DPM Tharman: We took incumbency too much for granted and were bit too in-your-face

That’s right, Mr Minister! In fact, I think the words ‘too much’ should be replaced by ‘totally’ and in the past, PAP was annoyingly in-our-face. It seems that the post GE2011 period is a time of reckoning for them; they seem a lot more certain about what works, what doesn’t work, what could have been done better and the best part of it is that they have acknowledged that they have made some mistakes. It must be a very humbling experience for them indeed.

It only took a mere 6% vote swing to bootstrap their minds, to change their attitude towards the electorate and now they are even learning how to placate the people. I see where they are coming from; they certainly need to do this if they ever wish to remain in power. Not a comfortable position to be in though for an authoritarian regime like the PAP to pussyfoot the electorate.

I wholeheartedly agree with the minister that “PAP should engage more.” In fact, they should stop looking at people who are critical of the PAP as enemies, but see them as feedback channels to help make Singapore a better place for all. Actually, these critics are the ones doing the real public service here.

I see the predicament that they are in and I definitely sympathise with them. I mean, it must be really hard for authoritarians to incorporate this new engagement model in their framework. It didn’t exist previously and it is a great departure from the knuckleduster approach, and now that they have a new engagement model, there is no turning back.

Tharman Shanmugaratnam, Deputy Prime Minister and Minister for Finance and Minister for Manpower, also said during the Kent Ridge Ministerial Forum held at the National University of Singapore on the 4^th of April that “the opposition voices that exist get a good spread, second only to online media, which is even more overly sympathetic towards the alternatives."

The key difference is not that the online media is more sympathetic to the opposition cause, the difference exists because of the way we operate and the writers in the online media are opinion makers/leaders whereas the mainstream media are mostly opinion relays. The MSM became opinion relays because one man (MM Lee) thought that they best serve as factual’ reporting outlets.

Story of GE2011

Tharman said, "Not everything starts and ends with the GE of 2011, and quite frankly, this has been an oversold story."

Of course not, Tharman – if anything started with GE2011, it is still on-going. It certainly didn’t end at the GE and it is likely to continue till 2016 and beyond. Sadly for him, as long as there are buyers, the GE story will continue to be sold. The issues in this GE touched a nerve and it has awakened the electorate and he needs to come to terms with this.

Minister Tharman was also lamenting that he doesn’t get any advantage from the mainstream media. On the contrary, his incumbency is a vantage point and he either doesn’t seem to realise it or he is just being coy about it. The fact that he gets invited to ministerial forums which are exclusive to PAP ministers, grassroots events, parliamentary sessions and local/international forums makes him a newsmaker. It is because he is in a position of power and strength that people form and express opinions about his policies; about what he does and says. His actions affect our lives in one way or another. There has been ample coverage about him in the past and it is very likely that he will continue to be a newsmaker. There is really no need to be modest about it, really.

Perhaps, their new strategy is to downplay their strengths, to be modest or even “demure” (for want of a better word!) with their audience and through this process they are hopeful that they will get some sympathy from the young and impressionable.

The $1.1Bn quick fix

The $1.1Bn quick fix

Singapore will be ‘cheaper, better and faster’, says Swee Say

26th of November 2011. Lim Swee Say brought the message of hope for the hopeful at the YSA (Young Sikh Association) Ministerial dialogue session held at Suntec City. Singapore will be resilient and shall grow at 3% – 5% per year for the next ten years growing to a whopping size of S$0.5T by the mid-2020s. By his account, Singapore has done better than the rest of the OECD countries. We are not plagued by the same issues of structural unemployment or high unemployment rates. However, going forward our challenges are two fold – an ageing population and widening income gap. The income disparity was a forgone conclusion, as long as it didn’t affect the crowd gathered to listen to him, it was a non-issue.

No, we are not going to have cheaper and better housing. He was referring to our economic philosophy, that Singapore will attain sustained growth through high skill, high innovation and high productivity; something that I can relate to. However, my e-thesaurus showed a different list of synonyms for the words skill, innovation and productivity. As to how he translated skill-innovation-productivity to cheaper-better-faster is a wonder. Thesaurus malfunctions perhaps!

I hung around long enough to hear his spiel about globalisation and localisation. I learned two new words from Swee Say and they are ‘glocalization’ and ‘corecalization.’ The audience seemed to be awe struck by how he could fuse two opposing forces of globalization and localization into a single force of glocalization to bring unprecedented growth for Singapore. In essence, it was down to the number of jobs created for locals versus foreigners. Corecalization was even more aggressive, it was about whether the core Singaporean team managed to gain essential skills; it didn’t matter even if the rest of the workforce was made up of foreigners. Swee Say asked the crowd that were gathered as to how many Singaporeans were experienced aircraft engineers with the talent and ability to manufacture aircraft engine blades. There was no retort.

We can expect a headline like, ‘Singapore enters a phase of high tech manufacturing’ in the local newspapers soon. They have exclusive bragging rights for this one, that’s for sure.

Like a good salesman he didn’t fuss over the disclaimer clause or what’s written in fine print. It was an important clause nonetheless, that many PMETs may become structurally unemployed in the future, the price we need to pay for induced economic growth. No worries for now though, for we can kick that can down the road or cross that bridge when we get to the river.

I am glad that they are as predictable as ever. One thing for sure, the existing growth policies will remain for a long time to come. We will continue to record stellar economic performances in the years ahead, which is a good thing. The current economic malaise is just a speed bump. There is hope, or is there?

Either, I worry too much, or they don’t see it coming. The question that was unanswered was how we are going to deal with the people in the fringes of the economy, the people who are going to lose their jobs and those who are left behind. Is there really any hope for the under-privileged and the marginalized, or should they just wallow in their hopelessness?

Lemon economics: Why some people are always better off than the rest

Lemon is an American slang for a lousy car – the sale of low quality products get sold in the market because of asymmetric information. A popular example of this phenomenon is in the second-hand car market, where sellers know that their car is a lemon, but where buyers cannot make that judgement without running the car or may not have the knowledge to ascertain the quality at the point of sale and merely relies on gut instincts to make the purchase. The lack of information about its quality creates conditions for sellers to exploit the buyer. In all cases, the seller is always better off than the buyer.

Information acts as an arbiter in any economic transaction. When pertinent information is withheld by any economic actor, the other party makes an adverse or negative selection. Adverse selection can also take place when choices are limited through regulation as in state run pension programs or when government conducts business exclusively with interrelated entities. Social and economic inequality sets in when the bulk of the population or the government continues to make adverse selections for prolonged periods of time which leads to instability.

A case in point is when the government purchases solely from state-run companies, it runs the risk of stifling innovation through chronic adverse choices and crowds-out other better players in the market. This result in low-productivity levels, low efficiency and low throughput and it is akin to buying lemons; in this case, the buyer makes the selection based on affiliation rather than quality. Temasek Holdings, which owns major enterprises in Singapore, has been returning 17% annually since it was established in 1972. During the same period, the economy has been growing at an average growth rate of 7%. This shows that the Temasek has out-performed economic indicators such as GDP growth. While the government has been proudly boasting its achievements, the policy makers have failed to realize that it has achieved growth at the cost of other privately run local businesses. Mathematically, if the GLC’s grew faster than the economy, then it would have taken a larger slice of the economic pie.

The other inherent problem in our economy is that small medium businesses will have to content with peripheral business opportunities and cannot compete effectively with the GLCs due to the lack of capital and funds. The GLCs, in this situation, have access to fiscal surpluses and CPF funds as low-cost capital. Again there is evidence of crowding-out whereby Temasek and GLCs utilize public funds to fuel their internal growth and at the same time leaving too little to stimulate private sector growth. Take CPF our state-run pension funds as another example, where both employers and employees make mandatory contributions. Until 2002 the funds were exclusively managed by the government since 1955. The rate of returns consistently underperformed GDP growth rates. The investment choices and interests rates were arbitrarily set by the government because it knew it best. The government has also channelled these funds through its sovereign wealth funds abroad leaving little capital to fund local enterprises. Our monies have been utilized to develop other economies at the expense of our own local enterprises being under developed. Majority of CPF account holders are not even aware of how their funds are being utilized and contribution is enforced strictly by the state.

There is also an interest rate arbitrage at work here; the government gets low-cost capital from CPF and on top of that, fiscal surpluses which are utilized as the capital base for the investments both locally and abroad. It is imperative to note at this juncture that, while Temasek has been making an investment return of 17%, the CPF account holder makes a modest 2.5% per annum. Suppose if you had invested S$20,000 with Temasek in 1980, you would have made a whopping S$2.2M by now. Conversely, at the current rates of 2.5% per year, your CFP savings would have only grown to a paltry $42,000.

In the book ‘The Age of Turbulence’, Alan Greenspan said, “Chronic surpluses are as destabilising as chronic deficits.” All our wealth is accumulated in two companies, Temasek and GLC and it is like putting all our eggs in one basket. Should these entities fail, much of our reserves will be wiped out. There is also the dilemma of ‘moral hazard’ whereby executives of these sovereign funds have no liability or any risk, as their losses are underwritten by the citizens. The wealth of our nation is controlled by a closed network of elite, which may destabilize the socio-political situation of the country. There is also empirical evidence from other wealthy nations in the Middle East to indicate that structural surpluses can stifle innovation and productivity.

The state continues to make all the economic choices, which limits our capability and what we are able to achieve as a country and as a people. It is clear that we have yet to achieve our true potential. The fundamental root cause is because the people here have limited freedom of speech, civil liberties and access to information. It is only when we have unbiased press and freedom of expression that we will be able to surface issues in a cordial and civil manner.

Stop Our Government’s Oversized Executive Control Now!

The will of the people, freedom of speech, independent judiciary and property rights are the cornerstones of democracy. George Washington took great care to ensure that these principles of democracy were never compromised as the first president of the United States of America. He retired soon after winning the war against the British Empire and took up the presidency at the invitation of the people. When he retired from his presidency he led a private life. He did that to ensure that imperialism was not replaced by despotism. Washington often referred to himself as the Chief Magistrate and not the head of state or the commander in chief, a title which gained currency with the later presidencies.

The 1^st United States Congress voted to pay Washington a salary of $25,000 a year—a large sum in 1789. Washington, already wealthy, declined the salary, since he valued his image as a selfless public servant. At the urging of Congress, however, he ultimately accepted the payment, to avoid setting a precedent whereby the presidency would be perceived as limited only to independently wealthy individuals who could serve without any salary. The president aware that everything he did set a precedent, attended carefully to the pomp and ceremony of office, making sure that the titles and trappings were suitably republican and never emulated European royal courts. To that end, he preferred the title "Mr. President" to the more majestic names suggested. Nor did Washington believe that it was the chief magistrate's role to serve as "Tribune of the People," promising great works, and demanding the power to carry them out.

There are lessons to be learnt from Washington as we contemplate on our choices for president. Our political situation is markedly different from the US and the institution of elected presidency in Singapore is still in its nascent stages. This is the second time an election is held for the office of presidency. 

We worry, and rightly so, about the concentration of executive powers in the ruling party. With over two-thirds majority, the PAP has the power to legislate and amend the constitution at their will. There is little or no freedom of press and there is little information publicly available about the state of our national reserves. Just like the parliament, the office of the elected presidency represents the will of the people. However, the current constitution is written in such a way that the president only acts as the guardian of our reserves apart from the numerous ceremonial functions. As this institution matures, one hopes that the elected presidency evolves as some expect, to represent the moral conscience of the people and keep the executive branch in check.

Electing someone from the executive branch or someone who has recently retired from office, like Dr. Tony Tan, as the president does not provide the adequate checks that are required – pertinent information about our past reserves can still be withheld from the public and it is still kept within the closed network of PAP elites. Keeping such information secret and kept close to their chests only brings more distrust about the ruling party. The build-up of distrust and misgivings will only lead to further pent-up ill feelings about the PAP, which will lead to their ultimate downfall.

We have been witnessing such breakdowns all around us; Bersih in Malaysia, rioting in the Middle East, and clashes between various factions in Thailand. These civil unrests could have been avoided if the press in those countries had played their part in reporting fairly or even in helping broker power between polarized factions. But, sadly, they chose sides or remained silent which have proven to be disastrous for some regimes. PAP’s outsized conception of executive responsibility has driven their need to have an exclusive grip on power. Only by reducing those demands and through the office of an elected presidency can we restore the executive branch to its proper constitutional place: a modest office with modest powers.


Vote for Tan Jee Say.

Are we growing with our economy or not?

From 1980 to now, Singapore's economy has been steaming ahead at an average growth rate of 7% per year. Last year, in 2010, the economy grew by a whopping 14.7%, making Singapore the fastest growing economy in Asia and the second fastest in the world. By all accounts we have done well. To add to our feat, Temasek Holdings ("Temasek") has been returning 17% annually  since it was established. It is estimated that Temasek together with GIC, MAS, HDB and other GLCs and Statuary Boards manage about a S$1 Trillion in funds. Our reserves are about five times the size of our GDP. So, what's there to complain?

Our public debt, on the other hand, which is mostly domestic debt is financed primarily by CPF and the local banks in Singapore. The public debt stands at about S$200B. While our public debt is considered very high in terms of public debt to GDP, it is only 20% of the national reserves and therefore, a default risk is minimal. The thing that caught my eye was that a large proportion of our public debt is financed by CPF, meaning to say, our national savings are used to power our economy. So what does that mean to CPF holders?

Fund managers do hold government bonds and securities at prudent levels because it is considered a low risk investment with very modest returns. Currently, the CPF Board gives out about 2.5% interests per year on our CPF balances. While this may be higher than the bank rates, it is much lower than the rate of economic growth and much lower than the 17% returns that Temasek is making each year. This has prompted me to compute the opportunity cost of keeping your monies in the CPF. 

Suppose if you had invested S$20,000 with Temasek in 1980, you would have made a whopping S$2.2M by now. Conversely, at the current rates of 2.5% per year, your CFP savings would have only grown to a paltry $42,000. That is a HUGE difference, I must say... be wise with your monies.

Who are your best clients?

I am beginning to wonder if there is such a thing as a lousy client. And if you're in a position to choose between an employee and a bad client, who would you choose?

Is acceding to everything the client asks for good customer service or saying 'no' would be better at the end of the day?

It turns out that there are organizations that squeeze everything out of the service provider. These are the guys who use illegal software, manipulate service providers through fixed contractual terms and try to include everything under the ambit of the scope of works. My only advise is 'get out' of this kinda of situations. It's not worth your time and energy.

In this case, retaining your employee is the way to go.