Singapore's future: a miserable and expensive (though global!) city-state?

Singapore’s image has taken a beating in recent times. Not only is it the most expensive city in the world but it has also been labelled a ‘City of Misery.’ A city where everything, perhaps even happiness, must be mandated or authorized by the government!

It’s easy to pick on Singapore? It’s a small city-state whose name is synonymous with efficiency, practicality, authoritarianism and success. At least if success is measured by average per capita income.

The gradual appreciation of the Singapore Dollar is one factor in Singapore's jump in global cost of living indices

As successful people are aware, success come at a price. Envy and jealousy are the most obvious though not the most useful. More important is the analytical discourse surrounding achievements, such as Singapore’s progress from Third World to First World.  

In this vein, Singapore’s newest accolade as the world’s most expensive city is a wake-up call for the city-state.

Like most societies, Singapore’s economic progress is a significant factor in maintaining social cohesion. If Singaporeans’ perceptions about economic progress and social mobility suffer then the impact on the country’s broader social structure may be considerable.

Statements by parliamentarians notwithstanding, during the last few years Singapore has become an expensive city.

Part of the reason is down to conscious policy decisions, e.g. the exorbitant cost of owning a car as a result of the government’s Certificate of Entitlement (COE) system. However, there are factors other than the vehicle COE system affecting Singapore’s cost competitiveness. Certainly, the recent focus on foreigners has added to inflationary pressures. As lower paid foreign workers from nations like China, the Philippines and Myanmar are replaced with better paid Singaporeans, increased wage cost are ultimately borne by consumers. Small and Medium Enterprises (SMEs) are the hardest hit.

Singapore’s foreign exchange rate policy also plays a part. The gradual appreciation of the Singapore Dollar against the US Dollar makes the city seem more expensive to expats, particularly when placed in the regional context. Neighbours like Indonesia and Malaysia sport depreciating currencies.

Singapore may well yet morph into Switzerland or Australia, countries with rigid labor markets and high levels of government provided social welfare. Call a plumber and pay a handsome sum just for the tradesperson to step into your home - and schedule the visit on a future date to suit only his convenience. In such a world, costs are high and efficiency suffers; though society leaves no one behind as a result of an a comprehensive and far reaching social safety.

In Singapore, an all pervasive social safety – coupled with a rigid labour market - net may be ours too ... if we are ready for Goods and Services Tax (GST) rates to gradually move to fifteen percent; and personal income tax rates towards 50 percent!

Is it worth the cost? It’s your choice Singapore.

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Imran is a business and management consultant. Through his work at Deodar Advisors, Imran improves profits of businesses operating in Singapore and the region. He can be reached at imran@deodaradvisors.com. 

The World’s newest ‘Banana Republic:’ the United States?

The United States is bankrupt. The government refuses to pay its bills. The US currency is no longer the 'be-all and end-all' of international currencies. Notwithstanding Apple, Microsoft and other entrepreneurial start-up companies, US economic clout is on the wane.

Ok, so the US is not really bankrupt – it can keep printing (and debasing?) more paper currency notes which the rest of the world happily purchases in ever growing amounts. Economic stability equals a free trade environment predicated on trust in the USD.

The rest of the world includes Singapore.

Singapore's foreign currency reserves, one of the largest pools of capital in the world are biased towards the US Dollar (USD). From Temasek Holdings to the Government of Singapore Investment Corporation (GIC), Singapore's stake in international economic stability is great. Singapore is not alone. China – the largest single owner of US government debt – has a lot riding on USD stability.

The day China stops buying US debt, the USD may collapse.

Result: China becomes much less wealthier, on paper at least. Moreover, the US will be unable to keep importing goods from China because it cannot pay for them in the 'new, debased' USD. In turn, this leads to social problems within China as Chinese factories reduce production and lay off workers. Consequently, Chinese consumers, including travellers, decrease consumption and the world suffers more ... and the vicious cycle continues.

Of course, global politics are not so simple. Despite a gradual shift away from US dependencies, the world needs the US to behave responsibly. International stability continues to rest on the US, economically and politically. Shutting down government because of domestic political squabbles is not responsible. It smacks of 'Banana Republic' politics and politicians. The US looks more and more like the Third World countries it chooses to lecture (and bomb when they don't listen) about governance on a regular basis.

The world entered a new socioeconomic era some years ago. The post World War Two Bretton Woods and Cold War orders have wasted away. However, the replacement paradigm has yet to be defined. At least for the next several decades the world will continue to watch US domestic politics as if it were their own.

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Imran is a business and management consultant. Through his work at Deodar Advisors and the Deodar Diagnostic, Imran improves profits of businesses operating in Singapore and the region. He can be reached at imran@deodaradvisors.com.