Winning back public trust after GE

Jul 2, 2011
 
By Ngiam Tong Dow

THE General Election on May 7 this year yielded the best possible outcome for Singapore. The People's Action Party (PAP) Government was returned to power with an 81-6 majority although its vote share dipped to 60.1 per cent, reflecting a secular decline. The Workers' Party (WP) won Aljunied, a Group Representation Constituency.

The greatest value of the WP win in Aljunied is that it breached a psychological barrier, giving a boost to the opposition and its supporters. Politics is about winning the hearts and minds of the people. Trust is the cornerstone. This election shows some chipping away of the trust that past generations of Singaporeans had in the PAP. This was shown, for example, in the way Aljunied voters did not heed the statements from senior PAP leaders warning them against choosing the opposition. The challenge for Prime Minister Lee Hsien Loong and his colleagues is to win back their trust.

The PAP began as a multiracial grassroots party. Its largely English-educated leadership was supported by the ordinary man in the street, clerks, postmen, technicians, small businessmen, carpenters and barbers. Mr Lee Kuan Yew and his Cabinet colleagues were seen by the electorate as selfless men, sacrificing promising careers for an uncertain future in politics. PAP cadres rode bicycles to hang up election posters on lamp-posts. The party could not even pay for a soft drink. Former MP Chan Chee Seng told me that they paid out of their own pockets.

[Imagine that Singapore Inc was a small struggling business back then. The partners were dedicated, though rather impoverished. They put in their blood, sweat, and tears for very little in terms of remuneration. But they were driven by passion and vision. And after many years of struggle and success, they have build up a good viable business. And they now seek to a new management at the top. And they tell the CEO candidates that they must suffer as they had suffered and take pittance in pay to show their dedication and passion.

Sure. That would work.]

The founding generation lived frugal lives. My permanent secretary drew a monthly salary of $1,950, just three times more than mine, a young rookie, at $680.

When the gap between the highest and the lowest paid is excessive, the rank and file become disgruntled. Insolence sets in. Morale goes down. The organisation, whether Government, business, or professional practice, begins its slow decline.

[This is an interesting issue. The widening income gap. Economic inequality. The hollowing out of the middle class (is that happening here?) The flight of jobs (again is that happening here?) Globalisation. Job re-design. Is there even a solution to this? Can we abandon captialism? Because that is what some Singaporeans seem to be commenting on online when they ask for govt intervention to hold down prices of flats, and other deemed essentials. If not communism, then socialism.]

The Government has done most things right. Over the five decades since independence in 1965, Singapore's per capita income has increased from $500 to $50,000. Unemployment rates have fallen from over 10 per cent to 3 per cent. The Housing Board has resettled and rehoused 85 per cent of the population. Average education levels have been raised from primary to tertiary levels in one generation.

Yet the Government's popular vote has dropped to 60.1 per cent, close to the psychological tipping point of 60 per cent. I feel that this decline is due in part to the Government's own policies. Some Singaporeans believe less and less that the Government acts in their best interest. In the earlier years, Mr Lee Kuan Yew's rallying cry was that no one owes Singapore a living. Despite its hard edge, the older generation believed that then PM Lee Kuan Yew and his Government put Singaporeans first.

Not having gone through the hard times of the earlier years, the young generation today is not willing to give the Government the benefit of the doubt. They judge the Government by its actions, not just promises.

Changes in two aspects of PAP policies can help build more trust: ministerial salary, and being more open about national reserves.

The formula used for benchmarking ministerial salaries to top earners in the private sector is perceived as a case of heads you win, tails we lose. Worse, it is regarded as self-serving.

A better benchmark would be the median income at the 50th percentile. If we can agree that the core role of government is to raise the livelihoods of the people, then the median income is a good measure of the Government's performance. As a minister's job is more complex than that of the average wage earner, his compensation can be 10, 15, 20 or 25 times the average. Ministerial salaries can range from $40,000 to $100,000 a month or somewhere in between. This would be about $480,000 to $1.2 million annually.

The Government should adopt a clean wage system and not use incentive schemes modelled on the private sector. Profit may be the measure of performance in a company, but not in a public administration. Using gross domestic product (GDP) as a proxy for performance of the Government and using this as one indicator to determine bonuses for ministers is deeply flawed. For instance, the GDP of Singapore can expand simply by importing more low-cost foreign workers - but this would be detrimental to citizens' interests. It is good that a committee has been set up to review salaries of ministers and political office-holders.

[Interesting point about incentives. Could be a valid observation, However, I think his proposed Ministerial salary a little on the low side. Or rather the low end is too low. The high end is about there, but could be higher.]

To my mind, even more crucial than revising ministerial salaries is the need for transparency in the management of Singapore's national savings.

These are accumulated from Central Provident Fund contributions, budget surpluses, revenue from land sales and dividends from government-linked companies such as DBS, Singapore Airlines (SIA), SingTel, ST Engineering, Keppel and Sembcorp. These enterprises were established with equity from the Ministry of Finance or the Ministry of Defence.

Temasek Holdings and the Government of Singapore Investment Corporation (GIC) are the wealth managers for the Singapore Government. Temasek Holdings was established by the Ministry of Finance to manage the equity investments of the Government, such as SIA, Neptune Orient Lines, DBS and other government-linked companies. Though Temasek was expected to play an entrepreneurial role like its predecessor, the Economic Development Board, it has become more and more of an equity investment manager no different from private hedge funds. In fact, it has sold off some knowledge-based government-linked companies.

[Really? You compare them to hedge funds? But being in the dark I have no way of knowing if the comparison is in fact valid.]

Temasek and GIC are profiled in the financial press as Singapore's sovereign funds. They are not. They are just wealth managers for the Ministry of Finance. The ministry is the custodian of Singapore's national wealth. The President exercises custodial powers only over drawdown of past reserves.

[Needs to explain what he means and what is the difference (at least in his eyes) of a SWF and "wealth managers" for MOF. I don't see the distinction. By his own words, MOF is the custodian of Sg's wealth and if these wealth managers work for MOF, then are they not managing Sg's national wealth, which is what SWF do.]

There is considerable misunderstanding over the governance of Singapore's reserves. Few people understand just what the reserves are composed of and which agency is responsible for which portion of the funds. To be sure, Temasek Holdings and GIC do publish annual statements on their funds, even disclosing returns. But these are neither comprehensive nor specific.

The Singapore Government can seek to build more trust with citizens by being more open about the size and composition of the national reserves.

While there is no outcry on the secrecy now, a more open, transparent approach can reduce confusion and dispel any doubts on the issue. I would urge the Minister of Finance to consider publishing an annual audited statement on the size and composition of our reserves. It can be presented as a White Paper to the new Parliament, which is due to begin its term.

[I am suspicious of people who wants to know our wealth, and how it is invested. There is leverage to be gain from such knowledge and it puts us at a disadvantage. George Soros and other robber barons can use such knowledge to their own advantage and to the disadvantage of others. But perhaps there is also the need for transparency to rebuild trust and so there is a need to balance transparency and disclosure with some discretion and protection.]

The writer is a former permanent secretary for finance in Singapore. This article is based on a lecture delivered on Tuesday at the Nanyang Centre for Public Administration at Nanyang Technological University.

Has the Third Party's Moment Arrived?

At the Aspen Ideas Festival, columnist Tom Friedman said he would vote for a third-party candidate. John Avlon on how technology and gridlock could spell an end to the curse of Ross Perot.

July 1, 2011

Independence Day came a few days early this year, as columnist and author Tom Friedman declared his support for a third party at the Aspen Ideas Festival.

“We need a third party. I am for a third party,” Friedman said to applause. “We are trapped in a corrupt duopoly.”

Expressing disappointment with President Obama, dismay with what passes for Republican policy debates, and frustration with the culture of hyperpartisanship in Washington, Friedman sees a reckoning coming, pushed by new technology. “One thing about the Internet and the hyperconnected world—it has flattened every hierarchy in the world from The New York Times to the banking industry. It’s flattened every hierarchy in the world except the two-party system, and that will not remain. That is a prediction that I will make.”

He’s right. Professional partisans are still playing politics by analog rules—they have not woken up to information-age reality. Politics is the last place where people are expected to be satisfied with a choice between Brand A and Brand B.

Friedman launched into this criticism while talking with Aspen Institute President Walter Isaacson about his upcoming book on U.S. domestic politics, co-written with Michael Mandelbaum, That Used to Be Us: How America Fell Behind in the World It Invented and How We Can Come Back.

Friedman is just the latest and most prominent addition to the chorus of voices concluding that hyperpartisanship is hurting our country because it is stopping us from solving the serious problems we face.

In May, the Gallup poll found that a majority of Americans support the creation of a third party, including 68 percent of independent voters.

In 2003, when Gallup started asking the question, a majority of Americans thought a third party was not necessary. But the polarization of the Bush years has metastasized in Washington despite candidate Obama’s core campaign promise to bridge these divides. The two parties are more polarized that at any time in our modern history—more ideologically and geographically stratified. Demonizing people who disagree with you has become standard-operating procedure, as RINO and DINO hunting proliferate in closed partisan primaries. Policy debates have been hijacked by special interests. All or nothing has become the negotiation position of choice.

The current issue crystallizing the problem is the cataclysmic game of chicken that D.C. is playing with the debt ceiling. Bipartisan proposals to deal with the deficit and the debt, like the plan put forward by Alan Simpson and Erskine Bowles late last year, are dismissed by ideologues on either side—especially House members appointed to the commission. And the hottest place in that particular hell goes to the folks who are content to demagogue the deficit and the debt and then refuse to embrace any realistic plan to deal with it.

“If Alan Simpson and Erskine Bowles want to run as president and vice president, I will vote for them,” Friedman said. “If Michael Bloomberg wants to run, I’m very happy to vote for him. We need a shock to the system.”

The point of encouraging a third party, in Friedman’s view, would be to influence the national debate and dislodge the dysfunction through shock therapy.


“Now, I don’t think a third party can win for a lot of reasons…[but] if it’s led by a Bloomberg, it’ll have more impact on the next president than the person who does win. Because let’s remember that Ross Perot won almost 20 percent of the vote. At one point he had 40 percent of the polls, and he was nuts.” For all Perot’s not-ready-for-prime-time-ness, he did succeed in shifting the national debate around the deficit, which put Clinton and Gingrich on a political course to create a surplus by the end of that decade. We need that same reset today.

I spoke to former senator Alan Simpson after Friedman’s endorsement, and the quotable senior statesman declined that particular honor. “I don't see a third party, unless the frustration level is that both parties are stupid. And if the recognition level goes up that the Republicans are stupid and the Democrats are stupid, then there's an easy chance for a third party.” But, Simpson said, he would remain a Republican. “I'm an ornery-enough bastard, if I get into a thing or an organization I'll get in there and fight for my position. That's the way I've always lived all my life. So I'm a Republican. But I always say to them, ‘I thought Republicans believed in government out of our lives, the precious right of privacy, and the right to be left alone. Well, then what they hell are we doing in abortion, and gay/lesbian issues, and mental health…I have a cousin who was gay who was a war hero, World War II. We're all human beings,” he said. “I am rather lyrically profane, because the only way to cut through the shit is to get profane and say, ‘You, sir, are speaking bullshit, and the American people know what bullshit is.’”

Speaking of lyrical profanity, a major contributing factor to the current hyperpartisanship is the rise of partisan media, which is causing us to self-segregate into separate political realities. Friedman had dreams of how to dislodge that as well, imaging an on-air centrist truth-teller who launched into the talking points parroted by partisans, saying: “'Those two people are talking complete nonsense. This one actually thinks that we can get out of this hole without raising taxes, and this one thinks we can get out of this hole without cutting entitlements. What nonsense…That’d be pay-per-view for me. I would love that. And that’s what’s totally missing.”

Given the fact that 41 percent of Americans are now self-described independents, there is a rare opportunity for political and media innovation—an emerging market that is already a near majority.

The two parties are deeply polarized, but the American people are not. That’s why we’re witnessing a market breakdown in our politics. A rising tide of voters might describe themselves as fiscally conservative but socially liberal, but because of the disproportionate influence of special interests like the religious right and public-sector unions, the two parties cannot meet this market demand. They are polarized and paralyzed—incapable of reasoning together to solve long-term problems, absent a crisis.

As we paddle closer toward a cliff, frustration is growing. The status quo is not working.

Impractical extreme voices dominate the debate. And unless they show a new capacity to self-correct, it just might take a third party to remind Republicans and Democrats that they are Americans first—and that hyperpartisanship is the opposite of patriotism.

End is nigh for sacred cows of public housing

Jul 2, 2011
 
Since National Development Minister Khaw Boon Wan took office in May, a raft of changes to housing policy has been announced. Although not fully implemented yet, these ideas mean the slaughtering of some 'sacred cows' that have been the hallmarks of Singapore's public housing market for the past decade. Esther Teo, Cheryl Lim and Jessica Cheam examine the changes.
 

1: From 'build to order' to 'just build'

ARGUABLY, the most 'sacred of the cows' in public housing being slain is the idea that the flats should no longer be 'built to order'.

This is a key shift from the current system where a construction tender for new HDB flats is called only after there are buyers for at least 70 per cent of the units launched.

Now, the HDB will call for a tender as soon as architectural drawings and tender documents are ready, meaning that the HDB will go ahead and build new flats regardless of the response.

National Development Minister Khaw Boon Wan wrote in one of his famous blog posts: 'I told (HDB) to proceed to build, knowing that the orders will definitely come.'

That statement rolled back one of the most rigid principles the Ministry of National Development (MND) has adhered to for more than a decade.

That principle, of course, resulted from the trauma of dealing with an oversupply of new flats in the 1990s.

Under the former registration for flats system (RFS), HDB built flats according to the number of applicants on its waiting list.

But the agency was caught out when flat demand vanished overnight when the Asian financial crisis struck in 1997.

The number of new flat applicants fell to 22,000 in June 2001 from its peak of 146,000 in 1997, resulting in a surplus of 17,000 unsold flats that year.

That prompted the Auditor-General to express concerns about the high cost of holding vacant flats.

Amid news reports that vacant flats were creating 'ghost towns' in pockets of Singapore, HDB had to take drastic steps to clear its surplus stock.

It reduced prices, converted large flats to smaller ones and held walk-in selections of unsold flats.

Former National Development Minister Mah Bow Tan has since invoked the spectre of these 'ghost towns' many times as a reminder of how homeowners had paid a steep price for the oversupply of flats.

'Members may recall residents in near-empty new HDB blocks in Sembawang, Jurong West and Sengkang expressing their concern about safety and theft,' he told the committee of supply as recently as March this year.

'HDB has to take into account market conditions and sentiments when it plans its building programme,' he added.

'(But) in our desire to meet the strong housing demand today, we should not forget lessons of the past regarding the volatility of demand.'

But viewed as a breathtaking move from the historical context, market watchers say that the change was not surprising given the current political climate.

Recent build-to-order (BTO) launches have all been oversubscribed and the HDB is racing to push out a record 25,000 homes this year.

Mr Khaw has also made clear that building ahead-of-order would onlybe only a temporary measure to clear the demand backlog, and that the HDB will go back to the BTO approach once the situation has stabilised.

Mr Tan Kok Keong, Orange-Tee's head of research and consultancy, said that such a change needs to be watched closely and revisited constantly.

'In the event that prices in the private property market drop and come into reach of HDB buyers, it might lead to an oversupply situation,' he said.
ERA Realty key executive Eugene Lim said, however, that if application rates fall, HDB should be able to react quickly enough to rein in the programme, preventing asupply glut.

He noted that the move was really targeted at first-time buyers, temporarily allowing for HDB to launch more new flats at one go and to quicken the sales process.

'It's a good move but we must note that Mr Khaw has said this will be temporary.The BTO system is still more reliable in determining supply and we'll return to that after this backlog is cleared,' he added.

HDB cut prices to fill the blocks. Existing owners became unhappy that their new neighbours paid less for their homes and some petitioned for a discount.

Low prices also meant that those in mortgage arrears had difficulty selling off their flats, and many more were in negative equity.

esthert@sph.com.sg

2: Income ceiling to be raised

IT MIGHT have taken 17 years and a watershed election to get things moving but the Housing Board's (HDB) income ceiling will finally be raised in a key policy shift that some experts say, while not unexpected, was long overdue.

In a surprising turnaround, the Government committed to review the ceiling for first-timers during the run-up to the May elections - possibly raising it from $8,000 to $10,000 - despite defending it as relevant as recently as March this year.

A couple's combined income now has to be below $8,000 a month for them to qualify to buy a new build-to-order (BTO) flat directly from the HDB, which is typically 20 to 30 per cent cheaper than a resale flat.

While there have been frequent calls to ease the ceiling, which has remained unchanged for the past 17 years even as household incomes increased, the Government maintained that four in five households still qualified for public housing with the cap at $8,000, which it considered generous enough.

Former national development minister Mah Bow Tan had said earlier in Parliament: 'Our budget is not limitless. Our subsidies are targeted to offer more help for the lower-income group.'

Yet, as the property market boomed in recent years and prices rocketed upwards, young couples in the middle-income group felt increasingly squeezed.

Some busted the income ceiling soon after joining the workforce, becoming barred from buying flats from the HDB. Pricier resale flats or private property were also out of their reach.

Industry players say that the review is welcome in the light of the property bull run - with home prices jumping 17.6 per cent last year - but cautioned that the demand for new flats will surge further, worsening the demand backlog that has built up.

This is because the move will likely siphon some demand away from executive condos (ECs) and design, build and sell scheme (DBSS) flats and also from private mass market homes.

This, in turn, means that the Government must continue pushing out new flats at a steady pace to avoid volatility and to ensure that the problem is not aggravated, he added.

They add that with the National Wages Council's recommendation for a rise in wages and a tight labour market, the need to relook the ceiling is now even more pressing.However, market experts say the impact on the private market might be muted, as the sandwiched class - households earning between $8,000 and $10,000 - do not make up a huge part of the market.

Mr Tan Kok Keong, OrangeTee's head of research and consultancy, said that demand for new mass market homes might dip by less than 5 per cent in the initial months of the ceiling hike as the policy shift kicks in.

'Buyers will now have more choices but (public and private homes) are still different products and some will still prefer buying private homes as they are not subject to HDB rules,' he added.

Dennis Wee Group director Chris Koh added that should the income ceiling for BTO flats be raised, the $10,000 ceiling for ECs and DBSS flats are likely to be raised as well.

If not, the increased BTO demand will likely result from the cannibalisation of demand from the other public housing offerings - ECs and DBSS flats.

Mr Colin Tan, research and consultancy director at real estate firm Chesterton Suntec International, said the ceiling hike was 'long overdue'.

OrangeTee's Mr Tan added: 'HDB should take a longer-term perspective in its review and consider - what exactly is the role of HDB and public housing. Is it still to cater to the mid-to lower-income and provide basic housing needs?'

3: Never-seen-before HDB data released

MR KHAW'S blog is only about a month old but it is keenly watched by a large audience including home buyers, sellers and industry analysts.

Since he started 'Housing Matters', as the blog is named, Mr Khaw has made the unprecedented move of releasing HDB data that never used to be so readily available before.

So far, he has released detailed breakdowns of the profile of applicants for new HDB flats and buyers in the HDB resale market.

Mr Khaw has also taken to posting observations about supply numbers and housing policies, and has even given fatherly advice on what factors home buyers should take into account.

This new open style is a radical departure from the past. Chesterton Suntec International research head Colin Tan noted that 'compared to the recent past, HDB has been a lot more open today with the information... and it is also more timely'.

Some in the industry have welcomed it as a breath of fresh air.

Property agency PropNex's chief executive Mohamed Ismail said that this will give consumers 'a more accurate picture of the current demand'.

International Property Advisor chief executive Ku Swee Yong noted that with such 'better quality data', buyers can make decisions with greater clarity.

'I believe Mr Khaw is trying to set the record straight... and hopes to prevent less sophisticated home buyers from making decisions that will bring future regret,' he added.

But even though the revelations can bring more transparency, they can also cause 'murkiness' in the short term because they throw up more questions, warned Mr Ku.

Mr Khaw has announced, for example, that HDB will now build more flats ahead of demand and that it will also offer more flats in mature estates. But experts are asking where the land will come from and whether the frenzied building pace will cause construction costs to escalate. While this type of communication is welcome, the use of a blog is an unusual way of releasing information and has created some level of uncertainty and a dampening effect on the market, especially in the private sector, said Colliers International director of research and advisory Chia Siew Chuin.

Nevertheless, the industry is coming to accept this 'change in the line of communication', she added.

Developers have noted that Mr Khaw is trying to engage Singaporeans and the wider sector, in addition to the developers, academics and other experts usually consulted in the industry.

Chesterton's Mr Tan said that the underlying reason for this new form of communication - also a reflection of Mr Khaw's consultative approach - is that HDB can now illicit more direct feedback from the public from the minister's remarks and figures, which the Board can then use to plan its next move.

Professor Yu Shi Ming, head of the National University of Singapore's real estate department said the information and musings of the minister is 'certainly more expedient and timely'.

Most of this information was available in the past, said Prof Yu, perhaps just slower to surface because of the medium of communication used.

But he also acknowledged that some of the content posted was 'reactionary', such as Mr Khaw's response to a recent uproar on the prices of a recent project under HDB's design, build and sell scheme (DBSS).
Dennis Wee Group director Chris Koh agreed, noting that former National Development Minister Mah Bow Tan had also been looking into the same housing issues, but that his musings were not communicated via the 'blog and social media' medium as explicitly.

jcheam@sph.com.sg

4: Flats to be built in mature estates

WITH their more established infrastructure and well-connected transport links, mature HDB estates have always been hot locations in the property market.

So whenever new flats in these estates are offered, many buyers rush to apply for them.

The most recent build-to-order (BTO) exercise garnered an average of three applicants per flat. But flats in the mature estate of Tampines were oversubscribed by seven times.

Yet this is mild compared to previous BTO exercises in mature estates. In one exercise, for example, flats in Telok Blangah were oversubscribed by up to 20 times.

In the past, the HDB has always maintained that building new flats in mature estates would be the exception rather than the norm.

The Straits Times understands that these flats often attract large numbers of applicants, who may include those who do not need a home urgently.

Therefore, the high subscription rates might not accurately reflect the true demand and could alarm the market into thinking there is insufficient supply.

There is also a lack of land on which to build new flats - unless older flats are torn down and their residents resettled.

More importantly, there is a need to ensure that new estates take off.

'New towns like Punggol and Sengkang need the critical mass of people to justify the infrastructure put in place. Otherwise, mall operators will complain about a lack of shoppers and bus companies will have empty buses plying routes in the neighbourhood,' said PropNex chief executive Mohamed Ismail.

But Mr Khaw has given the market renewed optimism with his recent announcement that because such flats are popular, HDB will look at building more new flats in mature estates next year.

International Property Advisor chief executive Ku Swee Yong said this could result in home buyers taking more of a wait-and-see approach.

'Buying a property is a big decision so a lot of people are waiting to see what the next move is going to be, to see if new flats will be coming up in areas of their choice before making a move,' he said.

Dr Chua Yang Liang, head of research at Jones Lang LaSalle, said parcels of land in mature estates have periodically been released for sale over the years and added that the opening up of more housing projects in mature neighbourhoods is part of the urban development cycle.

'Having people want to move back into a mature estate can be a good thing for the community. New households can add to the energy, improve local businesses and enhance the quality of life,' he said.

He pointed to how some neighbourhoods in cities overseas have turned into 'ghost towns' when the population migrates to othernewly established areas.

'This demand can be seen as an opportunity to renew existing transport links and facilities, and grow the population while maximising the infrastructure that is already in place,' said Dr Chua.

Industry analysts said the market needs to be aware about the land limitations in these mature estates.

Many of them also point out that new towns would eventually grow into mature housing estates.

Mr Ku said: 'Perhaps all these newer towns need is time to build up reputable schools and better establish their infrastructure and maybe more people might want to move there.'

CHERYL LIM

cherlim@sph.com.sg

5: DBSS could see big change or even be axed

THE inception of the Design, Build and Sell Scheme (DBSS) in 2005 was labelled by the Government as a 'bold experiment' and a signal of a major shift in Singapore's public housing programme.

The scheme allows private developers to tender for state land, then design, build and sell Housing Board flats. Previously, HDB projects were developed solely by HDB.

DBSS homes have bridged the gap between build-to-order flats, the most basic form of public housing, and the more premium executive condominiums, offering buyers a wider choice of flats and better value for money.

Equipped with premium features like floor-to-ceiling wardrobes and teak parquet flooring, these homes may look like private apartments but they are still subject to HDB rules and regulations.

A total of Eight sites have been developed under the DBSS so far, with the latest project being Centrale 8 in Tampines.

Six years since its introduction, the scheme has come under scrutiny after a public outcry over the record $880,000 price tag of five-room flats at the Centrale 8 project.

The project's developer, Sim Lian Group, has since slashed the top price of those flats to $778,000.

The flats were still oversubscribed by two times, but that debacle has only fuelled further public concern over how private developers are given free reignrein onover the pricing of HDB flats.

The Ministry of National Development is now reviewing the scheme as part of a broader review of housing policy.

Property analysts say the review could see drastic changes to the scheme, with some saying it might be better to scrap the scheme altogether.

Others have suggested the HDB establish firmer control over the development of DBSS projects, relegating private developers to the role of contractors instead.

PropNex chief executive Mohamed Ismail said the Centrale 8 debacle exposed the scheme's key weakness.

'The scheme is primarily still dealing with public housing but housing that is awarded to private developers. These developers might be listed and might have to answer to shareholders so they are very much profit-oriented,' he said.

The ministry has said that DBSS units make up a small proportion of public housing with 5,500 DBSS units built and sold to date.

Ideally these units should ideally be priced higher than BTO flats but lower than ECs, said analysts, otherwise they could risk destablising the public housing eco-system, despite their small numbers.

'If one developer can launch at that price and still be oversubscribed by two times, other developers could try to go the same route,' said Mr Nicholas Mak, head of research at SLP International.

'If enough of them succeed, this new elevated price could become the new benchmark.'

 .

S. JAYAKUMAR ON MALAYAN RAILWAY LAND

Jul 2, 2011
 
POA deal a win-win - eventually

In his recently released book, Diplomacy: A Singapore Experience, former Senior Minister S. Jayakumar details the background and the twists and turns in Singapore's dealings with Malaysia over the Points of Agreement on Malayan Railway land. This is an edited extract of his account, from the chapter on 'Managing relations with Malaysia'.
 
I WILL deal only with a set of interrelated issues that troubled our relations for many years - the implementation of the Points of Agreement (POA), relocation of the Customs, Immigration and Quarantine (CIQ) for railway facilities, revisions to the Water Agreements, and the 'crooked bridge'.

The on-again, off-again bilateral negotiations and acrimonious exchanges over these issues illustrate the volatility of political and diplomatic relations then, despite our efforts to cooperate on an equal footing and work towards a win-win outcome.

These episodes also illustrate how personal relationships between the leaders and ministers are important factors in international diplomacy, and more so in dealing with close neighbours.

I believe that PM Lee Hsien Loong and PM Najib Razak have developed a certain comfort level and trust which enabled them to finally overcome the long unresolved POA issue, to reach a mutually beneficial settlement.

At the ministerial level, I had a very good personal relationship with Foreign Minister Abdullah Badawi (1991-99). My wife and I attended the weddings of his son and daughter. I consider Abdullah Badawi one of the most gentlemanly and approachable foreign leaders I have dealt with. He knew many of our leaders well and tried hard to keep relations on an even keel.

Likewise, I got on well with Abdullah Badawi's successor, Syed Hamid Albar, with whom I shared a common passion for golf.

Unfortunately, their hands were tied by Dr Mahathir (Mohamad), who adopted a negative tone to bilateral relations. Although there was some cooperation in the early years of his administration, Dr Mahathir essentially wanted Malaysia to trump Singapore. This situation persisted even after Abdullah Badawi took over the premiership in 2003. Domestic political constraints coupled with Dr Mahathir's incessant behind-the-scenes attacks on Abdullah Badawi and Singapore restricted Abdullah Badawi's ability to settle some of the outstanding bilateral issues...

That Singapore and Malaysia will always remain neighbours is a geographic fact. There may be hiccups from time to time but both sides should continue to seize opportunities to enhance bilateral cooperation and put overall relations on a better footing. The POA settlement is an excellent example of adopting this win-win mindset...

Points of Agreement (POA)

I WILL begin with the 'POA issue' because, of all the important outstanding issues, this is the only one that can be said to have been resolved.

For nearly 20 years, the POA issue was a continuing irritant in Singapore-Malaysia relations, until May 2010 when PM Lee Hsien Loong and PM Najib Razak came to an agreement that put the matter behind us. There are many aspects, both legal and political, about the POA's chequered history. I will deal only with the more salient aspects.

What is the POA?

THE POA is an agreement between the Malaysian and Singapore Governments concerning railway lands in Singapore. It was signed by PM Lee Kuan Yew and Finance Minister Tun Daim Zainuddin on Nov27, 1990. The POA was signed on the same day that PM Lee handed over the premiership to Goh Chok Tong. PM Lee had wanted to clear the decks before Goh Chok Tong took over.

Early developments

IN THE early 1980s, Malaysia inquired whether we had any special plans for the Malayan Railway land in Tanjong Pagar. Malaysia was thinking of stopping the railway at Woodlands and either selling or developing the property in Tanjong Pagar. We responded that we preferred the Malayan Railway Administration (MRA, now KTMB) to continue to use the land at Tanjong Pagar for railway purposes.

However, if MRA did not want the land because it wanted to terminate the services at Woodlands, we were prepared to take the land back in accordance with the leases of the various parcels.

When we decided in September 1989 to shift the CIQ facilities from Tanjong Pagar to the Woodlands Checkpoint, we thought it made sense for the railway to terminate at Woodlands as well.

We knew that the Malaysians were thinking of stopping in Woodlands and either selling or developing the Tanjong Pagar property, but that they were concerned that all MRA lands south of Woodlands would then revert to Singapore without any compensation since they would no longer be used for railway purposes. So one possible win-win solution was to allow the Malaysians to redevelop some of the MRA lands in addition to the Tanjong Pagar property, and for Singapore to share in the gain from this redevelopment. The remaining MRA lands that could not be redeveloped would revert to Singapore.

Genesis of the POA

PM LEE put this proposition to Daim. Most of the MRA lands in Singapore (with the exception of three plots in Woodlands, Kranji and Keppel) were narrow strips and not capable of independent development.

If the MRA decided to terminate its line at the new Woodlands Checkpoint, then notwithstanding the restrictive covenant, the plots at Keppel, Kranji and Woodlands could be re-alienated to a company which would be 50:50 owned by nominees of Singapore and Malaysia. There would be no compensation for the remaining MRA lands.

Malaysia, however, wanted the railway station to terminate at Bukit Timah and not Woodlands. PM Lee agreed to this. Malaysia also wanted a larger share in the joint venture company. PM Lee agreed to 60:40 in Malaysia's favour.

After further negotiations, the POA was signed by PM Lee and Daim on Nov27, 1990.

Terms of the Agreement

THE main thrust of the POA was:

The Tanjong Pagar station at Keppel would be vacated and moved to Lot 76-2 in Upper Bukit Timah in the first instance;

The land at Tanjong Pagar would be vested in a limited company (M-S Pte Ltd) to be developed as residential and commercial land in accordance with our zoning plans;

After our MRT reached Woodlands New Town, the MRA could, within five years, move its station from Lot 76-2 to a site in Woodlands adjacent or close to the MRT station. Then the two pieces of land in Kranji and Woodlands would also be vested in M-S Pte Ltd and developed in accordance with the plans given;

The POA also stated that in exchange for the MRA land at Keppel, a plot of land of equivalent value in Marina South would be offered to M-S Pte Ltd so that a prestigious building could be developed on this Marina site. If M-S Pte Ltd felt that the land offered was not suitable, then alternative sites in Marina South of equivalent value would be offered to M-S Pte Ltd.

The effect of this Agreement was that when the Tanjong Pagar station was relocated to Upper Bukit Timah, all railway lands south of Bukit Timah other than the Tanjong Pagar site would revert to Singapore.

If Malaysia exercised the option of moving the station to Woodlands (within five years after our MRT reached Woodlands, which happened in February 1996), all the railway lands south of Woodlands other than the Tanjong Pagar, Woodlands and Kranji sites would revert to Singapore.

That option eventually lapsed as Malaysia failed to move the station to Woodlands by February 2001.

The problems

FOR four years after signing the POA, we worked with Malaysia to implement the Agreement. However, the Malaysians made requests that departed from the terms of the POA.

For example, they wanted to retain certain lands outside the railway corridor that they considered capable of development, other than Keppel, Kranji and Woodlands.

Next, they asked to include a commercial/shopping complex in the Bukit Timah station and for four additional parcels of land in exchange for moving directly to Woodlands.

The Malaysians also wanted to jointly develop the Bukit Timah site on a 60:40 basis if MRA relocated its station straight to Woodlands.

Malaysia also disagreed with us on the legal status of the POA as well as on when it took effect.

Our position was clear: The POA was an internationally binding agreement concluded by the two governments after careful deliberation and should be implemented in good faith.

As PM Goh told Parliament on June5, 1997, 'it is not possible for me, or for any Prime Minister of Singapore, to simply set aside the POA, which is an international agreement solemnly entered into between two governments. To do so would undermine the sanctity of all the agreements and treaties Singapore has concluded in the past or will sign in the future.'

To resolve the legal issues, we proposed arbitration or international adjudication.

POA unresolved for 20 years

BECAUSE of these problems, the POA became an outstanding issue for two decades. Several attempts to discuss the POA as part of a larger package deal did not bear fruit.

On the important aspect of the legal status of the POA, there was a major breakthrough during Malaysian Foreign Minister Rais Yatim's introductory visit to Singapore in April 2008.

When he called on PM Lee Hsien Loong, he acknowledged that the POA was a valid and legally binding document. That was significant as no other Malaysian leader had hitherto taken that position. We had always been prepared to be flexible, provided the legality of the POA was not questioned.

Once Dr Mahathir questioned it, we had no choice but to be firm.

Final agreement in May 2010

THE POA was finally resolved in May 2010 when PM Lee Hsien Loong and PM Najib Razak reached an agreement. KTMB would relocate its Tanjong Pagar station to Woodlands by July1, 2011 and the POA land parcels and some additional land parcels in Bukit Timah would be vested in M+S Pte Ltd.

The agreement also involved a land swop of the POA and Bukit Timah parcels for land of equivalent value in Marina South and Ophir-Rochor, which Malaysia formally took up in September 2010.

When announcing the land swop deal, the two Prime Ministers also agreed that both countries would jointly develop a Rapid Transit System between Tanjung Puteri, Johor Bahru and Singapore and an iconic project in Iskandar Malaysia.

In my view, the POA deal is clearly a win-win outcome. It was a political and economic plus for both sides.

For Malaysia, the deal meant additional land parcels in Bukit Timah being vested in M+S Pte Ltd, together with the three POA parcels in Tanjong Pagar, Kranji and Woodlands mentioned in the original POA (which could subsequently be swopped for land in Marina South and Ophir-Rochor).

In conjunction with investments in Iskandar Malaysia and a Rapid Transit System linking Johor Bahru and Singapore, the political settlement was one which Najib and his administration were comfortable with.

For Singapore, after all these years that the railway line had cut Singapore into two halves, the deal removed a major obstacle to efficient land use and planning. It also enabled us to rationalise and amalgamate the various railway land parcels south of Woodlands Train Checkpoint (WTCP), amounting to about 216ha, which would otherwise have stagnated as isolated land parcels specifically designated for railway use only.

In addition, KTMB's relocation to WTCP would resolve long-standing security concerns vis-a-vis the Malayan railway line extending south all the way to Tanjong Pagar, such as smuggling, drug trafficking, and more recently in the wake of 9/11, terrorism.

Furthermore, Singapore and Malaysia both stand to benefit from the joint 60:40 ownership of M+S Pte Ltd, which is developing the Marina South and Ophir-Rochor parcels.

Singapore would gain from the future revenue streams of 'iconic' developments at the Marina South and Ophir-Rochor locations through our 40 per cent stake in M+S Pte Ltd.

Finally, on a broader note, the settlement of the long-standing POA issue removes a major obstacle to bilateral relations, hopefully paving the way for deeper cooperation between Singapore and Malaysia.

Some leaks good, some leaks bad

Jul 1, 2011

By Gareth Evans

AS A British court weighs whether Julian Assange should be extradited to Sweden, and American prosecutors weigh the criminal charges they will file against Private Bradley Manning, the alleged major source of the disclosures by Mr Assange's WikiLeaks, global debate continues on whether such revelations do more good than harm. However, too often, that debate is polarised as national security versus democratic accountability, with no room given to the distinctions that really matter.

In government, any leak is, by definition, embarrassing to someone, somewhere in the system. Most leaks are likely to involve some breach of law by the original source, if not by the publisher. But that does not mean all leaks should be condemned.

One of the hardest lessons for senior government officials to learn - including me, when I was Australian attorney-general and foreign minister - is the futility, in all but a tiny minority of cases, of trying to prosecute and punish those responsible for leaks. It does not undo the original damage, and usually compounds it with further publicity. The media is never more enthusiastic about free speech than when they see it reddening the faces, with rage or humiliation, of those in power. Prosecution usually boosts leakers' stature, making it useless as a deterrent.

But some lines do have to be drawn if good government is to be possible, just as a zone of privacy in our personal and family lives is crucial to sustaining the relationships that matter most to us.

As sex-texting former United States congressman Anthony Weiner is painfully learning, there is such a thing as too much information. The trick is to know how and where to set boundaries that concede neither too much nor too little to those with a vested interest, for good reasons or bad, in avoiding scrutiny.

Some of WikiLeaks' releases of sensitive material have been perfectly defensible on classic freedom-of-information grounds, exposing abuses that might otherwise have remained concealed. The helicopter gunship killings in Iraq, the corruption of former Tunisian president Zine el-Abidine Ben Ali's family, and the paucity of progress in Afghanistan are, by this standard, fair game.

None of this makes Mr Assange a Daniel Ellsberg (who 40 years ago leaked the Pentagon Papers, exposing US government thinking on Vietnam). Nor does it put him in the same league with Anna Politkovskaya, the crusading journalist who was murdered after refusing to stop investigating Russian human rights abuses. His stated motives seem too anarchic for that. Sometimes, however, whistles do need to be blown.

But some leaks are indefensible, and at least the sources must expect some punitive reckoning. This category includes leaks that put intelligence sources or other individuals at physical risk (as did some of WikiLeaks' early releases on Afghanistan and Zimbabwe). It also includes leaks that genuinely prejudice intelligence methods and military operational effectiveness; expose exploratory positions in peace negotiations (invariably helping only spoilers); or disclose bottom lines in trade talks.

What is clear in all of these cases is that the stakes are so high that it simply cannot be left to the judgment of WikiLeaks and media outlets to make the necessary calls without consulting relevant officials. Sensibly, US officials facilitated such consultations, on a 'without prejudice' basis, in some of the early WikiLeaks cases.

The trickiest cases are in a third category: private conversations whose disclosure is bound to cause offence, embarrassment or tension, but has no obvious redeeming public-policy justification. The problem is not that negative things are said behind closed doors - as one leader famously responded to an apologising US Secretary of State Hillary Clinton, 'You should hear what we say about you' - but that they become public knowledge. Particularly in Asia, loss of face means much more than most Westerners will ever understand.

Governments should not overreact to these kinds of leaks. They do leave bruises and generate tensions that are bound to undermine the confidence and frankness with which individuals interrelate, which can sometimes impede effective cooperative decision-making. But life will go on, because it has to.

At the same time, these kinds of leaks should not be naively applauded as somehow contributing to better government. They do not, and will not, because they will strongly influence at least what is written down and circulated, thereby inhibiting the free exchange of information within government. Leaks of this kind will reinforce the bureaucratic barriers that must be removed if policymaking and implementation are to be effective in all areas that require input, coordination, and common information and analysis across departments and agencies.

Such leaks are also bound to lead governments to place a higher premium on information generated by covert intelligence-gathering, which is generally less leak-prone, but usually of much lower quality - as I can personally attest, having once been responsible for Australia's main secret services.

It is also bound to inhibit officials - all but the bravest tend to be inhibited anyway - from conveying foreign criticism of government policy or personalities that might find its way into the media. None of this improves policymaking.

Those of us who see the potential for far more harm than good in the WikiLeaks disclosures, and refuse to join in the cheers for Mr Assange and his colleagues, are probably trying to resist an inexorable tide. We know we will all have to get used to more exposure and make the best of it, but that should not stop the effort to draw lines where they really matter.

The writer is a former foreign minister and attorney-general of Australia.

PROJECT SYNDICATE

The straitjacket of public policy

Jul 1, 2011
 
By David Skilling

MUCH thinking, research and debate is focused on understanding why some countries have performed better than others. Why are the rich countries rich, and others not? Some mixture of policy, institutions, culture, geography, leadership - and good luck - is usually cited.

But within the group of advanced economies, who score well on these measures, why does the performance of countries change over time?

One of the interesting empirical regularities in economics is the absence of a strong correlation between average growth rates across decades within countries. A strong performance in one decade has little relationship with performance in subsequent periods. The United States did better in the 1990s than it did in the 1980s, for example.

Why do some countries, after a decade or two of strong economic performance, enter into periods of sub-par growth? Sometimes, as is the case with Greece and Ireland, it is because their strong performance was not based on strong foundations. But in many cases the decline in performance is not accompanied by any obvious change in policy direction. The same policy approach was maintained but no longer generated the same type of results.

The message is that sustaining success over time requires an ability to adapt to a changing external environment. There is no one set of policies that assures sustained success. Some countries find that their 'operating systems' work well in a particular environment, and are less successful when that world changes. This is true in the economic context, but also in education and social areas. Across the developed world, there are many examples of social policies designed for one environment struggling to deliver good results in another context.

Indeed, in many developed countries, there is a sense that the limitations and stresses of relying on a previous generation of policy are becoming apparent - and that new policy ideas are required to respond to the emerging world. In addition to the immediate economic and social challenges of the post-crisis world, many countries face structural challenges around resilience, competitiveness and renewing the social contract.

The need to adapt to fit the emerging external context is particularly true for small countries, such as Singapore, because of their greater exposure to the external environment. And small countries are likely to face a specific set of issues over the coming years. The relatively benign global environment that has contributed strongly to the success of small countries over the past few decades may be ending, bringing with it a new set of challenges that will likely require new policy approaches.

But observation suggests that meaningful adaptation is much easier to talk about than to do for many governments. Across the developed world, the basic contours of many areas of policy have not changed much over the past few decades despite disruptive economic, social and technological change in the world around them. This is partly because decision-making in governments is slow, often by design, and because it takes time to assemble broad-based public support.

But perhaps the more important constraints are self-imposed. There has been a sense in many countries that, even if the outcomes are not as desired, there are few available policy choices to make and that 'there is no alternative'.

Tom Friedman described a 'golden straitjacket' in which markets tightly constrained the actions of governments. And the Washington Consensus, highly influential in the two decades prior to the crisis, specified a restricted role for government.

Again, observation - and substantial empirical evidence - shows that many of these constraints on policy choices are less real than imagined. Although there are policy fundamentals such as price stability and fiscal prudence that are generally appropriate, and policy choices commonly involve hard trade-offs, on many issues countries have significant leeway to craft policies. Even the trade-off between redistribution and economic growth is remarkably hard to pin down. Countries do have meaningful policy choices in many areas.

Unfortunately, however, the belief that there are no big policy choices left to be made has led to systematic under-investment in strategic policy capacity in many developed country governments over the past couple of decades. The focus has been on execution and implementation, with relatively less attention paid to strategic policy direction.

This lack of attention to strategic policy choices has sometimes been reinforced by complacency in well-performing countries. In some of these countries, there was a sense that the correct policy model had been identified and that only incremental improvements were warranted - leading to a lack of attention to the impact of a changing environment. This can lead to problems. History shows that countries often fail to achieve their potential not because they do the wrong things, but because they continue with what were the right policies after they have ceased to be effective.

But given the scale of the existing challenges, as well as the elevated potential for further disruptive change in the global economic and political environment, it is increasingly apparent that current policy approaches in many countries will need to be adapted to generate the desired economic and social outcomes. Periods of intense policy innovation seem to move in 30 to 40 year waves, and it is possible that many developed countries are entering into another period of policy change.

Given the likely need for policy change and adaptation, and some of the observed difficulties in delivering timely change, building real strategic capacity will be an increasingly important source of competitive advantage. Decision-making by governments always matters, but in periods of stress and change, it is even more likely to have a fundamental bearing on the trajectory of the country. Building capacity in governments to get the strategic policy choices right, and delivering the next generation of policy, should be seen as a priority.

This is true for Singapore as well. The changes in the global economic and political environment will create substantial challenges and opportunities for a small open economy like Singapore, and will require policy responses. And the rapid economic and social progress of Singapore over the past decades, which has led to Singapore becoming one of the richest countries in the world, creates a new generation of strategic policy choices that will need to be made.

Singapore has the rest of the developed world for company in this endeavour. The aspiration should be for the next generation of Singapore policy to be world-leading, just as Singapore has been one of the world's leading policy lights over the past generation.

The writer is director at Singapore-based Landfall Strategy Group which advises governments on strategy.

The new "30 Years War"

June 28, 2011

By Michael T. Klare

A 30-year war for energy preeminence? You wouldn’t wish it even on a desperate planet. But that’s where we’re headed and there’s no turning back.

From 1618 to 1648, Europe was engulfed in a series of intensely brutal conflicts known collectively as the Thirty Years’ War. It was, in part, a struggle between an imperial system of governance and the emerging nation-state. Indeed, many historians believe that the modern international system of nation-states was crystallized in the Treaty of Westphalia of 1648, which finally ended the fighting.

Think of us today as embarking on a new Thirty Years’ War. It may not result in as much bloodshed as that of the 1600s, though bloodshed there will be, but it will prove no less momentous for the future of the planet. Over the coming decades, we will be embroiled at a global level in a succeed-or-perish contest among the major forms of energy, the corporations which supply them, and the countries that run on them. The question will be: Which will dominate the world’s energy supply in the second half of the twenty-first century? The winners will determine how -- and how badly -- we live, work, and play in those not-so-distant decades, and will profit enormously as a result. The losers will be cast aside and dismembered.

Why 30 years? Because that’s how long it will take for experimental energy systems like hydrogen power, cellulosic ethanol, wave power, algae fuel, and advanced nuclear reactors to make it from the laboratory to full-scale industrial development. Some of these systems (as well, undoubtedly, as others not yet on our radar screens) will survive the winnowing process. Some will not. And there is little way to predict how it will go at this stage in the game. At the same time, the use of existing fuels like oil and coal, which spew carbon dioxide into the atmosphere, is likely to plummet, thanks both to diminished supplies and rising concerns over the growing dangers of carbon emissions.

This will be a war because the future profitability, or even survival, of many of the world’s most powerful and wealthy corporations will be at risk, and because every nation has a potentially life-or-death stake in the contest. For giant oil companies like BP, Chevron, ExxonMobil, and Royal Dutch Shell, an eventual shift away from petroleum will have massive economic consequences. They will be forced to adopt new economic models and attempt to corner new markets, based on the production of alternative energy products, or risk collapse or absorption by more powerful competitors. In these same decades, new companies will arise, some undoubtedly coming to rival the oil giants in wealth and importance.

The fate of nations, too, will be at stake as they place their bets on competing technologies, cling to their existing energy patterns, or compete for global energy sources, markets, and reserves. Because the acquisition of adequate supplies of energy is as basic a matter of national security as can be imagined, struggles over vital resources -- oil and natural gas now, perhaps lithium or nickel (for electric-powered vehicles) in the future -- will trigger armed violence.

When these three decades are over, as with the Treaty of Westphalia, the planet is likely to have in place the foundations of a new system for organizing itself -- this time around energy needs. In the meantime, the struggle for energy resources is guaranteed to grow ever more intense for a simple reason: there is no way the existing energy system can satisfy the world’s future requirements. It must be replaced or supplemented in a major way by a renewable alternative system or, forget Westphalia, the planet will be subject to environmental disaster of a sort hard to imagine today.

The existing energy lineup

To appreciate the nature of our predicament, begin with a quick look at the world’s existing energy portfolio. According to BP, the world consumed 13.2 billion tons of oil-equivalent from all sources in 2010: 33.6% from oil, 29.6% from coal, 23.8% from natural gas, 6.5% from hydroelectricity, 5.2% from nuclear energy, and a mere 1.3% percent from all renewable forms of energy. Together, fossil fuels -- oil, coal, and gas -- supplied 10.4 billion tons, or 87% of the total.

Even attempting to preserve this level of energy output in 30 years’ time, using the same proportion of fuels, would be a near-hopeless feat. Achieving a 40% increase in energy output, as most analysts believe will be needed to satisfy the existing requirements of older industrial powers and rising demand in China and other rapidly developing nations, is simply impossible.

Two barriers stand in the way of preserving the existing energy profile: eventual oil scarcity and global climate change. Most energy analysts expect conventional oil output -- that is, liquid oil derived from fields on land and in shallow coastal waters -- to reach a production peak in the next few years and then begin an irreversible decline. Some additional fuel will be provided in the form of “unconventional” oil -- that is, liquids derived from the costly, hazardous, and ecologically unsafe extraction processes involved in producing tar sands, shale oil, and deep-offshore oil -- but this will only postpone the contraction in petroleum availability, not avert it. By 2041, oil will be far less abundant than it is today and so incapable of meeting anywhere near 33.6% of the world’s (much expanded) energy needs.

Meanwhile, the accelerating pace of climate change will produce ever more damage -- intense storm activity, rising sea levels, prolonged droughts, lethal heat waves, massive forest fires, and so on -- finally forcing reluctant politicians to take remedial action. This will undoubtedly include an imposition of curbs on the release via fossil fuels of carbon dioxide and other greenhouse gases, whether in the form of carbon taxes, cap-and-trade plans, emissions limits, or other restrictive systems as yet not imagined. By 2041, these increasingly restrictive curbs will help ensure that fossil fuels will not be supplying anywhere near 87% of world energy.

The leading contenders

If oil and coal are destined to fall from their position as the world’s paramount source of energy, what will replace them? Here are some of the leading contenders.

Natural gas: Many energy experts and political leaders view natural gas as a “transitional” fossil fuel because it releases less carbon dioxide and other greenhouse gases than oil and coal. In addition, global supplies of natural gas are far greater than previously believed, thanks to new technologies -- notably horizontal drilling and the controversial procedure of hydraulic fracturing (“fracking”) -- that allow for the exploitation of shale gas reserves once considered inaccessible. For example, in 2011, the U.S. Department of Energy (DoE) predicted that, by 2035, gas would far outpace coal as a source of American energy, though oil would still outpace them both. Some now speak of a “natural gas revolution” that will see it overtake oil as the world’s number one fuel, at least for a time. But fracking poses a threat to the safety of drinking water and so may arouse widespread opposition, while the economics of shale gas may, in the end, prove less attractive than currently assumed. In fact, many experts now believe that the prospects for shale gas have been oversold, and that stepped-up investment will result in ever-diminishing returns.

Nuclear power: Prior to the March 11th earthquake/tsunami disaster and a series of core meltdowns at the Fukushima Daiichi nuclear power complex in Japan, many analysts were speaking of a nuclear "renaissance," which would see the construction of hundreds of new nuclear reactors over the next few decades. Although some of these plants in China and elsewhere are likely to be built, plans for others -- in Italy and Switzerland, for example -- already appear to have been scrapped. Despite repeated assurances that U.S. reactors are completely safe, evidence is regularly emerging of safety risks at many of these facilities. Given rising public concern over the risk of catastrophic accident, it is unlikely that nuclear power will be one of the big winners in 2041.

However, nuclear enthusiasts (including President Obama) are championing the manufacture of small “modular” reactors that, according to their boosters, could be built for far less than current ones and would produce significantly lower levels of radioactive waste. Although the technology for, and safety of, such “assembly-line” reactors has yet to be demonstrated, advocates claim that they would provide an attractive alternative to both large conventional reactors with their piles of nuclear waste and coal-fired power plants that emit so much carbon dioxide.

Wind and solar: Make no mistake, the world will rely on wind and solar power for a greater proportion of its energy 30 years from now. According to the International Energy Agency, those energy sources will go from approximately 1% of total world energy consumption in 2008 to a projected 4% in 2035. But given the crisis at hand and the hopes that exist for wind and solar, this would prove small potatoes indeed. For these two alternative energy sources to claim a significantly larger share of the energy pie, as so many climate-change activists desire, real breakthroughs will be necessary, including major improvements in the design of wind turbines and solar collectors, improved energy storage (so that power collected during sunny or windy periods can be better used at night or in calm weather), and a far more efficient and expansive electrical grid (so that energy from areas favored by sun and wind can be effectively distributed elsewhere). China, Germany, and Spain have been making the sorts of investments in wind and solar energy that might give them an advantage in the new Thirty Years’ War -- but only if the technological breakthroughs actually come.

[From 1% to 4% is significant? Simply put, Wind and Solar are too diffused to be useful. No matter how efficient, the energy for a given area will not yield the energy density to make the solution feasible. At best they can supplement or provide low energy needs like LED lighting.]

Biofuels and algae: Many experts see a promising future for biofuels, especially as “first generation” ethanol, based largely on the fermentation of corn and sugar cane, is replaced by second- and third-generation fuels derived from plant cellulose (“cellulosic ethanol”) and bio-engineered algae. Aside from the fact that the fermentation process requires heat (and so consumes energy even while releasing it), many policymakers object to the use of food crops to supply raw materials for a motor fuel at a time of rising food prices. However, several promising technologies to produce ethanol by chemical means from the cellulose in non-food crops are now being tested, and one or more of these techniques may well survive the transition to full-scale commercial production. At the same time, a number of companies, including ExxonMobil, are exploring the development of new breeds of algae that reproduce swiftly and can be converted into biofuels. (The U.S. Department of Defense is also investing in some of these experimental methods with an eye toward transforming the American military, a great fossil-fuel guzzler, into a far “greener” outfit.) Again, however, it is too early to know which (if any) biofuel endeavors will pan out.

Hydrogen: A decade ago, many experts were talking about hydrogen’s immense promise as a source of energy. Hydrogen is abundant in many natural substances (including water and natural gas) and produces no carbon emissions when consumed. However, it does not exist by itself in the natural world and so must be extracted from other substances -- a process that requires significant amounts of energy in its own right, and so is not, as yet, particularly efficient. Methods for transporting, storing, and consuming hydrogen on a large scale have also proved harder to develop than once imagined. Considerable research is being devoted to each of these problems, and breakthroughs certainly could occur in the decades to come. At present, however, it appears unlikely that hydrogen will prove a major source of energy in 2041.

X the Unknown: Many other sources of energy are being tested by scientists and engineers at universities and corporate laboratories worldwide. Some are even being evaluated on a larger scale in pilot projects of various sorts. Among the most promising of these are geothermal energy, wave energy, and tidal energy. Each taps into immense natural forces and so, if the necessary breakthroughs were to occur, would have the advantage of being infinitely exploitable, with little risk of producing greenhouse gases. However, with the exception of geothermal, the necessary technologies are still at an early stage of development. How long it may take to harvest them is anybody’s guess. Geothermal energy does show considerable promise, but has run into problems, given the need to tap it by drilling deep into the earth, in some cases triggering small earthquakes.

From time to time, I hear of even less familiar prospects for energy production that possess at least some hint of promise. At present, none appears likely to play a significant role in 2041, but no one should underestimate humanity’s technological and innovative powers. As with all history, surprise can play a major role in energy history, too.

Energy efficiency: Given the lack of an obvious winner among competing transitional or alternative energy sources, one crucial approach to energy consumption in 2041 will surely be efficiency at levels unimaginable today: the ability to achieve maximum economic output for minimum energy input. The lead players three decades from now may be the countries and corporations that have mastered the art of producing the most with the least. Innovations in transportation, building and product design, heating and cooling, and production techniques will all play a role in creating an energy-efficient world.

When the war is over

Thirty years from now, for better or worse, the world will be a far different place: hotter, stormier, and with less land (given the loss of shoreline and low-lying areas to rising sea levels). Strict limitations on carbon emissions will certainly be universally enforced and the consumption of fossil fuels, except under controlled circumstances, actively discouraged. Oil will still be available to those who can afford it, but will no longer be the world’s paramount fuel. New powers, corporate and otherwise, in new combinations will have risen with a new energy universe. No one can know, of course, what our version of the Treaty of Westphalia will look like or who will be the winners and losers on this planet. In the intervening 30 years, however, that much violence and suffering will have ensued goes without question. Nor can anyone say today which of the contending forms of energy will prove dominant in 2041 and beyond.

Were I to wager a guess, I might place my bet on energy systems that were decentralized, easy to make and install, and required relatively modest levels of up-front investment. For an analogy, think of the laptop computer of 2011 versus the giant mainframes of the 1960s and 1970s. The closer that an energy supplier gets to the laptop model (or so I suspect), the more success will follow.

From this perspective, giant nuclear reactors and coal-fired plants are, in the long run, less likely to thrive, except in places like China where authoritarian governments still call the shots. Far more promising, once the necessary breakthroughs come, will be renewable sources of energy and advanced biofuels that can be produced on a smaller scale with less up-front investment, and so possibly incorporated into daily life even at a community or neighborhood level.

Whichever countries move most swiftly to embrace these or similar energy possibilities will be the likeliest to emerge in 2041 with vibrant economies -- and given the state of the planet, if luck holds, just in the nick of time.

Bio: Michael T. Klare is a professor of peace and world security studies at Hampshire College, a TomDispatch regular, and the author, most recently, of Rising Powers, Shrinking Planet. A documentary movie version of his previous book, Blood and Oil, is available from the Media Education Foundation. This piece originally appeared on TomDispatch. The opinions expressed in this commentary are solely those of the author.
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