"to rescue truth from beauty and meaning from belief"

Economy Past and Present not so hot for PAP re-election


The PAP’s election strategy even at this early stage is so obvious it can only come from all those unproven military scholars. The AHPETC affair was really a reconnaissance in force to locate and fix the enemy before bringing on the full frontal assault of the general election campaign onto the entire opposition’s unproven competence in running town councils. No subtlety required.

Economy not so hot

However a slowing economy this year and the new normal of 2-4% GDP growth going forward means the PAP is vulnerable in their key competence; the economy. So better to use town council competency to fix the opposition parties onto the PAP’s chosen set-piece battle than to fight a less predictable encounter battle on the consequences of the PAP’s handling of the economy.

Little wonder then, Prime Minister Lee Hsien Loong was waxing lyrical about the past achievements of glittering 6% plus GDP growth in his tenure. But to voters, It is much more how socio-economic circumstances has and will affect one’s income, healthcare and savings plus all the ancillary factors such as cost of living, job opportunities and career prospects.

The Glittering GDP and Its Consequences
It is worth repeating that the Mr. Lee achieve his glittering GDP growth by running macro-economic policies along the same old capital and labour intensive growth model and the same old extreme fiscal conservatism of the past 50 years. Put on cosmetics and give them new names: “Growth Maximisation Strategy” and “Fiscal Prudence”. It is as if Singapore today is still the Singapore under Lee Kuan Yew.

As the writer repeats ad nauseam, macro-economic policies predicated on out-growing the natural constraints of land and labour have long term consequences. The more these policies are pursued, the more extreme the consequences.

Low Wages
Only 41% of Singapore’s GDP is accounted by wages, nearly 50% lower than the OECD average. Low wages and low productivity are caused by dependence on unskilled and inadequately qualified foreign workers which also caused under-employment and reduced career prospects among qualified local workers.

The government’s solution to wage growth from productivity growth is only a half-truth. As long as easy access to foreign labour remains, any increase in productivity will be captured by owners of businesses and capital rather than by labour.

High Real Estate Prices
Coupled with low taxes, rebates and business set-up subsidies, Growth Maximisation indiscriminately created too many businesses, many of which are non-viable without access to cheap labour, low tax, rebates and business set-up subsidies. The upshot is excessive demand for residential, commercial and industrial real estate property leading to rampant prices.

Inadequate Retirement and Healthcare

CPF and household savings are depleted in what is, in effect a massive financial transfer from households to the government as a result of rampant real estate prices and low rates of returns from savings. The absence of mandatory social entitlements meant that the depletion of savings result in inadequate provisions for retirement and healthcare.
Inter-generational Social Inequity

For the low-income and increasingly the middle income, inadequate provisions for retirement and healthcare, under present policies of using children’s CPF accounts to support the elderly, results in social inequality being passed from one generation to the next. It also prevents social mobility.

Incompetence or fixing the voter
The list can go on. In apparent contradiction to its own claim of competency, the PAP is very bad in managing the consequences of its economics. If macro-economic policies calls for a huge influx of foreign workers, then infrastructure spending must increase to meet the demand of the large increase in population.

Is it sheer incompetence – why else is it possible for a government to be “blindsided” by demand for housing when the same government controls the Growth Maximisation strategy and all policies levers? Or is it a deliberate policy choice not to mitigate these consequences because of the beneficial financial effects to the government’s narrow party political objectives?

The excess demand for infrastructure and real estate delivers huge financial transfers to the government through Temasek’s ownership of the GLCs and land sale revenue. The resulting depletion of savings made the lower income and increasingly the middle income dependent on discretionary government hand-outs given in drips and drabs which, given these are non-mandatory entitlements, are in effect “fixing” the voters.

Gold Dust Among the Chicken Feed
The question should rightly be how or whether at all one has benefitted from the glittering GDP growth. Policies overly friendly to business and optimal to the government are rarely ever optimal to wage earners and Singapore has seen enough evidence of that. The sharp wealth disparity says Mr. Lee’s economic record is gold dust for the few among the chicken feed for the many.

So more of the same with 6.9m, maybe even 10m population? More of the same meanness and stinginess of a government which became excessively rich over stuff like “fiscal prudence” and “self-reliance”? Or is it time to stop voting against one’s own economic interest and help your country to change course before it irretrievably steers towards the rocks.

Chris Kuan


3 thoughts on “Economy Past and Present not so hot for PAP re-election

  1. Pingback: Daily SG: 12 Aug 2015 | The Singapore Daily

  2. /// Economy not so hot

    Little wonder then, Prime Minister Lee Hsien Loong was waxing lyrical about the past achievements of glittering 6% plus GDP growth in his tenure. ///

    The shameless thing is, when the economy is doing well, they pat themselves on their backs and reward themselves with 22 months bonus (that on million dollar base). And when the economy does not do well, it is blamed on the weak RMB, or poor Chinese economy, or the slowdown in the US. Anybody’s fault, but their fault. Just like Malaysian politicians blaming the whole world, but themselves.


  3. Chris: Appreciate your careful analysis of reserves today. Please email me below.


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