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5 Minutes With… Leong Sze Hian on rising inflation

Posted by theonlinecitizen on February 4, 2008

5 Minutes With… is a new column on theonlinecitizen where we get a more immediate reaction to a news item of the day.

In this first installment, TOC chats with Leong Sze Hian, the President of the Society of Financial Service Professionals, about TODAY’s report on rising inflation in Singapore titled: “Growth, not handouts, the answer”.

 

TODAY says: However, Mr Lee cautioned against expecting unlimited handouts to tide Singaporeans through this difficult time. “Government revenues have been strong. But we must be realistic — not everything can be solved by the Finance Minister becoming the God of Wealth.

TOC: How strong actually are government revenues? Is it not “realistic” for the government to help more, especially poorer Singaporeans like those on public assistance?

Leong Sze Hian: I estimate the coffers of the GIC and Temasek to be about $400 billion. So, just 1% of the returns of say Temasek’s 18% a year over the last 33 years, may be enough!


TODAY says: Measures are in the pipeline, with some already underway. For example, further efforts are being made to diversify Singapore’s overseas food sources, to help contain rising costs, including the sourcing of frozen chicken supplies from Brazil and fresh fish from Chile.

TOC: How much will this help, realistically? Isn’t getting food sources from as far away as Chile and Brazil just as expensive? Or are they cheaper than say, Malaysia or Thailand or even China? Why wait till inflation bites before we go to Chile to get cheaper food?

Leong Sze Hian: You are absolutely right. Why wait for inflation to hit a 25-year high – then start to work?


TODAY says: And despite the growing pain of rising costs, a fresh report from the Ministry of Trade and Industry released yesterday shows that Singapore has one of the lowest rates of food inflation in the world…. The price of food in Singapore has risen 2.9 per cent from 2006 to 2007, while in Malaysia food prices have shot up 3.1 per cent and in Hong Kong by even more, by 4.5 per cent.

TOC: From which study or report is the MTI quoting from? Is 5% inflation “low”, internationally? Even if it is low, is it fair to compare our cost of living with that of Malaysia and Hong Kong?

Leong Sze Hian: As with many past cited reports, they should make the report public, so that you don’t have to ask this! Malaysia food prices are already much lower. So, just 0.2% higher food inflation than Singapore‘s still end up with much lower prices!

 

TODAY says: One surprising fact: Despite the rise in operational costs, a survey by the Department of Statistics also released yesterday showed that 75 per cent of 1,271 hawker stalls here have not increased prices.

TOC: If 75% of hawkers have not increased prices, then how did food inflation jump 2.9 per cent? Where did this rise come from? Why is it that Singaporeans seem to be experiencing a different scenario from the DOS’ statistics?

Leong Sze Hian: If the survey had interviewed the wrong hawkers, maybe those few who raised prices, increased a lot!

 

TODAY says: The CPI — which is used to measure inflation year-on-year — for food in Singapore had increased from 1.3 per cent to 1.6 per cent from 2005 to 2006, and then to 2.9 per cent last year.

TOC: Is it fair to say that the increase was more than 100% (from 1.3 to 2.9)?

Leong Sze Hian: Yes! Actually, it’s 123%!

 

TODAY says: The MTI expects that while the CPI is likely to be higher this year, especially in the first half, it would rise moderately in the second half….. Citing the turbulent financial markets and the slowdown in the United States’ economy, he (PM Lee) said Singaporeans “have to expect more uncertainties ahead as the US problem (credit crisis arising from sub-prime mortgages) has not worked itself out and we don’t know how bad it will be”.

TOC: What justifies the MTI’s confidence that the CPI will only rise “moderately in the second half” when the PM himself is citing uncertainties in the US’ economy?

Leong Sze Hian: Well, they were also very confident last year. So, notwithstanding confidence, I think I am more confident about the PM’s prediction, than the MTI’s!

 

TODAY says: Singapore has been buffeted by external inflationary pressures — especially on food prices — driven by a myriad of factors, including rising affluence and consumption in China and India; disruption in food supplies caused by droughts and diseases; and farmers switching from growing crops for food to biofuels in face of higher costs of food transportation.

TOC: If we are “buffeted” by “external inflationary pressures”, does that mean that food prices would have been even higher if we were not “buffeted”? What does it mean and how are we “buffeted by external inflationary pressures” – if indeed we are?

Leong Sze Hian: I am buffetletly (if there is such a word) confused too!

 

TODAY says: Singaporeans should not be unduly worried, said Mr Lee. “When we say that inflation will hit 4 to 5 per cent in the first half of 2008, it is already where we are in January, so we may not see another price hike going forward,” he explained.

TOC: The PM seems to be saying that we should be somehow happy or thankful that we, in January, are already seeing a 4 to 5 per cent inflation rate. Is it possible that this 4 to 5 per cent will stay with us throughout the rest of the year? PM Lee was also quoted as saying : “Last year, inflation was about two percent. This year, it could be five per cent, maybe even more.”(AFP)

Leong Sze Hian: I bet my last dollar against it! I bet it will be even higher!

 

TODAY says: Will the Government act to control food prices or subsidise the price of essential items? PM Lee said such a move would backfire, especially when Singapore imports all its food supplies.

TOC: What does PM Lee mean when he said such moves will “backfire”? Is it not possible for the govt to control even essential items?

Leong Sze Hian: Govt should cut or freeze HDB 1 and 2-room rentals, reverse the decision to increase the property tax on all HDB flats wef 1 January 2008, freeze or reduce rising new HDB flat prices, freeze or reduce utilities charges (I think it is about time that utilities companies take a temporary break from making ever increasing profits), freeze or reduce public transport fares (same reasoning as the above for utilities companies), freeze or reduce S & CC charges (isn’t accumulating more than $1 billion in town councils enough), reduce or freeze public healthcare fees, etc – need I say more!

 

TODAY says: Citing the chaos in countries like China and Malaysia as a result of panic buying, the Prime Minister added: “Price control is not something we can do and if you want the Government to subsidise, that’s also not a good thing to do because it is very expensive and most of the food will be consumed by people who are not poor.” The most astute solution is to grow the economy and increase wages, he said.

TOC: Is it true that price control is something the govt cannot do, as the PM said? Growing the economy and increasing wages are options which will take time to implement and materialize. By saying that, isn’t the PM being ignorant of the hardships which people are currently facing, especially the poor? Shouldn’t places like NTUC do more to help alleviate inflation?

Leong Sze Hian: Well, the Govt has always said that so many things are subsidised – HDB flats market subsidy, hospital subsidy, education subsidy, etc. So, maybe food is the exception. What’s the point of growing the economy, when the wages of the bottom 30% keep going down, and the number of low-wage workers keep going up!

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14 Responses to “5 Minutes With… Leong Sze Hian on rising inflation”

  1. noone said

    ‘No need to buy branded bread,’ he said in Mandarin to laughter. ‘Bread is bread, rice is rice.’

  2. Insouciant said

    No need to buy branded talent. Talent is talent, the willingness to serve is the willingness to serve.

  3. […] – Looking For LaLaLand..: Is the Prime Minister seriously out of touch? – The Online Citizen: 5 Minutes With… Leong Sze Hian on rising inflation – HWZ: Singapore ’s food inflation is extremely high by international […]

  4. Gary Teoh said

    To reduce cost, why not the government chooses a cheaper brand of ministers who are willing to serve wholeheartedly,money is not everything, it is only an excuse that without high pay no body want to serve in the cabinet.

  5. NTUC aunty said

    Maybe they were relying on NLB historical prices?

  6. Kim Yew said

    Sze Hian, I like your style. I believe you really do care for your fellow citizens. I wouldn’t be surprised if the PAP bigwigs have an eye on you and try to entice you to join them someday. I’m told they can be very persuasive.

    Please promise us that you won’t lose that conscience that you so often display for your fellow man.

  7. mr lee said

    A few thing to take notes, and sorry for my broken English.If the government can help, they should help.Government not = to Business Organisation.The purpose of a government is to manage the country in a proper way so that most citizens will lead a good life.
    In Singapore, we are quite lucky that we did not have those kind of nature diaster to do us harm.So, therefore i think our government compare to countries like Indonesia or China can able to save alot of money.And with the kind of development we have now, how come there are so many people still with low wages?And how comoe everyone is complaining of money not enough?Unless the government does not want to help, or then what is the problem now?

  8. Annonymous said

    Was just reading through the stuff. For your information, “buffeted” means being pounded repeatedly with great force. It’s not the same as “buffered”, quite the opposite really. Wouldn’t hurt if you guys can check your work before publishing it.

  9. saintmoron said

    Our country is very rich indeed, even developed nations are saying so, but why are the general populace struggling?

    First the monies are in the hands of few super rich people, much of State Funds are used to invest in foreign sovereigns, having little or nothing used for the people for welfares. However, the most terrible, horrible problem that besets and causes us, the people, the hardships are the ever escalating costs of essentials. There is nothing worse than greedy people out to exploit the man in the street. They make you work, slog will be more appropriate, pay as little as they can get away with. In turn they charge you the highest prices on our consumptions, as though there are no controls over them, which is a fact because they (services/goods providers) themselves are running the businesses and calling the shots.

    Unless these ‘shot callers’ recover their consciences and or get back their humaneness, be prepared to suffer.

  10. Dear Anonymous,

    “Buffeted” was used by TODAY. We were quoting them – in inverted brackets above.

  11. Annonymous said

    My point was the news article was saying Singapore was “buffeted by external inflationary pressures”- meaning the newspaper was saying we are hit badly by it, which is quite factual. But in your question to Leong Sze Hian, it seems you guys thought it meant “buffered” or something close to that. Anyway thought I’d point out the meaning of the word for everyone’s benefit. Cheers.

  12. ronin said

    I will bet my last dollar that food prices will either continue to rise or stay high this year….more likely the former.

    Why? Because the govt’s only weapon against inflation is the SGD exchange rate. But appreciating SGD brings a BIG negative side effect of making S’pore uncompetitive. Rental rates here are already at HK’s level, so a stronger SGD will make us very uncompetitive.

  13. Terence said

    TODAY says: However, Mr Lee cautioned against expecting unlimited handouts to tide Singaporeans through this difficult time. “Government revenues have been strong. But we must be realistic — not everything can be solved by the Finance Minister becoming the God of Wealth.

    TOC: How strong actually are government revenues? Is it not “realistic” for the government to help more, especially poorer Singaporeans like those on public assistance?

    Leong Sze Hian: I estimate the coffers of the GIC and Temasek to be about $400 billion. So, just 1% of the returns of say Temasek’s 18% a year over the last 33 years, may be enough!

    I think what PM Lee is implying here is that giving too many handouts goes against the government’s policy of ‘workfare’ over ‘welfare’. Giving handouts is not the best solution, and that is the main thrust of the article. However, I felt the article should do more to address how ‘growth’ can offset ‘inflation’, rather than trying to justify how the effects of inflation may not be as far-reaching as it seem.

  14. 5 cents said

    In an imperfect system, our government can only shift the burden of costs in business from sectors to sectors. And because business is cyclical, respective industries will mostly have to ride the bears and bulls in and out of seasons. Having said that, the cycle of change has become more define and pronounce. The remedification necessary required of the few rich beneficiaries is harder to extract and in turn, the social and economic costs will encompass more of the middle class. In fact, irrespective, rich or poor, we have all become “poorer” as a people under such management. The government, in my opinion, has not offered concrete solutions but instead, temporary relieves. Ultimately, the cumulative effects of excesses must be borne by someone. If it is not the locals, it will have to be the foreigners who will pay the social cost for the rich man’s pride and honor!

    So it is a fallacy to think the elites are servants of the people.

    Rather, it is the people who are servants of the elites!

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