Close Shop All good (and bad) things come to an end.The KTM has decided to fry something other than kway teow. :-)To all past patrons, thanks for the fish. :-P Time Out for Some Reasonableness Got this comment from an anon on Lucky's blog:Kwayteowman, do us a favour, if you want to dispute Lucky's article, try to take on the general tenor of it and not pull out bits and pieces to surgically analysed them to death.That's not the way reasonable people would do unless you are just here to make trouble. There are times when someone says something that makes one stop and think, "What am I doing?"This is one of those times for the KTM. KTM is obviously stressed. Patience is obviously in short supply. Why the heck is he blogging and responding to comments?Really no good reason. Looking at some of his latest comments, he also thinks maybe he is being unduly harsh and caustic. Really no reason to be so antsy thinks the KTM. Perhaps the KTM can also afford to be bit kinder even when he's impatient.Under such circumstances, KTM has decided it would be prudent to lay off blogging and responding to blogs for a while. How long? Dunno. Lucky, if you're reading this. Paiseh. The KTM admits he's been unreasonably harsh in the last couple of exchanges. Apologies. We go back a long way, so he knows you won't take offence. Thanks. We continue our discussions another time when the KTM is a little less high-strung. :-P The Conundrum of Labour For some strange reason, there is a tendency for people who have no understanding of economics and the market to try to teach the Government how to run the economy. Does the Government even "run" the economy? :-P And there's this related issue about dunno "growth at all cost" and not "growth for the people". Dunno who invented this, but it's certainly quite a popular. Funny thing is that even a PAP MP talks about this, which causes the KTM to suspect there must be truth that PAP cannot find people. Suppose for a moment that these folks are correct that our current model is a "growth at all costs" model, what is the alternative? Growth at no cost? How to grow the economy "for the people"? The KTM suspects that some people are on drugs.Let's take a step back for a moment and ask ourselves, WHAT is the incentive for the Govt to adopt a "growth at all costs" model? To justify their high pay? Need to justify meh? Do people believe that if the economy grows a little slower, the PAP dunno how to pay itself well? Are people smoking something?These are rhetorical questions. The point is that there is no *real* incentive to do a "growth at all costs". This is the punchline: it is not so much the Govt that's fixated on GDP growth, but the online kaypohs 'cos they dunno what they are saying. :-) As it turns out, it's not exactly hard to run a Government also. The way the KTM sees it, the KTM expects the Government only to do the following:Ensure that housing is availableEnsure that we have adequate healthcare and access to electricity and waterEnsure that our children have a decent educationProvide services like policing, the Courts and fire fightingEnsure people have jobsHow hard is it to achieve the above? For housing, we actually doing more than okay. If not, HDB probably won't be so free to dabble in those dunno what quasi-condo flats. Moving forward, hopefully we won't screw it up. For the rest, we're doing pretty well and they are not too hard, except the last item: JOBS. The KTM thinks that jobs are important. In fact, it is more so than economic growth. For many Singaporeans, their identities are intimately tied to their jobs. Without jobs, families break up and people fall into depression. It's a pretty vicious thing. We can also do a simple thought experiment: suppose your sister bounces through the door and announces she has a new boyfriend, what would you ask? Perhaps you will ask "how old is he"? Surely, you will eventually ask "what does he do for a living". Like it or not, Singaporeans are often defined by their jobs. Actually from where he is standing, it seems quite clear to the KTM that our economic policies is always about jobs. It turns out that job creation is often correlated with economic growth. Why? Simply because firms don't hire people when they are not growing or anticipate that they will continue to grow. The fundamental difficulty is that our economy have "developed" to the so-called next stage of development. This means that many (most?) of the low-cost manufacturing industries have gone to cheaper locations like China, India, Vietnam, etc. Unfortunately, our population doesn't change and we still have these 400,000 or so (KTM is not completely sure of this number, but the actual number should be within this ballpark) middle-aged people who have secondary school education or less. How do we deal with displaced workers? Well, there are the IRs coming up, but it's not entirely trivial to create jobs that pay relatively well that don't require much education. Changes in the economy have also created lots of middle-aged PMETs getting retrenched. This is not new. This has been happening since the 80's but with the baby boom generation fast approaching middle-age and retirement, the numbers are ballooning. Also, old policies like giving them taxi licenses doesn't quite work anymore 'cos the taxi market is saturated and taxi companies are complaining about not being able to hire out their taxis and have to go to the Govt for tax exemptions. We have to realistic that training and retraining doesn't quite help because the market is fundamentally biased against hiring older workers. Because the KTM is not a politician he can afford to those PC'ness out of the window and just spout the brutal truth: the labour market is not stupid. Not everyone who reaches 40 years old gets retrenched. While the numbers are relatively large, the KTM believes that the proportion is not huge. It is quite clear that many (most?) of those who get retrenched are generally less capable and over-priced. Good workers will typically not get retrenched unless their company folds. Experience is also over-rated. Employers are actually always on the look out for good workers. There are people who are simply good workers. They get things done with minimal supervision. They know how to exercise their initiative and common sense to do the right things. In comparison, there are also the mediocre workers who sort of do their work, but they are pretty dispensable. The latter are the ones who lose their jobs when they get too expensive.The problem of "getting too expensive" is largely due to the seniority-based wage system that is the norm in Singapore. While it might be nice for the workers to get annual increments, most fail to understand the risks of being over-priced. The KTM however gets this impression that things are evolving, albeit a little slowly. Labour markets look at signals. Contrary to public opinion, degrees actually don't really matter. Employers are basically interested in degrees (for many jobs) mainly because it's a signal. Hiring is risky business and it's really hard to identify and hire the right people. Employers will take whatever they can get to improve their success rate. The KTM has come across this poly graduate who is significantly more efficient and effective at her work than most of the graduates. You throw a job at her, she'd get it done. She is tough and knows how to deal with people. The KTM is quite certain that this girl would never be out of a job. :-P But we digress, let's not kid ourselves that the Government has some magic bullet that will make the hiring or middle-aged retrenched PMETs attractive. The KTM actually made some sweeping generalizations of retrenched PMETs above. Some of them are obviously untrue for some people (some could just have very evil bosses who simply used the recession as an excuse to fire them), but it doesn't matter 'cos we're dealing with mindsets and it's hard. There's been a lot of propaganda exhorting the companies that hire older workers, but let's be realistic that there's a limit to how far it can go.Those who advocate some anti-discrimination laws dunno jack about what they are saying 'cos while such laws sound good, they are hardly enforceable. The employers are coughing up money to employ people, why should they be compelled to hire people they don't want to hire? People who cry for more stringent quotas on foreign workers fail to understand that there are also business people who need to make a living. Part of doing business is controlling costs and it is fair that they lobby against quotas on foreign workers. If don't, they may go bust. If they go bust, who's going to cry for them? The Government thus has to tread a fine line when it comes to managing these quotas. For the average joe who doesn't feel threatened by these foreign workers, suppressing costs with cheap foreign labour is actually good 'cos it helps put a lid on the costs of living. :-)To conclude, the KTM would like address a comment made by one Raymund Koh, "If Singaporeans do not demand a decent wage commensurate with the lifestyle here to enjoy a proper living, I am sure many would end up without a roof over their heads. It is time for employers to wake up and look at the issues that cause Singaporeans to shun certain jobs".The KTM personally thinks that Raymund needs to wake up his own idea and realize that it's not the employers' problem to make sure that Singaporeans have a "decent wage commensurate with the lifestyle here to enjoy a proper living". They have a business to run. It's up to the Singaporeans themselves to do what they can to get at their decent wage. Of course, some can choose to run to the Government for a solution, but fundamentally, it's not the employers' problem. The employers in Singapore are actually having a hard time. Just that most of them too darn busy to find the time to blog. :-) Afternote:The KTM mentioned above that anti-discrimination laws are no good. It turns out that a reader currently working in NZ came along and posted a comment that in NZ, employers have to "show proof that positions has been advertised and that no Kiwi or PR applicant has the necessary experience for the position" before hiring her British colleague. Well, it turns out, her British colleague has been at the job for 4 years already. Is NZ so short of people that 4 years cannot find? The truth of the matter is: the Government can pass dunno what regulations. You just have to leave it to the creativity of the employers to get around them. People should wake up and understand this: in an employment situation, the balance of power is almost always completely on the side of the employer for two reasons: (i) he's the one cough up the cash; and (ii) because he's the one coughing up the cash, he has complete discretion on who he wants to hire. ST Online Forum29 June 2009Singaporeans too fussy, so ease up on hiring quotaTHE new Ministry of Manpower (MOM) guidelines on work permit quota entitlements introduced on June 1 are causing distress and confusion among many employers like me.Under the new rules, the new ratio in the service sector is 10:1, whereas under the old guidelines it was 5:1.Furthermore, to qualify for a new lower levy under the new rules, these work permit holders must have a diploma. Does it make sense to expect lowly paid work permit holders (foreign workers) to have a diploma? If they did, would they want to work for such low wages, doing jobs shunned by Singaporeans for low monthly incomes of $600 to $800.The problem came about because of fussy Singaporeans who do not want to take on many jobs. Recently, The Sunday Times reported on 10 jobs shunned by Singaporeans. In truth, it is more like 50 to 60 jobs which Singaporeans shun nowadays, including the following, just to name a few:Toilet cleanersMaidsConstruction workersVoid-deck cleanersGardeners (landscape technicians)Wet market stall holders or workersHawker assistantsButchersAbattoir workersFuneral home workersHospital attendantsPetrol-pump attendantsGarbage collectors Manufacturing or assembly line workersThe list goes on - any jobs that are so-called 'hot and dirty' will be rejected.So where does that leave us? Singaporeans are too fussy, proud, dignified, qualified or whatever to do many jobs - in fact, some Singaporeans would rather be jobless than take on certain jobs, even when employers are willing to pay a premium of up to 40 per cent. There are simply no takers. Period.Even for administrative jobs, Singaporeans refuse jobs they feel may be too far from their home or not near an MRT station. Likewise, they reject if they are required to work on weekends, do shift work, wear a uniform or serve customers.As employers we receive many applications from Myanmar, the Philippines and even as far away as India for every job vacancy advertised.Given that Singaporeans are extremely picky and fussy, even during this downturn, small and medium-sized enterprises (SMEs) and multinational companies (MNCs) need foreign workers in order to run and operate businesses here. It would help greatly if MOM could make the quota system less onerous and more business-friendly.It would also decrease incidents of 'phantom workers' if MOM could relax the guidelines and revert to the more pro-business ratio of 5:1 in the service and retail sectors.A survey of SME and MNC bosses or personnel in charge of recruitment will reveal how difficult the situation is, where businesses desperately need workers but cannot find them due to these onerous new quota restrictions.Spenser TanST Online Forum30 June 2009Singaporeans aren't fussy about jobs or pay - only realisticI REFER to Monday's Forum Online letter by Mr Spenser Tan, 'Singaporeans too fussy, so ease up on hiring quota'. Mr Tan may be right in one way, but he is wrong in another.Mr Tan said Singaporeans choose jobs near MRT stations. Well, who would not when bus services are so inadequate and infrequent?Also, if one just relies on buses, one could be late for work at least three times a week. Moreover, employers demand that employees are punctual and may even deduct pay for lateness. Thus, it is natural for a job applicant to consider his future job location or risk losing the job later.Mr Tan's other gripe was about wages paid in certain jobs. Does he realise that in the past seven years, inflation has made so many things overpriced, a worker who earns $1,600 a month can no longer afford a three-room HDB flat? Seven years ago, the same flat cost about $150,000, but today it has risen to more than $200,000, before factoring in the cash amount upfront.If Singaporeans do not demand a decent wage commensurate with the lifestyle here to enjoy a proper living, I am sure many would end up without a roof over their heads. It is time for employers to wake up and look at the issues that cause Singaporeans to shun certain jobs.For example, take the case of a maid. Would a Singaporean accept a maid's wage of $400 a month? Is that enough even for transport?Raymund KohThe Sunday Times5 July 2009Number of chronic jobless people doubles to 16,600By Debbie YongTry as they may, they just cannot seem to land a job.The latest job market figures for the January to March period, released by the Ministry of Manpower (MOM) on June15, showed that there are now 16,600 long-term unemployed people in Singapore.By definition, these people have been jobless for 25 weeks or more.A year ago, the corresponding figure was less than half - 7,500.In the first five months of this year, the CareerLink Plus Centre has seen 542 long-term unemployed and low-wage workers approaching it for help, compared to 1,293 cases for the whole of last year. The centre is a joint project between the Workforce Development Agency and self-help groups like the Chinese Development Assistance Council, the Singapore Indian Development Association, the Eurasian Association and the Association for Muslim Professionals. It is spearheaded by Mendaki.Labour MP Halimah Yacob said: 'The economic crisis is not the only factor although it makes it harder for the unemployed to find jobs.'The issue is one of structural unemployment too as many also do not have the skills to do the jobs that are available.'Madam Halimah, an MP for Jurong GRC, has seen more of the chronic jobless in her constituency seeking help since the downturn.Help is given with regard to technical and computer skills, and softer skills like preparing resumes and presenting themselves well at job interviews.This chronic jobless group mainly comprises mature workers aged above 40, housewives in their 40s and 50s who want to go back to work, and people with physical disabilities, medical conditions or past criminal records.In this group too are choosy job seekers, said Mr Josh Goh, senior manager of corporate services for The GMP Group, a recruitment firm.'Job seekers should temper their job expectations, such as pay packages and employee benefits, in line with the current economic situation.'The question arises: How long can one stay unemployed before it starts to look bad on one's resume?Mr Paul Heng of Next Career Consulting Group feels that a layoff of three months to four months is the average during regular times, but this can hit six months in a downturn.Given the current bleak market, bosses will likely be more understanding of one's jobless stint, said Mr Dhirendra Shantilal, senior vice-president for Asia-Pacific of human resource firm Kelly Services.'But job seekers will have to demonstrate that they had used the time productively, to gain new skills from relevant courses or even taken on temporary work and other activities to keep in touch with the market dynamics,' he said.Mr Heng gave this advice: list the serious job applications sent out, the responses received, the interview opportunities, and the offers received.All these will help to convince a prospective employer, he explained.And there are government-sponsored training programmes too, giving those who are unemployed little justification for sitting idle.For example, the $650 million Skills Programme for Upgrading and Resilience (Spur), launched last November, encourages Singaporeans to upgrade their skills through subsidised training courses.'You have to take things as they come,' said one job seeker, Mr Tan Gim Leong. The 42-year-old former engineer had been unemployed since December 2007 but took up a six-month contract teaching position in a secondary school last July.He then attended an Advanced Certificate in Training and Assessment course at the Institute for Adult Learning. He hopes to become a corporate trainer with its completion last week.'Because I am doing a career switch, there definitely will be some gaps. But this can all be explained in interviews,' he said.The Sunday Times5 July 2009Employers hit by stricter S-Pass systemMOM says it may grant one-time pass renewal for affected firms to manage transitionBy Jamie Ee Wen Wei The Ministry of Manpower (MOM) has tightened the criteria for giving out foreign worker S-Passes and the June 1 change has hit hiring in sectors from services to IT and manufacturing.S-Pass applicants are assessed on a points system based on multiple criteria including salary, education qualifications, skills, job type and work experience.Although the criteria are unchanged, MOM has recalibrated the points allocated in each criterion to encourage employers to employ better qualified S-Pass holders.Foreign workers eligible for the S-Pass must be semi-skilled diploma or post-secondary holders earning at least $1,800 a month.As of December 2008, there were about 74,000 S-Pass holders.Last week, responding to queries from The Sunday Times, MOM said the recalibration was to encourage employers to employ better qualified S-Pass holders.An example would be hiring an employee with longer work experience.The ministry did not disclose what specific points are allocated for each criterion.MOM said the revision will apply to renewals and to new S-Pass applications.To help companies manage the transition, MOM said it will consider granting a one-time renewal of up to one year to affected S-Pass holders who may not have acquired enough points.The ministry said it has briefed employers and industry associations.It has also created an employment self-assessment tool and an online calculator on its website to help bosses assess if their S-Pass applicants meet the criteria.Human resource experts and employers The Sunday Times spoke to said companies, especially those in retail, IT and manufacturing, as well as shipyards, are feeling the impact of the stricter rules.These jobs often require shift work or hard labour, and are often unpopular with Singaporeans.Department store Metro's human resource and operations director Edward Tan said his company now has to be more selective about the S-Pass workers it hires. They make up about 5 per cent of its workforce.Over at shoe retailer Charles and Keith, human resource manager Chia Wai Jyy said her company has had difficulty upgrading its workers from work permits to S-Passes.One case was rejected recently. 'Previously, if the worker satisfies most of the criteria, chances are he or she would get the pass, but now the standards are higher and all criteria are strictly adhered to,' she said.But taking another perspective, Mr Josh Goh, senior manager of corporate services in The GMP Group, a human resource firm, said companies here should look into revising their job compensation and benefits package, or redesign them.The aim, he said, is to make them more appealing to Singaporeans or permanent residents, rather than depend on S-Pass holders.He also advised local job seekers to be less fussy, and to adjust their expectations and explore opportunities in the less popular jobs.jamieee@sph.com.sgThe Sunday Times5 July 2009Tze char stalls need foreign workersThe mainstay of coffee shops here, the tze char (stir-fry) stall, continues to face a dearth of willing Singapore workers.The law allows only Singaporeans and permanent residents to work in food stalls, including tze char stalls, at coffee shops.Now, the two main coffee shop groupings, the Foochow Coffee Restaurant and Bar Merchants Association and the Kheng Keow Coffee Merchants Restaurant and Bar Owners Association, are jointly appealing for this no-foreigners rule to be relaxed.Together, they have some 600 members who said they are finding it hard to hire Singaporeans to man the tze char stalls, which often require more workers than other food stalls.The associations feel that a different set of rules should apply to them.Mr Hong Poh Hin, the first vice-chairman of the Foochow Coffee Restaurant and Bar Merchants Association, said his members are arguing that they need to hire foreigners because Singaporeans do not want to take on the job.Common reasons cited are the long hours, hot working conditions and low pay.Tze char stalls may require at least 10 workers. They earn between $1,000 and $2,000 as cooks, servers and dishwashers. Ten-hour shifts are common and rest days may just be once in two weeks.Because a coffee shop's licence allows for the hiring of foreigners after meeting a certain quota for Singaporean employees, some tze char stalls have resorted to going into joint businesses with their coffee shop landlords to get around their problem.But some feel this is not the best solution.Mr Teo Keng Kee, 64, a coffee shop owner, said: 'It can get complicated, especially when filing taxes. If the tze char stall hires problematic workers, I may also get into trouble.'His coffee shop is now co-running a tze char stall in Owen Road. Of their 13 workers, six are foreigners.The two associations, which raised the issue with the Ministry of Manpower in May, are working on a proposal that will recommend issuing a different licence for tze char stall holders.Mr Wee Jee Seng, executive secretary of the Kheng Keow Coffee Merchants Restaurant and Bar Owners Association, explained: 'Currently, stall holders pay a $13 licence fee annually but we hope that a separate licence can be given to tze char stall holders.'It may be more expensive but at least they will be able to hire foreign workers.'Jamie Ee Wen Wei Building Slums & Taxing Capital Gains Housing is a huge concern in Singapore, or rather, the rise in property prices in Singapore has led to some quarters complaining about (the lack of) affordable housing and also the prospects of being indebted for life because of housing mortgages. It doesn't take a genius to realize that housing policy is a huge piece of the puzzle when it comes to sustainable development. After all, shelter is one of the pillars of Maslow's hierarchy of needs. Before we continue with a discussion on what can be done, it might be instructive to take a step back and think about what housing is about, look at the the present situation and try to understand how things became the way they are.If we look back for the past three decades, we will find that housing prices have risen something like ten-fold (KTM is being sloppy here and didn't do his research on exactly how much. Helpful kaypohs are welcome to provide good figures.) in REAL TERMS (this means adjusted for inflation). Does this make any sense?What's in a home? The price we pay on something reflects the intrinsic "value" of the item. Do people today derive ten times more utility from their homes than they did three decades ago? Maybe the finishings today are better than those of the past. Maybe there's this new MRT station or good school next to the new place, but ten times better?? Harlo? How can it be??The point here is that it hasn't gotten ten times more expensive in real terms to build houses/flats and the property developers/HDB isn't the main culprit. The main culprit is actually the people who buy/sell properties themselves who have driven up the prices - and this is not only locally, but it is in fact a global phenonmenon. But why?? Why are people willing to pay ten times more when the value isn't ten times more?Rational irrationality.The KTM believes that are two key reasons: (i) housing is a necessity. You just gotta have it regardless of price and that makes the demand quite inelastic; and (ii) expectations that prices will continue to rise (as explained in the attached article). Singapore is not short of land. We have few homeless people today (which means that people must be housed somewhere) and our population is shrinking (which means we will need less space that what we have now). Also, flats are getting higher and higher and going up to like 40 storeys. While having landed property for everyone is out of the question, packing more people and more efficiently is not a problem and therefore there is no need to worry.The thing that is keeping prices high are people's expectations that prices will always rise. This means that when times are bad, they will refuse to sell for less than the purchase price because it would seem like "making a loss"; when times are good, people will speculate (some will also go bust in the process but they dun deserve much sympathy). The moral of the story is that housing prices will continue to rise unless we do something drastic and the KTM thinks we should. Some will say that rising property prices are good because they increase the asset value of Singaporeans. There is some truth to this, but do people understand what's really happening when property prices rise? Properties sitting quietly DO NOT generate economic value. The rise in property prices makes some people richer only because it an implicit income redistribution from the property buyers to the property owners. Also, the generation of wealth by rising property prices is extremely un-socialist. It will make the already rich even richer and exacerbate the income inequality. First, the KTM thinks that this condo business is stupid. Pay twice the price for pretty much the same floor area, just for a security guard and a swimming pool. HDB should STAY OUT of this pseudo-condo business and just focus on low-cost public housing. Second, make it clear to people that HDB prices WILL NOT rise. This is tricky. There are actually some merits in having a resale market for HDB flats. It is much more efficient than going back to a sell-back-to-HDB scheme. While a ten-fold increase in value is ludicrous, it is possible to have small-scale changes in property value because a new MRT/school is built nearby. It thus is probably right for the market to decide on the price. Then you also have the problem of existing HDB flats to deal with. A scheme that directly suppresses prices might cause a lot of people who currently own flats to lose money (paper or otherwise) and is thus politically impossible to stomach. The KTM has been thinking about this for a while and he has two random ideas:1. Build slums Okay lah, this is not original. Some PAP MP proposed this. :-P More seriously, the KTM is not really proposing that we build slums. Instead, the idea is not to limit the upside for the higher-end properties, but to suppress the prices for properties at the lowest end. This gives some freedom to the market and also address the cost of housing for the lower income folks. What we do is to pick some of the housing estates furthest from the city center, maybe Sengkang, Punggol and Woodland and glut them with flats and make it clear that HDB will always sell these flats at say $150K or whatever the current market price is. If there is an excess supply of flats and it is known that HDB will sell at $150K, it would be impossible for the existing flat owners to sell their flats for more than $150K. This will of course upset them and so existing owners might be offered a one-time $20K cash bonus or say $40K HDB subsidy for their next flat or something to appease them. The idea is to try to appease the small number of people affected negatively and peg and maintain the cost of lower end housing so that we can try to keep prices from rising. By pegging the outskirts of the city, it will likely have have a trickle down effect towards the city centre. 2. Draconian Tax on Capital Gain. The second idea is very simple: we should have a capital gains tax on all HDB sales. The idea is that half the increase in the sale price from the last transacted value should be paid as tax. Suppose you buy a flat at $300K. When you sell at $350K, you only get $325K and $25K goes to the Government as taxes. If you sell for less, say $280K, then you poor thing thing already and get to keep everything. This tax is not so much increase Government revenue but to dampen the upward pressure on HDB prices. At the end of the day, this is not only an economic proposal/policy. The Government has to be disabused of the notion that it is a good idea for HDB prices to grow so that the people's assets will grow and they will feel rich and contented. Someone ultimately pays and this someone turns out to be our children and our children's children. Do we really want that? If we want to be socialist, we must also recognize that the poor suffer disproportionally if we don't contain the housing costs. Truthfully, the situation today is not too bad. If we act now, we have a chance to keeping the housing situation in Singapore sane (as the rest of the world continues to spiral out of control after this present financial crisis); if we don't act, it will get worse and the poor will suffer. :-(Afternote:For the benefit of those who don't understand sarcasm, the KTM wishes to clarify that this article has NOTHING TO DO with building slums. *sigh*The Straits TimesJune 18, 2009When, oh when, will people learn?By Robert J. Shiller THERE is a lot of misunderstanding about home prices. Many people all over the world seem to have thought that since we are running out of land in a rapidly growing world economy, the prices of houses and apartments should increase at huge rates.That misunderstanding encouraged people to buy homes for their investment value - and thus was a major cause of the real estate bubbles around the world whose collapse fuelled the current economic crisis. This misunderstanding may also contribute to an increase in home prices again, after the crisis ends. Indeed, some people are already starting to salivate at the speculative possibilities of buying homes in currently depressed property markets.But we do not really have a land shortage. Every major country of the world has abundant land in the form of farms and forests, much of which can be converted someday into urban land. Less than 1 per cent of the earth's land area is densely urbanised, and even in the most populated major countries, the share is less than 10 per cent.There are often regulatory barriers to converting farmland into urban land, but these barriers tend to be thwarted in the long run if economic incentives to work around them become sufficiently powerful. It becomes increasingly difficult for governments to keep telling their citizens that they cannot have an affordable home because of land restrictions.The price of farmland has not grown so fast as to make investors rich. In the United States, the price of agricultural land grew only 0.9 per cent a year in real (inflation-adjusted) terms over the entire 20th century. Most of the benefit from investing in farmland has to be from the profit that agribusinesses can make from their operations, not from the appreciation of the price of land.Despite a huge 21st-century boom in cropland prices in the US that parallels the housing boom of the 2000s, the average price of a hectare of cropland was still only US$6,800 (S$9,900) last year, according to the US Department of Agriculture. One could build 10 to 20 single-family houses surrounded by comfortable- sized lots on this land, or one could build an apartment building housing 300 people. Land costs could easily be as low as US$20 per person, or less than 50 US cents per year over a lifetime. Of course, such land may not be in desirable locations today, but desirable locations can be created by urban planning.Many people seem to think that the US experience is not generalisable, because the country has so much land relative to its population. Population per sq km in 2005 was 31 in the US, compared with 53 in Mexico, 138 in China, 246 in Britain, 337 in Japan and 344 in India.But to the extent that the products of land (food, timber, ethanol) are traded on world markets, the price of any particular kind of land should be roughly the same everywhere. Farmers will not be able to make a profit operating in some country where land is very expensive. Farmers would give up in those countries unless the price of land fell roughly to world levels, though corrections would have to be made for differing labour costs and other factors.Shortages of construction materials do not seem to be a reason to expect high home prices, either. For example, in the US, the Engineering News Record Building Cost Index (which is based on prices of labour, concrete, steel and lumber) has actually fallen relative to consumer prices over the past 30 years. To the extent that there is a world market for these factors of production, the situation should not be entirely different in other countries.An even more troublesome fallacy is that people tend to confuse price levels with rates of price change. They think that arguments implying that home prices are higher in one country than another are also arguments that the rate of increase in those prices should be higher there.But the truth may be just the opposite. Higher home prices in a given country may tend to create conditions for falling home prices there in the future.The kinds of expectations for real estate prices that have informed public thinking during the recent bubbles were often totally unrealistic.A few years ago, Professor Karl Case and I asked random homebuyers in US cities undergoing bubbles how much they thought the price of their home will rise each year on average over the next 10 years. The median answer was sometimes 10 per cent a year. If one compounds that rate over 10 years, then they were expecting an increase of a factor of 2.5 and, if one extrapolates, a 2,000-fold increase over the course of a lifetime. Home prices cannot have shown such increases over long-time periods, for then no one could afford a home.The sobering truth is that the current world economic crisis was substantially caused by the collapse of speculative bubbles in real estate (and stock) markets - bubbles that were made possible by widespread misunderstandings of the factors influencing prices. These misunderstandings have not been corrected, which means that the same kinds of speculative dislocations could recur.The writer is professor of economics at Yale University and chief economist at MacroMarkets LLC. More Thoughts on Sustainable Development: A Preamble The KTM has always been interested in the question of sustainable development for Singapore. The crux of the issue is that we have achieved significant economic progress in the last 45 years and are probably as first world as we can get in this part of Asia. This coming of age has brought us to a stage where we are confronted with the ills of the developed world: income inequality, social issues arising from foreign workers, and an aging and shrinking local population. Very simply, the question of sustainable development is the question of what's next? Can we keep at it and how do we cope with the host of "modern" problems? As it turns out, the KTM was hosting a foreign visitor recently and the visitor commented, "Singapore's really nice and everything, but how long do you think you can sustain this?" The KTM frankly didn't expect such a question, and having non-Singaporean ask such a question really drives home the importance of this question. The KTM has pretty much given up blogging 'cos he doesn't see much point. In the next couple of entries, the KTM will however try to articulate his current thoughts of some of the issues that he has been thinking about. People blog for a number of reasons. The KTM is merely using this blog to record some of this thoughts for future reference. He has found it pretty fascinating to read some old entries and to try to recollect some previous thoughts and ideas. The nice thing about life is that we tend to get a little smarter over time (hopefully) and perspectives will change. It's nice often times to just take some time to reflect on those changes. If we capture our thoughts, they will help us remember how we think; if we don't, those fleeting moments will fade into oblivion. :-PSustainable development is complicated and there are several components that the KTM has been thinking about. A couple of years ago, the KTM had some initial thoughts and his views hasn't changed much, though his views on several ideas have become sharper (hopefully):HousingSustainable economic developmentProblems with Government outsourcingIncome Inequality & Social Mobility That's quite a lot of stuff, but the KTM hasn't been writing for a long time. Not writing is however not the same as not thinking mah.Actually, it doesn't even matter if people don't read. Perhaps the KTM will come back and read his own writings in a couple of years. :-P Writing forces us to articulate our thoughts. :-) The Public Deserves a Better Explanation for the Merrill Lynch Fiasco Now it's pretty clear to one and all that Temasek messed up on the Merrill Lynch deal.The KTM must express his disappointment at Minister Tharman's statement that "what matters to the Government is the overall performance, and that an investment should be assessed 'over the long term'".This statement is not entirely wrong - but it needs to interpreted in context. For example, while Temasek's assets may have shrunk some 31%, these figures are no cause for alarm in view that most stock indices have more than halved over the past year since since most of Temasek's assets are listed, 31% ain't bad. Also, the same statement is applicable when Temasek acquires new assets at a market premium.However, in this instance, we are talking about a S$3.4 to S$4.6 billion from ONE deal, so the defence of "what matters is the overall performance" is inadmissible. This loss is NOT the same as cumulative losses from a bunch of small deals. The latter can be explained away as just systematic losses in any general investment strategy. Also, this not a paper loss. It is realized loss.Why the need to explain? Even a loss of S$3.4 billion is more than the S$2.6 billion Progress Package. In other words, if Temasek had not bought into Merrill Lynch, we would have had the Progress Package "for free" (or the package could have been more than "twice as progressive"). It is not enough to say that Temasek has done well in other areas, so that factoring this one loss into the whole portfolio, the portfolio still "looks okay". What is true is that if Temasek had not been so gungho as to buy Merrill last year, we would be in better shape today. At this point, it might be instructive for the KTM to articulate his theory of culpability (or accountability). Basically, the KTM is of the view that culpability extends only to the point where a person has realistic control over the action/situation.In the case of Mas Selamat's escape, those who said Wong Kan Seng should resign dunno what they are saying because one cannot realistically expect DPM Wong to have anything to do with locking MSK up or worrying about how to secure him. How can we expect someone to be culpable for things beyond his control? Where's the fairness? Those who claim that the DPM should resign because that's how things are in other countries are being stupid again. What kind of logic is that? But we digress.In this recent US$5.1 billion investment in Merrill, it is hard to imagine that the Chairman, Board and ex-CEO of Temasek were not in the chain of command that approved the purchase. If they made the call and they messed up, should a statement not be made to explain and also someone in Temasek be asked to take responsibility (just like the Superintendent of WDRC for the MSK escape)? The KTM agrees with Money Editor Ignatius Low that the public deserves an explanation, not from MOF, but from Temasek: why was the investment made and why have we divested so early, leading to the huge losses?Let's appeal to common sense here: any company and/or institution that chalks up a multi-billion-dollar loss over ONE deal within the short span of ONE year jolly well explain what happened.Afternote: Temasek did try to explain in a Forum Page letter on 22 May 2009. Unfortunately, the explanation really isn't too satisfactory in the KTM's opinion - but nevermind lah, sure to hear more when the elections comes around so we can wait. :-) The Straits TimesMay 16, 2009Temasek should clear the airIt must not shrug off BoA losses as a blip if it is to emerge strongerBy Ignatius Low, Money EditorWhat is one to make of Temasek's decision to sell its entire stake in Bank of America (BoA)?The move has resulted in one of the largest-ever realised losses from a single investment in Singapore's history. The number is so large - at least US$2.3 billion (S$3.4 billion) - that one has to wonder exactly what it was that compelled Temasek to bite the bullet.After all, outgoing CEO Ho Ching reiterated this week that the investment fund takes a long-term view, at least 10 years and up to 50 years. So it could have well waited a few years for the global economy to recover and cash out then.Instead, it will now face the wrath of the Singapore public, already shaken by news that Temasek's portfolio shrank 31 per cent in the wake of the financial crisis and its recent $401.5 million investment in Australia's ABC Learning Centres has likely lost most of its value.There are probably three reasons why Temasek chose to cash out.The first has to do with the fact that, unlike the Government of Singapore Investment Corporation (GIC), which invested in UBS and Citigroup, Temasek did not end up with what it paid for.Temasek's original US$5.1 billion investment was in Merrill Lynch, a truly global business engaged in high-yielding activities like corporate finance and private banking. BoA, on the other hand, is focused on more traditional businesses like consumer and corporate lending.More importantly, Temasek owned as much as 13.7 per cent of Merrill. But after BoA's takeover, it owned only about 3 per cent of the merged entity. In other words, Temasek went from owning a major stake in a global investment bank to a minor stake in a gigantic US lender.If BoA did not fit into Temasek's strategy, it was entitled to exit the investment. If Merrill had been bought by a similar type of institution, say JP Morgan or Goldman Sachs, Temasek would not have been in such a dilemma today.Secondly, there were very real fears a few months ago that major US banks could be nationalised.If a bank like BoA was nationalised, the value of its shares would likely plunge to zero or near-zero. That risk was enough to prompt many other shareholders to rush to exit their investments early this year, however painful the loss.Finally, BoA is showing some signs of distress. A recent US government stress test showed that 10 US banks needed US$74.6 billion more in capital, with BoA making up almost half that amount at US$33.9 billion.Leadership problems have also emerged. Once hailed as a hero, chief executive Kenneth Lewis was recently ousted as BoA chairman. His position as CEO is now in doubt, and the US government has urged BoA to revamp its board.So if one is inclined to take a charitable view, Temasek's action is similar to that of an investor cutting his losses and trying to recoup his money by betting on winners somewhere else. But such arguments are unlikely to assuage Temasek's critics.There is just no running away from the fact that the investment fund has lost as much as US$4.6 billion of the nation's reserves (the topmost end of the loss range) from a single investment in just over a year.Here, Temasek will need to clear the air on two major issues. The first is the timing of the sale.Temasek unloaded all its shares by the end of the first quarter of this year when prices averaged US$6.73, just before an April rally that saw BoA shares double from US$7 to US$14. It is impossible to time the market perfectly, of course, but could Temasek have waited a little while more for the situation to improve?Just three days ago, US Treasury Secretary Timothy Geithner was quoted as saying that the US financial system has completed a big part of a painful adjustment away from its excessively leveraged state, and was 'starting to heal'.Tellingly, none of the other sovereign wealth funds that had ploughed into the global investment banks at roughly the same time had exited their investments.The Singapore Government has already admitted to buying into these mega-banks too early. Did Temasek make it two wrongs by also selling too early? Could it have hedged its bets by selling only part of its stake?The second issue is whether Temasek had taken sufficient measures to protect itself against downside risk, knowing full well that it was investing such a hefty amount in a US bank in the middle of a gathering financial storm.The comparison with GIC is illustrative. GIC invested US$6.88 billion in Citigroup just one month after Temasek's investment in Merrill Lynch. But GIC's investment came with a protection clause: It could opt not to convert its investment into shares should the stock price dip, and instead receive 7 per cent in coupon interest in perpetuity.That clause came in handy when it was asked by the US government to convert its investment into shares three months ago. To give up its right to that coupon interest income, Citigroup was forced to offer GIC and other similar investors a fairly low conversion price of US$3.25 a share - so low that other Citigroup shareholders complained.As a result, GIC is not in Temasek's position. It is, in fact, sitting on a small paper gain today, going by Citigroup's closing price of US$3.55 yesterday.To be fair, neither Temasek nor GIC - or any shrewd investor - could have predicted the ferocious market meltdown that occurred in September last year. These are, after all, extraordinary times, and so extraordinary outcomes - and losses - will be expected.Still, Temasek should not shrug off the loss as yet another wiggle in the curve it had no control over. It must not stop doing what it does best, which is to continue to be aggressive and obtain the best possible returns for the people of Singapore.But some serious soul-searching is in order at the 35-year-old institution so it can emerge stronger and better-equipped for the job ahead.ignatius@sph.com.sgThe Sunday TimesMay 17, 2009Govt takes long-term view of investmentsBy Mavis TohThe Government takes an overall and long-term view when it comes to investments such as those made by state-owned investment vehicle Temasek Holdings, said Finance Minister Tharman Shanmugaratnam last night.'What matters to the Government is the overall performance,' he said, adding that an investment should be assessed 'over the long term'.'We track, engage and evaluate the performance. But we don't just look at six months or one year,' he said.And over the last five years, Temasek has not underperformed but has instead 'come out significantly ahead' of other major investors.'I don't think anyone can honestly say that they've done badly compared with other major investors.'He also pointed out that all major investors have been significantly affected by the global downturn over the last year.He made these points at a grassroots event when asked to comment on how the Government regarded the losses chalked up by Temasek following its sale of Bank of America (BoA) shares.It was reported yesterday that Temasek Holdings sold all its BoA shares in the first three months of this year, resulting in estimated losses of between US$2.3 billion (S$3.4 billion) and US$4.6 billion.Temasek's involvement in BoA stemmed from its US$5.1 billion investment in Merrill Lynch. It had held a 13.7 per cent stake in the investment bank, making it the largest shareholder.Temasek's entire stake was subsequently converted into BoA shares in January following the bank's completion of the acquisition of Merrill Lynch. This gave the investment company about a 3 per cent stake in BoA, or a holding of 188.8 million shares.Analysts and fund managers said selling the BoA shares was in line with Temasek's tweaking of its long-term investment strategy to focus more on Asia and emerging markets such as Brazil and Russia. It will, in turn, reduce emphasis on developed countries such as the United States and Europe.In February, it was revealed that Temasek's net portfolio value dropped by 31 per cent between March 31 and Nov 30 last year, from $185 billion to $127 billion.Asked to comment about the BoA sale at a Tamil Festival event in Taman Jurong, Mr Tharman said that it is for Temasek, not the Government, to comment on its investment moves.He said it is the responsibility of the board and management to make individual investment decisions, whether large or small.'What we hope is that these decisions will lead to long-term good performance,' he said.'They should have the long-term horizon in mind and reassess its position at each stage of the game.'He added: 'Over the cycle as a whole, both boom year and sharp correction, Temasek hasn't come out badly but significantly ahead.'Temasek's annual performance was also published for all to see, he said.If one considered the recent cycle, it was not underperforming compared with other major investors, and in fact did much better than other major investors.Mr Tharman said that he is prepared, if asked in Parliament, to again explain Temasek's performance as a whole.ST Forum PageMay 22, 2009Why Temasek sold its stake in BoAI REFER to recent reports and commentaries on Temasek's divestment of its Bank of America (BoA) stake. We would like to clarify some of the points raised.Temasek invests with the objective of delivering sustainable returns over the long term. This means our investment strategy is not aimed at delivering target returns on a year-by-year basis. This is why we report our portfolio returns not just for a single year, but for various time horizons in our annual Temasek Review.To achieve our investment objectives, we constantly review our portfolio and rebalance it from time to time. We may choose to divest an investment, even at a loss, to optimise our risk or portfolio exposures, or if there are better opportunities elsewhere or later. We may also choose to hold or increase our existing investments.Ultimately, the aim is to ensure that our portfolio delivers returns that are higher than the cost of capital employed on a risk-adjusted basis, or what we call Wealth-Added.Our investment in Merrill Lynch was made in December 2007. This was exchanged into BoA shares in January this year following BoA's completion of its September 2008 offer to buy Merrill.Our investment thesis had changed from Merrill's specific businesses to the more diversified BoA linkage to the broader US economy. The risk-return environment had also changed substantially.We decided to divest our BoA stake after considering all relevant factors.This move to balance risks against opportunities is part and parcel of our discipline of investing and divesting to deliver sustainable long-term returns on our entire portfolio.We are mindful of the risks we face as we invest. We reinforce this risk-return balance through a compensation framework which puts the institution above the individual, emphasises long term over short term, and aligns employee and shareholder interests for both the upside and downside, over the medium and long term.While we do our best to mitigate risks, the reality is that not every one of our investments will be equally successful. We recognise that only time will tell if we have made the right decisions to deliver sustainable returns on our portfolio as a whole.Myrna Thomas (Ms)Managing Director,Corporate Affairs Temasek Holdings Much Ado About Local Entrepreneurs There are few things that bother the KTM enough for him to want to crawl out of his hole and blog. As it turns out, the KTM is quite irritated over the recent talk about dunno what local entrepreneurs. For the record, the KTM agrees with ex-EDB chairman Chan Chin Bock that local entrepreneurs are overrated. At least four people, including one NUS Econs prof have written to the Straits Times and spoken out against Mr Chan. Frankly, it seems to the KTM that they don't even know what they are disagreeing with. Probably read half, dun read half and off on their tirades they go. :-PTo quote Dr Roland Cheo, "IT HAS been suggested that Singapore does not need local entrepreneurs and should rely on foreign multinational companies". WRONG. A more accurate statement should read "IT HAS been suggested that IT IS ACCEPTABLE TO rely on foreign multinational companies IF THE LOCALS CAN'T DO THE JOB". Harlo, wake up and read carefully lah.Suppose you ask an unmarried guy, "Would you like to have a beautiful wife or a virtuous wife?"Obviously, the answer is BOTH beautiful and virtuous lah. However hor, life doesn't always go the way we want and sometimes, we have to settle for a virtuous, but not-quite-so-beautiful wife. What else is new?Similarly, Chan Chin Bock is saying, while we don't have too many local entrepreneurs, let's not fret over it 'cos what's the big deal? How wrong is that? Ooi Teck Chau seems to think that the local entrepreneurs are the answer because MNCs and fold their operations in Singapore if times are tough. What makes him think that local entrepreneurs who are successful wouldn't do the same and move to say China if Singapore is uncompetitive? Harlo, which entrepreneur argues with money? This Roland Cheo must also be new 'cos he definitely doesn't know what he's saying if he thinks that we can produce entrepreneurs on demand much as we have produced engineers and production workers in the past. Just because he's a prof doesn't make him a miracle worker. He also doesn't seem to realize that there's A LOT of seed money funded by the Government that's available. He also doesn't know what he's saying when he talks about venture capitalists. Singapore got meh? Do we think that the real venture capitalists will flock to Singapore because the Government says so? People better wake up their idea that entrepreneurship is not all glam and a bed of roses. What we need are not just random entrepreneurs, but GOOD entrepreneurs. Do people seriously think that producing entrepreneurs is like going to the supermarket to buy pork? :-)Roland says,"If there were more local entrepreneurs, small or medium, cyclical unemployment based on international business cycles would be lessened, and some of the retrenched could find alternative employment in local industries which would generate wealth in Singapore." The KTM says, "It depends on the quality of these local entrepreneurs. If they are the cannot-make-it types, then more companies would be folding in the present economic environment and we'd have EVEN MORE unemployment on our hands".The KTM actually wonders whether people are deaf or blind. The Government has actually overhyped this dunno what entrepreneurship business in recent years. In fact, so much so that it really annoys the KTM. Entrepreneurship is seriously overrated. What the country needs are not more entrepreneurs. What we need are people who have the gumption to do what THEY LIKE TO DO (some of these folks will however naturally become entrepreneurs no doubt). If we end up a nation of teachers, insurance salespeople, artists, firemen, or even janitors, it's really quite fine if the jobs are there and people like their jobs and contribute to the society in some concrete way. Let's take a step back and imagine what happens if the Government continues to promote entrepreneurship even more, why do people think that the young will become entrepreneurs? How many will do it because they love their country? People please wake up their idea lah. The more likely reason is that it'll be because they think it will make them rich or if it seems glamorous. Do they really know what they are in for if they become entrepreneurs because the Government says so? To reiterate, the KTM is not saying that it's a bad thing to have local entrepreneurs. What the KTM thinks we need more however are people who will follow their hearts. The Government has created several cohorts of would-be-test-tube-washers who found that they couldn't find test tubes to wash when they graduated. Do we wanna repeat the same with this entrepreneurship business? We have enough lemmings thank you. ...This entrepreneurship business is really much ado about nothing 'cos given the current structure of the economy and gradual shifts in the education system, there will be a larger number of youths who will strike out on their own as entrepreneurs. With larger numbers, we will gradually see more successes. Let's take it easy and mai kuncheong. Afternote: The KTM is really swamped with his KT frying and *SHOULD NEVER* have been blogging. However, ranting in a blog does sometimes offer some relieve for the stressful life that is Singapore. The KTM has promised himself that he will not reply to comments on this post for the next month (he might respond after that lah). Reason is that prompt responses tend to spark more comments, which will suck up EVEN MORE time. :-)Readers are welcome to slug it out and/or disagree with the KTM at their pleasure. :-) Seriously, not that the KTM is rude lah, but responding to blog comments is the most time-consuming part of blogging. The luxury of time is unfortunately not something that the KTM will enjoy in the foreseeable future. :-( Afternote 2: The latest letter by one Paul Chan is particularly idiotic. He says, "No large multinational corporations (MNCs) will uproot manufacturing operations from their home country while they expand production facilities in a low-cost country." How many US MNCs have their manufacturing operations in the continental US, except the automakers that we all know are going bust? We actually have our own MNCs. They are called GLCs. Has Paul Chan seen Raffles City in Shanghai? The biggest supermarket chain in Singapore is not controlled by a MNC BTW, it's called NTUC Fairprice. :-P What are people fussing about? That the large business entities in Singapore are not privately, but publicly owned? Suppose CapitalLand and NTUC Fairprice were privately owned by some local tycoon, would Singaporeans at large be better off? With GLCs being public entities, the wealth at least "belongs to the people" (at least in theory). Oh yes and in case people dunno, Osim, Hyflux and Bee Cheng Hiang (yes, the bak kua company!) have all gone global (or at least regional). :-PThe Straits Times22 Apr 2009No home-grown entrepreneurs? No big dealJeremy Au YongIT DOES not matter if Singapore does not produce its own entrepreneurs. That was the stark point made by former Economic Development Board chairman Chan Chin Bock yesterday when asked about the country's apparent inability to produce its own successful companies.Mr Chan argued that as long as a company is yielding 'social benefits', like providing jobs and adhering to good governance, it should not matter whether it is a multinational corporation (MNC), a government-linked company, or a local enterprise.Referring to a Singaporean economist based at the University of Michigan, he said: 'As Linda Lim says, we have to think in terms of growth being for people, not people for growth.'Based on that principle, he said, he could not understand why people were concerned about the lack of home-grown entrepreneurs. That concern has been expressed by, among others, Professor Lim herself.Mr Chan said: 'To me, I can't understand the logic of that. What does it matter as long as in governance terms, to the community, to the workers, to the country, if all the deliverables are there, the jobs are there, the good governance is there and all that. At the top, why do you want to worry about the shape of the deliverer, whether it is an MNC?'He added: 'Don't forget that you can have an MNC that performs a very good social function, and you can have a local entrepreneur that performs the worst social function.'ST Forum Page24 Apr 2009S'pore needs home-grown entrepreneursIN WEDNESDAY'S report, 'No home-grown entrepreneurs? No big deal', former Economic Development Board chairman Chan Chin Bock made the stark point that it does not matter if Singapore does not produce its own entrepreneurs.It struck me as rather surprising that such a comment would come from someone who champions the economic development of Singapore. I disagree that it is of no importance if Singapore does not produce its own entrepreneurs.Mr Chan's point is that as long as a company is yielding 'social benefits', it should not matter whether it is a multinational corporation, a government-linked company or a local enterprise.It is true that when we look at the benefits, whether economic or social, brought about by a company, it is of little or no significance where it is from. However, this leaves society at the mercy of the company, should it decide to move its operations or withdraw its stakes from the country.Should a corporation uproot itself from its host country, jobs will be lost in the thousands and the potential ripples from this shockwave will affect many people.We need to have our own entrepreneurs if we want to have an edge over our competitors. Mr Chan quoted Singapore economist Linda Lim as saying: 'We have to think in terms of growth being for people, not people for growth.'Would it not be better if the growth was generated by our own people? Would we not grow more if Singaporeans learn how to start up and operate businesses and pass on the relevant experience to other citizens?Instead of relying on foreign expertise, grooming local talent will ensure that our people continuously learn and innovate, thus creating more value for businesses and the economy.Perhaps it is during good times, when most have a roof over their heads and a steady source of income, that Singaporeans dare not venture out of their comfort zone. But when times are bad, more people want to be their own bosses.Whether it is out of desperation or due to a lack of jobs, it is evident that many have tried to start a business. I believe that, given the right opportunity and funding, more will follow.Ooi Teck ChauST Forum Page28 Apr 2009Be realistic on home-grown entrepreneursWITH regard to Mr Ooi Teck Chau's letter last Friday, 'Singapore needs home- grown entrepreneurs', I would like to make the following points for clarification of my seminar remarks:In today's globalised world, economic and social benefits to a host country are (unfortunately) not captive. For example, hundreds of Taiwanese home-grown entrepreneurs would not hesitate to relocate to China when opportunities beckon there. Similarly, American multinational corporations (for example, General Motors or General Electric) will not hesitate to retrench in the United States but expand in China as they are doing now. Why would Singapore entrepreneurs be different?For Singapore, while we will do our utmost to encourage home-grown enterprises, we cannot depend exclusively on such local enterprises to deliver social benefits for Singaporeans. We should nurture and reward the providers of social benefit, irrespective of size, ownership or country of domicile. We welcome social contributions from multinational corporations, government-linked companies or home-grown enterprises alike.Globalisation is an economic fact of life in the 21st century. Singapore just has to learn to play by its rules.By doing so, we are not exceptional. New Malaysian Prime Minister Najib Razak has just announced the repeal of a 40-year-old policy to encourage bumiputera entrepreneurship.This is my personal view. It may not necessarily be an Economic Development Board view.Chan Chin BockST Online Forum28 Apr 2009Why local entrepreneurs matter, says economics donIT HAS been suggested that Singapore does not need local entrepreneurs and should rely on foreign multinational companies.This is a viewpoint that is not shared, though I believe that more and more it is perpetuated as a legitimate argument.Let me put forward a few reasons why local entrepreneurs matter to our future and it is in our best interest to promote our future entrepreneurs.First, as an education economist, I recognise that Singapore is in the enviable position of having a world-class education system. Repeatedly in international benchmarking exercises, Singapore youth at secondary school level have ranked superlatively against their international counterparts.In 1997, then-Prime Minister Goh Chok Tong embarked on an ambitious programme called Thinking Schools, Learning Nation. This was the start point, arguably, where measures were taken to add creativity to curriculum and place less emphasis on rote learning. Some schools have strived under this new emphasis.As a university educator, I concur that students today may not have the same rigour as in the past, but they have a greater capacity to surprise with non-conventional thinking. Again, this is not the norm; such students represent outliers, but to our credit they exist.Promoting creativity in our education system, only to deny these future creative graduates access to entrepreneurial resources, will relegate them to the growth story of the past: whether it is to join a multinational company in an executive position or to take a financial or investment track position in a bank. The added schooling resources and the added time taken to achieve creativity in the school system would be confounded, given that such graduates can achieve the same outcome as in previous generations.The presence of venture capitalists who are able to fund deserving entrepreneurs is a more dynamic, market-driven alternative to the previous economic growth model (which relies mostly on multinationals) which complements rather than supplants an export-oriented approach.Second, as a deep recession is on the cards for Singapore, it is a fact that multinationals here are retrenching employees and the Government is doing its part to absorb some of these numbers. The civil service, however, is not a revenue generator but a cost centre in the economy.If there were more local entrepreneurs, small or medium, cyclical unemployment based on international business cycles would be lessened, and some of the retrenched could find alternative employment in local industries which would generate wealth in Singapore. In a global recession, local industries are less likely to leave Singapore than multinationals.Lastly, I step away from my economist's mindset, and revisit a portion of my past. Of having a wardrobe of Heshe and 2nd Chance shirts and slacks, of drinking Sinalco and Green Spot with friends. Sadly, these memories will not mean anything to current generations because these local brands or companies have wilted under international competition and no longer exist.Singaporeans now dress and eat like anyone else in this globalised world. No wonder we are accused of not being nationalistic enough, of not caring about civil society. Our values have been globalised, much as our identity has.Local entrepreneurs with a distinct Singapore brand help give Singaporeans an identity unique to ourselves and help make Singapore a place called home.Dr Roland CheoDepartment of EconomicsNational University of SingaporeST Online Forum29 Apr 2009Home-grown entrepreneurs need encouragementI AM not sure former Economic Development Board chairman, Mr Chan Chin Bock, in his letter yesterday, "Be realistic on home-grown entrepreneurs", is looking at home-grown entrepreneurship as a broad-based issue.One belief is that, in economic terms, the returns on resources extended to building up home-grown entrepreneurship are far less than that extended to encouraging established world industries to bring their enterprise to our country. In the shorter term, we cannot fault this assumption.Industries come because we can offer lower cost operation due to many reasons, such as tax incentives, skilled workers and managers, excellent infrastructure, clean and safe environment, and a place where everything works. They can also leave quickly when a more competitive government can offer better incentives.A more serious problem arises, however, when our creative entrepreneurs lack the motivation to venture out on their own.Mr Chan mentioned that even established home-grown industries in the United States, such as General Motors and General Electric, will not hesitate to lay off workers, shrink their operations and relocate to another country.This may not be destructive to the US economy. In fact, it may encourage the country to innovate further with whatever resources that remain, such as harnessing state of the art research, which eventually generates higher returns.If we look at the issue from this point of view, we must move quickly to build up our own industries.Yes, as a global economy, we must attract the best, and that means locals will have to compete to be part of it. Realistically, we can do this only if we are given additional incentives. Otherwise, I fear that we may remain a nation efficient in providing skilled workers and managerial services - in short, an established offshore service centre.Daniel GweeST Online Forum29 Apr 2009 What ex-EDB chairman said made senseI REFER to Mr Ooi Teck Chau's letter last Friday, "Singapore needs home-grown entrepreneurs".Mr Ooi was responding to the report "No home-grown entrepreneurs? No big deal" (April 22), in which former Economic Development Board chairman Chan Chin Bock was reported to have said that it did not matter if Singapore did not produce its own entrepreneurs.I was a guest at the EDB Society-Straits Times Pioneers Seminar at which Mr Chan shared with the audience his 30 years of experience, which was conducted in an informal, off-the-cuff manner.When the subject of not having enough local entrepreneurs was raised at the end of the two-hour dialogue, he took about five minutes to answer it. He first highlighted the ability to produce what he called "social benefits" as the most important attribute of a company. Good governance was important too. As long as companies can deliver those benefits, we should not be concerned about who owned the companies, he added.It was within this context that one or two "stark" points were made, as addressed by Mr Ooi in his response. At that moment, I did not find those points stark at all as I perceived the main message was that quality and contribution of a company are more important than who owns it or the nationality of its ownership.Ng Ya KenST Online Forum30 Apr 2009Where it makes sense to develop home-grown entrepreneurshipI REFER to Mr Chan Chin Bock's letter on Tuesday, 'Be realistic on home-grown entrepreneurs'. I disagree with the argument that 'in today's globalised world, economic and social benefits to a host country are (unfortunately) not captive'.No large multinational corporations (MNCs) will uproot manufacturing operations from their home country while they expand production facilities in a low-cost country. The objectives for relocation are threefold: to capture more large local markets in the host country; to export increased production to other free markets for better profits; and to upgrade to higher-value products in the home base.Home-grown entrepreneurs from Taiwan, Hong Kong, Japan, the United States and Germany invest in China for the same reasons, and not out of love of the host country. They will not flock to politically unstable and restrictive countries with poor infrastructure. Their overseas investment brings back more social benefits to the home country, but also enlarges their business sphere.The profit motive, not generating economic and social benefits to the host country, is their primary objective. When a third country offers better terms and conditions, MNCs will not hesitate to uproot from one host country to switch. This is the reality of globalisation.We may not expect home-grown entrepreneurs to match MNCs like General Electric or General Motors in size and technology, but our economic model should be more conducive to nurture many smaller home-grown enterprises to strengthen our economic home base to sustain growth and social benefits. Then we should emulate MNCs to generate more economic and social benefits to Singapore from external sources.Paul Chan Type your summary hereST Forum PageMarch 13, 2009Allow partial CPF withdrawals nowMY WIFE and I are in our late 40s and live in a paid-up five-room HDB flat.We are still working and have a few hundred thousands dollars in our Central Provident Fund (CPF) Ordinary and Special accounts.We will also have a six-figure insurance payout on maturity when we reach 65 years of age.With the guaranteed amount from the compulsory insurance taken via the CPF when we are older, we have enough set aside for our retirement.However, the issue that worries us is taking place now, not when we reach 55.Whatever take-home pay we earn now is barely enough to meet family expenses for ourselves and our two children.Needless to say, we have little or no savings at all.I believe that there are many more people like us, at the lower end of the typically squeezed middle-income group.We do not qualify for many government handouts. Our salary increments, whenever we have them, do not keep up with the pace of inflation.We need more money now, and not when we are 55.The irony is that when we withdraw our CPF savings at age 55, we may not have urgent need for the payout as our children will probably have finished their education and joined the workforce.It is time for the CPF Board to consider allowing eligible members who have healthy balances, and who are currently not using their CPF savings, to withdraw a small part of their savings before the age of 55.The CPF Board can regulate this policy with certain conditions, for example, allowing members to withdraw a certain percentage of CPF savings before then.Members should also have more than enough funds to meet the mandatory Minimum Sum, or must not have to service heavy loans using their CPF savings.The CPF Board can also consider allowing members to withdraw their savings in the form of a loan with principal sum and interests paid into their own accounts.The Government tells us regularly to make adjustments and changes to adapt to current conditions or to keep up with the times.To my best knowledge, the CPF Board has not made as many changes to its policies.If the current economic situation is not the right time, then when is?Gary Chua Politicization of Executive Pay While it is true that the KTM doesn't really think that the bankers really deserve the pay they are getting, the KTM is quite perturbed by Government interference in executive pay packages. This was first touted by Obama and now it seems that Brits and Australians are learning from him.Politically it might be a good idea. Politicians pretending that they understand the frustration of the masses who are faced with unemployment, loss of pensions and risings costs of living. The KTM things however that these politicians, Obama included, are not being smart. First of all, the average joe has no right to question size of the pay packages. The only people who have a right to comment are the owners of firm, i.e. the shareholders. Basically, executives are accountable only to their owners and not to the general public. In Obama's case, he actually has the right to question and cap the bonuses 'cos the US Government is effectively investing in the banks and we're seeing the US Government take up stakes. So fine, it is his right to put a $500,000 cap on bonuses.Is it smart? Let's think about the problem. What we have are financial institutions that have been mismanaged but are deemed "too big to fail" and so the US Government pumps in money. The fact that they need to be bailed out means that they are in trouble and they need people to turn them around. So who do you need to turn this companies around? The smart ones or the cheap ones? The thing to understand here is not a matter of how much these executives are worth. It's a question of who is available to do the job and what's the market rate. The KTM believes that the capping of the pay will most likely prevent the ailing institutions from hiring the people they desparately need to turn them around. Sometimes politicians fail to see the structural problems they introduce by attempting to do the populist thing. Funny enough, the right course of action might have been to fire the people who caused the mess and INCREASE pay to attract the right people to come clean it up (Footnote: The KTM is being sloppy here. A sensible pay package is not just one with higher pay, but probably one contingent on the recovery of the company and capped only by the performance of the company). :-P The KTM doesn't have very much faith that Obama has what it takes to deal with the present economic crisis. The size of executive pay has to be seen in the context of the billions that are being pumped in. Yeah, so the US tries to save a couple of millions here and there. If it can't get the right people to helm the ailing institutions, we are also talking about billions down the drain. Not like the KTM really cares about how much the US will lose, but unfortunately, our reserves also got involved in the mess. Finally, the politicians also seem to like to make it seem that CEOs shouldn't get pay rises because their companies lay people off. Harlo? Whether a CEO gets pay increases should depend on whether the CEO does the right thing. In the present circumstances, from the perspective of running a company, the "right thing" to do might be to lay people off. The KTM isn't saying that all CEOs who lay off their employees are doing the right thing. The point here is that the number of people laid off is not a direct KPI for the value of a CEO. The unions should be reminded that the shareholders own the companies, not them. The shareholders have every right (through the Board) to decide on how much to pay the executives. (As a side note, the KTM is well aware that the structure of the modern firm with its separation between shareholders, board and executive also has some structural problems and potential moral hazards, but that's a subject for another day. Getting the Government involved further muddles the problem.)The KTM is a firm believer that Governments should not interfere with the running of companies period. The Straits TimesFeb 27, 2009 'Sickening' executive pay SYDNEY - THE Australian government on Friday criticised ''sickening' executive salaries after a company which sacked 1,850 people was accused of tripling the pay of its chief executive. Clothing manufacturer Pacific Brands paid CEO Sue Morphet A$1.9 million (S$1.88 million) last year, sharply up from the A$686,000 she received in 2007, media reported. The company said Ms Morphet's pay increase was the result of a promotion from divisional general manager to chief executive, but politicians jumped on the story to attack top pay packages. 'To see that a privileged few are doing so well at a time when thousands of workers are being retrenched is frankly sickening,' Treasurer Wayne Swan told reporters. The Greens party announced it would move legislation in parliament to cap salaries at a million dollars, while Mr Swan said 'the government is looking at all options'. Finance Minister Lindsay Tanner said Australia had a 'serious problem with excessive executive pay and payouts' and the government was committed to 'push back in the other direction'. The idea of capping executive pay has gained popular support around the world as the collapse of the financial sector plunges economies into recession. US President Barack Obama earlier this month launched a new bid to tame Wall Street excess, clamping a half million dollar salary cap on executives of stricken finance firms who plead for taxpayer bailouts. In Australia, the chief executive of telecom giant Telstra, Sol Trujillo, also came under fire from unions for pocketing a A$3 million bonus when he stepped down on Thursday after axing 10,000 jobs in four years. Australia's unemployment rate hit a two-and-a-half-year high of 4.8 per cent in January and the government has forecast the jobless rate to hit 5.0 per cent by June as the global economic downturn bites.The Straits TimesFeb 27, 2009 Half will quit over bonus cap Half of bankers would quit UK if bonuses capped : poll LONDON- HALF of British bankers would consider leaving the country if a cap were put on their cash bonuses, a survey showed on Friday. The poll by jobs website eFinancialCareers.com found that 49 per cent of British-based bankers would consider voting with their feet such a limit to their income were introduced. That figure rose to 71 per cent among financiers with six to ten years experience. 'Were bonuses to be capped unilaterally in the UK, the country would run the risk of an exodus of top financial talent,' said Mr John Benson, chief executive of eFinancialCareers. However, the number of alternative locations in which to work has shrunk dramatically as the credit crisis has hit hiring and pay around the world. 'That 71 per cent of people with six to 10 years experience would move abroad I don't doubt, given the opportunity. That last word is the operative word,' said Mr Shaun Springer, who heads recruitment firm Napier Scott. 'If you could tell me of the areas that could harbour those skill sets of bankers, please let me know - I'll be flying out there.' US President Barack Obama this month set a $500,000 cap on executive pay at state-backed banks - pocket money on Wall Street before the crisis. European banks are also under pressure to curb bonuses, especially those that have taken government help, and many have cut them. Thirty-three per cent of bankers polled said they believed caps on cash bonuses are the most likely change to be implemented over the next year and 39 per cent support such caps. The poll was conducted between Feb. 16 and Feb. 20, with 888 financial professionals responding. Idea to Offload Foreigners More Cheaply? The KTM came across the following comment at Aaron's post by SIMPLE:You ask what’s an alternative scheme to JCS to save jobs, preferably retaining local workers and letting FWs go first. Begin with the End in Mind and First thing First, says the management guru Steve Covey.So using these principles, the End (target) is to keep more jobs for locals if an employer has to downsize and retrench some of its workers. So why not have a scheme to give a total sum of $1200 (spread over 4 quarters just like the JCS) to the employer per worker retrenched who is not a local. This way the employer will be incentivised to retrench FWs first. The result is direct as targetted and measureable. Such a scheme will cost the govt only a small sum of S$60 million for every 50,000 workers retrenched who are non-locals. To plug any exploitation, the quarterly payments to an employer under this scheme will be reduced pro-rata by the number of new FWs employed after the scheme becomes operative. This also shows the great extent of leakages and ineffectiveness inherent in the JCS which hands much of the $4800,000 millions to companies which are wealthy or not financially troubled than to save jobs. Did the young turks that eureka the JCS or the President and his Advisory Council who assessed the JCS think about this or any other cheaper alternatives? Of course if the govt’s intention is different from that of saving jobs for locals then this scheme will obviously not achieve it.Part or all of the balance of the $4.8 billion allocated for JCS can be rechannelled to a new scheme to provide help to the growing pool of retrenched local workers and unemployed, to increase the size of the Support Family Scheme budget and the other budgets to help companies, or saved for future off-budget measures.Will this work and will you support if I submit this suggestion to the press?In fact, this is probably the smartest thing that the KTM has heard in the JCS debate so far, that he's inspired to write a whole entry to respond to it. Finally, there's someone who has come up with an alternative that seems to make economic sense and is really quite innovative. The KTM frankly wouldn't have thought of it. :-)SIMPLE is right in that it's more targetted and cheaper (at offloading foreigners). His estimate of 50,000 is however probably on the low side since the initial estimates is that we can expect up to 300,000 job losses among the foreigners during this recession. Thinking through it, the KTM has no doubt that the proposed scheme will probably be more effective than the JCS at encouraging foreigners to be fired, but there quite a number of issues with it. First, the proposal hangs on the premise that getting FWs retrenched will help Singaporeans. This assumption is probably untrue. There are probably instances where getting the FWs fired does nothing for the locals. The retrenchment of FWs only help the locals if a company has two of them and needs to let one go. If a company has no locals, then encouraging it to fire the FWs helps no one (maybe the company and hurts the FW).Second, the criticism that some companies will get a bonanza for doing nothing is still rings true. For a company was going to fire a whole bunch of FWs anyway and there's no competing locals, this policy would be a small ang bao that goes into its coffers for no good effect. Third, the claim that this scheme is easier to measure is false. Yes, we can measure the retrenchment numbers for FWs - but it doesn't tell us how effective the scheme was in encouraging locals to be retained viz-a-viz the FWs. We actually know that a large number of FWs will likely be laid off in the coming year already. These numbers should not be included in the measurement of effectiveness. To some extent, the JCS is also measurable in that we know how many Singaporeans kept their jobs! Of course, this number doesn't tell us much about the effectiveness of the JCS since many would have kept their jobs anyway, with or without JCS.Fourth, this proposal falls into the category that the KTM would classify as "Beggar Thy Neighbour" policies. Politically it's a very hard sell because it's fundamentally "nasty". There is a difference between "encouraging employers to retain locals" and "encouraging employers to fire the foreigners". Even if mathematically the two are identical, they are not the same. The test of the pudding is this: will Opposition MP Mr Low Thia Khiang dare propose this as an alternative to the JCS? The KTM isn't a politician, so he doesn't know how politicians think (and doesn't claim to be a mind reader remember?), but it seems like a political minefield. Sure to get a lot of flak from the NGOs that support migrant workers. The question posed by SIMPLE right at the end is a question that the KTM really appreciates. It forces him to re-examine his position on policy tradeoffs between local workers vs FT. The first part (will it work?) is the easy part. The KTM can't really say whether it would necessarily work. It will definitely be cheaper overall by quite a lot (easily 70 to 80% savings) and could possibly be cheaper on a per local worker saved basis. However, it is actually less targetted at helping locals than JCS 'cos in the unlikely case of hiring, JCS actually does make local effectively $300 cheaper per month. Which is more effective and cost effective overall depends on the number of FWs that are going to get fired already, the number of locals who are in vulnerable positions (in competition with FWs), etc. The long and short of it, is that the KTM doesn't dare make any predictions on its effectiveness and efficiency.As for whether the KTM will support this policy, the answer is no. The KTM thought long and hard and he concluded that he will support policies that help locals to the disadvantage of FWs, but he cannot bring himself to support policies that will hurt FWs, without necessarily helping the locals. If it comes to a vote, the KTM will abstain. He cannot bring himself to lend support to the policy, but he cannot see himself arguing vehemently against it. Saving money from the reserves is not entirely a bad thing. The KTM is very kiam siap. :-)AddendumThe following is the response by SIMPLE:I compliment KTM. He very generous in praise and also open-minded. But KTM must be working veri hard with your wok. I think the heat and fumes make you a little blur and light headed. You must take it easy and relac. Perhaps take a course under SPUR. You know they have courses like Logical Thinking and English Comprehension. I am not suggesting that you need these but you also agree that no one is perfect, right and you can of course take the advanced versions. I already gone there to learn outside-box thinking and it helps. You also can take that course. The more the merrier - you will have longer breaks from your char-ing and govt still give you money to apy for cost andallownace for you. Limited promotion period only so quickly.KTM, why simple calculation also dono even after I give formula. Maybe times-table is easier for you, so here goes. If every plate of KT with 50k hums you sell for $60M, 6 plates with 300k hums you will sell for? $300m isn’t it. Now you also know $4.8 B equals $4800M. So the savings based on 300k jobs is 94% and not just only 70-80% - not too little, right? We can all shake legs, no need to fry anymore and go round the world every week for the rest of our lives with that kind of savings - $4500M. This savings as I said can be used to fund existing and other additional schemes in helping companies and locals or saved for more off-budgets later. Better than giving ang pows to every tom dick and harry without knowing what they do with the money. What if they still fire some workers and then go to Bali or shopping in HK, flying Garuda to save cost or stinch it. Then even our economi also no benefit and our reserve money for JCS also go down the drain.Aiyah, so many of your comments I confuse and dono where to start and end. Maybe after your courses you will read my original scribe in a refreshed lite and then all you reservations will auto clear up.Just one last comment on gymnastic thinking. Tell govt to call the scheme I have suggested with a spin. They already smart and spin Ang-Pow scheme and call it the JCS. They smart and wouldn’t can’t call this “Fire the FWs Credit Scheme” because they also appreciate that’s politikal suicide. Just spin it as “The Bon-Voyage Farewell Appreciation Scheme for FWs” and condition that employers should share 50% with the departing FWs. You see the point now - it is a win-win all round. Govt save money, FWs and employers get ang-pows and local workers get to keep their jobs. and we the people can also hope to get some more ang-pows from the savings. Oh, yes Positive Thinking is another course I took.Chin up my friend. Under my scheme it is more rewarding for an employer, if he has to retrench, to fire his local workers last and, if he is hiring more new workers, to hire local workers first. (refer to the condition I had imposed).Chow, I have to run now for my HM (Hokkien Mee) course. In future you may call me HMM.The KTM sloppy and never count properly. Nevertheless, it is true that the numbers for this “Bon-Voyage Farewell Appreciation Scheme for FWs” are indeed attractive. :-)Addendum 2SIMPLE was somewhat snide in his response to the KTM. Perhaps he thought the KTM was trying to be patronizing. But seriously, the “Bon-Voyage Farewell Appreciation Scheme for FWs” did make the KTM sit up and pay attention and with some further thoughts, it is quite clear that it does offer very attractive trade offs. Effectiveness aside, it is so much cheaper that saving the money does offer greater flexibility as SIMPLE suggests. Nevertheless, the KTM still finds it hard to accept 'cos it "feels wrong". :-P This highlights an issue that the KTM wrote about a long time ago: governance boils down to values. :-) Beyond all the considerations of pros and cons and cost/benefit analysis, it sometimes (often?) ends up to be a decision not about whether its 5 cent more or 10 cent more, but a question of what we hold dear and believe to be right (or wrong). SIMPLE is "right", but the KTM simply (no pun intended) cannot accept. Such are the mysteries of life. P.S. Would probably be instructive to see this “Bon-Voyage Farewell Appreciation Scheme for FWs” scheme debated in Parliament. :-P The Road to Hell ... is paved with good intentions.A well meaning fellow (WMF) wrote privately to the KTM to register his disagreement with the KTM's views on the JCS in the an earlier post. Perhaps he was trying to be nice in raising his disagreements with the KTM in private to help the KTM save face. The KTM will however address his points in public because he believes that they are in the public interest and it is also in the KTM's interest to makes some disclaimers. Also, bloggers must have thick skin and the KTM frankly isn't the least concerned about face or being proven wrong. Wrong, wrong loh. Face can eat meh? :-P1, Is the KTM ascribing unduly noble intentions to the Gahmen on the JCS? Does the KTM not understand the JCS isn't exactly all that innovative because the CPF rates are so low, it is no longer feasible to cut the rates further?This question needs to be addressed in two parts: One, yes, it did occur to the KTM that the Gahmen doesn't have too many options left. Helping businesses cut costs in face of a recession is SOP. Regardless of whether Singapore or overseas, Gahmens do it. Yes, even the US Govt does it.The underlying problem is that the Gahmen doesn't really have many levers under its control to help businesses in a hurry. Yes, the Govt can cut corporate taxes, but tax cuts are not helpful in the short term since they don't pay tax until a year from now. The only other obvious (and time-tested) direct lever would be a cut in the CPF rates to reduce labour costs. However, the CPF rates are already so low that it's not feasible to make another cut without risking another round of massive HDB mortgage repayment problems. So the obvious thing to do would be to CPF rates and then cough up money to make up the difference and wah lah, you have the JCS. In this light, perhaps it doesn't require a genius to come up with the JCS. What the WMF is highlighting is that it is not impossible for the Gahmen to come up with the JCS even if it has NO intention whatever to help the locals and just wants to help the big corporations. And you know what, the WMF is absolutely right. Yes, it is possible, but the KTM make no claims to endorse or refute this possibility because he is not in a position to do so. Two, the KTM wants to clarify in no uncertain terms is that he does not profess to be a mind-reader, has no pretensions of being one and has no aspirations whatsoever to become one. He is not pretending to understand or guess the Gahmen's intentions in coming up with the JCS. The KTM's views on the JCS are merely his personal analysis of what the JCS seems to achieve in practice. And as the KTM has stated in his earlier post, it doesn't really matter who invented the JCS. By the same logic, he also doesn't really care HOW it was invented. At this point he just cares about HOW WELL IT WORKS. Is the KTM saying that intentions don't matter? :-P Well, suppose you have a guy who really loves this girl and asks the girl to marry him. Does it matter if the girl married the guy because (i) she loves the guy; (ii) the guy is loaded; or (iii) the girl doesn't have too many other options and it's a care of mi hiam buay pie? Quite certainly different people will have different answers to this question and the KTM really has no interest in delving into this fluffy discussion on intentions. :-P2. Do you realize that this is actually a direct subsidy to the firms?Yes. The KTM has no illusions that the JCS is a subsidy from the Government to the firms. In fact, people can think of it as tax cut brought forward. :-P The KTM's general response is: this is a Recession dammit, cuttings costs to help businesses stay in business is what Govts are supposed to do what. There are a few reasons for this: (i) if companies go down, jobs are lost; (ii) companies that stay alive pay corporate taxes, so giving some subsidy to keep them alive to keep them paying more taxes in the long term may be good business sense; and (iii) (though this point might be a little tenuous the KTM will admit) our businesses don't exist in like a vacuum hor, they also compete with businesses in other countries at some level and a recession is not a bad time to engage in some what's actually anti-competitive behaviour in a perfectly defensible way. In the same light, the main opposition to the JCS is that the "perfectly good" businesses might not "need" the money and might do things like give the money to their shareholders as dividends. Is there such a possible? Absolutely. So why should the Gahmen do this? The purists will respond by saying, as the KTM has highlighted previously, that it is not the Gahmen's place to pick the "winners" and "losers". There are practical difficulties in picking the right companies. One family man suggested that firms be asked to "apply" and then we do some "means testing"? :-P Well, the KTM can tell you what he would do if he were a CEO of a company that employs locals. He would apply and "threaten" to fire the locals unless the Gahmen pays up. :-P Why not? Free money leh. How in the Gahmen going to call the KTM's bluff? Suppose the KTM's company actually goes and fires a couple of locals and tells them, "I'm firing you because YOUR Govt didn't want to pay us the JCS and we are left with no choice" and then these fellas go and see their MPs or better yet, write letter to Forum Page. Anybody wants to volunteer to explain to these fellas why JCS was paid to Ah Tiong's company and Ah Tiong kept his job, but not to KTM's company so they lost their jobs? Is it true that "good companies" don't retrench? Do people think that DBS, Google and Microsoft as "bad" or "troubled" companies in risk of going under during this recession? Do people know if they are retrenching? That's a rhetorical question in case people dun get. Moral of the story: retrenchments are not limited to troubled companies. Next, it also makes no sense to "reward" poorly managed companies and penalize well-managed companies. Crux of the issue is that even while all those Dr I-got-PhD-so-I-know-better-You're-A-Moron's claim that the JCS can be more "targetted", the KTM doubts they really understand some of these issues. :-P Finally, one can claim that the JCS is very targetted because if firms dun have any locals on their payroll, they get nothing; if they fire the locals, they get nothing. 100% hit rate? :-P3. Do you realize that the JCS is introducing seriously distortions to the local market? Given that this is a one-year deal, do you think businesses will get swayed?Yes, the KTM understands perfectly the huge distortions that the JCS is introducing in the labour markets. The KTM also appreciates why economists really hates such "inefficiencies". Thank God the KTM isn't an economist, so he can live with these distortions with a clear conscience and sleep well at night. ;-P In case people don't understand what a distortion means, it is best understood from the perspective of a non-local. This is what they see: recession is here, company is in trouble and some people have to go. The Singapore Govt will however pay the company $300 per month if the company keeps your colleague and fires you; if the company fires you, it gets nothing. It is indeed true that this is a temporary one-year thing and businesses are not stupid and think only short term. Will the JCS "really" sway them? To answer this question, requires people to play mind-reader which the KTM is not fond of doing. However, if the recession blows over in a year, then everything is fine and dandy and they fire the locals and the locals will be able to find jobs; on the other hand, if the recession is still on-going in a year, do the local firms doubt the Gahmen's resolve to maintain its present course and pay another year of JCS? So you introduce the JCS and locals keep their jobs and then you cancel it and locals lose their jobs and all your efforts go to waste? :-P 4. Do you realize that it is wrong from a humanist perspective?This is the point that blindsided the KTM. Crux of the issue is very simple: if the JCS works, there might be a lot of foreign workers sent home to face a lifetime of debt. The KTM will be quick to admit that the plight of these foreign workers never quite figured in his analysis of the JCS. But yes, while the KTM would like to empathize and sympathize with the plight of these unfortunate souls, it doesn't change the price of pork to him. They took up loans on their own free will and were not coerced by the Singapore Govt, so why should the Govt take responsibility for what is effectively the outcome of the market?A simple analogy is appropriate: suppose a Singaporean buys a HDB flat at some obscenely high price and price tumbles. Govt must make good meh? Similarly suppose a local businessman takes up a loan but his business goes under and he goes bankrupt. Govt should bail? People have a choice of what they want to do. People have to pay for bad choices. Local, foreigner, or otherwise. Such is life. The KTM will state in no uncertain terms that he would vote against any Government that takes into account the debts of these foreigners in deciding on the Budget. People are welcome to call the KTM "heartless". :-)Here's one piece of good news for the foreigners: when the recession is over and the things are good, they are welcome to come back. :-P The KTM really likes the JCS for another reason: things have been so boring in recent times. With the JCS, there's at least something to think about and talk about. :-)The Straits TimesFeb 10, 2009It's fire foreigners, hire locals in the EUBy Jonathan Eyal, Straits Times Europe Bureau LONDON: - Employees at an oil refinery in Britain's north-east reported for duty yesterday, ending a week-long strike in protest against the employment of foreign workers.The British government, deeply embarrassed by this outburst of open racism, breathed a collective sigh of relief. 'We should keep our sights set firmly, not on the politics of xenophobia, but on the economics of this recession,' urged Business Secretary Peter Mandelson.But the backlash against foreign workers in Europe is only beginning, and as the economic downturn bites harder, not only trade unions but governments themselves are becoming guilty of trade protectionism.The British dispute represents a classic case of globalisation, with all its contradictions. The refinery at the heart of the anti-foreigner backlash is actually French-owned. The company that brought in foreign workers is American, although most of its staff are Italian and Portuguese. And one of the organisers of the strike is a certain Mr Stewart Roe, a 61-year-old who came back to England after working in South Africa. Apparently, it remains perfectly acceptable for the British to work abroad, provided foreigners do not do the same in Britain.Britain has been more generous than other European countries in admitting foreign workers. While its economy was booming, the country lifted all border restrictions on the poorer countries of Eastern Europe; approximately 600,000 mainly Polish workers arrived over the last five years alone.However, with British unemployment now touching twomillion - the highest level in more than a decade - and projected to peak at about three million by the end of this year, even politicians are toying with cheap nationalist jibes.Soon after he came to power in 2007, Prime Minister Gordon Brown pledged to promote 'British jobs for British workers'. At that time, this sounded like just a catchy phrase with no significant meaning. But to Mr Brown's dismay, his pledge was too catchy: It appeared on all the placards held up by striking refinery workers last week. 'We want nothing more than what the Prime Minister promised,' the protesters shouted.An anti-foreigner momentum is now building up throughout Britain. The police are rushing reinforcements to Kent, in southern England, where a similar protest is scheduled for tomorrow. The British Post Office has also come under fire for employing overseas labour.Ironically, the 'foreign' workers whom Britain's trade unions wish to see excluded are European Union (EU) citizens who, by law, are entitled to seek employment wherever they wish in the continent. No European government, therefore, has the right to restrict their flow, unless it wants to tear apart the EU.Yet this does not prevent other European countries from implementing their own restrictive labour practices.Spain has unveiled a new government-funded campaign designed to persuade foreign workers - mainly Romanians - to return to their homes. No compulsion is involved, but the appearance of street billboards openly admitting that such workers are no longer wanted will hardly improve race relations.France has gone even further. Its government is proposing to offer cash to local industries - provided they promise not to relocate to other European countries and use only local suppliers. French President Nicolas Sarkozy singled out French car companies that have relocated their factories to the Czech Republic, warning them that it is 'unacceptable' for them to supply the French market.The French leader seemed oblivious to the fact that such cross-border industrial operations are precisely why the EU was created in the first place.Openly protectionist labour policies are also supported by more insidious, indirect moves. All European governments have bailed out their banks, on condition that local companies should get priority access to credit. Mr George Provopoulos, the Greek central bank governor, warned his banks last week not to lend to Eastern Europe. In Spain, a senior minister urged his people to 'bet on Spain, bet on our products, our industry and our services'.To make matters worse, large construction projects - launched by governments to increase employment during the recession - also seem to have been inspired by nationalist considerations.Under EU regulations, such contracts must be open to all European companies. But France has now called on Europe to modify this procedure, in order to be able to discriminate in favour of its own national suppliers.In public, all European politicians claim that they remain committed to free trade. Nevertheless, Mr Claude Trichet, president of the European Central Bank, readily admitted recently that 'protectionist pressures now represent Europe's chief danger'.There is, however, one small country in Europe that still seems able to swim against this nationalist tide. Over the weekend, the people of Switzerland - a non-EU member - were asked to vote on whether they should open their borders to workers from Romania and Bulgaria, two of Europe's poorest former communist states.The Swiss answered 'yes' with a thumping two-thirds majority. It was a lone European voice for sanity and free markets.jonathan.eyal@gmail.com Knowing when to quit An interesting article by Mr Ngiam Tong Dow appeared in the Straits Times today.The KTM is shamelessly retaining a copy of the article here for future reference. While the gist of the article is about leadership renewal, the KTM seems to detected veiled criticism of the present administration.Whatever Mr Ngiam's intentions, it's an interesting article nevertheless. :-PThe Straits TimesFeb 10, 2009Fostering the freedom to thinkBy Ngiam Tong Dow I AM told that when a Jewish boy returns home from school, his mother would ask him: 'Son, how many questions did you ask your teacher today?' In contrast, a Chinese mother would ask: 'Son, what did you learn from your teacher today?'The difference in approach is cultural. In the Bible, Moses and the other prophets plead and argue with God. By contrast, candidates in the Chinese imperial examinations were required to quote from the Confucian Analects by rote.I was the first chairman of the Surbana Corporation, which was spun out of HDB's development division. HDB architects were scoffed at by their private sector counterparts as dull and unimaginative. To my utter surprise, when I led them out of HDB to Surbana, the architects who had earlier been derided by their peers won lucrative design commissions, not only in Singapore, but also in the Middle East, India and China.How did this happen? Essentially, they were given the freedom to think. There were no institutional constraints in Surbana. Thus they thrived.In public administration, I found that the best ideas emerged in free-ranging discussions with my younger colleagues over lunch in hawker centres. Outside the formal office structure, we were intellectual equals.To my knowledge, two great ideas were born at such lunches. The first came from Dr Tan Wee Kiat, who was then chief executive officer (CEO) of National Parks Board. He told me - then his permanent secretary at the Ministry of National Development (MND) - that Singapore should not be conceived as just a Garden City, or a city with parks and gardens. Rather we should see Singapore as a City within a Garden.This vision is slowly but surely being realised to make Singapore a city within a park.Similarly, Mr Lim Hng Kiang, who was my deputy secretary at MND, suggested that instead of micro planning the streetscape block by block, we should develop development guide plans for the six or eight geographical regions of Singapore. We should canvass ideas from planners, architects, nature lovers, ordinary citizens and property developers. This is now standard operating procedure.Singaporeans are good at thinking within the box. Our students score well in examinations. We make competent professionals and managers. But very few of us are creative or entrepreneurial.As a society, we need to foster thinking outside the box. But this is easier said than done. The problem is not lack of intelligence. The greatest impediment is cultural. As an Asian society, we tend to be paternalistic. Father knows best. The teacher knows best. The Government knows best.Dr Goh Keng Swee, my chief at the Ministry of Finance, told me that my duty as a permanent secretary was to raise the competence of the ministry to the next higher plateau. And then he added wryly: 'When you yourself plateau, you should leave.'Dr Goh's acerbic comment set me thinking: What is the greatest contribution a CEO can make? I came to the conclusion that the most valuable contribution he could make is know when to quit.History is replete with great leaders who did not know when to quit. Mao Zedong was a classic example. When the Singapore delegation paid a courtesy call on him in 1976, we felt sorry for the infirm old man who had to be propped up by his nurses to shake hands with our then prime minister, Mr Lee Kuan Yew.The Chinese Communist Party (CCP) learnt from the Cultural Revolution that nobody should be a leader for life. They have now instituted a system where the President and the Premier serve no more than two five-year terms. The transition of power from Mr Jiang Zemin and Mr Zhu Rongji to Mr Hu Jintao and Mr Wen Jiabao was achieved peacefully.Whether you are a parent, CEO or the Prime Minister, letting go is the most difficult decision you are ever going to make. Yet if we fail to make that decision, we would not leave behind a structure that survives us.A control freak is the worst type of CEO an organisation can be saddled with. Because he is insecure, he works himself into a frenzy delving into minutiae, missing the woods for the trees. More insidiously, he makes sure that no subordinate can surpass him. Because his glass ceiling is low, the organisation can never grow. He abuses the weaknesses of his management to divide and rule rather than leverage on its strengths.If I were an investment analyst, I would spend time assessing the temperament and character of the CEO before looking at the business numbers.The East Asian Institute at the National University of Singapore published a study 15 years ago on how the CCP identifies, tests and selects the 300 cadres who govern China.A CCP cadre begins his career at the grassroots village level. His direct supervisor rates his work performance. His character is assessed by someone from the central personnel department who canvasses opinion incognito from the grassroots. Character flaws are identified early. Even then, some do slip through.No human system is perfect. Nevertheless, we can say that the leadership that emerges at the Politburo level of the CCP is honest and able. Without selfless leadership, China could not have made the progress it has in the last four decades.The greatest gift that teachers can give their students is the freedom to think. Do not constrain their minds nor constrict their hearts. Asking questions is harder than giving answers. If we think within the box, we demonstrate competence. If we think outside the box, we explore the unknown. It requires intellectual courage to do so.The writer, a former senior civil servant, is an Adjunct Professor at Nanyang Technological University. An earlier version of this article was delivered as a lecture to the Academy of Principals. The UNTRUTHs about Jobs Credit! In many ways, the work of a critic is easy. We risk very little yet enjoy a position over those who offer up their work and their selves to our judgment. We thrive on negative criticism, which is fun to write and to read. But the bitter truth we critics must face, is that in the grand scheme of things, the average piece of junk is more meaningful than our criticism designating it so. But there are times when a critic truly risks something, and that is in the discovery and defense of the new. The world is often unkind to new talent, new creations, the new needs friends.                    - Anton Ego, from "Ratatouille"One Recruit Ong highlighted a post by Lucky Tan on the Job Credit Scheme in the comments for the previous post. In case people dunno, Lucky Tan is a king of political satire in the Singapore blogosphere (Molly is the queen lah) and he often speaks in double-speak which means what is good is bad; and what is bad is not. In this post, the KTM shall attempt to decipher Lucky's recent post on the JCS.Does it Really Matter Where It was Invented?Lucky claims that the jobs credit scheme was first proposed by Barak Obama a few months ago and "the idea was thrown out by his own party members, the Democrats, as unworkable". The KTM must admit his sua-ku'ness for not knowing this. He was probably too busy mucking with his KT to have followed Obama's campaign too closely. Frankly, the KTM really doesn't care who invented the JCS. The only thing that he really cares about is whether the scheme is a good one. Why does it matter if it was invented in America or picked up in some longkang in Choa Chu Kang? Is the fact that the idea was rejected by the Democrats an indication that the idea is bad? Do people have so much faith in the American politicians? Change we can eat? :-P Last the KTM checked, American is going to be faced with a severe social security crisis, foreign debt crisis and healthcare crisis, even if they get out of the current credit crunch. Least we forget, do people remember who got the world into the current soup? Singapore is also grappling with the same sort of issues, but compared to American's muck, what we're looking at are non-issues. In this light, maybe we should learn from American and do exactly what they decide not to do? :-P People please wake up and remember that what matters is whether a policy WORKS and not whether it is invented here. Basics of Recession EconomicsBefore we continue this discussion, it might be instructive to understand recessions and how things work in a recession. First, recessions are temporary events - even the Great Depression didn't last forever. Even if a Government did ABSOLUTELY NOTHING, the system would eventually reach a point so low that there's absolutely no where else to go but UP. Second, Governments however, unless they want to be voted out at the next election had better be seen to be doing SOMETHING to try to "fight the recession". Obama is currently touting a US$900 billion stimulus package to save America (the package has apparently shrunk to US$780 billion while the KTM was writing this post). Third, a Government doesn't have too many things that it can in the face of a recession. In general, it can try to do things that can broadly be classified as one of:Reducing Costs for Businesses. These include tax incentives and more often than not cuts in the CPF contribution rate. Stimulating Demand. There are many ways to spend money, ranging from building schools, building roads to giving direct handouts (think GST credits, more workfare, etc).Directly Creating Jobs. This just means hire more people into the civil service. Typically, a Government will put together a package deal that includes all of the above. The KTM is sloppy and lazy and hasn't gone to study the details of the present Budget. The study of the details and classification of the various items into the above categories as left as an exercise to the interested reader. Fourth, people have to understand the goals of a Government in a recession Budget. For countries like the US, it is vaguely plausible for the US Government to claim that would try to bring the US out of the recession. People just pause to think for one minute: is it even vaguely plausible that the PAP Government is trying to bring the country out of a recession with its present Budget. Let's not be stupid and ridiculous and we better pray for the US. Until the US gets out of its present soup, like it or not, we're going to be swimming in the same soup. (Side note: it is precisely because the KTM does not believe that it possible for us to spend our way out of the current recession that he was initially troubled by the Government proclamation that it was going to dip into the reserves. The KTM was relieved that the amount to be drawn from the reserves $4.9 billion is relatively modest.)So what is a plausible goal of the present Budget? Basically, all we can hope for in the present circumstances is to mitigate the effects of the recession. What does that mean? Ideally, what we would like to see is NOTHING happen, i.e. today there are x jobs, there will continue to be x jobs for the next year or two until the recession lifts. Possible? Of course not lah, so if you are the Government, what is the next best thing? Very simple: if today you have y Singaporeans holding jobs, you will continue to have y - delta Singaporeans holding jobs for the next year or two, where delta is small. Why is this reasonable? Because we have a whole lot of foreigners. :-P Hold that thought. Fifth, let's have no illusions that the JCS can stop all companies from retrenching people. People think the Government is stupid and doesn't understand this? Does it even sound vaguely plausible that it's possible? We are an export-driven economy. If other other countries don't buy, who's going to buy what we make? If we demand is not there, can we expect the manufacturing sector to keep workers around and twiddle thumbs? Will a 12% savings in wages stop companies from retrenching people who have nothing to do? The KTM's point: those who argue that JCS is bad because it cannot keep all companies from retrenching have no clue about what they are saying. The JCS was never intended to stop all retrenchments. In a economic recession, companies have to reorganize and sometimes, retrenchment are necessary.Sixth, when pumping money into the economy, the Government should try to avoid introducing market distortions as far as possible. This means that all the proposals to only help "good" companies ah, dunno what companies ah, are all bullshit. The Government is not in a position to pick the "winners" and the "losers". Let's leave it to the market. Alright, now that the preliminaries are out of the way, the KTM can proceed to explain why the JCS made him sit up and pay attention. :-PJCS - The Final Plank in the Foreign Talent PolicyThere are two economic models that seem to be able to keep nations from descending into civil war. The first model is the welfare state - basically you tax the hell out of your people and provide significant social security; the second model is the "economic growth at all costs" model where you have little or no welfare, but you keep unemployment low. The theory here is that the rising tide lifts all boats (though this theory is being challenged in recent times). It doesn't take a genius to figure out which model countries like Singapore and China has chosen to adopt. In the latter model, the greatest threat to social stability is UNEMPLOYMENT. If you make sure everyone has jobs and needs to work, who has time to go to Hong Lim Park?As it turns out, the KTM has always been a proponent of importing foreign workers because it was clear to him that one of the things that we can do is to offload them when the going gets tough, to make space for the locals. Now while this all sounds very good, this kay poh has been thinking about the problem more deeply in the last couple of weeks, it suddenly dawned on him that while the theory is that we can offload the foreigners, there was no "easy" way to do it. Let's think about it. It was reported a couple of weeks ago that nationality is not a key factor in retrenchment decisions, which was not a surprise if people know how employers think. Now, MOM can tightened the work permits, so that firms cannot hire foreigners easily. This however doesn't help because firms aren't looking to hire at this time!! The point is to send the foreigners currently in the country home! The only other naive approach would be for MOM to not renew the work permits for existing foreign workers or to reduce the foreign worker:local worker ratios. Such an approach would definitely raise an outcry among the SMEs, whose owners are actually tax payers. Online kay pohs seem to think that they are the only voters around and that deserves to be taken seriously. :-P The worst thing about non-renewals is that the Government would then be doing the picking of whom to retrench and whom to keep. This is very bad 'cos it is not the Government's role to do such things. It is sure to get it wrong. This is where the JCS comes in. The JCS makes locals about 10% cheaper to keep on the payroll than foreigners. Now, it turns out that the JCS is also targetted to jobs that pay less than $2,500 per month because these are likely non-executive jobs that are most sensitive to costs. The criticism that the money is going to corporations is pretty bogus. Well, almost every recession as far as the KTM can remember (oh lah, KTM got lousy memory, so please dun pick on him for this), the Gahmen almost always cuts CPF rates to help employers cut costs. Given that this recession is supposedly worse than the previous ones, is it reasonable for the Gahmen NOT to do the same? The JCS therefore can be decomposed into two components. One is a CPF rate cut for local employers to help companies cope - but this cut is only applicable to locals. Firm that employ solely foreigners get nothing and the cut only lasts one year (but the general expectation is that if things don't improve, the same might be repeated). Whoa. :-P Slick. The other component is the Gahmen paying money directly into the CPF accounts of the people affected so that their retirement savings and more importantly HDB mortgage payments don't get affected. This is a many-birds-with-one-stone policy. But seriously lah, the thing that really impresses the KTM is the insidious way that we are getting rid of the foreigners while minimizing market distortions and in a way that employers cannot really complain. Why are the non-Singaporeans not helped? Well, can anyone blame the Government for not taking care of our own when the going gets tough? Is the US doing very much different with their "buy America" policies? How Efficient is the Job Credit Scheme?The next item to deal with is the efficiency of the JCS:Suppose the jobs credit actually works and eventually saves a whopping 50,000 jobs. Dr Chua Hak Bin, a Citibank economist, calculated that each of these jobs will be saved at a cost of $90K per year for the tax payer. $90K is triple the median income. We are spending $90K to save jobs that pay $30K. Even if the jobs credit miraculously saves a 100K jobs, it will be at a cost of $45K per job. The jobs credit is ineffective use of tax payers money when it doesn't work and it is inefficient when it does work! --- Lucky TanThis efficiency argument is the most idiotic one. First, someone tell us: what is the "right price" for saving a job? $90K to expensive izzit? Then how much? $50K? Alright then smart aleck, suggest a way to save jobs at $50K a pop. :-P The KTM hasn't heard any one of these kay pohs suggest a "more efficient" way to save jobs last he checked. The KTM already mentioned before that the JCS does a lot more than save jobs. Minimally, it reduces costs for local businesses, pumps some amount of money into the economy (multiplier is unfortunately expected to low) and saves the right jobs, i.e. jobs for locals. Let's do a thought experiment. People should walk up to random Singaporeans and ask them: would they rather the Gahmen spend save 50,000 jobs each (THEIR jobs), or would they rather the Gahmen give them $300 a month if they should lose their jobs. It doesn't take a genius to figure that the average Singaporean wants to keep his job - so the Gahmen is doing exactly what the people want. People also better get it into their heads that the "Singaporean worker who is retrenched today is older and faces more foreign competition than his 1985 counterpart. He/she will face trouble getting re-employed when the economy recovers" (thanks Fox). So it's not just about $90K to save one job, it might be $9OK to keep some folks from being jobless for 3 or 4 years. The final thing that the KTM wants to say about this so-called efficiency is that it's completely unquantifiable. Citibank says 50,000 and Credit Suisse says 60,000. Who the heck knows who is right? Why not? Because by definition, the jobs saved are the ones where the people didn't get fired, so who the heck knows? Do people expect all the employers to volunteer this information, "because of JCS, my company decided not to retrench y jobs?" Reasonable or not? To the Gahmen's credit, at least it didn't come up with some magic number like 200K to justify the JCS. The KTM is quite certain that with some Excel manipulations, one can cough up any number between 50K to 200K. Also, if people understood what the KTM just said above, if people think carefully about it, what the JCS is doing is not exactly stopping retrenchments, but where there are retrenchments, move Singaporeans favourably down the list. So, what we care about are the retrenchments numbers for Singaporeans. This further complicates any attempts to collect sensible data. Not to worry lah, the KTM is quite sure that MOF will do something in a couple of months to try to estimate this magic number. Whether MOF will announce this number remains to be seen. What's clear is that nobody has the number at this point no matter smart they claim to be. :-P Kay pohs are welcome to prove the KTM wrong on this point and show us the numbers. One needs to be a mind-reader on a national scale to be able to understand how JCS will affect retrenchment decisions.How about Unemployment Benefits and Giving Money Directly to the People?The KTM is rabidly against handouts, the details of which are quite involved and are probably best left to another day. First, it seems that the Gahmen is already doing more in terms of giving handouts. Dunno what more workfare, more GST credits, etc. If you ask the people who are receiving whether it's enough, it's never enough one lah. :-PSecond, it is infeasible to give all that much money to the people. Suppose the Gahmen gives every Singaporean household $300 a month. The money either matters or it doesn't matter. Families for which the money matters will likely have to use the money to pay for utilities or HDB mortgage - basically it is unlikely to stimulate demand; families for which the $300 doesn't matter wouldn't care and would have conducted their lives exactly the same way if they hadn't gotten the handout. Third, because the effect on consumption is likely to minimal, what will giving money to people do for this recession? Make people feel better? What does that mean? We could just as well have done nothing and just wait for recession to blow over. While the KTM dislikes handouts intensely and will perhaps explain his stand in more lucid detail in a future post, he does believe that there are hard luck cases who need to be helped. However, the criteria and amount of help given should be consistent and recession-independent. If a child cannot afford to go to school, regardless of whether it happens during a recession (like now) or when times are good, the Gahmen should help period. In this light, while the total amount budgeted for the help scheme should increase since we expect more people to need help, the disbursement processes shouldn't require any changes. If the Gahmen says that more should be done, then it will be admitting that not enough was done before. But even so, why suddenly want to do more because of the recession? Why the sudden change of heart? If the system was indeed broken, the KTM is not advocating against change. He is merely trying to understand why the sudden change? Final Words on the RecessionTo conclude, the KTM will say this: this recession is bigger than Singapore. It is bigger than PAP. Nobody knows exactly how long it's going to last, but the KTM will be audacious and make one prediction - REGARDLESS of what we do with the Budget, for as long as the US is in this muck, Singapore will be swimming in the same soup. Those who are religious, please pray for Obama. We should quit quibbling over the lousy Budget ("lousy" here is just a figure of speech lah, so people dun anyhow quote. The KTM actually thinks the Budget is okay. Seems reasonable enough. :-P) and worry about what we can do in our individual jobs to deal with the recession. People better keep in mind that those who don't their jobs well will risk getting axed REGARDLESS of the Budget. This Budget is a standard Recession Budget (whatever that means) with a novel "offload the foreigners w.o. messing with our CPF" clause. The KTM hopes that it's all intuitively obvious now. What has the KTM said above that's rocket science? NOTHING. The KTM is merely restating the obvious, which was obviously not obvious to many kay pohs. :-P Such are the mysterious of life.Afternote: This is a really long post and it sucked up a lot of the KTM's time to write it. The KTM's KT is calling (going chow tar) and the KTM will have to attend to his KT for the next couple of days. As such, the KTM is unlikely to be as responsive to comments as he would have liked. Readers are welcome to slug it out among themselves at the meantime. :-PHomework for Aloysius & Bernie; Go and try to figure why the KTM hates handouts. Note that handouts are social transfers. Gahmen is doing a Robbin Hood, taking money from the richer folks and giving to the poorer ones. If you know your economics, the most efficient way is to give CASH (so the Gahmen must be right?). If you dun give cash, but give car park rebates or healthcare rebates, etc. you cannot optimize for the all individuals. Giving them moola and letting them decide what to do with it is optimal isn't it? Why then does the KTM NOT like handouts? Is the KTM smoking something? Think about it lah. If you like handouts, you are welcome to expound on the economic efficiencies of giving out dough also. :-)AddendumThe KTM actually wanted to rest for the day already, but he came across the following suggestion:Maybe the alternative implementation is to give the job holder the money directly, instead of channeling via their employer. For example, some one who earn $2500 per month will get $900 at the end of each 3 months stated period. And the employers be notified of this. Should the employer face hardship in cash flow to keep the company afloat, the company can, with a ease of mind, cut the pay of the employee by $300.It the company is profitable, then it will have no good reason to cut the pay of the employee who receive the job credit payout. Yes, some might say why does employee who face no risk of retrenchment be given the money? It is the same as asking why companies that face no risk of hardship be given the money too?This implementation will make sure that the money reaches the people instead of dropping into some corporate blackhole. It might not be the best implementation. It just defines the line between a job giver credit scheme vs a job holder credit scheme.This suggestion highlights the problem with Singaporeans who want to give suggestions for policies -- they cannot seem to think like employers.In the above suggestion, people ask themselves: will this new suggestion make it more or less likely for the employer to retrench the fella in question? Remember what we're trying to do is to pay off employers so that they dun fire Singaporeans. Now, suppose for a moment that the fella is right in suggesting the scheme of giving $900 to the employee and then allowing companies to claw back $300.... then someone explain to the KTM why we should be paying this fella an extra $600 from the reserves when he hasn't lost his job?? Harlo?? *sigh* Or perhaps this fella is just trying his luck to engineer for himself a $200 pay rise from the reserves to make up for the lack of increments this year?This is what the Gahmen is saying: it is saying that it estimates that it will take $300 per month per employee to "bribe" employers to retrench foreigners in lieu of Singaporeans. While the KTM doesn't really have any statistics to prove anything, this number frankly seems plausible. :-P If the Gahmen thinks that it can achieve the same by paying $100 per month, people think the Gahmen stupid and wouldn't pay less and draw down less of the reserves? The KTM really isn't trying to be condescending or patronizing in this instance. He is merely highlighting this example as a case study to explain to people why they should think harder before anyhow make suggestions. Public policy is a bit like food. Everyone seems to like to think that they are experts, but truthfully, how many are Michelin chefs (which perhaps explains why people should go to Paris to learn some cooking if they have cash to burn :-P)? ST Forum Page5 Feb 2009Opposition MP Low has valid concernsI REFER to the parliamentary exchanges between the People's Action Party (PAP) Members of Parliament and opposition MP Low Thia Khiang in yesterday's reports, 'Lively debate over Jobs Credit plan' and 'Is scheme to save jobs truly effective, asks Low'.The rebuttals by the PAP MPs showed that they had failed to understand the nub of Mr Low's concern, which was whether the Jobs Credit scheme was truly effective.I wish that subsequent questions by the PAP MPs, directed at the opposition, could have been more carefully thought through. The context of Mr Low's query was that the Government had, in the past, adopted policies which were tried and tested.As Jobs Credit is new and requires huge monetary resources of some $4.9 billion, or a quarter of the entire Budget allocation this year, it is only natural to ask questions about its effectiveness.In the midst of the current economic outlook, it would be better to place our resources on ongoing programmes that are effective in preventing companies from collapsing.I am not advocating that we should not consider out-of-the-box answers. But I do not see the sustainability of the Jobs Credit programme.As Mr Low has cautioned, the programme does not have strings attached.Shouldn't there be a condition that companies benefiting from the scheme must not retrench their staff for at least six months?Such a caveat will ensure that the programme will prevent retrenchments.Joey YeoST Forum Page5 Feb 2009Let's get on with Jobs CreditTHE JOBS Credit scheme is an ingenious measure because it is pro-business, pro-worker and pro-Singaporean.It helps businesses to cut costs, a major component of which is staff salaries.It is pro-worker because it offers employers a reason to retain and hire workers. A Member of Parliament had argued that it would be more cost- effective for an employer to retrench workers than to hire a worker at a lesser cost. While this may true in theory, the reality is more complicated.An employer must consider whether retrenching a worker and shifting his workload to an existing employee will retard the efficiency of his operations. This he has to weigh against maintaining efficiency by keeping that employee, although at higher staff costs. In this light, the Jobs Credit scheme nudges the employer into retaining rather than retrenching staff.Why is it pro-Singaporean? Because it offers grants to the employer only if he hires a citizen.One MP, during the Budget Debate, suggested that credits should be eased for businesses instead. However, this may not translate into more jobs for Singaporeans, because the business owner could use the money to increase supplies instead.Yet another MP traced our present problems to depreciating demand for the company and not costs. But a company does not exist in isolation and is part of an economic eco-system. Increasing jobs in one firm might lead to a rise in demand for another.While it is true that we are predicating job retention and stimulating demand on an inexact science like economics, the probability of succeeding outweighs the inherent risks that any scheme carries.So, let's go ahead with the Jobs Credit scheme.Tan Kee LinThe Straits TimesFeb 6, 2009Budget aim: Biggest bang for the buckJobs Credit gives twin boost to economy, says Finance MinisterBy Sue-Ann Chia, Senior Political CorrespondentIN CRAFTING the Budget this year, Finance Minister Tharman Shanmugaratnam had one thing in mind - getting 'maximum bang for the buck'.And he believes the $4.5 billion Jobs Credit scheme surpasses that goal, by giving the economy a big fiscal boost as well as enhancing job security for locals.'What we are essentially doing is injecting $4.5 billion into the economy in a way that will not only have a significant multiplier effect but will help preserve the interests of Singapore workers,' Mr Tharman said yesterday in his wrap-up of the three-day Parliament debate on the Budget Statement.This amount is is almost 2 per cent of the gross domestic product (GDP). It is a a key plank of the Budget's $20.5 billion Resilience Package for revving up the economy, to battle Singapore's worst economic crisis since independence.Proportionally, it is bigger than the stimulus package in most nations, including the United States, Britain and China.But it is the right size, Mr Tharman said, adding: 'There is a consensus internationally now that fiscal responses have to be larger than normal to counter the cyclical downturns and they must be focused on speedy implementation so that a real impact can be felt in 2009.'Hence, the Singapore package 'is large, timely and front-loaded' to make a significant impact this year, he said.In comparison, the estimated impact of the Americans' US$885 billion (S$1.3 billion) stimulus package is 1.8 per cent of its 2009 GDP as only 30 per cent of the sum will be used this year.Britain's &pound20 billion (S$44 billion) package is about 1 per cent of its GDP this year. As for China, its 4 trillion yuan (S$880 billion) will be spread over a few years, amounting to about 2 to 3 per cent of its GDP this year.Besides the size, Singapore also differs from others in the way it funds the stimulus package. Said Mr Tharman: 'They will have to borrow to fund their deficits and their taxpayers will have to pay the burden in future.'Singapore does not have to borrow.'He also defended dipping into past reserves to partly fund the Resilience Package, saying it was the right move to do so now than use up available savings first. 'Moving on a Big Bang measure now and leaving nothing to use subsequently would be irresponsible.'Mr Tharman was responding to 54 MPs who took part in the debate dominated by four issues: using the reserves, Jobs Credit, helping the retrenched and boosting domestic demand.MPs came up with many proposals, including cutting the goods and services tax (GST) temporarily, deferring HDB mortgage payments, introducing unemployment insurance and giving tenants directly the rental and property tax rebates.The minister dealt with each but dwelt at length on the much-debated Jobs Credit scheme which some MPs doubted would be effective in saving jobs.The scheme gives companies cash, amounting to 12 per cent of the first $2,500 of local workers' monthly wages, a move aimed at encouraging them to retain workers.Mr Tharman argued that while it was not possible to avoid a rise in retrenchment, the scheme will still 'make a difference to the pace and scale of job losses'.He also disagreed with opposition MP Low Thia Khiang and Nominated MP Siew Kum Hong that it would not work.He said many companies have given feedback that it could make a difference in minimising or deferring layoffs.Dismissing suggestions that profitable companies should not be given the cash grant, he said: 'If we do this, we will only be weakening the ability of the business sector to create employment not just now but in the future.The Budget, he said, was designed for measures to be rolled out quickly this year and achieve 'broad-based impact'.Hence, he was against cutting the GST, arguing that it neither reduces business costs nor encourages people to spend. Any cut would also mean a reduction in revenue to fund social support schemes for the needy.'What we're doing is...not just to meet short-term needs but also to strengthen the chances of recovery and strengthen Singapore for the long term,' he said.sueann@sph.com.sg Jobs Credit Explained As the KTM had explained in his previous post, the item that stands out in this year's Budget is the Jobs Credit scheme. The Jobs Credits Scheme was explained in gross detail in an article in the ST today (attached below).There are only two policies that stands out in the KTM's mind as particularly brilliant -- CPF and COE. The KTM will not say more at this point, except that it is possible that the Jobs Credit scheme might also be added to this list. Basically for folks who understand some basic economics and how fiscal policy works, it's quite clear what the Jobs Credit scheme attempts to address. However, the most interesting point about the idea is that it's not entirely obvious. These are the kinds of ideas that the KTM really appreciates: ideas are not obvious, but are intuitively obvious once they are described.The KTM believes that credit is due to the person or team who came up with the idea. This demonstrates that our Civil Service is indeed quite creative. :-) The KTM is frankly impressed.Why then is Jobs Credits not yet on the KTM's list of "favourite" policies? Well, at this point, it's not clear how well it will work. Ideas that are kinda cool and intellectually interesting may not actually pan out on the ground. Such is the reality of public policy. Nevertheless, it is likely that Jobs Credit will not do worse than a cut in the CPF rate. :-PThen again, to be fair to the past bureaucrats, it is also not necessarily true that they are not as bright as the current team. One issue with the Jobs Credit scheme, as the KTM highlighted, is that unlike CPF cuts, the Government actually has to cough up money to fund it. Who knows? There might have been MOF bureaucrats in the past who did come up with a similar idea, but it got killed because the then Finance Minister didn't like the idea of coughing up money to pay for it? In some sense, some credit must also go to Minister Tharman for supporting the idea. The KTM also thinks that MOF has done the right thing to explain the policy in the Straits Times article. It is the right step in improving governance. Not only must the Government do the right thing, but it has the duty to explain why it is the right thing (or at least why it believes it is right). :-) The KTM suspects that explaining will not serve to reduce the criticisms from the rabidly anti-PAP online rabble, but it is nevertheless a move in the right direction.Finally, for all our sake, the KTM sure hopes that the Jobs Credit scheme will not simply be a cutesy intellectual curiosity, but that it will actually work. :-P All public policies regardless of whether they make intellectual sense or not, need to stand up to the test of the pudding. If it works, it's good policy; if it doesn't, then it's no good regardless of its intellectual merits.Afternote:The KTM has one quick comment about some of the comments by the supposed experts quoted in the Straits Times. Citibank's Chua Hak Bin is talking rubbish when he makes the following comment,'Suppose the scheme succeeds in saving 50,000 jobs, that's a cost of about $90,000 a job. That's double the median annual wage,'He clearly misses the point and doesn't understand public policy. Dunno why the ST even bothers to ask him for comments. Basically, the money spent actually goes into helping companies in coping with wage costs beyond just saving the 50,000 jobs. Also, part of the reason why the Government is spending the money is to pump funds into the economy that would hopefully have a multiplier effect. Finally, there's the relatively important political objective of saving jobs for LOCALS. The point here is that the Jobs Credit scheme seeks to do a lot of weird and wonderful things at the same time. Economists who are asked by the ST to give comments better go and think through before they open their gaps. Then again, perhaps Chua Hak Bin did say these things, but the ST selectively quote? Whatever lah. Good luck to people who let themselves be quoted. :-)Addendum:The discussion over Jobs Credits gets even more interesting as former senior civil servant joins in the fray and decries the scheme, preferring CPF cuts. :-) In case people don't know, Ngiam is not just any random former senior civil servant. He was formerly Permanent Secretary(Finance). Given his espoused stand, he would most definitely have killed the Jobs Credit scheme if he were the PS(Finance) today. Surely must know what he's saying right? So who's right? The KTM's view? Nobody really knows -- and this highlights the problem with public policy. There are many things we can do and there are many plausible reasons for each option. While the KTM does agree with some of the concerns raised by Ngiam, in this present instance, the KTM is however tempted to side with MOF's decision for two reasons: (i) MOF has access to more data than Ngiam and they would have gotten their small section of analysts to crunch some numbers. Ngiam's claim that "we cannot second-guess the employer. He has to restructure his business and reorganise his labour force" is a motherhood statement that KTM also knows how to spout, but it doesn't really prove that companies cannot already make adjustments with Jobs Credits; and (ii) Jobs Credits provides flexibility - if it doesn't quite work, we still have the unpalatable option of CPF cuts next year. CPF cuts are much more painful and politically costly to reverse/undo. We are already facing a huge problem of managing pensions. Cutting CPF exacerbates the problem. This point highlights the complexities of public policy. By addressing one problem, we can sometimes generate other problems down the road. It takes some brains and foresight to keep these issues clear. :-)This Budget is very educational. The KTM likes. :-PThe Straits Times2 Feb 2009Jobs Credit scheme: Killing 3 birds with one stoneBy Aaron Low, Political CorrespondentIN GIVING money to companies to help them cope with the downturn, the Government is in effect killing three birds with one stone, economists and analysts tell Insight.# First, The Jobs Credit, amounting to a 12 per cent subsidy on the first $2,500 of an employee's wage, delivers cash into the hands of companies.This is more effective than giving cash to individuals, for two reasons:- More people are saving in anticipation that this will be a protracted recession, says Dr Randolph Tan of Nanyang Technological University (NTU). Hence, money that is given out to individuals may not have much of a multiplier effect, in the sense of generating more value in the economy. It will simply be stashed away in the individual's bank account, or under the mattress.- The aim is to help businesses manage cash flow and hopefully forestall downsizing, business closures and retrenchments. Professor Hui Weng Tat from the Lee Kuan Yew School of Public Policy says that this will have 'the indirect effect of sustaining the consumption demand of workers who are able to keep their jobs'.'Giving cash grants to individuals who would otherwise face a higher chance of losing their jobs could result in a higher probability of contraction of consumption demand,' he says.'In this regard, giving money to companies would be more effective in sustaining aggregate demand.'# Second, on top of saving jobs, the scheme also puts pressure on employers to save jobs specifically for locals.The issue of foreign talent and workers in Singapore's midst has been a touchy subject with some Singaporeans wanting the Government to do more to provide jobs for Singaporeans.Latest figures show that the workforce has 1.057 million foreigners, or about one in three of the workforce here.This scheme may tilt the balance towards local workers as it is skewed towards the lower-paid and local workers, says PricewaterhouseCoopers tax partner David Sandison.He notes that a firm gets to save proportionally more by employing lower-paid workers as the subsidy is capped at $300.There are no such savings for foreign employees. In fact, companies have to pay an additional foreign worker levy, which ranges between $50 and $450 a month, depending on how many foreigners a firm employs.Hence, the difference in cost, after taking into account the Jobs Credit, 'may skew the decision-making towards firing of more foreigners', says Prof Hui.# Third, the scheme avoids cutting employers' Central Provident Fund (CPF) contribution rate, which some companies had been calling for.This scheme is a 'unique' instrument that is equivalent to a 9-percentage-point cut in employers' CPF contributions, but without the pain, says NTU's Dr Tan.Cutting CPF contribution rates would have been painful for workers because the national savings plan is not only tied to retirement financing but also medical, educational and housing needs. Many Singaporeans rely on their CPF savings to pay for their homes and medical treatment.Dr Tan notes that before the Jan 22 Budget statement, 'it seemed that a CPF cut was the only instrument available'.'By showing it can achieve the aim of reducing wages without actually shifting the burden to workers, the Government is putting its money where its mouth is,' he says.Still, despite the strengths of the scheme, economists point out that it is not perfect.NTU economics professor Tan Khee Giap says the scheme can afford to be a lot more targeted in its approach.He argues that smaller companies should be given higher subsidies as their wage bills form a higher percentage of their total costs, as compared to larger multinational companies.'Instead of a 12 per cent subsidy across the board, maybe it should be 15 per cent for small firms and 5 per cent for larger firms,' he says.'If the objective is to save jobs, the scheme should target small and medium enterprises since they employ 65 per cent of the workforce.'Indeed, Mr Poon Hong Yuen of the Ministry of Finance, who was in the thick of helping to design the system, acknowledges that the scheme could have taken a more targeted approach, except that it would have been difficult to implement.Perhaps the biggest criticism of the $4.5 billion scheme is that when companies face the crunch, the decision to hire or fire will not be decided by savings of 12 per cent.National University of Singapore professor Shandre Thangavelu expects the scheme to have only a 'short-run' impact on the retrenchment behaviour of employers. After a while, the layoffs will still hit.Citigroup's head of Singapore research Chua Hak Bin says the cost of the package seems disproportionate to the benefits it would possibly yield.'Suppose the scheme succeeds in saving 50,000 jobs, that's a cost of about $90,000 a job. That's double the median annual wage,' he says.'The scheme looks disproportionately generous towards saving jobs versus helping those who are jobless, who get close to nothing in the Budget.' The Straits Times3 Feb 2009CPF cut better than job creditsBy Ngiam Tong DowI WOULD prefer the more direct and robust approach of 1985 when we reduced the employers' Central Provident Fund (CPF) contribution from 25 per cent to 10 per cent. The current proposal of job credits is equivalent to a 9 percentage point cut in an employer's CPF contribution to encourage him to retain staff that he would otherwise discharge.But we need to do more than just save existing jobs. Singapore may no longer be competitive in these jobs. A job credit is in effect a wage subsidy. Subsidies cannot be sustained for long if our workers are no longer as productive as their peers in other, perhaps hungrier, countries, particularly in a knowledge-based global economy. For years, our productivity growth has lagged behind wage growth.We should go for a direct CPF cut in the employers' contribution and leave the employer to restructure and reorganise his company to compete in the harsh world we now find ourselves in.This was what happened in 1985. The world then was more benign, but we bit the bullet nevertheless. The adjustment was borne entirely by labour.I prefer a direct wage cost cut because this is the most effective way of saving jobs. In the meantime, all Singaporeans have to tighten their belts. And most critically, we must raise our individual capability and our overall productivity.We cannot second-guess the employer. He has to restructure his business and reorganise his labour force. We should not distract him by offering job credits.Of course, the present crisis is vastly different from past downturns. But that is all the more reason why we have to be careful not to make strategic mistakes.The writer, a former senior civil servant, is an adjunct professor at Nanyang Technological University. On the Budget The KTM is generally happy with the Budget. He is not a fan of drawing down the reserves and he was worried that we might overspend.The announced Budget seems modest enough. A lot of random people who have no idea what they are saying as asking for the Government to spend more. The KTM disagrees. It's really not clear that we can spend our way out of our current soup. Let's just take some modest measures and see how the situation evolves before we decide what to do next. Spending too much in this first instance would reduced our flexibility to respond in the next fiscal year. The KTM has some doubts that the economy will necessarily recover by end-2009. It's not an unlikely scenario that the economy will need a booster shot one year from now. The KTM thought the Job Credit scheme is an excellent alternative to a cut in the CPF rate for several reasons: (i) because it's once off, we can have a much larger effective cut of 9%; (ii) people's retirement savings do not get affected; and (iii) it's targeted to save jobs for "local" workers. Actually, with hindsight, this scheme seems like such an obvious solution. It's a wonder we didn't do the same in years past. Okay lah, it's not exactly a no-brainer. The key difference between the Job Credit scheme and a CPF cut is that the Government has to cough up money for the former, but not the latter. The KTM thinks however that it's a good tradeoff we're making. The KTM would also like to highlight an article on the Budget in the ST today that he thought was rather balanced and thoughtful. There is one point in the article that the KTM would like to highlight:It should be remembered that the Government needs to deliver an annual 3.5 per cent return for CPF savings, no matter how hostile the global financial markets are.A lot of kay pohs don't understand why the CPF rate shouldn't be higher. It's because of times like this. :-) The Straits TimesJan 23, 2009Sticking to sound principlesBy Tan Khee Giap, For The Straits TimesTHE size of the 2009 Budget deficit - about $15 billion or 6 per cent of GDP - is unprecedented. Both small enterprises and big corporations will benefit from the provisions for credit and special risk sharing; households will benefit from rebates, allowances and income supplements. All these measures reflect the Government's determination to ease the pain of rising unemployment, which is likely to deteriorate after Chinese New Year. It is nevertheless urgent that we be realistic as to what this unprecedented fiscal deficit can and cannot deliver.To begin with, Singapore, being the first East Asian economy to suffer a recession in this global downturn, will probably also be among the last to come out of it, notwithstanding this unprecedented fiscal stimulus.According to estimates by the Asia Research Centre at Nanyang Technological University, Singapore's economy will contract by 4.5 per cent this year, within the lower range of the latest official forecast of -5 per cent to -2 per cent. The economy will recover weakly to 2.6 per cent in 2010 and return to its potential growth rate of 5 per cent only in 2011.The Government has done a good job diversifying the economy over the past two decades. The 1986 Economic Review Committee addressed the loss of cost competitiveness and was successful in diversifying the electronics-based manufacturing sector with new sources of growth such as petrochemicals, pharmaceuticals, precision engineering and life sciences.The 2002 Economic Review Committee correctly identified the services sector, including the integrated resort-driven tourism sector, for expansion. This led to the construction and higher-end property market boom since 2006. Yet the global financial tsunami has demonstrated that our efforts to diversify our economy may not be enough.As a highly open economy, with total trade amounting to about 2.5 times its gross domestic product, Singapore's 85 per cent external-demand-driven economy is still in the midst of diversifying into the Chinese and Indian markets. Until our major export markets - the United States, Japan and Europe - recover, no amount of fiscal deficits will be able to turn the economy around swiftly.This situation is compounded by the worse-than-expected slowdown of regional economies, including China's. The deepest economic recession Singapore will have encountered in its history since the 1930s, caused by factors not within its control, demonstrate how vulnerable it is. We must continue to be prudent in future budgets in order to cope with rainy days and possible future global tsunamis.The Government's ability to cushion short-term pain with its ample financial resources cannot be taken for granted.Resisting populist pressuresTHE public must understand that the Government has been courageous in sticking to sound budgeting principles and balanced policies in the 2009 Budget, instead of giving in to populist demands.We have heard calls from many quarters, including trade chambers on behalf of small and medium enterprises as well as big corporations, that employers' Central Provident Fund (CPF) contributions and the existing Goods and Services Tax (GST) be cut. CPF and GST cuts would at best be inappropriate and premature, as they are untargeted and blunt policy instruments. More importantly, the current economic difficulties confronting companies here are not due to loss of competitiveness but lack of external demand; not so much due to the rising cost of credit but its availability as financial institutions shun risks.The sound approach is not to pump-prime the economy indiscriminately. We know that for every dollar spent here, only 40 cents are retained as domestic consumption, with limited multiplier impact. Unlike China and Japan, which can stimulate their economies with enhanced domestic consumption, Singapore cannot do so readily.Significantly, the Government did not cave in either to demands from the public for welfare benefits to be institutionalised. It must manage unrealistic expectations and ensure people understand that massive one-off short-term measures - such as those Minister of Finance Tharman Shanmugaratnam announced yesterday - cannot be repeated during normal times. The global financial environment in the foreseeable future is likely to remain volatile, with prospect of recovery for major world economies uncertain.Dipping regularly into our hard- earned national reserves on a massive scale is not sustainable. It should be remembered that the Government needs to deliver an annual 3.5 per cent return for CPF savings, no matter how hostile the global financial markets are.Future considerationsCHALLENGING and grim as the current global environment is, we have yet to see the worse. It is important to stay forward-looking and continue with Singapore's unfinished tasks. Like the 2009 Budget statement, future budget statements must take an integrated and targeted approach to strengthen our overall growth in a balanced manner. Three considerations need to be borne in mind:# Consideration 1: As we continue to expand our services sector, we must analyse the repercussions and implications of the current recession. We should rethink the longer-term impact of restructuring our manufacturing sector, especially the electronics segment. We must buy time to ensure the manufacturing sector is retained as long as possible, while allowing the services sector to develop further, including the financial sector, logistics, telecommunication, tourism, education and health care. We may have to ultimately prepare for the day, just as most mature economies have, when services become the dominant sector in Singapore.The Government will have to continue incurring large expenditure on both soft services infrastructure - including in education, health care and information technology - as well as on hard infrastructure facilities such as public transportation networks and environmental preservation, so that Singapore can remain competitive as a cosmopolitan city state.# Consideration 2: The Government must continue to look into the plight of senior workers and housewives who are in their mid-40s or older, who possess only secondary school education. Social infrastructure must be made available to enhance their labour force participation rate. Double-income households may be inevitable. As these categories of Singaporeans could very well stay in the labour market for a further 20 years, they should build up their retirement nest eggs now, especially given the lengthening average national lifespan.We must recognise that these groups of Singaporeans would not be in the position to compete with the large, regional pool of unskilled labour, who would readily accept lower wages. Fortunately, given decades of pro-business policies, the size of our economic cake has expanded significantly, and the economy has been able to provide more white- and blue-collar jobs than the resident working population can fill. I am, therefore, confident that the Government can cope with this medium- term challenge, especially since it has massively increased expenditure on continuing education.Having experimented with the pilot Workfare Income Supplement Scheme, we must now be prepared to expand it for as long as it is needed. We need to top up the wages of Singaporeans who accept jobs with monthly salaries of under $1,500, as a mean of addressing widening income disparities as Singapore's economy continues to globalise.As new cohorts of Singaporeans enter job markets, they would be in better competitive positions, with at least a polytechnic or technical diploma. Skill development subsidies should continue to be available to prepare Singaporeans who are ready to take new jobs or make career switches. Life-long learning will become the way of life for modern workers.# Consideration 3: The global competitive environment will require us to continue reforming our tax structures. We will need to shift from direct to indirect taxes, with personal income tax and corporate tax rates possibly lowered further.As the Singapore Constitution is amended 'to revise the framework for drawing more investment income from our reserves', more financial resources will made available, rendering the long-term provision of public goods more sustainable. Indeed in the 2009 Budget, the Government has, for the first time, dipped into our past reserves for $4.9 billion. The measure has received approval in principle from the President, given the severity of the downturn.Much as we accept that the economy will continue to be more, and not less, dependent on external demand, we must still work towards enlarging our domestic demand to about 30 per cent of total aggregate demand. We should do this not so much to augment the value-add GDP contributions but more for the potential job creation of small and medium enterprises, which already contribute to about 55 per cent of our total employment.Indeed, over recent years, we have seen increasing activity in wholesale, retail and commerce services as Singapore's resident population approaches five million. Once the economy recovers and circumstances permit, we must continue to move towards our targeted resident population. This may be unpopular but vital for the long-term stability and growth of this highly open economy.The writer is Associate Professor of Banking & Finance, Nanyang Business School, and Associate Dean, Graduate Studies Office, Nanyang Technological University. A Tale of Two Singapores The KTM was not surprised by the outcry over Tan Yong Soon's article on his cooking trip. That we have idiots for bloggers in Singapore is an open secret. What shocked the KTM was that Teo Chee Hean bothered to entertain an inane question posed by NMP Siew Kum Hoong, and Peter Ho's public statement. The KTM thinks the statement is stupid and ridiculous. Charles Chong has apparently gotten himself into some soup by referring to these people as "lesser mortals". :-) Funny.The KTM doesn't know Charles and doesn't think much of him, but he thought he would do Charles a favour by helping him clarify what he was saying. He probably meant "losers", NOT "lesser mortals". (Maybe he did say "losers" and the media was helpful in trying to make it sound more "politically correct"? :-P)Yes, this is the tale of Singapore, or more accurately, a tale of two Singapores, divided into the "winners" and the "losers"; the rich and the poor; the "elites" and the rest. :-) The KTM has expressed his views on this matter before and so has no wish to flog the dead horse even deader. (The title of this post is actually crap and inappropriate, but the KTM is too lazy to think of a better one.)Instead, this post is a rant about the lack of principle in the handling of the Tan Yong Soon incident. As to be surmised from the KTM's earlier points, the KTM is disappointed with the Minster-in-charge of the Civil Service and the Head, Civil Service. First, the KTM has nasty things to say about Siew Kum Hoong (but the KTM decided to remove them in order to keep this blog rated G). For all the equal rights he's been spouting, he doesn't seem to understand that civil servants have the right to (i) spend their own money any way they wish; and (ii) conduct their private lives in their private capacity, i.e. by writing for the Straits Times. What was his point in raising the question about Tan Yong Soon in Parliament? We don't have enough economic problems to deal with and he got no better questions to ask? Two, the Minister seemed to forget that civil servants have a right to their private lives. Tan Yong Soon did not write for the Straits Times in his capacity as Permanent Secretary of MEWR. He was writing what seemed to the KTM to be a travelogue. Perhaps some what can explain to the KTM what is the link between a food tour and MEWR. Oh yeah, the KTM forgot that he needs to go to NEA for his hawker license. Brilliant. That's called a conflict-of-interest? Cannot promote french cuisine over char kway teow? KTM should write to ST too. Then again, the KTM does understand what "ill-judged" and "lack of sensitivity" means and so he can explain: as it turns out, the ordinary people don't understand the separation between the Civil Service and the political appointees. So hor, by the apparently lack of sensitivity, the PAP might lose votes. Fair enough, but that's really NOT Tan Yong Soon's problem and it should never be an issue for the civil servants. Civil servants are appointed independently by the Public Service Commission and they should have the RIGHT to a private life. The KTM is not saying that civil servants should not be indiscriminate in what they do, but in this case, where what's done is already done, we should be circumspect in asking ourselves a very simple question, "Did he actually do anything WRONG?" The KTM fails to understand why what Tan Yong Soon did "stands in contrast to the values and ethos of the Service". So it is wrong for a civil servant to take his family on a holiday? And it is wrong for him to share his wonderful experience with the rest of the poor Singaporeans like the KTM (who poor thing thing cannot afford such a trip) by writing a travelogue? The Civil Service (and Administrative Service in particular) must demonstrate the moral courage to do what is principled and not what is politically convenient or expedient.Moving forward, we are facing the greatest economic challenge we have ever faced as a nation. We are going to need all the moral courage we can muster to DO THE RIGHT THING. Sometimes, the right thing is to tell kay pohs like Siew Kum Hoong to FO. :-PAfternote:This post was written because the KTM is quite irritated by some of the things he's read online. At least irritated enough to crawl out of his hole to spout some rubbish. The post is calculated to offend and draw flak. The KTM will reply civilly to folks who want a good discussion but he reserves the right to ignore posts from ones he deems are from "losers". :-P All comments (except those containing obscenities, profanities or seditious and racist remarks as per regular policy) will however be allowed. :-)The KTM generally has quite a dim view of the letters that appear in the ST Forum Page. Strangely enough, there are quite a number of posts in the Forum expressing pretty much what KTM thinks about this issue. :-) This incident actually also demonstrates that the Government (as personified by Teo Chee Hian) is really quite out of touch with the ground. Most Singaporeans (or at least the ones the KTM has spoken to) actually don't care much about this incident and are more worried about their jobs. Generally attitude is "he wants to blow $45K on a cooking trip his problem loh; even if he doesn't he's not going to give the money to me what". KTM's view is that the Government is giving to much credence to these online kay pohs. The Straits TimesJan 19, 2009Rapped for insensitivityBy Li Xueying, Political CorrespondentTHE minister in charge of the civil service, Mr Teo Chee Hean, has criticised an article written by a senior civil servant as 'ill-judged' and showing a 'lack of sensitivity'.Mr Tan Yong Soon, permanent secretary in the Ministry of Environment and Water Resources, wrote an article in The Straits Times' Life! section on Jan 6. Headlined Cooking up the holiday spirit, his article described a five-week holiday he and his family spent in Paris, learning how to cook at the Le Cordon Bleu cookery school in Paris.The cooking courses cost around $42,000.The article attracted a storm of criticisms from Singaporeans who felt that it showed a lack of empathy for the working man.Tackling the issue in Parliament, Mr Teo said that what Mr Tan does during his vacation leave is 'his private decision'.'However, I was disappointed with what he wrote in The Straits Times,' said Mr Teo in Parliament on Monday. 'The article showed a lack of sensitivity and was ill-judged.'The minister was replying to a question by Nominated MP Siew Kum Hong, who asked whether the public service has guidelines to ensure that civil servants conduct themselves 'appropriately and sensitively'.Mr Siew noted that Mr Tan has the prerogative to spend his money as he sees fit. 'But in these times writing about it in the national newspaper was unnecessarily provocative and unimaginably insensitive,' he said.Mr Teo agreed.He said that the article 'struck a discordant note during the current difficult economic circumstances when it is especially important to show solidarity and empathy for Singaporeans who are facing uncertainties and hardship'.He added that Mr Peter Ho, the head of the civil service, had spoken to Mr Tan 'to make these points and asked Mr Tan to take note of the feedback and learn from this episode'.Mr Ho has also followed up to write to Mr Tan to 'put the matter on the record', added Mr Teo.Statement from Civil Service head Peter Ho'It is part of the duty of civil servants to be sensitive to challenges faced by Singaporeans, especially in difficult times like these. The leadership of the Civil Service - the Permanent Secretaries - must exemplify this sensitivity.'This is vital for Government to be able to formulate and implement policies effectively. So Mr Tan's comments were clearly ill-judged, and were quite inappropriate, particularly because of his leadership position.'My colleagues and I feel very bad about this episode, because it stands in contrast to the values and ethos of the Service, and if left unaddressed, can undermine the confidence and trust essential for us to do a good job. It is a setback for the Service, but it is also a reminder of what our duty is, and where our duty lies - to do better for Singapore and for Singaporeans.'Civil servants should remember the values of the Singapore Public Service: 'Integrity, Service, Excellence'. Our first duty is to serve Singapore and Singaporeans, and we should always conduct ourselves with decorum and humility. Everything takes its marking from this.' On Capitalism and the Free Market 2008 has been an interesting year and the KTM suspects that 2009 will be no different. If there is fear, uncertainty and insecurity, they are all justified. After all, the world is looking at the worse economic crisis since the Great Depression. Not many of the people alive today were born before the Depression and not many really understand how serious it was and how serious it can be, but this post isn't about crystal-ball gazing, it is a reflection of the KTM's thoughts on capitalism and the free markets in view of recent events. Recent events have caused deep-seated beliefs in the "supremacy of the free market" in some quarters to take a beating. Even Greenspan, The Oracle, was forced to admit that he was wrong. He had underestimate that greed could cause the captains of Wall Street to forsake their responsibilities to their shareholders to engage in activities he could not have foreseen in his wildest dreams.In this backdrop, we have the meltdown caused by Lehman and huge bailouts of Citigroup, AIG, and now the automotive industries. Now, even though flush with cash, banks are not lending and there are serious doubts about the effectiveness of the various stimulus packages proposed by the different nations, with the Germans criticizing the Brits and vice versa. Then there's Madoff, who now holds the world record for the biggest con job EVER. Strangely enough, except for some pasar malam at Hong Lim and disquiet over TCs losing some money in Lehman-linked investments, Singapore has emerged relatively unscathed, sans the HUGE looming recession ahead (wrong, it's already here). That said, the KTM is actually quietly confident of our short term future 'cos this is a moment that Singapore has been preparing for and there is no other country in the world that is quite as prepared as we are going into a recession. Nevertheless, there will still be pain (of course). The KTM understands that across the causeway, people are still rather oblivious of what's going on - distracting by a year of political theatre. Poor sods. Reality will hit soon enough. No, it will bite. *sigh* Hopefully, our neighbour won't descend into anarchy. Anyhow, in this backdrop of gloom and doom, what does it really mean for Singapore and the world moving forward? If capitalism and the free market have failed, is there a better system? Obama has done a lot of work in trying to convince Americans that government is not necessarily a dirty word. Is government regulation then the solution to the world's economic problems? The KTM has thought about this issue long and hard over the last couple of months 'cos it is a very fundamental question for public policy: to what extent should the market be allowed to "do its thing" and to what extent should the Government interfere with the functioning of the market? First, let's do some stock taking. What is the subprime crisis? Does it demonstrate in no uncertain terms that the free market has failed? People say it's about greed - yeah, but then, capitalism and the free market is also all about greed isn't it? Was it a regulation failure? Perhaps. But as far as the KTM is concerned, it's just another one of those bubbles. We have seen many. Of course, there is no denying that the subprime mess is probably the mother-of-all-bubbles, but how structurally different is it from the rest? People seem to forget that not everyone lost money in the subprime mess. There are also a lot of people who MADE money selling their properties at prices way above the "fair" value. Just turns out that these folks aren't in a hurry to cough up the money they made. Banks (and because of them American tax payers) lost a lot of money, but that's just because they were being stupid. So where's the problem? The KTM actually doesn't see much of a problem. Seems exactly like how the free market should be expected to work to the KTM, i.e. you do something stupid, you pay for it.What has occurred to the KTM is that the neoclassical "free market" theories have failed (though it's still somewhat speculative at this point) because they have failed to take into account the presence and role of Government. In a "perfect free market" world, the banks and automakers would have gone bust. But they have not, as they should. The act of bailing out entities that are inefficient/irresponsible creates moral hazards in the KTM's opinion.Of course, the prospect of a Second Great Depression is extremely scary, but maybe that's what the world needs at this point to bring it "back into balance". For example, it doesn't take a genius to realize that something is seriously wrong with the world today with American racking up its US$10 trillion foreign debt (est. according to Wikipedia) or $37,000 per capita debt. With the latest bailouts, this number will continue to balloon. American politicians love to talk about it. How many are doing anything about it? Does ANY US politician dare doing anything about it? Maybe another Great Depression will help bring some sense to this madness. So, to keep it simple, the KTM's view is that it may not necessarily be true that the invisible hand has failed, but maybe economists and market gurus have just failed to account for the role of politics and government in the functioning of the market. And intimated related to politics are the expectations of the people. Ordinary folks expect, rightly or otherwise, the government to protect them. But that makes no sense in the free market where only the fittest will survive and the weak will perish. How do we even begin to model this? Moving forward, the KTM believes that some progress might be made if we can better understand and model the effects of politics and government on the free market. Also, people should stop this nonsense about the market being efficient. The market is obviously not entirely efficient, simply because people are NOT rationale and having a whole bunch of them aggregated together as a "market" DOESN'T make them them rationale! What is true however is that there is some sense in the madness. Just like water that will always find its level, the market will have a tendency to regress to its "true" level in the long term (whatever that means) regardless of how crazy and irrational people get. All in all, the KTM still believes that market works and that government shouldn't meddle (except in the case of natural monopolies). Yes, maybe the KTM is nuts. :-P Hard to believe, but a depression might actually be good for us (in the long term). So much for an upbeat New Year message. :-) Yaw Shin Leong is Right! Yaw Shin Leong is currently being attacked by many for his comment that he had voted for PAP MP Teo Ho Pin during the last General Election.It is quite clear that politicians walk a tight rope and some things are better left unsaid. There are many (KTM included) who have doubts about the wisdom of Yaw making his vote known, but that is not the subject of this blog entry. Some things done cannot be undone and so there's really no point crying over spilt milk. The KTM has been in this dunno what philosophical mood recently and he's more interested in Yaw's position that he votes for the person rather than the party. Sounds reasonable enough, until you hear the last part, where Yaw says that he might even consider voting against a WP candidate. In fact, the KTM posted the following comment on Yaw's blog:Agree in general except one point: if there is a contest between WP and any other party, you should vote WP. Because you belong to the party, it is only right that you should support your own party. That much loyalty you owe to your party.If you cannot agree with the people that your party has accepted into its ranks, then you should change parties so that your loyalties do not continue to be divided.The KTM didn't even need to think on this one (which turned out to be his mistake). While the KTM's views are generally not very popular, it seemed clear to the KTM that most would probably agree with the KTM on this statement. Sounds right what. How can it be wrong? You pick a party, you have to show loyalty to a party no?For dunno what reason, the KTM was thinking about this "loyalty" principle and trying to figure out how one can seek to justify this principle. Surely, if this is right and reasonable, we must be able to explain to people why this is a reasonable principle. Strangely enough, the KTM couldn't. :-(The way that one can go about reasoning about such things is to construct really warped thought experiments that gives us a headache. One simple and related example: suppose that one was a magistrate in imperial China and one's father was caught and charged with murder. The evidence is conclusive and penalty is death. Well, the magistrate has pretty much absolute power, so what should one do? Do the "right" thing and sentence one's father to death, or do the "filial" thing and find some excuse to acquit him? Now for the thought experiment (Disclaimer: the following is pure fiction. Any semblance to any persons dead or alive is mere concidence): fast forward to year 20XX, SP (Sarong Party) has become the dominant Opposition Party in Singapore neck-to-neck with the PAP. The PAP till that point has not lost a single election, though the margins have steadily been thinning and GE20XX looks like the year that change was going to happen. Suppose for a moment that there are 85 seats in Parliament (This is a rant: KTM never understood why we have 84 seats. Scully PAP 42, Opposition 42 how?). As it turns out, in this pivotal year, after 84 seats have been contested, the results indeed show a neck-to-neck fight PAP 42: SP 42 and there is one last SMC remaining. KTM belongs to the SP of course. :-) This last SMC fight is really interesting - it is a fight between the then PAP PM Lee Hiang Lung and a major SP stewart, Slimy Two-Face (STF). More background: SP is generally filled with lots of patriotic people who love the country. Sarong Party Secretary-General is a well-respected figure encik Mee Pok Man. But MPM is old and STF is his designated successor. If SP wins, STF will likely be the next PM. The KTM happens to be a small fry activist in SP - but as it turns out, KTM has had dealing with STF. STF as it turns out is extremely good looking and suave and he NEVER says the wrong things. Unfortunately, the KTM had on several occasions caught sight of STF doing some unscrupulous things that makes the KTM despise this character. It is nothing personal. STF has no integrity period. It also turns out that STF is extremely good at covering his tracks, so no one else except the KTM knows about it and the KTM has thus far been unable to find any incriminating evidence against STF. What about PM LHL? Well, he is very much like all his PAP predecessors. Career bureaucrat. Does his job. Foot in mouth every now and then. Runs the economy reasonably well, but policies are considered too money-minded and lacking in compassion (which is why the gradual decline in "mandate" to begin with). So fast forward back to Polling Day GE 20XX. As fate will have it, the KTM actually lives in the contested SMC and has to decide who to cast the vote for: PAP or SP. It turns out that the KTM has philosophically objections against spoiling the vote and so rules that option out. So, should the KTM vote PAP or SP? By dogma, it will be SP - but should we vote by dogma? Note also that if the KTM votes against STF, he is compelled to come up with a damn good reason because he doesn't like STF to begin with. The KTM believes that in casting one's vote, personal feelings shouldn't figure. So how?After much thought the KTM decided that he couldn't follow dogma in this instance and would vote against STF. The reasons are as follows: Why did KTM join the Sarong Party? Nope, not for the SPGs. Rather, it was because his philosophical learnings were closer to those of SP rather than PAP and he prefers the policies proposed by SP over those by PAP. The KTM would avoid using qualifiers like "better" because at this juncture in this imagination world, Singapore is already close to the US Republican/Democrats model and any policy can be both good and bad depending on where one is standing.So in this light, it is really first the country and then the party and not the other way around. Next, the KTM believes that a PM without integrity is the quickest way to ruin the country and so STF as PM is unacceptable to him because he doesn't believe that it is in the interest of the country.Consequences if STF loses? PAP will run the country for another 5 years -- might not be ideal, but PAP has already run the country (20xx-1969) years, so there'll be no surprises. There's always the next election and at the meantime, the KTM might be able to uncover STF's evil deeds and clean house for his party. In fact, if STF did come to power and did bad things, SP's hard and good work would be completely crushed (c.f. DPP, Taiwan). Okay. The KTM admits that most of this story is pretty bogus and contrived, but what it has demonstrated to the KTM beyond reasonable doubt, is that Yaw Shin Leong is perfectly justified to say that he cannot be sure that he will necessarily vote for a WP candidate. And in summary, the fundamental reason why Yaw Shin Leong is right is: nation before party, principles before dogma. Truly, it takes some guts and integrity to say that what is right, instead of what is politically correct and expedient. We live in interesting times. :-PAfternoteYaw has apparently retracted his statements. Poor sod was probably under a lot of pressure. In doing so, he might get some votes from the rabid anti-PAP crowds, but cuts no ice with folks like the KTM. Sad thing about politics is that posturing is necessary. Sometimes, the wise thing to say is NOTHING at all. :-) Three Questions Someone commented that the KTM has recently come out of the woods out of nowhere guns blazing. Hehe. Perhaps. :-)It is indeed true that the KTM has taken quite a long hiatus from blogging. But truthfully, the main reason is this: the KTM didn't find anything he wanted to blog about. The KTM isn't paid to blog (at least not anymore), so it really doesn't matter. Perhaps it was a writer's block? Perhaps Singapore is just really boring? Who knows, but these last couple of days has been interesting because the KTM now has three questions swimming in his head. :-) Inspiration? Perhaps. Why does the KTM care about these questions? 'cos there are no easy answers. :-) What investment policies are acceptable for our reserves? How can we judge if the Government is doing the "right thing" with the reserves? This is not a question about whether we should use the reserves to subsidize the price of rice. The question we are asking here is the following (and in a vacuum): suppose GIC has $xx billion dollars in the reserves, what sorts of risks should GIC be entitled to take? The point here is the following: even for individual investments, this question is not easy to answer because different individuals have different risk appetites. Two individuals who have the same nett worth may decide to invest in two different portfolios and they may both be "optimal" if the risk appetites of the two individuals are taken into account correctly. This question is hard because of a number of reasons: (i) the money doesn't belong to one individual, but to a collective entity of 3 million people. How do we ensure that the final decision is really what these 3 million people want? Should it be a democratic process and we have referendum? (ii) SWFs attract unnecessary attention and often become political problems when we invest our money in foreign countries. Foreign countries are often enamoured with the idea that we're buying and controlling key assets (e.g. ports). (iii) Investments will entail downside and in cases like Shin Corp and to a lesser extent UBS/Citibank, these downsides can become political issues - so SWFs are quite different from regular funds and hedge funds because they are susceptible to public pressures. While one may argue that the PAP has successfully brushed aside all such concerns, the KTM doubts this is a viable strategy in the long term because there is certainly a political cost. Next, there is the question of how we can and should define accountability. Why is this complicated? Because there's risk and it's very hard to measure. First we need a "target" - GIC definitely shouldn't under-perform compared to the market average, but what is the "correct" premium that we should demand as "acceptable performance"? 1%? 2%? 5%? Unless we set the bar really low, some years, GIC will not make it - then what? Fire the Chairman? What should be the people and MOF's response? Finally, there is also question of the relation between our CPF money and the reserves, 'cos presumably our CPF monies constitute a portion of the reserves? So what should be the right interest rate for CPF viz-a-viz the expected return on the reserves? "With great pay comes great responsibility" What does high pay in the public service really mean? While people may think that the KTM is referring to the MSK case, nah. The MSK is really straightforward in the KTM's view and not very interesting to discuss. What the KTM thinks would be interesting to do is to think of an imaginary scenario (or perhaps cite a real one) where things are really screwed up and ministerial liability is clear cut, and then we ask ourselves: how should we be attempting to reconcile the high ministerial salaries with the mistakes.And even before that, it would be interesting to think about what high ministerial salaries mean. The Govt has said that salaries should be pegged to the top dunno 24 people or something and given their reasons. Others have disagreed. The question is: what should be the relation between pay and responsibility? MSK is a really lousy example, but suppose for a moment (and many probably won't have too much trouble with this) that we can find DPM Wong personally responsible for the fiasco, but only slightly so. Slightly only lah. If fully, the answer is obvious and we don't want that. We want to construct a somewhat ambiguous problem here so that we can have something to reason about. Next, we put DPM's pay on a slider start at say $100. There is a school of thought that probably believes that as we move the slider and increase his pay, he therefore becomes more and more "responsible" and at some point, perhaps when the slider reaches $1 or $2 million, he should be sacked? How reasonable is this argument? Why is it reasonable/unreasonable?To what extent should the Government "take care" of its people? What is our response to our old folks cleaning tables in the hawker centres? There was this article today in the Sunday Times on this 83 year old cleaner who is still working and there was this other guy Tired Man who claimed at TOC:I believe it is a duty of the government (of course not the annuities as I see economic component it.) to look after her elderly as they had contributed to the society for the past few decades. I do not wish my mom to pick up aluminum cans for living. Am I watching a movie of my future? It is such a disgrace for a PM to encourage his “mothers” and “fathers” to work at their age. To become a graceful society, the government must be equiped with graceful brain and policies.This statement is probably not new to the reader and many people probably have come across something similar, or even hold a similar opinion.It is a no-brainer that the Government should "take care" of its people, but the question is how do we reconcile the role of Government with the opinion expressed by Tiredman et al. that "it is a duty of the government to look after her elderly as they had contributed to the society for the past few decades"? Prema facie, the KTM believes that most people (even the KTM) can and will agree with this statement. The key issue is essentially: what is the "extent" of this duty?To take this question of what "take care" should mean further, it is perhaps interesting also to also explore this question in the context of local vs foreign workers, as people must be aware of the recent spat between MPs Seng Han Thong and Low Thia Khiang over the employment of locals at our town councils. It is likely that the KTM will blog about these three questions in the days to come. Not exactly sure when 'cos the KTM still hasn't come to a conclusion on what his views are on these issues -- and more importantly, how to even think about these questions. Entries will be published either at Singapore Angle or at this KT stall depending on how polished the final product ends up. :-)Readers are welcome to leave comments for the KTM on what they think. It is unlikely that the KTM will engage in a full debate at this point 'cos his still trying to figure out what he thinks, but he might ask questions and we can have a short preliminary discussion going. :-)The Sunday TimesMay 4, 2008 You're so old. Why are you cleaning toilets?Is it a sad reflection of society that the elderly are in such jobs, asked a readerBy Teo Cheng WeeCleaning toilets. Clearing plates. And many of these cleaners are elderly.Indeed, in the 13 years that Mr Ahmad Aman has been cleaning the toilets in shopping centres, two questions are constantly posed to him.They are: 'Uncle, why are you still doing this job at your age?' and 'Uncle, why aren't your kids taking care of you?'The father of nine is 83 years old. But he says he has to work because he has a family to feed.He has two school-going children with his second wife. The former seaman is divorced from his first wife.He is reluctant to take money from his other seven children, who he says do not earn very much either. With only a basic education from Malaya before he moved to Singapore in 1946, there are few other available jobs for him.The sight of such old cleaners prompted Straits Times reader Anne Chong to write to The Sunday Times last month, saying that the situation was 'a sad reflection of society here'.'During my travels through China, from rural Yunnan to cosmopolitan Shanghai, I never once encountered an elderly toilet cleaner.'This is perhaps because in China, it is considered a stain on the family honour if your mother, grandmother or aunt has to clean toilets to support herself, so the elderly are usually supported by the family network.'The situation is the same in the Philippines,' she wrote.Restroom Association of Singapore (RAS) president Tan Puay Hoon responded in a letter two weeks later. She said RAS was 'looking into the possibility of designing jobs for elderly toilet cleaners'.'With sufficient funding, they can be trained as restroom assessors to audit and rate public toilets (for RAS),' she wrote.Elderly cleaner Chuy Chee Yong, 76, who has worked for eight years as a table cleaner in Lavender Food Court, said he is 'somewhat ashamed' of his job.The father of three would like to retire if he could, but needs money to pay for his heart medication and to take care of his wife, who is also ill. Like Mr Ahmad, he does not want to take money from his children because he feels that they too are struggling to make ends meet.Cleaning contractors estimate that workers aged above 65 make up about 10 to 20 per cent of their total staff. They reckon that, of this estimate, perhaps half - people like Mr Chuy and Mr Ahmad - work because they need to. The rest do so to earn a little more pocket money.Many of these elderly folk, moreover, are illiterate or have minimal paper qualifications. Cleaning is their main avenue of work because the barrier to entry is low.The Ministry of Manpower (MOM) said that 'cleaners, labourers and related workers' make up the biggest number of jobs for people aged 65 and above here, with about 16,000 people employed in such jobs last year.That makes up 35 per cent of the total number of workers for that age group. In comparison, these jobs comprise only 2 per cent of the total number of jobs for Singaporeans aged from 30 to 34 - and the percentage rises with each older age group. Cleaning contractors say that they are not out to look for older workers as the salary is the same - about $500 to $800 a month - whether one is young or old.Mr Jason Low, head of operations for cleaning contractor Sun City Maintenance, put it this way: 'Who are the people who can survive on this amount? It's the old folk, who live frugally and need only to support themselves.'RAS' Ms Tan agreed, saying that the industry will not be able to hire younger cleaners if the pay stays at this level. 'If you are young and need to support a family, you will need to earn at least $1,000 to $1,200,' she said.A few contractors told The Sunday Times that hiring older workers is not a bad thing, even if they may be slower.At cleaning contractor A&P Maintenance, for instance, about a quarter of its workers are aged 65 and above.'What we like about older workers is they don't job hop, they're more loyal and they put in more effort. The young ones will go absent regularly,' said Mr Kenny Tan, executive director of A&P.Mr Alvin Tan, operations manager of S21 coffee shops, said they also try to hire more old people. 'As there are limited jobs for older workers, this is our way of doing public service'.Acting Labour Minister Gan Kim Yong, who is the chairman of the Tripartite Committee on Employability of Older Workers, said that 'all workers, including toilet cleaners, make a meaningful contribution to society and should be respected'.Labour MP Halimah Yacob agreed. She said one should not assume that all older workers doing dirty jobs are unhappy.'Many of the older workers I have met in these jobs have a great deal of pride in their work. I don't think we should be too judgmental about whether their work is shameful,' she said. To regulate (and how) or not to regulate? The KTM got involved in a discussion with Mr Tan Kin Lian on the question of the regulation of financial institutions w.r.t. "questionable" financial products at TOC. This entry is a short summary of the crux of the exchange. The KTM is hoping to continue the discussion on the regulation of financial products with Mr Tan here. :-PMr Tan said in the article that “(MAS presumably) should disallow financial and insurance products that have excessive charges and offer unfair terms to consumers”, which seems to imply that MAS should start playing the role of HSA for financial products. Would such regulation be prudent and how should it be done?The KTM disagreed with this statement because he is of opinion that if the Govt tried to regulate, it’s probably going to screw it up - because MAS won’t be able to do it right. However, the KTM could most certainly be wrong if there’s indeed some way of regulating the industry, which is why Mr Tan's views on “how” the regulation should be done were sought.The following question was posed to Mr Tan:Imagine. Just imagine that the Government agrees with you that we should regulate more and you are appointed the Director at MAS in charge of the regulation. In addition, you have a small army of analysts at your disposal to help you with your work. My question: what is your directive to your army of analysts w.r.t. what should be considered “questionable” products?Obviously there are many factors, e.g. liquidity, maturity, etc. etc., but at the end of the day, it’s all about the tradeoff between rate of return versus risk. So what are you going to do? Are you going to say that only products with a minimal “effective” (nett of fees) rate of returns of say 5% can be sold? How would you even begin to quantify the risks and are you going to make decisions on behalf of the people w.r.t. their risk appetites?Since you were from the insurance line, so perhaps we can do a simple case study for insurance products that typically have two components - guaranteed and non-guaranteed. What sorts of conditions would you impose on them? People surely haven’t forgotten the recent episode where AIA zeroed the bonuses (because investments didn’t do so well)? When insurance companies sell their products they always have this dunno what projected returns. If they cannot meet how? Should MAS keep track and fine them?? If MAS passes such a law, the KTM is sure you know the reaction of the insurance companies. As we know, NTUC Income is a major player in the financial sector in Singapore and since NTUC is a co-operative, which means that it is supposedly owned “by the people for the people”, how is it possible that NTUC will come up with “questionable” products, which seems to be what you are insinuating as you sweep the financial landscape with your broad strokes?Now suppose the KTM has misunderstood, and NTUC Income is flush with lots and lots of “good products”, then isn’t the solution simple? Government can just tell the people, “Let’s buy NTUC. NTUC will take care of all your retirement needs!”. In any case, if NTUC Income is “doing the right thing”, wouldn’t it already be exerting competitive pressures on the other financial institutions to fall in line?Mr Tan said that he would like the regulator to require the product issuers to answer a few key questions:what are the charges levied on the consumerwhat benefits is being provided by the product issuerwhat is the best estimate cost of the benefitsThe KTM was frankly quite surprised at this 'cos he thought that there were already rules on disclosure. Mr Tan also cited an very interesting example of a product meant to skim consumers:A structured product is being introduced to give a capital guarantee at the end of 5 years. If the yield on government bonds is 4% per annum, the product can earn 20% from this investment. If the charges taken away for the marketing, issue expenses and the profit to the issuer is 15%, the product is likely to return 5% for 5 years or 1% per year. To hide this miserable yield, the issuer invest the remaining 5% in an option. Many of these options expire without value. The investor is likely to get back the original principal - nothing more.The KTM then responded as follows:Your cited example is interesting - but it is still not clear that regulation (in the sense of banning such products) is necessarily the only way. You seem to have described a problem of misrepresentation. My question on your 5%-gamble-on-option product is the following: how does/can a financial institution get away with it?Even a naive investor will ask the question: how much can he expect to get after 5 years, above and beyond the capital guarantee? Surely the bank rep must cough up a number and the expected returns must be more than you regular bank savings rates for him to invest in the structured product. Are you suggesting that there a problem in that number? In your example, the bank rep should have said 1% p.a. right? If not, then shouldn’t MAS simply take action against misrepresentation?Frankly, the KTM has no issues with MAS requiring financial institutions to make full (or what’s deemed “sufficient” ;) disclosure of financial products (but he thought this has already been done what no?). Where the KTM disagrees quite strongly with you is the statement that “(MAS should) disallow financial and insurance products that have excessive charges and offer unfair terms to consumers”, because the terms “excessive” and “unfair” are highly contentious (and he was basically seeking to understand where in your opinion is that threshold separating “reasonable” from “excessive” and separating “fair” and “unfair”).If there’s is no misrepresentation and it’s a case of willing buyer/willing seller, why should we stop people from buying/selling? You seem to be implying that your invest-5%-on-option instrument is bad. Perhaps you are right, but there is this organization called Singapore Pools and they sell this thing called 4-D. Is buying 4-D necessarily better or worse than investing 5% on options?Now the question about NTUC Income was not random (and neither was it a personal attack - merely an unfortunate coincidence that Mr Tan was former CEO of NTUC Income). The point very simply is the following: NTUC Income is a subsidiary of the NTUC, a national co-operative under the control of the Government. And hor, co-operatives aren’t usually supposed to be making tons of money since they are supposedly “by the people for the people”.The answer to “questionable” financial products thus seems pretty obvious (or perhaps not): if NTUC Income is doing its job and coming up with quality products, it should be hard for other financial institutions to sell their “questionable” products. All NTUC Income has to do is to take up ad’s side-by-side with these “questionable” products with accurate information and let these products sell themselves. Of course, this might not eliminate “questionable” products completely, but it should make these products relatively unpopular if the uptake isn’t high enough. So ends the KTM’s logic. :-)This argument could however be flawed since the KTM is not sufficiently familiar with the financial landscape to see where the underlying assumptions might fail. Addendum:Mr Tan replies:The product issuer tells the financially naive investors that their money is invested in certain combination of shares or bonds that will give certain yield under certain circumstances in the future.The ordinary folks have no way of calculating the probability of the “happy events” occuring. As a financial expert, I will not be able to calculate this probability as well, but I guess that the chance is very, very small.What happened? Most of these “happy events” did not occur. The investor is likely to get his principal back. In some cases, they lose part of their principal - as they were not aware about the risks.I understand that some of the structured products are invested in CDOs. They have not matured yet. Let us see if the investors can get back their principal.As the so-called MAS director of regulation (if I ever get appointed), I will never allow this type of “rip-off” to happen. It will not be possible for the product issuer to answer my (b) and (c) questions, so the product will never get approved by me.Why did the government regulate gambling? It is to ensure that the consumers are not “rip off”. They should be given a fair game of chance, and may pay some loading to cover expenses.Sadly, this kind of protection does not occur, when financial products are concerned and reputable, trusted banks are involved.And the KTM responds:Wah, isn’t it somewhat extreme to issue disclosure requirements that are not satisfiable?While the KTM still doesn’t understand completely what you mean by (b) and (c), he does not believe that your requirements are impossible to satisfy. It is just not plausible for MAS do something like that. In fact, let’s imagine that you are the MAS Director and KTM is CEO of the imaginary KT Income, and you issue this new directive. This is what the KTM will do:KT Income will kwai kwai follow your instructions and submit the data to you as required. Whatever PhDs you have, the KTM will also similarly employ to spit out the numbers you ask for. Throw in the partial differential equations, Black-Scholes, kitchen sink and all. Somehow, there will be these magic numbers all backed up nicely with data and charts. :-PThat’s not it. The KT Income will not be submitting just one product for approval, but a whole range of products (10?) ranging from almost riskless bond-like products to the high-risk products. Why? The KTM is merely probing your system. You cannot possibly be blocking the bond-like products. The question will be: where is your threshold and how do you actually do the regulation?If your threshold is too low, the KTM will complain to the Finance Minister that you are killing the financial sector and Singapore can kiss it’s pipe dream of becoming a financial services hub goodbye. :-P And it’s not just a complaint letter. The complaint will be a big stack of documents demonstrating to the Minister in no uncertain terms that MAS has disallowed a product that is comparable to products available in other major financial centres like New York or London - and you can go figure how to explain to Minister. The KTM’s numbers will be correct (’cos they will be generated by this army of PhDs in the back room). :-)Ding-dong enough and something will eventually get through ‘cos KT Income has the resources to play this little game with the MAS bureaucrats. And what happens after that? Two things:(i) What is submitted to MAS for approval and what is printed in the marketing brochures are not exactly the same. There no lies of course! By why the omissions? “Aiyah, not our fault. We did try to print (b) and (c) in our earlier versions, but we found out that the customers couldn’t understand and didn’t find it useful. We want to help the customers understand and so we only print useful information in the product description.” Actually hor, you want us to print also never mind, since like you say, nobody understands anyhow.(ii) There will always be risks - and if the product tanks, whose fault? Well, MAS has already checked and approved, so KT Income cannot accept responsibility. MAS’s approval means that we had already done our due diligence. Any losses arising are an act of God (or MAS’s failure in its checks. Complacency?)!Be aware that an approval process will have the unintended side effect of implicit endorsement. There is no reason why MAS would in its right mind want to accept responsibility for the downside of a financial product. It might not be MAS’s fault, but will the people understand? :-) Damned if you do; damned if you don’t.Frankly, the KTM does not disagree with the spirit of your proposal. Surely, protecting the people cannot be wrong. He just doesn’t believe that there is a practical implementation of what you’re proposing. Addendum 2:The KTM was thinking through this problem and he suddenly realized that there's probably an easier way to regulate financial products. This is perhaps what MAS can do: inform all financial institutions that it is not adverse to making a public announcement if customers complain and it discovers that a product is "questionable" - and don't define "questionable". :-)Frankly, then MAS doesn't have to do much and life goes on. After a while, some fellas will think that MAS is sleeping? Good for them and they try something funny - and someone gets conned essentially and complains to MAS. MAS verifies the complaint and makes a big story of this case, call in the press, have reporters do sob stories on how some poor folks have lost their life savings, yada yada. Stock price of the offending institution takes drastic beating and everyone falls in line thereafter because they know that MAS means business? Sounds plausible? :-) Questions about the Reserves While kaypohing elsewhere, the KTM was asked the following questions by one Family Man:Kway Teow Man,Please advise me. When I was a kid, I understand we need to store a big reserve to help Singaporeans in times of emergency. As it is now, inflation and the price of rice has increased tremendously.However, our govt has indicated the subsidy of rice is the start of a slippery road. So our govt decides to buy more citibank and UBS shares, leaving our singaporeans without a cent of subsidy.What is your take on this?Should our govt spend some billions to subsidise the price of rice? When do you think the reserves will EVER be used to help Singaporeans? Or should only be kept in GIC to grow and grow and grow (hopefully)When a meteor hits us?When an earthquake hit us?When the sea overflow the banks?The KTM thought that these were really good questions and they deserved a considered response.First, a disclaimer: this is the blogosphere where the norm is to pretend one is an expert and spout nonsense. The KTM really is no expert and is not pretending to be one - but he does like to spout nonsense. :-) The KTM's response below is by no means authoritative and Family Man is encouraged to write to his MP, to the Finance Minister, to the PM or Forum Page to seek the authoritative answer from the horse's mouth. To begin, there is a need to be clear that there are two separate issues in these questions: (i) whether we should invest in UBS/Citigroup; and (ii) whether reserves should be used to subsidize the price of rice. The former is GIC's problem, while the latter is the Finance Ministry's business. GIC's responsibility is clear and that's to maximize returns on the reserves. On the UBS/Citigroup deal, the KTM is of the opinion that most bloggers dunno jack about that they are saying - but since in Rome, you do as the Roman's do, so the KTM will join the fray and kay poh with his two cents worth. Notwithstanding the paper losses, the KTM is of the opinion that it is too early to say whether the deal is a good or bad one. First, the KTM's understanding is that these deals are actually interest-bearing convertibles with relatively high coupon rates and not actual stock. Is there a difference? Yeah, but this is probably not the forum for a discussion on the differences. Next, given the nature of the deals and the premiums that have to be paid (and the bankers that get involved) of course there will be some paper loss. In fact, given the looming recession, it's probably going to get even worse, so people brace yourselves. :-P What people fail to remember is that as a Sovereign Wealth Fund, GIC has a significantly longer investment horizon than what most people can appreciate.Third, you dun get to buy into UBS and Citigroup everyday and on such a scale. Hopefully, the US financial markets don't have meltdowns too often lah - doesn't do us much good also. If we win, there's the potential to win big (but of course in such gambles, there's always a downside also). But even if we win and say in 15 years, GIC makes an effective annualized rate of return of 10% (20%?), will it make them heroes you think? People will still bring up the Shin Corp deal. :-) Indeed, GIC has a pretty shitty job (but they apparently pay their people well to make up for it). :-PNext, we come to the question of when and how to spend the reserves. Frankly, this is not a question for the KTM to answer. The elected Government of the day has the responsibility of explaining this to the electorate. The following are some issues that people might want to understand so that even when (and if) the Government explains, the explanation is hopefully less cryptic.One, it is the KTM's understanding that something like 50% (someone can check this figure) of the Net Investment Income from the reserves is already being spent by the Government even as we speak. What seems to be happening is that the money is just added to the state coffers just like your regular tax revenue - but then again, money is money what. Does it matter what source (as long as it's not illegal or immoral)? The KTM is lazy lah, so he didn't go and check the figures (so someone can help do it), but his understanding is that even this 50% is substantial and in the order of billions. Definitely more than enough to subsidize rice. So really, the question really isn't a matter of whether reserves should be used to subsidize rice, but a question of whether to subsidize rice to begin with. Just look across the causeway and see what happens when you subsidize necessities. Essentially, you distort the market and cause people to hoard or export your commodities for profit, leading to increased enforcement/policing costs - and for what?Dunno about you lah, but the KTM received a couple of cheques in the mail in recent weeks for dunno what GST rebates, Singapore shares,.... Aiyah, it's all very confusing and the KTM isn't quite keen to rack his brains to understand what's going on also. Government give money, the KTM take loh. How often does one get free money in the mail right? :-) Actually, the KTM sometimes thinks that it wouldn't be too bad if every year also election year ..... :-PAs it turns out, the KTM probably got a thousand plus - really cannot keep track, but definitely more than enough to buy rice for the next three to five years probably. Of course, people will then say that it's not only rice lah, the cost of living is going up. Even the PAP kindergartens are going to charge more... and that's correct but what this shows is that the price of rice really isn't a problem (or more precisely isn't THE problem). Perhaps it is in the surrounding countries, but not in Singapore. Even the price of pork, chicken or duck isn't really a crisis. In short, to respond to Family Man's point about an "emergency", the KTM is actually of the opinion that we're aren't quite in an "emergency" just yet -- but the "emergency" might just be lurking around the corner under the present global climate. For how long can the US hold back a recession? Our problems are significantly more complex and endemic - and with the looming recession, the Government will have an even more serious problem to grapple with and that's the problem of jobs. Yes, jobs are being created at a phenomenal rate over the last few years and this will continue for a short while more before the job market starts to shrink - but the jobs are not the jobs that the Government needs!! Maybe the Government will bring forward the IR projects? Whatever. Structural unemployment is still an issue and it will not go away. But imposing high tariffs and quotas on foreign workers is also not the solution because this will slow down economic growth and probably reduce corporate taxes. Also, businesses will complain (people think that businesses dun pay taxes huh?) and allowing foreign-labour-dependent businesses to grow will at the very least stimulate the creation of some jobs for the locals. However, at this rate, the proportion of foreigners in the workforce will continue to grow and fuel xenophobic sentiments. So how?Dunno leh. If the Ministers cannot take it, maybe they can quit and fry KT? Definitely much more fun and stress-free frying KT than running a country. And the best part, can anyhow open gap to spout nonsense with impunity on the side. That said, fry KT dun need 4 A's one. Must just be able to take the heat and the grease. After the latest MSK incident, they are probably used to the heat already lah, so maybe just the grease is new. :-P Numbers that tell us nothing The KTM read with interest this article that came out in the news today about MOH doling out some $39.6 million for 301,000 needy patients. Unfortunately, the KTM can make no head or tail from the report. The number of patients helped at 301,000 looks pretty good, except when we realize that we only have about 3 million citizens (since the PRs have been cut out from healthcare subsidies -- but even if we include everyone, it's only 4.5 million). Question number one: isn't the Medifund reserved for the really poor and needy? We have 10% of population poor and needy meh? Correction, these people are needy and SICK. Got so many needy and sick people? The KTM finds it hard to believe. Anecdotally, the KTM's dad got hospitalized briefly this past year and the KTM forked out about $2K and didn't apply to the Medifund. Mrs KTM also got hospitalized briefly and it was paid for by insurance. Yes, it's a pretty suay this year for the KTM's family - but that's precisely the point. How many people are suay enough to have to end up in hospital in any given year? Are these 300,000 individuals really distinct people or do we have some folks who are chronic hospital stayers and every time they apply for Medifund, they get clocked as a new applicant? Another possibility, are Singaporeans anyhow applying for aid under Medifund and the Government giving out small grants to pacify them even though they are not entirely "poor"?If we divide $39.6 million by 300,000, that's about $130 per person. The KTM seriously cannot believe that in a given year, we have 10% of the population who are suay enough to get sick and hospitalized and cannot afford to pay $130.The fact of the matter is that it's probably much less than $130 for most since we know that most of the nasty medical bills are these thousand-dollar items that the poor and needy definitely cannot afford. The KTM's view is that MOH shouldn't go and give out these kachang puteh amounts to people so that the total number of patients helped seems large. We are wasting eveyone's time. Medifund should just focus on helping the poor and needy on the big bills. The KTM would rather Medifund just helped 30,000 Singaporeans instead of claiming we helped 300,000 and it becomes pretty meaningless when we work out the numbers. Some clarity on exactly what's going on with the Medifund might be helpful to the kay pohs like the KTM. :-)The Straits TimesRecord 301,000 needy patients get help from MedifundThe fund handed out $39.6m to cover hospital costs, nursing home and hospice fees last yearBy Lee Hui ChiehCONCERN: Madam Halimah Yacob says that due to rising medical costs, more middle class patients may face difficulties.A RECORD number of people asked the Government for help with their medical bills in 2006, according to numbers released yesterday.Over 307,500 Singaporeans applied to Medifund, which covers hospital, nursing home and hospice fees for the needy.More than 301,000 - or 97.9 per cent - were successful in getting financial aid.But almost 6,500 people were not - a 30-fold increase over 2005.In the wake of rising medical costs, more middle class patients may be facing difficulties but do not qualify as needy, said Madam Halimah Yacob, who heads the Government Parliamentary Committee for Health.Constituents have asked Madam Halimah, a Member of Parliament for Jurong GRC, for help because they could not afford 'big-ticket costs such as treatment for cancer and heart disease', she said.She expects more people to run into trouble as the population ages and health-care costs continue their upward swing.Health-care costs rose by 6.2 per cent from Sept to Oct this year, almost double the rate of inflation.The number of aid recipients grew 4.5 per cent last year to hit a record high of 301,126.Medifund handed out $39.6 million in 2006, also a record. This was 1.2 per cent higher than 2005, according to government statistics.The growth rates, though, appear to have slowed. From 2004 to 2005, the amount of money given out had leapt 20.9 per cent and the number of applicants had increased 15.7 per cent.Last year saw rejection rates top two per cent; in the five years before that, the approval rates were above 99 per cent.Madam Halimah said she hoped the Medifund criteria would be made more flexible.As in previous years, most of the Medifund money - close to $37 million - was handed out by hospitals, with the rest given out by community hospitals, nursing homes and hospices.And as before, the Institute of Mental Health, which houses many destitute long-staying patients, continued to top the list.Last year, it doled out $10.4 million of Medifund money, up from $10.2 million in 2005.About a quarter of Medifund assistance last year went to those over 65. From the end of this year, the Government will set aside a portion of Medifund, to form a new fund called Medifund Silver, for this group.huichieh@sph.com.sg Sustainable Funding Model for Charities Ren Ci is currently under probe for alleged irregularities on its accounts. The jury is still out, but lots of Singaporeans are already saying all kinds of unkind things. Why are Singaporeans so quick to jump to conclusions?In any case, an article today highlighted that some interest-free loans were made to a Buddhist artefact shop, and the proceeds of the shop were supposed to have been ploughed back into Ren Ci. Unfortunately, the shop had yet to make money. What is the significance of this revelation? Personally, the KTM actually thinks it's okay for huge charities with lots of reserves to set aside a portion of the reserves for business ventures (with a view to making higher returns on the reserves). This is especially true if the business concerned has some sort of synergy with the VWO. In this case, Ren Ci and Buddhist artifact shop seems like a good fit what. In other words, the KTM believes that the ideal funding model for charities should be one where a charity is supported by a strong business outfit. Ideally, the profits of the outfit will be enough to cover the expenses of the charity so that donations need not even be collected from the public or subsidies sourced from the Government.The benefits of this arrangement goes beyond a purely monetary issue. One important element is that it will provide the staff of the charity with opportunities for career advancement and scope. Personnel can move between the charity and business outfit for development purposes and for variety. The business outfit can also train capable administrators for the charity. One of the issues faced by charities is a high turnover and a difficult in recruiting good people. By the story of Ren Ci highlights the problem with using donations for business ventures. There is the question of accountability. How can charities convince donors that their money has not been siphoned away to feed some fat cat?Then there is also the question of risk. Sure, if we look around, the rich dudes are almost always the businessmen. The truth however is that for every business that succeeds, many others would fail. What if a charity starts a business venture and it fails?The KTM has two ideas on how the proposed funding model might perhaps come about:Charities start a enterprise development fund and donors can donate directly into this fund, knowing full well that the money will be used to fund some business outfit that will eventually support the charity (if it doesn't fail). Some socially-conscious shrewd businessman who already has a successful business, "donate" his business to some charity or spawns a charity on he side. Point here is that since it's his money, he can do what he likes. The pitfall however is the evilness in the hearts of some Singaporeans. Remember the undertaker Roland Tay who was accused to siphoning donations to the families of the suicide/murder cases that made headlines? Such a businessman is susceptible to accusations that he is out to make money out of the charity. Ultimately, there is a fine balance between flexibility and corporate governance/accountability. Many Singaporeans only like to talk and accuse charities of this and that. Perhaps if they will get off their butts for a change and do something, they will realise why life ain't quite so simple and sometimes, trying to do good can be a real pain. :-PThe Straits TimesNov 10, 2007 Ren Ci lent money to Buddhist artefact shopShop's registered owners are charity's CEO and a former board memberBy Ho Ai LiA COMPANY selling Buddhist artefacts has emerged as an external organisation which borrowed money interest-free from Ren Ci Hospital and Medicare Centre, now the subject of a Ministry of Health (MOH) inquiry.Mandala Buddhist Cultural Centre was set up in 1996 with a loan of between $200,000 and $300,000 from Ren Ci, said one of its two registered owners, Mr Wee Beng Seng, 52, a former Ren Ci board member.Mandala's other registered owner is Ren Ci honorary chief executive officer Venerable Ming Yi.As an external body that got a loan from Ren Ci, Mandala's books have also been looked into by MOH, said Mr Wee.Profits from the business, started at Fu Lu Shou Complex in Rochor Road in 1996, were to have been ploughed back into Ren Ci, Mr Wee told The Straits Times yesterday.But business was poor and the cost of operating out of Fu Lu Shou Complex high, as the shop employed a clerk and a sales assistant, he added.Three years ago, Mandala gave up its two Fu Lu Shou shop units and moved into Foo Hai Ch'an Monastery in Geylang East, where Venerable Ming Yi is abbot and Mr Wee, a member of staff.Asked about the money, Mr Wee said: 'It hasn't been returned yet. Unfortunately, the shop is not making any profit.'Ren Ci made the news this week with an MOH statement announcing an inquiry into the charity's books after 'possible irregularities in certain financial transactions' came to light during a general review last year.Replying to questions from The Straits Times yesterday, MOH said it has no reason so far to conduct a similar inquiry into the 11 other charities it reviewed last year.Where Ren Ci is concerned, however, The Straits Times understands it is believed to have made interest-free loans totalling millions of dollars to various companies from 1996, and there are discrepancies - amounting to several hundred thousand dollars in some cases - between what the charity recorded it lent, and what the companies involved recorded they borrowed.Venerable Ming Yi told Chinese daily Lianhe Zaobao on Wednesday the money it lent had mostly been recovered, with only $200,000 to $300,000 still unaccounted for.A check showed that besides being listed as the owner of Mandala, the monk is also a director and shareholder of Bodhicherie Vegetarian Food and Semco Design Communications.Ren Ci has about 120 nursing home patients and 300 chronic sick patients.With the inquiry expected to take about three months, Ren Ci's Institution of a Public Character status, which expires on Nov 27, will not be renewed for the time being, said MOH. This means donations made to Ren Ci by the public after then will not be tax-deductible.hoaili@sph.com.sg How about Auctioning the Olympic Tickets? The KTM reads with interest that the ticketing system for the Beijing Olympics crashed after getting 8 million hits in the first hour. :-)Another 1.8 million tickets are on going to be offered only to people living in China on a first-come-first-serve basis. The KTM believes that this is the wrong move. They should sell the tickets by auction in batches eBay-style.This is just a random thought that came to the KTM. Selling 1.8 million tickets on a first-come-first-served basis is definitely going to cause problems because it is quite clear based on anaedotal evidence that the demand outstrips supply.In such situations, selling on a first-come-first-served basis provides speculators with the opportunity to try their luck -- since there is likely going to be a black market subsequently where they can offload tickets for a profit. This first-come-first-served approach will also cause everyone to try to buy at the same time and to provision for this phenomenon which is known as a "flash crowd" is big problem.The KTM firmly believes that an eBay-style second-price auction is the way to go. :-) The Straits TimesOct 31, 2007 Olympics: Beijing apologises after ticket sales suspendedBEIJING - ORGANISERS of the Beijing Olympics apologised on Wednesday for suspending ticket sales for next year's Games, after unexpectedly high demand caused the computer booking system to crash.The second phase of sales began on Tuesday morning but, with over eight million hits on the booking website in the first hour, the Beijing Organising Committee for the Olympic Games (BOCOG) had to stop sales.'We sincerely apologise to the general public,' a BOCOG statement said, adding sales would resume on Nov 5.BOCOG blamed the problem on the sheer number of people who had sought to buy tickets.'Because of the overwhelming volume of page visits, the technical system was unable to perform the tasks well enough, and many applicants were unable to successfully submit their applications,' the statement said.'The ticketing centre had underestimated the demand from the public, resulting in shortcomings in the preparations and causing inconvenience to ticket buyers.'Aside from the eight million clicks on the website, the number of calls to the ticketing phone line exceeded 3.8 million in the first hour.In the now suspended second phase of sales, roughly 1.8 million tickets are on offer only to people living in China on a first-come-first-serve basis.The first round of sales that ended in June was decided by lottery and saw 1.6 million tickets snapped up.China will eventually sell a total of seven million tickets over three phases, with about 75 per cent going to residents of China and the rest to overseas buyers.Overseas sales begin in April.The ticketing suspension has proved an unexpected glitch for BOCOG, who have previously been praised repeatedly by the International Olympic Committee for their preparations. -- AFP On Section 377A As usual, the KTM is slow. He is writing about 377A after everyone else on the blogosphere has had his say. :-) First, a declaration of position: the KTM considers himself "homo-neutral", that is, he is not homo-phobic and considers homosexuals "normal people". At the same time, the KTM is by no means inclined to join the straight "liberals" in lobbying to repeal Section 377A. The KTM believes that the homosexuals have a right to live their own lives without interference from the State, but at the same time, doesn't really like the idea of "gay parties" and "pride parades" (do we have parties in celebration of heterosexuality or heterosexual pride?), or have people try to "educate" his children that "a homosexual lifestyle is normal and acceptable". In case people think the KTM strange, the KTM believes that his position is shared by the MAJORITY of Singaporeans today. Don't believe? Get out there and do a poll. :-)Frankly, this whole business of repealing Section 377A is not high on the agenda for the KTM. The KTM is spouting a bit of nonsense today because he hasn't blogged for a while and just feels like writing something and there isn't much interesting to write about nowadays (it was a close call between 377A and the Myanmese situation...)It was clear to the KTM right from the start that this whole petition to repeal 377A was a non-starter. "Why do people even bother?" the KTM has always wondered.Some say that even though the outcome was as expected, this was a sign of progress.... Huh?? Perhaps someone can explain to the KTM what sort of progress we have made by starting a process that was doomed for failure? :-) There was an interesting Forum letter (attached below) by a gay man living in Singapore stating in no uncertain terms that he disagrees with the manner in which the pro-gay activists are pushing their agenda. He believes that it will only hurt their cause. It turns out that the KTM agrees with him. While the KTM is gay-neutral (and honestly doesn't care if Section 377A is repealed or not), he will most certainly vote against the repeal of Section 377A if we have a referendum. Why? Not because the KTM has against the gays, but because the KTM thinks that this whole thing is a bloody circus and the repeal of the Act DOES NOT make us a more progressive society despite what the "liberals" claim -- and fundamentally, the repeal of the Act will only encourage the gay-activists to lobby for "gay marriages", i.e. an even bigger circus that the KTM is not keen to see happen. [Simply put, what the KTM is trying to say is that the aggressiveness of the gay activists are very likely to put off the moderates instead of helping their cause.]Let's take a step back and ask ourselves a very simple question: DO people think that the Government really cares about Section 377A? The Government has declared (in what the KTM interprets to be no uncertain terms) that Section 377A will not be enforced. Why should a Government care about repealling an Act that they don't enforce? The Government shouldn't and it probably doesn't. The KTM is quite certain that Section 377A is not something that keeps ANY of the Ministers or senior Civil Servants awake at night. :-)(i) Why then did the Government not repeal the Act and (ii) how to get the Government to repeal the Act? Question (i) is really a no-brainer. People have to realize that ALL major religions in Singapore condemn homosexuality and while the KTM is sort of sitting on the fence, there are A LOT of Singaporeans on the anti-homosexual camp (though not all are quite as rabid as the learned Professor Thio Li-Ann :-P). The KTM believes that the fact is: the number of Singaporeans who are homo-phobic is SIGNIFICANTLY larger than the number of gays. So do people think that the Government will do something that pisses off more people or fewer people? Simply put, it is not politically profitable to repeal 377A (and cut that bullshit what the rest of the world thinks about Singapore. The Government has never cared about what the rest of the world thinks, except for the prospective investors -- and surprise, surprise, most businessmen really don't care about gay rights and only whether the taxes are lower and whether there is money to be made). Also, there are the concerns that it's not going to end with the repeal of Section 377A ... and that the repeal of Section 377A will be followed by lobbying for gay marriages. And you know what -- it's also quite clear that the gay activists are not going after 377A either (why should they care about an Act that is not enforced?). They are going for something bigger and 377A is just one of those obstacles on their way to their final goal -- and with that understanding, the Government is going to be even more resistant to lose any ground on this issue. As for Question (ii), the KTM doubts it's going to happen in his lifetime. People have to face it -- the homo-phobes DO NOT WANT TO BE EDUCATED on the fact that "homosexuals are normal"; the major religions are NOT going to change their doctrine; and homosexuals will remain the minority for the forseeable future. The minorities in any society are bound to suffer some sort of discrimination. One doesn't even have to be gay. One can just be good at art and lousy at taking exams, and will already suffer similiar discrimination. The minority must understand their place and live in harmony with the majority. ST Forum PageOct 27, 2007 Why this gay is for keeping Section 377APRIME Minister Lee Hsien Loong made the right decision to keep Section 377A of the Penal Code, a law criminalising gay sex.As a gay Singaporean, I agree that keeping Section 377A would maintain the social status quo and harmony.Gay activists are trying to push the gay lifestyle to mainstream society. I do not agree with the activists' stand and I believe there is a silent majority of gay people who chose to keep quiet about the drama surrounding the bid to repeal Section 377A.I live my gay life discreetly and I am happy to have been able to do so without any legal interference pertaining to my homosexuality for the past 30 years.Singapore is a good place for a gay man to live in, as long as one understands the social contract involved and respects the mainstream's wish to have the traditional family unit as the social norm.Aggressive promotion or campaigning for gay rights is counter-productive and I am strongly against such action.Goh Kim Soon Give the Hawkers a Break Can? Recently we had a case of a curry-puff man who was jailed for evading taxes. Today, an editorial appeared in the Straits Times arguing that hawkers should be required to issue receipts, in the name of plugging revenue leakage.Does this make any sense?First of all, the Government already has a tendency to over-react. One jilted boy sneaks out of an army camp with a stripped down rifle causes the entire SAF to review its security procedures.... were the procedures really so broken to begin with? Now, one curry-puff man jailed, we therefore presume that all hawkers are cheating and under-declaring their incomes to evade tax??? Do people think that every hawker sells a million curry puffs a month and is capable of under-declaring hundreds of thousands of dollars of taxes even if they wanted to?Also, how many Singaporean customers want receipts? We think the cleaners got not enough litter to sweep up izzit? Perhaps people can consider giving up their fixed income jobs and come sell KT before they talk. The Straits Times, EditorialOct 12, 2007 Hawker-hero as tax diddlerTHE jailing of a million-dollar curry puff seller for under-reporting income is exposing a deficiency in Singapore's otherwise efficient tax collection. It should be eliminated for the sake of parity in tax-paying, to say nothing of plugging revenue leakage. Tax reporting for fixed-income workers is leak-proof because clarity of procedure makes it so. Employers certify the earnings on a single form; employees sign off after reporting non-employment income and making standard deductions. It is more complex for corporates and smaller businesses, but no more so than the varied nature of income, outgoings, depreciation and deductions requires. But an honour system in reporting sales income is still allowed food vendors. Why should this be? The problem, or the cause, is that many if not most hawkers do not give receipts for sales transacted. They are not required to. They 'estimate' income in filing returns; this is giving them carte blanche for big-scale fraud. How many hawkers can resist the temptation? For illustration, the Ang Mo Kio curry puff hawker under-declared earnings by 85 to 90 per cent over a period of six years. The penalty levied, of half a million dollars, showed the impressive extent of tax evaded and of earnings among unprepossessing food sellers.In this age of organised sole proprietorships in the cooked-food business, persisting with the lax practice amounts to allowing a large underground economy to operate. Leakage is impossible to estimate. The size of the business alone should tell the Internal Revenue Authority (IRAS) efficient tax collection requires that changes be made. The obvious solution is to make receipting a requirement, with no exception. Better-capitalised foodcourt stalls practise this. Scrupulous receipting and record-keeping, with frequent machine audits by the taxman, are normal in developed countries. From that has grown a culture of honest dealing between seller and buyer in the smallest of businesses. Having cash registers and issuing receipts for every yummy meal sold admittedly is not very practical. Hawkers will grumble that sales would be reduced and costly space is taken up to accommodate a bulky machine. Cashiers may need to be hired.The IRAS would likely have required receipting long ago if it was the most feasible approach. But not to mandate a transparent method (conceded: receipting can be manipulated) is intolerable. Singaporeans who love street food as an integral element of their culture admire 16-hour-day hawkers who own a string of properties. They would be less admiring of them if they knew their workaday heroes became rich as much by cheating on taxes. On the Corporate Governance of Religious Organizations An interesting Forum letter was published today. In that letter, a concerned parent wrote in to complain about the apparent bad influence of an unnamed mega-church. The KTM thought it was interesting because this letter is likely to spark a controversial debate. Why controversial? Because it involves religion and the OB markers.The KTM tends to steer clear of religion and racial issues 'cos despite all the talking big, he's really a chicken and doesn't want to get into trouble with the law. What interests the KTM however is a related issue of the corporate governace of religious organizations.This is a question of law and NOT a question of religion. The following is the hypothetical scenario (any resemblance to any existing organization or person, living or dead, is purely coincidental): suppose we have this large religious organization. By large, we mean that it has a lot of members and therefore also a lot of cash (which is, of course, contributed willingly by the members).Suppose again that the leader of the organization decides to use the organization's funds to buy himself a nice car and pay himself $600K a year, and on top of that, installs a golden toilet bowl costing $50K in his office. Suppose a small number of the members are not happy, do they have legal recourse? [Digression] Actually, do people know if the State taxes these large religious organizations and mega-churches? Of course, we have all heard about an embezzlement case by a priest who was later sued by the Catholic church. That's fine and dandy 'cos the Catholic church is a huge organization and there's the Pope to keep everyone in line -- but suppose the same thing happened in a different and less hierachical setting, where the priest-equivalent person is really the head of the organization. What then? Is it still embezzlement? Suppose the KTM starts this new religion called the Kway Teow Cult that worships the Kway Teow God. The KTM will of course be the High Priest of the KT God lah. Then hor, suppose this new religion teaches that the believers must give 5% of their income to the High Priest in order to receive blessings (and people actually believe). Is it legal? If this is legal, perhaps the KTM should just hang up his KT wok and start the KT Cult. :-) Yes, the KTM must be very bored today to be asking such boh liao questions (or maybe he's just looking for a quick way to get rich). :-P ST Forum PageSep 19, 2007 Some mega churches affect students adverselyI READ with deep interest the article, 'Drawing the line between Caesar and God' (ST, Aug 2).The objection of one of the large independent churches in Singapore to complying with provisions in the draft code of governance for charities would logically provoke concern about its financial transparency. This is especially so as these are 'rich' churches, judging by their well-equipped premises and set-up. These circumstances bring to light another concern. Some of these 'mega churches' have relentless recruitment activities in many schools and junior colleges.My friends and I have loved ones whose lives and attitude have changed after they joined these churches. They lose interest in schoolwork to the point of academic failure. Family time is curtailed drastically, and they stop attending family functions. Parental objections are ignored, family squabbles ensue and family harmony is disrupted. It's heartbreaking. It is like we have lost our children.I write this not to impugn any religion, but to warn against the abuse of religion. Having had such traumatic experiences, I cannot remain silent. I hope this letter will serve as a warning to parents regarding such youth activities that may destroy their personal lives and family harmony.Dr Lee Bee Wah Legislation of the Virtual World The KTM was asked about his views on the regulation of cyberspace, to which the KTM expressed concern over AGC's current policy on cyber-disputes involving virtual worlds. According to a recent article (attached below for easy reference), "the police and the AGC have better things to do with their time than trying to sort out 'crimes' in these make-believe online zones".It seems to the KTM that implication there is that the AGC has decided that 'crimes' in cyberspace are not the same as real life crimes (and therefore not worthy of their time and attention). Perhaps AGC is right. Or perhaps the Straits Times has not presented an accurate picture of the AGC's position.Fundamentally, the KTM is of the view that virtual objects do have value (and he's probably right 'cos they are being sold in eBay for hard cash), and if people are cheated of their virtual objects, then it is a crime, period.What is the difference between Paulina being cheated of his $500 family-heirloom bracelet by Peter the conman and having the bracelet sold to a pawnshop for $500 and having Paulina the Night Elf Hunter being cheated of her uber powerful Bracelet of Mauling, which the owner of Peter the Troll Shaman subsequently sells on eBay for $500? What's "Coca-Cola"? It's just a name what. Why can't the KTM go and sell "Coca-Cola" Kway Teow? Because it's a trademark -- which means that virtual things can and do have value.There was another recent report about some Governmental organizations (IDA and STB?) venturing into Second Life to buy virtual real estate. Of course, it is clearly a crime if someone hacks into IDA's account and "steals" IDA's virtual real estate in Second Life. But suppose instead, there's a conman who somehow manages to convince the IDA staff managing IDA's Second Life account to transfer ownership of IDA's virtual real estate to him in a fradulent way? Maybe there's a virtual Singapore (KTM is guessing) and this fella then proceeds to build a virtual brothel there. Is it a problem? If AGC's position is that only if virtual terrorists start flying virtual planes into virtual Changi Aiports or if virtual Singaporeans start throwing virtual racial insults on other virtual Singaporeans, then we should be concerned, then the above scenario is clearly not a problem (or is it so clear?).What is clear however is that even if the AGC decides to take action, the process is fraught with many technical difficulties and potentially legal minefields. Does the AGC even have jurisdiction to deal with the crime? Suppose a Singaporean gets cheated of his virtual uber powerful and rare sword by the Russian mafia on a US server, what can the AGC legally do?Not being able to effectively prosecute is one thing. Not seeming to understand that virtual objects do have value and is deserving of legal protection is another. :-)The Straits TimesAug 23, 2007 Virtual world spat? Settle it yourselfThe authorities will act only in certain cases like those involving race and religion, or childrenBy Chua Hian HouSINGAPOREANS who get into disputes over their 'virtual world' activities are unlikely to find resolution by going to the police or prosecutors.At a conference here yesterday, the Attorney-General's Chambers (AGC) principal senior state counsel Charles Lim said that 'the police and the AGC have better things to do with their time' than trying to sort out 'crimes' in these make-believe online zones.Two popular 'virtual worlds' here include the World Of Warcraft, a fantasy-themed adventure game, and Second Life, where people construct alternative lives.A dispute might arise if one participant defaults on the sale of a magic sword, or sells a condo to another that is smaller than advertised.But, Mr Lim told the State of Play conference organised by the Nanyang Technological University, there are exceptions.It will act on racial and religious vilification, repeated fraud, or attempts to target vulnerable groups like children.For instance, if a participant 'created an avatar to advocate flying a plane into Changi (Airport)', or someone peddling a non-existent gaming account to multiple buyers.That such seemingly odd questions are even being debated shows how complex legal issues are as virtual world sites grow in popularity.There are more than 50,000 local players of World Of Warcraft and 5,000 inhabitants of Second Life. Both 'virtual worlds' attract many millions worldwide.As the popularity of virtual worlds rise, so will disputes involving magic swords or virtual land sales, Mr Lim acknowledged.Aggrieved parties with disputes in the virtual world can always take out a 'private summons', or hire a lawyer to seek civil redress, he said.Rodyk & Davidson law partner Gilbert Leong said that 'as a private individual, I would think carefully before doing this as any legal proceedings take up significant resources'.The issue of how to handle disputes within the virtual world was one that countries worldwide are grappling with, said National University of Singapore law professor Lim Yen Fen.In South Korea, she said, statutes have been passed on virtual world 'crimes' and it now treats virtual theft as severely as physical theft.In 2004, more than 1,000 South Korean teenagers were arrested for offences related to virtual 'crimes'.The conference attracted about 100 delegates, including international legal experts, virtual world developers, judges and legal officers from Singapore and South Korea.chuahh@sph.com.sgENOUGH ON OUR PLATEThe Attorney-General's Chambers (AGC) principal senior state counsel Charles Lim said that the 'the police and the AGC have better things to do with their time' than trying to solve 'crimes' in the online make-believe world.VIRTUAL THEFT IS STILL THEFT IN KOREAIn South Korea, virtual theft is treated as severely as physical theft after statutes were passed on virtual world 'crimes'.In 2004, more than 1,000 South Korean teens were arrested for offences related to virtual 'crimes'. The Problem with Social Mobility The KTM once argued that "we should not try to carry all Singaporeans up with everyone (and everything) else as the tide rises. This is not a feasible and sustainable approach in the long term and it is likely to hurt our competitiveness since we are so small and we are being squeezed by humongous neighbours. Rather, perhaps consider putting some effort into ensuring that the poor folks dun drown and their kids have a chance at swimming to the top".A recent article in the Straits Times seems to have address some of the KTM's concerns. It was reported that "students in the bottom third, in terms of parental income and educational background, have a 50 per cent chance of making it to the middle or top third in the Primary School Leaving Examination (PSLE)". While the PSLE is probably not a perfect predictor of future success, it can be argued that good examination results is as good an indicator as we are going to get (at least for now). In a backdrop where more than half of the PSC scholarships are going to folks who live on landed property, this latest report is welcome news. Nevertheless, the KTM has come to the conclusion that the problem with social mobility .... quite frankly, is social mobility. :-) To begin, perhaps we should start with a working definition of social mobility. The KTM once defined social mobility as "the phenomenon where a person is able to move into a higher income bracket relative to the rest of the population than his parents", and thinks that this definition is still good.In addition to the article, what prompted the KTM to think about social mobility is also the recent ruckus over university education. The KTM is a part-time social scientist and so the question he likes to ask is: what's really going on.In the attached article, it is said that those at the bottom third have a 50 per cent chance of making it to the middle or top third. In other words, 50 per cent of the bottom third move to the middle or top third right? Which leaves only one sixth of the population in the bottom third? :-) Of course there's no such thing lah. Basically, if some people move up the food chain, then others must have been pushed down loh. It cannot be that everyone moves upwards in a relative sense, even if in the absolute sense but some objective measure like $$$, everyone is moving up. Next, what is it that really makes people unhappy? Is it not having enough in absolute terms? The KTM thinks not. At least not in Singapore. It seems to the KTM that a lot of unhappiness arises when people are compare themselves to others. Therefore, social mobility is likely to cause a whole lot of problems. If there was no mobility then people might actually be more resigned to their lots in life ... and perhaps they might be perhaps be less unhappy? Actually, the KTM also doesn't know lah, but it's a thought.Back to the issue of university places, the KTM believes that it's insatiable. Reason is very simple: with social mobility, it means that it is possible for people whose parents did not go to university to get to university. This is definitely true. The KTM knows of many examples. Now suppose you have a university graduate and he/she has kids. Do you think that he/she will expect the children to also go to university? You bet. So, there we have it. Those who make it to university will continue to stay university educated in general, and you have more and more moving into this category. How not to have an increasing demand for university places? :-PThe Straits Times,Aug 13, 2007 Schools help poor children out of poverty trap: TharmanSCHOOLS here are helping children from poor families break out of the poverty trap, said Education Minister Tharman Shanmugaratnam yesterday.Students in the bottom third, in terms of parental income and educational background, have a 50 per cent chance of making it to the middle or top third in the Primary School Leaving Examination (PSLE), he revealed.The upward trend is seen in secondary schools and tertiary institutions too.'With effort and determination, everyone can do well,' he said, unlike in many other countries, where students from low-income backgrounds end up in the same position while those at the top stay there.But there is 'constant movement' in Singapore as the education system here seeks to give equal chances to all regardless of family background. Every school, not just a few, has good teachers and resources, he added.Speaking at an award ceremony held by the Chinese Development Assistance Council (CDAC) yesterday, he cited the evidence to show that 'no group is stuck permanently in the same place'.To keep up the social mobility, Mr Tharman said the whole community must chip in to help children from poor families do their best in school.He noted that the CDAC has contributed significantly through its education programmes and has helped students from poor families to improve and gain confidence.Mr Tharman also gave out the CDAC's Best Progress Awards to 97 primary and secondary students for their remarkable improvements in their examinations last year.Secondary 3 student Pang Xue Yao, 14, had found Maths difficult since primary school, where he would often fail the subject.Last year, Xue Yao, whose father works as a driver and mother is a housewife, decided to improve his grades by signing up for tuition classes run by the CDAC.It worked. The Normal (Academic) student went from scoring D7 to A1 for Maths.His maths tutor, Mr Chua Tan Huat, 65, said: 'He's a good student. He'd always sit in front of me during class.'Another CDAC tuition beneficiary is Adeline Chong, 16, a Secondary 4 Normal (Academic) student who improved her Maths grade from C5 to A1.Adeline, whose father is a computer repairman and mother is a housewife, said she found the tuition classes boring at first but bucked up as she felt she had a point to prove to classmates.'Even though my PSLE aggregate score was lower than theirs, I felt I could do better,' she said.hoaili@sph.com.sg On Universal College Education In the light of the recent debate about whether there are sufficient university places, it is interesting to read about the Taiwan experience, where 96% of each cohort is able to get places in a university. Another interesting fact is that while Singapore has 3 universities for a population of 4 million, Taiwan has 163 (!) tertiary institutions for a population of 23 million. Interesting. So, which approach is the right one? The Singapore approach or the Taiwanese one? If the Taiwanese are correct, we better do something about it soon since we are already some 10 years behind them.While looking for data on university education in Singapore, the KTM came across an interesting report (dated 2003). The following are some interesting highlights: The university cohort participation rate was only 5% in 1980 and the Garmen has promised to increase this to 25% by 2010. To the KTM's understanding, the cohort participation rate is currently 23%. The Garmen decided against building a fourth university because it was not confident of being able to set up one with the requisite quality. (Of course, this stand has apparently changed in recent times. Perhaps it's because of the UNSW fiasco and the empty plot in Changi?) Provisions were already being made for the Dragon Year cohort.In addition, the KTM believes that around 40% of each cohort is currently being enrolled in the polytechnics. If Singapore is to go the Taiwan way, the first step would be to "upgrade" all the polys to full universities, thereby achieving a university cohort participation rate of 65% overnight -- and this is on public funds. There are actually a large number of private universities and distance learning (twinning) programmes that are not included in these figures (so a conservative estimate might be something like 75%, leaving 25% to go). At this point, there are two (for a start lah. There are probably more) questions worth asking:Does this change the price of pork, i.e. are Singaporeans therefore able to compete more effectively?Who pays? Upgrading the polys means that poly education will now because university education and hence attract larger subsidies. Understanding the Price of PorkSeriously, the KTM does not think that giving everyone a university education will change the price of pork because at the end of the day, there will always be a pecking order -- and it is this pecking order that determines one's place in the grand food chain.Nevertheless, there are probably many, many people out there who do not share the KTM's view and would like to believe that with a college degree, they are therefore more employable and will be better able to compete with the foreigners. It is perfectly plausible that they are right and the KTM is wrong. The obvious downside to universal education is quite likely to be a massive increase in unfulfilled expectations. Question: if 80-90% of each cohort is so-called university educated, are 80-90% of the jobs generated each year jobs that meet the expectations of a college graduate? Perhaps in time to come, it would be perfectly acceptable for graduates to work as cashiers, bus drivers and waiters -- but wait? Then what for waste fours years to go to university? Need to be college-educated to be cashier, bus driver or waiter meh?Some smart alecks will then talk about the universal good of education, that it is GOOD for everyone to get a good education regardless of whether he/she will end up being a cashier or banker. Sounds good, except that people have to realize that the MAJORITY of Singaporeans do not go to school for love of learning. They go to school to get that piece of paper to allow them to get THAT job. If THAT job is a cashier's job, would they still want to go to university? Would it then lead to mismatched expectations? Actually, the KTM doesn't really know also. He is merely thinking aloud. Why is it not impossible for the Garmen to pull off a hat-trick and generate 80-90% of college-level jobs each year? What really is the limiting factor in the generation of jobs? Paying for ItNext comes the thorny question of how to pay for universal college education. The key in universal college education is in equity. Under such a system, EVERYONE would be entitled to an education. Sounds fine and dandy, except that higher education doesn't come cheap. The KTM estimates that current subsidies enjoyed by each publicly funded university student is something around SIN$50-70K.If everyone is to enjoy the same, then it will cost A LOT of money -- and the obvious question of who pays will come up. Does the Taiwanese Garmen pay all 95% of the college students? The KTM actually doesn't know, but he doesn't believe so. It's probably impossible.Why not just let privately-funded universities pick up the slack? Well, easy to say. Does our Garmen currently disallow people from setting up private universities in Singapore? The answer is no. The reason why people dun any old how set up such universities (but to be fair, there are already some) is that it's really expensive and it's not a very attractive business venture (think UNSW).Singaporeans are also not stupid. If the KTM set up the Kway Teow University and offer B.S. (KT Frying), people will all flock to KTU and sign up meh? Singaporeans also want some assurance of quality and more importantly GOVERNMENT ENDORSEMENT. They want to know that if their sons and daughters go to KTU, that the Civil Service will employ their kids on par with graduates from NUS/NTU/SMU. This highlights the structural difficulties in setting up another university. :-(But seriously, this discussion actually highlights and interesting fact about the current allocation of education subsidies. Think about it. Who are getting the most subsidies? Obviously, university graduate > poly graduate > JC graduate > others. On the other hand, who will be earning the most money after graduation? Again, the same relationship holds. This means that unlike the taxation structure, the disbursement of education subsidies is actually regressive. More is given to fellas who will eventually be earning more! Interesting hor?But then again, there is also some sense in the current madness. The reason why we see what we see is a need to ensure equal access to education. This means that regardless of whether a person is rich or poor, it shouldn't cost excessive amounts to go to school. Since university education is the most expensive, it also attracts the highest subsidies. The equity comes from equal competition. The idea is that all can compete fairly for the university places. Winner takes all. It's fair because every individual has an equal chance at it. To be fair to the current scheme, it has worked well. However, moving forward, as income inequality is accelerating, it might perhaps be time to think about whether the current scheme is necessarily the most appropriate one. Shouldn't those who are not quite as academically gifted be allocated more resources (actually not necessarily more, but at least as much resources for fairness) so that they don't suffer a double whammy? Actually, this is a hard question with no easy answers. Some people can study, so $60K of university education subsidies makes sense; others seriously are not cut out to study and so even if you gave him $60K worth of education subsidies, he/she also cannot make use of it. Should we thereby give cash instead? No lah, the KTM is not suggesting this at all. The KTM actually hasn't actually quite figured out what to think yet. All he has are but questions at this stage. :-)Not every question needs an answer. Not every question HAS an answer. :-PThe Straits TimesAug 10, 2007 5 out of 100 points enough to enter varsity in TaiwanFears for quality of education as universities lower entry requirements to woo studentsBy Ong Hwee Hwee, Taiwan CorrespondentIN TAIPEI - IN TAIWAN, getting into a university these days is a breeze.The university admission rate hit a record high of 96.3 per cent this year as some universities lowered entry requirements to boost intake.The lowest admission score came from a student who got a place despite scoring less than five points on average out of 100 for each of four subjects.Of the 90,000 students who applied for university admission, some 86,000 secured a place, said the Education Ministry.Only 3,000 students - or 4 per cent - were turned away, according to ministry results released on Wednesday.The admission rate has risen sharply in recent years, as a disproportionately large number of universities vie for a dwindling pool of students.Last year, the acceptance rate was 91 per cent. In 2005, it was 89 per cent.But while the admission rate hit a record high this year, the entry score plunged to a new low.The lowest admission score was 18.47 points out of a total of 400 for four subjects.In contrast, the lowest admission score was 100.59 points last year.The latest results have thrown the spotlight on an issue of growing concern: lax admission criteria which have affected the quality of tertiary education in Taiwan.The root of the problem, say observers, lies with the fact that there are simply too many universities in Taiwan.The sheer number of tertiary institutions is widely seen as a result of the government's controversial education reforms, launched in the mid-1990s, to popularise tertiary education.To achieve the target, more high schools were established, enrolment for universities was expanded and vocational colleges were upgraded to full-fledged universities.As a result, the number of tertiary institutions surged to 163 last year, from 139 a decade ago.To compete for students, universities - especially the less competitive ones - resorted to lowering their entry requirements.Taiwan's falling birth rate has further aggravated the problem.The island's birth rate hit a record low of 1.1 last year, one of the lowest in Asia.'It boils down to the debate over which is more important when it comes to promoting tertiary education: equity or quality? Taiwan appears to favour the former,' said Professor Fang Der-long, who heads the Department of Education at the Kaohsiung Normal University.'But it is true that we are witnessing a stratification of Taiwan's tertiary education because the standards of the cohort are so diverse,' he told The Straits Times.To gain admission to top-notch universities like the National Taiwan University, a student needs to score 400 points or more for at least five subjects.In a bid to arrest the declining standards, the Education Ministry said it may impose a minimum entry requirement with effect from next year's university intake.The ministry said it is also looking into a grading system for tertiary institutions.Universities which fail to make the grade could be forced to cut down their intake or barred from enrolling new students.The ministry is also urging poorly managed private universities to close down, merge with other institutions, or convert to elementary or high schools.Some universities, however, argue that a better solution would be to allow schools to enrol mainland students.But President Chen Shui-bian has rejected the idea, saying such a move could open the door for Chinese nationals to compete against Taiwanese for jobs in Taiwan.If nothing is done to address the problem, the Education Ministry says the admission rate could hit 100 per cent next year.By then, it would be impossible not to be able to get a place in university.hwee@sph.com.sg The Sunday TimesAug 12, 2007 S'pore to up number of varsity placesBy Keith LinTHE Government is studying ways to increase the number of university places and whether to build a fourth university, Senior Minister Goh Chok Tong revealed yesterday.The aim: to give more Singaporeans, especially polytechnic graduates, a chance to study at a university here.Now, about one in four in each cohort receives a university education.'We will up the percentage,' Mr Goh promised.Speaking to about a thousand residents and grassroots leaders at a National Day dinner in his Marine Parade constituency last night, Mr Goh also pledged a stronger social safety net for those struggling to cope with changes in the economy.Measures being studied include topping up the Central Provident Fund (CPF) accounts of lower-income senior citizens, securing higher returns on CPF savings and raising the retirement age, he said.Prime Minister Lee Hsien Loong will discuss new ways to help Singaporeans work longer and build up their retirement savings during the National Day Rally next Sunday.Mr Goh's announcement comes after several parents and students complained about the difficulty in securing places in the three local universities this year.In June, Dr Tony Tan, who heads Singapore's high-powered International Academic Advisory Panel, suggested the setting up of a liberal arts college as one way to increase the number of university places.If not for its decision to pull out in May, the University of New South Wales would have been the fourth university here, with a planned intake of 15,000 students by 2020.Business administrator Elizabeth Moses, whose 18-year-old son is at a local polytechnic, said more local university places could save her the high cost of sending her son overseas.'It's great news,' she said.Turning to the outlook for Singapore as a whole, Mr Goh was upbeat, saying that 'our boat is now entering a favourable stretch of the journey'.He cited several reasons for his confidence.Economic restructuring was paying off and the economy was being upgraded.The external outlook was also positive.He said that the current turmoil in stock exchanges worldwide, sparked by problems in the United States mortgage market, was in his view 'temporary'.On Singapore's other strengths, he said it was well plugged into the global economy and had a Government that thought long term and acted to solve problems.It also has in place the unique practice of planned political leadership succession.Mr Goh said that he was, however, also aware that some Singaporeans found it difficult to keep up with the fast pace of life or rising cost of living.The Government would help them to cope better, he added.He also called on those who had done well to share their wealth through acts of philanthropy, so as to 'give something back to the community on which their success has been built'.klin@sph.com.sg