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Rice, Rice Everywhere

Posted by theonlinecitizen on May 2, 2008

Farquhar

Rice, Rice Everywhere

Poorer Singaporeans get left behind in affluent Singapore

It was the curse of Coleridge’s Ancient Mariner to wander the high seas, tormented by the sight of water everywhere, yet finding himself unable to quench his aching thirst.

The analogy of want even amidst a situation of plenty would be familiar to not so well-off Singaporeans, given the recent squeeze on the price of basic commodities – of which the spiralling cost of rice is the most talked about – that has arisen in spite of the economic boom that the country is experiencing.

While the price and apparent scarcity of rice have now assumed an importance of national proportions, dominating local media headlines as well as the concerns of politicians, the government’s initial instinct was actually to deny the severity of the problem as it first started coming to light.

This was epitomised in the comments by Minister for Trade and Industry Lim Hng Kiang in November 2007 that Singaporeans should simply switch to cheaper products to offset the effects of growing inflation – remarks somewhat reminiscent of those, popularity misattributed to the unapologetically profligate Queen Marie Antoinette of France, that peasants should switch to eating cake should they run out of bread.

Government’s belated response

That the government has belatedly adopted a concerned tone is probably the result of the unrest spawned by rising food prices elsewhere in the world. Full scale riots have broken out in developing countries from Bangladesh to Haiti, while unrest looms precariously in giant nations such as China and Indonesia. Rising food prices also contributed to the dissatisfaction which fuelled an anti-government swing in recent elections in neighbouring Malaysia.

Even so, the government’s focus has been somewhat misdirected, centring on countering perceptions of a possible scarcity of rice rather than on the plight of poorer Singaporeans. This is probably to prevent panic buying from driving up the price of rice even further. But there was little chance of that in any case, since it did not appear that Singaporeans were that susceptible to panic and overseas supplies have remained stable despite some rice-growing countries saying that they might limit exports.

The bigger problems remain inflation and its effects on lower-income groups. Inflationary pressures are being disproportionately borne by this group of Singaporeans, since basic commodities such as foodstuff make up a larger proportion of what they spend on compared with more affluent Singaporeans. Furthermore, rice is only one item out of many whose prices have been on an upward trajectory.

The latest statistics show that poultry, eggs, vegetables and seafood have all seen higher percentage increases in price than rice over the past month1. The same survey shows that transport prices remain stable, but this reflects lower car prices rather than a decline in the cost of public transportation (which lower-income groups depend on). House prices continue to rise, but without the means to unlock rising assets values and translate them into liquidity – unlike in the US or Britain, where expanding consumption has been on the back of easy loans taking advantage appreciating house prices – this only means that the real costs of servicing housing loans have been increasing.

At the same time, lower-income groups are also being squeezed by stagnant wages2. But the current predicament of the lower-income groups has only emerged as a major issue recently due to a rather unexpected burst of inflation over the past two years which have hurt them particularly badly. To be fair, as the government has rightly pointed out, this run of inflation is mainly predicated on external factors, such as increased demand from rapidly growing parts of the developing world that has been unmet due to a lag in supply, the distorted international trade in agriculture, high energy costs and shortages in food supplies due to unpredictable weather.

Nevertheless, the role played by external factors is scarcely an excuse for the somewhat anaemic response from the Singapore government to the plight of poorer Singaporeans. After going through the first stage of denial (which continues to linger to some extent), the government waged an information campaign to convince Singaporeans that the problem wasn’t really that bad and, barring that, it wasn’t really the government’s fault. It circulated posters on this to the grassroots and sponsored television commercials proclaiming the virtues of switching away from fresh meat to cheaper frozen meat.

A series of measures – enough?

After some more dawdling, the government then announced that poor families will be given food aid. But this is being done on an ad hoc basis, and the government’s traditional emphasis that it is the responsibility of the individual to come forward casts some doubt on whether such aid will reach the most vulnerable Singaporeans. Past examples have indicated that the take-up for such programmes has been relatively feeble, because poorer folk are usually slower in catching wind of such measures or put off by the conditions attached. They can also be discouraged from coming forth because of the stigma attached to aid.

Finally, the government rolled out a bunch of subsidies consisting of a total of S$3 billion in the form of GST credits, senior citizens’ bonus and growth dividends. This might have been an attempt to address the growing problem of inequality, and perhaps also because the government has been somewhat embarrassed by the magnitude of the 2008 budget surplus.

But one question that immediately comes to mind is why the package of subsidies accounts for less than half of the budget surplus of S$6.4 billion. Can the government afford to give more? One would argue in the affirmative, since public finances are healthy since the government has been running a string of (bigger than expected) surpluses. Furthermore, the inflation suffered by Singaporeans is, as the government itself has stated, something of an anomaly, and it should be precisely for such unexpected occurrences that it sets aside budget surpluses.

The albatross of inequality

But the real issue of widening inequality will loom large even after the government has weathered the current predicament over rising food prices. One-off transfers such as the post-budget goodies of 2007 lowered the Gini coefficient, a measure of income inequality, from 0.485 to 0.46 that year. (As a point of comparison, Singapore’s Gini coefficient in 2004, already one of the highest in Southeast Asia, was on par with those of large developing countries like China and Mexico.) It has been steadily increasing. Policy choices such as eliminating estate taxes (as previously argued by Farquhar) and widening the tax base by moving more towards taxing consumption are likely to ensure that this trend continues. The government’s inclination to give out one-off transfers to counter this will do little to reverse this trend.
Thus the current predicament of poorer Singaporeans is part of a longer-term trend of a society that is becoming steadily polarised between the haves and the have-nots. The prognosis is not positive. Without a more progressive agenda to alleviate inequality, lower-income groups are likely to languish despite Singapore’s continued growth. Singapore cannot claim to advance as a nation while it leaves behind those who lose out (from external trends such as globalisation and a rapidly changing economy that are far beyond their control) in spite of having the means to do more for their plight. That’s the real albatross around its neck.

——————–

1 Singapore Department of Statistics, CPI index for February 2008

2 Singapore Department of Statistics, Occasional Paper on “Key Household Income Trends, 2006”

——————–

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19 Responses to “Rice, Rice Everywhere”

  1. Plenty Of POOR said

    Singapore has plenty of rice.
    Singapore has plenty of money in the national reserves.
    Singapore has plenty of foreign investments.
    Singapore has plenty of members of parliament.
    Singapore has plenty of praises and boasts.
    Singapore has plenty of elites and scholars.
    Singapore has plenty of rich millionaires.

    YET SINGAPORE ALSO HAS PLENTY OF PEOPLE WHO CANNOT MAKE ENDS MEET,
    WHO HAS TO BEG THE GOVT FOR KINDNESS FOR YEARS AND STILL BEGGING …

  2. EY said

    I’m quite curious as to whether such statistics exist to illustrate the national proportion (or percentile) of mean income per capita by household (not too sure whether this is the correct term…essentially it is the total household income divided by the number of people in the household). These numbers may exist in the DOS but I’m just too lazy to dig them out. But I think knowing this gives us a better perspective on how large a percentage are people affected by the relentlessly increasing cost of living.

  3. cx said

    “I’m quite curious as to whether such statistics exist to illustrate the national proportion (or percentile) of mean income per capita by household (not too sure whether this is the correct term…essentially it is the total household income divided by the number of people in the household). These numbers may exist in the DOS but I’m just too lazy to dig them out. But I think knowing this gives us a better perspective on how large a percentage are people affected by the relentlessly increasing cost of living.”

    Yes the figures are available. Go dig them out. The lowest decile gets by on about $180 per person per month.

    “House prices continue to rise, but without the means to unlock rising assets values and translate them into liquidity – unlike in the US or Britain, where expanding consumption has been on the back of easy loans taking advantage appreciating house prices – this only means that the real costs of servicing housing loans have been increasing.”

    Huh?? Ignoring the sloppy editing, if you look at all those eaZy credit ads it’s not too difficult to get loans – look at SIBOR rates; look at mortgage rates, refinancing rates, MAS data on housing loans first before writing. And besides even if it were, what has this got to do with the real costs of servicing housing loans? If the price of your house goes up, you can always refinance, probably at a lower interest rate, so the cost of your loan doesn’t go up. If all you’re saying is that houses are getting more expensive, so it’s more expensive to service the larger loan you must get, then what’s the point in stating the obvious? In fact, even if it was easy to borrow on rising asset prices, more expensive houses would mean bigger loans anyway.

    There’s a decent article somewhere in there that’s held back by hopelessly inadequate research. You quote the DOS paper on 2006 income trends; there’s an updated one from 2007 that says income for poorest decile went up in real terms, though by much less than for the top deciles. You don’t really examine the Gini – for example, in Singapore, the figures only include income from work, not income from wealth (e.g. interest and investment income). This means it will not be affected by throwing away estate taxes, or by taxing consumption more heavily; at least not in the first instance (possible secondary effects from reducing income tax rate). It’s unfair of course to carp at a wholly voluntary effort but surely if it’s pretending at national significance it ought to make sure the work is up to scratch too.

  4. The Ancient Mariner said

    Rice, rice everywhere
    And all the stomachs did shrink;
    Rice, rice everywhere
    And not a grain to eat

  5. Farquhar said

    Dear Cx,

    Thanks for your comments. Your carping is certainly welcomed – that’s the only way that this column will ever be improved. Farquhar does not pretend to be anything of “national significance” – it’s just a place to bounce around ideas and arguments. Hence, valid counter-arguments will always be welcomed and taken on-board.

    You have rightly pointed out some of the flaws in the argument about rising housing prices. But what it actually meant to say was that higher house prices do not translate into gains for poorer Singaporeans, because these Singaporeans tend to stay in HDB flats and the HDB concessionary rate (2.6%) is lower than commercial bank rates (typically above 3%) so there is no way that they can unlock liquidity by refinancing their housing loans. Hence they are not able to use the rising house prices to offset their increase in expenditure elsewhere due to greater prices. Perhaps this would have been more accurate instead of saying that “real costs of servicing housing loans have been increasing”.

    Thanks for pointing out that a 2007 paper was available. The 2006 paper was singled because that phrase “stagnant wages” came from the paper itself, and because the 2007 paper did not show signs that the trend was going to change. For the lower-income groups (taken in this case to be “Average Monthly Household Income from Work Per Household Member Among Employed Households by Decile” for the first 20 deciles), their real income over the years has been:

    2000 2005 2006 2007
    1st to 10th: 290 260 280 280
    11th to 20th: 490 480 500 520

    But that should have been clarified. Again thanks for pointing it out.

    Your third point that the Gini coefficient doesn’t take into account wealth inequality is true, but Farquhar would venture that wealth inequality does have an effect on income inequality. In any case, the Gini coefficient was cited as one indicator of showing the growing inequality in society – while not definitive, it does give a good guide of such a trend. Estate taxes and consumption taxes were highlighted as policy that are most likely to exacerbate this trend – are you disagreeing with that?

    After reviewing the article, it is apparent that the editing has to be tightened to catch some egregious grammatical errors. Thanks for pointing that out.

  6. Kim Buay Song said

    Are there any good academic (i.e. non governmental) studies on income distribution patterns in Singapore?

    I mean, where are all our best brains in NUS, NTU and SMU up to? useless academic research that nobody reads? or are they too cowed or cowardly since the last time some NTU dons got screwed for saying something not pleasing to the government’s ears.

    We need data! and courage?

  7. Farquhar said

    Dear Ancient Mariner,

    Thanks. That’s probably what Coleridge, as a contemporary of Malthus, would have said (if he wasn’t a member of the aristocracy himself).

  8. smuter said

    Buay Song,

    you must be out of town for a long time. Don’t you know that NUS, NTU and SMU are full of Chinese, Indian and Vietnamese professors and graduate students.

    Recently, I visited my cousin who is studying for his master at a top business school in singapore (i won’t reveal) and spoke to his classmates. 99% of them are from maninland China (some quite chio too). So it is not only the kopisoh problem, you see.

    I was shocked to learn that one of chio China ladies chat me up and try to find out about what I do for NS. Later, I was even more shocked to learn that 8 out of 10 of these china students are members of the Chinese Communist Party.

    So, the govt is actually spending lots of tax payer’s money to train CCP cadres for their masters and phds.

    And the professors. I think SMU is still ok, but NTU is now a chinese territory and NUS an Indian territory. The Chinese professors are happily making plenty of profits from outside teaching to do proper research and the Indians, I don’t know what they are up to.

    So hah! rely on academia? Fat hope!

  9. Gary Teoh said

    They ask us don’t hoard rice, ther will be enough, but less than 3 months, price go up again. Lim swee say has to answer, why he always tells lies !!!

  10. cx said

    Farquhar: thanks for the reply. Just a couple of points – one that you can’t have “20 deciles” and two, if you were referring to HDB concessionary rates and saying you couldn’t refinance them for a better deal, then what’s the point? Those rates are the lowest there are, and it’s a good thing that you can’t beat it, not a bad thing. Think what you were saying in your clarification. If they could refinance their HDB loans, then the HDB rate wouldn’t really be concessionary would it? And wouldn’t that be a bad thing?

    I think the column is generally a good idea, but online journalism needs less of the stylistic excess and more content and research. There’s nothing worse than reheated polemic from the point of a view of a mere newspaper reader.

  11. Farquhar said

    Dear Cx,

    Thanks again. As noted in the earlier reply, the argument about housing prices was quite flawed, as you have rightly pointed out. The point that article was trying to make was that higher house prices don’t really translate into gains for the lower-income groups because it is difficult for them to unlock liquidity from their houses, but this point certainly has to be justified with more research and argued in a more coherent manner.

    Farquhar thanks you for your kind words about the column, and you are certainly right in flagging that online journalism needs more content and research, though perhaps this is something that our mainstream contemporaries should take note of as well. In any case, Farquhar would deign to point out that polemic can’t be reheated if it cannot be found elsewhere in the government-controlled newspapers in the first place.

  12. cx said

    I think the content and research that goes into many articles in mainstream newspapers are quite substantial. There was one by Chua Mui Hoong the other day citing numerous examples of foreign ministers who had mistakes made on their watch but stayed in their jobs (I’m sure you can sense the context.) The angle she used is probably unattractive to most readers of TOC but the fact is she used more and better considered examples than ANY of the hundreds of blog rants that sprouted following the minister’s presentation to Parliament.

    The same with income inequality, the subject of your latest column. More and better research can and has been found in the pages of mainstream media. What is lacking is diversity of views and competition of story angles. Online journalism can do that but they won’t get far if all they do is pontificate from the POV of a university educated, fairly wealthy, middle class professional/student background newspaper reader. Either that, or violent unconsidered rants by people whose main source of news, ironically enough, is the newspaper, and whose chief evidence is anecdotal (cf Smuter’s post, above).

    Online journalism can only get credibility if it becomes a consistently trustworthy souce of well written and objective news stories, with genuine insight and obvious clear understanding of the ground covered. I think some of the Malaysian websites have that because they have managed to attract and retain some experienced journalists and editors who left the mainstream news media. These people bring to their new jobs precisely that knowledge and understanding that online journalism really needs. What we don’t need is reheated polemic, as I said – reheated because most of the points have been made a wearyingly large number of times before.

  13. Andrew Loh said

    Dear Cx,

    Your point is taken. But do keep in mind that we are no mainstream media. We aren’t even a news website – and truth be told, we don’t have the resources of a news organisation such as SPH.

    Thus, we do not claim to be perfect or always right. I don’t think any news org would claim that anyway.

    I think we have to keep that in mind and make fair comparison. Your examples of Malaysian websites are exceptions rather than the norm. I only know of one Malaysian website which did what you mentioned – Malaysiakini, which, by the way, is run by paid full timers (as far as I know).

    TOC is just a blog where ordinary Singaporeans share their views – voluntarily.

    TOC does not pretend to be a news website. (I have said we are not many times in private conversations and even recently in an interview with the TODAY paper.) And even with their capability in research and access to vast resources, local news agencies still get their facts wrong at times. (That’s why they have a “What it should have been” section in their papers, right?)

    Thanks for your views but there is no need to repeat what you have said before about the author – that “What we don’t need is reheated polemic”. The point is noted already and we will do our best not to indulge in ‘reheated polemics’, whatever that means.

    I disagree with the substance of that particular comment of yours about this particular article, by the way.

    Regards,
    Andrew Loh

  14. Farquhar said

    Dear Cx,

    Agree with Andrew that your point is taken, but am wondering whether your case that this week’s article is “reheated polemic” is a bit overblown.

    First, the newspapers do not seem to have covered the angles/points made in the article. Hence, not sure whether your point about lacking a “diversity of views and competition of story angles” is applicable here. Don’t think that the same angles/points can even be found elsewhere on the blogosphere.

    Second, it would seem that in the ensuing debate over the article, it was only the point about housing prices that you found fault with (and which Farquhar has already conceded was flawed). The logic of the arguments and other facts appear to have met your exacting standards.

    Perhaps you would be so kind as to point out where “more and better research can and has been found in the pages of mainstream media”? Farquhar would definitely like to be able to update the article accordingly. It would also help if you could elaborate on which of the criteria – “well written and objective news stories, with genuine insight and obvious clear understanding of the ground covered” – that this column is not up to the mark in. That would be much appreciated.

  15. cx said

    The last two paragraphs were to do with online journalism in general, not your website in particular.

    More and better research etc. can be found precisely because many of the mainstream writers have vast experience in their fields and consequently a lot of institutional knowledge and perspective. That shouldn’t be discounted too quickly. My point about online sites (including yours) is that they should try and incorporate the views of those people who have genuine insight and obvious clear understanding of the ground covered – professionals, grassroot workers etc. Too many seem to be students and sometimes that shows – I think there was an issue last year about a not-so exclusive ‘exclusive’ report from the auditor general posted on TOC. Also too many of the contributors seem to be from the liberal, western/english educated fringe so the tone is always depressingly similar – hence the description of it as reheated.

  16. Andrew Loh said

    Hi Cx,

    If you do know of any professionals or grassroots people who would like to contribute to TOC, please do let us know.

    Regards,
    Andrew Loh

  17. FX said

    Dear CX

    “There was one by Chua Mui Hoong the other day citing numerous examples of foreign ministers who had mistakes made on their watch but stayed in their jobs (I’m sure you can sense the context.)”

    If any foreign minister of another country makes any mistakes, it is their countrymen who will have to pay the price and it is their prerogative whether they should let him stay or not – it is not really our business unless their mistakes have widespread implications which may affect us.

    If any of our leaders makes any mistake, Singaporeans will have to pay the price and I doubt citizens of any other foreign country will be too unduly concerned.

  18. Expected Analysis said

    Defence spending is a necessary evil to serve as a deterrence to our perceived enemies. However, to continuously increase our annual defence expenditure is something that Singaporeans have to ponder over and question.

    After many years of increased spendings on upgradings, acquisitions of modern weapons and technology, there has to be a stage of maintaining the current status rather than continue splurging on excessive procurements.

    It is an established fact that high tech weapons are not sold on affordability alone. Much political patronage has to be entertained which gives rise to corruption tendencies.

    Military equipments are unlike others, for there is no standard retail prices.

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