Uniquely Singapore: staff shortage and the foreign worker crunch

Oct 26, 2011
 
special report
Tough to meet orders
 

AN UNUSUAL quiet has settled on the once bustling production floor at Apex Technologies; machines that once hummed with activity lie dormant, accumulating dust.

The lack of activity is not due to the usual suspect of falling orders, but to a shortage of workers to operate the machinery, said managing director Alan Hoong.

The Toa Payoh precision engineering firm makes moulds for the semiconductor industry, employing mainly foreigners.

It had about 60 on the payroll a year ago, but that has fallen to around 35.

The factory used to run two shifts, with one worker manning one machine, but Mr Hoong has had to combine the two shifts into one and get each employee to operate multiple machines.

Even with this radical revamp, the company is struggling to regain the level of productivity it once had.

'It is quite drastic. Even right now, we are having difficulty filling orders,' Mr Hoong said, even with sales dropping due to the global economic slowdown.

He estimated that the company has lost about 30 per cent of orders due to the staff shortage.

Mr Hoong said it takes anywhere from six to 12 months to get workers up to speed because of the level of training required. And while foreign workers are hard to employ, locals are simply not staying on.

He has tried all avenues, from hiring local ex-convicts to older workers, but most give up after a few days of training.

'Most don't have the patience - they quit halfway and become property agents,' he said.

The labour supply headache extends to senior staff as well, with foreigners who had spent almost a decade at the company working their way up to become supervisors, group leaders and project managers having to go.

'We spent so many years training them, and they were willing to stay on, so imagine the relationship, trust, goodwill.

'Now, the work permit gives us a two-year term, but by the time the workers are trained enough to be independent, we have to send them back,' said Mr Hoong.

'I feel helpless, and angry.'

He said Apex Technologies has explored the possibility of moving into automation, but it would cost around $10 million, which the company cannot afford at this moment.

'That (automation) needs a much higher skilled person to manage, but that is my only hope. Right now, I have foreigners willing to undergo the training, but locals don't want to,' he said.

MELISSA TAN



Plenty of customers, but not enough staff

MR WEI CHAN, founder of Next Door Deli in Ang Mo Kio, is beset by various problems, but a lack of customers is not one of them.

It is quite the opposite, in fact. He has had to put expansion plans on hold, and his shelves are half empty.

The crux of the problem is that Mr Chan, 47, also the business development director of popular bakery Pine Garden's Cake and Vietnamese delicatessen Baguette, has been unable to find vital new employees in recent months.

Despite spending up to $4,000 on advertising each month, he is still looking to employ eight more staff, including bakers and drivers for the three businesses.

In total, they have 38 staff, of whom 20 are local. The 18 foreigners include Malaysians, Chinese and Myanmarese.

 He told The Straits Times: 'I would love to make kueh. I have the recipes, but I simply do not have the manpower. For my deli, I would want to operate for longer hours on the weekends, if possible.

'I could also operate my machines 24/7, and that would increase production by a lot more. The opportunity cost of not having enough employees is really high.'

Mr Chan actually prefers to hire Singaporeans because foreigners who have been trained to bake or cook may eventually not have their S-passes renewed.

The cost of hiring a foreigner works out to be the same as a local, after including the cost of housing and the levies.

A baker can earn from $2,200 to $2,500 a month.

'Singaporeans simply are not interested in being bakers. When they do actually turn up for the interviews, we end up being 'interviewed',' he said.

Some of the questions the job seekers have asked Mr Chan include 'Does the bus stop in front of your shop?' and 'Can I get a cash advance?'.

He likens the situation to how households in Singapore no longer employ Singaporean maids.

'Can you find Singaporeans who want to be maids? There are jobs that we don't want to do, and we have to look elsewhere. By restricting the number of S-passes and E-passes, it is really hurting our business,' he said, referring to the various types of employment passes.

Automation is also not a real solution for his bakery and deli. Although productivity can be improved by 3 per cent to 4 per cent, there are some processes that still require the human touch.

'Can a robot refill my salt and pepper shakers? Or do that?' he said, pointing to an employee who was wiping dust off one of the decoration pieces in Next Door.

'Customers love our bakery for customised cakes. A robot cannot do that for us,' he said.

MAGDALEN NG


Firms feel impact of foreign worker crunch
Businesses protest, but some economists believe the limits are necessary
 
 By Aaron Low, Magdalen Ng & Melissa Tan

WINNING a $3 million contract should have been a triumph for Mr Robert Goh's electrical engineering business, but the foreign worker levy is ramping costs up so high that the 15-year-old company's future is in doubt.

 SJ Thames Engineering employs about 20 foreigners for technical and basic engineering work, but once-healthy margins are being squeezed hard by the levies.

The cost per foreign worker is about $2,000 to Mr Goh. This cost includes $250 for lodging, salary of about $900 and a levy of $450.

'But even if I offer that amount, I can't get a local to join,' said Mr Goh, who placed an advert recently for an engineering job that attracted just six Singaporeans out of 160 applications.

He said that implementing productivity improvements is not that straightforward as the work is labour-intensive.

Mr Goh's concerns are mirrored across the business community as disquiet increases over government measures to slow the flow of foreign workers.

There have been a series of moves over the past 12 months to make it costlier for companies to hire foreign workers, both at the unskilled and semi-skilled levels.

At the lower end of the skills scale, the Government is raising the levies of Work Permit holders. Companies will have to pay between $130 and $320 more a month for each foreign worker by July 2013, depending on the company's sector.

At the higher end, the Manpower Ministry is raising the salary criteria for Employment Pass holders to level the playing field for Singaporeans competing with foreigners for the same jobs.

This is to ensure that Singaporeans remain the core of the workforce, Deputy Prime Minister and Manpower Minister Tharman Shanmugaratnam has said.

Tax breaks and incentives were also implemented alongside the foreign worker policy changes to entice firms to increase productivity by investing in technology.

The main objective of these measures is to wean companies off cheap foreign labour as the country and its infrastructure cannot absorb infinite numbers of workers, said economists.

They are also meant to help raise productivity and indirectly increase salaries of Singaporeans.

The Government wants to lift real wages by 30 per cent over the next decade, largely through increases in productivity.

The impact of the measures is already showing up. A Citigroup report found that 130,000 non-residents entered Singapore in 2007, while 191,200 came here in 2008. In the recession year of 2009, this dropped to just 57,000.

Last year, even when the economy recovered and grew at 14.5 per cent, the number was even lower at 51,300.

And the latest rounds of tightening are likely to choke the numbers even further, even though the Government has said the economy must stay open to foreigners.

The prospect of not getting access to foreign workers is clearly worrying many bosses.

In a rare show of public disapproval, the major business associations have issued statements in the past month highlighting their concerns, warning that without access to manpower, companies are thinking of packing their bags.

The strongest warning came from the Singapore International Chamber of Commerce, which represents multinational firms. It said its members are watching the foreign worker situation carefully.

Chief executive Phillip Overmyer said: 'If this continues, you would probably see some companies shrinking their Singapore operations over the next few years, and this would mean fewer jobs for Singaporeans.'

Singapore Chinese Chamber of Commerce and Industry president Teo Siong Seng told The Straits Times that businesses can see that Singapore cannot simply just take in more foreigners every year.

'But many firms are asking, 'If locals don't want to work here, why is the Government restricting foreign workers to these sectors?' Shouldn't there be a more flexible approach, to look at each sector?' said Mr Teo.

Some companies such as contract manufacturer VDL ETG Singapore have been successful in entering higher value markets and switching to more efficient modes of production, but many others are struggling to do so.

The basic problem most have is being unable to attract locals in the first place, said marine firm BH Global Marine.

Executive chairman Alvin Lim told The Straits Times: 'We are willing to pay $2,500, higher than the $2,000 we pay for foreigners, for a new local, but they tell us, 'Saturday, Sunday I don't work. Go out to sea to troubleshoot, very tough, cannot'.'

As a result, the company has set up a branch in China, where it needs to pay only $1,000 for an engineer, he said.

'In Singapore, we try to get Singaporeans, but if we cannot get, then what can we do. No choice but to move overseas,' said Mr Lim.

Despite protests from businesses, economists believe pain is inevitable if Singapore wants to move up the productivity ladder.

Lee Kuan Yew School of Public Policy economist Hui Weng Tat said Singapore should focus on 'industries and businesses in which we have a comparative advantage'.

'Export-oriented, labour-intensive businesses and industries that thrive on relatively cheap labour should be restructured or relocated overseas. This may be painful in the short term, but necessary for the long-term good,' said Professor Hui.

But Mr Lawrence Leow, president of the Association of Small and Medium Enterprises, pointed out that restricting foreign workers affects small businesses and may, in the longer term, hit the entrepreneurial dreams of aspiring businessmen.

He said: 'It is about the whole eco-system and whether the Government remains friendly to business. But if it gets too hard, people will just pack up and chase their dreams elsewhere.'


Higher costs may force MNCs to move
 
THE increased foreign worker levy is affecting not just smaller firms, but causing pain for some multinationals as well.

Operational costs at ASM Technology Singapore, a subsidiary of the Dutch-owned ASM International, have increased by 5 per cent to 7 per cent year-on-year.

The average starting pay of an engineer ranges from $2,700 to $3,000 a month. The increased levy of $200 is more than 7 per cent of the total salary.

The semiconductor equipment manufacturer has approximately 1,100 employees at its Yishun site - two-thirds are engineers, and about 12 per cent of all employees are foreigners.

Mr Patrick Lim, ASM's vice-president for corporate services, told The Straits Times: 'Our manpower and production are not immediately affected by the increased levy because we can still afford to pay.

'But over time, the rising costs will not be something that we can ignore.'

Mr Lim said Singapore's competitive labour costs have always been a draw for multinationals, but once these expenses rise too high, the companies will have to look elsewhere.

Relocation is an option that cannot be ruled out for ASM Technology if costs continue to increase.

'Singapore's problem is also compounded by our strong currency. Put these two factors together, Singapore is no longer attractive compared to places like Hong Kong or China,' said Mr Lim.

'Once companies start to move their (research and development) teams out of the country, there will be less activity in the manufacturing sector, and Singapore will lose its competitive advantage.'

[As Singaporeans become more selective about the jobs they will do, perhaps these jobs should move out of the country. However to be replaced with jobs where Singaporeans have a comparative advantage is easier said than done. What are our comparative advantages? We criticise, complain, and denigrate. But how many movie critics can Singapore support?]

Bikes' revival provokes tension in Germany

23 October 2011

BERLIN: Germany might still be known for its high-speed autobahns, but in cities, bicycles are now so popular that a war of words has broken out between drivers and cyclists over who rules the road.

In Berlin, more than 500,000 of the 3.5 million inhabitants get on their bikes daily to move about the city, twice as many as a decade ago, making the most of an extensive network of cycle paths.

On Unter den Linden, the capital's celebrated, tree-lined central boulevard, cyclists zoom up and down between the pedestrians and hordes of tourists admiring the Brandenburg Gate.

'Beer bikes' pedalled simultaneously by about a dozen or so people who drink beer while cycling around the city are also a common sight in the German capital.

"There is a real problem with the cyclists who do not respect the rules, who zigzag and ride any old way. They are becoming less and less civilised," Tahmaures, a 58-year-old taxi driver, fumed.

Germany traditionally conjures up images of a nation of car lovers, but the Transport Ministry said there had been "a renaissance of the bicycle since the beginning of the 90s".

And it is concerned about the high number of accidents suffered by cyclists.

One in three accidents in towns involved bicycles last year, and the rate was one in four for fatal accidents, according to the German Statistics Institute.

"Infrastructure for traffic is no longer suitable. The growing number of cyclists requires a new concept for urban organisation," Claudia Nolte, spokeswoman for the German Automobile Club for the Berlin-Brandenburg region, said.

In 2011, the German federal state devoted 86 million euros (118 million dollars) to cycling infrastructure.

Critics, however, complain that cyclists tend to run red traffic lights, cycle the wrong way up one-way streets and take up too much of the pavement without regard for pedestrians.

"Aggressiveness is not solely the domain of bikes, there is also a lot of rudeness by drivers who do not pay attention to bikes," Roland Huhn, of the German cyclists' association, said for his part.

In a book published earlier in the year, author Annette Zoch criticised cyclists for hiding behind the excuse that their chosen mode of transport is environmentally-friendly.

"On a bicycle, man becomes a monster," Zoch said in her ironically written "Book For Those Who Hate Bikes", while the respected Der Spiegel weekly has devoted its front page to conflicts caused by the rise of the bike.

In Freiburg, the southwestern German city which prides itself for its strong ecological achievements, a third of all movement around the city is done by bicycle which authorities have promoted since the 1970s.

A giant car park near the train station can even host 1,000 bicycles.

Some of the city centre's narrow streets, though, have become so blocked by bikes, pedestrians can hardly get through and a ban on the parking of bicycles has been imposed in some places.

"Relations between pedestrians and cyclists have rather deteriorated" recently, Stefan Lieb, spokesman of the pedestrians' association Fuss e.V., said, adding it was mainly because bike use had grown so much.

Some German towns and cities, including Berlin and Munich, have imposed speed limits of 30 kilometres an hour in certain areas or turned over certain streets for sole bike use.

- AFP/de

[So sg cyclists are not the only ones.]

Asia's next battleground: Water

Oct 24, 2011


Its scarcity could spark major conflicts, warns expert

By Ravi Velloor

NEW DELHI: It may seem odd to talk about it at a time when television screens are filled with scenes of the worst flooding that Bangkok has suffered in 50 years.

But a new book by a respected voice on Asian strategic affairs warns that a scarcity of water is set to become Asia's most defining crisis by the middle of the century, one with the potential to trigger major conflicts.

As Asia continues to live beyond its means where water is concerned, accentuating its scarcity, disputes and competition over bodies of water that cross the boundaries of various countries pose a greater threat to peace and stability in a continent already marked by festering territorial and resource disputes, Professor Brahma Chellaney says in the first such wide-ranging study on water and peace.

Add to this the fact that people are using more water and Asia is expected to bear the greatest impact of global warming, and the region faces an incendiary situation.

'National reliance on oil can be reduced through other sources of energy,' Prof Chellaney says in Water: Asia's New Battleground. 'There is no such hope with water. Water has no substitute.'

Worries over water have begun to manifest in myriad ways across Asia.

Pakistan has sought international arbitration to stop India's run-of-the-river projects upstream on the Indus River, despite a treaty signed in 1960 that has survived even the worst lows in their bilateral ties.

India itself never fails to raise its concerns with China about its plans to build the world's biggest dam along the Brahmaputra River, which originates in Tibet and flows through India before reaching Bangladesh.

Indochinese states are warily watching China's massive river engineering plans to take moisture to its parched regions by diverting water from elsewhere.

In West Asia, some disputed or occupied territories such as the Golan Heights and the West Bank draw their strategic value as much for their water wealth as their advantageous location.

Prof Chellaney of New Delhi's Centre for Policy Research says the forestalling of water wars demands a cooperative Asian framework among river basin states, so that they work towards a common ownership of shared resources and share the benefits securely.

In this context, he points out, no country is more central to the issue than China, which has been noticeably cool on a multilateral approach to water, as, for instance, at the Mekong River Commission.

Smaller states, for this reason, fear that China may be following a strategy of 'divide and conquer'.

'No other country in the world matches China's position as a multi-directional, transboundary water provider,' says Prof Chellaney. 'Significantly, the important international rivers of China all originate in ethnic- minority homelands, some of which are racked by separatist movements.'

He says China's increasing assertiveness on such issues will prompt a number of regional actors to form a web of interlocking partnerships to act as a discreet check on its exercise of power.

'As the dispute over the South China Sea shows, this may actually bring other claimants together in opposition to Chinese policy and make them turn to the United States for security assurances,' he says.

That said, it will be impossible to turn the competition for water into cooperation without China's active support for sub-regional water sharing and cooperative-management mechanisms. But for that to happen, China will need to drop its allergy to terms such as 'internationally shared water resources' and for legally binding accords on water.

Prof Chellaney says: 'To cite one example, China needs to go from being a 'dialogue partner' to becoming a member of the Mekong River Commission, so that it can work with its (neighbours)... on a water management plan for the mutual benefit of all.'


velloor@sph.com.sg

Is Population Growth a Ponzi Scheme?

By Joseph Chamie
Thursday, March 04, 2010
The Globalist

The basic pitch of those promoting population growth is straightforward in its appeal: "More is better." Joseph Chamie, who has spent a lifelong career as a demographer, including 12 years of service as the director of the United Nations Population Division, finds that more is not necessarily better.

Bernie Madoff's recent Ponzi scheme has drifted out of the world’s headlines. However, there is another even more costly and widespread scheme — "Ponzi Demography" — that warrants everybody’s attention.

While it may come in many guises, Ponzi demography is essentially a pyramid scheme that attempts to make more money for some by adding on more and more people through population growth.

While more visible in industrialized economies, particularly in Australia, Canada and the United States, Ponzi demography also operates in developing countries. The underlying strategy of Ponzi demography is to privatize the profits and socialize the costs incurred from increased population growth.

["Privatise the profit and socialise the cost" was the specific indictment of the bank bailout. Where the banks made huge bets for huge profits, but when the bets when the wrong way, they suddenly became too big to fail and got bailed out. This has nothing to do with and does not explain "Ponzi Demo". This happened because of lax financial regulation that allowed banks to gamble. Throwing in a "Ponzi Demo" theory and conflating it with the bank bailout sounds like the first step in shifting the blame away from the investment banks and to start blaming immigrants.

How does Ponzi Demo privatise profits and socialise costs? He does not say. He simply assumes that you know what he means. It's like a spiritual medium. Someone with a name starting with "R" is calling...]

The basic pitch of those promoting Ponzi demography is straightforward and intoxicating in its pro-population growth appeal: “more is better.” However, as somebody who has spent a lifelong career as a demographer, including 12 years of service as the director of the United Nations Population Division, I find that more is not necessarily better.

As has been noted by Nobel laureate economists Joseph Stiglitz and Amartya Sen as well as many others, current economic yardsticks such as gross domestic product (GDP) focus on material consumption and do not include quality-of-life factors.

Standard measures of GDP do not reflect, for example, the degradation of the environment, the depreciation of natural resources or declines in individuals’ quality of life.

[The writer is a hack. Brilliant, but still a hack. Using Madoff and Ponzi as the hook, he then strings together a series of soundbites that taps upon the zeitgeist or shared consciousness of his readers. The first two soundbites are drawn from environmental issues and are valid concerns, but it is generally irrelevant to the Ponzi Demo hypothesis. But it's nice to pull in the "environmentalist" support.

The third is a humanistic concern. While valid, it's like saying, "the doctor takes my pulse and blood pressue, but those tests don't tell me about the quality of my life!"]

According to Ponzi demography, population growth — through natural increase and immigration — means more people leading to increased demands for goods and services, more material consumption, more borrowing, more on credit and of course more profits. Everything seems fantastic for a while — but like all Ponzi schemes, Ponzi demography is unsustainable.

[More borrowing, more credit is specific to the US and UK, and also perhaps the PIGS in Europe who were emulating the US. It is not a necessary, or even a supplementary part of the Pop growth strategy. ]

When the bubble eventually bursts and the economy sours, the scheme spirals downward with higher unemployment, depressed wages, falling incomes, more people sinking into debt, more homeless families — and more men, women and children on public assistance.

[Again conflating the sub-prime triggered financial crisis that rose from poor financial practices and regulation with population growth policies. Oh wait. Maybe I'm being hasty. Which bubble is he talking about? The tech bubble in 1998? The Asian Financial Crisis in 1997? The Sub-prime housing bubble in 2008? They all have different catalysts and causes and if the writer wants to make a case that the common thread in all these bubbles were because of the Ponzi Demo effect, he needs to provide proof. Otherwise, the other theory that I have, Human Greed works as well as an underlying theory.]

That is the stage when the advocates of Ponzi demography — notably enterprises in construction, manufacturing, finance, agriculture and food processing — consolidate their excess profits and gains. That leaves the general public to pick up the tab for the mounting costs from increased population growth (e.g., education, health, housing and basic public services).

[Analyse this para carefully. He is saying that construction, manufacturing, finance, agriculture and food processing industry are advocates for population growth. Really? McDonald's is an advocate of population growth? Apple is an advocate of population growth?Nabisco? Proctor & Gamble? Ford? Goldman Sachs? Citibank?

And when the bubble burst, these "advocates" will consolidate their excess profits and gains? In what world did this happen? Which one of these advocates were consolidating their excess profits and gains when Lehman Brothers went bankrupt?

As for the mounting costs, see below.]

Among its primary tactics, Ponzi demography exploits the fear of population decline and aging. Without a young and growing population, we are forewarned of becoming a nation facing financial ruin and a loss of national power.

Due to population aging, government-run pensions and healthcare systems will become increasingly insolvent, according to advocates of Ponzi demography, thereby crippling the economy, undermining societal well-being and threatening national security.

[This is a welfare state US social security issue. The problem does not arise from pop growth, but rather because the underlying policies of US social security system has the young of today paying for the benefits of the old today. The question then is who will pay for the social benefits of the young today when they get old? That's why they need population growth. 

Even so, there may be evidence that the US system would have been sustainable except for corruption.

To be sure the CPF system is a save for your retirement plan that is not dependent on a govt pension or retirement plan.

As for Healthcare, the US govt spents 17% of their budget, Singapore spends about 5%. And our healthcare is actually more accessible.]

Low birth rates, especially those below replacement levels, are considered a matter of national concern. Without higher fertility rates and the resulting population growth, the nation, it is claimed, faces a bleak and dreary future.

So Ponzi demography calls for pro-natalist policies and programs to encourage couples to marry and to have more children, which will lead to the promised sustained economic growth.

In addition to financial incentives and other benefits for childbearing, appeals are also made to one's patriotic duty to have children in order to replenish and expand the homeland: “Have one (child) for mum, one for dad and one for the country.”

In addition to measures to increase fertility levels, Ponzi demography also turns to immigration for additional population growth in order to boost companies' profits. The standard slogan in this instance is “the country urgently needs increased immigration,” even when immigration may already be at record levels and unemployment rates are high.

[Employment rates in SG are low even when immigration is high.]

Among other things, increased immigration, it is declared, is a matter of national security, long-term prosperity and international competitiveness. Without this needed immigration, Ponzi demography warns that the country’s future is at serious risk.

[Here you have to wonder. Who the fark goes around saying increased immigration is a matter of national security?]

Another basic tactic of Ponzi demography is a pervasive and unrelenting public relations campaign promoting the advantages and necessity of an increasing population for continued economic growth. Every effort is made to equate population growth with economic prosperity and national progress.

"Economic growth requires population growth" is the basic message that Ponzi demography wants the public to swallow. No mention is made of the additional profits they reap and the extra costs the public bears.

[No mention is made because... it doesn't happen! See comments above on the profiteering of advocates of population growth. See again how clever he is? "They don't mention it" thus implying that it happens? That you know it happens? ]

Attempts to question or even discuss Ponzi demography are denigrated and defamed to such an extent that concerns about population growth become radioactive. Politicians, journalists and environmentalists, for example, choose by and large to sidestep the entire issue.

[REALLY? Environmentalists would side-step the issue? You must be hanging out with the wrong kind of environmentalists. No, what I hear from environmentalists is a concern that increasing population and urbanisation will severely stress the biosphere. Oh you mean sidestep your theory of Ponzi Demo like it was dog turd? Oh yes, I can see that happening.]

When confronted with environmental concerns such as climate change, global warming, environmental contamination or shortages of water and other vital natural resources, the advocates of Ponzi demography typically dismiss such concerns as unfounded and overblown.

[Actually, in the US, the people against immigration tend to be Republicans, and the people who tend to dismiss climate change evidence are... also Republicans.]

And they claim there is no scientific basis, or they obliquely stress “innovation,” ingenuity and technological fixes as the only appropriate and workable solutions.

Many are complicit with Ponzi demography or at least tacitly support its goals. Few politicians, for example, are able to resist promises of campaign financing, the appeal of increased numbers of supportive voters, prospects of increased tax revenues and the political backing of pro-natalist and pro-immigration lobbyists and special interest groups.

[Pro-natalist and pro-immigration in the same group? Pro-natalist would be pro-life and these tend to be Republicans. But they tend to be Anti-immigration. Incredible that the pop growth party can pull together such diverse political enemies.]

Many environmental groups are also reluctant to take up or even touch the volatile subject of population growth, especially those that have been burned on this issue in the past. Such groups fear possibly offending some members and donors, which might undercut their organizations and efforts.

[In Wikipedia, these are called weasel words. Vague accusations, nameless victims, shadowy perpetrators. Actually, the whole article is full of weaselly words and statements.]

Despite its snake-oil allure of “more is better,” Ponzi demography’s advocacy for ever-increasing population growth is ultimately unsustainable. Such persistent growth hampers efforts to improve the quality of life for today’s world population of nearly seven billion people as well as for future generations.

[There is some truth in this article. But it is the truth of a broken clock. That is, even a broken clock is correct twice a day. And if you write long enough, sooner or later, you will accidentally say something that is right. Though maybe for the wrong reason. Does he think China believes its population should continue to grow? Oh wait, he probably doesn't know or care. But no. China would like it's population to stop growing, but there is a natural momentum that cannot be stopped without horrific humanitarian issues. So it will continue to grow for a while. China's problem is not a lack of population growth, but feeding and housing and providing jobs for them all.

But yes, SG is pursuing a replacement level birthrate supplemented with some immigration in the best case scenario. However it is not ever-increasing population growth indefinitely. There will be some optimal sustainable stable population level. ]

Moving gradually towards population stabilization, while not a panacea for the world’s problems, will make it far easier to address problems such as climate change, environmental degradation, poverty and development, human rights abuses and shortages of water, food and critical natural resources.

Fortunately, most couples around the world have chosen — or are in the process of choosing — to have a few children rather than many and to invest more in each child’s upbringing, education and future well-being. Nations need to make the same vital transition with respect to their populations.

The sooner nations reject Ponzi demography and make the needed gradual transition from ever-increasing population growth to population stabilization, the better the prospects for all of humanity and other life on this planet.

[And he ends with some handwaving to the hot button topics of the day. Wow, he even manages to wave ti human rights abuses. Fantastic!

Seriously, taking this at face value it is a nice article, not terribly bad and not terribly insightful. Read it, mull over the ideas, toss it. 

But if you are suspicious type like me you wonder. There are a lot of red herrings, nudge-nudge wink-wink, soundbites, shared and assumed knowledge, but very little actual evidence of a Ponzi Scheme. The so-called advocates of ponzi demo are non-starters. I don't see Citibank asking the US govt to be pro-immigration anymore than I see DBS asking the SG govt to let in more immigrants. 

So in summary, if there is a Ponzi Scheme based on population growth, the parties he charges as being the advocates of such a scheme are not in fact the advocates. He claims that these advocates make excessive profits during boom times and when the bubble burst they consolidate their profits. They don't. In a bust, almost everybody suffers.]

New foreigner hiring rules 'put off MNCs'

Oct 21, 2011


Resulting staff shortage may cause firms to pack up or scale back, says business group

By Yasmine Yahya

MULTINATIONALS are finding it so hard to find skilled staff in the light of the new rules on hiring foreign workers that some may scale back their operations here.

That was the stark warning from the Singapore International Chamber of Commerce (SICC), which has called on the Government to review the policies.

It suggests that the measures, which apply to all sectors in a standard form, be fine-tuned and tailored for specific industries.

The SICC's call echoes one earlier this week by the Singapore Business Federation, which raised concerns about the foreign worker levy.

The worker shortage appears to be showing up across the board, from a lack of chambermaids in the hotel sector to a need for engineers for manufacturers and drivers for logistics companies.

SICC chief executive Phillip Overmyer told The Straits Times multinationals and big local firms from many industries are finding it very difficult to fill vacancies.

Mr Overmyer cited the case of two hotels at the integrated resorts that held a recruitment drive last year to find up to 50 people in service and maintenance roles.

The hotels have to abide by a strict quota of foreign workers and so need to find Singaporeans instead.

About 400 Singaporeans applied for various positions but not all turned up for the first round of interviews and even fewer for subsequent interviews.

By the end of the process, only four people accepted jobs and, after just a week, two of them quit. The other two followed within a few weeks.

Mr Overmyer said the hotels remain understaffed.

'Because there are so many other jobs, most Singaporeans don't want to take up service jobs. Singaporeans don't want to wait on people or work shift hours,' he said.

The result has been feedback from guests slamming service standards as 'terrible', he added.

'This is the kind of thing we're hearing more and more at the integrated resort hotels - and this is an industry we just created only a few years ago.'

Mr Overmyer noted that companies in sectors such as manufacturing, oil and gas, education and construction engineering face similar challenges.

Even though Singapore is a logistics and distribution hub for many companies, it is tough for bosses to find locals willing to work as drivers or warehouse operators, he said.

He noted that the foreign worker policy could have consequences throughout the economy, beyond the immediate affected firms.

Mr Overmyer also pointed to international schools, such as the Singapore American School and the Overseas Family School, which will have to meet stricter criteria when selecting and hiring teachers from next year.

Principals are concerned that some of their staff might not make the cut and it would be tough to find replacements. That in turn could make Singapore a less attractive place for expatriates to work and raise their families.

Eventually, if it becomes increasingly difficult for multinationals to bring in foreign employees, they will likely move their Asian headquarters to Hong Kong or another neighbouring city, he said.

The recent moves made by the Government to tighten controls on the hiring of foreigners have made many of these firms nervous.

'Nobody is packing up just yet, but they are waiting and running the numbers. If this continues, you would probably see some companies shrinking their Singapore operations over the next few years, and this would mean fewer jobs for Singaporeans,' Mr Overmyer said.

The SICC is surveying member companies on foreign manpower issues.

Its preliminary findings show more than half of the 120 companies polled so far saying that access to foreign talent was an important factor in helping them decide to set up or expand their operations here. And while they prefer to hire Singaporeans, they often find it hard to recruit and retain locals.

Some companies are considering outsourcing certain business operations but they fear this will not be a viable solution as those third-party operators are also likely facing similar manpower issues, Mr Overmyer said.

The SICC hopes the Government will take a more targeted approach towards its foreign worker policies, he added. The policies should be industry-specific and not so broad that the same policy applies to all sectors.

'We might be able to find a way to shrink some industries but not others. If we don't take action to allow the big guys to play as they've been playing here for the past several decades, I'm very much afraid they will leave in a few years.'

Mr Gan Chin Yean, managing director of US precision engineering firm Interplex, said the problem of finding staff is real, even for a multinational like his.

'It's just difficult to get locals... So we may have to move our operations to Malaysia or elsewhere if the foreign worker policy continues to get worse.'

yasminey@sph.com.sg

Big boys call the shots in EU financial crisis

Oct 19, 2011


commentary

Tiny Slovakia forced to join bailout despite doing everything right

By Jonathan Eyal

SMALL countries are supposed to know when to shut up and simply do as they are told.

At least that is the opinion of Mr Jose Manuel Barroso, the European Union's top-ranking official, who was infuriated last week when Slovakia, one of the EU's newest member states, had the temerity to reject a bailout plan for Europe's financial crisis. 'Sovereignty is fine,' Mr Barroso lashed out, 'but you cannot allow a small stakeholder in the community to slow down all the others.'

Slovakia ultimately relented: Under intense pressure from its neighbours, its Parliament duly voted again, approving the bailout proposals.

However, ordinary Slovaks have every right to feel aggrieved. The way big European countries treat their smaller allies is little short of appalling. An EU which was created in order to ensure the independence and equality of its members is now trampling on these very principles.

Slovakia, with a population of 5.5 million, may account for only 2 per cent of the EU's total population, but far from being the object of ridicule, it should be hailed as Europe's poster child.

The Slovaks languished under the colonial rule of Austria and Hungary for centuries and, more recently, were part of a union with the Czechs in what used to be called Czechoslovakia. That union failed and, in 1992, the Czechs and Slovaks parted ways.

In a near-mirror image of Singapore's historical experience, the Slovaks were initially told they were too small and resource-poor to thrive on their own. And, just like Singapore, they proved their doubters wrong. Slovakia attracted massive investment from overseas; it is now one of Europe's top car producers. Although still relatively poor, Slovakia's economic growth rate is among the highest in the industrialised world. It has shown that ingenuity and good governance count for more than sheer size.

When Slovakia became the first Eastern European country to join the euro currency zone in 2009, it took its obligations seriously. Its government reduced its debts and stabilised inflation, a Herculean feat which won universal praise.

Yet, to their horror, the Slovaks soon discovered that other euro member states exercised no such responsibility; in fact, they continued to borrow and spend freely. And, when Greece, Ireland and Portugal faced bankruptcy, the Slovaks were suddenly told they must pay into a fund to bail out these countries.

The sums involved are considerable: Slovakia's contribution is €7.7 billion (S$13.5 billion), a mere 1 per cent of the total bailout fund, but a lot of money for a small country. More importantly, Slovaks are incensed by the idea that they should bail out countries which are far richer, and which have only themselves to blame for their current predicament.

European officials brush aside such objections. To them, joining the euro zone club entails both benefit and responsibility.

There is no doubt that Slovakia derives enormous benefits from euro membership: It operates a currency with a global reach, it is able to borrow far more cheaply and has gained the credibility of a mature economy, thereby attracting further investment. Still, the argument that, as a result, it must now pay for its bankrupt euro partners remains false.

Existing European treaties forbid the bailout of any country and ban the European Central Bank from lending to individual states. So, Slovakia is perfectly within its rights to say no, because the current effort to save the euro is being undertaken despite, and not because of, existing legal obligations.

Still, the Slovaks have accepted that if they wish to save the European currency system, they have no choice but to cough up the cash. Yet what worries them is that the sums recently pledged are already considered insufficient; much larger figures, going into the trillions of euros, are now being bandied about.

All the initiatives on saving the euro are being launched by two big countries: Germany and France. They decide how much money should be offered, to whom and on what conditions.

What is more, an informal division exists between Western and Eastern Europe. The objections of Western European countries are always taken seriously. For instance, not one European politician dared to accuse Britain of irresponsibility when it blocked the idea of introducing a tax on financial transactions.

Similarly, no wave of criticism fell on France, the Netherlands or Ireland when they rejected a project for an EU constitution back in 2005. And no one condemned the Germans when they recently subjected Europe's financial arrangements to a decision of their own national constitutional court.

But when Slovakia dared to raise objections, it was treated much like an irritant. Literally minutes after its Parliament voted against paying its money last week, German Chancellor Angela Merkel defiantly announced that the financial bailout project 'will go ahead'.

Mrs Iveta Radicova, the Slovak Prime Minister, paid for the passage of the bailout vote with her job: She pushed through the deal, but her government collapsed, and fresh elections are due next year. Yet, the rest of Europe is mistaken if it believes this is the end of the story.

Currently, Germany and France's plan to remove the right of individual countries to make any decisions in future economic affairs, and transfer this to a European committee - which, inevitably, will be dominated by the bigger members - is creating an uproar throughout the continent. In their rush to save the euro, Germany and France may end up tearing the EU apart.

The sorry treatment of Slovakia carries a warning for other regional organisations inspired by the EU. Bodies such as Asean are frequently criticised for taking decisions by consensus because it supposedly slows down progress.

However, as the EU's current experience indicates, any arrangement which ignores the interests of individual states because they are small is not only dangerous, but also deeply unjust.

Just ask Slovakia, which did everything right and has the law on its side, but still finds it difficult to be heard.


Jonathan.eyal@gmail.com

Sylvia Lim, PAP MPs spar over happiness gauge

Oct 18, 2011


parliament

By Tessa Wong

WORKERS' Party chairman Sylvia Lim locked horns with PAP MPs Cedric Foo (Pioneer) and Heng Chee How (Whampoa) yesterday over her criticism of the Government as too focused on gross domestic product growth, at the expense of Singaporeans' happiness.

In her maiden speech as an elected MP, Ms Lim (Aljunied GRC) said Singapore had co-sponsored Bhutan's resolution at the United Nations General Assembly titled Happiness: Towards A Holistic Approach To Development.

She wanted to know what measures the Singapore Government planned to put in place to measure happiness and how its policies over the next five years would be guided by such indicators.

She also observed that headline figures on GDP growth mask the 'harsh realities' for certain groups of Singaporeans.

These include the bottom fifth of households by income, a group whose wages have stagnated in the last decade, those who feel unfairly treated as compared to foreigners, families hit by divorce who are left homeless, as well as seniors who worry about health-care costs, she said.

She cited Singapore's low fertility rate as an example of a policy the Government would approach differently if it were more concerned about happiness.

Quoting an article published in The Straits Times last month, she said National University of Singapore economist Tilak Abeysinghe had found that - based on data from 1977 to last year - fewer children were born when home prices rose.

Ms Lim said yesterday: 'If the happiness and sustainability of Singapore's society is the overarching goal, then there's a need to unravel the exact relationship between high property prices and fertility and what responses might arrest or even reverse the decline in fertility rates.'

[As my stats professor explained many times, correlation is not causation. And in this case, there isn't even a consistent correlation. After the 2000 spike which was mainly due to the Dragon year phenomenon, the housing Affordibility Index (HAI) actually increased slightly (which means housing is more affordable), but TFR continued to crash. There is a relationship... if you ignore the inconvenient exceptions that cannot be explained.]

Her speech drew swift rebuttals from Mr Heng and Mr Foo. Mr Heng challenged her to come up with ideas to help Singaporeans pursue happiness.

Mr Foo questioned Ms Lim's choice of Bhutan as a model for Singapore to follow, pointing out that the landlocked Himalayan nation of 700,000 people has a per capita GDP of only about US$2,000 (S$2,500) compared to Singapore's, which is over US$43,000.

'I think the opposition member couldn't have chosen a more dissimilar country to compare Singapore with. We are exposed to the seas, exposed to the onslaught of competition from the world, we were dealt a different deck of cards... and we must find our own formula forward,' he said.

Mr Foo also pointed out that Bhutan was for many years a monarchy and held its first general election in 2008. Perhaps it was because Bhutan only has two opposition members in its legislature's Lower House that 'the people are very happy', he added.

Observing that happiness measures are meant to complement, not replace, GDP growth figures, he said: 'I want the opposition member, Ms Sylvia Lim, to clarify whether GDP growth is total baloney.'

Ms Lim said she did not say GDP was irrelevant as an indicator, but that international opinion showed it is 'inadequate to represent the state of happiness or sustainability or well-being of a society'.


[Other comments on the HAI-TFR "link" :
http://blog.iproperty.com.sg/housing-woes-affecting-birth-rates/
 
http://asiasingapore.blogspot.com/2011/09/rising-house-prices-and-declining.html

Before we can pursue happiness, we have to first define it.]

Presidential election needs more clarity: Alvin Yeo

Oct 18, 2011


parliament


THE recent presidential election has caused some confusion - starting with how the eligibility of candidates is determined, said Mr Alvin Yeo (Chua Chu Kang GRC). One question that arose was whether a cooperative is equivalent to a company.

Another was whether a senior position in a fund management company with assets under management - but not paid-up capital - of more than $100 million, could qualify someone as a candidate.

The first question was in relation to presidential candidate Tan Kin Lian and the other, Mr Tan Jee Say.

The Constitution requires candidates to serve at least three years as chairman or chief executive of a company with a paid-up capital of at least $100 million, or in a 'similar or comparable' position.

Mr Yeo observed that the three-member Presidential Elections Committee decides whether a candidate is in such a position, and its decision is final. He said he was not seeking to criticise the committee's decision.

But, he added, it seems incongruous that the statutory criteria is so open to interpretation, and the decision is made by three individuals without review by other bodies.

The Government should review the situation and consider if greater clarity is needed, he said.

Mr Yeo also addressed two other aspects: the president's duties and powers, and how elections should be run.

Candidates in the recent election had disagreed on the president's functions, and some voters may have been misled, he said. This, in turn, affected how the presidential campaigns were conducted.

'The election of our supposedly non-political president had strong political overtones to it,' he said.

Mr Yeo asked if candidates should be required not to have been members of political parties, nor to have taken part in political activities and contested elections for a minimum period of years.

He also asked if limitations should be put on campaigns to keep them non-political, so that candidates 'do not promise to do something if elected, which is not legally within their powers'.

JANICE HENG

Call to re-look pricing of new flats

Oct 18, 2011
parliament

Zainudin also wants Govt to help families, lower-income group


By Kor Kian Beng

GIVING Singaporeans affordable roofs over their heads was uppermost in the mind of Mr Zainudin Nordin (Bishan-Toa Payoh GRC) yesterday, when he called on the Government to re-look the way new HDB flats are priced, with a view to lowering the prices further.

He felt more could be done, especially in imputing the cost of land in the price formula.

Current home prices worry him, he said, because from listening to his residents he finds that Singaporeans are spending a large chunk of their incomes on paying their housing loans.

Beyond new flat buyers, he wants the Government to help two other groups.

One is the low-income.

The Government should restrict the resale of three-room HDB flats to only the low-income, as is the HDB's original intention, he said. Currently, there is no income ceiling for these resale flats unless buyers are applying for government loans or grants.

The other group are families who need cheap, temporary shelter while waiting for longer-term accommodation, like new flats to be built.

In his focus on affordable housing, Mr Zainudin wants the Government to 'seriously consider the pricing formula'.

'I agree that we have to impute a cost for the use of land to build flats, but on what basis? I don't think this question has been adequately debated,' he said.

Though government figures show Singaporeans spend a smaller proportion of their incomes on home loans compared to international benchmarks, he feels more could be done to ease their burden.

It would help increase their retirement savings, he added, noting that they also spend a large chunk on transport and education.

Singapore families who own new flats in non-mature estates spend an average 23per cent of their incomes on paying their 30-year home loans. Internationally, the rate is 30 per cent to 35 per cent.

Mr Zainudin also wants the pricing formula to be as transparent as possible. Doing so will assure Singaporeans that 'the Government is not out to make a profit through the sale of public housing'.

As for the resale prices of three-room flats to the low-income, he suggests prices be pegged to the original sales price plus the annual inflation rate.

Such a move would pave the way for these families to own flats, as well as exclude people who buy them 'as an investment or for speculation'.

kianbeng@sph.com.sg



[Haves and Have-nots. Restricting resale of 3-room flats to low income families would mean that 3-rm flat owners cannot ask for better price. This would be a drag on their attempt to upgrade. E.g. say they bought a 3-rm flat from HDB, after 10 years, they sell the flat back to HDB at a slight appreciation due only to inflation. Currently, they can get a very good market-based price for their flat, which would go towards offsetting their second bite of the cherry for an upgraded 4 or 5 room flat direct from HDB.
This would mean that it would be more difficult for them to upgrade, and they may not in effect upgrade, and they may not even be able to sell the flat because they can't afford to upgrade, and they would be less socio-economically mobile, being stuck in a 3 room flat for a longer time.
The current set up is a good compromise. HDB builds and sells at a discount 3-room flats to eligible low-income families. The flats rise in price and the low income family is able to sell the flat at a gain and buy another subsidised flat from HDB. The 3-rm flat is then released to the open market for higher income buyers to transfer their income to the low income family. This is redistribution of wealth. In a sense the govt has tapped into the private market to "subsidise" the low income family's upgrading.]

The instability of inequality

Unless relative economic roles of the market and state are rebalanced, protests will get more severe

by Nouriel Roubini

TODAY Oct 17, 2011

This year has witnessed a global wave of social and political turmoil and instability, with masses of people pouring into the real and virtual streets: The Arab Spring; riots in London; Israel's middle-class protests against high housing prices and an inflationary squeeze on living standards; protesting Chilean students; the destruction in Germany of the expensive cars of "fat cats"; India's movement against corruption; mounting unhappiness with corruption and inequality in China; and now the "Occupy Wall Street" movement in New York and across the United States.

While these protests have no unified theme, they express in different ways the serious concerns of the world's working and middle classes about their prospects in the face of the growing concentration of power among economic, financial and political elites. The causes of their concern are clear enough: High unemployment and underemployment in advanced and emerging economies; inadequate skills and education for young people and workers to compete in a globalised world; resentment against corruption, including legalised forms like lobbying; and a sharp rise in income and wealth inequality in advanced and fast-growing emerging-market economies.

Of course, the malaise that so many people feel cannot be reduced to one factor. For example, the rise in inequality has many causes: The addition of 2.3 billion Chinese and Indians to the global labour force, which is reducing the jobs and wages of unskilled blue-collar and off-shorable white-collar workers in advanced economies; skill-biased technological change; winner-take-all effects; early emergence of income and wealth disparities in rapidly growing, previously low-income economies; and less progressive taxation.

The increase in private- and public-sector leverage and the related asset and credit bubbles are partly the result of inequality. Mediocre income growth for everyone but the rich in the last few decades opened a gap between incomes and spending aspirations. In Anglo-Saxon countries, the response was to democratise credit - via financial liberalisation - thereby fuelling a rise in private debt as households borrowed to make up the difference. In Europe, the gap was filled by public services that were not fully financed by taxes, fuelling public deficits and debt. In both cases, debt levels eventually became unsustainable.

Firms in advanced economies are now cutting jobs, owing to inadequate final demand, which has led to excess capacity, and to uncertainty about future demand. But cutting jobs weakens final demand further, because it reduces labour income and increases inequality. Because a firm's labour costs are someone else's labour income and demand, what is individually rational for one firm is destructive in the aggregate.

The result is that free markets do not generate enough final demand. In the US, for example, slashing labour costs has sharply reduced the share of labour income in GDP. With credit exhausted, the effects on aggregate demand of decades of redistribution of income and wealth - from labour to capital, from wages to profits, from poor to rich, and from households to corporate firms - have become severe, owing to the lower marginal propensity of firms/capital owners/rich households to spend.

The problem is not new. Karl Marx oversold socialism but he was right in claiming that globalisation, unfettered financial capitalism, and redistribution of income and wealth from labour to capital could lead capitalism to self-destruct. As he argued, unregulated capitalism can lead to regular bouts of over-capacity, under-consumption, and the recurrence of destructive financial crises, fuelled by credit bubbles and asset-price booms and busts.

Even before the Great Depression, Europe's enlightened "bourgeois" classes recognised that, to avoid revolution, workers' rights needed to be protected, wage and labour conditions improved, and a welfare state created to redistribute wealth and finance public goods - education, health care and a social safety net.

The push towards a modern welfare state accelerated after the Great Depression, when the state took on the responsibility for macroeconomic stabilisation - a role that required the maintenance of a large middle class by widening the provision of public goods through progressive taxation of incomes and wealth and fostering economic opportunity for all.

Thus, the rise of the social-welfare state was a response (often of market-oriented liberal democracies) to the threat of popular revolutions, socialism, and communism as the frequency and severity of economic and financial crises increased. Three decades of relative social and economic stability then ensued, from the late '40s until the mid-'70s, a period when inequality fell sharply and median incomes grew rapidly.

Some of the lessons about the need for prudential regulation of the financial system were lost in the Reagan-Thatcher era, when the appetite for massive deregulation was created in part by the flaws in Europe's social-welfare model. Those flaws were reflected in yawning fiscal deficits, regulatory overkill, and a lack of economic dynamism that led to sclerotic growth then and the euro zone's sovereign-debt crisis now.

But the laissez-faire Anglo-Saxon model has also now failed miserably. To stabilise market-oriented economies requires a return to the right balance between markets and provision of public goods. That means moving away from both the Anglo-Saxon model of unregulated markets and the continental European model of deficit-driven welfare states.

Even an alternative "Asian" growth model - if there really is one - has not prevented a rise in inequality in China, India and elsewhere.

Any economic model that does not properly address inequality will eventually face a crisis of legitimacy. Unless the relative economic roles of the market and the state are rebalanced, the protests of this year will become more severe, with social and political instability eventually harming long-term economic growth and welfare. PROJECT SYNDICATE

Nouriel Roubini is chairman of Roubini Global Economics, Professor of Economics at the Stern School of Business, New York University, and co-author of Crisis Economics.

The Euro-Crisis

Oct 15, 2011
 
Euro crisis dominates G-20 summit

PARIS: The finance chiefs and central bank governors of the Group of 20 (G-20) began last night a two-day summit to put flesh on the bones of plans to end Europe's festering debt crisis conclusively.

'The absolute priority is to find ways to stabilise the euro zone, epicentre of the global crisis,' French President Nicolas Sarkozy, the G-20's outgoing chairman, said on the eve of the meeting.

Underlining the challenge ahead, Standard and Poor's cut Spain's long-term credit rating, while another ratings agency, Fitch, downgraded Switzerland's UBS and placed seven US and European banks on a credit watch for a possible downgrade.

United States Treasury chief Timothy Geithner also weighed in, warning that 'cascading default, bank runs and catastrophic risk' lie ahead for the world economy unless Europe puts its house in order.

A Franco-German crisis plan is likely to ask banks to accept bigger losses - possibly as much as 50 per cent - on their Greek debts than the 21 per cent spelled out in a July plan for a second bailout of Athens, which now looks insufficient.

'It will be more, that's more or less certain,' said French Finance Minister Francois Baroin, who is hosting the Paris talks.

The G-20's finance ministers are also pressuring Europe's banks to shore up their capital, as the likelihood of Greece declaring a default keeps flaring up.

Efforts to fortify the continent's lenders took a sense of urgency after Franco-Belgian bank Dexia collapsed because of its huge exposure to Greek debts.

Also on the table are plans to leverage the euro zone's €440 billion (S$769 billion) rescue fund - the European Financial Stability Facility (EFSF) - to give it more firepower.

Emerging economic powers China and Brazil, meanwhile, are offering to help out by increasing the International Monetary Fund's war chest to make it more effective at dealing with Europe's debt crisis.

A key concern has been that, while the EFSF has the resources to cope with bailouts for Greece, Portugal and Ireland, it will be overwhelmed by the need to rescue bigger economies such as Italy or Spain.

Such a firestorm will devastate bank balance sheets, rock markets, derail economic growth and threaten to splinter the 17-nation euro area.

Europe's woes are already responsible for wiping out about US$13 trillion (S$16.5 trillion) of wealth since July 1, analysts at Barclays Capital estimate.

The most effective method would be to turn the EFSF into a bank, so it could draw on European Central Bank resources. Both Germany and the central bank, however, are opposed to that.

The G-20 may refer to the euro crisis in its communique and in closing news conferences tonight, but little else of substance is likely to be inked in, with the EU summit in nine days' time the make-or-break moment.

The Paris meeting may give the green light to regulators for new rules on banks deemed 'too big to fail', including capital surcharges.

Any concrete progress on bigger goals, such as setting parameters to measure global imbalances and reining in speculative capital flows, is unlikely to come before a Nov 3 to Nov 4 summit in Cannes, where France will pass the G-20 baton to Mexico.

The G-20 countries make up 85 per cent of global output.

REUTERS, BLOOMBERG, AGENCE FRANCE-PRESSE


NEWS ANALYSIS
The end of an economic dream

Market upheavals in the euro zone are symptoms of a deeper problem. Here's a look at what the buckling of an untenable model will mean for jobs, welfare and pensions in Europe, as well as its impact on national politics.
 
By Jonathan Eyal

LONDON: It is highly unusual for the European Union to miss one of its regular summits: These are hugely important gatherings, where its 27 member states conduct their business.

But that's precisely what the EU has now done, by postponing a summit originally scheduled for this weekend.

Ostensibly, the delay is needed to allow governments to come up with an answer to Europe's roiling financial crisis. However, no such solution is in sight. A plan to help EU countries on the verge of bankruptcy was nearly derailed by Slovakia, one of its poorest members, before it finally relented on Thursday.

As the continent flounders in disarray, European Central Bank chief Jean-Claude Trichet warned this week that political dithering is 'only aggravating the situation'.

And yet, regardless of what its politicians do, decades of austerity and economic decline loom for a Europe that was built on fragile foundations, the cracks of which are emerging now in the form of the wildly teetering market movements.

Its beginnings go back to the end of the Cold War two decades ago, a period when, paradoxically, Western Europe seemed to be at the height of its powers.

It was then that the EU embarked on its most audacious project: the creation of the euro as its single currency. Some experts warned that no monetary union can succeed unless national economies approach a similar level of development, and spending priorities are decided centrally, rather than in each state. But the warnings were ignored.

The result is today's disaster. A currency designed for an industrial giant such as Germany, which exports more than the United States, was also adopted by Greece, whose exports are less than a tenth those of Singapore's. European governments were allowed to spend as much as they wished, borrowing at cheap interest rates that they would never have enjoyed had they retained their old national currencies.

What's more, Europe's problem is no longer one of just too much debt, but one of long-term economic competitiveness, destroyed by an overvalued currency. For example, after Italy adopted the euro, its effective exchange rate - based on its labour costs - rose by 26 per cent. The only way this disparity can be addressed is by either devaluing the currency, or by depressing the salaries of workers, a method that economists call 'internal devaluation'.

The first option is not available, since the euro is controlled by a bank beyond the influence of any government. And the second option is equally impossible, since workers will not tolerate a huge drop in their earning power. So, even if Germany - which now bankrolls Europe - agrees to guarantee the debts of all other European governments, this will still not stop Europe's crisis.

Getting out of Europe's monetary union is not an option either. According to the most optimistic calculations, an exit from the euro could cost Italy about 10per cent of its gross domestic product, as government debts remain unpaid and banks go bankrupt. The country would need about 25 years of uninterrupted growth to merely recover from this loss. In short, the Europeans are damned if they stay in the euro, and damned if they don't.

The only way out of this deadlock is to reinvent Europe's monetary union, this time according to economic, rather than political, principles. Countries will have to abandon all control over their financial policies; these will be decided on a Europe-wide basis. And they will have to continue repaying their huge debts. Some nations will make it, but others will not; this will be a battle in which only the fittest survive.

Either way, the continent is inevitably facing decades of misery. Since the end of World War II, Europe's economic model was broadly the same. Each government came to power promising to expand the provision of health care and welfare services. And each took it for granted that the economy would inevitably continue to grow. Capital was cheap, companies made fat profits and jobs were plentiful.

Europe's model has been fraying for years. An ageing population has already made the generous provision of pensions unsustainable. The cradle-to-grave welfare system excused the Europeans from hard work: When France faced a high unemployment problem, it simply shortened the working week, on the assumption that employers would be forced to hire more people.

The nanny state also protected people from the consequences of their own actions: Children from broken families were left to the state to look after, while few Europeans saved any money, because no financial cushion for a rainy day was needed. And, as Europe became less competitive, its share of global trade shrank. A century ago, Britain alone was responsible for more than half of global commerce; today, all of Europe accounts for a quarter.

Yet, although European governments knew they had to address these problems, they hoped that the process of adjustment would be gradual, and that economic recessions would remain short.

When the global financial crisis struck in 2008, then British Prime Minister Gordon Brown famously proclaimed that it would last a mere six months.

Europe's current crisis means that the hard choices can no longer be postponed. As debts are being repaid and governments struggle to balance their books, welfare and pension entitlements will be slashed. And Europeans will be forced to save rather than spend, leading to a prolonged period of zero growth.

But the continent is ill-prepared for what lies in store. Politicians, all of whom were born during an age of plenty, have yet to explain what needs to be done. And the EU, which until now was associated with ever-rising prosperity, will come in for even more criticism as an organisation that imposes permanent austerity with no democratic accountability.

Unsurprisingly, therefore, Europeans are now lashing out at others - immigrants, 'devious bankers' or 'unfair traders' such as China - rather than admitting that the failure is theirs alone.

Still, the coming European depression will be different from the global Great Depression of the 1930s. For while that century's crisis resulted in a great expansion of the role of the state, the current European crisis can be solved only by actually shrinking the powers of governments.

The only common thread between these two huge economic disasters is that, as always, it will be the ordinary citizen who will pay the immediate price.

---

Of swimming pools and the Greek crisis

LONDON : It invented the Olympics and the word 'democracy', and served as the cradle of European civilisation. Today, however, Greece may also be the country which drags down the entire continent with its monumental debts.

The Greeks are far from poor: the nation of 11 million is ranked 22nd in the latest Human Development Index. Nor are the Greeks lazy; in terms of official hours worked per year, they work harder than the Spaniards or Italians. But such statistics are rendered meaningless by a culture of bribery and tax-dodging.

If a Greek wants anything from the government, he assumes a bribe is expected; even the supreme court ruled that bribes are legal although, quaintly, only if they are offered after, rather than before services are rendered. But, once the bribe is paid, a citizen does not see why he should also pay taxes. Last year, for example, 324 homes in a part of Athens declared for tax purposes that they own a swimming pool. But satellite photography showed 17,000 pools there.

Among the developed countries, Greece ranks bottom in terms of public sector efficiency. Its officials can retire at the age of 58, on almost full salary. Better still, pensions often continue to be paid after a person is deceased, since families avoid recording the death. A country both spendthrift and incapable of collecting taxes can only survive by borrowing. Greece's debt stood at 94 per cent of its total economy a decade ago; today, it is 144 per cent, and rising.

Yet, as disaster loomed, Europe looked the other way. 'Matters such as probity, auditing, efficiency of tax collection and the nature of public spending were studiously ignored by the European Union,' claims Jason Manolopoulos, the author of a recent angry book about the country.

And nothing currently contemplated tackles the problem. Greece was offered a bailout of €110 billion (S$193 billion). In return, it has pledged to balance its books: It has introduced six budgets in the past year, each with braver financial targets. All of these were missed.

It has also vowed to raise €50 billion from the sale of government assets; not even 5 per cent was collected. Everyone continues to claim Greece will not default on its debts, but every European government is planning for it. The economy shrank by 6 per cent this year, throwing one million people out of work.

'We have told the Greek population that, maybe, it is time to pay some tax,' a Greek official meekly told protesters outside Parliament recently.

The response was immediate: He was pelted with rocks, and someone shouted back: 'Let the German taxpayers pay; It's our right not to pay tax.'

Jonathan Eyal

---


Euro crisis fuels rise of French far-right

AMNEVILLE (France): Amneville, a town in north-eastern France, does not look like a fault line in the euro zone. The smell of grilled chicken wafts over the marketplace on a Saturday morning, the CD vendor plays German oom-pah music and the sky behind the ochre clock tower is a steely blue.

Yet, the single currency is a target for an unusual politician canvassing voters in this town near the German border.

Mr Fabien Engelmann, a 32-year-old plumber with tight-cropped hair, was an activist with France's leading trade union and a Trotskyist for many years. Later he joined the far-left New Anticapitalist Party. This year, he switched party again - but not on a leftist ticket.

He joined France's famed far-right National Front, and he was not the only one among disenchanted unionists. Since January, Ms Marine Le Pen has taken charge of the minority party and revived it.

'It really is the arrival of Marine Le Pen that convinced me to join the National Front,' Mr Engelmann said. 'She has an economic programme that is much more geared to defending the little people, the workers.'

Ms Le Pen is reshaping France's political landscape and putting pressure on mainstream parties with her populist war cry on pocketbook issues.

Whereas her father, Jean-Marie, played up worries about immigration as party leader, the anxiety she addresses is economic and deep. Her party's new target is the oppressive power of global finance, and the mood she is tapping spreads across Europe.

Traditionally in France, President Nicolas Sarkozy's right-of-centre UMP party wins the votes of the self-employed, farmers and retirees. Government workers, young people and urbanites favour the Socialists. The swing voters - blue-collar workers and low-level employees - are the Front's constituency. And they are tired of making sacrifices to shore up the single currency and fed up with losing jobs to global rivals.

To make things better, Ms Le Pen wants to pull France out of the euro, reinstate protectionist barriers and reassert the state's supremacy over market forces.

And she is being taken seriously by French opinion makers. She has been on the front page of every magazine and newspaper, and is a regular on prime-time TV. She already ranks third in polls for the next presidential election in May.

Her score in an Ipsos voting intention poll this month was 16 per cent, behind Socialist Francois Hollande (32 per cent) and Mr Sarkozy (21 per cent). In 2002, her father beat Socialist candidate Lionel Jospin with just 16.86 per cent of the first-round votes. Mr Sarkozy's biggest fear is that Ms Le Pen could knock him out in the first of the two-round vote.

'Our ideas are gaining ground,' says finance professor Jean-Richard Sulzer, who is in charge of the party's economic programme. His glee is evident as he points out a protectionist Socialist Party goal that echoes one of the Front's. 'They are spreading like an oil slick.'

The National Front rejects all the ideas that have previously driven European economic growth: globalisation, free trade and the dominance of services and the financial industry. To restore French competitiveness, it will quit the euro; to boost employment, it will close French borders to cheap Chinese imports, re-industrialise and empower the state's regulatory role. And it will bring the banks to heel.

For some in towns like Amneville, scarred by the loss of jobs as its factories close, this sounds like an idea worth trying.

In the eyes of the working classes, power is no longer held by politicians but by the financial markets, says sociologist Alain Mergier.

The European Union, far from protecting workers, overexposes them to the effects of globalisation. The working classes are the most eager for France to abandon the euro, Ifop polls show. Nearly one in two blue-collar workers wants a return to the French franc.

REUTERS

---

Economic nationalism making a comeback

LONDON: They do not like immigrants and they do not like Europe. Some of them do not even like being called 'far right'.

However you describe them, fringe parties from Finland to the Netherlands are taking a cue from the euro crisis to revive ideas of economic nationalism.

Few go as far as Ms Marine Le Pen's National Front in France, which advocates a pullout from Europe's single-currency regime.

But some have turned up the rhetoric in favour of a strong state to reclaim powers lost to Brussels. Often they want to shed the burden of bailing out weaker euro zone partners like Greece.

In the Netherlands, Mr Geert Wilders' Freedom Party is now the second most popular, recent polls show.

'The peoples of Europe were robbed of their sovereignty, which was transferred to far-away Brussels. Decisions are now being taken behind closed doors by unelected bureaucrats,' Mr Wilders said in a Berlin speech last month.

He has toyed with the idea of leaving the euro but it does not seem that strong a view - he would rather be in the euro club with Germany and kick out the countries on the periphery.

The Finns Party, known until recently as the True Finns, won 19 per cent of the vote in an April election. Their opposition to bailouts gained sympathy among voters who resent helping southern countries while they face austerity. The party wants countries like Greece out of the euro.

Austria has two far-right parties, both in opposition and widely accepted on the political landscape. Both oppose further bailouts of euro zone countries.

One, the Freedom Party, has proposed dividing the euro zone into two parts: the strong north and Mediterranean weaklings. It often comes second in opinion polls behind the Social Democrats.

Among Europe's big countries, Germany's National Democratic Party and the British National Party are more marginalised.

Britain's Conservatives provide a mainstream outlet for euro sceptics, and German Chancellor Angela Merkel has been the reluctant party in euro zone bailouts.

A September poll showed a euro-sceptic political party would find strong support in Germany. Around 50 per cent said they would welcome such a group on the scene.

REUTERS

'Policies are rational but politics is emotional'

From Straits Times, Oct 15, 2011

While in town recently, British politician Peter Mandelson spoke about a party's loss of emotional connection with voters and how that can lead to defeat at the polls. Insight reports on the discussions his comments sparked.
 
By Andrea Ong

HE WAS a co-architect of Britain's New Labour movement, which swept the party to victory in 1997 and helped it stay in power for 13 years.

But during a recent visit here, Lord Peter Mandelson was more focused on the reasons for Labour's loss at last year's polls.

He identified one crucial factor: emotional connection.

'As a party, we had begun to drift, to misplace our New Labour identity... Finally, we lost what I can best describe as our emotional connection with our voters,' he said.

Lord Mandelson, a former British secretary of state for business and European Union trade commissioner, was in town last month as a Lee Kuan Yew Exchange Fellow.

His words struck a chord with his Singaporean audience.

Lee Kuan Yew School of Public Policy dean Kishore Mahbubani said the two words to take away from Lord Mandelson's lecture were 'emotional connection'.

Soon after, an extract from Lord Mandelson's speech appeared on the People's Action Party's (PAP) website. It also generated fresh discussion online on the disconnect between the Government and voters.

The challenge of reconnecting with voters is an issue that has been much on the minds of PAP leaders since May, when the party saw its share of the national vote slide to 60.1 per cent - the lowest since Independence in 1965.

At the National Day Rally in August, Prime Minister Lee Hsien Loong stressed that going forward, 'we have to get our politics right as well as our policies right'.

And that means appealing to people's emotions.

'Policies are rational but politics is emotional,' was how Lord Mandelson put it. In politics, people are driven by emotional forces like passion, ambition and ideals, he said.

But after 52 years in power, is the PAP able to summon such emotional force among voters, and to move the people it governs?

Civil servant Jeremy Tay, 26, sums up his feelings towards the PAP in one word: indifference. 'They keep things running. I'm not sure there ever was much emotional connection to begin with,' he says.

For sales executive Cao Wei, 28, who has worked in two foreign multinational companies, it is the issue of foreigners competing with locals for jobs that can spoil the emotional connection.

'At the lower-income levels, you will never be cheap enough to compete with foreigners. At the same time, the top-tier jobs are taken up by expatriates,' he says.

The PAP, he says, should not just stop at explaining the rationale for foreigners' presence. Instead, 'they could show that they are taking people's views into account by having more forums and dialogues'.

The incumbent's dilemma

INCUMBENCY poses several challenges.

Successful parties that have been long in power have to find ways to continuously reconnect and not fall complacent, and that is difficult, Lord Mandelson said in his lecture.

At the same time, they come up against voters' rising expectations.

'People want better and cheaper housing, more subsidies in their lives as the cost of living rises, better urban living, ever-rising quality of public services like education, health, transport,' he tells Insight in an interview.

'These are the right demands for people to have, but you can't always satisfy them in the way and as quickly as people want,' he adds.

Minister of State for Defence and Education Lawrence Wong posted an excerpt of Lord Mandelson's speech on his Facebook page.

Mr Wong agrees that with incumbency comes added burdens, such as having 'to explain what you are doing across the entire front of government, from A to Z, everything that affects people's lives', whereas parties out of government can choose to champion a single cause.

A first-term Member of Parliament, Mr Wong acknowledges that the PAP government has to rethink how it formulates and communicates its policies.

'You need to find some way to not get too embroiled in the details and logic of each individual policy, and be able to put out an overarching message that is compelling,' says Mr Wong, who heads the PAP's publicity and publication sub-committee.

Dr Terence Chong of the Institute of Southeast Asian Studies says the PAP's relations with Singaporeans are 'transactional' rather than emotional in nature.

'You deliver growth, we remain compliant, things will be fine,' is how he sums it up.

'Perhaps the relationship was characterised by a grudging obedience since the PAP got things right more times than it got things wrong,' he says.

While the Government has a duty to ensure Singapore remains economically competitive, Dr Chong points out that 'it's difficult to build emotional connection by telling citizens that the big bad world will eat you up if you don't buck up'.

Dr Reuben Wong of the National University of Singapore says the PAP also has to contend with its reputation for a 'technocratic scholar-mindset which is increasingly removed from the average Singaporean'.

Voters thus associate the PAP with values like credibility, efficiency and capability - which do not stir the emotions.

'These have positive but very 'cold' associations as they do not relate to how one feels,' says Associate Professor Sharon Ng of the Nanyang Technological University's (NTU) business school.

Prof Ng, who researches on marketing, contrasts that with the 'very hot' topics which the opposition parties spoke out on, relating to people's aspirations and fears. These 'connected with the public on a different level', she says.

Rebranding the PAP?

AFTER the 2006 General Election, the 'post-65' group of first-term MPs tried to appeal to young voters by launching a group blog and performing a hip-hop dance at the Chingay Parade.

But those attempts to popularise the PAP soon fizzled out.

Is the PAP in need of a new branding campaign? After all, politicians in various countries are heading down that path.

British Prime Minister David Cameron appeared on the cover of GQ men's magazine ahead of last year's polls. US President Barack Obama's 'Yes We Can' campaign in 2008 banked on pop culture and online media like YouTube and Facebook.

Most recently, Malaysian Prime Minister Najib Razak embarked on a 'cool campaign' to shore up support for his party ahead of the national polls. Reportedly advised by former New Labour campaign members, he showed up at pop concerts and radio stations, and tweeted about his appearances.

Opinion is divided on whether the PAP should employ such soft marketing tactics.

Dr Reuben Wong believes Singapore politics is becoming Americanised, with television and social media becoming increasingly important platforms.

He cites the recent presidential election, during which all four candidates faced off in three roundtable discussions that were broadcast on traditional and new media.

Others are of the view that political marketing cannot replace substance.

New Labour came to power in 1997 with a savvy 'Cool Britannia' campaign which saw former prime minister Tony Blair being backed by popular bands like Oasis, Blur and Suede, says Dr Terence Chong. 'But they abandoned him when they felt he no longer spoke for them or the working youth,' he notes.

Mr Lawrence Wong is similarly sceptical of branding efforts.'Policies still matter because that's the substance of what the Government does,' says the former career civil servant who entered politics earlier this year.

But the Government can improve on how it communicates and presents these policies, he adds. People have to feel, not just understand rationally, how policies can benefit them.

There is also greater scope for consulting citizens when formulating policies. And when policies are implemented, the Government can afford to be more flexible in how it treats people at the margin, who just miss qualifying for help, Mr Wong says.

Lord Mandelson, labelled 'the Sultan of Spin' by the British press, agrees that emotional connection cannot be forged from political style alone.

'It's to do with truthfulness, authenticity and being consistent with what you think, say and do. It's called leadership,' he says. 'And Singapore continues to have leadership in ways and on a scale that a lot of other countries are denied.'

Ministers and MPs have also been stepping up their use of social media in a bid to engage the public. But the jury is still out on whether such attempts represent real change.

Associate Professor Benjamin Detenber from NTU's Wee Kim Wee School of Communication and Information says it will take time to cultivate a genuine connection and presence online.

'Just having a Facebook page and updating your status does not automatically qualify as connecting,' he notes.

People judge politicians through a whole series of online activities, such as the comments they post and the photos and links they 'like', he adds.

Dr Reuben Wong regards Minister of State for Manpower and National Development Tan Chuan- Jin as 'one of the better ones' among the PAP MPs using social media. But, he notes, Brigadier-General (NS) Tan still steers clear of controversial issues.

Agreeing, Dr Terence Chong argues that engagement is not just about the medium but the message. 'The medium must never become the message. If so, it'll just be the Government giving you the same stock answers, this time in 140 characters or less,' he says, referring to the maximum length for a message on Twitter.

Reconnecting from the ground up

BRANDING aside, the PAP has quietly set itself a bigger goal in connecting with voters.

After the General Election, both the Prime Minister and former foreign minister George Yeo spoke about reform within the party.

PM Lee said at his post-election press conference that the PAP would embark on 'soul-searching' in the months ahead, to find a formula to go forward.

Mr Yeo, who lost his Aljunied GRC seat in the May 7 polls, was more forthcoming.

'I think it should be the revitalisation of a movement, of a movement which, in an earlier phase of great unity, created Singapore and enabled us to make the astonishing progress that we've made.

'What we need to do now is re-achieve a new unity so that in this century, with all the challenges of globalisation and information technology, also fragmentation, we continue to surge ahead. We're smack right in the middle of a region which is bursting with energy. If we get our domestic politics right, we'll have a very bright future,' he had said then.

Dr Reuben Wong says that in order for the PAP to relaunch itself as a mass movement, its members first need to question what the PAP stands for and some underlying assumptions.

For instance, the PAP may have to look beyond its usual pool of civil servants and professionals for candidates.

'The PAP needs to regain street credibility and show they understand how ordinary Singaporeans feel,' he says.

In the meantime, MPs are expanding their outreach efforts. They are employing new platforms, such as townhall meetings and policy dialogues, to engage people whom they have not been as effective in reaching out to in the past.

The party's committee to review its election results has been at work since May but has said little in public about its findings.

Perhaps the party's preferred strategy is to talk less and do more, especially in reaching out to Singaporeans on the ground and beefing up its support at the grassroots.

Mr Lawrence Wong hints at these efforts. He says reconnecting with voters may involve small changes, such as re-timing house visits to suit the schedules of young professionals who work, or organising activities beyond the usual block parties and karaoke sessions.

'It may not make a huge, nice, sexy story, but it's the small things that can help MPs connect emotionally with their residents and present a human face to the party,' he says.

It remains to be seen if the PAP can - as it did in its early years - tap into the spirit of these times and stir hearts to its cause once again.

andreao@sph.com.sg