing that we’re most concerned about after all.
Some of us are probably going to be better paid and we’d have to hope that it’s a real increase in wages. Because the MAS has said that some food and other services firms are not done passing on cost increases. In fact, the strange thing is that core inflation (minus expensive stuff like cars) is higher than overall inflation this year.
Here’s what it’s saying today in its twice-yearly Macroeconomic report: “On a year-ago basis, core inflation is projected to pick up gradually into early next year, before easing in the second half of 2015.’’
So what’s really happening?
I guess we should be careful what we wish for. We wanted fewer foreigners here, and we’ve got it. Now we’ve got to live with the idea that Singapore won’t be going at full throttle. And we’ve got to realise that we’ll be the engine of the economy – we’ve got to get the pistons pumping harder than before.
The engine, however, needs a driver and it would be good to hear from the G, now that we’re halfway through the 10-year economic plan, what it thinks of the restructuring push. Are we going about it right?
Here’s what ST’s Mr Low said: “But as exports continue to flag and the harvest of yet another year is anaemic economic growth, policymakers must do something to alter the trajectory of a narrative slowly going awry, lest it take hold and become a self-fulfilling prophecy.’’