“For this year our growth forecast is 13 – 14 percent. . . . but we cannot expect to go like this for the long term,” said Prime Minister Lee Hsien Loong at the National Day Rally speech last Sunday, 29 August 2010, referring to our Gross Domestic Product (GDP).
“Let’s just take three years: 08, 09, 010. [In] 08 we were plus one percent, 09 we were minus one percent. [In year] 10 if we are lucky, plus fifteen percent. . . . Divided by three to average it out, that means on average we have made over the last three years, 5 percent growth. It’s not bad but it’s not as spectacular as what we thought and it’s a realistic target of what we can sustain.”
Now, here’s the interesting thing:
In mid 2007, the total population of Singapore was 4.59 million. In mid 2010, as just announced by the Department of Statistics yesterday, it was 5.08 million. Over the three-year period, our total population grew by 10.68 percent. This to produce 15 percent growth over roughly the same three years.
This suggests that much of the growth we have had is attributable to just having more hands on deck, and the greater output comes from greater inputs.
A better measure would be the growth in total labour force of 2010 compared to 2007, figures which I am not yet able to locate. I am sure it will be higher than 10.68 percent, it might even be close to 15 percent.
Why do I say it is most probably higher than 10.68 percent?
Consider this:
Between 2007 and 2009 (two years) the Ministry of Manpower reported that the employment (of citizens and Permanent Residents) at year end increased from 2.73 million to 2.99 million, an increase of 0.26 million, or 10.95 percent. With the economic recovery, we can expect a further increase for 2010, demographics permitting.
In these same three years, the Department of Statistics reported that temporary residents (i.e. those who were not citizens or Permanent Residents) grew from 1.01 million to 1.31 million, an increase of 0.30 million or 29.70 percent. Now, the great majority of these temporary residents are here to work.
We’ve been adding a lot of humans to produce that 15 percent GDP growth. Our productivity growth (i.e. increase in output per person unit of labour) might be close to zero or even negative.
If productivity has not grown, then one could argue that we have not become richer per capita. We’ve just treaded water while becoming more crowded.
* * * * *
The problem is that it is overall GDP growth, not the quality of growth, let alone quality of life, that is a key performance indicator for rewarding ministers and civil servants. It would hardly surprise me that priorities are skewed on account of this. There is no easier way to increase the gross GDP figure than to keep adding more and more inputs, like baking a bigger cake by adding more flour, sugar, eggs and butter. The Economic Development Board goes about wooing capital and the Ministry of Manpower just rubber stamps virtually every application for a foreign worker, from menial to executive.
We need to demand that ministers talking about the economy should go beyond gross GDP numbers, and talk about it in per capita terms, as well as focussing on statistical measures of productivity, and on median and spread of incomes. I would also like to see income data split by citizens, permanent residents and temporary residents, which currently I cannot find on any government website.
* * * * *
Another figure that caught my beady eye was the plan to build 22,000 public housing flats in 2011, on top of the 16,000 this year. These are big numbers compared to the last ten years, data for which you can see in the post Housing for PRs, nobody in charge. In 2006, building hit a low of only 2,733 flats.
As Lee indicated, the surge in building numbers is a response to rocket-like rises in property prices, which in turn is due to shortage.
But I can foresee all sorts of collateral problems coming out of the 16,000 and 22,000 figures: Is there enough spare capacity in our construction industry to achieve this? We have starved the industry for years as the Housing and Development Board kept its annual building rate under 6,000 units per year. Meanwhile, we’ve had a sand supply crisis, which I believe is still not fully fixed.
So where is the needed sand going to come from? Where are we going to find enough bricklayers, welders, crane drivers, safety officers? Do we have enough earth-moving equipment, scaffolding, cement-mixers? If not, does that mean more foreign workers? More cost increases of construction inputs, pushing up inflation of flat prices?
Perhaps we do have some spare capacity coming on with the fortuitous winding down of the two casino projects, thus releasing manpower and equipment. But if so, it’s just plain luck.
Bottom line: our housing planners appear to be ones creating a boom and bust cycle; it is very unhealthy for the construction industry. By failing to plan adequately long-term, our government does not optimise the use of resources. In other words, it contributes to inefficiency a.k.a. low productivity.
* * * * *
The third number that clanged about in Lee’s National Day Rally speech was the $9,000 give-away to National Servicemen. I see from other forum boards that people are wondering how this number was computed, but that’s not what I am interested in. What struck me instead was the poor connection between this give-out and the rationale that Lee used; it had something to do with giving form to a “citizens first” promise, which in turn was a response to rapidly rising unease with immigration.
Thus I really would be talking about immigration and Lee’s response. That alas is a lengthy discussion by itself, so I’ll leave it to Part 2.
Yawning Bread 
companies like to expand because it makes its chief executives more important, just as GDP increases can be used as reason to pay ministers higher bonuses; hiring low salary foreign workers allow companies to make more profits and allow the managers to pay reward themselves; ordinary employees are often left out; indeed, the current high profits reported by many US companies come from reducing heat counts so that employees are losing out rather than benefiting
so vaguely worded good news “we are doing well” “economy is expanding” does not automatically lead to general good feelings; there is need to answer “what’s in it for me”
Alex, you can get round the problem of throwing more bodies to produce more by using per capita GDP instead of just GDP. If you can trust the CIA World Factbook, then the numbers are not very flattering.
Per capita GDP (ppp) are as follows:
$52,200 (2009 est.)
$53,500 (2008 est.)
$53,200 (2007 est.)
note: data are in 2009 US dollars
In fact, you can see that per capital GDP actually fell in 2009.
2009 is a recession year so the dip in gdp per capita probably should not be taken too seriously
however, I find a comparison of selected numbers intriguing; see http://sinazen.com/gdp for source data
2008 gdp per capita
China rank 106，US$3315 (but because of high population, total GDP is now second in world rank
russia 11806
taiwan 17040
south korea 19504
hong kong 30755
japan 38559
singapore 38972
australia 37433
switzeland 51032
iceland 53029
When I was at a certain gathering recently, there was a girl who said her friend could not get married because she had been rejected by the HDB many times over, when applying for a new flat. Her friend has no idea why she had been rejected, though.
So… a question: do these figures(22,000) actually cover those who have been rejected repeatedly by the HDB? I really wish their process was a bit more transparent, so we know what exactly is going on. Process as in: selection of applicants, reason for rejection, what percentage are given to PRs and locals, racial quotas, amount of empty flats, etc.
2 640 000 000
And building 22,000 flats? That’s opening a lot of potholes: first, there’s the issue of a tight schedule which could lead to rushed jobs and in turn, structural problems among other possibilities. I don’t wish a repeat of say, Nicoll Highway collapse or of Hotel New World(an issue of botched calculations).
Second, building that many requires a lot of money and I wonder where they are going to get that amount from. From some reports in 2010, building a Queenstown flat cost about $120, 000. So 22, 000 units would be around SGD$26 400 000 in total providing costs are still somewhat the same and inflation has not occurred.
Back to the 2nd point: Are they going to simply allocate more from the budget or from the treasuries? To fund this operation, are they also going to tax the population directly in the form of higher GST, or indirectly in the form of say… increased charges for utilities like electricity and water?
Third, what type of flats are they going to build? Low cost flats? High cost flats(like mansionettes)? Just what will be the percentage of say… studio flats, 2 room flats, 3 room flats and so on which are going to be built?
Fourth, building that many units will require a lot of resources. For example: I wonder where they are going to source that much sand from. From the Cambodian government?
Again, the HDB needs to release far more statistics and data and not leave it to the population to speculate.
productivity is outpet per hour of labour, not per worker – let alone “person”, which includes those outside the labour force. and of course, low-skilled workers have low productivity, and when you bring them in you drag down overall productivity.
But Lee was obviously not referring to all workers when he talked about raising productivity – he was referring to Singaporeans. Locals’ productivity may have very well increased, even if foreign workers’ low productivity did drag down the nation’s overall productivity.
And finally Patrick, you also say, “Locals’ productivity may have very well increased, even if foreign workers’ low productivity did drag down the nation’s overall productivity”.
I recall reading reading an article on the SDP website that pointed to a historically low productivity level in Singapore – pre-FT influx – when compared to both long standing first world countries, but worse, other economies like Hong Kong’s and S Korea’s, whose growth phase is similar to Singapore’s. (Yes, the SDP, and not the PAP who merely realized that the SDP were making an important point, were the first political entity to sound the alarm on the low productivity levels among Singaporeans.)
I have no reason to share in your optimistic, “let’s leave some room for doubt” sentiment because I fervently believe that the productivity problem among Singaporeans is more greatly a management productivity one than it is of rank and file employees, although the former does impact on the latter.
And I have not seen any change on the management productivity front.
Patrick
The how to explain the PAP government’s plan to provide training for foreign workers if PM Lee does not bother about it?
Not logical statement in my view.
And I don’t think Lee really cares about low-skilled foreign workers’ productivity, nor does he think he can raise it. I hope you don’t think that the productivity drag didn’t occur to his economics team when they first opened the floodgates. Our government is certainly more competent than that.
Patrick,
I do not think so.
If we remember,the initial idea was to bring in foreign talents,which was not objected by majority of Spore citizens,then half way thro’ the plan changed,PAP decided to tie everything with GDP,and the faster/easier way to increase GDP,is to increase labour and capital,and to increase productivity which is a more difficult one,during this growth period,did any minister ever mentioned about productitvity gain?not at all.
“By failing to plan adequately long-term, our government does not optimise the use of resources. In other words, it contributes to inefficiency a.k.a. low productivity.”
I think you should do some research before equating efficiency with productivity, because they’re not the same thing.
Shooting the messenger?
There aren’t any real hard comparative numbers released by singstat.gov.sg . Why then, should we take anyone’s numbers (whither YB or SG govt) at anything more than face value?
The lack of transparency continues to threaten. All YB do was raise the issue that this “fabulous” GDP growth seems to have come at the expense of squeezing more people onto this island, rather than any real increase in this society’s wealth vis-a-vis the rest of the world.
And what be the potential consequences of making aware such huge changes in Buildings-to-be-ordered if the infrastructure to ensure that they can be built is insufficient?
Or are the glossy numbers just – pre-election shiny?
E.o.M.
you miss my point. not talking about data here, but about econ concepts.
Dear patrick,
So what you are saying is that, low skilled workers productivity does not matter.
The increase in their numbers does not matter
in contributing to GDP.
Efficiency does not equate to productivity.
(my friend, my toes are laughing)
Please go back to Economics 101.I recommend Lipsey & Stiener.
————————————————————–
The increase in housing is certainly, going to expolde the economy. I am sure there is spare capacity, from the resort construction.
In terms of equipment and unused materials.
Which, if MBT was smart would have stored.
In fact, I am quite surprised, why LHL did not mention this as the main reason for holding back on building HDB flats.
Because all the resources were used up for the resorts, if HDB had to compete, then it would be a lose-lose situation for all.
(maybe he pai-sei lah, no house for people but build casino).
But a practical person, would appreciate, this strategy.
Thus the delay in HDB flats and now the flood.
However, there is a catch, the HDB flats will not be built, if there is no demand(BTO).Which in a way, is a decent strategy.
How much of this 16,000 flats are going to contribute directly to Singaporeans, trickle down to the layperson?
I can safely say, very very little.
Almost all inputs are imported. What we might cause is a serious inflation to raw materials, except labour. Like the one caused by Philippines for hoarding rice. We were warned that construction cost is going to go up by 6% earlier, but now after this its going to go up several folds.
Of course, the Malaysian coastline might suffer,
if nobody’s watching. I seriously hope, someone does watch.
But wha la! govt coffers will be full, stamp duty paid,
Lee & Lee, is it… the lawyers for convayencing.
Who is going to fit the bill, Bonds lah rojakgirl.
Everybody wants Singapores Bonds.
It helps capital expenditure in terms of household purchases :
Courts,Ikea & Harvey Norman will be beaming. Imported again.
Now for the difficult part, who are the buyers, do they & will they have stable jobs for over 30years, paying them a decent salary.
Now, we have to go back to the PM for this question?
I am not getting a single penny to answer this one.
So I won’t.
I’m afraid you’re the one who needs to go back to the basics of reading and typing coherently without wetting your pants during your spastic tantrums. All I said that LHL probably knows and doesn’t give a shit, and the rest of my statements about productivity were positive and not normative. And oh, LOL @ economics 101. I have taken more economics than you’ve read children’s picture books in your lifetime, and obviously you took econ 101 and think that that’s “real” economics” when it’s really watered down and simplified kiddy econ that doesn’t even involve a differential equation. Alex was talking about allocative efficiency which doesn’t need to correlate at all with labour productivity. Too bad this is a text box and I can’t type in the formulas, but you won’t understand them anyway so it’s okay. In short, please stick to scaring the kids and don’t dream of playing with the big boys.
Patrick, I don’t think Alex “equated” efficiency to productivity at all because of his use of the word “contributes” [to inefficiency a.k.a. low productivity].
His statement is correct because planning (and organization) for the optimal use of resources do “contribute” to productivity, even if productivity is not defined in its entirety by only those two components; there are other components that contribute to productivity. (And yes, the resulting efficiencies, by which I include cost-efficiency, do also contribute to the measure of productivity.)
Also, Patrick, when you say, “Alex was talking about allocative efficiency which doesn’t need to correlate at all with labour productivity” you are only partially correct.
The part that you left out is that the allocative efficiency you refer to is the productivity at the management level. Or perhaps, you believe that management:
a) is not “labour”; and,
b) is exempt from considerations towards the measurement of organizational productivity.
Patrick,that is a very petty statement,although I do accept your point easrlier that we should not interchange people with labour.
Not all resources were taken up by the casino,
some were taken up by developers, who clearly knew that property prices will be going up towards the opening of the casinos.
Now, those developers who did not complete on time, will suffer because of the inflated construction prices. There are about 30,000 of upcoming units. Last I heard launches might be delayed.
oh! salah, did I just say that property prices will go up because of input cost. hey, don’t quote me ok.
At the end of YB’s essay….and much of it about lack of real productivity increase…..is an Ads by Google
“Productivity At Work
Step-by-Step Guide On Productivity Learn How To Grow Your Business
productivity.enterpriseone.gov.sg”
I find this sooooooooo funny and ironical!!
And oh, patrick,
– productivity is simply output per unit of labour. That unit can be hour or pax.
– and quite obvious, the message here is about ROI – how much input to drive output
ps: I no econs grad, i just have a bit of common sense. 🙂
I stand corrected, and I have amended the sentence to: Our productivity growth (i.e. increase in output per xxxxpersonxxx unit of labour) might be close to zero or even negative.
I think Patrick is missing the forest for the trees. I pointed out that population increase occurred even as GDP grew over the three years (taken together). The numbers suggest that working population might have grown as fast as the 15 percent increase in GDP.
Now, if the working population found themselves working fewer hours per day to generate that increased GDP, then one can say that productivity (output per unit of labour) increased. But I think if anyone tried to suggest to the typical Singaporean that over the last 3 years, he has seen more leisure time, he would laugh his head off.
Therefore I don’t think I was far wrong, even if not technically accurate, when I used output per person as a rough indicator of productivity.
Alex,Pro-PAP Patrick made very general statement to confuse yr readers and to promote PAP.
His mian trust is that PAP knows all along all the problems,whether these problems were mentioned or tackled or not,and you people do not know economics,I know all.
If we look at the successful developed countries,all of them took one route,that is increase GDP thro’ productivity gain,and resulted in correspondence increase per-capita GDP.
Of course PAP is blessed with a very color blind people,who allows 36% foreigners to work in this country within a short span of around one year,and PAP is also blessed with a population who turns blind to the government accumulation of wealth in its hand,so long as PAP ensures appreciation of their property prices.So increase in labour,increase in capital,solved.I dont think it is ever possible for any normal developed country.
Productivity is difficult,but then it is very difficult to imagine all PAP leaders fail to address this issue during this growth period,not even once,until very recently,now they are so serious they propose to give money to train foreigners,money from our coffer.
Finally,for those who are interested to know more about PAP manipulation of economics figures,I suggest the following site:
furrybrowndog.wordpress.com/…/a-quick-examination-of-singapores-economic-figures/
On 1 Sept, 20:35, Patrick wrote: “Locals’ productivity may have very well increased, even if foreign workers’ low productivity did drag down the nation’s overall productivity.”
I find the statement rather sanguine. Foreigners in Singapore aren’t only the low-paid and unskilled. They are nurses, chemists, money traders, engineers, spanning an entire spectrum of work. There is nothing to suggest that the average productivity of foreigners is lower than that of Singaporeans, who also span the entire spectrum of work.
In any case, I was not talking about productivity as a snapshot. The whole article was to point out that when Lee spoke almost exclusively about GDP growth, he was leaving out other important parts of the picture. The problem is that I have no access to necessary data to do an exhaustive correction, but what little data in the public domain that there is – population trends – suggests that the growth of which he spoke merely came from adding more humans into the mix.
This is not to say this isn’t a valid strategy for growth. It can be. The trouble though is that shovelling more humans in has externalities – crowding, culture shock – which GDP numbers do not capture. Hence, the picture is not as rosy as Lee painted. That in a nutshell was my point.
—
On 1 Sept,22:39, Patrick wrote: “LHL probably knows and doesn’t give a shit”.
Can you clarify? What does he probably not give a shit about?
It is better,for one to know that dialectic does exist in economics as well, albiet econometrics only tends to reduce it.
FYI, 15% growth over 3 years is not equivalent to an average growth of 5% per year.
1.05^3 * X = 1.157 * X
Even the basic approximation of +1%, -1%, +15% = +15% over 3 years is playing fast-and-loose with the math.
1.01 * 0.99 * 1.15 * X = 1.149885 * X
I think LHL was just giving the big picture on this, and not going to decimal places.
There may be boom-bust in terms of the market for HDB units, but for the construction industry as a whole, the dramatic rise in flat construction comes just in time to offset the winding down of many private sector construction projects this year.
Yuen, yes, 2009 was recession year. But from 2007 to 2008, per capita GDP only went up by 0.56%. Basically, our GDP is produced by throwing more bodies at it.
Those figures you quoted are nominal GDP. I think it is more meaningful to compare on a ppp basis. One US dollar in China goes much further than a dollar in the US or in Singapore.
Again, from the CIA World Factbook, China’s per capita GDP (ppp) are:
$6,600 (2009 est.)
$6,100 (2008 est.)
$5,600 (2007 est.)
note: data are in 2009 US dollars
https://www.cia.gov/library/publications/the-world-factbook/geos/ch.html
Alex, the problems you have highlighted (myopic focus on GDP) are not new. They have been discussed countless times over the years.
My personal opinion is that they know exactly the consequences of what they are doing; they also know there is not much that Singaporeans can actually do about it. Ergo, they will continue on this course.
That being said, some points which your readers may find interesting:
1) The fact that salaries have remained stagnant despite GDP growth is a pretty strong indicator that there have not been productivity gains to justify corresponding wage increases. This is a fairly common point.
(Notwithstanding the fact the relationship is an indirect one as many other factors also affect wage levels, such as short-term availability of labour.)
2) Your points on the construction industry seem quite logical.
However I think the bigger picture to keep in mind is that these 22K flats will probably not be enough, or will be barely enough to house the expected 80K migrants for the coming year, let alone make any dent in the existing undersupply.
The underlying structural problems have not been addressed – a monopoly over low to mid-range housing supply. I am all but certain that the 22K figure was not plucked out of thin air.
Prices may flatten momentarily – just long enough for elections to be held and the complaining to quieten down.
By the way, 80K migrants is just an arbitary/claimed figure. Pretty much no one is watching the watchers here.
3) Regarding the $9000, your CPF balance is just a number in a computer.
Basically what they are doing is the digital, high tech equivalent of printing banana money to throw to the populace. Doesn’t cost them anything and you guys get screwed by the resulting inflation.
Somewhat like quantitative easing, and the best part is, the “money” stays with the CPF board to be used on their “approved” goods.
Case in point: During the GFC the Australian government had a stimulus scheme where all first home-buyers got an additional 7-30K “handout” from the Government to spend on their first home. Guess how much house prices rose across the board?
I just find the whole sorry business quite sad; that there are actually some who will be grateful for being taken advantage of.
Yap, that was in very late 90s, where the aussie govt gave a grant for new homes. This was to encourage home ownership from renting. Today, that has grown into a problem of its own.
Last year, I asked a friend in Melbourne while I was there.
He said it was alomost impossible to own a home without dual income.
Thanks to Howard for accomodating the world with its demands, blindly.
The reason that there were so few HDB flats build during the past few years could be due to the 2 casinos project. It is to lessen the competition for manpower and resources, which will definitely drive up the cost of both projects. So I don’t think it’s due to plain luck that HDB ramped up their production as both casinos projects wind down theirs.
Or it could have been timed well for a great strategy towards the GE.
Build less HDB flats over 3 to 4years–
demand goes up, prices rise.
Then towards the GE, come up with a grand plan, 22K flats + ECs
trying to avoid a bubble.
There are 2 points the PAP will use, 1) prices have gone up, you are asset rich and they seem to be doing their jobs well.
However, the problem was cretaed by them in the first place.
What an excellent marketing strategy?
What is strange, is that HDB resale flats had a Minimum Occupation Period(MOP) of only 1 year, if it was bought without a grant and if it was purchased with a bank loan for sometime.
Now it seems, private property owners and residents were allowed to buy HDB resale flats.
I wonder, why the $8000 household income cap rule did not apply to these people. How can it be possible, they are living in a private property.Now, however, they have to sell it, if MOP is incomplete, raised to 5 years.
‘I wonder, why the $8000 household income cap rule did not apply to these people.’
Because these people are buying in a free market. They do not get any subsidy.
Income cap does not apply to resale flats.
I am wrong, here. The $8,000 cap does not apply.
Sorry for this.
Alex, like you, I am concerned about the “citizens first” rationale behind the $9,000 give-away to National Servicemen.
This is one case where I think the PRs must be given equal priority. It’s unhealthy for “esprit de corps” of the armed forces to treat different soldiers differently. Furthermore, PR or not, they too have put in those 2 to 2.5 years of NS and 10 years of reservist commitments.
The way the pay outs are structured, they only get the pay outs when certain milestones are reached, e.g. end of 2 years of NS, 3rd high-key, MR, etc. So if they don’t serve, they are not rewarded. Simple as that.
They’ve been through NS too, why deny PRs what they should have? Do they not contribute to the defence of the nation?
It’s all part of the “rule and divide” policy, dude. =)
too cynical; reason must be to show citizens they get some benefits PRs do not get (but in this case, I think unwise)
Actually, PRs are eligible for it once they get their citizenship. As a PR who went thru NS and then went on to get my Pink IC, I see no problem with this. If you’re willing to do NS, then there’s no reason not to make the leap to become a citizen.
You got conned and your future generations is doomed!
I feel that this is like the Melamine incident in China. When you want more protein, you add poisonous things to make it look like milk has more protein.
Good job for KPI
In 2006, three NS men were robbed by one unarmed man in a crowded shopping mall in JB. (http://sgforums.com/forums/10/topics/185809)
If these three men’s guts, (unarmed) combat ability and brains were representative of the rest of the army, they’re a total waste of good money.
I am quite troubled by us Singaporeans, talking and harping all about our problems. I wonder what the PRs & Fts are feeling right now with this raging debates.
(Poor Alex, I am putting him to more work, hehe)
If Singaporeans don’t talk about what affects (ails?) them, then who will?
😉
E.o.M.
Hey, I am here in the UK, and the locals also talk and harp about their problems. What’s the problem?
There’s a raging debate over immigration here too, BTW.
If we don’t take responsibility for our problems, and just leave it to the govt, the result is plain for all to see.
Dear LC,
UK is vast. However, London is pretty crowded out, most locals live in the outskirts travelling by train. They do put in much effort in travelling, however the timing and system is almost perfect.
The key issue here in Singapore, is that we are pretty small in size, in terms of land and now infrastructure is maxed out as well. The claustrophobia is certainly getting to people and the under-employment.
We do not want to be like the Maldives,Male. Where people are roaming the streets at night. The reason being, they do not have a place to sleep at night because it is taken up by the night-shift accomodators or occupiers. They sleep in the day.
Its that crowded.
Last I heard, Cameron has put a stop to blind immigration and wants specialized people. 125,000 only i reckon p.a.