Reply to Prof Ng’s reply

I refer to the 2 Mar 2017 Online Citizen letter “A reply to “False justifications for water price increase””.

Bullshit 1: 30% hike cannot even catch up with inflation

Prof Ng said that general inflation since 2000 has exceeded 30%. However, according to MAS core inflation index (http://www.mas.gov.sg/statistics/other-statistics.aspx), core inflation increase since 2000 is 29.959%. It hasn’t exceeded 30%.

More importantly, the price of raw water from Malaysia has remained at 3 cents per 1,000 gallons all this while and hasn’t been subjected to inflation. Since Singapore gets half its water from Malaysia (Straits Times, Singapore’s water success has H2O expert worried, 21 Mar 2016) and more from our local reservoirs, more than half of our water has not been subjected to inflationary pressures. Setting aside the low cost involved in treating fresh water, the average inflation that can be applied to our water should only be about ½ × 30% + ½ × 0% = 15%. Thus, Prof Ng is wrong to say that the announced 30% water fee hike cannot even catch up with inflation. It is about double the average water cost inflation.

Bullshit 2: Singapore water price compares favourably to other countries

Prof Ng likes to compare Singapore water price to those of European cities. But even amongst European cities, there are some with reasonably low water bills relative to their incomes (http://www.thejournal.ie/water-charges-ireland-europe-rankings-3015297-Oct2016/):

City Annual water bill as percentage of median income
Dublin 1.3%
Stockholm 1.5%
Rome 1.7%
Madrid 2.2%
Luxembourg 2.5%
Helsinki 2.8%
London 2.9%
Paris 2.9%

Prof Ng selectively chooses Beijing as a comparator for Asian cities which he conveniently brushes off with the comment that he dares not drink straight from a Beijing tap. But the same can be said of Singapore; almost every household boils water to drink or installs expensive water filters.

Japan, South Korea, Taiwan and Hong Kong have cheaper water than us that isn’t inferior in quality.

Bullshit 3: Often hear about water saving on radio

Prof Ng claims that he often hears about water saving on radio but not saving of other things and asks why. The reason is that our radio stations are government owned and broadcast what the government wants the people to hear.

Bullshit 4: Water prices do not adequately reflect costs

Prof Ng claims that our water prices do not adequately reflect costs. If that’s the case, then PUB should be suffering immense losses year after year. But no, PUB has been making positive net operating income and positive net income before grants all the way till 2013 and 2009 respectively.

Bullshit 5: Price goods at the highest cost source

Prof Ng says that water should be priced at the higher costs of producing NEWater and desalination even for raw water obtained from Malaysia for economic efficiency. But it is precisely a monopoly that prices goods way above costs which results in a dead weight loss for society that leads to economic inefficiency. So on the contrary, for economic efficiency, water should be priced near its weighted average cost of production.

Prof Ng claims that any extra money made by the government in producing water can be used to offset spending in other areas and lower taxes in those areas. But what we are seeing is a near simultaneous increase in the price of everything. Car park, electricity, conservancy and now water charges have all gone up. Tell us Prof Ng, what is going to go down? For all we know, all these increases are just being used to shore up investment losses by our government.

Bullshit 6: Most cities under price water causing wastage

Prof Ng likes to cite high water prices in European cities but yet claim that many cities under price water causing wastage. If so many European cities are charging high water prices, then surely there should also be many cities that are not under pricing water? Prof Ng flips arguments like flipping roti prata. Whichever way he flips, his logic is always, heads he wins, tails you lose.

Bullshit 7: Population increase does not lead to lower water costs

Prof Ng disagrees with the notion that population increase has led to water price increase. He can only make sense of this notion in a simple dichotomy of Singapore being fully supplied with cheap Malaysian water versus Singapore requiring expensive water over and above that supplied from Malaysia. The truth is more than that.

Let’s say the cost of purifying Malaysian raw water is $1 per litre while the cost of producing NEWater and desalinated water is $10 per litre. Let’s say at first we were producing 9 litres from Malaysian raw water and 1 litre of NEWater and desalinated water. The weighted average cost of producing water would be 0.9 × $1 + 0.1 × $10 = $1.90 per litre.

Let’s say due to population growth, on top of consuming 9 litres from Malaysian raw water, we now also consume 9 litres of NEWater + desalinated water. The weighted average cost of water is now 0.5 × $1 + 0.5 × $10 = $5.50 per litre. So the average cost of water has indeed increased as a result of population increase.

Let’s say in the long run, population exploded and on top of the 9 litres of Malaysian raw water, we consume 27 litres of NEWater + desalinated water. The weighted average cost of water will become 0.25 × $1 + 0.75 × $10 = $7.75 per litre, which is an increase again.

Bullshit 8: Larger population lowers cost of desalination

Prof Ng claims that a larger population helps lower the cost of investment for desalination. But that’s only for fixed costs, not running costs. The main cost of desalination is the cost of electricity and every extra litre of desalinated water will use an extra amount of electricity.

Bullshit 9: We are economically better off with larger population

Prof Ng says that we are economically better off with a larger population because immigrants cannot take away assets owned by existing people without adequate payment. But the issues involved are much more than that. As more people fight for the same amount of limited resources, prices go up for all. Also, the law of diminishing returns will ensure that as more and more people crowd onto this island, the benefit from the extra people will become lesser and lesser until it actually begins to detract from rather than add to the well being of the society.

The leaders of this country must recognise the optimum level at which Singapore can perform and not force our country to go far into diminishing returns.

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