Monday, November 9, 2009

Singapore Inc.

Singapore Inc. is a derogatory moniker much bandied about these days to describe how the government has adopted a “growth-at-all-costs” mentality to economic growth. 

I have a more nuanced interpretation of Singapore Inc. I see Singapore Inc. as the governmental manifestation of a single-minded focus on value maximization and return on investment (ROI). One way of seeing this is how our government has adopted the just-in-time philosophy that is commonly held as conventional wisdom in the manufacturing business. Singapore Inc. is all about efficiency and no waste. We see this in public housing policy (notably the Build-to-Order Scheme), public transportation policy (MRT stations do not open until a critical mass is attained), and public healthcare policy.

On paper, a just-in-time approach seems smart. Frugal. Cost-effective. Government spending is frequently criticized as being wasteful (particularly by Republicans in American politics), but it would appear here that the Singapore government has managed the rare feat of achieving the opposite, that of fiscal balance while obtaining maximal value from public spending. 

So is there anything wrong with this seemingly rosy picture? Sure there is, if you’re caught on the wrong end of such policies (like say, being a disgruntled homebuyer unable to find…"affordable" housing). But in this post, I’m looking beyond the obvious…inconveniences endured by the (so-called picky) populace. I’m no highly paid urban planning consultant, but even I can see that efficiency comes with distinct costs of its own to society, just not measured in dollars and cents. 

Just as just-in-time manufacturing leaves factories vulnerable to supply shocks and the manufacturing economy subject to output volatility spikes (due to lack of redundancy and tight coupling), Singapore Inc. is subject to the same unintended consequences, some with potentially profound consequences. 

Let’s take public housing as an example. Notwithstanding recent announcements to release more land for housing (just-in-time to sooth the electorate), clearly, many people are unhappy with the housing situation, whether with the supply or affordability of housing. HDB, with the introduction of schemes that have made oversupply of flats a thing of the past, has ironically made the work of MCYS (which is concerned with national fertility) harder. Housing that is not readily available at affordable prices means that Singaporeans find it hard to marry and settle down -- and have kids, a stated national objective. Small expensive homes also don't exactly encourage large families. This leads in to the immigration issue, which stresses the housing situation further. See my posts “The solution … is the problem” and “Policy Schizophrenia”.

Public transport is also not working as well as it could be. The less tenable the public transportation option, the more people are inclined to buy cars (not exactly a plus for the environment). The government’s answer to this is to raise ERP rates and cut COE quotas, while being “just-in-time” with upgrades to the subway system. Singaporeans are in a no-win situation here. They either have to shell out, or double up like sardines in the trains and buses. Conversely, while MRT stations may be mothballed because of lack of development, it doesn’t take a great deal of imagination to postulate the opposite, that if MRT stations were un-mothballed, new town centers would develop much faster. That would go some way towards making the suburbs more livable.

To round up our discussion on the trifecta of public goods and services, in the public healthcare system, we have our perpetually crowded hospitals and polyclinics. Naturally, being just-in-time here affects waiting time, the quality of care and perhaps most importantly, our readiness for public health emergencies (such as H1N1). In addition, by being less generous with aid for the lower income (for fear of raising entitlement expectations), the lower income groups have less wherewithal to escape the poverty trap. [To be fair though, our healthcare system isn’t anywhere near as dysfunctional as the USA’s.]

Leaving aside just-in-time, Singapore Inc. is also all about investing. The government has no problems on losing money investing. There’s Micropolis, Suzhou Industrial Park, Bank of America/Merrill Lynch, Barclays and the latest, Stuyvesant. And those are only the ones I can remember offhand. Sure, in a big portfolio, some losses are to be expected, but a billion here, a billion there, soon you're talking real money. And the situation is even more egregious at the town council level, where town councils speculate in minibonds without having the foggiest idea that they are complex credit derivatives. 

It's not like the people in charge of the money are even remotely remorseful with losing/wasting money. Remember, these are the same folks who could tell us with an absolutely straight face that $400k was spent renaming "Marina Bay" to “Marina Bay”. Like a hedge fund manager, there’s no shame attached to losing other people’s money (OPM).

The government has no issue with investing in defence, economic development, seed funding for research, business infrastructure (the airport for instance), attracting foreign direct investment, immigration, and education (up to a point). All this spending is ultimately in service of ever higher rates of economic growth. It is always framed as a means to an end. No just-in-time here, thank you very much, in stark contrast to the spending on public goods. Even longevity planning is done ultimately with the intent of transferring retirement responsibility to the individual, as I have written in “On CPF Life”. There is an underlying hardnosed economic logic to that, and altruism or serving the public is not a prime objective there. 

While growth in the economy as measured by GDP is apparently high, it’s questionable whether high GDP growth has resulted in a better life, if we look at measures of income inequality, quality of life, even the desire to migrate. Not coincidentally, GDP growth is correlated with the pay of senior civil servants. One might wonder if there is a system of misplaced incentives here.

Instead of investing in the stock market or in GDP growth, why not invest in our society and our human capital? The government has spent considerably on primary and secondary education, nature parks, infrastructure and public works (such as the Marina Barrage). Why not spend more liberally, generously even, on public housing, public best of breed transport as I have written previously, tertiary and postgraduate education, healthcare, retirement and eldercare, and the environment? This would go a long way towards really helping make this island a better place to live. Then we could drop the Singapore Inc. moniker in the trashheap where it belongs.

Conversely, what I would like to see Singapore spend less on: market investments, perks and incentives for foreigners, especially non-PRs, money spent to attract high-rollers here (Formula 1, Sentosa Cove and Jetquay all irritate me, as they serve only to remind us that we are second class citizens in our own country). If these were private ventures, that’s perfectly ok. But should tax dollars really be providing the financing for these high-roller investments? And as for incentives for foreigners, if we're already spending generously to make Singapore a great place to live for Singaporeans, we should have no problems attracting foreigners at all in the first place. That we have to tack on extra incentives that Singaporeans are not entitled to gives the impression that foreigners need a hardship allowance to set up shop here. Which, in a manner of speaking, could be painfully close to the truth.  

As for high salaries and bonuses for senior civil servants, while egregious, I would be far less annoyed if their KPIs were measured less in terms of GDP growth but in broader terms such as quality of life and human development in Singapore. Otherwise, it would leave the impression that economic growth at all costs steamrolls all of us under its relentless path. I for one wouldn’t want to be hungry all the time. If I have to be hungry all the time anyway, then why should I choose to succeed here in Singapore, where the rewards are so lacking in substance and I can do so much better elsewhere? And I can indeed. If our leaders can be so coldly rational themselves, then they should not find unexpected that our own youth can discard the milksop sentiment of staying in one's country of birth for its own sake. Our youth will go wherever the opportunities and rewards are greatest, unfettered by bonds moral, patriotic, contractual or otherwise. Philip Yeo's own kids have done so (his son Gene is an assistant professor at UCSD), no doubt aided by his astronomical salary as a senior civil servant. If our leaders expect our youth to be perpetually hungry, then we certainly can be, and we will carry it to its logical, rational conclusion.

2 comments:

Ponder Stibbons said...

Nice rant.

The just-in-time logic doesn't work for transportation infrastructure because induced demand is always an issue there. And it's ridiculous to run public transport on a completely profit-oriented basis given the many positive externalities of public transport.

UBS did a purchasing power survey recently that showed that Singaporeans have slightly less purchasing power on average than residents of KL. The govt has made a big deal of how we've done so much better than our neighbors economically, but if economic growth doesn't translate into a greater ability to consume, then it seems rather pointless.

I could not agree more with your last two paragraphs. The most painful thing to me is that many Singaporeans I talk to defend discriminatory remuneration policies by employers (by which I refer to things like only foreigners being entitled to housing and moving allowances even when their Singaporean equivalents are returning from abroad). They automatically assume that if housing benefits are given, then the job concerned must demand such a 'talented' person that no Singaporean fits the bill, so we have to turn to ang mohs. They have thoroughly internalised the govt's rhetoric that we need Foreign Talent because there are not enough good Singaporeans.

I used to work in one of PY's creations and the colonial atmosphere of the place always made me want to gag. The worst part of it is that the kind of culture he has grown there is such that people who give negative feedback are blacklisted, so it's extremely difficult to get anyone to take one seriously unless one is already a sycophant who supports the colonial policies.

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