Sunday, March 16, 2014

Costliest city? But can it be home to citizens?

Mar 16, 2014

That is the enormous challenge Singapore faces as it joins the ranks of top global cities

By Han Fook Kwang, Editor At Large

Singapore is the most expensive city in the world.

True or false?

This debate was one of the most-watched spectator sports last week, and is still making the rounds.

The different reactions to the Economist Intelligence Unit (EIU) survey were more interesting than the result itself because of what they say about this evergreen cost-of-living issue.

In one camp are those who rubbished the survey, accusing it of using flawed methodology and making invalid comparisons across cities.

I think we can ignore this group because, like it or not, it was a well-researched study done by an established organisation of the international news weekly, The Economist, and which had been doing it for the last 30 years.

But it is important to understand exactly what the study is about and who it was meant for.

In fact, it was done mainly for companies which post staff overseas and want to know how much "cost of living" allowance to pay them.

So, for example, taking New York's index at 100, Singapore scored 130 in the latest survey, which means that if a company went strictly by the EIU's index to peg its rates (most would take other factors into account), it would pay someone being posted here 30 per cent more in allowances than another person in the Big Apple.

The study was never meant to determine the cost of living here compared with New York's for citizens of either city.

The question then is whether Singaporeans ought to be concerned that their country is the costliest place for expatriates, at least according to the EIU.

Some obviously do, going by the responses of this newspaper's readers.

Their views are aptly summed by this excerpt from a letter we published last week:

"Although it is true that the kinds of goods and services included in the survey are not those consumed by 'ordinary' Singaporeans, we cannot assume that all Singaporeans are ordinary. Many of us, even the 'ordinary' ones, do have aspirations. We do yearn for imported cheese, filet mignon, high-end dining and so on. If we do not buy them, it is not because we do not want them but because we cannot afford them."
One quick point, though, about the survey lest it be thought it covered only things bought by expats on million-dollar salaries who eat imported cheese every day. In fact, the EIU studied the prices of more than 160 items, including very ordinary ones such as white rice, bread, toothpaste, detergent, water and electricity.

That's as it should be, as even Ferrari-owning foreign bankers need to clean their teeth and wash their clothes.

And it obtained these prices from three types of shopping places - supermarkets, and mid-price and specialised shops - depending on where they were mostly bought from.

But the sentiment behind that reader's comment about aspiring to want the good life is a valid one and needs to be addressed.

Another reader made a similar point in a slightly different way. She wrote: "Singaporeans are told to be realistic about their options; they need to 'run hard' and 'out-compete the world'...

"To want to 'run hard' and 'out-compete the world', it is human nature to also want to be able to access the rewards. And it does include being able to afford those items that do not feature in the average Singaporean's consumption basket.

"Otherwise, it will simply emphasise inequality, which can be socially corrosive.

The question facing Singapore, and which lies behind these sentiments, is whether it can be a successful global city attracting some of the best people from around the world, and still be a country that its citizens feel at home in and can enjoy the benefits its international status brings.

If you look at the EIU's list, the top 10 most expensive places are all up there in any ranking of global cities: Singapore, Paris, Oslo, Zurich, Sydney, Caracas, Geneva, Melbourne, Tokyo and Copenhagen.

It seems you can't be a successful international magnet without also being an expensive one.

That's an observation with important implications for any aspiring city, but especially Singapore, because the city is the country.

So how serious is the effort here to want to be in the same league as these other cities?

In fact, Singapore's global ambition has been an important part of its economic strategy for some time now, and it is well on the road to achieving it.

It is the reason why it started promoting the business of wealth management in a big way, attracting many of the super-rich here.

It was also why it approved the setting up of two casinos in large integrated resorts despite strong objections from some quarters, brought the Formula One race here, and spent a billion dollars on the iconic Gardens by the Bay.

The results have been quite spectacular, changing the physical landscape especially in the Marina Bay area, as well as culturally, with the presence of so many foreigners, without whom the dining and entertainment businesses would not have changed so dramatically in the last decade.

Just as the country was successful in the early years in attracting multinational companies to set up their factories here, it looks now to have repeated that success in the global city competition.

Singapore's achievement in this area hasn't gone unnoticed, which explains why Knight Frank, in its latest study, predicted that it will have more multi-millionaires - with assets of more than US$30 million (S$37.9 million), excluding their own homes - than any other city bar London in 10 years' time: 4,878 to be exact.

Note that these are actual numbers of super-rich individuals, and not counted on a per capita basis.

Sellers of imported cheese and filet mignon should be cheering quietly at the prospect.

But here's the key question: Is it possible to envisage a future where Singapore is top in this league, a destination of choice for the very rich, but also a comfortable home for its citizens across all income levels?

Or will this be an impossible act, and lead to the country becoming "socially corrosive", as that reader put it?

It isn't the only place where this issue is being raised.

London's success as a financial centre has raised questions in Britain about the unbalanced growth in the country and how to spread it more evenly to other cities. But citizens there at least have the option of moving to Sheffield or York if they find the capital too expensive or fast-paced.

Singaporeans have no such choice.

To be fair, the Government recognises this problem, which is why it has stressed that it wants to achieve more uniform growth for all, rather than growing at all cost.

But no one should be under any illusion about the enormity of this challenge, one not attempted anywhere else on this scale.

Can Singapore square the circle?

That's what the discussion arising out of the EIU survey should ultimately be about.

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