20 December 2010

MediFund and the Poor

The Medical Endowment Fund, or Medifund, assists needy citizens who are unable to pay their medical bills.  During the 12 months ended 31 March 2010:
  • There were 364,681 applications for assistance for outpatient attendance and 47,334 applications for assistance for inpatient stay.
  • The quantum of assistance is determined after means testing, and averaged $89 and $1,029 for outpatient attendance and inpatient stay, respectively.
  • Medifund paid the entire bills (after the applicant had exhausted all his / her other means of payment) in 92 per cent of applications.

Note: MediFund annual reports

17 December 2010

Full-Time Employment Income In Singapore

The 1,786,200 residents in Singapore engaged in full-time employment as at 30 June 2010 derived gross monthly income from work as follows:

893,100 had gross monthly income from work of more than $2,710 (the median).

630,400 had gross monthly income from work of between $1,200 and $2,710.

262,700 had gross monthly income from work of less than $1,200.

No data were available for the number of residents engaged in full-time employment whose monthly income from work was less than $1,800, or two-thirds of the median income, which indicator is used by International Labour Organisation to define low wages.

Reference: Singapore Workforce, 2010.

An employed person is defined as a person aged fifteen years and over who, during the reference period (the week preceding the date of the survey interview) either: (i) worked for one hour or more for pay, profit or family gains; or (ii) had a job or business to return to but was temporarily absent because of illness, injury, breakdown of machinery at workplace, labour management dispute or other reasons.  National servicemen are excluded.

A person is defined as being employed full time if his normal hours of work are 35 hours or more in a week.  Prior to 2009, the threshold was 30 hours or more a week.

This is an update of the post that was first published on 2 December 2010.

14 December 2010

ComCare And The Poor

The Community Care Endowment Fund, or ComCare, provides financial assistance to needy Singaporeans.
  • Since its launch in 2005, it has disbursed more than $200 million to help 160,000 needy Singaporeans.
  • 25,166 cases were receiving assistance as at 31 March 2010.
  • $66 million was disbursed in the 12 months ended 31 March 2010.

Note: ComCare annual reports

13 December 2010

The Plight Of Street Hawkers

Approximately 9,000 summons are issued every year to illegal street hawkers.  A first-time offender is fined $300.

To be eligible for a licence under the Street Hawking Scheme, applicants must be citizens or permanent residents, belong to a household in which the gross monthly income is $1,500 or less or $450 per capita or less, be at least 45 years old and otherwise unemployed.

Three out of 71 applicants this year received their licences.  Altogether, 881 licences have been given out.

It costs $120 to renew a licence.

Note:  "9,000 Peddlers Caught Each Year", The Straits Times, 25 July 2010.

12 December 2010

The Plight Of Poor Households

Monthly household income from work among employed households in 2009:
  • The average was $1,303 in the first decile and $2,459 in the second decile.
  • The average per capita was $334 in the first decile and $626 in the second decile.
  • The median for households in one- and two-room HDB flats, which accounted for 3.1 per cent of all employed households, was $1,091.
  • The median for households in three-room HDB flats, which accounted for 18.9 per cent of all employed households, was $3,193.

Monthly household income from work for resident households in 2009:
  • $650 for households in one- and two-room HDB flats, which accounted for 4.4 per cent of all resident households.
  • $2,660 for households in three-room HDB flats, which accounted for 20.2 per cent of all resident households.

Among resident households in one- and two-room HDB flats, 63.0 per cent were employed households; 37.0 per cent did not have any working persons of which 23.5 per cent were retiree households.

Among resident households in three-room HDB flats, 84.3 per cent were employed households; 15.7 per cent did not have any working persons of which 8.8 per cent were retiree households.


Key Household Income Trends, 2009.

A resident household refers to one headed by a citizen or a permanent resident.

An employed household refers to a resident household with at least one working person.

A retiree household is defined, for statistical purposes, as one comprising solely non-working persons aged 60 years and above.

For statistical purpose, a household refers to a group of persons living in the same dwelling unit and sharing common living arrangements, and may comprise related or unrelated members.

07 December 2010

The Plight Of The Autistic

Fewer than approximately 0.2 per cent of the 18,000 autistic persons aged 19 years and older receive help at specialised centres in Singapore ("Get Real: My Not So Sweet 21", Channel News Asia, 6 December 2010),

04 December 2010

Part-Time Employment Income In Singapore

There were 176,700 residents in Singapore engaged in part-time employment as at 30 June 2010.

137,400 had gross monthly income from work of less than $1,200.

86,600 were under-employed.  This means that they worked part-time for economic reasons (i.e., not by choice) and were available for, but could not find, more hours of paid work.

At least 47,300 under-employed residents had gross monthly income from work of less than $1,200.


Singapore Workforce, 2010.

An employed person is defined as a person aged fifteen years and over who, during the reference period (the week preceding the date of the survey interview) either (i) worked for one hour or more for pay, profit or family gains; or (ii) had a job or business to return to but was temporarily absent because of illness, injury, breakdown of machinery at workplace, labour management dispute or other reasons.  National servicemen are excluded.

A person is defined as being employed part time if his normal hours of work are less than 35 hours in a week.  Prior to 2009, the threshold was 30 hours a week.

01 December 2010

How Did Singapore Fare At The 2010 Asian Games?

Some people consider that Team Singapore put up a respectable showing at the 2010 Asian Games in Guangzhou despite the high standards of the other competing nations.

This is how Team Singapore fared, compared to its performance at the 2006 Asian Games in Doha.

Number of medals won
2010: 17 medals — four gold, seven silver and six bronze — from five sports.
2006: 27 medals — eight gold, seven silver and 12 bronze — from nine sports.

Targeted or projected number of medals won
2010: Between 30 and 33 medals.
2006: Six gold medals.

Medal standings
2010: 16th ranked by number of gold medals and 15th by total number of medals.
2006: 12th ranked by number of gold medals and 14th by total number of medals.

Size of contingent
2010: 240 athletes.
2006: 134 athletes.

Number of sports competed in
2010: 22, including five team sports.
2006: 16.

If winning medals is the criterion, the results speak for themselves.

Singapore Sports Council stated the obvious in September 2010 — our athletes should start competing to win.  In order to do that, athletes selected for international events should be of sufficient calibre; that is, they should be capable of winning, or (if we are in a more generous mood) at least almost winning.

Singapore National Olympic Council requires that national sports associations select athletes who had achieved at least sixth placing e.g. time/distance/score/mark at the 2006 Asian Games and teams which are ranked at least sixth among the Asian Games countries, in each case within a twelve-month period before the 2010 Asian Games.

If our athletes and teams met the selection criteria, what happened at Guangzhou?  Could it be that many  of the sixth placed times/distances/scores/marks four years ago are not good enough four years later when overall standards have improved?

How should our athletes and teams be selected for the 2012 Olympic Games?

Beyond selection criteria, what else needs to be done?

If winning medals is not the criterion, as some say, then what is?  It is not about setting national records or personal bests.  It is not about gaining exposure or experience; if it is, what is the exposure or experience gained at the 2010 Asian Games in preparation for — the Olympic Games, the next Asian Games or the South-East Asian Games?

Why should we care?  Because Team Singapore is funded, even if partially, by government grants.

This is an update of the post that was first published on 27 November 2010.

18 November 2010

Misgivings About Intelligent Energy System

A follow-up post on the Intelligent Energy System ("IES").

Estimated Cost Of The IES

Energy Market Authority ("EMA") probably has, by now, an idea of the cost of implementing the IES in its present form, in terms of initial capital cost (which includes the requisite infrastructure and installation costs, not just the smart meters), periodic replacement cost and operating cost.

EMA should share with us what this cost is, even if it is a rough estimate, because it will likely be borne by consumers eventually.

If the cost is $5 per household per month or 1 cent per kWh, for instance, how many consumers will be willing to foot the bill, irrespective of whether it is subsumed under the market support services fee and/or the grid charge in the future?  If the majority are not prepared to pay, why bother to continue with the project in its present form?

Will There Be Any Meaningful Shift In Consumption From Peak Period To Off-Peak Period?

EMA mentioned that its proof-of-concept trial of smart meters and variable pricing last year showed that consumers shifted their consumption from peak periods to off-peak periods, and enjoyed some savings in the process.  What was the magnitude of the shift?

The national peak period is from 8:30 am to 8:30 pm and the off-peak period is from 12:30 am to 7:30 am (the remainder are shoulder periods) on weekdays (reference: SP Services, the market support services licensee, quoted in Market Surveillance & Compliance Panel Annual Report 2009).  It seems unlikely that many households will shift much of their electricity usage to the 12:30 am to 7:30 am off-peak period.

Furthermore, households account for only 18 per cent of the national electricity consumption, so a 1 per cent shift in household consumption is a 0.18 per cent shift in the national electricity consumption.

Will There Be Any Savings?

Even assuming there is a meaningful or significant shift in consumption patterns when the IES is fully implemented, it is doubtful if this will result in savings for households in aggregate.

The electricity suppliers will try to protect their profit when switching from a flat-rate tariff to a peak and off-peak structure.  Unless there is a reduction in the cost structure of the generating companies in particular, they are unlikely to allow their revenues to fall.

If only some consumers shift some usage from the peak period to the off-peak period, they will pay less than if they had not shifted.  But if everyone shifts, the aggregate utilities bill may not change, and the average consumer may not pay less than if no one had shifted.

Consumers may know that they pay less if they shift their consumption from the peak period to the off-peak period than if they do not shift, but will they know whether they pay less than under the flat-rate tariff?

16 November 2010

Will A Stronger Yuan Not Benefit The U.S.?

Not everyone agrees that China's huge current account surplus with the U.S. this year supports the contention that China has been manipulating its currency, destroying jobs or limiting growth in the U.S.

China's trade surplus is due to its investing in the U.S.

China's trade surplus has led to its huge accumulation of foreign reserves, much of which it invests in U.S. government and other securities and commercial assets in the U.S.  These investments did not lead to China's trade surplus; instead, they resulted from it.

By investing its current account surplus in the U.S., China provides capital to American companies.  Does the U.S. prefer China to invest its current account surplus in Iran instead?

Americans have not been saving enough and American companies have not been investing enough, and China's investments in the U.S. have helped meet this savings deficit.  But the U.S. (or almost any other country, for that matter) would prefer to stand on its two feet, rather than having to rely on a Chinese crutch, especially if its current predicament is viewed as having stemmed at least partly from a very undervalued yuan.

The U.S. wants to increase its exports to, and lower its trade deficit with, China.  This will drive the U.S. economy, and in turn reduce its dependence on investments from China.

Getting the Chinese to make the yuan more expensive against the U.S. dollar will not make Chinese exports more expensive to American consumers.  This is because the cost of production (in yuan) will fall as the supply of yuan falls when the government engineers a yuan appreciation.

While the cost of imports (in yuan) will fall as the yuan appreciates, the cost of domestic production inputs (such as the wages of Chinese workers) will not fall unless there is a severe and prolonged recession or deflation in China.  A 20 per cent appreciation of the yuan will not result in a 20 per cent reduction in the domestic cost of production in China.

Revaluing the yuan will not solve the U.S.'s problems

The current cheap yuan contributes to, and exacerbates, the problems faced by the U.S.  If the Chinese government does not believe this, it would not have expressed concerns about the adverse impact of an appreciation of the yuan to a more realistic level on the Chinese economy.  It knows how a stronger yuan can hurt China.

The yuan may or may not be "manipulated", but the yuan exchange rate is clearly determined and guided by the Chinese government, rather than free market forces.

15 November 2010

The Plight Of Poor Students

The Straits Times School Pocket Money Fund is a community project with the objective of providing children from low-income families with pocket money to attend school.  The money can be used for the purchase of food at school, bus fares, books and stationery.

Primary school children receive $45 a month and secondary school children receive $80 a month.

Applicants must be citizens or permanent residents receiving full-time formal education; live in a four-room or smaller HDB flat; and belong to a household in which the gross monthly per capita income is $450 or less.

More than 12,400 children need $5 million in pocket money this year, according to a The Straits Times report.  This means each child receives just $400 a year, or $33.60 a month x 12 months or $10 a week x 40 school term weeks, depending on how the payouts are structured.  It is not clear why both numbers are lower than even the intended payout to primary school students.


National Council of Social Service

The Straits Times, 13 November 2010.

Will HDB Apartments Appreciate Forever?

It has often been said that HDB apartments are appreciating assets, especially if the Singapore economy continues to grow.

The HDB Resale Price Index was at its all-time high at 167.8 in Q3 2010.

However, the HDB Resale Price Index did not show an uninterrupted rise over time.  It fell from 136.9 in Q4 1996 to a low of 95.5 in Q1 2002, and did not surpass its previous high until Q3 2008, an anguishing almost 12 years later, when it was 137.5.

The HDB Resale Price Index is a composite index.  The weights are based on 12 quarters moving average transactions.

Finally, even if the HDB Resale Price Index is rising, the resale prices of HDB apartments in any given neighbourhood cannot keep rising forever.  An HDB apartment is "sold" with a 99-year lease starting from the date of the first lease.  As the years pass, the remaining lease becomes increasingly shorter.  Upgrading programmes may halt or even reverse the time-related decline, but the effect is temporary.  Sooner or later, age catches up.

13 November 2010

Should A School Recruit Foreign Scholars?

A secondary school (or high school) in Singapore reportedly sent its principal and a teacher or teachers overseas to recruit foreign scholars.

Why is it necessary for a school to recruit foreign scholars?

Is the school so enamoured with its ranking that it needs to supplement its local student population with foreign students?

As it is, foreign students take up places that would otherwise have been available to local students.  And there is no shortage of students who want to enrol at that school.

Furthermore, if those foreign students are given a financial incentive to enrol at the school, would it not have been better for the school to use such funds on its local students, whose parents pay taxes, with which the government uses to provide financial support to the school.

There is no need for a school to recruit foreign students, whether or not they are scholars.

Or, is the recruitment by the school part of a broader programme to give qualified foreign students a free or highly subsidised education in Singapore in the hope that they will stay on as permanent residents or citizens?

11 November 2010

Fuss Over New Citizens

Mr Ray Ferguson, Standard Chartered Bank's regional chief executive officer for Singapore and South-East Asia, gave up his British passport and became a Singapore citizen in October 2010 together with his wife Clare.

This was reported by both major newpapers, The Straits Times and TODAY.  Coincidence?

Why is this newsworthy?

While we welcome Mr and Mrs Ferguson and their children into the Singapore family, many of us don't really care whether it is a billionaire, a Nobel laureate, an Academy Award winner, or an Olympic Games medalist who wants to become a citizen of our country.

What is important is whether we who are already citizens regard Singapore as our home, a place where we and our children can find and enjoy the democracy, justice, equality, happiness, prosperity and progress that we desire.

If we are truly convinced that we want no home but Singapore, we don't need to adduce affirmation from newly naturalised citizens, whoever they may be.

10 November 2010

Reducing Speaking Time In Parliament

The Standing Orders Committee of the Singapore Parliament is recommending that the time allowed for speeches in parliament be reduced, according to media reports.

Under the recommendations:
  • A member of parliament will not be entitled to speak on any motion in Parliament for more than 20 minutes, down from 30 minutes presently.
  • A cabinet minister or a parliamentary secretary will not be entitled to speak on any motion in Parliament for more than 40 minutes, down from one hour presently.

The recommended changes are a balance between efficiency and how much time is needed.

Hopefully the balance is correctly struck.  Effectiveness of parliamentary debate is of paramount importance.  Efficiency is a bonus.

04 November 2010

Matching Results With Government Policies

In a recent opinion post, an economist postulated that a divided government in Washington would be good for the US economy.

By "divided government", he meant a situation in which not all the three political institutions — the White House, the senate and the house of representatives — are in the hands of a single political party.

He supported his claim with some statistics drawn from the past four decades.

Firstly, median GDP expanded 3.3 per cent per year when there was divided government, compared with 3 per cent (presumably, this means 3.0 per cent) per year when there was unified government.

Secondly, median unemployment was 5.7 per cent when there was divided government, compared to 6.1 per cent when there was unified government.

Thirdly, the equity markets (measured by the S&P 500 index) increased at a median rate of 13.5 per cent per year when there was divided government and 9 per cent (again presumably, this means 9.0 per cent) per year when there was unified government.

Do the data support his claim?

It is not clear whether the data were statistically significant; that is, they did not happen by mere coincidence.

Assuming there is some acceptable degree of statistical correlation, which is the cause and which is the effect?

Most importantly, there is a considerable time lag between formulating a policy, guiding it through possibly almost unending debate in the House and the Senate, where the bill may meet lengthy or obstructive delays, and passing of the bill (the passage is considerably less tortuous in the British parliamentary system).  Once the bill becomes law, it may still be challenged in the courts or frustrated by the states.

After overcoming these hurdles, much time is needed before any policy can halt and then reverse the momentum of the adverse economic situation, not to mention producing discernible results, by which time the political scene in Washington may have changed.  Ironically, the politicians in the new government may get to enjoy the benefit of the policies when these bear fruit eventually, even if they had, while they were part of the previous government, opposed those same policies strenuously, but the electorate has a short memory.

For example, the Democrats inherited an economy that was already heading into trouble in 2007-2008 (during which time the government was divided), but the unified government of 2009-2010 was unable to introduce enough changes quickly enough to be able to point to the fruit of their efforts (preventing the unemployment rate from getting much worse was just not good enough) before the 2010 mid-term Congressional elections, and the party in power was duly punished.

As for the stock market, it often behaves rather irrationally.  It may reflect current conditions (the result of past government policies) and/or perceptions of future conditions (the result of current government policies, as well as, past government policies).  It may reflect interest rates and money supply, both of which are the purview of the US Federal Reserve, an entity that operates independently of the government.

The claim that a divided government in Washington will be good for the US economy may be valid, but the data are inadequate to prove the point.

02 November 2010

Intelligent Energy System Should Be Re-Designed

Energy Market Authority recently announced a $30 million pilot project for the Intelligent Energy System (“IES”).  The IES is a step towards a smarter power grid, which will provide consumers with more information, choice and control over their electricity usage, thereby improving energy efficiency for the country as a whole.

The pilot project will involve around 4,500 residential, commercial and industrial consumers.

With its advanced metering infrastructure, or smart meters, the IES will provide the following potential benefits to households:
  • Choice of electricity retailer and pricing plan.
  • More information to monitor and manage energy usage.
  • Better control of major home appliances to reduce energy usage.

Many of us may be curious about our electricity consumption.  But for most of us, it is a one-time exercise — once we find out how much electricity each appliance uses, that's it.  Even now, we do not keep monitoring our electricity consumption real time; once every two months when our electricity meters are read is often enough.

Most, if not all, of us know how to reduce energy consumption.  The challenge is whether we are prepared to change how we use our electrical appliances.  If we want to change, it will not be because the smart meter tells us how many kilowatt-hours we can save by, for example, raising the air-conditioner temperature setting — we know we will use less energy the higher the setting; what matters is the setting we can accept.

Most of us cannot or will not substantially change our energy consumption pattern because it is tied to our lifestyle.  For those who use the air-conditioner when they go to bed or those who sun their laundry after washing, it means nothing if electricity is cheaper at other times of the day.

Having similar energy consumption patterns over the course of the day and having no bargaining power individually, the majority of households may find the electricity pricing plans not differentiated enough to offer meaningful choice.

Smart meters will help the power grid operator to detect localised outages quickly, but only fractionally faster than feedback from affected consumers.

Individual smart meters may be nice to have, but the reality is that consumers have to bear the cost eventually, directly or otherwise.  The pilot project costs $6,667 per consumer.  What is the estimated cost to each household to fully implement the IES?

Will the savings, if any, in household electricity billings ever be significant or meaningful enough to offset the capital and operating costs of the IES?

A more practical way may be to install a single smart meter for each group of households in a neighbourhood (for example, strata titled properties or blocks of HDB apartments).  The councils of the strata titled properties or the town councils of the HDB apartments can choose electricity retailers and pricing plans.  These bulk meters can provide the desired real-time feedback to the network operator, the electricity retailers and others.  It's far simpler and more cost effective.

01 November 2010

Raising The Retirement Age In Singapore

Earlier this year, people protested in a number of European countries when their governments raised the minimum retirement age and/or reformed the pension schemes.

What has Singapore's experience been in raising the minimum retirement age and/or reforming the pension scheme?

Minimum Retirement Age
Prior to 1 July 1993, Singapore did not have a statutory minimum retirement age.  People generally retired at age 55 years.

The minimum retirement age was set at 60 years in 1993.  It was raised to 62 years in 1999.

When the law on re-employment comes into effect in 2012, employers have to re-employ their older employees from the existing retirement age of 62 years to age 65 years, and later to age 67 years and beyond, on a mutually agreeable basis taking the needs of the employers and the older workers into account.

Central Provident Fund
Previously, a person could withdraw the entire balance in his account with Central Provident Fund ("CPF", the national social security savings plan) on reaching age 55 years.

Now, a CPF member can withdraw the balance in his CPF account on his 55th birthday after setting aside the Minimum Sum (to form his retirement funds) and the Medisave Required Amount.  He is allowed to withdraw a percentage of the balance even if it is less than the Minimum Sum, but this legacy concession will be phased out in 2013.

The Minimum Sum was first set at $30,000 in 1987. It is $123,000 now.  The target Minimum Sum is $120,000 (in 2003 dollars) by 2013 to ensure that CPF members set aside sufficient retirement funds for themselves.

Among active CPF members who reached age 55 years in 2009, 37.5 per cent met the Minimum Sum requirement; 62.5 per cent did not.  Active CPF members accounted for approximately 55 per cent of all residents in the 50-59 years age group in 2009 (the remainder were inactive CPF members or not CPF members).  Among CPF members brought into the Minimum Sum Scheme in 2009, 25.4 per cent had no Minimum Sum to set aside as they had small balances in their CPF accounts or were otherwise exempted.

The age at which a CPF member can start to draw down on his CPF retirement funds was raised to 62 years in 1999.  It will be raised to age 63 years in 2012, age 64 years in 2015 and age 65 years in 2018.

In the future, the drawdowns will take the form of monthy payouts from CPF LIFE, a national annuity plan that was introduced in 2009.  Participation in CPF LIFE is compulsory if a CPF member has in his CPF account (excluding his Medisave account) at least either $40,000 at age 55 years or $60,000 at age 65 years.

CPF LIFE will pay its members for as long as they live.  The quantum of the payouts is not guaranteed, but will be adjusted regularly, taking into account interest rates and mortality experience, to ensure solvency of the fund.  The payouts, which may stretch over 20 years to 30 years or longer, are not adjusted for inflation.

Prior to the introduction of CPF LIFE, only 1,140 CPF members used their retirement funds to buy annuities from insurance companies in 2008.

Medisave was introduced in 1984.

The Medisave Required Amount is $22,500, and the target is $25,000 (in 2003 dollars) by 2013.

No withdrawal from a CPF member's Medisave account is allowed if the balance is less than the Medisave Minimum Sum, presently $34,500 (adjusted annually).

Minimum Retirement Age, CPF and Medisave
As a CPF member's social security plan and hospitalisation plan are self-funded, a higher minimum retirement age gives him the right but not the obligation to work longer.  This is useful if he does not have sufficient funds for his retirement (and that of his spouse, if she is not employed), or wishes to continue working for any other reason.

This may partly explain why there have been no protests in Singapore against the raising of the minimum retirement age.  Also, protests are usually futile.  And they may not be legal.

However, as the minimum retirement age is being raised, the age at which a CPF member can draw down on his own retirement funds is also raised.

Even without an increase in the minimum retirement age, the Minimum Sum and Medisave Required Amount have been raised over the years.  Although it was (and continues to be) done to address rising longevity and rising healthcare costs, it reduces the amount a CPF member can withdraw from his CPF account on reaching age 55 years.

Unless a person has sufficient retirement funds over and above his CPF savings, retiring at age 55 years is not an option.

The situation is best summarised by prime minister Lee Hsien Loong in 2007 who said "Singaporeans are living longer.  They must work longer.  They must draw down their CPF Minimum Sum later.  They must save more and must take care in case they live beyond 85."  [Central Provident Fund Board annual report 2007].


1. The above is a simplified description of the history of Singapore's minimum retirement age, and the national pension scheme.

2. Every working CPF member and his employer must make monthly contributions to his CPF account. The contributions remain in his account.

3. A CPF member is a citizen or permanent resident with a CPF account.  An active CPF member is one who had at least one employment contribution paid into his account for any of the latest four months.

4. The ratio of active CPF members to residents in the 50-59 years age group in 2009 is an approximation.  The number of active CPF members refers to those above age 50 years to age 60 years as at 31 December 2009.  The resident population data refer to those in the 50-59 years age group as at 30 June 2009.

5. A CPF member is exempted from setting aside a Minimum Sum if he is terminally ill, has withdrawn his CPF funds on medical grounds, has passed away, has his own annuity, has left Singapore permanently or is a pensioner in receipt of a monthly pension.

6. Medisave is the national savings scheme to help CPF members meet the hospitalisation expenses and approved medical insurance premiums, especially after retirement, of themselves and their dependants.  Every CPF member and his employer must make monthly contributions to his Medisave account.

23 October 2010

Who Is Supposed To Stop The Haze?

According to media reports, Indonesia's foreign minister Mr Marty Natalegawa said on 22 October 2010 that controlling the land fires in Sumatra (one of the main islands of Indonesia) was a priority for Indonesia.

However, fighting the haze caused by the land fires could not be done by Indonesia alone.

Being a transnational problem, it required cooperation from other countries in the region.

The minister did not elaborate.

What If It Were Not Rare Earth Minerals But Food?

According to media reports, China cut the export quota of rare earth minerals — a group of 17 elements used in the manufacture of a range of products such as LCD panels and hybrid vehicles — in the second half of this year by 72 per cent and plans to cut supplies by a further 30 per cent in 2011.

Separately, Japan and the US claimed that China slowed down customs clearance of exports of rare earth minerals to their countries recently to show its displeasure with them.

The Japanese believed that China was retaliating against its detention of the captain of a Chinese trawler involved in a collision with two Japanese coastguard vessels off the disputed islands of Senkaku (or Diaoyu, as they are called in China).

The US believed that China was retaliating against its decision to investigate whether China was violating international trade rules with policies to subsidise its clean energy industries.

Although China has only one-third of the global reserves of rare earth minerals, it accounts for 90 per cent of the global supply.  Some believe that the Western countries are to blame for this situation — they had shut down their rare earth mineral mines when they were unable to compete with the lower cost rare earth minerals from China.

China believes it has the right to decide for itself how much rare earth minerals it wishes to produce and to export, but not everyone agrees with this view.

The U.S., European Union and Mexico have complained to the World Trade Organisation last year that China's export restrictions on minerals such as bauxite and magnesium discriminated against foreign manufacturers that use the inputs and gave an unfair advantage to Chinese producers.  The WTO will not publish a ruling until next April instead of this year.

These events show that just-in-time manufacturing with its lean inventories is a risky practice.  It is also risky to shut down mines or any other production facility within a country's borders simply because it is not competitive, unless there are reliable alternative sources.

These events have also prompted several countries to intensify their efforts to recover rare earth minerals through recycling.

The shortage of rare earth minerals is painful to a country's industries, but it is not the end of the world.

The loss of supply of food will be.

Can Singapore afford to rely on other countries to supply it with food, or with enough food?  Even if Singapore companies own, or have contracted to buy produce from, the relevant farms located in other countries, the governments of those countries may impose export quotas or block or slow down exports of vital food when it comes to a crunch.  Or organisations in those countries may block the export of, or seize, the food that they desperately need for their people.

Diversifying Singapore's sources of food will help, but may be prove to be of limited usefulness if there is a global shortage of a certain type of staple food or a certain group of staple food.

Singapore should re-think its strategic priorities and set aside land and other resources for farming.  It is not high tech, not high value-add, not glamorous, but it is vital for the country's survival.

18 October 2010

Honesty, Sincerity And Sportsmanship

In the recently concluded Commonwealth Games in New Delhi, the Singapore men's 4x200m freestyle relay team was disqualified from the final because it had missed the deadline to submit its entry for the final.

The team set out for the competition venue 15 minutes before the deadline, on a journey that usually took 20 to 30 minutes, according to team manager and head coach Mr Ang Peng Siong.  The team arrived 45 minutes after the deadline because of traffic delays.

Mr Ang made a mistake.

He admitted his mistake, and apologised.  He did not offer any excuse.  He did not deflect blame.  He did not dismiss or trivialise the impact of his actions.

His honesty and sincerity are admirable qualities.  We can learn from him.

It was also reported that the head coaches of the other teams participating in that final signed the appeal submitted by the Singapore team.

The sportsmanship shown by the other head coaches is refreshing, notwithstanding that the Singapore team might not have won a medal, having qualified for the final with the seventh fastest time.

16 October 2010

Dispelling Fallacies In Economic Policies

Minister for Trade and Industry Lim Hng Kiang urged university students to guard against popular fallacies in economic policies.

Economics could be a powerful tool to clarify complex issues in public policy.

Singapore, more than most other countries, placed a high premium on applying rational thinking and empirical evidence in analysing and designing policies.  It could not base its decisions on instinct and gut feel.  Intellectual honesty and rigorous analysis were needed to chart an optimal path through the challenges.  Policies must be based on clear objectives and sound evidence.

Note: "Fallacies In Economic Policies Dispelled At MTI Economic Dialogue 2010", Monetary Authority of Singapore, 14 October 2010.

06 October 2010

A Fairer Tax System

The US should tax the wealthy more, according to Warren Buffett, the world's third richest man.

Existing tax revenues are insufficient to fund the programmes that Americans believe are right to have in the country.  More tax revenues are needed.

Furthermore, the US faces a soaring national debt.

Additional tax revenues have to come from somewhere.  If the government is not getting them from wealthy and ultra wealthy guys such as Mr Buffett, why should it get them from the guy who serves lunch to them?  It's not fair.

The US tax system should be reconfigured to make it fairer.

So too, should the tax systems of many other countries.

04 October 2010

International Competitiveness And Exchange Rates

Some economists believe that fiscal stimulus as a panacea for recession is not effective in the best of circumstances, and is wrong for what ails the West now.

They reason that most of the stimulus money injected by Western governments ends up benefiting the emerging economies because the Western economies are not competitive.

In the global marketplace for goods and services, however, competitiveness is a function of both the domestic price of the good or service and foreign exchange rates.

Thus, many people in the US are convinced that the competitiveness of American goods and services vis-à-vis Chinese goods and services is undermined because the Chinese yuan is undervalued by up to 40 per cent against the US dollar.

Similarly, Japanese exporters face tremendous difficulties as the Japanese yen appreciates against almost all other currencies (including the US dollar).  They wish that their government will bring about a cheaper yen to help them.

With China being the world's largest exporter and the second largest economy, an undervalued yuan has adverse implications for the health of the economies of its trading partners and their (the trading partners') ability to enough create jobs for their people.

When a currency is undervalued, the impact on its trading partners is a function of the extent to which the currency is undervalued, and the period over which such undervaluation has occurred.

China says that a significant increase in the value of the yuan will result in many Chinese companies filing for bankruptcy and in severe job losses.  Interestingly, this is the flip side of the coin of what the US has been saying — that the undervalued yuan is hindering economic recovery and job creation in the US.

29 September 2010

Singapore's Olympic Medal Targets

According to media reports, the Singapore Sports Council is targeting two medals to be won by Singapore athletes at the 2012 Olympic Games and six medals at the 2016 Olympic Games.  Singapore has won only two silver medals in previous Olympics — in women's team table tennis in 2006 and in men's weightlifting in 1960.

The Sports Council did not say in which sport or sports the medals are targeted to be won.  From the perspective of the public at large, that is understandable.  A medal is a medal, whether it is won in swimming, table tennis or shooting, for example.

But what does this mean for the respective national sports associations ("NSA")?

What are their respective goals?  What are their respective key performance indicators to achieve the goals set for them?

Each NSA wants its athletes to win as many medals as possible in its sport.

But that is not enough.  Unless each NSA is assigned, or has set for itself, a targeted number of medals to be won, no NSA is accountable for its contribution to the total number of medals to be won.

In other words, a collective goal needs to be split into, or made up of, goals for each contributing NSA.  Otherwise, which NSA is accountable if the target is not met?

By way of example, when a company sets a profit target, each of its component divisions is assigned or has set for itself a profit target, against which its performance may be measured.

Even if that company manages to meet its profit target through the out-performance of some divisions which compensated for the under-performance of other divisions, the various divisions will be rewarded or recognised differently.

So should it be for the NSAs.

Hopefully, the Sports Council's target is not just a vision or a wish, with no one being held accountable if the target is not achieved provided everyone tried his or her best.

21 September 2010

No Dual Citizenship

The suggestion of dual citizenship, or dual nationality, has crept into the discussion on offering citizenship to permanent residents, and the broader discussion on citizenship versus permanent residency.

Foreigners who are permitted by their home countries to be citizens of a second country (i.e., without losing the citizenship of their home countries) will likely welcome the suggestion.

With dual citizenship, erstwhile foreigners will enjoy the few privileges that are available to citizens but not permanent residents.

They can buy new HDB flats or get government grants and HDB mortgage loans when buying HDB resale flats.

They will qualify for higher subsidies for medical care and education.  Their children will compete equally for placement in public schools.

They can vote in parliamentary and presidential elections.

Using them to make up for the baby shortfall is misplaced unless they consider themselves as Singaporeans only, not part Singaporeans and part citizen of another country.

If they are young enough to fulfil national service obligations, will they stay and defend Singapore in times of need, when they have an alternative home elsewhere?

Like permanent residents, they will stay here only as long as conditions here suit their objectives or preferences, and will likely relocate if conditions elsewhere are more favourable or more attractive.

There are few, if any, benefits for Singapore to grant dual citizenship to foreigners.

09 September 2010

National Service Recognition Award

The recently announced National Service Recognition Award (“NSRA”) gives the unfortunate impression that past contributions don't matter.

Most currently serving NSMen will not be receiving the full quantum of the NSRA because they have already served past one or two of the milestones.

Former NSMen are excluded.

It is ironic that at a time when we remember Dr Goh Keng Swee for his contributions to Singapore's defence, the generations of former NSMen whose combined efforts and sacrifices transformed his concept into reality and helped protect our fledgling nation when it was most vulnerable are excluded from the NSRA.

As the prime minister said, whilst much of the earlier hardware has been superseded by newer and more sophisticated equipment, we would not be flying F15s if we had not started off with flying Hunter aircraft.

The SAF would not be what it is today if not for the NSF and NSMen of yesteryear.  They deserve no less recognition.


NSF are full-time national servicemen and NSMen are operationally ready national servicemen who have completed their full-time national service (also known as reservists in many other countries).

29 July 2010

Economic Growth And Over-Crowding

The projected GDP growth rate of 13-15 per cent this year is extremely rapid, even after taking into account the 1.3 per cent contraction last year.  GDP has already grown 4.3 per cent per annum over the past four years in spite of the recession.  If GDP grows 14.0 per cent this year, it will have grown 6.2 per cent per annum over the five years ending this December.

This is much higher than our target medium-term GDP growth rate of 3-5 per cent per annum for the next decade.

The sustainability of the medium-term growth target is premised on (among other things) improvements in labour productivity of 2-3 per cent per annum.  Increasing headcount will provide the remainder of the growth.

The past decade was different.  GDP growth of 5.0 per cent per annum was achieved mainly by increasing the number of employed persons by almost one million, or 3.8 per cent per annum.  GDP per employed person grew only 1.2 per cent per annum.

This year's projected growth requires 100,000 more foreign workers, which will increase the number of foreign workers by almost one-tenth in one year, notwithstanding the higher foreign worker levy.  This does not take into account other foreigners who will be granted permanent residence or citizenship (80,000 last year), many of whom will end up in the labour force.

It is not clear how many of these additional foreign workers and new residents are already here.  GDP can grow 14 per cent this year even if there is no sequential quarterly (i.e., quarter-on-quarter) growth in the second half of this year.

The foreign workers and new residents need space and facilities — accommodation, private and public transportation and road space, facilities for recreation and social interaction, schools for their children, clinics and hospitals, prisons etc. — and they need these to be made available at very short notice.

Many of these facilities are also used by the general population.

Can our physical infrastructure and our society cope with the sustained influx of foreign workers and new residents of this magnitude?

Singapore is a city state.  If an American doesn't like living conditions in New York, he can move to Los Angeles or Chicago, or any one of a number of smaller cities and towns.  Here, we have no choice.

Vibrant economic growth is needed to provide enough meaningful jobs for our citizens.  But if growth far exceeds that which can be supported by our citizens, together with a modest number of permanent residents and foreigners, we should consider forgoing some of it.

06 July 2010

Banks Should Not Consolidate Further

Like many other companies, Singapore banks wish to extend their geographical footprint to tap offshore business opportunities and grow their bottom lines.

But, banks are different from other commercial or industrial enterprises.

Firstly, banks serve important functions in the local economy, intermediating between their depositors and their borrowers.  They lend to the large multinationals and to the SMEs, which are mostly ignored by the global banking giants.  In the process, banks help them to grow.

Secondly, a significant part of their funding is derived from their non-bank customers — ordinary people like you and me — who place much of their life savings with the banks.  Their deposits are protected, but only up to the coverage level of deposit insurance, which stands at $20,000.

What will happen if one of the banks runs aground?

While the management of the banks will try to be prudent, it is their business to take risks; if they are overly cautious, they will likely achieve little and returns will be meagre.  However, human judgement and decision making are just that — human.  Seemingly well managed banks, even global behemoths, have failed.  It is unrealistic to expect that no Singapore bank will ever fail.

Adequate capitalisation is a defence, but too much of it is a drag on return.  However, even with a capital adequacy ratio of, say, 15 per cent, a bank has 6.67 times as much risk-weighted assets as capital, and this is after taking the credit risk of assets that are considered to be not so risky at less than their full face value.

Already, the three Singapore banks are probably too big to fail.  Reducing their number will ensure that they will be too big to fail.  But only because tax payers' money will be used to prevent the financial system from collapsing.

Depositors too may suffer, as deposit insurance may prove insufficient.

10 May 2010

Costs Of Rescuing Greece

Mr Stavros N. Yiannouka lamented that Europe's leaders such as Germany did not have the political will to come up with a multi-billion euro package to rescue Greece ("Greek crisis: Joke is on Europe's leaders", ST Forum 7 May 2010).

Greece did not suffer a natural disaster such as a devastating earthquake or tsunami.

Greece's problems, according to many accounts, seem to be the result of its own policies, practices, decisions and actions.

Why should anyone think that any other country should be obliged to save Greece for Greece's sake?

Why should Greece's creditors not have to suffer any pain from taking its credit risk in the first place?

That the remaining 15 members of the eurozone are going to Greece's rescue is a decision to protect the stability of the euro. Thus, the UK, which is a member of the European Union, but not part of the eurozone, is unwilling to support the euro, if it would expose the UK to liabilities.

Consider how the people of some other countries of the eurozone which are struggling under the weight of their own fiscal difficulties, feel when their governments have to borrow to shoulder their proportionate share of the eurozone's €80 billion rescue package.

Consider also how the people of the other member countries of the International Monetary Fund (including the less wealthy countries of the world) feel when they find their countries on the hook following the IMF's decision to grant Greece a €30 billion standby facility, inasmuch as most resources for the loans provided by the IMF come from its member countries via a quota-based mechanism.

Singapore's revised quota is 1.241 per cent, implying an exposure of €372 million from the IMF's €30 billion standby facility.

14 April 2010

Generating Companies - Sale or IPO?

A managing director of Temasek Holdings reportedly suggested that companies engaged in the business of providing power infrastructure could consider tapping Singapore's under-utilised capital markets.

Operational assets that generated stable cash flow (e.g., SP PowerGrid, which manages the electricity and gas transmission and distribution networks) could be put in business trust offerings on SGX.

But, didn't Temasek sell its entire interest in three power generating companies — Power Seraya, Senoko Power and Tuas Power — in 2008, instead of listing them on SGX?

Taking a company through an initial public offering possibly would have required more effort, but the offerings (if they had taken place) would have benefited the country in other ways.

At their combined sale price of $11.5 billion, the three companies would have added breadth to the Singapore capital markets.

In addition, they would have given investors a rare opportunity to invest in companies that had a risk profile quite different from the risk profiles of other companies listed on SGX.

They would have appealed to investors looking to invest in companies with a steady cash flow.

Timing was unlikely to have been a concern.  As a long-term investor in the three companies, Temasek could have waited a little while longer for the right time (if 2008 was not right for an initial public offering) to dispose of its interest at the right price.

Even if Temasek wanted or needed to raise cash urgently to invest elsewhere, it could have borrowed the funds quite inexpensively, given its strong credit rating.

It's a pity Temasek did not dispose of its power generating companies via an initial public offering.

18 February 2010

HDB Flats And Permanent Residents

Is the number of permanent residents too small to significantly impact the prices of HDB resale flats?

In the 12 months to June 2009, the number of permanent residents increased by 55,000, compared to the roughly 30,500 in each of the preceding four years.  Assuming the percentage of new permanent residents buying HDB resale flats remained unchanged, the volume of permanent-resident demand would have increased correspondingly.

As the demand and the supply of HDB resale flats are quite inelastic (i.e., low responsiveness to changes in price), it would not be surprising if permanent residents were an important factor behind the 31 per cent increase in HDB resale transactions last year (applying a six-month shift to the time series), and the 7.4 per cent increase in HDB's resale price index.  URA's price index for non-landed private residential property fell 15.4 per cent over the same period.

Also, permanent residents comprised 14 per cent of the resident population, but accounted for 20 per cent of HDB resale transactions.

Some unhappiness in this matter may stem from the thinking that permanent residents should not have the same rights or privileges as citizens in accessing scarce or valuable resources such as HDB resale flats, places in the top schools and the universities etc.

Transactions by permanent residents are differentiated from, and are not seen as being commingled with, transactions by citizens.  Transactions by permanent residents exist at the margin, whereas transactions by citizens form the core or base demand.  Thus, transactions by permanent residents disturb the price that would have prevailed otherwise.

While potential buyers look with dismay at rising valuations, many if not most of those who have bought HDB flats to live in view these rising valuations with scant interest.  Paper gains are nice but are irrelevant if they not realised.  Eventually, valuations will fall as the lease runs out. In the meantime, higher valuations lead to higher annual values and higher property tax and possibly smaller “hong baos” at budget time.

15 January 2010

The Plight Of The Under-Employed

For many people, the concept of employment seems straightforward.  If a person receives an income from work, he is employed; otherwise, he is unemployed.

In practice, not many people are familiar with how employment, unemployment and under-employment are measured.

What does being employed mean?

According to the guidelines recommended by International Labour Organisation, a person is employed if (among other things) he performed some work for pay, profit or family gains during a specified full calendar week.  For operational purposes, the notion of "some work" is usually interpreted as work for at least one hour.

Working as little as one hour (or even five or ten hours) in a week is fine if it is due to personal choice e.g., students, home-makers or the semi-retired working part-time because of personal commitments such as studies or minding children or preference.

But there are other people who work part-time for economic reasons (that is, not by choice) and are available for, but cannot find, more hours of paid work.  The fewer hours they work, the less they see themselves as being employed.

Governments consider these people to be under-employed, which is a sub-set of the employed.

As at June 2009, 156,200 residents were part-time employed (defined as anyone working less than 35 hours a week), constituting 8.4 per cent of the resident workforce.  Of these, 80,500, or 4.3 per cent of the resident workforce, were under-employed.

The US includes its under-employed in alternative, more comprehensive measures of unemployment (the combined unemployment and under-employment rate was 16.0 per cent last month, compared to the official unemployment rate of 10.0 per cent).  It recognises that the under-employed are inadequately employed.

Most of our under-employed residents had a monthly income from work of $1,200 or less.

They are almost indistinguishable from the 275,000 full-time employed residents with a low monthly income from work of $1,200 or less, except in one significant regard — they represent an under-utilised productive capacity of the employed population, and have the potential and the willingness to work more, contribute more and earn more, if only they had the opportunities.