Budget 2012 debate round-up speech by Mr Tharman

Dear Mr Tharman,

I refer to your Budget 2012 debate round-up speech [1].

It was wrong of you to say that Mr Low has shifted position just because previously he said there were too many foreign workers and now he said there must be a careful balance in foreign worker numbers. You are like the hawker who scoops too much rice on the customer’s plate and when the customer complains too much rice, you remove most of the rice and when the customer then pleads for balance between rice and other dishes, you claim the customer is changing position. The customer hasn’t changed position. When there is too much rice, he tells you there is too much rice. When you remove too much rice, he also tells you, you haven’t got balance. There is thus no shift in position, only honest feedback when too much is too much and when too little is too little.

It was also wrong of you to brush off Mr Chen’s suggestions to refine foreign worker policies by misquoting him. Mr Chen didn’t recommend the liberalisation of the construction industry per say, he merely recommended less stringent policies for the construction of public infrastructure for social services and public healthcare. Mr Chen’s focus was thus, not construction per say but specific projects that impact the cost of social services. Furthermore, for all your talk about not letting low productivity industries remain low productivity and the need to close the construction productivity gap with other countries, the fact remains that our construction foreign worker dependency ratio remains at 1 local to 7 foreign workers. If it is so important to raise construction productivity, shouldn’t you have tightened construction dependency ratio like you did for manufacturing and the service industries? Or are you tacitly agreeing with Mr Chen that some relaxation, at least for now, is necessary? Similarly, for the aerospace industry, since you can so easily differentiate high skill jobs from low skill ones, it shouldn’t be too difficult for you to assign appropriate quotas for those high skill jobs within the aerospace industry for the benefit of Singaporeans.

Your assurance to Mr Giam failed to address his concerns. Does emptying our CPF account to buy a flat means we can afford a flat? While families with $1,000 monthly income can purchase a flat, how much of their retirement savings will be eaten by the flat purchase? While 98% of those below 35 earn more than $1,000 a month and can afford bigger flats, again how much of their retirement savings would be eaten up? For many Singaporeans, ‘affording’ a flat means emptying the CPF retirement savings. In the 29 Feb 2012 Straits Times report “CPF savings may not be enough for old age”, NMP Marry Liew cited LKY School of Public Policy economist Hui Weng Tat for showing that current CPF contribution rate is not sufficient for retirement even before considering CPF drain for property purchases.

While it pleases you to say that our housing grants are more aggressive than what any other governments would give, would you be so kind as to also admit that the price increase for our public housing is also more aggressive than any other government would have allowed? The high cost of home ownership has drained the people of their retirement savings and diminished their quality of life.

You can’t really blame Mr Low for saying that this budget came about post-GE 2011. Even the slogan for Budget 2012: “Inclusive society, stronger Singapore” is suggestive of the government’s change in position. While there have been numerous transfers over the last five years, there is a significant new transfer this year: the nearly $3 billion GST Voucher Fund that really sets the tone for the shift. Even the Special Employment Credit Fund which wasn’t given out last year has been significantly boosted to $2.35 billion this year.

While middle income households have seen a 3.2% increase in real household income, those who bought flats now compared to five years ago would have seen an 83.8% increase in HDB resale prices. Increase in household income is so kachang puteh compared to increase in housing prices. While higher end household incomes have not increased as much as median household incomes, they are already so high to begin with. Furthermore, many higher end households own multiple properties and would have benefitted from the sharp rise in housing prices.

You claimed that our median household income growth rate is rare when compared internationally and you supported your claim with the claim that Hong Kong and Taiwan had negative real median income growth over the same period. However, from the Hong Kong Census and Statistics Department website, we can derive Hong Kong’s median household income growth over the last five years as 6.3%, not negative as you have claimed:

2006 2011
Median monthly household income (HK$) HK$17,250 HK$20,500
Household size 3 2.9
Consumer Price Index (B) for median income households 91.5 105.8
Per capita household income at current prices (HK$) HK$5,750 HK$7,069
Per capita household income at 2006 prices HK$5,750 HK$6,114
Percentage increase 6.3%

Also, the Taiwan National Statistics website only shows average family income, not median family income so you might not have been comparing apple to apple when you compared with Taiwan. Furthermore, as your good colleague Mr Shanmugam always says, Singapore is a city so we should always compare with cities like Taipei rather than with Taiwan. According to the Taiwan National Statistics, 10.7% of all Taiwan income recipients are farm workers which would pull down the Taiwan average or median income, which is why we should compare with Taipei, not Taiwan. Similarly we should compare with Seoul rather than with South Korea.

It is meaningless to just look at taxes without also looking at salaries. What is important is not that taxes are low but that after tax income is high. Many First World nations have high taxes but even higher salaries so that take home pay beats ours. Indices like the UBS survey show that despite low taxes, Singapore after tax wages tends to be much lower than those of many First World nations.

Our public housing is not cheap compared to the public housing of other First World nations. So even though the lower income group gets $4 back for every dollar of tax paid, that $4 would have been more than taken back by the HDB. Same goes for the middle income families. Even though they get back 80 cents for every dollar of tax paid, that 20 cents difference is small change compared to the many more dollars he will have to pay for his flat. Very few systems would extract so little in the form of taxes but so much more in other ways like expensive housing.

If we deem it necessary to add 550 buses to improve service levels but cannot mandate the PTOs to add them, does it not show that we didn’t negotiate for the right service levels to begin with?

It is also not accurate to say that bus operations are running operating losses. While SBS bus operations did incur a $6m operating loss in 2011, it made an operating profit of $14.9m, $22.4m, $8.5m, $25.6m, $22.4m, $41.2m, $50.7m and $60.3m in 2010, 2009, 2008, 2007, 2006, 2005, 2004 and 2003 respectively. Thus, except for last year, SBS bus operations have been making healthy profits in all the years where the annual reports can be downloaded from the Internet. So it’s more accurate to say that with the exception of last year, bus operations have been running operating profits.

To say that the $1.1 billion is to cover losses on the 550 buses is to suggest that these buses are for unprofitable bus routes or timings. Why should profitable bus services go to PTOs while unprofitable bus services get paid for by the government? What is the point of privatising bus services only to have the government bear losses? Also, does it mean that SBS has been making profits all these years by under providing bus services?

Your claim that we are not doing badly is bad because:

  • You made the mistake of comparing Singapore the city against larger entities like Taiwan and South Korea. You should compare us with Taipei and Seoul. Your figure for Hong Kong is also incorrect and leads to false comparison. Your comparison against Japan is inappropriate since mature industrialised economies seldom grow by leaps and bounds.
  • As far as the World Bank database is concerned, our 2009 unemployment rate and our average unemployment rate between 1999 and 2009 are neither the lowest in Asia nor the lowest amongst developed countries [2].
  • There is little conclusive evidence that social mobility remains higher than other countries or compared to most developed countries.
  • If high home ownership comes at the expense of retirement savings, there is nothing to be proud of.
  • Most First World nations are rated AAA by S&P and Moody’s too so nothing to shout about also.
  • Thank you

    Ng Kok Lim

    [1]: http://app.mof.gov.sg/data/cmsresource/Speech/2012/RUS_Final.pdf

    [2]:

    World Bank database 2009 unemployment:

    Rank Country Name 2009 unemployment (% total labour force)
    1 Thailand 1.2
    2 Norway 3.2
    3 Netherlands 3.4
    4 Korea, Rep. 3.6
    5 Macao SAR, China 3.6
    6 Malaysia 3.7
    7 Switzerland 4.1
    8 China 4.3
    9 Austria 4.8
    10 Japan 5
    11 Luxembourg 5.1
    12 Mexico 5.2
    13 Cyprus 5.2
    14 Hong Kong SAR, China 5.2
    15 Trinidad and Tobago 5.3
    16 Saudi Arabia 5.4
    17 Australia 5.6
    18 Singapore 5.9

    Derived from World Bank database, average unemployment from 1999 to 2009 (only for nations with at least 10 out of 11 years data available):

    Rank Country Name Average unemployment
    1999 – 2009 (% total labour force)
    1 Thailand 1.7
    2 Cuba 3.1
    3 Iceland 3.1
    4 Mexico 3.3
    5 Netherlands 3.4
    6 Malaysia 3.4
    7 Norway 3.5
    8 Switzerland 3.6
    9 Luxembourg 3.8
    10 Korea, Rep. 3.9
    11 China 3.9
    12 Austria 4.3
    13 Cyprus 4.5
    14 Denmark 4.6
    15 Japan 4.7
    16 Singapore 4.8

    Note: Since unemployment rate is expressed as a percentage of total labour force, a country with very liberal immigration policies can easily halve the unemployment rate by doubling the population of workers while the number of unemployed citizens remains unchanged.

    Advertisements

    One Response to “Budget 2012 debate round-up speech by Mr Tharman”

    1. Rajesh Says:

      i like it.

    Leave a Reply

    Fill in your details below or click an icon to log in:

    WordPress.com Logo

    You are commenting using your WordPress.com account. Log Out / Change )

    Twitter picture

    You are commenting using your Twitter account. Log Out / Change )

    Facebook photo

    You are commenting using your Facebook account. Log Out / Change )

    Google+ photo

    You are commenting using your Google+ account. Log Out / Change )

    Connecting to %s


    %d bloggers like this: