Friday, July 30, 2010

100mm: Expect floods if this much rain falls in an hour

Jul 22, 2010

By Victoria Vaughan

IF MORE than 100mm of rain falls in an hour, expect flooding.

National water agency PUB said yesterday that in the last 10 occasions when rain of that intensity fell, it had resulted in floods eight times.

Of those past 10 rainstorms, two happened last year, three the year before, two in 2007 and three in 2006.

Every year, Singapore gets, on average, two storms dumping that much rain in an hour, and nine storms in which the 100mm is spread over three hours.

PUB, responding to questions from reporters after the recent floods, explained that besides the intensity of a storm, the following factors also work together to set up perfect conditions for flooding:

  • The type of developments in the area; that is, whether it is built up.
  • The kind of surfaces there; that is, whether they are paved or porous.
  • The distribution and movement of the rainfall.
  • The ground level in relation to the water levels in the drains.
  • The capacity of the drains to channel away the storm water.
  • Whether there is a blockage in the drains.
Of the last 10 most intense rainstorms here, the heaviest happened on July 19, 2007. The monitoring station at the Ulu Pandan water treatment plant recorded 137mm in an hour that day, said the National Environment Agency (NEA).

The recent downpours have not topped that. The June 16 storm which put Orchard Road under water sent down 101.6mm in two hours.

Orchard Road was not even the wettest place that day: Sentosa logged 115mm of rain.
Another recent storm, that on July 17 from Typhoon Conson, brought 114mm of rain to the Lower Peirce Reservoir in one hour.

But a high of 194mm that day was recorded at Poole Road in Tanjong Katong.

The second heaviest of the last 10 intense rainstorms came on April 3, 2008, when 126mm was dumped on Jurong Pier Road. This burst led to flash floods in Dunearn Road near Swiss Club Road, Upper Paya Lebar Road near Bartley Road and Commonwealth Avenue. The storm lasted from 4.20pm to 6pm.

The third heaviest downpour happened on Nov 19 last year, when 121mm was recorded at the Ngee Ann Polytechnic station. The Bukit Timah canal burst its banks and knee-deep water brought traffic to a standstill along several stretches of Bukit Timah - Coronation Road to Third Avenue, Wilby Road to Blackmore Drive and the Sixth Avenue junction.

The downpour took place between 12.50pm and 3.20pm.

From the history books, Dec 2, 1978, still holds the record for the highest amount of rainfall in a day in the last 60 years. That day, 512 mm fell.

Seven people died, including five who drowned, and about 1,000 people were rescued and evacuated by the Singapore Armed Forces and the police in one of the biggest rescue and evacuation operations here, according to the Defence Ministry website.

The highest one-hour rainfall, at 148mm, was recorded on Nov 2, 1995.

Tuesday, July 27, 2010

Getting East Asia to save less, spend more

Jul 20, 2010
By Linda Lim

AFTER recovering from the Asian financial crisis of 1997-98, East Asian economies began running consistently large current account surpluses.

The accumulated foreign exchange reserves served as a buffer against potential speculative attacks on their now-floating currencies, and allowed management of those currencies to reduce volatility and maintain the international competitiveness of their heavily export-oriented economies.

Because the United States was the largest final destination market for their exports and home of the world's reserve currency, a large proportion of these Asian reserves were invested in US dollar assets - especially US Treasuries but also corporate assets via Asia's sovereign wealth funds.

The resultant capital inflow into the US and global markets, together with the US Federal Reserve's easy money policy, kept US and world interest rates low, funding ever-increasing US and some European budget deficits and household debt.

Cheap money fuelled 'financial innovations' such as sub-prime mortgages and risky assets, which led to a crisis.

The capital flow from Asia (and other commodity-exporting economies) also propped up the US dollar and depressed Asian currencies, maintaining Asian export competitiveness, current account surpluses, and reserve accumulations, while expanding US current account deficits and national indebtedness.

US Fed chairman Ben Bernanke identified a 'global savings glut' as the cause of these global macroeconomic imbalances. With only a few exceptions, excess public sector savings in the form of persistent government budget surpluses are not the source of the high savings in East Asia, leading to the observed current account surpluses.

Japan notably runs large government budget deficits and has a huge national debt, but still exports more than it imports, due to high savings in the private sector. The basic question is: Why do East Asians save so much, particularly at low levels of income?

Demographic profile is a major reason. With the bulk of the population in the prime working-age years, and high rates of female labour force participation, dependency ratios have been relatively low, leading to high household savings and low shares of consumption in gross domestic product (GDP).

With few descendants to support them in retirement (and high life expectancy in many Asian countries), as well as weak or non-existent social safety nets, there is a high rate of precautionary savings not only for retirement, but also for health care and children's education.
Some economies - Singapore, Malaysia, Hong Kong - have forced-saving schemes or national 'provident funds' with high rates of mandatory contributions out of earned income.

Some researchers have also identified the high cost of residential property - as measured by ratios of housing prices to years of annual income that are much higher than international norms at given per capita income levels - as a contributing factor to high savings and low current consumption rates.

Underdeveloped and inefficient financial sectors in many Asian countries cause low returns for savers, requiring more savings to yield the income required for retirement.

Widening income inequality, with China, Hong Kong and Singapore now at the US levels of the Gini coefficient, also concentrates income among high-income earners who tend to be high savers.

Finally, high corporate savings are a major contributor to high aggregate national savings. In Asia, these result from a number of structural features of the corporate sector. Large, low-income China and small, high-income Singapore represent the two extreme cases, with the lowest shares of labour (wages) in national income, and consumption ratios at or below only 40 per cent of GDP, versus the Asian average of 55 per cent.

Moreover, in each case, these shares have steadily declined over the past two decades. Malaysia ranks a close third.

Both China and Singapore are characterised by high and rising shares in GDP of state-owned enterprises or government-linked corporations, and of multinational corporations - neither of which have built-in incentives to distribute corporate income where it is produced, preferring reinvestment for growth.

Multinationals are often beneficiaries of host country tax breaks or other investment incentives that reduce local income distribution, and are obligated to remit income overseas to their predominantly home-country shareholders.

Elsewhere, the private sector is dominated by closely held public companies or family-owned conglomerates, both of which have little shareholder pressure or motivation to distribute rather than accumulate and reinvest corporate income for growth and expanded market share.
Most of the causes of high Asian household and corporate savings are structural rather than policy-driven, and cannot be easily or quickly unwound by government policy.

Demographics obviously take a long time to change but have an impact when they do. As a population ages and large cohorts retire, they dissave.

Financial sector reform should help rebalancing by increasing the efficiency and diversity of financial instruments, so that less savings are required to earn a target return for the investor.

After the Asian financial crisis, this did occur in some countries, most notably South Korea. Elsewhere, banks remained dominant, becoming more conservative in their lending practices after the Asian financial crisis. Furthermore, the experience of the crisis made China reluctant to pursue capital account liberalisation.

Still, demographics and financial sector reform are probably responsible for the increased share of private consumption in GDP between 1990 and 2008 in the largely domestic private sector economies of Japan (rising from 53.2 per cent to 57.8 per cent), Taiwan (54.6 per cent to 61.4 per cent), South Korea (50.9 per cent to 54.5 per cent) and Hong Kong (57.1 per cent to 60.5 per cent).

Consumption also increased (41.6 per cent to 45.2 per cent) but remained low in Malaysia over this period.

The difference between Hong Kong and Singapore is striking, with private consumption in the latter declining from 46.3 per cent of GDP in 1990 to 38.6 per cent in 2007. This is surpassed only by the decline in China from 50.6 per cent to 36.4 per cent.

Besides the practice of running surplus government budgets in Singapore compared with Hong Kong, the decline in the wage and consumption share is probably due to the rising share of foreign labour - which, like multinationals, has an expected higher propensity to save its income for repatriation rather than domestic consumption.

The lack of a social safety net might partly explain high savings in relatively low-income China, but cannot explain continued high savings in high-income Singapore and Japan, where safety nets are adequate and financial markets relatively well-developed.

[I question the conclusion that the safety nets in Singapore are adequate. If my "safety net" is my CPF, then that safety net is based on savings. If my medisave (savings) and medishield (insurance bought with savings) and eldershield (also insurance) are part of the safety net, again they are from savings. Then it is clear why savings in Singapore is still high - because the safety nets are funded by savings.]

What about currency appreciation? In theory, this should reduce the relative share of export to domestic market production, while increasing the share of imports for consumption, thus shrinking current account surpluses and foreign exchange reserve accumulation.

However, this has not happened despite the near-continuous appreciation of Asian currencies against the US dollar over the last three decades, particularly in Japan and Singapore.

The last two decades in East Asia have seen savings' high share of GDP decline in the 'more democratic' economies of Japan, South Korea and Taiwan, but also in non-democratic Hong Kong. This is probably mostly due to demographic reasons largely beyond the control of government policy, with the exception of Singapore's migrant labour policy.

But the inevitable acceleration of ageing and retirement will eventually lead to lower savings and thus to macroeconomic rebalancing away from export production and towards domestic consumption.

Financial sector liberalisation has helped rebalancing, but is still incomplete and likely to continue being retarded by a combination of post-Asian financial crisis and post-global crisis risk aversion and ideological scepticism, nationalist objections, and resistance by domestic financial institutions to increased competition.

Witness, for example, Japan's backtracking from the proposed privatisation of its postal savings institution, South Korea's legal attacks on foreign transactions in its financial sector, and the continued dominance and even expansion of China's state-owned banks.

There is no evidence from East Asia to date that expanding social safety nets will significantly reduce savings, given that they have not done so in Japan and Singapore. There may also be governmental hesitation to do so, given ageing populations and the recent negative demonstration effect of fiscally unsustainable safety nets in Europe.

[I suspect social safety nets may have to be expanded completely in order to induce spending. People save for their homes, for unemployment, education (their own and their children), for medical and other emergencies, and retirement. If we expand the safety net to cover just medical, there is still housing, employment, education, etc. If we cover medical and education, there is still the rest to save for. Only when the safety net covers everything will people have no reason to save and every reason to spend. In other words we have to be a welfare state and then things may become unsustainable.]

Corporate restructuring necessary to reduce high corporate savings rates is likely to prove most politically intractable, requiring governments to relinquish state control of economic resources and activity.

On the other hand, the experience of the global crisis and international pressure to rebalance to prevent further crises provide a political stimulus and awareness of the need for multilateral collective action as well as national rebalancing.

The writer, a Singaporean, is professor of strategy at the University of Michigan's Ross School of Business. This is an edited excerpt of an article that appeared in Rebalancing The Global Economy: A Primer For Policymaking, edited by Stijn Claessens, Simon Evenett and Bernard Hoekman.

Jul 26, 2010
Save or spend? Two sides of the coin

We published an article by Linda Lim, a professor of strategy at the University of Michigan's Ross School of Business, last Tuesday arguing that Asian economies should save less and spend more. The article spawned an e-mail exchange between Professor Lim and Professor Tommy Koh, chairman of the Centre for International Law at NUS. We carry today edited excerpts of their exchange.

DEAR Linda,
It is with some trepidation, as I am not an economist, that I write to register my disagreement with several points in your essay.

First, you state 'Cheap money fuelled 'financial innovations' such as sub-prime mortgages and risky assets, which led to a crisis'. I beg to disagree. It is greed that led Wall Street to deceive investors with those unsound instruments.

[These two explanations are not mutually exclusive. The greed of Wall Street would have no no expression without the availability of cheap money. Cheap money lying idle were the "fuel" for financial innovations motivated by greed.]

Second, you quote United States Federal Reserve chairman Ben Bernanke as saying that a 'global savings glut' was the cause of these global macroeconomic imbalances.

Mr Bernanke's argument is self-serving and disingenuous. He is trying to blame America's creditors when the fundamental problem is America's unsustainable deficits.

Third, you argue that the reason why East Asians save so much is demographic. I do not agree. East Asians save because of our culture of thrift and out of prudence.

During the 1997-98 Asian financial crisis, if Hong Kong had not had very substantial reserves, speculators would have succeeded in bringing down the Hong Kong dollar and stock exchange.

Fourth, I agree that East Asia should spend more - but not in the way that US consumers spend.
East Asia should spend more of its savings on education and training, housing and health care, on alleviating poverty and ensuring that every Asian has access to safe drinking water, basic sanitation and a decent standard of living, on improving our environment and upgrading our infrastructure and cities.

DEAR Tommy,

Thanks as always for your careful reading of my article.

On cheap money: Its contribution to the financial crisis is not at all controversial, though both former Fed chairman Alan Greenspan and Mr Bernanke have indeed said self-servingly 'It wasn't us' - the title of an Economist magazine commentary on the tendency of central banks to deny that monetary policy had any role in the financial crisis, a patently absurd suggestion.

Greed, we have always had with us. But when interest rates are low, first, it is hard to make money via conventional means so the greedy look for extraordinary innovations; and second, the cost of capital is cheap, encouraging people to risk it playing for higher stakes.

Cheap money always leads to asset bubbles, everywhere. There was also the lack of regulation which permitted excessive risk-taking. Greed may be necessary but it is not sufficient to explain a financial crisis of such magnitude.

On the 'global savings glut': Mr Bernanke came out with this notion well before the crisis. It was an attempt to explain why the US current account and fiscal deficits - which should have been unsustainable long ago - did not prove to be so. Even today, savers around the world plough their money into US assets, which perpetuates the deficits. Why do they do this?

Because the money has to go somewhere. There is so much of it and in times of uncertainty, there is still a 'safe haven' preference for the US dollar.

On the demographic explanation for savings rates: It is uncontroversial, with a great deal of empirical research behind it.

Culture may have a marginal effect but so far this has not shown up in the research. It turns out that East Asian cultures (diverse among themselves) have savings rates that vary over time and are strongly correlated with demographic profiles and real interest rates. The same is true of other countries.

Culture is neither necessary nor sufficient as an explanation for high savings. When the Japanese and Germans age further, they will not be able to avoid drawing down on their savings to survive. The same will be true for Singaporeans.

On what Asians should spend more on: The bedrock of a market economy is consumer sovereignty, so Asians should spend on what they want. For some, it will be more food, clothing, a home of their own. For others it will be better services - health, education, etc.

Chinese economists have been arguing for some years that China should be investing its surpluses in health and education services, and not in manufacturing for export to rich foreigners or buying pieces of paper like US Treasuries or BlackRock shares. Unfortunately, since so much of China's savings is in the hands of state entities, this does not happen.

DEAR Linda,

I hope you will not be offended if I were to give a rejoinder to your reply.

First, it is wrong to blame so-called cheap money for the excesses and sheer dishonesty of Wall Street. What happened was a combination of greed and a lack of regulation.

[I believe the author has explained that greed alone cannot explain the excesses of the financial crisis. It was greed fueled by cheap money and lubricated by deregulation. Cheap money had a role. We can debate if a well-regulated sector might have had some defence but I suspect that brilliant greedy minds would have found other loopholes. Maybe.]

Under the regime of former president George W. Bush and Mr Greenspan, 'regulation' became a dirty word and 'de-regulation' a good word. But as Mr Greenspan has recently confessed, he had been wrong to assume the market could always be relied upon to regulate itself.

Second, it is very convenient for Americans to blame others for their problems. It is intellectually dishonest of Mr Bernanke - and, I regret to say, many of my intellectual friends in Washington - to blame Asia for our high savings rate and for lending our savings to America.

If American intellectuals were more willing to confront the truth, they would acknowledge that the fundamental problem is their low saving and high spending habits and their indebtedness.

This is not a new point. Many years ago, economist Henry Kaufman wrote a book warning that American families, companies, cities, states, and the federal government itself, were in danger of drowning in a sea of debt.

It is morally absurd for the world's No. 1 debtor nation to blame its self-inflicted problems on its creditors.

[Of course morally absurd. But money lenders, and casinos do the same things too. So do indulgent parents to free-spending children. The fault lies with both. In this case the fault lies with the free market, the capital market, and the amoral pursuit of the highest returns on investement.]

Third, we Asians save because it is in our culture to do so. Thrift and saving are among the Asian values which my grandmother taught me. Saving is a virtue. Spending and living beyond one's means is not a virtue but a vice.

[Culture may be one factor, but demography trumps culture. If you're old and have no income, you draw down on your savings. Regardless of your culture. If you save in spite of your need for sustenance, that's not culture. That's mental illness.]

I think it is time for Asians like me to stand up and speak the truth (with love) to Americans. They should save more and spend less. They should live within their means. And, if they do not, please do not try to make saving into a vice and spending a virtue.

Fourth, let me raise the issue of the exchange rate of the Chinese currency. The US campaign against China on this issue reminds me of another recent period in American history.

During the mid-1980s, when America was gripped by economic nationalism and protectionism, to appease the protectionists, Washington targeted Japan and the four newly industrialised economies (NIEs) of East Asia - South Korea, Taiwan, Hong Kong and Singapore. Japan was pressured into signing the Plaza Accord which substantially revalued the yen by more than 50 per cent against the US dollar.

Washington also accused the four NIEs of currency manipulation as the justification to graduate us from trade preferences. The representatives of the other three NIEs in Washington kept silent, but I asked to debate the accusers at Peterson Institute.

What are the lessons learnt? The first lesson is that US trade policy is always driven by domestic politics. The second lesson is that though the yen was substantially revalued, Japan continued to enjoy (and still does) a trade surplus with the US.

It is not the exchange rate but the saving rate that is the root cause of America's current account deficit.

DEAR Tommy,
I don't disagree with you at all. But I think you are misunderstanding the thrust and context of my argument.

It was not about the causes of the financial crisis. These have been amply addressed by many, including myself and yourself. But the world has moved on, as it needs to, from the causes of the crisis to its policy solutions.

No one - including the Chinese government - disagrees that global macroeconomic rebalancing is required. Rebalancing is not the only solution to the crisis, but it is one solution - together with financial re-regulation, and international monetary policy and banking rules coordination.

The US must indeed save more and spend less; and China and other Asian countries must save less and spend more.

What I was doing in my article was actually challenging Washington pundits, who believe it's up to China and the rest of East Asia to change their macroeconomic behaviour. I tried to show them how difficult (and perhaps impossible) that change is: Asians will not grow old faster (and thus spend more) just because Washington wants them to; state-owned enterprises and export-oriented multinational corporations have no incentive to retain earnings and distribute them in the host country; and so on. In other words, there are structural and not just monetary-and-fiscal-policy reasons for these persistent global imbalances.

It is very Washington-centric to attribute the global macroeconomic re-balancing argument to Americans only. Many Chinese economists have said the same thing - and more.

I think we need to move beyond the notion that Americans have a monopoly of ideas. They do not - hence the increasing representation of Asian voices in debating such issues. Hope we can agree on that, even if you and I (both Asians) do not agree.

Finally, I think your comments are actually an expression of your frustration with your Washington friends rather than a disagreement with the theoretical and empirical reasoning underlying my article. Or at least I hope so, since I can't do anything to change the facts.

[While I am generally impressed by Prof Tommy Koh, in this instance, I must confess to being a little disappointed in him for debating and defending a rather culturally chauvinistic position. Dr Lee argued her case very well, I thought. And I understand her point that it is structurally difficult if not impossible for the Chinese to do what the Americans want them to do.

That said, that last para was a little personal. :-)

Six months later, we have this article below on how China can spend more. But itis govt spending not private consumption although the expectation is that there will be some knock on effect from private individuals spending on their homes.]

Jan 13, 2011

China has much to gain from a public housing scheme

By Meng W. Tan
AS DEMAND in the developed economies continues to languish, the world increasingly is hoping that a burgeoning Chinese economy will pull the developed economies - and hence the global economy - out of the doldrums. The working of this reverse coupling theory rests on the premise that China, which has grown into the world's second largest economy predominantly by exporting until now, succeeds in building a sustainable internally driven growth.

Much to the world's disappointment, however, domestic consumption in China today remains relatively subdued.

At the height of the global financial crisis, the Chinese government acted decisively by pumping four trillion yuan into the economy. As the crisis evolved and external demand withered, more measures - on both the supply and demand sides - were introduced to stimulate domestic consumption to make up for the shortfall in export.

The bold rescue measures by the government succeeded in staving off widespread business failures and massive unemployment, but fell short of generating internally driven growth. Most of the increase in private consumption over the last two years has been artificially propped up by government subsidies and rebates given to consumers, and is therefore not sustainable.

However, given China's relentless push for urbanisation and economic restructuring in the years ahead, there is certainly room for its domestic economy to grow.

One way it can undergo a sustained expansion is for China to embark on a massive public housing programme.

So far, public housing programmes implemented by many local governments have achieved only limited and varied success. Only 6 per cent of urban Chinese families currently live in public housing, which includes low-rent homes and apartments with controlled prices.

The limited success can be attributed mainly to the government's hitherto emphasis on economic growth, leading local officials to focus on only economic activities that contribute to gross domestic product (GDP) growth. What little motivation left to provide low-cost housing was further eroded by corruption and by vested interests of local governments which depended heavily on land sales and private property development for fiscal revenue.

Things are set to change, however, with the resolute switch from the 'growth-at-all-costs' strategy to inclusive growth strategy as outlined in the recently announced 12th Five-Year Plan (2011 - 2015). Public housing is a key investment area in the new five-year economic plan. With that switch, career advancement of public officials will increasingly be coupled with improvement of living standards rather than growth of GDP. Local governments, for example, have been ordered to set their own goals for the provision of affordable public housing.

Already, many cities have stepped up their efforts. Shanghai's supply of public housing will increase by 25 per cent this year to reach 15 million sq m. For China as a whole, the government is projected to have built 5.8 million units of affordable housing by the end of last year. This figure is set to almost double to hit 10 million units this year. Altogether, the programme is projected to cost the government 700 billion yuan last year and 1.3 trillion yuan (S$253 billion) in the following year.

This spending will generate an explosion in demand for building materials, home furniture, and other related products and services - with the ensuing multiplier effect driving the rest of the domestic economy. Given the government's strong financial reserves, there is no doubt that this new impetus for internal growth can continue for at least the next 10 to 20 years, as China gravitates towards its target of urbanising 70 per cent of its population.

Besides generating internally driven growth, the public housing programme also provides policymakers with a powerful counter-cyclical fiscal tool to complement the currently often used monetary tools (open-market operations, interest rates and reserves ratio) to manage the macro economy.

In recessionary times, for example, the government can step up fiscal spending in the construction of public housing. Such investments certainly beat the indiscriminate construction of highways that lead to nowhere by officials keen to report higher GDP figures during the two years when the money from the four trillion yuan rescue package was being hastily dispersed.
Another macro-economic aspect the public housing programme will have an indelible impact on is asset inflation. Despite years of efforts using predominantly monetary policy tools, the runaway property prices continue to scale new heights. Government efforts have been largely unsuccessful because asset inflation in China is more than just a monetary phenomenon and therefore cannot be effectively addressed by using only monetary tools.

Given the rapid pace of urbanisation, there is indeed an insatiable demand for affordable public housing as young urbanites form new families and rural migrant workers continue to flood into the cities. As it is, the majority lower- and middle-income Chinese are deprived of the opportunity to own an apartment while the minority rich invest in high-end units which are then left vacant. Based on estimates from electricity meter readings, such empty apartments are estimated to number 64.5 million in urban China.

The fact is that private housing in China has become an investment asset even before home ownership has become prevalent.

The premature escalation of property from a roof over the head to an investment asset means that a larger proportion of the population are priced out of the market even before they have a chance to own a property. Without government intervention, the pursuit of maximum profits by private developers inevitably results in market failure which causes misallocation of economic resources.

More importantly, an out-of-control private property market polarises the society as the rich are further enriched by property investment while the poor remain poor or become even poorer. Without the government's intervention, profit accumulates in the hands of private developers, speculators and corrupt local officials. By intervening directly as a market player, two goals are achieved.

Firstly, the government provides a critical asset that everybody needs at a reasonable price and profit margin, determined based on wage growth and health of the overall economy. Secondly, the profit is redistributed in the form of housing subsidies so that more can rent or own a house and get to share in the fruit of economic growth.

Hence, the public housing programme not only generates internally driven growth directly, but it also facilitates redistribution of wealth and allows the lower- and middle-income population to spend less on acquiring a house and have more left for other consumptions. Until affordable public housing becomes a prevalent fixture in the Chinese landscape and offers a real alternative for the majority of the wishful home owners, any policy measures to curb rising home prices, redistribute wealth and raise domestic consumption are likely to be met with only temporary and limited success.

Finally, the development of public housing provides an opportunity for policymakers to revalue the yuan and speed up the restructuring of the economy.

Chinese policymakers have been unwilling to let the yuan appreciate - for fear of the social turmoil that can result from massive unemployment arising from the closure of factories whose products are made uncompetitive by a stronger yuan in the international market.

However, if the dislocated labour arising from yuan revaluation can be relocated to the public housing sector, then the government's fear of any impending social turmoil can be assuaged. This creates more room over time for the yuan to appreciate, which in turn helps to speed up structural reforms.

Inefficient producers and businesses still engaged in low value-add or polluting activities can be allowed to fail, so that resources can be re-allocated to more productive and emerging sectors.
The overdue economic upgrading will raise across-the-board wages which, together with the higher purchasing power afforded by the stronger yuan, can further help to boost domestic consumption and substantially improve the quality of living for the low-income masses.
In short, a successful public housing programme in the coming years will underpin Chinese policymakers' efforts in stimulating domestic consumption and setting in motion a sustainable and benign cycle of internally driven economic growth that economists and policymakers all over the world have been clamouring for. This internally driven growth will certainly gather momentum in the coming years. That is when the much-touted theory of reverse coupling will be put to a real test.

The writer, a Singaporean, is a PhD candidate in world economics at Nanjing University School of Business.

Thursday, July 22, 2010

Look beyond GDP for true measure of welfare

Jul 21, 2010

Look beyond GDP for true measure of welfare

This is an edited excerpt of a speech by Nominated MP Viswa Sadasivan in Parliament on Monday when he moved a motion calling on the Government to track indicators beyond gross domestic product.

THE gross domestic product, or GDP, has been and will continue to remain the most commonly used indicator of economic performance and growth. Changed circumstances today require a broader framework where policymakers are prompted by socio-economic indicators other than GDP.

In the first 30 years of Singapore the population was less bifurcated, socially and economically - so, GDP as a key indicator was sufficient. We just needed to grow fast, create jobs and build affordable houses.

Today, it is no more about how fast we grow. Increasingly, it is about how we grow, where we grow, whether we are prepared to pay the price for growth and, whether we are growing together. These are all challenges that developed societies face; challenges of managing success.

The GDP is not equipped to prompt us or provide answers in these increasingly critical areas. Worse, if we focus too much and too long on the GDP, it could paint too rosy a picture - a false positive - and distract us from these issues.

The GDP is essentially a measurement of economic activity, not economic benefit. Used on its own, it can be a misleading indicator of economic progress and welfare of the individual Singaporean.

We need a system that helps us better anticipate these issues - be more proactive than reactive.

Singapore's per capita GDP has risen exponentially over the past 44 years. According to figures from the Department of Statistics, in Singdollar and nominal terms, Singapore's per capita GDP grew from $1,567 in 1965 to $53,192 in 2008, one of the highest in the world.

But profits take about 46 per cent of Singapore's GDP, extremely high compared to other developed economies. Half of this high profit share goes to the coffers of foreign-owned companies with operations here. What is left in the GDP pie to directly benefit Singaporeans is therefore a relatively small amount.

In other developed countries, wages take up more than half of the total GDP. In Singapore, wages account for about 43 per cent of our GDP, compared to 58 per cent in the US and 57 per cent in Japan.

While we have one of the highest per capita GDPs in the world, according to figures from the CIA (Central Intelligence Agency) World Factbook for 2009, Singapore ranks as one of the highest in the world in terms of income inequality. Based on 2008 figures, Singapore has a Gini coefficient of 48.10 - which is much higher than other countries in Asia including China, Malaysia and the Philippines. This should certainly be a cause for concern for us, but it will be red-flagged only if we pay prompt attention to this indicator together with the GDP.

[I think it is a given that as a country progresses, the GINI coefficient tends to rise. When everyone in the country is poor, the income inequality is practically zero - everyone is equally poor. But as income rises the range will increase and separate. There will always be poor people, but rich people can always be richer. In the case of China, the GINI is probably low because of their vast population. They may have more millionaires than Singapore, but they have a billion more poor people to even out the GINI.]

There is significant movement, especially in the developed world, to shift global thinking on how we measure our economy, our progress and prosperity.

US Federal Reserve chairman Ben Bernanke has argued passionately for an acknowledgement of the inherent limitations of the GDP as a policy tool for policymakers, as it focused primarily on what he terms 'material determinants of social welfare'. He calls for a 'broader measurement of human welfare'.

The Report On Economic Performance And Social Progress was commissioned by French President Nicolas Sarkozy in the aftermath of the global crisis that started in 2007. It states that conventional market-based measurements of income, wealth and consumption are insufficient to assess human well-being.

It emphasised the need to give greater prominence to factors such as income distribution, personal consumption and individual wealth, while assessing qualitative aspects such as health, education, the environment, employment, material well-being, interpersonal connectedness and political engagement.

It was tabled at the 2009 G-20 summit in Pittsburg, US. The leaders endorsed the need to include indicators other than GDP to have a better measurement of progress.

The Organisation for Economic Cooperation and Development (OECD) is actively challenging the pre-eminent status of the GDP as the 'end all' of all indicators. They strongly support the 'institutionalisation of a range of indicators'.

Apart from the currently used key indicators of GDP, consumer price index (CPI), industrial production index, and total exports/imports, we could consider including other economic indicators that measure median wages, income distribution, productivity, job satisfaction and household consumption. The new framework should also include indicators for quality of life and general well-being - a range of indices that measure income, public services, health, leisure, wealth, mobility, the environment and connectedness.

[Yes. By all means have "Miss Congeniality" titles, but the crown goes to Miss Universe. The other measures can flesh out the picture of an economy, and highlight areas for improvement, or areas of concern. But if the economy is in the toilet, everyone gets diarrhea. Was it Clinton who said, "It's the economy, stupid"?]

I would like to acknowledge our admirable economic achievement over the past 45 years because of sound economic policies and good governance. I urge the Government to view my observations with an open mind - to see it not as a criticism of current practice but as a considered appeal for a review that will help provide greater clarity in policy formulation, resulting in policies and programmes that resonate better with the ground.

Singapore's well-being goes far beyond GDP

This is the text of a speech by chairman of government feedback arm Reach and Senior Parliamentary Secretary for the Ministry of the Environment and Water Resources Amy Khor in Parliament on Monday. She was responding to a motion by Nominated MP Viswa Sadasivan calling for the Government to track indicators beyond gross domestic product as a measure of success.

LET me start by assuring Mr Viswa Sadasivan that the Government values and appreciates constructive feedback on its policies. So we take his comments seriously.

We agree with Mr Viswa that the development of a society cannot be predicated on pure economics alone. A responsible government takes a balanced approach towards developing a country, taking holistic account of its economic, social and security needs, and with a steady eye towards the long term, beyond the election cycle. Policies are developed for the collective benefit of our citizens so that progress is broad-based, and no single sector benefits at the expense of others. The ultimate aim is to enable our people to have a good quality of life, and not merely a high standard of living.

Hence, contrary to what the Member implies the Government had hitherto been adopting, it has never been a 'GDP growth at all cost' strategy. As Minister Mentor Lee Kuan Yew shared at a recent dialogue held in conjunction with the Singapore International Water Week and the World Cities Summit, even in our early days, when we were deprived, we were mindful not to allow heavy pollutive industries using old technology to set up base in Singapore, to ensure a good quality living environment. Hence, even back then, we had to turn away much needed investment opportunities.

To put things in their proper perspective, the Member might like to know that in terms of allocations, the economic sector takes up about 20 per cent of our Budget, whereas the social sector, which includes education, health and social services, makes up 40 per cent. This reflects the priority of this Government to invest in the capability and well-being of our citizens. I would like to assure the House that the Government, through its choices and its Budget, is very much focused on people.

As Mr Viswa has acknowledged, the GDP is a key economic indicator for any country. GDP measures the income generated by economic activities within a country - and for all its shortcomings, it is still one of the best gauges of a country's progress and wealth.

A country's GDP per capita tells us a lot more about the economic well-being of its people than any other single measure. Empirical studies have shown GDP to be highly correlated with other indicators of economic and social well-being. Put simply, economic growth is key to improving the lives of people.

The Member mentioned that our focus on GDP growth has led to some socio-economic dysfunctions. Specifically, he cites two observations - the large proportion taken up by profits relative to the wage component in the GDP and the significant share of profits by foreign- owned companies.

To clarify, this high profit share (vis-a-vis wages) is not the outcome of deliberate government policy to favour the corporate sector as against workers. It arises from contributions from a range of companies, large, medium and small, both foreign and local, which operate in Singapore. While it is true that a not insignificant share of the profits accrue to foreign companies, this is not a zero-sum game. Some of the profits go towards taxes while some will be retained or reinvested in other projects in Singapore, generating positive multiplier effects in terms of new jobs, technology transfers and management know-how and add to a vibrant corporate ecosystem, anchored in Singapore.

Also, the Government does not hold down wages. Indeed, it is not possible for us to artificially raise (or lower) the wages of our workers. To do so will distort the market and eventually lead to perverse outcomes. Instead, the sustainable way must be to upskill our workers.

[Witness the recent labour unrest in China leading to wage increase for the Chinese worker. No doubt they deserved their wages as they are hard workers, but the effect of their wage increase was to increase costs to manufacturers and MNCs are now considering alternatives to China as their manufacturing base. The point is that they cannot simply raise wages without a parallel increase in productivity. This would just raise costs. But it is disingenuous to say that the govt does not hold down wages. Sort of. By allowing foreign workers to work in Singapore, they are keeping wages low and so the lowest paid Singaporeans cannot get better wages.]

This in turn would raise the wages they can command. What is critical is that we continue to monitor wage and income growth of Singaporeans, to ensure that our workers benefit from growth.

In this year's Budget speech, the Minister for Finance had mentioned how median incomes per Singaporean household member had grown by about 20 per cent (adjusted for inflation) over the last decade, and particularly so from 2005 to 2008. Lower income households also saw their incomes rise over the past 10 years, albeit to a lesser extent compared to median households. Overall, the total income growth for lower income households was about 7 per cent in real terms.

The Government has also made strenuous efforts to redistribute the wealth generated by GDP growth through asset enhancements and income distribution measures in order to uplift the more vulnerable segments of our society. The Government provides substantial subsidies for housing and education.

We have also put in place the Workfare Income Supplement (WIS) scheme to supplement the incomes of our low wage workers, to encourage them to stay on their job and improve their skills.

Mr Viswa mentioned that Singapore has one of the highest levels of income inequality in the world, as indicated by our Gini coefficient. We are not alone. This is also faced by other global cities such as Hong Kong and New York. Their Gini coefficients are in fact more than five, like several other American cities. I would like to point out to Mr Viswa that the Gini coefficient of 4.81 that he cited for 2008 had not taken into account income redistribution via taxes and government transfers. In 2009, the Gini coefficient net of government transfers and taxes is in fact significantly lower at 4.53. But even this statistic, as is any other single indicator, is not perfect - it does not capture transfers through families, and community support through our Many Helping Hands approach. Furthermore, as noted by the Minister for Finance in his Budget speech this year, the solution for Singapore cannot be to grow slowly to reduce income inequality.

Slow growth will make everyone worse off, but it will have the harshest impact on the low income, the very ones we are trying to help. In other words, the correct approach is not to dumb down the top, but to pump up the bottom.

Mr Viswa also cited study findings to illustrate that Singapore has fared badly in indicators of well-being of our citizens and that this is a consequence of a GDP-focused drive for growth. But let me say that other study findings paint a different picture. Let me share with the House just one of these alternative findings.

The Human Development Index (HDI), published in the United Nations Human Development Report, looks beyond GDP to a broader definition of well-being. It is a composite measure of three dimensions of human development: living a long and healthy life (measured by life expectancy), being educated (measured by adult literacy and gross enrolment in education) and having a decent standard of living (measured by purchasing power parity and income).

Although the index is not a comprehensive measure of human development, it does indicate the average progress of a country in human development. Between 1980 and 2007, for nearly 30 years, Singapore's HDI rose by 0.68 per cent annually from 0.785 to 0.944. Singapore ranked in 23rd placing out of 182 countries, ahead of Hong Kong (24th), Malaysia (66th) and Thailand (87th).

Mr Viswa has called for a framework for broad-based public policy analysis, and the regular reporting of non-economic indicators.

The Government understands the need to adopt a Whole-of-Government approach towards developing policies. Civil servants are required and expected to think and formulate policies from the perspective of the public service as a whole, rather than from the viewpoint of a specific ministry or agency.

This mindset is critical as many of the challenges that we face can no longer be adequately addressed by a single ministry or agency because of their complexity and interdependence. This mindset will also ensure that all relevant factors are considered in the process of policymaking.

The Government already tracks a broad range of socio-economic indicators, with ministries and agencies actively monitoring outcomes and performance in their areas of responsibility. Some of the performance and outcome indicators are published annually in the Budget Book, which is available on the Ministry of Finance website.

Even as we debate the pros and cons of various indicators to reflect our socio- economic conditions, we must not forget that indicators are what they are described to be - signs and pointers.

It is a challenge to develop indicators that accurately or unambiguously capture a particular state of affairs in the socio- economic realm, or the outcomes of a policy at any point in time.

Hence, it is important that we do not skew behaviour or encourage short-term outlook by over-emphasising the use of indicators. Government policymaking must instead be anchored in a clear understanding of reality, and cannot be driven by short-term measurement of indicators. For this reason, the Government has expended many resources to gather the thoughts and reactions of people to all sorts of policy issues via its ministries and through the agency of Reach, the Government's dedicated feedback unit. It is perhaps one of the strongest endorsements that Singapore does not just pay lip service to non- or beyond-GDP factors that underpin our national well-being.

Mr Viswa's thesis that policymaking will be impoverished if it ignores beyond-GDP indicators is understood and appreciated. I thank him for his motion, and want to assure the House once more that the Government's approach to developing Singapore has always been holistic, multi-faceted and with the long term in view.

Tuesday, July 20, 2010

'China is to be studied, not feared'

Jul 17, 2010

As the 20th anniversary of diplomatic relations between China and Singapore draws near, Insight talks to Foreign Minister George Yeo on Singapore's place in the orbit of a resurgent China.

By Rachel Chang

TO CHINA'S leaders, Singapore is a bonsai in China's image - a miniature doppelganger similar in all respects save size.

Flourishing and fully grown to its tiny height, the Singapore miniature is often a source of inspiration and ideas to the giant republic - but it is never taken as a full-scale model.
'Sometimes, when they get frustrated with their own problems, they will ask themselves, how does Singapore do it? Let's check - they faced the same problems, they have the same culture, how did they solve it?' is how Foreign Minister George Yeo tells it.

He first heard the term after a senior Chinese leader used the word in conversation with a Singaporean businessman.

'He felt a little hurt when he mentioned it to me,' Mr Yeo recalls. The term struck the Singaporean businessman as dismissive.

'I said, no, some bonsai are very old, very precious. And if you see a beautiful bonsai, you can be sure that a lot of effort has gone into it,' he says.

He speaks with optimistic equanimity, a trait that also characterises much of his world view.
'It's not derogatory,' he adds. 'It's just a very realistic assessment of what a city state can do (for) a continental nation.'

Widely regarded as one of the finest diplomats in the region, Mr Yeo regards China, population 1.3 billion, with the studied fascination of a scholar confronting an ancient civilisation.
He thinks the behemoth bold and creative; to him, the country's re-emergence on the world stage is not to be feared, but to be understood.

Of 'Singapore-style condos'

THREE decades ago, when Deng Xiaoping made the decision to open China's doors to the world, Singapore was one of the first to get its foot in, unofficially at least, before official ties were sealed in 1990.

Its affluence relative to China's made the country a byword for success to an uncertain nation just rousing from its socialist slumber.

Mr Yeo remembers hearing a radio commercial in Suzhou in the mid-1990s, advertising 'Singapore-style condominiums'.

'Not a Singapore investment, but condominiums like the type in Singapore,' he recalls. 'So, in other words, the Singapore association had with it a certain association with quality, with modernity.'

For years now, Chinese delegations have been arriving in droves, scouring the details of the Singapore Government's policies, from housing development to water treatment to transport regulation.

But today, as China powers forward to new heights beyond the bonsai's reach, the interest level is waning.

'There was that period in China when they were sort of putting things together and Singapore looked attractive,' he says. 'But since then, of course, there's been a surge. Their cities have become bigger than ours; they have the Olympic Games and the Expo.'

'We have a URA urban centre, they got a bigger one; we got a concert hall, they got bigger concert halls. Everything is on a bigger scale, nicer, grander.'

The Chinese do return, episodically, for new solutions or ideas. The bonsai, after all, has achieved full bloom.

Singapore's generosity has not gone unnoticed, he says. This year, Singapore was loaned a pair of baby pandas, just the seventh country after the United States, Japan, Spain, Austria, Australia and Thailand to be shown the favour.

The Singapore Zoo wanted a pair, and the Chinese government was approached, he reveals. 'We had raised it earlier, but we were given a queue position,' he quips.

'Then as we were planning for President Hu Jintao's visit (in November 2009), we raised it again to them and they said, why not we make it a (20th anniversary of diplomatic relations) celebration?'

A long line of countries had registered their panda interest before Singapore, notes Mr Yeo. But China wanted the gift announced when the two countries' presidents met in Singapore. 'They intended it to be a very visible symbolic gesture of friendship,' he says.

For Singaporeans at large, 'it was big news. People got very excited', he recalls, with delight. 'I thought that (for) the public, that was the high point of President Hu's visit.'

Listening to Mr Yeo, it is clear that he considers it both an advantage and good fortune that Singapore is so innately similar to China, fostering an ease of understanding rare in a world so prone to getting diplomatic wires crossed.

As he puts it: 'We're happy to help them because, I think, we believe we're helping ourselves.'
What Singapore should fear when it comes to relations with China, says Mr Yeo, is only internal stasis. 'The key challenge to us is whether we're able to always be fresh and creative. If we're inert and rigid and stop sparking, then naturally we cannot sustain anybody's interest.'
Beyond Washington consensus

NOT every senior government leader is as sanguine as Mr Yeo regarding China's rise. Late last year, Minister Mentor Lee Kuan Yew incurred the ire of China's netizens when he said on a visit to the US that America must remain present in Asia to counterbalance China.
Cyberspace lit up as ultra-nationalistic commenters rushed to decry Singapore as a pawn of the US.

While Mr Yeo is similarly invested in the US' presence in the region, he has made it clear that he views China's coming prominence benignly.

He maintains that China is not an aggressive, imperialistic power; contrary to what some fear, its external agenda is merely to maintain a stable environment in which it can concentrate on internal governance.

Still, China's growing investment and links with developing regions like Africa worry many in the West. The Chinese may not have delusions of empire, but they will buy resources from wherever they can - no matter that the money lines a dictator's pockets, or fuels civil war.
They are also loath to impose moral strictures on rogue nations like North Korea, frustrating the old imperialist powers which believed in using their influence to bring about positive change in the world.

As Mr Yeo notes, the idea of 'positive change' has always carried the unsaid corollary of 'to become like us'.

In contrast, the Chinese tell their children 'don't get involved in other people's affairs', he says. 'Accept things for what they are, make a living, look after yourselves.'

In fact, he says that unhappiness over China's presence in Africa is due to the old - American and European - powers who 'thought Africa was their fiefdom'.

For colonial powers that did 'horrible things' to their African colonies, Mr Yeo says that the present talk of human rights is inevitably received as hypocritical.

But China's presence all over the world is significant beyond a shifting of power axes, he says, and matters on a philosophical level.

In recent decades, the 'Washington consensus' - that free markets, deregulation and political freedom are the way to development - has been the wisdom of the day.
But China is defying that consensus.

It refused to devalue the yuan during the Asian financial crisis of 1997, when the International Monetary Fund forced painful devaluations on Thailand and Indonesia.

Its economy barely slowed when years of lax regulation led to an unprecedented economic crisis in the US and Europe last year.

Perhaps most stinging of all: The country has staunchly held democratisation at bay, refuting the liberal precept that economic freedom must come hand in hand with political freedom, and capitalism with civil liberties.

Not that Mr Yeo thinks that the Beijing model will take over the world. China is not interested in exporting its model, he emphasises.

'But what it means is there are many models (of development) and you should find your own. If someone tells you, there's only one model, and it must be our model, (you will say) thank you very much, we are still looking,' he says.

'So psychologically, it has a very powerful impact.'

Mr Yeo does not put it in so many words, but for Singapore's leaders, long derided for denying a Western-style democracy in the city-state, it must feel like vindication.

Once it was predicted that liberal democracy would be the final model, the end of history. The Chinese are perhaps proving, to truncate Martin Luther King Junior's quote, that the arc of history is long.

Valuable lessons for both sides

LAST year, Singapore's trade with China came to $75.7 billion, outstripping trade with the US, which came to $66.9 billion, and inching up on the European Union trade of $86.8 billion.
Chinese delegations are once again coming in droves to Singapore, not just to study how its government works, but also the People's Action Party. The latter receives as many as four delegations a week sometimes, party members say.

Where once they marvelled at the good governance, now the Chinese are preoccupied with another aspect of this peculiar bonsai: urban politics.

Mr Yeo has called the PAP 'the most successful urban political party in Asia'. Lone among longstanding dominant political forces in the region, the PAP has not been ousted from office.
To him, unprecedented urbanisation poses the biggest political challenge for traditional parties. The Chinese Communist Party was formed when China was only 20 per cent urban. Now, with the population set to one day be 80 per cent urban, migration to the cities is tugging at the Confucian social fabric.

A similar urban disaffection has translated into votes for the opposition in Asian countries from Indonesia to South Korea to Malaysia, he notes.

Singapore does not have a rural hinterland, but the parallel he sees is the intense influx of immigrants.

'How do you create an organically healthy urban community? That requires a certain rewiring of social relationships so that people... feel that they are living in the village while they are living in the city.'

A social fabric that can stretch and shrink as populations evolve is the holy grail which neither Singapore, China nor any other Asian country has found yet, he says.

He does not foresee national elections in China, but notes that they are 'still experimenting'.
'If they want city dwellers to feel a sense of control over the immediate environment, we must give them a franchise, otherwise (they) are just being administered. Then it's just a hotel, not a home.'

As for what the bonsai can take from blooming China, Mr Yeo is most excited by the experimentation the Chinese are doing, most effectively by blithely upending old expectations.
Sprung from the assumptions of the developed world, the Chinese sometimes do things in strange ways. For example, 'they will put ice into wine'.

'The French, they will scoff, but they will still sell wine to China, right?'

'You know,' he laughs, 'sometimes it's quite nice to have a cube of ice in my wine when I'm thirsty. It cools down the wine and makes it more drinkable.

'If you're too conservative, too set in your ways and you say, 'Oh well, no, it should not be done, it's crass', well... the Europeans used to say that of America.'

Genius or madness, Singapore can partake of the same - revelling in the juncture of new and old; the tried-and-tested and the experimental, he says.

And the bonsai must go forth with boldness: 'I think we would be a very exciting place, a crucible of new ideas, of new possibilities. When cultures mix, there's tension, but there's also sparking... and new forms will evolve.'

Why Singapore can't be a walled city

  • On China's governance, which emphasises a central authority in Beijing that is impartial:
'There's a rule that you cannot be a public official within 400 li of your birthplace. This is to keep the country unified.

In 1994, the water level in the Yangtze River was rising. Taihu lake was at the point of overflow. And they had to decide whether to flood a million farmers in Jiangsu province, or to flood Shanghai.

And everybody knew that the flood was due because they had been reclaiming ponds and lakes in Shanghai and replacing them with drains, so the sponge-like ability of the Yangtze Delta to absorb floodwaters was reduced in Shanghai.

The matter went up to (the central authorities in Beijing). Tables were pounded. In the end, they decided that too bad, the million farmers would have to give way to Shanghai because Shanghai was too valuable.

You can imagine the resentment. But without a central authority considered to be fair in Beijing, they will kill each other.'

  • On the Chinese learning from Singapore:
'I remember once talking to the mayor of Zhuhai and he showed such great familiarity with Singapore. I said, when did you visit us (officially)? He said, no, I was visiting relatives in Singapore. We were out in the morning and we filmed the way you removed your rubbish.
In other words, the relationship is not only a formal one, it is a familiar one. Singaporeans visiting friends or relatives in China will get questions asking how we do things here.'

  • On Chinese government officials learning from Singapore government officials:

'In 1996, a big delegation led by (head of the propaganda department) Ding Guangen came. The Internet, newspapers, cinemas, that was all under his purview.

He came with three or four minister-level officials, and they spent a whole week in Singapore. Doing real work, from morning to night.

Even the day they left, they did a tour of Changi Airport. I must say I felt a little naked because by the time they left, there were aspects of our policies which I wasn't aware of but they had gone into it in such detail.'

  • On the need to connect to the outside world:

'You can shift physically but the networks are intact. So I can move from Bedok Reservoir to Hougang, all my social networks are intact. It is so when foreigners come in as well. We need a kind of culture that is welcoming.

Then of course it's got outer rooms and inner rooms and they can be brought closer in as they become closer. But no closed doors. There are doors, but there's no gate with barbed wires saying 'keep out'. That's what keeps us alive and connected.

If Singapore were a walled city, we would be irrelevant.'

Friday, July 16, 2010

2 won't air anti-mosque ad

Jul 16, 2010

NEW YORK - TWO US networks are refusing to air a slick, highly confrontational ad by a group protesting plans for a mosque near Ground Zero in New York, US media reported on Thursday.
The ad takes a radical stand against the 'monstrous 13-storey mosque' which supporters bill as a chance to heal post-9/11 tensions and which so far has support from New York City officials.

US media, including the Politico website, quoted sources at NBC and CBS networks saying they were refusing to screen the video, titled Kill The Ground Zero Mosque. 'On 9/11 they declared war against us,' the video says against a backdrop of militants firing weapons and footage of hijacked airplanes slamming into the World Trade Center on Sept 11, 2001.

'That mosque is a monument to their victory and an invitation to more... Join the fight to kill the Ground Zero mosque.' NBC Universal's advertising standards manager Jennifer Riley wrote that the ad never clarifies whether references to 'they' mean terrorists or the Islamic organisation sponsoring the mosque project. 'Consequently, the ad is not acceptable,' she said, Politico reported.

The video has already received more than 139,000 hits on YouTube and is funded by an organisation called National Republican Trust, which is not part of the Republican Party.

Supporters say the proposed Islamic centre and mosque two blocks from Ground Zero will transform negative stereotypes about Islam that have been widespread in the city and across the country since 9/11. The group behind the project has already purchased the building and is waiting for permission from the city landmarks commission to raze the structure and begin construction. Mayor Michael Bloomberg and other prominent city officials have spoken in favour of the idea. -- AFP

["Love your neighbours. Hate your enemies. Do good to those who do good to you or who may do good to you someday. And do bad things to those who do bad things to you or before they do bad things to you. Even the tax collectors do that. An eye for an eye. A tooth for a tooth.

But we have been taught better than that. 'Love your enemies and pray for those who persecute you. You must be perfect just as your father in heaven is perfect.'

This is an opportunity for Americans to show that they respect freedom and liberty. Freedom to worship, and Freedom of association.

This is an opportunity for Americans to show that they know the difference between peace-loving people and violent, murderous, deviant, religious fanatics.

This is an opportunity for Americans to show that those who come with a prayerful soul are welcome.

But if we let the hate-mongers win, then ground zero would once again be the scene of another defeat for the spirit of freedom and liberty.

If we let the fear of something different prevail, then the terrorists of 9/11 would have won again, terrorising us 9 years after the fact with an irrational fear of a place of worship.

If we let the pettiness overrule our values and principles, then the twin towers of Freedom and Liberty would have once again fallen victim to the violence of irrationality, unthinking hate, and callous ignorance.]

Wednesday, July 14, 2010

China historian's view of why Barisan declined

Jul 13, 2010

By Cai Haoxiang

A CHINA historian is here to offer reasons why the once-powerful leftist movement Barisan Sosialis disappeared entirely from Singapore politics.

Dr Cheng Yinghong's thesis is that China's Cultural Revolution of 1966 influenced the Barisan movement significantly, causing it to become more extreme.

The change led eventually to the Barisan's decision to have its remaining seven Members of Parliament stage a walkout from the House in October 1966, so as to launch an extra-parliamentary struggle.

Dr Cheng, 51, an associate professor of history at Delaware State University in the United States, will present his theory in a lecture at the Institute of Southeast Asian Studies tomorrow.

What may prove controversial is his stance that while the massive security crackdown of 1963, codenamed Operation Cold Store, seriously damaged the leftists, it did not lead to the Barisan's demise.

'I'm not defending the PAP, but you have to compare (the reasons why the leftist movement in Singapore disappeared),' he said in an interview with The Straits Times.

'Globally speaking, the disappearance of the left was due to violence and crackdown, but not in Singapore.'

His analysis of the reasons for the Barisan's fall was based on research done on the leftist newspapers of that time, namely the Barisan's semi-monthly Front and monthly Party News, and the People's Forum, a semi-monthly newsletter run by the leftist Partai Rakyat Singapura.

He found evidence that one month after the Cultural Revolution began in China in 1966, the Barisan's politics were dramatically radicalised, as seen in newspaper articles which carried the slogans and rhetoric of Chinese leader Mao Zedong.

The Barisan, formed in 1961 as a splinter from the People's Action Party, was once one of the most powerful leftist movements in South-east Asia.

Most of its leaders were, however, arrested during Operation Cold Store, during which more than 100 leftist politicians and unionists were put behind bars.

Yet the Barisan machinery was still good enough to enable the party to win 13 seats in the 51-seat legislative assembly, during the September 1963 general election.

But Cold Store destroyed the Barisan's hopes of becoming Singapore's ruling party, causing its members to feel lost.

Dr Cheng said that as a result, the Barisan lost hope in beating the PAP at the polls.

'That's why I think they embraced the Cultural Revolution when it broke out in 1966,' he added.

Dr Cheng was born in Suzhou, China, in 1959, and left to pursue a doctorate in the US in 1994.

In 2007, he applied for a fellowship to research the impact of the Cold War in Asia at the National University of Singapore's Asia Research Institute.

There, he met scholar C.C. Chin, 69, who co-authored the book, Dialogues With Chin Peng: New Light On The Malayan Communist Party. Mr Chin suggested he look at primary sources like the old Barisan newspapers.

Dr Cheng's lecture tomorrow forms part of an ongoing re-examination of the left's role in Singapore's history.

He plans to conduct more research on Barisan leader Lim Chin Siong's ideological development and whether the Barisan was a local or national movement.

Tuesday, July 13, 2010

Strange death reason discovered

Jul 13, 2010

BEIJING - EVERY summer during the height of the rainy season, villagers of all ages in a corner of south-western China would suddenly die of cardiac arrest. No one knew what caused Yunnan Sudden Death Syndrome, blamed for an estimated 400 deaths in the past three decades.

Now, after a five-year investigation, an elite investigative unit from China's Center for Disease Control and Prevention believes it has pinpointed the cause: an innocuous-looking small mushroom known as Little White.

The search for the culprit began in 2005 and took investigators to remote villages spread over the rural highlands of Yunnan province, said Robert Fontaine, an epidemiologist with the US Centres for Disease Control and Prevention.

Local health officials had noted the deaths for years. In 2004, they appealed to Beijing for assistance. The government gave the task to the China Field Epidemiology Training Program, a unit of medical investigators at China's CDC assigned some of the country's toughest health mysteries.

The investigators zeroed in on mushrooms, because the deaths were closely aligned with the harvesting season. More than 90 per cent of the deaths occurred in July or August.

By the end of 2005, investigators began issuing warnings to some villages to avoid eating unfamiliar mushrooms. A public information campaign to warn against eating the mushrooms has dramatically reduced the number of deaths. Only a handful have been reported in the last couple of years, and none so far this year. -- AP

Monday, July 12, 2010


Jul 12, 2010

New light on an old issue

By Yang Razali Kassim

MALAYSIAN Deputy Foreign Minister Richard Riot Jaem's statement in Parliament on June 28, on the landmark deal on Malayan Railway (KTM) land in Singapore, has shed new light on an old issue. Responding to a question from an MP from the opposition Parti Islam SeMalaysia, the deputy minister unveiled what had hitherto been little known to the public in Malaysia as well as in Singapore.

As reported by the national news agency Bernama, Datuk Jaem dismissed the MP's allegation that the KTM land in Tanjong Pagar was to be sold to Singapore.

'The land is not ours,' he said. Rather, it had been leased in 1918 for 999 years from the Straits Settlements, of which Singapore was then a part.

The deputy minister continued: 'The Singapore Railway land leased was 434.26 acres (175.7ha). Out of this, 352.52 acres (142.6ha) was to be held by the Federal Land Commissioner for a period of 999 years, while 81.74 acres (33.1ha) was for perpetuity.

'If the land were no longer to be used for rail services, it was to be returned to the respective Straits Settlement without compensation whatsoever. As such, such allegations (those made by the MP) are not true because the land is not ours,' he was quoted as saying.

The Straits Settlements was a British colonial construct comprising Singapore, Malacca and Penang. It was dissolved in 1946 when Singapore became a crown colony separate from Peninsular Malaya. The Oct 25, 1918 agreement, known as the Singapore Railway Transfer Ordinance, gave the then Federated Malay States use of the land. But the land would have to be reverted - without cost, if the transfer was without cost - if it was not used for railway purposes.

The deputy minister's statement gives a totally new complexion to the long-running saga concerning KTM land in Singapore. The general perception in both Malaysia and Singapore had been that KTM land in Singapore was Malaysian territory - a residue of history. The land had long been seen as belonging to Malaysia because KTM was a state-owned entity, though it was subsequently corporatised in 1992.

Mr Jaem's statement clarified for the first time to the Malaysian public that the KTM land did not in fact belong to Malaysia, because it was 'leased' from the Straits Settlements in 1918. It was also probably the first time the Malaysian public learnt of the 999-year lease.

Significantly, the 1918 agreement had also stipulated that should the land not be used for its intended purpose - that is, for a railway line - then it would revert to the Straits Settlement concerned, in this case, its successor entity, Singapore.

Another significant point was that the land, should it be vacated, would revert to the transferring party 'without compensation whatsoever', in Mr Jaem's words. Hence his assertion that the issue of selling the land did not arise.

The larger significance of Mr Jaem's statement concerns the issue of sovereignty. For a long time, it was thought that the KTM land in Singapore was Malaysian state land, and therefore would never be sold. Mr Jaem's statement has turned the issue of sovereignty on its head: It was Singapore's sovereignty that was at issue.

As long as the KTM land existed in Singapore as state land, it could be argued that this affected Singapore's sovereignty. But because Malaysia's leased ownership of the land is based on a historical agreement, Singapore has to respect the law. Kuala Lumpur has no doubt been long aware that it would lose ownership of the land should it move its station from Tanjong Pagar to Woodlands. Hence the mutual recognition that the most rational solution would be to jointly develop the land vacated by the move.

Singapore is prepared to realise the market value of the KTM land in offering Malaysia a 60 per cent stake in the joint holding company that will develop the land. Singapore is also prepared to swop the KTM land at Tanjong Pagar, Bukit Timah, Kranji and Woodlands for other parcels in downtown Singapore of equivalent value.

So what was legally supposed to be returned to Singapore for free will now largely be paid for by Singapore - at a price that is now the subject of mutual valuation and negotiations between the two governments. A Malaysian paper, The Star, reported that a valuation exercise last year estimated the value of the land to be up to $4 billion.

Significantly, the debates in Malaysia on the deal have focused on the 1918 agreement. Former minister Shahrir Samad from Johor urged Malaysians to move away from 'nostalgic-romantic sentiments' to a future arrangement that would benefit KTM and Malaysia. Umno Supreme Council member Norraesah Mohamad said the new deal would turn a 'sleepy asset' into a high-value commercial venture. Umno Youth leader Khairy Jamaluddin said the new agreement would allow Malaysia to monetise its assets in Singapore. 'Malaysians must know that the Tanjong Pagar land cannot be utilised for anything other than a railway station,' he said.

This major shift in the railway land issue would not have been possible had there not been a new mindset at the very top of the Malaysian leadership. Under Prime Minister Najib Razak, we are seeing a government that is prepared to break new ground in seeking mutual accommodation for mutual gain. Singapore's leadership has also contributed to this major shift by not being too calculating, and showing that Singapore can also think out of the box to secure a more harmonious long-term strategic relationship. The end result is not just a resolution of the railway land issue, but also possibly a settlement of other outstanding issues that have bedevilled bilateral ties for too long.

The writer is a senior fellow at the S. Rajaratnam School of International Studies, Nanyang Technological University.

[The 999 year lease may be new to me, but the terms of the lease has been mentioned before. KTM had the use of the land for as long as they used the land for the purposes of a railway. If it stopped services, the land would revert to Singapore. Economically, it may make more sense for the train to terminate at Woodlands and lower operating costs. But KTM hung onto the land out of inertia or perhaps to hold Singapore to ransom. In any case Singapore sought to turn a lose-lose dong-in-a-manger situation into a win-win situation. Which the intractable and irascible Dr M with derailed with his paranoia. I am guessing that Singapore's easy agreement to the terms raised suspicions in Dr M that he was being taken advantage of. I think he was projecting.]

Tuesday, July 6, 2010

Sportsmen need to learn respect from Nadal

Jul 6, 2010

By Rohit Brijnath, Sporting Life

THE official photograph at the net was done. The duel had commenced. Tomas Berdych was about to walk to his baseline when Rafael Nadal murmured something to him. A greeting? A gentle 'good luck'? Often he will do it, as if acknowledging his opponent's humanity. It is refreshing, an act of a man who plays as if he is at war, yet his every gesture is of an athlete who recognises this is only sport after all.

Nadal knows about lines. Lines to hit and those not to step over. When the match was done and they crossed paths with their different silverware, he tapped Berdych on the back. When he left the court, he high-fived the crowd; when he broke Andy Murray's heart, he offered a healing embrace. His respect for his world is consistent: At last year's US Open, knees aching, he signed autographs after his defeat.

Nadal, at 24, is already Jimmy Connors' equal with eight Slams. These men make for interesting comparison for both share a strong similarity yet are different.

Connors trained as if locked in competition, as if a practice point lost was manhood questioned. Ethic became habit and passion transferred automatically from training ground to championship arena. Nadal's tennis echoes a similar religiosity. As he said on Sunday: 'I think all my life I practised with my high 100 per cent of intensity in every ball in the practice.'

But Connors, insulting umpires, surly in the press room, a picture of puerile, bowl-cut rebellion, could not keep sport in proportion. Nadal does, he appreciates that his responsibility to sport goes beyond displaying skill. It is about respecting the audience and his profession.

A game is defined by its present champions, they give it stature, they are handed it for safe-keeping. When Tiger Woods, throwing clubs and tossing invective, forgot this, Tom Watson said last year: 'I think he needs to clean up his act there and show respect for the game that people before him have shown.'

Watson's words should have been etched in World Cup dressing rooms, reminding footballers of their place and purpose. Too many perform as if the game owes them, as if this sport that offered them opportunity is lucky to have them.

Into modern sport has been built an unequal relationship: a fat pay cheque but slim responsibility. Even great players forget they are temporary owners of a sport. Eventually they go, but football stays, yet few care if they leave it a finer game.

Robinho's tantrums were unforgivable. Arjen Robben is far too gifted to require diving, yet this cheap tactic, rehearsed in his mind, mocks football. If diving has become custom, it is because too few stand up against it and surely this is the job of the great player. Yet they know that we, the audience, are too quickly forgiving of lower standards.

Luis Suarez's handball on the goal-line might be forgiven as instinctive, yet his bragging later, his inflated sense of himself as a saviour, was ridiculous. Beckenbauer thumped England repeatedly, Pele sneered at Maradona, Maradona jousted with Platini, Argentina and Germany derided each other, Rooney moaned about fans, Ronaldo spit at a cameraman.

[I cannot judge if in the heat of the game, the passion of the game, with patriotism and national pride flooding thru my veins I would not do the same as Suarez. But at the end of it all, there must be humility and respect for the game. Acknowledging that what was done was not sporting, but that one can still be a sportsman and not brag about it like it was a badge of honour. Yes, I would do it again, for my country, but I am not proud of it. I extend my apologies to the other team. Something like that.]

Only Messi, even in frustrated defeat, even aware of criticism to come, did not fall into sly posturing against Germany in some faux attempt to show passion. He came and left in dignity.
This is no call for sanitised sport. In arenas of despair and devotion and desire, some anarchy is inevitable, even desirable, for humans are at play. But even amidst passion, respect can breathe. As Nadal's uncle, Toni, told a newspaper once: 'Rafael has never thrown his racket. For me, it is unbelievable how some people treat what they are given.'

Athletes often use competitiveness as excuse for surliness, they believe praise of rival is weakness. On the contrary, in acknowledging an opponent, a team recognise the valour of other men seeking the same prize as them. It makes football what we like to believe it is: beautiful.
And so it is belated, yet appropriate, that as the Cup begins its conclusion, a flicker of sport's etiquette has returned. Andres Iniesta has simply said: 'Germany have had a brilliant World Cup so far and regardless of their excellent results, they're also playing very well.' Miroslav Klose has said: 'Villa is a very clever player, he has a great deal of qualities.'

It did not cost them anything, but already it makes their semi-final appealing, a collision of fine teams who respect each other. Somewhere, on the banks of a river near Mallorca where he might be found fishing, a Spanish tennis player will be applauding their grace.

Monday, July 5, 2010

Life is tough at 24 with Us and Them

Jul 5, 2010

Young Singaporeans too are discomfited by huge foreign presence here

By Rachael Chang

MY SISTER was back in town this past month for the first time since moving to Tanzania, in East Africa, a year ago.

During an idle conversation on property prices, she made an offhand comment that hung in the air with a note of finality: 'I cannot live here any more, it's too crowded.'
She sounded just like, well, me.

Nine months ago, I returned from a four-year study stint abroad, resigned to returning home to start work. The country that greeted me had transformed in my absence.

Singapore has been developing at breakneck speed for close to five decades now; it can sometimes be both thrilling and despairing in equal measure to find familiar alleyways gone, old shopping malls razed in a day.

But this time, it was different. It was the Chinese national frying up char kway teow, the Malaysian bus driver who had never heard of 'Clarke Quay', the Indian nationals dancing up a storm to Bhangra music in nightclubs, and the conspicuous Caucasians dotting MRT train carriages and in the heartlands. These were the things that jarred.

And it was really, really crowded.

This topic of conversation has been a perennial one among my peers for close to a year now. A recent Institute of Policy Studies survey revealed that we weren't the only Singaporeans in our mid-20s preoccupied by the issue. My sister is 27, I am 24.

Of the over 2,000 polled, the sentiment that the presence of foreigners made them economically worse off was highest among those aged 21 to 29 years old - 31 per cent of this age group felt this way, compared to only 22 per cent of those aged 50 and over.

The numbers puzzled some observers I spoke to. Shouldn't this young cosmopolitan generation be the most amenable to foreigners? Globalised and raised on a steady diet of Taiwanese pop music and American movies, surely we were comfortable with the new sights, smells and accents in our midst? And shouldn't this well-educated group better understand the economic argument for needing immigrants in a baby-strapped country?

Yes, and no. There are a myriad of reasons why young Singaporeans can tick all those boxes and still feel vulnerable about the influx of foreigners.

Some are utilitarian concerns that Singaporeans are known for - like the size of the sliver of pie that is our lot, and the strength of the rice bowl. But much of the source of our discomfort is intangible, revolving around generational angst and concepts of Singaporean identity.
But first, a caveat before anyone cries 'spoilt' and 'entitled': It is true that foreign workers do some jobs Singaporeans eschew - like build malls and clean toilets.

Some argue that Singaporeans would never stoop to certain menial tasks; others counter that these jobs pay too little to make a living, and the fount of foreigners willing to take these wages keeps them at that level.

Putting that perennial argument aside, I believe that the foreigners who irk those survey respondents - and my friends - are a different category. These are the ones in direct competition for places on the Dean's List, or who take up starting managerial positions for less money than we would have. These are the ones we are told time and again are 'hungrier' than us and therefore more likely to succeed.

Our mixed feelings towards this group spring from uncertainty and identity.

There is the sheer fact of being young. The 20s is the 'generation of angst', as political observer Eugene Tan puts it. We are thrust into the painful reality of adulthood without the internal resources, which age inevitably endows, to cope. We worry about affording a Housing Board flat and getting that promotion. We fret over whether our lives are going according to plan, having not yet accepted that they never do.

Our parents went from Third World to First, with every decade surpassing the last. Born into the First World but expecting rising affluence, we find our heads banging up against the ceiling of a country fully developed.

In school, we got used to foreigners beating us in examinations. Grown-up, it's all too easy to point the finger at them for inflating the prices of HDB flats, and stealing that promotion while 'I was away at reservist', a complaint I have heard.

Some argue that this is a misperception; that even if the foreign population had not swelled to a third of the total resident population in a decade, we would find something else to blame for the hardship - economic and otherwise - that is a part of young adulthood.

Perhaps. But Singapore society is already coping with the pain of transitioning from developing to developed. It may not have sufficient sociological ballast to withstand the shock of a sudden, intense influx of foreign labour over several years. Even if not a cause, the influx certainly deepens the stresses of an evolving nation, and intensifies the uncertainty of my generation terrified of what the future has in store.

In other words, foreigners feed our sense of insecurity. If that sounds like a poor reason for our mistrust of foreigners, we can lay claim to the second: Foreigners, through no fault of their own, cannot partake in a strong and pulsating Singaporean identity.

Our immigrant parents went to either English or Chinese schools. My generation went to school under one education system. Where some of our parents spoke crisp English with no second language, and others knew only dialect, my peers speak that lovable yet vilified Singlish, a unifying patois that means my Indian friends use Hokkien phrases and vice versa; that allows a Singaporean to be plucked out of a crowd in a foreign land by another attuned to the same cadences of speech.

Whether a sneaking fondness for package deals or a love-hate relationship with the ruling party, it is difficult to define exact components of a Singaporean identity, but its presence cannot be disputed.

We feel Singaporean enough to feel keenly the impact of those different from us, in our homeland. Instead of calling this anti-foreigner, perhaps we should cheer what this means for national identity: There's apparently enough of 'us' to generate an 'us versus them' mentality.
No, I'm not anti-foreigner. But as one friend noted, 'I like foreigners who try their best not to be foreigners.' Childish? Perhaps. But what's wrong with that?

[A rather balanced article. I can sense the writer trying not to be churlish about her, well for want of a better word, insecurities. These are insecurities, or anxieties that many Singaporeans feel. That is why the govt has realised that the influx of foreigners have to be reduced. If there are too many of "them" there won't be enough "us" to hold onto our identity.

That said, I wonder if in a sense our brand of multi-culturalism is responsible for our current predicament. Our "distinct" multi-culti approach is to respect and keep distinct the various cultural identities in our society in contrast to "melting pot" multi-culti where it doesn't matter where you come from, but you're in America now so assimilate. So New York is a melting pot multi-culturalism.

Because we don't pressure our diverse groups to "melt" together or assimilate, there are distinct cultural identities, and because we have these distinct identities, it removes our moral right to require new foreigners to assimilate.]

Rising yuan forces rethink of China ops

Jul 5, 2010

Manufacturers consider moving to places with lower costs like India

THE recent rise of the yuan is prompting a rethink among Asian companies with manufacturing operations in China.

Analysts say a more robust yuan would further erode China's labour-cost advantage over other links in the global supply chain, even as foreign-owned factories in China are seeing more workers strike over poor working conditions.

Last month, China's central bank pledged to let the yuan trade more freely against the United States dollar, with the result that the yuan hit five-year highs of 6.8089 to the greenback in the days that followed. It has since risen 0.8 per cent against the US dollar since the June 19 announcement.

The prospect of having to shell out more for higher wages is forcing manufacturers to think of relocating to Bangladesh, India, Indonesia and Vietnam, where wages remain relatively low.
Analyst Bruce Tsao from Capital Securities in Taipei said dramatic wage hikes in the mainland are 'adding more woe to labour-intensive industries in China already troubled by low profit margins'.

'Such factories may not move out of China soon, but the trend is inevitable in the long term,' he said.

Taiwan's Feng Tay Group, which supplies about one-sixth of Nike sports shoes, said it was planning to boost production in India as its Chinese manufacturing base shrank.

The company made 51 million pairs of shoes last year, 20 per cent in five Chinese plants. 'The ratio will keep falling in the years ahead,' said company spokesman Amy Chen, adding however that its Chinese plants would 'remain our production base of high-priced products'.

'We'll keep expanding our capacity in India over the next five years, considering its competitive edges like ample supplies of quality workers, relatively low wages and concessions offered by the government.'

Bangladesh, which has the lowest minimum wage in the world at just US$25 (S$35) a month, could also be poised to reap the benefits, as long as it can resolve its own chronic labour disputes and fix its crumbling infrastructure, experts say.

'Bangladesh has a huge opportunity to capitalise on rising costs in China,' said Mr Ifty Islam, an investment banker at Dhaka-based Asian Tiger Capital.

'But it is difficult to get more foreign firms to come if we can't prevent labour unrest,' he said.
China is not only facing the challenges of higher wages, but also that of growing labour unrest.
Production at a Japanese-owned electronics factory in northern China was suspended from Tuesday to Saturday as 3,000 workers went on strike over pay and benefits. It marked the latest in a spate of labour unrest to hit foreign-run firms in China, highlighting growing discontent among millions of workers over low salaries and poor conditions.

The official China Daily has warned of 'an end to cheap labour in China'.

Over the weekend, Chinese Premier Wen Jiabao said China's economic situation was good but the domestic and international economic environment was 'complicated'. He warned China's ma- croeconomic control policy is facing more difficulties with the global financial crisis and the unpredictability of the global recovery.

Separately, a deputy Chinese central bank governor, Ms Hu Xiaolian, stressed on Saturday the importance of avoiding excessive volatility in the currency.

'Speculative and flock-driven fluctuations are a big blow to confidence,' Ms Hu told a forum in Shanghai.


[Comment: The problems of economics are complex and inter-related. You keep wages low to encourage investment in manufacturing. But as the economy improves, the workers are no longer satisfied with low wages and demand higher wages. But if higher wages does not come with higher skills, there are other countries with workers who are willing to work for less, and the factories go where the labour is cheapest. Then what would China do? They need to skill-up. Then they find they are competing at the next level. But the next level of jobs have to be attracted to come in. Until there is enough jobs, they workers go off to foreign lands in search of better jobs. And compete with the indigenous labour force in those foreign lands. Like Singapore. And the workers in Singapore find their wages depressed because of the cheap imports and wonder if they should be protected. But if we protect our jobs by keeping the foreigners out, then the manufacturers will move to where production costs is cheapest. If imported labour keeps us cheap and competitive, then Singaporeans will still have jobs alongside the foreigners. But if we have no imported labour, and we demand higher wages for low-end jobs, the jobs will move offshore.

The wage supplement that the govt gives to the low wage worker has been called a subsidy to the employers. In a sense it is welfare - except we get commercial operators to hire Singaporeans cheap, then we top up the wages. It is not much different than paying employers to employ workers.]