Archive for March, 2014

Adequate water supply is common sense, not foresight

March 17, 2014

I refer to the 27 Feb 2014 Straits Times letter “adequate water supply a result of govt’s foresight” by Mr Ho Kong Loon [1].

Mr Ho said the Singapore government understood the critical need to act decisively to ensure adequate water supply in 1998. This Mr Ho said is the government’s determination, wherewithal and foresight to continually seek long term solutions to problems.

However according to PUB’s website [2], NEWater wasn’t an overnight success, the Singapore government had already attempted to turn used water into potable water back in 1974, 24 years before 1998. Our first Water Master Plan was also conceived in 1972. Thus, the understanding of the need to act decisively to ensure adequate water supply did not happen in 1998 but at least a quarter century before that.

The website also explained how the initial attempt to reclaim water in 1974 had to be shelved due to high cost and how it was only in the late 1990s that the cost of membrane technology had come down sufficiently to make NEWater commercially viable [2]. If the government was really determined to seek long term solutions to problems, it would have continued with its 1974 effort to reclaim water rather than shelve the project for nearly a quarter of a century until technology becomes viable. In other words, if technology had not become viable in the late 1990s, this ‘determination’ to reclaim water in 1998 would not have been possible. Thus, as with most other things, the government is driven more by events and circumstances than by intrinsic determination.

Even if we were to look back at the seminal 1972 Water Master Plan, it was also hardly a plan conceived out of foresight but a natural reaction to events and circumstances. Straits Times reported how 10 months of water rationing between 1963 and 1964 due to drought kept Singapore leaders awake at night [3] and how LKY referred to it as a matter of life and death that could lead to war because Tunku Abdul Rahman had threatened to turn off the water supply in 1965 if Singapore didn’t do his bidding [3] and how the Japanese blew up the pipes carrying water to Singapore in 1942 [3] which ultimately led to Singapore’s surrender. The gravity of these three events along with many other water related events should make it clear to any average Joe of the acute need to ensure adequate water supply. Given this context, it is bewildering why anyone should consider this a matter of foresight rather than a matter of common sense.

[1] Straits Times forum, adequate water supply a result of Govt’s foresight, 27 Feb 2014

THE current prolonged dry spell, which has also badly affected some states in Malaysia, brought about quite dissimilar reactions on either side of the Causeway (“S’pore experiencing record dry spell – and it could get worse”; Tuesday).

National water agency PUB has been pumping massive amounts of Newater into our reservoirs to maintain water levels.

Thus, Singaporeans can go about their daily activities without worrying that their water supply may be cut off due to dangerously low water levels at our reservoirs.

But some Malaysian states have had to ration water (“Selangor to ration water; other states may follow suit”; Tuesday).

Thousands wait for water trucks to arrive with the precious commodity, which is sufficient for only cooking, drinking and, possibly, washing.

In 1998, the Singapore Government understood the critical need to act decisively to ensure Singaporeans will have an adequate supply of potable and non-potable water in the event of long droughts or other emergencies.

At the same time, some top Malaysian politicians threatened to cut off the raw water supply to Singapore when it suited their political agendas.

Our initial forays into Newater met with derision and even contempt from some Singaporeans. PUB had its work cut out to educate the public that Newater was safe to drink.

Currently, the four Newater plants and two desalination plants, which turn seawater into potable water, have allowed Singapore to obtain water using non-traditional methods.

Both initiatives, which involved huge capital outlays, were carried out only after years of meticulous study into their viability.

With hindsight, Singaporeans can take comfort in the fact that the Government had the determination, wherewithal and foresight to continually seek long-term solutions to problems.

Ho Kong Loon


NEWater History
NEWater may sound like an overnight success for Singapore. But its evolution is a journey that spanned 3 decades.

Singapore’s first water masterplan was drawn up in 1972. In 1974, PUB built a pilot plant to turn used water into potable water. This was the precursor of today’s NEWater factories. But it was ahead of its time. The costs were astronomical and the membranes were unreliable, so the idea was shelved to await further technological advancement.

In 1998, the necessary technology had matured and driven production costs down. In May 2000, the first NEWater plant was completed.

[3] Straits Times, Quenching Singapore’s thirst, 3 Sept 2011

A water pact with Malaysia upon which Singapore used to depend expired this week. Its end was marked by a cordial handover of a water catchment area in Johor and treatment facilities – a powerful testament of Singapore’s progress towards greater self-sufficiency in water. Insight tells the story of that quest.

A SIMPLE turn of the tap did not guarantee water if you happened to be in Singapore on April 24, 1963.

It was the first day of a water rationing exercise that would last 10 months.

An unusually dry spell both in Singapore and in the Tebrau River area in Johor – a primary water source for the island – caused water stocks to plunge dramatically, leaving the authorities with little choice but to impose restrictions.

For four days a week, depending on which area you lived in, you were either deprived of water between 8am and 2pm or between 2pm and 8pm.

People who did not ordinarily read the newspapers or listen to the radio suddenly found themselves having to scan headlines or turn knobs at least once a week – to stay informed about rationing schedules.

Those who forgot to store water in pails at home during the allocated timings had to stand in queues to use public taps.

The cost of food went up.

A government advisory that called for the washing of cars and watering of gardens to be ‘kept to a minimum’ clearly did not stop some. A forum letter in The Straits Times on May 3 had one reader wondering ‘why the gentleman living opposite me still finds it necessary to water his lawn non-stop for 14 minutes’ a day.

Eerily, the spying on neighbours went further than that.

Another letter on May 17 read: ‘At a time when the state is facing an acute water shortage, is it proper for a person to bathe three times a day? That is exactly what my neighbour and his six children are doing every day of the week.’

Eventually, the rain returned and the reservoirs filled up. Curbs were finally lifted on Feb 28, 1964 – ironically, on a day when heavy rainfall caused an 11-year- old boy to drown.

Singaporeans who lived through that angsty period learnt a lesson they never forgot: that water, or the lack thereof, was a major source of weakness for the island-state.

This week, a no less momentous milestone in Singapore’s aquatic history was crossed, but with far less public interest. A 50-year water agreement signed in 1961 – one of just two between Singapore and Malaysia – drew to a close.

As a result, a catchment area in Johor more than five times the size of Singapore’s Central Catchment Nature Reserve ceased to serve Singapore’s water needs, but with nary an eyebrow raised.

Public indifference, however, can be seen in a positive light. It is arguably a testament to Singapore’s success in overcoming its water vulnerabilities.

What has happened since 1963?

In the words of Dr Joey Long of the S. Rajaratnam School of International Studies, ‘the tables have turned’.

‘While in the initial years Singapore’s access to adequate water was viewed through the lens of security and survival, Singapore’s present circumstances should be viewed with more optimism,’ he said.

In 50 years, a virtuous mix of visionary leadership, meticulous groundwork and scientific advancements has helped Singapore exorcise her hydro-demons.

A tiny island-state ranked 170th out of a list of 190 nations in fresh water availability appears to be leapfrogging its way into water independence.

A matter of life and death

BUT there was a time when the situation was a lot more tense – and not just because people had to line up at public taps and tolerate dirty cars.

In 1970, seven years after that depressing drought, water security continued to keep Singapore’s leaders awake at night.

‘If these chaps do not observe the agreements, it will be a very serious matter for us,’ said then Prime Minister Lee Kuan Yew, referring to the two Singapore-Malaysia water agreements, in a meeting with Professor S. Jayakumar before he took over as Singapore’s permanent representative to the United Nations.

‘It is a matter of life and death… it can lead to war,’ he added.

Never far from Mr Lee’s mind was the threat from Malaysian premier Tunku Abdul Rahman, relayed to him by the British, that ‘if Singapore doesn’t do what I want, I’ll switch off the water supply’.

Coming just days after independence, the threat – though never acted upon – convinced him that ‘as long as I was totally dependent on Malaysia’s water supply, we would always be a satellite’.

That, combined with the Japanese blowing up water pipes that carried water across the strait from Johor in 1942, was what drove him to seek water self-sufficiency from the get-go, he later revealed.

The cards dealt to Singapore in 1965 were not promising.

The bulk of its water came from Johor. Two agreements signed in 1961 and 1962 allowed Singapore to buy water for 3 sen per 1,000 gallons (4,546 litres), excluding land rental costs in the catchment areas.

The expiry dates of the two water pacts were 2011 and 2061 respectively.

The 1961 agreement gave Singapore full and exclusive rights to draw water from Gunung Pulai, Pontian, Skudai and Tebrau. The 1962 agreement allowed Singapore to collect up to 250 million gallons of water a day from Johor River.

In exchange, treated water was sold back to Johor at the price of 50 sen per 1,000 gallons, which was below cost.

The two agreements were confirmed by both Singapore and Malaysia in their separation agreement and promptly lodged with the UN.

The British also left behind three reservoirs – MacRitchie, Peirce and Seletar.

At once, Mr Lee and his Government swung into action. One of his first initiatives: forming a unit under the Prime Minister’s Office to coordinate water policy.

Singapore lacked natural aquifers and groundwater. But it did not lack rainfall, per se, receiving from the heavens 2,400mm annually, comfortably higher than the global average of 1,050mm.

Rather, what could not be found in abundance were water bodies and land that could ‘catch’ the rain.

In 1969, the capacity of Seletar Reservoir was enlarged and its catchment scope broadened.

The 1970s saw a flurry of activity.

The Government began studying the feasibility of various conventional and not-so-conventional water sources, and published in 1972 the Water Master Plan. This is seen by water experts as the first long-term blueprint for water resource development here.

Upper Peirce Reservoir was completed in 1975. That same year, Kranji River was dammed to separate seawater from freshwater. This created Kranji Reservoir – one of the first of several reservoirs formed this way.

But the Government also took chances with the not-so-likely. It constructed an experimental plant to recycle used water – a predecessor to Newater.

Unfortunately, the requisite technologies, such as reverse osmosis, were still premature. The tests failed to persuade policymakers that the idea was sufficiently economical or reliable and no permanent plant was built.

As the economy grew rapidly, it soon also became clear that Singapore could not simply expand reservoirs indefinitely. Industry was competing for land use.

A concerted effort at promoting conservation began. The first ‘Water is precious’ campaign, launched in 1971, reduced water consumption by 5 per cent.

Four decades on, the public education drive continues in schools, factories and the media, whether it is exemplifying ‘water efficient homes’ with toilets that use cistern water-saving bags or mandating self-shutting delayed action taps in buildings. To drive home the message, a water conservation tax was later introduced. It is levied today at a rate of 30 per cent for the first 40 litres per month. Beyond that, the tax rises to 45 per cent. The Government’s aim is to cut per capita consumption from 155 litres today to 140 litres by 2030.

The 1980s and 1990s

THE 1980s saw both bright spots and dark ones in bilateral ties. From time to time, threats to fiddle with Singapore’s water supply, whether serious or not, emanated from Malaysian society or officialdom or both.

In 1986, for instance, the visit of Israeli President Chaim Herzog to Singapore stoked anger across the causeway, prompting some to call for the treaties to be revoked or at least re-negotiated.

There was good reason for optimism in the late 1980s, when the two sides penned an agreement supplementing the 1962 one. Singapore was given the go-ahead to build a dam across Johor River and to buy water over and above the original limit of 250 million gallons a day.

A decade passed. As it considered its long-term water needs, Singapore’s leaders decided to negotiate supplementary agreements to extend the supply of water from Johor beyond 2061.

In 1998, in the wake of the Asian financial crisis, the two sides came close to an agreement on a ‘water-for-funds’ deal, which was later called off.

Another round of talks took place in 2000 but differences remained over the sale price of raw water from Johor. There was initial agreement to raise the price from 3 sen per 1,000 gallons to 45 sen, and later to 60 sen.

Malaysia then said it wanted to unilaterally revise the price to RM6.25 per thousand gallons, a move Singapore insisted was not legally sound. After rounds of strongly worded exchanges in various forms, the matter quietened.

Ambitious new strategy to add two big taps

Four big taps

THE Singapore Government had been hard at work exploring alternative sources of water.

Even as talks with Malaysia ran into an impasse, efforts on another front were headed for a breakthrough that would ‘change the whole equation’, in the words of Dr Lee Poh Onn, a fellow at the Institute of Southeast Asian Studies.

After the failed 1974 experiment, Singapore decided to give recycled water another shot, sending two engineers to the United States in 1998 for a study trip.

Upon their return, they reported findings that suggested recycling had become viable, thanks to, among other things, advances in membrane technology. Subsequent studies corroborated the findings, prompting the Government to construct the first demo plant in Bedok in 2000.

The three-step process eventually adopted for the production of Newater involved filtration and reverse osmosis, removing particles as small as 0.001 microns before disinfecting the water under ultraviolet light. The water met US and UN standards and was, indeed, purer than tap water.

By May 2002, the Government was finally ready to go public with its bold new water strategy.

It was an ambitious plan to double the different types of water sources Singapore relied upon from two to four by 2011, the year the 1961 agreement with Malaysia expired.

Instead of relying only on water collected in reservoirs here and bought from Johor, there would be ‘four big national taps’ within 10 years. The two new ‘taps’ were desalination plants and Newater or water-reclamation plants.

In his speech to Parliament, then Environment Minister Lim Swee Say declared: ‘Singapore certainly can become completely self-sufficient after 2061, if need be.’

The year 2061 was significant as it was when the 1962 water agreement with Malaysia would expire.

A toast to the future

FOR Newater to succeed, the public had to be willing to drink water that was previously sewage.

‘Public acceptance is not guaranteed at the start. Recycled water has been rejected in Australia, where people term it ‘yuck’ water,’ said Dr Eduardo Araral, assistant dean of the Lee Kuan Yew School of Public Policy at the National University of Singapore.

‘Singaporeans accepted it both because they are are pragmatic and because they trust the Government’s promise that Newater is safe to drink,’ he added.

Some 60,000 ‘toasted’ with bottled Newater during the 2002 National Day Parade, including Mr Goh Chok Tong, who was then Prime Minister. Singapore now has five Newater plants, the largest of which is at Changi. Newater is used both in industries and indirectly for households, after it is mixed into reservoirs.

The next significant breakthrough came in desalination technology, although some call this success story a work in progress.

As the cost of desalting seawater fell by more than half in the decade leading up to 2002, PUB called for and received tenders to build a plant. In 2005, a desalination facility using reverse osmosis membranes was commissioned in Tuas. It was built by SingSpring, a wholly owned subsidiary of Hyflux. A second desalination plant in Tuas should be ready by 2013.

Of the current daily consumption of 380 million gallons, Newater and desalination now make up 40 per cent. PUB aims to raise that to 80 per cent by 2061, when all agreements with Johor expire.

Meanwhile, work on other fronts continue.

The completion of Marina Barrage in 2008 increased Singapore’s water catchment area from half of its total land area to more than two-thirds. Studies are under way on the possibility of increasing this in future to 90 per cent through the use of treatment plants that handle both salt water and fresh water. There are now 17 reservoirs – up from three in 1965 – including Marina, Punggol and Serangoon.

Less visible upgrades may not be any less important. PUB has an ongoing programme to replace leaky asbestos cement water pipes with more corrosion-resistant ones. Also, an underground system of pumps and pipes connecting Singapore’s reservoirs was completed in 2007 to prevent wastage by transferring water from full reservoirs to less full ones.

Turning weakness to strength

‘I NEVER imagined we could progress from a situation of crisis to the situation of opportunity today,’ said Dr Lee.

A dramatic turn of events, which he ultimately puts down to political will, means the water issue is now more likely to evoke hope than anxiety.

Research and development projects are creating jobs and expertise that can be exported. The PUB expects the GDP contribution from the water sector to grow from $0.5 billion in 2003 to $1.7 billion in 2015, with the number of jobs doubling to 11,000 by 2015.

To be sure, some latent risks remain.

Dr Araral warns, for instance, that skyrocketing energy prices in the future may yet cause problems for the much-vaunted but relatively fuel-guzzling desalination project, although that may in turn spur the development of other sources of water.

Terrorism, too, could derail the most carefully constructed of systems.

‘Security experts note that water reservoirs are attractive targets of terrorists,’ he said.

Nevertheless, most agree that whatever happens in the future, the achievements as they stand today already exceed the wildest of expectations – not least among them those of the water rationing generation.

Singaporeans can rest with the firm assurance that their secure access to this life-giving commodity is no longer in the hands of others.

The water story

1857: Philanthropist Tan Kim Seng donated $13,000 to construct Singapore’s first waterworks and piped water supply.

1867: Singapore’s first reservoir, MacRitchie, completed.

1927: Water agreement signed between British-controlled Singapore and Johor Sultan. This agreement is superseded by the 1961 agreement.

1961: First water agreement signed between Singapore and Malaysia. Singapore gets full, exclusive rights to draw water from Gunung Pulai and three other areas for 3 sen per 1,000 gallons.

1962: Second Singapore-Malaysia water agreement signed, allowing Singapore to buy water from Johor River at the same price.

1963: Public Utilities Board (PUB) set up to take charge of water supply. Also, start of 10-month-long water rationing due to drought.

1965: Singapore separated from Malaysia. Both countries agree to abide by 1961 and 1962 agreements.

1971: First water conservation campaign launched.

1977: Start of 10-year-long Clean Singapore River campaign.

1990: Signing of supplement to 1962 agreement, allowing Singapore to build a dam across Johor River and to buy water over and above original quota of 250 million gallons a day.

2000: The beginning of Singapore- Malaysia water talks that end in stalemate in 2003. The two sides could not agree on price.

2001: Restructuring of PUB so it took charge of not only water supply, but also drainage, water reclamation plants and sewerage systems.

2002: Launch of Newater – or recycled water – technology, which decisively paves the way towards water independence for Singapore.

2005: First desalination plant completed in Tuas. A second plant, also in Tuas, is expected by 2013.

2008: Inaugural International Water Week, which became an annual conference on water solutions. Also, Marina Barrage was completed, the first reservoir here in the heart of the city.

2011: 1961 water agreement with Malaysia lapsed. Singapore returns all land and facilities, saying handover does not affect adequacy of water supply.


The high cost of Singapore living!

March 13, 2014

I refer to the 11 Mar 2014 TREmeritus article “CNA editor: The high cost of Singapore living?” by Mr Nicholas Fang.

Mr Fang repeats what has been told to us from young: that we are a small country with no natural resources that managed to compete with the world’s best. Now that we are all grown up, it’s time to wake up from this fairy tale.

If we compare small population economies (defined as less than 10 million population) against large population economies (defined as 10 million population or more), the percentage of small population economies achieving World Bank’s High Income status classification is nearly twice that for large population economies. It thus seems that prosperity is easier achieved for small population economies than for large population economies. Our smallness hasn’t been a hindrance to us.

World Bank Data Population 10 million or more Population less than 10 million Total
Number of High Income economies 19 55 74
Number of Not High Income economies 67 73 140
Total 86 128 214
Percentage 22% 43%

Similarly, if we compare economies deriving less than 5% of its GDP from natural resources against economies deriving 5% or more of its GDP from natural resources, we find that the percentage of the former group achieving World Bank’s High Income status classification is again more than twice that for the latter group. Prosperity seems easier achieved for economies deriving less than 5% of its GDP from natural resources than for economies deriving 5% or more of its GDP from natural resources. The absence of natural resources hasn’t been a hindrance to us.

World Bank Data 5% or more GDP from natural resources Less than 5% GDP from natural resources Total
Number of High Income economies 13 61 74
Number of Not High Income economies 58 82 140
Total 71 143 214
Percentage 18% 43%

It’s amazing how Mr Fang can conclude from just a handful of the hundreds of EIU items that the EIU items relate only to expatriates but not to the ‘average’ citizen like himself. It’s amazing too he can conclude that the hundreds of thousands of expatriates in Singapore are all consuming well beyond the exquisiteness of his ‘average’ taste.

The difference between the CPI and the EIU index Mr Fang brought up could be due to the fact that the former includes imputed rental which kind of muddies the consumer price information whereas the latter does not. It’s unfortunate the EIU index does not include housing prices because if it did, it will more clearly show our high costs given that the price of our public housing is the price of private housing elsewhere.

Mr Fang should realise that we don’t have the right public information to know if our public transport is cheaper than say New York. Our hub and spoke transport system forces the average home-to-destination or destination-to-home journey into a series of bus-train-bus combinations the average price of which cannot be obtained simply by looking at bus only or train only fare information separately.

Mr Fang also repeats the irrelevant notion that we have a short history as an independent state because modern Singapore has had a glorious history spanning close to 200 years.

Mr Fang wants us to search our soul about the image we want to project. But for the average man on the street, image is the last thing on his mind, coping with the daily grind of life is.

Ex-ST writer is not the world’s most wise

March 9, 2014

I refer to the 9 Mar 2014 TR Emeritus article “Ex-ST writer: SG is not the world’s most expensive city” by Mr Andy Mukherjee.

Mr Mukherjee claims that Singapore will obviously have higher US dollar prices due to Singapore’s appreciating exchange rate over the past decade. That is not true for goods imported from the US or for international commodities denominated in USD like oil.

When the Singapore currency strengthens, a 1 USD imported item will still cost 1 USD even though it can be bought for less SGD. For example, if the exchange rate was 1 USD = 1 SGD, a 1 USD item will cost 1 USD or 1 SGD. When the exchange rate improves in our favour to 1 USD = 0.5 SGD for example, the 1 USD item will still cost 1 USD but will now cost 0.5 SGD. Thus, the USD price didn’t change while the SGD price became lower.

An imported item will only become pricier in USD if the currency of the country from which the item was imported strengthens against the USD. For example, a 1 Euro item from Europe will cost 1 USD when the exchange rate was 1 USD = 1 Euro. When the Euro strengthens relative to USD to 1 USD = 0.2 Euro, the 1 Euro item will now cost 5 USD. The USD price of non-USD denominated imports depends not on SGD-USD exchange rate but on the respective currencies’ exchange rate with USD.

Only local products and services will cost more in USD when the Singapore currency strengthens. However, since the Singapore economic model is based on low wage workers, labourers, waiters, cooks and so on, Singapore services should still be cheaper than services in other developed economies despite the strengthening of the Singapore dollar.

Mr Mukherjee claims that cars in Singapore have little utility beyond the dating scene. But many friends have expressed appreciation for the convenience that a vehicle brings to a family with little children.

Mr Mukherjee suggests that safe drinking water can be quite expensive in Mumbai. But if Mumbai has no cheap access to safe drinking water, wouldn’t most Mumbai people have died of thirst within a few weeks? Mumbai residents boiling water to make drinking water safe is no different from Singaporeans boiling water to make drinking water safe.

Mr Mukherjee points out the issue of nationality specific spending patterns like kimchi refrigerators for the Koreans or cheap cricket channels for the Pakistanis. But don’t Koreans and Pakistanis wear Western style underwear, T-shirt, shoes, socks, eat McDonalds hamburger, drink Coca Cola, use toothpaste, toothbrush, drive automobiles, ride bicycles, watch television, use the computer, connect to the Internet and so on? Should one, two differences in nationality specific spending patterns invalidate the comparison of a whole multitude of products and services commonly consumed across cultures and throughout humanity?

Mr Mukherjee claims that the EIU study fails the simple test of people revealing their preferences by their decisions because employers that used the EIU study to tone down Mumbai’s wage expectations would have caused a beeline of Mumbai people rushing to find jobs in Singapore. It is Mr Mukherjee who has failed the test of his own logic. We can always turn the question around and ask what if employers did not adjust wages to account for differences in cost of living? Wouldn’t the Indians in Singapore be making a beeline for low cost Mumbai since wages are the same? Since that hasn’t happened, by Mr Mukherjee’s logic, employers should have adjusted wages here to account for higher cost of living so that expatriates here do not make a beeline for Mumbai. As for Mr Mukherjee’s original logic, he should realise that it is not just Mumbai people but many Third World nation people have always been making a beeline for jobs in Singapore which is why international surveys have always revealed Singapore to be one of the top destinations for Third World citizens.

In conclusion, there is nothing in Mr Mukherjee’s essay that proves that Singapore is not the world’s most expensive city.

Problems with an associate professor’s comparisons

March 9, 2014

I refer to the 7 Mar 2014 Straits Times letter “Problems with global comparisons” by Associate Professor Martin Bodenstein.

Mr Bodenstein asserts the EIU survey does not compare cost of living of local citizens across the globe because not everyone drives a Mercedes Benz, wears an Armani suit, orders champagne or spends a night at Marina Bay Sands.

But a Singapore citizen doesn’t even have to drive a Mercedes Benz to incur higher cost of car ownership than his counterpart in other developed countries. His piece of COE paper is already more than the price of a Mercedes Benz elsewhere.

Similarly, is the local citizen better off because he cannot afford an Armani suit and so does not wear one? Is the local citizen better off because he cannot afford champagne and so drinks teh tarik instead? Is the local citizen better off because he cannot afford to spend a night at Marina Bay Sands and so spends a night on an open bench at Marina Barrage instead?

Shouldn’t it be the other way around instead? A Singaporean has a living standard comparable to the expatriate because he can similarly afford an Armani suit, order champagne and spend a night at Marina Bay Sands? If the Singaporean cannot afford what the expatriate can, doesn’t that show that the Singaporean is worse off in living standards?

Mr Bodenstein also asserts that cross border comparisons of cost of living is plagued primarily by the problem of differences in local tastes and substitutability of goods as not everyone here eats beef or pork or not in the amounts consumed in the West but eats vegetables instead.

Does Mr Bodenstein have any proof to show that our lower beef consumption is due to taste and not due to beef price? If beef price is lowered, consumption of beef will not increase because Singaporeans prefer vegetables to beef? Is a Singaporean better off because he cannot afford to eat beef or pork or in the same amounts as those consumed in the West? Is Mr Bodenstein’s concept of substitutability about expatriate eating beef being equivalent to locals eating vegetables? If that’s the case, we can extend the concept further and say that the African who can only afford to eat grass is merely eating a beef substitute so there is no difference in cost of living across the world from dirt poor Africa to the prosperous West.

Mr Bodenstein claims he is better off in Singapore because he pays lower taxes that more than offset his expensive Honda. The US authorities should take note of this and correspondingly reduce Mr Bodenstein’s pension entitlements in future because Mr Bodenstein failed to appreciate that higher US taxes isn’t for nothing but for a more secure, comfortable retirement that lower taxed Singaporeans don’t get to enjoy.

Finally, Mr Bodenstein claims that the EIU survey is the wrong place to assess the impact of rising prices in Singapore. No, Mr Bodenstein, it is you who have amply demonstrated that you are not the right person to comment on this issue.

Straits Times, Cost of Living – problems with global comparisons, 7 Mar 2014

IT IS official now: We live in the world’s most expensive city (“S’pore ‘world’s most expensive city'”; Wednesday).

The media hype surrounding the release of the Economist Intelligence Unit’s (EIU) cost of living index, which ranked Singapore first among 131 global cities surveyed, can easily make one lose sight of what the survey set out to measure.

The survey forms part of a professional tool that the EIU markets to human resource departments of international corporations to compute cost-of-living adjustments for business travellers and expatriates. To this end, price data for a fixed consumption basket of a typical (Western) expatriate is collected around the globe and combined to city-specific indices.

In no way does the survey compare the cost of living of local citizens across the globe, unless one believes that everybody drives a Mercedes-Benz to town wearing an Armani suit, orders champagne, and then decides to spend the night at Marina Bay Sands.

Cross-border comparisons of the cost of living are plagued by many problems. With respect to the relevance of the EIU survey to ordinary folk, these problems primarily concern differences in local tastes and the substitutability between goods.

Not everyone here eats beef or pork, or at least not in the amounts consumed in the West. Traditional South Asian and South-east Asian cooking makes more creative use of vegetables.

Market prices also influence consumption habits, and thus the measured local costs of living.

But even if one is an expatriate who cannot live without a slice of real gruyere cheese and a fancy car, goods prices need to be assessed in relation to direct and indirect income taxation.

When considered in isolation, the price tag of a six-year-old Honda in Singapore is almost prohibitive due to taxes and fees, but low personal income taxes by international standards (for both locals and foreigners) leave me financially better off than when I was in Washington, DC, with comparable gross income and a Honda.

I do not intend to downplay people’s concerns about the impact of rising prices on real income inequality in Singapore. Broad-based participation in economic growth is an important goal for public policy to secure social stability. Yet, the EIU survey is the wrong place to look for assessing that situation.

Martin Bodenstein (Associate Professor)
National University of Singapore
Department of Economics

Much to thank for beyond the last 50 years

March 9, 2014

I refer to the 6 Mar 2014 Straits Times letter “Much we can be thankful for” by Mr Patrick Liew [1]. Mr Liew purported to put things into perspective by merely parroting the state’s and its media’s claim that the EIU report relates more to expatriate lifestyle. The EIU Worldwide Cost of Living 2014 report compared more than 400 individual prices across 160 products and services including food, drink, household supplies and personal care items. The state media listed only a handful of the hundreds of EIU items and from that handful Mr Liew concluded that the EIU items relate more to expatriate lifestyle without considering the hundreds of other items not listed.

Mr Liew expressed his thanks for not facing congestion problems in many developed cities. But Singaporeans face many congestion problems even though they may not be reported. Many major roads are congested even during non-peak hours or on Saturdays. During peak periods, the congestions can be nightmarish.

Mr Liew also expressed thanks for the regulation of our property market without considering that it came only after an election setback. That being the case, it was ultimately the votes of the people that regulated our property market.

Mr Liew said we will be better off in Singapore compared to many developed cities if we lived simply. But if we have to live simply in Singapore to be better off but don’t have to live simply to be better off in other developed cities, doesn’t that show that we are actually worse off instead?

Mr Liew claimed our economy is better off than other developed countries because there are plenty of jobs and that our tax rates are amongst the lowest. But the plenty of jobs we have are low paying jobs that cannot support the quality of life found in other developed countries. What good is it for a country to have plenty of low paying jobs that only provides the barest living sustenance? Our low tax rates give us nothing in our old age and nothing when we fall sick.

Most developed countries are safe, not just Singapore. Otherwise, people in those countries would be flocking to Singapore instead of the other way around wouldn’t it? The government would not have to start campaigns to encourage Singaporeans overseas to come back would it?

Our country is a model mostly for Third World or communist countries. It is hardly a model for developed countries. While we have done well for a country with no natural resources, practically all developed countries have done well with little or no natural resources.

Mr Liew is wrong to say that it took us less than 50 years to build our city state. Many important institutions and buildings were put in place more than 50 years ago. Our running water began during colonial times with the generous donation by Mr Tan Kim Seng. Our police force began during colonial times. KK Hospital where most Singaporeans were born began during colonial times. Many good schools that nurtured generations of leaders for Singapore were founded during colonial times. Our most precious heritage buildings were built during colonial times.

There is so much to thank for beyond the last 50 years. Without the years that came before the last 50 years, there would have been no last 50 years.

[1] Straits Times, Much we can be thankful for, 6 Mar 2014

Singapore’s No. 1 ranking in EIU Cost of Living Survey

March 7, 2014

I refer to the transcript of Mr Tharman’s Budget 2014 speech for his comments on Singapore’s Number 1 ranking in EIU’s cost of living survey.

Mr Tharman said the strengthening of the Singapore dollar makes Singapore goods expensive for someone who is paid in a foreign currency. Firstly, many expatriates are given the choice of being paid in Singapore dollars. Secondly, the EIU cost of living survey ranks countries based on prices of goods and services only, it does not rank countries based on how affordable goods and services are relative to salaries. Singapore’s No.1 ranking in the EIU cost of living survey has everything to do with prices and nothing to do with salaries or the currency of salaries. Therefore, Mr Tharman’s argument about someone being paid in a foreign currency is completely irrelevant in so far as Singapore is No.1 ranking in the EIU cost of living survey is concerned.

Since most goods in Singapore are imported, the strengthening of the Singapore dollar vis-a-vis the USD will not affect the USD price of these imported goods.

Mr Tharman also said that a stronger Singapore dollar makes imported goods cheaper. But the reality is that Singapore’s imported goods have become more expensive, not cheaper. The strengthening of the Singapore dollar merely allows importers to make better margins without necessarily lowering the prices of the goods they import.

Mr Tharman claimed that the EIU’s basket of goods that include imported cheese, filet mignon and Burberry type raincoats is geared towards higher end expatriates that differ from the basket of goods consumed by ordinary Singaporeans. However, according to the EIU website [2]: survey prices are gathered and listed from three types of stores: supermarket, medium-priced retailers and more expensive speciality shops. Surely, supermarket goods cannot be too different from goods consumed by Singaporeans? Thus, while the goods quoted by Mr Tharman are quite different from those consumed by Singaporeans, many other goods not quoted by Mr Thaman are quite the same as those consumed by Singaporeans. This is further supported by the statement from EIU spokesperson Mr Jon Copestake who said [3]: The highest-weighted category in our survey is that of groceries and everyday staples which include goods like fresh fruits and vegetables, meat, fish, rice, etc.

Mr Tharman also complained that the EIU survey’s transport category only included cars and taxis but not public transportation whereas the average Singaporean takes public transport. But if the average Singaporean is consigned to taking public transportation while the average person in some other country can afford to drive, wouldn’t that in itself show that our cost of living is higher than other countries and that our people cannot afford what people in other countries take for granted? The EIU Worldwide Cost of Living 2014 summary report explained that high COE led to Singapore’s transport costs being three times higher than those in New York. So it is not just the rich or the expatriate but the average Singaporean too who must pay four times the price for a car compared to the average New Yorker.

Mr Tharman said our public transport is cheaper than other cities. But public information on public transport doesn’t inspire the confidence that those figures are correct. LTA compares average MRT fare and average bus fare separately with those of other cities. But the Singapore public transport model is a hub and spoke model that forces most home-to-destination or destination-to-home journeys into a series of MRT and bus ride combinations. Providing separate statistics for MRT and bus journeys distorts the true picture of our public transportation costs. As an example:

Home to MRT station by bus: $0.80 Average bus fare: $0.80
MRT station to destination by MRT: $1.00 – $0.40 rebate = $0.60 Average MRT fare: $0.60

But the cost of the journey from home to destination is actually $1.40. We should be comparing $1.40 with other countries, not $0.80 or $0.60 separately. Comparing $0.80 or $0.60 with other countries makes us look cheap when the actual cost is $1.40. The more hub and spoke a transport model is, the greater the distortion between cost of home-to-destination journeys and cost of individual MRT and bus journeys. EIU is therefore correct to exclude public transport costs because they never truly reflect the cost of public transport in Singapore anyway.

Mr Tharman then claimed that few surveys measure living costs of ordinary residents and went on to cite the one from the Lee Kuan Yew School of Public Policy as the one that does. But the Lee Kuan Yew School of Public Policy survey is quite a useless survey because it is almost never used by anyone outside Singapore. It is almost like North Korean statistics useful only within North Korea.

I refer too to the 6 Mar 2014 Straits Times report “S’pore the costliest city? That’s rich” [4]. In that report, Straits Times claimed that the EIU study included fees at international schools as part of overall cost of living. However, the EIU website [2] says: the final three subcategories of:

• Housing rents
• International schools, health & sports
• Business trip costs

are not included in the index calculation. Hence, Straits Times is wrong to say that international school fees are included as part of overall cost of living since it is excluded from the index calculation.

Straits Times also quoted former MP Calvin Cheng saying rental rates were taken from Orchard Road whereas most Singaporeans live in HDB flats [4]. Does Mr Cheng not know that housing rents are excluded from the index calculation and hence does not impact our cost of living ranking?

If housing rents and international school fees had been included in the index calculation, Singapore cost of living would have shot up even more.

In conclusion, the state and its media, by listing only a handful of the more than 400 individual prices across 160 products and services in the EIU survey, failed to show that the items are generally expat-centric and irrelevant to Singaporeans.

[1] Straits Times, “Cost-of-living surveys reflect expatriate, not local, costs”, 6 Mar 2014



[4] Straits Times, “S’pore the costliest city? That’s rich”, 6 Mar 2014
The study also took into account taxi fares and the costs of buying and running a car but excluded public transport. And it included fees at various international schools as part of the overal cost of living.

Former Nominated Member of Parliament Calvin Cheng said: “Rental rates for the survey are taken from average rates of locations like Orchard Road and River Valley, where most Singaporeans do not live in. Most locals live in HDB flats which they own.”