28 April 2011

Just Who Are Singaporeans?

Who are Singaporeans?

Sometimes, the term is used to refer to Singapore citizens.

At other times, the term is used to refer to Singapore citizens and permanent residents collectively.  Permanent residents are, of course, citizens of other countries who have been granted some of the privileges that citizens enjoy in recognition of their semi-citizen status (Singapore does not allow dual citizenship).  However, permanent residents are not citizens.  The number of permanent residents is not insignificant.  There were 541,000 permanent residents among the 3,771,700 Singapore residents as at June 2010.

When someone uses the term "Singaporeans", he should make it clear whether he is referring to citizens or citizens and permanent residents.

Perhaps, it may be best to reserve the term "Singaporeans" for citizens and use the term "Singapore residents" for citizens and permanent residents.

27 April 2011

Low Wage Vocations in Singapore - Part II

The vocations with the lowest median gross monthly wages, June 2009.


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Notes

1. Singapore Yearbook of Manpower Statistics 2010.

2. Data pertain to full-time employees in private sector establishments each with at least 25 workers who contribute to CPF (Central Provident Fund, the national social security programme).

3. Monthly basic wage refers to the monthly basic pay before deductions of the employee's CPF contributions and personal income tax.

4. Monthly gross wage refers to all remuneration received by an employee before deductions of the employee's CPF contributions and personal income tax. It includes overtime payments, commissions, allowances (e.g., shift, food, housing and transport) and other regular cash payments, but excludes employer's CPF contributions, bonuses, other lump sum payments and payments-in-kind.

Low Wage Vocations in Singapore - Part I

I previously wrote about low wages in Singapore ("Living on Low Wages", 31 March 2011), citing the example of  McDonald's 6,000 rank-and-file workers whose monthly wages are $1,100 for full-time employees and $1,240 for team leaders.  These levels are after increasing an average of 20 per cent due to improved productivity.

There are many more people in similar, or more challenging, situations.

Here is a sample, ranked by median basic monthly wage in June 2009 (the date of the latest data):



How do they survive on such low wages?

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Notes

1. Report on Wages in Singapore 2009.

2. Data pertain to full-time employees in private sector establishments each with at least 25 workers who contribute to CPF (Central Provident Fund, the national social security programme).

3. Monthly basic wage refers to the monthly basic pay before deductions of the employee's CPF contributions and personal income tax.

4. Monthly gross wage refers to all remuneration received by an employee before deductions of the employee's CPF contributions and personal income tax. It includes overtime payments, commissions, allowances (e.g., shift, food, housing and transport) and other regular cash payments, but excludes employer's CPF contributions, bonuses, other lump sum payments and payments-in-kind.


This posting was previously published on 25 April 2011.  It was updated subsequently.

24 April 2011

Outdoor Sites for Election Meetings

Outdoor meetings in conjunction with the upcoming general election may be held at designated places specified in permits that will be issued by Police Elections Liaison Office on a first-come-first-serve basis.  The consent of the owners of the respective sites is also required.

A candidate may apply for a permit for an election meeting for the constituency which he is contesting in.

A list of the sites for outdoor meetings will be publicised at the end of Nomination Day on 27 April 2011.

The ruling party will be contesting the general election in all constituencies.  However, it will not know before the end of Nomination Day whether it will be facing contests in specific constituencies.

Each opposition party knows by now which constituencies it wishes to contest in, and which constituencies it will not contest in.  There may be last-minute changes to avoid three-cornered contests.

Regardless of the intricacies of political manoeuvring which will only be resolved by the end of Nomination Day, making available the list of outdoor sites immediately after the Writ of Election was issued on 19 April 2011 would have facilitated planning by the various political parties.

Removing any site from the list because there is no contest in that constituency is a simple administrative matter.

22 April 2011

Foreign Workers Create Jobs for Locals

IM Flash Singapore's NAND flash wafer fab was cited as an example of the presence of foreign workers helping to create jobs for Singapore residents (citizens and permanent residents).

The company currently employs 1,200 workers, of which six in ten are residents and four in ten are foreigners.

Two-thirds of the managerial and professional positions in the company are held by residents, while two-thirds of the technician and manufacturing positions are held by foreigners.

The following conclusions may be derived from these data.

Managerial and professional positions account for 80 per cent of all positions, and technical and manufacturing positions account for 20 per cent of all positions.

It is not clear whether this division of positions between managerial and professional positions on the one hand and technician and manufacturing positions on the other hand is typical for a NAND flash wafer fab, nor whether it represents a steady-state situation for IM Flash Singapore.

Residents hold 640 managerial and professional positions, and foreigners hold the remaining 320 managerial and professional positions.

Residents hold 80 technician and manufacturing positions, and foreigners hold the remaining 160 technician and manufacturing positions.

No details were provided for citizen and permanent residents separately.

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Notes

1.  How Foreign Workers Have Helped Singapore The Business Times (22 Apr 2011).

17 April 2011

Should the Government Nationalise Bus and MRT Services?

In its manifesto for the coming general election, The Workers' Party called for the partial nationalisation of bus and MRT services in Singapore.

It proposes the setting up of National Transport Corporation to oversee and provide MRT and public buses servicing major trunk/inter-town routes.  This will ensure smooth integration of the overall national transportation network to avoid unnecessary duplication of services and overheads incurred by multiple operators.  Intra-town bus services will be de-regulated and operated by private operators.

National Transport Corporation will operate on the basis of cost and depreciation recovery, not profit.  It will be allowed to operate shops and outlets within the properties under its control to cross-subsidise its operations.

Minister in the Prime Minister's Office and Second Minister for Finance and Transport Lim Hwee Hua disagreed.  She said the underlying motivation for suggesting that the public transportation should be nationalised was that it would be cheap.  But nationalising in many other countries had led to inefficiency.  Ultimately commuters got cheap transport but it didn't quite work out.

She added that the Government had considered the idea, but found that it was not feasible.

By way of background, bus services, bus service operators, ticket payment services, and bus and rapid transit system fares are regulated by Public Transport Council, an independent body established by an act of Parliament in 1987.  Operators which do not meet service standards — such as bus reliability, loading and safety at bus network or route levels — may be fined.

Land Transport Authority plans bus routes, an activity previously the purview of the bus operators.

Two questions need to be asked regarding the bus and MRT services currently provided by SMRT Corporation Ltd and SBS Transit Ltd.

Firstly, do they meet the service standards set by Public Transport Council?  It appears to be so, despite the occasional grouse.

Secondly, are SMRT and SBS Transit profitable?

SMRT's operating profit was S$153 million on revenue of S$725 million in the nine months to 31 December 2010, from rail, bus and taxi operations, rental, advertising, engineering and other services.  Hypothetically eliminating its operating profit may reduce fares by 27.2 per cent.

SBS Transit's operating profit was S$65 million on revenue of $721 million in 2010, from bus, rail, advertisements and rental.  Hypothetically eliminating its operating profit may reduce fares by 9.6 per cent.

Thus, if the public bus and MRT business of SMRT and SBS Transit are operated on a non-profit basis, fares will be reduced from current levels.  There will be no reduction in the level of service to commuters because the proposal calls for the elimination of profit, not a reduction in costs.

Is Mrs Lim concerned that the Government cannot do as good a job as either SMRT or SBS Transit?

Operating the public transportation system, especially that of buses, is not a simple endeavour.

It is one thing to establish quality of service standards for others to comply with but quite another to operate under them.  A multitude of factors can affect the reliability of actual bus schedules and loading of buses.  There will be the inevitable criticism from commuters when they wait and wait for the bus that seems to take forever to arrive.

Recruiting and retaining drivers and other operational staff are more challenging (especially without a legislated minimum wage) than most people are prepared to admit.

Raising fares periodically is never popular, but if fares do not increase, neither will wages of the drivers and others.  Public transport fares are currently reviewed every year.

The combined market capitalisation of SMRT and SBS Transit is almost S$3.5 billion.  National Transport Corporation may need to pay a premium to take these two companies private, as a compulsory acquisition may be bad for Singapore's business image.  Even without any premium, S$3.5 billion is not a small sum.  It is difficult to envisage any one of the Government holding companies wanting to hold the shares in the capital of National Transport Corporation because this company is supposed to break even, not make a profit.  Its zero rate of return will be a drag on the performance of the holding company, and may make it more difficult for the Government to justify the remuneration of its key executives and other staff.

But, is The Workers' Party's recommendation workable?

It envisages keeping the intra-town routes in private hands.  Singapore is not a big place so the merits of this is hard to understand.

Although Housing and Development Board apartment blocks are defined for statistical purposes to be located in planning areas (e.g., Clementi, Jurong East, Jurong West etc.), the delineation of many planning areas may be arbitrary and it may be difficult separate one planning area from another planning area on the ground for operational purposes such as intra-town bus movements.  This difficulty is exacerbated in the case of private estates, especially those consisting of landed properties.  Having different private operators for each town will be confusing and troublesome for commuters who may end up having to take numerous buses to reach their destinations.

The bane of most bus operators is running buses through unpopular routes or at off-peak times.  It's plainly unprofitable.  Will any private bus operators be willing to provide these types of community service without the gravy from the trunk/inter-town routes?  They may have to, but this will push overall fares up.

Will the operators of the intra-town routes have sufficient economies of scale?

Perhaps, it may be better and simpler just to nationalise the entire bus and MRT services.

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Notes

1. The potential percentage fare reduction is arrived at by (i) computing the amount by which the revenue has to be reduced to bring the operating profit (less the operating profit from taxis, in the case of SMRT) to zero and (ii) dividing this by the passenger revenue.  Advertising and rental revenue is retained for cross-subsidisation.  SMRT's support costs are assumed to be reduced correspondingly when taxi operations are eliminated.  Investment and interest income and interest expense are excluded as the financial structure is subjective, but are not material in either SMRT's or SBS Transit's case.

2. The market capitalisation of SMRT Corporation Ltd includes its taxi operations, which are only slightly profitable.

3. Why nationalising public transport won't work The Straits Times (16 Apr 2011).

15 April 2011

Flawed Arguments for One-Party Parliament

Three new candidates from the ruling People's Action Party for the coming general election recently explained their support for a one-party system.

Former managing director of The Monetary Authority of Singapore Heng Swee Keat said that, when he was in policy making roles in the public sector, he saw how politics in some countries became so divisive that the right policies were not implemented.

Mr Ong Teng Koon cited the difficulties the US faced in passing its budget last week as something he did not want for Singapore.

Mr Alex Yam recalled from his visits to, and research of, other parliaments as a student that even with some semblance of a multi-party system, there were many instances of gridlock in policy and disagreement over very minute details, because of difference in ideology.

Their examples are flawed.

The US has a bicameral system, which makes it more difficult to adopt legislation when the Senate and the House of Representatives are controlled by different parties.  Many other democracies also have bicameral systems.  Singapore has a unicameral system.

The US president and his cabinet are not members of Congress.  Neither the president nor the leader of the Senate or the House can compel any Senator or Representative to support the president's policies.  The parliamentary system does not work in this way.  The party whip is seldom lifted to allow members of parliament the discretion to vote as they wish.

Candidates for US Congress have to raise campaign money, collect signatures to get their names on the ballot, and personally appeal to registered voters of their party in primary elections.  Thus, local issues can be as important as, or more important than, national issues to individual congressmen.  In many other democracies, the party controls whether to allow candidates to run, and actually puts their names on the ballot.

Significant authority is also vested with the legislatures in each of the 50 states of the US, and each of them can facilitate or impede the implementation of federal programmes.

Sometimes a general election does not produce a clear winner with the mandate to govern on its own or with its coalition partner or partners.  In such cases, the governments that emerge usually have to compromise or sacrifice some of their ideologies in order to gain the support of minority parties and/or independent legislators.  These governments are likely to be weak and unstable because the fringe entities hold the core entities to ransom over a multitude of issues.

The problem in these democracies lies not with a two- or multi-party parliamentary system, but with the inability of every party there to demonstrate that its policies are the best for the country and the people.

Mr Heng's comments additionally show why a two- or multi-party system is needed.

There are often no right or wrong answers in economic and fiscal policies.  For example, economists are divided whether governments should tighten their belts and practise fiscal prudence or spend their way out of a recession.

It is only when a policy is implemented that people have the opportunity to assess its effectiveness.  Even then, it is difficult to say with certainty whether that policy was better or more appropriate in the circumstances than the policies that were not implemented.  When a policy is not implemented, how it might have worked is pure conjecture because no one knows.  So it seems rather presumptuous to say that “right policies” were not implemented.

Such presumptions will likely be rigorously challenged in an effective two- or multi-party system.

An opposition with a critical mass fulfils at least two critical roles: (a) ensure robust debate of ideas and policies in the legislature by elected representatives who are not subject to the ruling party's whip; and (b) provide an effective alternative to the incumbent, if not immediately, then as soon as possible.

It's rather bizarre for a political party (it has to be the ruling party, not an opposition party) in a democracy to argue that the country will be better off with only one political party in parliament.

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This posting was originally published on 13 April 2011.

14 April 2011

Pensions and Wages and Attrition in the Civil Service

Last month, Singapore Deputy Prime Minister and Minister-in-charge of the Civil Service Teo Chee Hean said in Parliament:

"In 2010 the Singapore economy recovered strongly and the labour market tightened.  The resignation rate for the Civil Service rose, from 3.5 per cent in 2009 to 4.7 per cent in 2010.  For the Management Executive Service resignations rose in 2010 with attrition rate highest at 17 per cent for the younger graduate officers.

"To attract and retain able and committed officers, Civil Service wages must be competitive.  Salaries are therefore benchmarked against the private sector.  Civil Service remuneration fell during the recent recession.

"But as private sector wages rise, the wages of civil servants must also rise.  Otherwise, we will lose capable officers and suffer an overall decline in the quality of the Civil Service."

Firstly, the 4.7 per cent annual attrition rate for the Civil Service in 2010 is very modest compared to the 2.0 per cent national average monthly resignation rate.  It seems to be not an inappropriate level that ensures adequate renewal and rejuvenation, rather than something for the Minister or Civil Service to lose any sleep over or to justify a significant upward revision of wages.

Secondly, what about the 17 per cent attrition rate for the younger graduate officers in the management executive service last year?

Under the Pensions Act, a pensionable officer may be allowed to retire from the Civil Service before he reaches the retirement age, provided he satisfies certain service conditions, including having served for at least 15 years.  Upon retirement, the officer will be eligible for pension and medical benefits.

It is likely that many young graduates do not know what they want from their first job, and will resign as soon as they conclude that that is not their cup of tea or the grass elsewhere is greener.

It is not difficult to imagine that an individual who does not intend to remain in the Civil Service for at least 15 years will leave before he has invested too many years there.  The longer he stays (if he leaves before 15 years), the more he loses by way of pension forgone.

Perhaps, then, instead of relying on increasingly higher salaries to hold onto them, the Government should consider allowing pensionable officers to retire (i.e., leave with some benefits) from the Civil Service after they have reached earlier milestones, for example, 5 years and 10 years.  Some officers may still leave eventually, but they will likely have made valuable contributions to the Civil Service, instead of leaving soon after they have been trained and nurtured.

Alternatively, the Government should consider scrapping the pension scheme altogether.  This will relieve the Civil Service from its obligations to pay pensions and medical benefits over extended periods that may sometimes be almost as long as the actual periods of service.  This will also make compensation comparisons between the Civil Service and the private sector more straightforward.

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Notes

1. Singapore Parliament Report (Mar 2011).

2. Why one retired, another resigned The Straits Times Forum (7 Apr 2011).

3. Ministry of Manpower Labour Market 2010.

4. The annual resignation rate is the simple average of the quarterly resignation rates.  The quarterly resignation rates are expressed as the average monthly resignation rate during the quarter, which is the average number of persons who resigned in a month during the quarter divided by the average number of employees in the establishment.

12 April 2011

HDB Owners' Mortgage Insurance Lapse

Purchasers of Housing and Development Board ("HDB") apartments who service their HDB loans with their Central Provident Fund ("CPF") savings are required to purchase Home Protection Scheme mortgage insurance.

556,000 owners of HDB apartments fall into this category.

The mortgage insurance lapsed in about 9,000 cases because the home owners did not have sufficient funds in their CPF accounts to pay the premium.  These home owners may have lost their jobs.  It is likely that they also did not have sufficient funds in their CPF accounts to service their mortgages.

8.5 per cent of home owners were exempted from the Home Protection Scheme as they had purchased similar insurance.

About 2 per cent of home owners were not insured due to medical conditions or other reasons.

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Notes

1. HDB owners with insufficient CPF see mortgage insurance lapse TODAY (12 Apr 2011).

2. Housing and Development Board is Singapore's public housing authority and a statutory board under Ministry of National Development.

3. Central Provident Fund operates Singapore's national social security savings plan.

06 April 2011

The Politics of GRCs - Part 2

Some people have expressed considerable concern that Singapore's ruling People's Action Party ("PAP") may lose some Group Representation Constituencies ("GRCs") in the coming general election.  That may result in some political appointment holders being kicked out of office.  It may also derail the renewal process within PAP.

Accordingly, they suggest that the opposition parties restrict themselves to single member constituencies, and not contest the GRCs.

By way of background, GRCs were created by PAP and introduced in the 1988 general election.

A GRC is an electoral division in which an election is to be held on the basis of a group of candidates.

The stated purpose of a GRC is to ensure the representation in Parliament of members from the Malay, Indian and other minority communities.  Each GRC will have at least one candidate belonging to a designated minority community.

Singapore's next Parliament will have 87 members of Parliament from 15 GRCs and 12 single member constituencies.  There are, on average, five candidates in each GRC.

Since GRCs were introduced in 1988, no opposition party has captured a GRC.   It is not clear, however, whether this is due to the nature of the GRCs or simply the dominance or popularity of the ruling PAP.  Since the 1968 general election, no opposition party has won more than a handful of seats in Parliament.

GRCs allow a party to use stronger or more established candidates to anchor the team, and shields newer or weaker candidates.

The ruling party has an advantage in a GRC because it has more strong and/or established candidates, especially when it has been dominant for a long time.  Nevertheless, even strong candidates are not invincible.

There are simple solutions to the concerns set out in the first paragraph above.

Firstly, abolish GRCs.  GRCs were created by PAP.  There is no evidence that Singaporeans vote along racial or religious lines.

Secondly, reduce the size of GRCs to a maximum of three candidates.  The win or loss of any GRC will result in the win or loss of only three members of Parliament.  With huge GRCs comprising six candidates, an electoral win or loss of any one of these super GRCs is a gain or loss of six members of Parliament.

Thirdly, put important political appointment holders in single member constituencies so that they will not be weighed down by weaker or newer candidates in GRCs.

Fourthly, acknowledge that the purpose of any general election is to allow the citizens of the country to choose in a free and fair manner the candidates or group of candidates that they consider to be in their best interest.  If any candidate or group of candidates lose, they and/or their party were simply not the better or best choice.  It is not supposed to entrench any candidate or group of candidates who are second best.  That is how a democracy is supposed to work.

04 April 2011

Whose Responsibility is it to Fight Inflation?

NTUC FairPrice has promised that prices of its 500 housebrand items will remain the same for six months.  In addition, Cold Storage, Giant and Shop and Save have made similar commitments.  These will help lessen the impact of inflation.

Stallholders at food centres and coffee shops were also urged to commit not to raise prices.

But if the cost of their supplies and other inputs including but not limited to wages and utilities increase in the meantime, their profit margins will be squeezed.

Why should the shareholders of the supermarket chains and other businesses or sole proprietors be the ones to bear the burden of keeping inflation in check for their customers, when they are merely trying to pass on the higher cost of their inputs?

In a more delicate predicament are food vendors operating at the local universities and polytechnics.  According to media reports, most of the canteens there are managed by committees comprising staff and students, which have the power to decide whether or not to allow price increases.  Furthermore, the vendors are afraid of being blacklisted by the administration in the future.

Singapore Polytechnic approved a request by a stall holder selling chicken/duck rice because the latter had been selling way below market prices for a long time and his proposed price was still below the norm.  It tries to ensure that food prices are affordable to its students while protecting the business interests of its stall holders.

Republic Polytechnic rejected a request by a stall holder selling drinks and snacks to raise the price of his buns because it wanted to maintain low prices for its students.  It said that student welfare was of prime importance to it and it would to its best to avoid unreasonable or untimely price increases.

Why don't the universities and the polytechnics consider reducing the rental they charge the stall holders?

Similarly, shouldn't the Government shoulder at least some of the burden of inflation affecting its citizens as a whole, especially when it has the capacity to do so, in light of the budget surpluses?

What can the Government do?

It should lower or scrap GST on consumer necessities.  Lowering or scrapping GST on consumer necessities will not only mitigate the effects of rising inflation but also reduce the cost of living.

It can freeze rentals.

It can freeze property tax on all properties, especially residential and small commercial properties.

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Notes

1. Food prices at varsities, polys holding steady The Straits Times (26 Mar 2011).

Charity

Mr Masayoshi Son, president of Japanese telecommunication giant Softbank, will donate 10 billion yen to support victims of the 11 March 2011 earthquake and tsunami, according to AFP quoting the company.

Mr Son also plans to donate all remuneration that he will receive as the head of Softbank group from the current fiscal year until his retirement in order to support children who lost their parents due to the disaster.  Mr Son, who is in his 50s, has said that he plans to hand over control of Softbank when he is in his 60s.

Separately, Softbank group will provide one billion yen in aid for the victims and relief fund for the reconstruction of the disaster-hit area.