More to ST report on Singapore’s Legatum 2015 performance

I refer to the 3 Nov 2015 Straits Times report “Singapore economy tops key sub-index”.

Firstly, there is no such thing as the economy sub-index being the key sub-index. According to Legatum 2015 report (page 40):

“Finally, the Prosperity Index score is determined by assigning equal weights to all eight sub-indices. The average of the eight sub-indices yields a country’s overall Prosperity score.”

Thus, the economy sub-index is not a key sub-index but simply one of eight sub-indices of equal weight.

ST reported:

Singapore’s economy topped a list of 142 countries in an annual global prosperity sub-index released by the Legatum Institute yesterday, on the strength of its export market and productivity rate.

The Republic dislodged Switzerland to grab the top spot this year in the economy category of the Prosperity Index, which classified 47 per cent of its manufactured exports as “high-tech”, the third highest in the world.

The title and the opening paragraphs say it all, economy alone is sufficient to sing Singapore praises despite the fact that Singapore didn’t make it to the top 10 in any of the other sub-indices and only managed an overall ranking of 17th.

It is worth noting that China is ranked 3rd in Legatum’s economy sub-index even though China’s per capita GDP is still quite low by international standards. Hence, Legatum’s economy sub-index doesn’t necessarily reflect a nation’s level of economic attainment.

According to Legatum, the economy sub-index is a combination of many factors including high-tech exports. But many of our high tech exports are by foreign firms the revenue of which goes mainly to foreign firms, not to Singaporean firms or to Singaporeans.

About half of Singapore GDP belongs to foreign firms and foreigners. These should be factored out to obtain our true economic performance. We cannot include the economic performance of foreign firms and foreigners as part of our economic performance as a nation just as we do not include the salaries of our tenants as part of our household income.

For example:
• A household couple earns $8,000 in total from wages
• They rent out a room for $1,000 to an expatriate who earns $10,000

The household’s income is only $9,000. The expatriate’s $10,000 salary is not considered part of the household’s income.

Singapore is renowned for having one of the world’s highest per capita GDPs. For example in 2010, our per capita GDP (PPP) of $57,902 was second highest in the world but our indigenous per capita GDP (Singaporeans and PRs) then was only SGD $47,148 which was only about ¾ that of our per capita GDP. If we factor out PRs’ GDP, the true figure for Singapore companies and Singaporeans might be even lower.

ST reported:

The index found Singapore to have the second-highest capital per worker in the world at US$240,750 (S$337,290), behind Luxembourg.

WHERE S’PORE STANDS
OVERALL: 17
ECONOMY: 1
CAPITAL PER WORKER: 2
ENTREPRENEURSHIP AND OPPORTUNITY: 12
SAFETY AND SECURITY: 12
GOVERNANCE: 13
HEALTH: 14
EDUCATION: 15
SOCIAL CAPITAL: 25
PERSONAL FREEDOM: 38

Don’t be fooled by the above reporting. “Capital per worker” isn’t one of the eight sub-indices in the Legatum Index but one of the sub sub or sub sub sub indices.

ST reported:

Among Asean nations, Malaysia came in next highest after Singapore, ranking 44th overall followed by Thailand, Vietnam and the Philippines. Indonesia climbed up 21 places in the last seven years – the most by any country in the world, to rank 69th overall.

The establishment loves to compare Singapore with our immediate poorer Southeast Asian neighbours when in terms of economic development we are closer to our fellow East Asian dragon economies. The Legatum rankings of our fellow East Asian economies are:

17 Singapore
19 Japan
20 Hong Kong
21 Taiwan
28 Korea, Rep.

Our ranking isn’t exceptional when seen in relation to the rankings of our fellow East Asian peers.

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