Investment in UBS by GIC – a Chronicle of a Disaster in the Making

By Damon Yeo

It was mid-December 2007 [A] when the Government of Singapore Investment Corp. (GIC) made a whooping 11 billion Swiss francs (S$13.8 billion) investment in UBS.

There was news earlier in the summer of 2007 about how the US housing market was showing signs of slowing down, but some of the major financial institutions were still raking in record profits and numerous equity indices were nearing their all-time highs.

UBS was amongst the first of the banks to show signs of cracking. A day before GIC announced its investment, the bank had just announced a write-down of US$10billion[1] and the money raised was necessary to maintain its capital ratio and ease market fears of its stability.

As GIC became the largest single shareholder of the Swiss giant (circa 9%), deputy chairman and executive director Dr Tony Tan said in a statement that GIC had “confidence in the long-term growth potential of UBS’s business, particularly in the global wealth management business”.[2]

The word “long-term” does not have a fixed definition, but in the world of finance and markets, anything longer than five years is generally considered “long-term”.

With UBS it never rains – it pours

Since that fateful day for GIC, UBS’s fortunes had gone from bad to worse.

Throughout 2008, rival banks began to report massive losses, but very few had worse results than UBS. The Board reacted by changing the management team and the new management team introduced cuts across the board, from staff numbers to bonuses.

All the cuts had very little impact and in April 2008 [B], the bank’s ratings were downgraded by major rating agencies. This essentially increased the bank’s borrowing costs in the open market and further damaged its reputation of being a stable Swiss bank. The losses were mainly from its investment banking and trading arm, but alarmed customers in its wealth management division were leaving the bank.

In October, the bank had little choice but to turn to the Swiss central bank for assistance. [C] In an unprecedented move, the usually non-interventional Swiss Central Bank technically bailed out UBS via an agreement to ‘ring-fence’ US$60billion of UBS’s illiquid (and poor quality) assets.[3]

By then it was clearer to the markets – UBS has dabbled in the US sub-prime mortgage markets more actively than any other of their European rivals and was hurting from it.

For the entire 2008 financial year, the bank lost a total US$17billion, the largest loss in Swiss corporate history. Only Citibank, Wachovia, Merrill Lynch and Bank of America had lost more in this crisis.[4]

An Imminent Collapse?

While the losses were staggering, it still can be said that with the backing of the Swiss government, UBS remains stable financially, at least in the short term.

However, the viability of the bank’s business model in the long run was thrown into uncertainty in Feb 2009.[D]

It was announced that that the bank had been made liable to pay a $780million to the taxman in the United States to settle an investigation into its operations.[5] They had also initially agreed to divulge the identities of some of their clients who had used the bank to park their wealth offshore to evade taxes in the US.

Since the Middles Ages, Swiss banks had leveraged on their reputation to protect identities of their clients to lure wealthy customers, who are willing pay huge fees to the bank. UBS, in particular, was a massive player in the murky world of private wealth management. By helping rich Americans set up offshore accounts right under the noses of the taxman, the bank had approximately earned over $200million annually.

At time of writing, the case between the US tax authorities and UBS is still ongoing. The American government wants the bank to reveal all of the clients they had ever helped to evade tax, but UBS is negotiating to only disclose some of these Americans and not all. This high profile case had involved the governments from both countries and is now turning into a diplomatic issue.

This is a classic case of a catch-22 for UBS. On one hand, if they do back down and hand in the details of their clients to the US government, they will lose more customers in its wealth management business. They can no longer charge higher fees than their rivals because they no longer have that competitive edge over them. In business terms, the bank’s critical success factor will be lost. The bank may almost have to restart its wealth management business from scratch, in a market already saturated with other banks.

On the other, if UBS decides not to co-operate, the US Courts may revoke their banking licence in the country all together. No statistics and figures are required to show how a global bank like UBS will suffer if they are not allowed to trade and operate in the world’s largest economy.

Last week, Swiss Justice Minster warned that UBS may fail if no agreement was reached.[E][6] The headlines may be sensational, but she may not be exaggerating. If UBS does not suggessfully negotiate past this hurdle in the short-term, there will be no “long-term” future to talk about and Dr Tony Tan’s words will haunt GIC forever.

GIC has no management involvement in UBS, so will not be directly implicated in this court case. However, if UBS does fail, the entire S$13.8bn invested will likely go down the drain (less any amounts recovered upon liquidation).

S$13.8bn. That is nearly S$3,000 for every man, woman and child from Tuas to Changi in the island of Singapore.

Table 1: UBS share price since Dec 2007

(A) GIC invests in UBS

(B) UBS credit ratings cut

(C) Swiss Central Bank intervention

(D) Announcement of UBS legal case VS US Tax authorities

(E) Swiss Justice Minister warns of UBS collapse

---

[1] www.msnbc.msn.com

[2] Forbes

[3] Times Online

[4] www.thebanker.com

[5] NY Times

[6] Times Online

Other  articles by Damon Yeo:

>> GIC’s investment in Stuyvesant Town: Unraveling the mystery

>> The demise of Dubai: How the mighty have fallen

>> The minimum wage: pros and cons

>> HDB’s 2 billion dollar deficit: More questions than answers

>> Singapore v Hong Kong

>> DBS and a series of ‘unfortunate events’

>> Sale of Chartered – An Anatomy

>> 3rd most competitive nation in the world and what it means to the average worker

About the Author:

Damon is a proud graduate of Nanyang Technological University with a degree in Accountancy. He is currently working in the finance department of a UK Bank

Being the second freest economy in the world – What does it mean to Singaporeans?

By Damon Yeo

 For 2010, the Singapore economy has been named as second freest economy in the world, after Hong Kong by the Heritage Foundation. Since 2000, our economy has consistently scored about 87 by the foundation, a considerably high score according to this index.

So, what does this study mean for the average working class Singaporean? If you do not have time to finish reading the article, here is the answer: very little.

Well to be fair to the study, which had been carried out annually since 1995, it was not set out to measure the overall well-being of an average citizen in any given economy. Instead it just specifically measures how freely an individual can work, produce and consume as well as how freely the government allows labour, capital and goods to move around. It does not measure how much an individual has to start with.

The index measures ten separate broad areas of economic freedom and a maximum score is 100 for every area.  

Government Spending

One area to determine economic freedom is by looking at how much the government spends. The concept is that the less the government spends, the less economic distortions there will be in the market. In this benchmark, an economy where the government spends nothing at all will get a score of 100.

 Compared to other economies in the world, Singapore is ranked second. Only Myanmar has a ‘better’ score (possibly due to corruption). As expected, Scandinavian economies with generous welfare benefits are heavily penalised in this area – Sweden is ranked third last and Denmark fifth last.

 Quite clearly, this benchmark illustrates the inverse relationship between (the lack of) government spending and economic freedom.

 However, bear in mind that low level of spending by the Singapore government does not necessarily indicate neglect of provision of public goods – it could also represent the lack of unemployment benefit payouts and efficiency.

 Labour Freedom

 Our economy also ranks number one in the Labour Freedom benchmark. This benchmark measures six different factors, including hindrance to hiring additional workers, difficulty of firing redundant employees and mandatory severance pay. Broadly speaking, if companies in an economy can hire additional workers easily, fire redundant workers easily and pay very little (or no) severance pay, this economy is defined as free.

 This benchmark obviously measures economic freedom from the perspective of the corporations and not the workers.

 A previous article has already discussed this extensively. This report, which is done independent of World Economic Forum’s report on Competitiveness, reaffirms the fact that corporations are “well-treated” in Singapore, at the expense of workers themselves. This particular benchmark will be uncomfortable reading for many Singaporeans who lost their jobs during the current recession.

 This labour freedom is likely achieved by the tripartite relationship (government, unions and workers), which had been often championed as a comparative advantage of our economy.

 Monetary Freedom

 This particular benchmark in the study measures price stability and level of price controls in an economy. The study deems that If prices are stable (ie low inflation) and the government does little to interfere with market prices, the economy is free.

 Singapore is ranked relatively high at ninth for this benchmark, behind economic powerhouses like Japan, Hong Kong and Switzerland.

 However, the overall level of government involvement in Singapore’s economy is very different from that of the rest of these countries. More than 80% of Singaporeans own properties sold to them by the government and through Temasek Holdings, the government has significant interests in a large number of companies listed on the Straits Times Index. In a nutshell, the Singapore government can impose much more effective price controls than most other developed economies.

 Despite its ability to, the study has shown that the Singapore government has done little to control prices in Singapore. This somewhat explains the exponential increase in prices of HDB flats in Singapore.

 There will be debate on whether price controls have desirable effects on the society (not economy) in general, but it is clear from here that our government has chosen not to control prices.

 All in all, this report from the Heritage Foundation tells us very little what we don’t already know. For many a years now, the Singapore economy has been a great role model for all other countries in the world, but the bigger question is – how much had that benefitted workers in Singapore?

 

Other  articles by Damon Yeo:

>> GIC’s investment in Stuyvesant Town: Unraveling the mystery

>> The demise of Dubai: How the mighty have fallen

>> The minimum wage: pros and cons

>> HDB’s 2 billion dollar deficit: More questions than answers

>> Singapore v Hong Kong

>> DBS and a series of ‘unfortunate events’

>> Sale of Chartered – An Anatomy

>> 3rd most competitive nation in the world and what it means to the average worker

About the Author:

Damon is a proud graduate of Nanyang Technological University in 2004 with a degree in Accountancy. He is currently working in the finance department of a UK Bank

Singaporean Businesses Need to Buck Up – Innovate or Die!

By Kevin Lee

Recently reported in the press is the news that SMEs in Singapore are complaining about the restrictions on foreign workers and want the government to loosen the restrictions that limit the hiring of foreign workers.

A recent business survey indicates that these SMEs are quoting the same excuses that they have using all along – locals shun labour-intensive jobs, and the turnover rate for foreigners is lower. These business also want to hire foreigners because this reduces business costs, or, in other words, because foreign labour is cheap.

These latest results show that Singaporean businesses are heavily dependent on lowering the cost of factor inputs in order to compete in the market, rather than improving factor productivity. The difference between the two is illustrated as follows.

Company A hires Singaporean worker Mr Chan at $15 an hour to produce 10 widgets per hour. Mr Chan manufactures the widgets using equipment Y, which depreciates at $25 per hour. The cost of production per widget is hence $4 per widget: ($15+$25)/10 = $4. Company A can lower the cost of production by either lowering the cost of the factor inputs (labour or capital equipment), or by improving the productivity of these inputs.

Company A chooses to lower the cost of production by reducing the cost of factor inputs. Company A fires Mr Chan and hires Mr Balakrishnan from India who is willing to work for $5 per hour. However, Mr Balakrishnan was previously a farmer and he has only started to learn how to operate the manufacturing equipment, and so he can only produce 8 widgets per hour. Company A’s strategy lowers the cost of production from $4 per widget, to $3.75 per widget: ($5 + $25)/8 = $3.75. However the the productivity of Company A has declined. Its production per worker has fallen to 8 widgets per hour, compared to its previous output of 10 widgets per hour.

Company B chooses a different strategy. Company B starts out with the same equipment as Company A, and employs Mr Wong at the same wage as Mr Chan. Company B also invests in research & development to improve the technology of its manufacturing equipment. Because Company B has been investing in research & development, it has a new piece of equipment. This equipment costs more, and has a depreciation rate of $43 an hour,compared to $25 previously. Company B also trains Mr Wong to use this new piece of equipment. The result of this improved manufacturing process is that Mr Wong is now able to produce 16 widgets per hour, compared to 10 widgets previously. At the same time, because of Mr Wong’s improved skillset, Company B increases Mr Wong’s salary to $17 per hour.

The net result of this is that Company B’s cost of production is now $3.75 per widget = ($17+$43)/16. This is the same as Company A’s result. However, unlike Mr Chan, Mr Wong not only keeps his job, but also has received a pay raise. Mr Wong is also able to afford another child because of his higher income, and help improve to Singapore’s poor fertility rate. Furthermore, the longer term impact of this strategy is that Company B is able to continue lowering the cost of production, because it can continue to invest in R&D. Company A, however, is unable to bring down its costs further, because it is unable to find workers who are willing to work for much less than $5 per hour. Furthermore, Company B is able to expand its production and hire the experienced Mr Chan, who was previously fired by Company A.

The difference between Company A and B is the difference between night and day. Company A has chosen the strategy of lowering the cost of factor inputs, but this strategy rarely results in sustainable competitive advantage. In most cases, this strategy results in price wars and intense competitive rivalry that ultimately kills profitability when such price wars are not accompanied with increases in productivity.

Company B, however, has a sustainable competitive advantage. Its R&D program will continue to produce better equipment and labour productivity gains, and will allow it to lower its cost of production even further. In contrast, Company A cannot reduce its factor costs much further and will soon be put out of business.

Two fundamentally different strategies, two fundamentally different results.

Singaporean businesses are thinking like company A. Instead of focusing on improving productivity, they have chosen to pursue lower factor input costs. They repeatedly complain that Singaporean workers are too expensive and want to hire cheap foreign labour instead. Eventually, like company A, these businesses will be outcompeted by their more innovative counterparts.

In view of these SMEs’ mentality, is it surprising at all that Singapore’s productivity growth has remained stagnant relative to the US since 1995, as the recent Singapore Competitiveness Report shows? Is it surprising at all that the standard of living for the average working Singaporean has hardly improved in recent years?

No.

Singaporean businesses need to buck up and start innovating. The government also needs to stop feeding this quick-fix mentality with its liberal immigration program.

Quick-fix is ultimately no-fix, and Singaporean businesses must innovate or die.

Other articles by Kevin Lee:

>> PAP’s quick fix mentality will exacerbate Singapore’s economic challenges

About the Author:

The author is an Investment Analyst who is always on the lookout for innovative companies

The Demise of Dubai – How the Mighty Have Fallen

By Damon Yeo

An empire of sand castles, a mirage of El Dorado, a house built with a pack of cards – call it whatever you fancy but the reality is now evident – Dubai is crumbling under the weight of the financial crisis and collapse is imminent.

It is fair to say that Dubai’s fall from grace did not happen overnight. Over the last year or so, economists in the Europe and America had been predicting that the autonomous state would succumb but the worst was confirmed only on 25 November, when Dubai World asked for six-month grace period for their debts due in December this year. In the world of credit, this constitutes to a credit event and the creditors hold the right to decide if they will agree to the deadline extension or call for a default.

While the global economy slowly absorbs the full impact of Dubai’s downfall, it is perhaps important at this stage to attempt to identify what had gone wrong at Dubai.

The Property Bubble Burst

Like many other economic downturns over history, an asset bubble burst was one of the main catalysts of the current crisis in Dubai.

Unlike in the States or the UK, a property price index was only developed for Dubai in early 2009 and it is difficult to quantify the magnitude of the initial property boom and its subsequent crash.

However, it is known that the property boom was largely driven by megaprojects. Ambitious projects like the Palm Islands, the World and the Burj Dubai were all commissioned between 2004 and 2005. Burj Dubai is expected to open in January next year, but works on the Palm Islands and the World appeared to have grinded to standstill.

In late 2008, Bloomberg began to run reports on the vulnerability of the Dubai property markets. Deutsche Bank estimated that property prices have fallen by over 50% since August 2008 and will continue to dip another 15% to 20% in the coming twelve months. Investors who bought properties in the last two or three years are definitely in negative equity now, with little hope of returning into the black in the near future.

Dependence on Foreigners

The expansion of Dubai was largely driven by the influx of foreigners since the late 1990s. According to latest data, the population of 2.2million in Dubai was made up of nearly 83% non-nationals. Foreigners took up various jobs across various levels of the economy, from construction labourers and waiters to company CEOs and hotshot bankers.

Many of them were attracted to the Emirate because it offered an income tax-free environment and a relatively low cost of living.

Problems arose when the credit crunch hit Dubai. As construction projects slowed, large number of Indian and Pakistani labourers returned home. Other bankers, lawyers and accountants who were laid off by companies left almost immediately. These foreigners did not have kinship or any other sort of attachment to Dubai, hence could pack up and leave the city overnight.

The sudden departure of expats inevitably has a herding effect on those that remain. Businesses catering specifically to wealthy foreigners shut to avoid further losses, dampening the once renowned vibrant night life. The state of the economy hence suffers a downward spiral as people left the city in numbers.

Draconian Laws

Others have pointed out in retrospect that Dubai’s draconian law around failure to pay off debts is another reason for its eventual downfall.

Debt payment delay is a criminal offence, even for foreigners who work in the country. It is noted that one can go to prison even for a bounced cheque.

When times are good, very few take note of this particular law, since few are in debt to start with. When the times turn sour, people start delaying their repayments to credit card companies and reality hit them hard. There are expats in jail at the moment because of this.

This is contributing factor to why many foreigners leave it in such a rush. There are numerous reports on luxurious cars being left abandoned at airport car parks as expats literally flee Dubai as fast as they could. Most of them will not return ever again, as they face possible jail time once they set foot onto the country.

Sense of Invincibility

Pride comes before a fall. The most damning factor for Dubai’s demise in my humble opinion is the sense of invincibility which had surrounded the economy all this while.

From Dubai ruling family’s perspective, they wanted to expand Dubai at all cost. They were hungry for more wealth and status all the time. Through their various investment vehicles, Dubai made ambitious acquisitions globally. Their relentless pursuit of expansion meant that at times, they had made questionable investments, financed mainly by debt.

One of their most dubious investments was their US$5 billion stake in MGM Mirage, a casino and developer company based in Las Vegas, in 2007 (it is controversial as well because Muslims are forbidden to gamble). Barely two years on, the entire investment decimated in value as MGM struggled to deal with falling patronage to their chains of casinos because of the credit crunch. In March this year, Dubai World filed a lawsuit against the former owners of MGM when the latter started to report that they may not be a going concern.

For all other investors of the Dubai dream, they had foolishly believed that Dubai was too big to fail. They believed that no matter what happens, Abu Dhabi, Dubai’s richer and more influential brother, will step in to provide support. After all, Abu Dhabi holds 9% of the world’s oil reserve.

However, the relationship between the two states had never always been cordial. As recent as the 1940s, there had been armed conflicts between the pair. Abu Dhabi had never explicitly stated that it would provide financial support to Dubai – it was only assumed by most investors.

This misaligned optimism and a false sense of security had allowed Dubai World to chalk up US$60 billion worth of liabilities in the form of bonds issued, loans and other payables to various investors ranging from sovereign funds, hedge funds and multinational banking corporations.

The Road Ahead

The immediate impact of this piece of news was to send shockwaves across all major equity indices globally, although within a few days, most of them had rebounded after various reports assured investors that actual impact on the financials was not as grave as firstly thought.

What is to follow will be anyone’s guess. One thing for sure is that the Dubai dream is well and truly over. The Emirate has lost its status and reputable as a rock solid investment with infinite future opportunities. The state and any of its linked companies will find it difficult to acquire funding and loans cheaply in years to come and with that, the rate of expansion has to decelerate.

The bigger question now is – will any lessons be learnt from this?

Sources:

1) Blomberg

2) BBC

3) Wall Street Journal

Other articles by Damon Yeo:

>> The minimum wage: pros and cons

>> HDB’s 2 billion dollar deficit: More questions than answers

>> Singapore v Hong Kong

>> DBS and a series of ‘unfortunate events’

>> Sale of Chartered – An Anatomy

>> 3rd most competitive nation in the world and what it means to the average worker

About the Author:

Damon is a proud graduate of Nanyang Technological University in 2004 with a degree in Accountancy. He is currently working in the finance department of a UK Bank. He is also a regular contributor at redsports.sg.

PAP’s Quick-Fix Mentality will Exacerbate Singapore’s Economic Challenges

By Kevin Lee

Earlier this decade, PM Lee Hsien Loong & the PAP faced a problem with Singapore’s population economics. With the country’s fertility rate way below the replacement rate of 2.1, Singaporeans were not making enough babies to replace themselves. The potential burden of this phenomenon was obvious – amongst other issues, the cost of supporting an aging population would have to be borne by a smaller workforce, and the government did not want to have to sustain this liability in the future.

In order to arrest the problems presented by a resident population failing to replace itself, the PAP has resorted to the quick-fix policy of opening the country’s shores to foreigners. A massive influx of immigrants and foreigners has resulted in the rapid increase of Singapore’s population. Between 2003 and June 2009, the population increased from an estimated 4.2m to 5m, or an increase of 19 per cent in less than a decade.

While this has, in the short-term, drastically expanded the productive work force, the longer-term impact of the PAP’s immigration policy has been to exacerbate the already challenging living conditions which have discouraged Singaporeans from having children. Directly attributable to the Government’s immigration policy, are two major side-effects which have made it more difficult for Singaporeans to have children.

Firstly, the cost of living for the majority of Singaporeans has risen. In particular, the escalating cost of housing to unaffordable levels is acting as an obvious hurdle towards family formation. A couple which is unable to afford a roof over their heads will obviously find it very difficult to start a family. After all, the most basic thing parents must provide to their children is a roof over their heads. Yet, instead of bringing down the cost of housing, the combination of a spike in housing demand and stagnation in supply has sent property prices to record levels. (ref. ‘PAP MP blames young couples who cannot get flats for not “planning ahead”’)

Secondly, labour productivity has declined. Singapore’s labour productivity levels have been falling for six consecutive quarters starting in the fourth quarter of 2007. The decline has been worsening each quarter, with the first three months of 2009 seeing the largest drop so far at minus 14.7 percent. (ref. “National focus needed on efforts to boost labour productivity”, CNA). Singaporeans are working harder and longer and with less to show for it. Naturally, they have less time and money to spend on their children.

The benefits of productivity on family formation are obvious. Workers who accomplish the same amount of work in shorter periods of time will have more time to spend on their family. Similarly, workers who accomplish more work in the same period of time will be able to earn higher incomes and thus be better able to afford a family. Instead of improving productivity, however, the PAP has chosen an immigration policy which has had a direct impact on this key economic statistic. The large influx of foreign workers in recent years means that each worker doesn’t have to work as hard. It also means that positions are constantly being filled by newbies without experience.  (read article here)

The combined effect of housing price inflation and the decline in labour productivity has been to make the real cost of bringing up a child even more expensive, and thus further discourage couples from having children. Meanwhile, little attention is being paid to initiatives which can make a genuine impact on the standard of living.

The solution to the housing affordability problem is simple. Either supply more flats or decrease the demand. The lack of proper planning by the PAP on this issue is quite perplexing, but this issue has been dealt with by other writers and I will not repeat their arguments here. (read article here)

The deeper problem is that of labour productivity.

An improvement in labour productivity does not only require the education & upgrading of the workforce, but a fundamental change in mentality of employers from a low-cost of labour mentality to a higher value-added mentality. Meanwhile, it seems that the only solution that the PAP has to throw at the productivity problem is to point the finger at workers for not upgrading themselves.

While skills upgrading is part of the solution, it is only one side of the productivity equation. Just as important is paying attention to improving the working conditions of employees and protecting workers’ rights. Employers in Singapore blame Singaporeans for shunning so-called ‘menial’ or ‘unskilled’ jobs, yet the only solution they seem to have is to throw cheap foreign labour into these jobs such as construction or frontline retail services. The tougher but more rewarding option of professionalising and dignifying such jobs is thrown to the wayside.

Contrary to what some may think, a career in construction can be a meaningful, dignified one. A construction worker who takes pride in his technical work and who has accumulated experience will certainly be much more productive than a cheap foreign import. When given the right tools and proper working conditions, his higher productivity will also justify a much more respectable salary than the pittance that is currently paid in the industry. Yet, keeping wages low and working conditions poor is a surefire way to make the job disrespectable, and for companies to lose their top performers.

Similarly, frontline sales staff in retail can make a significant difference to the bottom line if they are well trained, respectably paid, and given good working conditions. Conversely, untrained foreigners who do not even speak the language of business, are obviously unable to add significant value to a retail operation and sometimes even turn away prospective sales. (read article here)

In spite of this simple logic, the government’s immigration policy continues to foster a low-cost mentality rather than a value-added mentality by allowing local businesses to import cheap labour, which only serves to keep wages depressed and working conditions lousy. To be fair, enterprises are also to blame for perpetuating their low-cost mentality. But if nobody makes an effort, how will things ever improve?

Labour productivity also improves with innovation & entrepreneurship. A significant improvement in manufacturing techniques can allow a factory to dramatically increase its output given the same number of workers. Meanwhile, technological innovations in engineering or computing allow the formations of new enterprises and the creation of value-added jobs. Yet, the government continues to pursue policies which encourage an iron-rice bowl mentality rather than bold enterprise.

In particular, the scholarship system encourages Singapore’s brightest students to pursue a safe (bonded) career in government rather than one in the private sector. It systematically sucks out the brightest minds from innovating in the marketplace, into the ranks of the public service. Instead of finding solutions to scientific problems, bringing new products to market or searching for a cure for cancer, Singapore’s top young brains are writing policy papers and goodness knows what else, in ’silent resentment and ultimate dissatisfaction’.

The PAP argues that the government needs top brains in order to run efficiently and effectively. Yet, the stark reality is that entrepreneurs and innovators such as Olivia Lum, Sim Wong Hoo and Ron Sim have individually created many more jobs for Singaporeans than any government scholar or bureaucrat. Is it no wonder, then, that leaders such as S. Dhanabalan and DPM Jayakumar (ref. “Jayakumar wants Singapore top students to study in local varsities”) have recently lamented that allowing top students to go overseas is a bad thing? And, while it may appear that the government is unrolling campaigns encouraging entrepreneurship in schools, such campaigns are but lip service when millions of dollars continue to be thrown at scholarships designed to suck youngsters into government ranks.

The recent housing pains and productivity drops are symptomatic of a quick-fix mentality that can ultimately only exacerbate Singapore’s population and economic problems, rather than alleviate them. Until fundamental, structural issues in Singapore’s economy are tackled head-on, Singapore will continue to see its fertility rate remain low and its productivity (and competitiveness) slide. At the end of the day, the PAP cannot continue to pump more and more immigrants onto this little island. Sooner or later, Singaporeans need to find a way to return their fertility rate to replacement levels, and make the cost of family formation affordable. Singapore will need to find a way to foster genuine innovation and entrepreneurship and to improve worker productivity.

So far, the PAP doesn’t seem to be doing very well in coming up with the right solutions.

An analysis of Singapore’s property market this year

By Khalil Adis

[Khalil Adis a former editor of Property Report. He now writes for Property Report, Property Guru and Temasek Review]

2009 has been a roller-coaster ride for Singapore’s private property market and 2010 will be an equally challenging year for the HDB resale market.

A topsy-turvy year

2009 has so far been a year of paradox for Singapore’s private property market which first recorded the worst fall in history in property price index in the first quarter of 2009 followed by a stunning V-shaped recovery with the sharpest increase in a decade in the third quarter.

The first quarter witnessed the price index dropping 14.1 percent quarter-on-quarter.

However, just two quarters later, the private residential market posted a 15.8 percent increase, data from the Urban Redevelopment Authority’s (URA) showed.

According to the URA’s data, prices of non-landed private residential properties increased by 15.2 percent in the core central region, 18.5 percent in the rest of central region and 16.1 percent in the outside central region in the third quarter.

In comparison, prices of non-landed private homes decreased by 5.2 percent, 4.4 percent and 2.3 percent in the core central region, rest of central region and outside central region respectively in the second quarter.

This sharp V-shaped recovery has prompted fears that a property bubble was forming and that property prices in Singapore have become too inflated driven by low interest rates.

So in September, the Singapore government took measures to cool down the property market by making it harder for homebuyers to defer payments by removing the Interest Absorption Scheme (IAS) and Interest-Only Housing Loans (IOL) and releasing more land.

Before the intervention, property showrooms were filled with agents armed with blank cheques acting on behalf of speculators.

This has resulted in escalating property prices, which has put genuine homeowners at a disadvantage.

Property firm DTZ notes that the price hikes since the second quarter of 2009 has resulted in diminishing buying power of Housing Development Board (HDB) upgraders.

The proportion of purchasers with HDB addresses has declined to 37 percent in the third quarter of 2009, from the recent peak of 56 percent in the first quarter.

Anti-speculative measures have worked

The escalating prices, driven by speculators, are a cause for concern as recent data from the Ministry for Trade and Industry (MTI) shows that Singapore is just fresh out of a recession.

Analysts say removing the IAS and IOL schemes will bring stability to the property market, in line with the country’s economic growth.

“The measures are aimed at stabilising the market and not letting prices runaway from the reality of an economic downturn. Any rise in prices should commensurate with the rate of economic expansion,” says Donald Han, managing director for Cushman & Wakefield Singapore.

Two months later, analysts agree that the government’s anti-speculative measures have worked to some extent.

“The government’s strong stand on the need for anti-speculation, coupled with its prompt and immediate response to the rapidly heating market (IAS removal and land release), is what has brought sanity to the property market by weeding out speculators and cautioning would-be private home owners,” says chief executive officer for PropNex, Mohamed Ismail.

“The effect of the anti-speculation measures is targeted more at the buyers in the non-prime market who typically rely more financing to own a private residential property. The removal of Interest Absorption Scheme and Interest Only Loans also forced these buyers to be more prudent in their purchases as they are no longer allowed to defer their loan repayment. The reassurance of ample supply as provided by the government’s injection of sites into the first half of 2010 confirmed list, under the government land sales programme, has also softened the run-up effect,” says Dr Chua Yang Liang, head of research for Jones Lang LaSalle for Southeast Asia.

Subsales down

According to Jones Lang LaSalle, the overall monthly volume of purchases for October 2009 has declined by 29 percent from 1, 143 units in September to 811 units.

This is the third contraction since August 09 and also the second lowest sales volume achieved for the first ten months of 2009 since January 09 when 108 units were sold.

Jones Lang LaSalle also notes that this measure has resulted in a decrease in subsales – a measure of how much speculation there is in the property market.

“ The recent announcement of measures to curb speculative behaviour seems to have taken effect as seen in the subsales market. Proportion of subsales level has fallen to 7.9 percent in October from the 12 percent recorded in September,” says Dr Chua.

However, analysts say it is too early to tell if some measures, such as the interest-absorption scheme (IAS), should be restored,

“The IAS removal only played a small part of the government measures. But even as such, we do not think it is necessary for IAS restoration within the next one year,” says Mohamed Ismail.

Falling rentals

While property prices were escalating in the third quarter, rentals continued to decline in the same period.

According to the URA, the rental price index for private property has dropped 2.2 percent in the third quarter.

“The rental price index has dropped 20.4 percent to its current third quarter level of 129.3, and its recent decline of 2.2 percent is actually its lowest decline in four quarters,” says Mohamed Ismail.

Analysts note that rentals were declining, as landlords were willing to drop their rents during the recession.

“Rentals for private properties could be explained by the fact that in the bad economy, landlords were willing to lease out their property for lower prices. Given that rental agreements last for an extended period of time, we should see a lag in the recovery of the rental price index behind the more visible recovery of the property price index,” says Mohamed Ismail.

Therefore, the fourth quarter could see rentals going up in tandem with the recovering economy.

2010 and beyond

Going forward, analysts expect sales volume for private homes to ease, as there are fewer mass-market projects in the pipeline plus the government’s measures to cool the property market.

“Transaction volume in the non-landed segment is likely to contract by a further 10 to 20 percent due in part to the seasonal slow down and also the effect from the recent government announcements,” says Dr Chua.

Home prices are also likely to see some level of stabilisation with more moderate increase to more sustainable levels with less volatility.

This is because about 70 percent of the current buyers in recent residential launches choose the normal progress payment while the rest opted for the IAS.

However, analysts warned that the Singapore government could impose more measures to cool the property market should price continue escalating.

“Should housing price growth continue to surge ahead of economic fundamental despite these recent moral persuasion by the government to cool residential demand, further anti-speculative measures with a bigger bite could be introduced such as capital gains tax say for those who flip within a two year period of the first purchase,” says Dr Chua.

In October, the Monetary Authority of Singapore’s (MAS) expressed concern that a speculative bubble could form, prompting them to take possible further measures, on top of the release of land announced recently for mass-market developments.

Although the government has yet to announce such possible measures, prospective homeowners should assess their financial position before taking a plunge in the private property market.

The HDB market outlook

Following public criticism that there was not enough supply of HDB flats in the market, Minister for National Development Mah Bow Tan announced in parliament recently that the HDB will release 10, 000 to 12, 000 new flats every year for the next five years.

By releasing more supply however, the HDB is caught between the devil and the deep blue sea.

While releasing more flats will help quell the public’s frustration with the HDB, such measure will also bring down the value of HDB flats due to its market based pricing approach.

“Although HDB is slated to release a total of 13, 500 Build-To-Order (BTO) flats this year (by the end of 2009), an oversupply would only serve to dampen the asset value of a majority of Singaporeans who are dwelling in HDB flats,” says Mohamed Ismail.

Meanwhile, the HDB resale market will likely witness more transactions this year.

Acording to Propnex, there is a continual supply of resale flats which could potentially see 40, 000 transactions this year alone.

It adds that should the economy recover well, this could lead to greater demand in the HDB resale market due to a a greater number of Singaporeans being able to hold well-paying or stable jobs, or if there is a greater number of permanent residents in the market.

Such news mean Singaporeans should brace themselves for escalating prices in the resale market next year – just at a time when elections are coming.

The latest HDB Price Index (RPI) is now at a record high of 145.2 points – a growth of 3.6 percent over the previous quarter.

About the Author:

Khalil Adis was a former editor for Property Report magazine covering Singapore, Malaysia and Indonesia. During his course of work he has travelled to all three countries to cover their property markets extensively. He has also interviewed politicians like Singapore’s Minister for National Development Mah Bow Tan, Kuala Lumpur’s Mayor Dato’ Ahmad Fuad Ismail and Malaysia’s Energy, Green Technology and Water Minister Datuk Peter Chin. He now writes for Property Report, Property Guru and Temasek Review.

You can read more of Khalil’s articles on:

www.property-report.com and www.propertyguru.com.sg

Other articles by Khalil Adis:

>> Demand vs supply: so many applicants, but so few flats

>> Home affordability: HDB versus the public

Minimum Wage – The Good, the Bad and the Truth

By Damon Yeo

The Bad about Minimum Wage

The term “minimum wage” can almost be labelled as “dirty” in Singapore. For a long time, the government had insisted that having a minimum wage in place could do more harm than good. In a recent Straits Times report, MM Lee had noted that every country that has set a minimum wage over what the market will bear has found that the move cuts jobs and that Singapore’s aim is to create as many jobs as possible.

In the world of economics, the view is subscribed by many economists.

The purists argue that minimum wage laws are distortions to the market equilibrium and will theoretically increase unemployment. Adam Smith’s famous invisible hand theory will mean that artificial setting of price (wage) floors makes allocation of resources inefficient.

In Singapore’s context, the administration of any minimum wage policy will have spill-over effect on our immigration policies. Minimum wage policies cannot apply solely to Singaporeans, as this will make employers turn to cheaper foreign labour. However, if these policies were to be applied to PRs and migrant workers as well, we will see a further influx of foreign workers to our shores, since they are expected to pick up even higher pay then before.

Another area of concern is inflation. For 2008, inflation was 6.5%. A minimum wage policy is likely to have a bigger impact on construction, food and the general service industry (these industries are generally where workers are paid less). Prices of houses, food and most household items are likely to increase as cost of the labour providing them goes up with minimum wage.

The Good about Minimum Wage

Naturally, minimum wage laws have their supporters as well.

The loudest of voices on this side of the debate comes from those who fight to increase the standard of living for the poorest and the most vulnerable class in society. A minimum wage policy will ensure that the so-called “bottom” ten percentile of the society will still be able to earn enough to sustain a respectable lifestyle. Naturally, this will reduce the income gap between the richest and the poorest of the nation.

Others have noted that a minimum wage law does not add burden to the government. Unlike welfare benefits, cash payouts or tax credits to the poor, this policy will not require the government to increase its spending.

Some have argued that a minimum wage will improve the work ethic of those who earn very little as the higher pay helps motivate them more. It also encourages employers to have a tougher labour screening process, ensuring that better quality staff is hired as they now have to pay more for each employee. In Singapore, this may help raise the quality of the service industry – an area which had particularly deteriorated over the years.

The Truth about Minimum Wage

The first ever minimum wage policy was set in state of Victoria in Australia way back in 1824. It was enacted in 1904 and the British were the first to conduct studies on the effects of the minimum wage in 1907. United States, the symbol of big conglomerates and capitalism, first introduced the Federal minimum wage in 1938 and it has been in place ever since.

As of 2009, Singapore is only one of 10% of the nations in the world not to have any law or regulation of some sort in terms of minimum wage. It may come as a surprise, but even countries like war-torn Afghanistan, Iraq and the Democratic Republic of Congo have some sort of national law to set the minimum wage employers must pay (whether they are actually enforced is another matter).

And amongst those that 10% of nations that do not have a national law on minimum wages are all of the Scandinavian countries and others like Switzerland and Germany. However, in these countries, trade unions are renowned to be particularly strong (and definitely independent of any government influence) and wages are usually set by collective bargaining between the unions and the employers. It is worthy to note that in most of the Scandinavian countries, the disparity between the rich and poor is the narrowest in the world.

While acknowledging that there are studies out there to prove otherwise, there has been extensive research done to show that in fact there is a positive correlation between (a higher) minimum wage and level of employment (ie unemployment went down in places with a higher minimum wage). From a behavioural point of view, it can be argued that people are more motivated to find work if the minimum that they can earn is higher.

On the argument on reduction of competitiveness with a minimum wage, let’s not forget that while Singapore is the third most competitive economy in the world without such a policy, nine others in the top ten have some sort of minimum wage policy or notably very independent and strong trade unions.

Furthermore, a minimum wage policy is unlikely to affect a majority of the industries where Singaporeans are employed by multinational overseas companies. From an international perspective, there is little to suggest that such a policy will hurt our competitiveness. After all, it is not the lifestyles of high-earning lawyers, bankers and accountants that will be changed by such a policy – it is that of lowly paid cleaners, hawker assistants and construction workers.

In the United Kingdom, the minimum wage first became legislation in 1999, under the Labour government. There was much debate from the public, unions and the Opposition prior to its implementation, but research afterwards has showed that this new Act definitely did not increase level of unemployment in the country. Let’s also not forget that over the decade just passed, London surged ahead of her European counterparts to become a leading global financial centre (something Singapore is aspiring to be).

The people who first came about with the idea of a minimum wage had one motivation in mind – to protect individual workers from being exploited by factory owners for the benefit of more profits. From whichever angle you look at this, you must admit that this motive can only be a good thing, akin to the abolition of slavery.

With Singapore slowly creeping up the list of the most expensive cities of the world, the time is now for us to relook into enacting a minimum wage policy to start protecting those who might have already been exploited, even if not intentionally, by circumstances.

Sources:

1) David Card and Alan B. Krueger, “Minimum Wages and Employment: A Case Study of the Fast-Food Industry in New Jersey and Pennsylvania,” American Economic Review, Volume 84, no. 4 (September 1994), pp. 774-775.

2) www.ilo.org/public/english/protection/condtrav/pdf/infosheets/w-1.pdf

3) Waltman, Jerold. “The Politics of the Minimum Wage.” University of Illinois Press. 2000

Other articles by Damon Yeo:

>> HDB’s 2 billion dollar deficit: More questions than answers

>> Singapore v Hong Kong

>> DBS and a series of ‘unfortunate events’

>> Sale of Chartered – An Anatomy

>> 3rd most competitive nation in the world and what it means to the average worker

About the Author:

Damon is a proud graduate of Nanyang Technological University in 2004 with a degree in Accountancy. He is currently working in the finance department of a UK Bank. He is also a regular contributor at redsports.sg.

Economic Freedom and Political Liberty

By Louis Lim

The time has come for to raise serious issues of economic and political freedoms which we take for granted at our peril.

Many excellent points have been raised from a Western perspective as regards the erosion of democratic principles vis-à-vis economic freedom as proposed outside Western viewpoints. There is nothing wrong with this but the world as evolving currently requires an understanding of an Eastern perspective, in particular, a Chinese one. This is so because unlike the previous wealthy Chinese empire of the nineteen century, this emerging one would have a great impact (which it previously never had), on how the social-political-economic nature of the world is going to evolve.

I mention this because no other than the big Russian nation is now studying seriously whether a Chinese style (which John Naisbitt described as a form of ‘vertical democracy’) of government is more efficacious than an often disruptive and counter-productive, bicameral, Westminster style one.

No one who understands freedom could argue that a Western democracy is not the best form for individual freedom. In recent years, however, the advent of unfettered capitalism has seemingly made very questionable, the benefits of Western style democratic governance. It’s as though, the powerfully vested few could high-jack the system for their narrow interests alone, leaving the rest unprotected from wholesale skull-drudgery.

The strangest irony is that real democracy and unfettered capitalism (or true laisse faire) are, as Marx would describe, natural opposites. Democracy, in the simplest term is the will of the democratic majority, as expressed in individual ballots. Capitalism, on the other hand, is by nature autocratic, representing the will of a powerful minority. And when democracy becomes a captive of uncontrolled capitalism as in the US recently, democratic considerations takes a back seat, as it were, and the capitalist-autocrats take over and the common man suffers. Albeit, for only awhile (and this is the safeguard of democracy) but eventually, “he who holds the purse, controls the world”.

This is what the Chinese realised when Deng Xiao Ping, looked around in the eighties. You can have the longest, existing civilisation in the world but without money you are nothing. It did not take long before the pragmatic Chinese saw what needed doing; i.e. create a capitalist-type economy.

The question of compatibility was quickly resolved when Deng visited Lee Kuan Yew; he saw how an authoritarian regime sits well with capitalism and thrives. He got the answer of how you can control the population completely, at the same time provides them the means to be wealthy.

The rest, as they say is history. Confucianism, which provides the basic framework of Chinese society, and Communism, has fundamentally to do with respect of authority and allowing it to function without question; the provision being that it must do well in furthering the welfare of the people. It is thus clear that capitalism and autocracy are natural partners; nobody elects the leaders; the leaders elect themselves.

It is never understood, particularly in the right-wing West, why the Chinese people would not rise against the many human rights violations that the Westerner can see. The answer is that the Chinese view it differently. If your government has lifted ‘400 million’ or more of you out of abject poverty and your life is so much better in the last twenty years and there are opportunities to be fabulously rich, why would you object?

The assumption in the West is often that the individual generally knows what he wants and when enough numbers have the same wants they form the majority to elect the government they want. Off course, the rights of the minority, which can be a considerable number is often ignored.

This naturally results in a bicameral situation where one side is engaged endlessly in undermining the other, to the detriment of all. This fundamentally is the weakness. And when public opinion is controlled by a few press barons which represents only the interests of the few rich, democracy meaning free speech is often undermined.

Free speech becomes only free for opinion makers in the major newspapers. The voice of the ordinary man is often left unheard. Thus the warning of the sub-primed danger, the raising of Madoff’s schemes, the plight of the uninsured for health care and such, are like voices crying in the wilderness. The result is that the Chinese system now seems much better. Much of the world is now looking to China to lead it out of their economic crisis.

Those of us who treasure freedom have better wake up. Capitalism without social justice cannot endure as Communism with social and economic justice can. The enemies of Obama as reflected by the mean and vehement opposition of insurance companies in the US to the Health reforms, is a stark indication of the malaise of unfettered capitalism; it destroys democracy as we need it!

 

About the Author:

Louis Lim is a highly qualified certified management consultant who promotes entrepreneurship as a set of basic human skills for financial security! With them, anyone can always feel secure of making a living with or without a job. Louis has identified Internet Marketing as the latest opportunity for those seeking financial independence. He has decades of experience consulting for many firms and mentors many business people. He is sharing his skills in business on the internet. Louis Lim is also an Expert Author on Entrepreneurship in the top Ezine Business and Motivation magazines in the internet and Google.

Entrepreneurship – A Panacea For Job Insecurity?

By Louis Lim, Business Correspondent

In view of the current economic difficulties facing many, people ought to be more ware of what’s happening in the world and how what’s happening can adversely affect their financial securities and lives; if it has not done so already!

It is not a well known secret that one can avoid being a financial casualty by simply acquiring a set of skills different from what we are usually programmed from young to have. The latter has to do with being enslaved to a job or business controlled by others; the other being about having skills to generate an income independent of any circumstance or other people.

Anyone depending solely on a job for a living would be almost completely lost if he loses his job. The unfortunate fact is that since the Multi-Nationals Companies began institutionalizing the treatment of employees as just another business resource, albeit commodity, the age of life-long employment seizes.

Financial results associated with satisfying shareholders’ expectations became the main reason for a business enterprise. Coupled with the practice of achieving short term objectives and the need to maintain share prices, retrenching workers became a normal business practice. Words like ‘downsizing’ and ‘business rationalizing’ became common business parlance.

This dehumanizing of business enterprises, prevalent throughout 18th and 19th century industrializing Britain was revived and practice by American businesses. The new reality in a capitalist environment anywhere means a worker is subject to his job being taken away any day. More importantly, this means also that the individual worker must realize quickly the insecurity of a job.

What then is a worker to do to secure himself? Off course there are skills like being a doctor or dentist and others which are not down sizable. However, most workers are dispensable!

Men are, however, born with an innate creativity which can be described as entrepreneurial but this has historically been replaced by skills which are intended for us to work for someone else. The result is that only the top five per cent or so of employees can acquire financially independence (with high salaries) while the rest remained dependent and vulnerable all their lives.

To acquire these forgotten skills would require a change in mindset from one of being a worker (a worker’s mindset) to that of being a boss (an entrepreneurial mindset). The latter entails having a ‘Possibilities Mindset” which would enable one to know how to garner resources and knowledge and, to apply them to secure one’s own financial objectives.

Henry Ford, the car genius, once said that ‘money is not a man’s security; he is his own security’. What he meant was that a man’s security lies in his knowledge and skills. However, if your skill and knowledge is tied to working for someone then those skills and knowledge can be replaced any time.

However, Henry Ford is not wrong; if a man’s skills and knowledge is in the area of creating a money making enterprise. Robert Kiyosaki, a very successful entrepreneur, said that ‘every man must mind his own business’. He didn’t express it too well but what he meant is that ‘to have financial security a person must learn to develop his own money making business’. Is this possible? Every man? In my opinion, in today’ new reality, any worker who wants financial security has no other option!

Off course, whenever an uninitiated thinks of starting a business he thinks of big capital, connections, special knowledge and skills. For a man who has little money and has just lost his job, it’s even more unrealistic to think of starting his own business. However, many have done it, albeit, at great odds.

But what if you are not retrenched yet? And you have some time to learn. Could you invest in a money-making skill that can provide an alternative income? Could you learn to be an entrepreneur with little resources and connections?

The answer is yes but you have to adopt an entrepreneur mind-set; which really means that you to start believing in possibilities! Remember that when Bill Gates and Steve Jobs started their little enterprises in garages all they had mainly were their belief in possibilities. The amazing fact is that because of them the possibilities have increased exponentially with the advent of the internet.

Besides a strong belief in possibilities, an entrepreneur is one who learns to gather resources, knowledge and skills and organize them into money making processes. In most conventional businesses, this is usually a huge ask for any newcomer. Fortunately,, there are now other avenues where starting a business is made more possible for any one with little money and is prepared to spend time learning.

For example, the internet has made it easier to start your own business. The main thing you would need is a good PC, some affordable money, a willingness to learn and a lot of belief in yourself. What is to be learned is seldom difficult; a man’s limitation to success is often his own lack of self-belief! (Note : One website where you can learn how to be internet entrepreneur is www.thesuperfastaffiliate.com)

If your motivation is create a secure financial situation for you and your loved ones, you need to be an entrepreneur. The days of secure employment is long over and moreover, personal wealth is seldom acquired by working for others.

About the Author:

Louis Lim is a highly qualified certified management consultant who promotes entrepreneurship as a set of basic human skills for financial security! With them, anyone can always feel secure of making a living with or without a job. Louis has identified Internet Marketing as the latest opportunity for those seeking financial independence. He has decades of experience consulting for many firms and mentors many business people. He is sharing his skills in business on the internet. Louis Lim is also an Expert Author on Entrepreneurship in the top Ezine Business and Motivation magazines in the internet and Google.

Media content analysis: Signs that elections are coming

By Khalil Adis, Social Correspondent

One has to read in between the lines to decipher news from propaganda

Is it just my imagination or has the state media been orchestrating “feel good” news to prepare Singaporeans for the upcoming elections to be held by 2011?

From the Housing Development Board (HDB) recording a deficit of S$2.119 billion to companies fighting for higher wages for low-skilled workers, the news are almost too good to be true.

The average man on the streets may not be able to understand media content analysis.

With elections looming, it would be to Singaporeans’ advantage to understand Singapore’s press system and that media ownership does affect news reporting.

Understanding media content analysis will then help Singaporeans read news more critically so that they can make an informed decision when they go to the polls (assuming there are no walkovers in readers’ ward).

Singapore’s press system

While western democracies such as the United States sees the media as a “market place of ideas” and a watchdog of the government, Singapore practices a “nation building” press system.

Minister Mentor Lee Kuan Yew has maintained that this was needed for Singapore’s development when he first took over as the first Prime Minister of Singapore.

A free wheeling press, he argued, will eventually lead to the collapse of a nation as evidenced by the liberal press of the Philippines.

“The Philippines, before martial law, was an Asian version of the US system. The Philippine press enjoyed all the freedom but they failed the Filipino people,” said Lee in an address to the American Society of Newspaper Editors on 14 April 1988.

Lee does have his point as a nation building press was crucial for Singapore’s development due to the racial conflicts and religious fault lines that the Singapore government had to tackle post independence.

Media ownership

Let’s take a look at MediaCorp which publishes Today newspaper. MediaCorp is 100 percent owned by Temasek Holdings – the Singapore government’s wholly owned investment arm.

Its chief executive officer is Ho Ching, daughter-in-law of Minister Mentor Lee Kuan Yew and wife of Prime Minister Lee Hsien Loong.

The government, thus, has a monopoly on television broadcasting and directly holds most of the radio channels in Singapore.

As a media entity that is owned by Temasek Holdings, MediaCorp has to report on stories that support the ruling party’s ideologies.

Any other news that is critical of the Singapore government is generally not tolerated. Remember Mr Brown anyone?

Media content analysis

Fast-forward 43 years later, Singapore still practices the “nation building” press system as evidenced by an analysis of Today’s media content on 3 November 2009.

The first page itself screamed a mini headline called “HDB turns community builders”.

In it, the HDB said it had set up a new Community Relations Department two months ago to tackle the problems of squabbles among neighbours and the assimilating immigrants in the heartlands.

HDB’s news appeared amid rising concerns among frustrated netizens over the government’s open doors policy towards immigrants which has priced Singaporeans out from the HDB resale market, as cash rich immigrants are able to offer higher cash-over-valuations (COVs)

Flyers from property agents, acting on behalf of permanent residents, have been flooding the heartlands, promising high COVs to prospective sellers.

Another “feel good” news is the “Drop in arrears despite recession”

HDB said it was partly due to the introduction of trained counselors to help distressed families.

However, it is worth noting that the Resale Price Index (RPI) is now at its record high, which means distressed owners were able to sell off their properties at a good profit and downgrade to a smaller flat.

This is something that was affirmed by Nicholas Mak, formerly from Knight Frank, and now a lecturer in real estate at Ngee Ann Polytechnic.

One only needs to go down to the grassroots and see the genuine hardship cases at the Meet-the-MP session, to see for oneself, how many Singaporeans are facing problems in servicing their HDB mortgage loan either through genuine hardship cases or their own folly.

Another big shocker was HDB’s $2.119 billion deficit this financial year.

However, this has already been discussed by fellow contributor Damon Yeo, in his well-researched piece.

While the HDB feels the need to engage the public via the traditional press like Today, it has continued to ignore netizens as evidenced by its refusal to respond to Temasek Review’s press query.

It is worth noting that the People’s Action Party (PAP) just last week said it was using online media to win the hearts and minds of Singaporeans – a media popular among opposition parties and those who are critical of the Singapore government.

HDB on the other hand has refused to engage with Temasek Review’s readers.
Its continued silence will only create more questions.

Other social news include “On better terms” which cites companies like the National University Hospital (NUH) fighting for higher wages for its low-wage staff alongside comments by Senior Parliamentary Secretary (Manpower) Hawazi Daipi.

This is in contrast to MM Lee’s comments on the widening gap between the rich and the poor.

In response to a question by a SMU student on what Singapore could do to help its bottom 20 per cent, MM Lee answered that Singapore’s approach has been to create as many jobs as possible, while leaving the market to decide the right type of pay.

“Never mind your Gini coefficient. If you don’t have a job you get zero against those with jobs. So our first priority is jobs for everybody,” Lee said.

Another news piece, aimed at opposition held Hougang, had headlines that read “In Hougang, help in now closer at hand”.

It mentioned that Community Development Council (CDC) officers are now stationed in their community to better help residents in distress.

Bread and butter issues are important to heartlanders and announcing this news can be seen one way for the PAP to win voters in the opposition held ward.

However, one has to remember that going through the welfare process and asking for help is a different thing altogether.

Welfare is a dirty word in Singapore.

For those who have fallen on hard times and seek CDC’s help, they have been subjected to CDC officers who can be rude and unsympathetic to their concerns.

The CDC officers are just merely going through the motion, as it is their jobs to do so.

One also has to show how pathetic one’s bank account is plus credit card spending to lament a “scolding” from CDC officers.

In the meantime, Singaporeans can expect more “feel good” news until election times are over.

The only consolation is that they are now better equipped to decipher news from propaganda.

About the Author:

Khalil Adis graduated from Monash University with a Bachelors of Arts (Communications). He helps out at the Taman Jurong Constituency Meet the MP session whenever time permits and has seen genuine hardship cases from fellow Singaporeans.

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