Singapore Airlines: transparency, accountability and public financial support

The COVID-19 pandemic has upended many assumptions about the world’s normal state of being. New business trends have emerged or intensified while existing norms are being questioned in a rapidly evolving environment. Many businesses are forced to reinvent themselves in the throes of a crisis and do not have the luxury of time. For many, this is an existential crisis.

Among the many affected is Singapore Airlines (SIA). Even the airline’s multiple quality accolades are not sufficient to save SIA from the worst impact of the crisis. Without the Temasek sponsored bailout of SGD fifteen billion announced in March 2020 SIA’s solvency as a going concern was brought into question. 

A Singapore Airlines Airbus A-380 coming in for landing. (Source: Wikipedia)

Six months after the March bailout was agreed the situation has not materially improved for SIA. Passenger traffic has dropped by over 90 percent year on year while freight volume has approximately halved during the same period.

Less than 50% of SIA’s fleet is airborne. As of August 2020, out of SIA’s active fleet of 124 aircraft only 56 were being utilized for revenue generating passenger or cargo flights. After factoring in capacity utilization on passenger flights the scale of SIA’s problem becomes more apparent.

Moreover, even after placing scores of planes in long term storage SIA’s operating costs continue to burn cash. By mid-August SIA had already spent SGD 4.4 billion of fresh money raised as a result of the March exercise.

The present operating environment raises obvious questions about SIA’s future strategic direction.

Is the strategy proposed at the time of the March bailout still relevant or is it time for a rethink? Do Singapore taxpayers, either directly through the government or via government investment vehicles like Temasek, continue to support SIA for the next few years in the hope that the world – and SIA’s operations - returns to ‘normalcy?’

These questions are best addressed by an Independent Review Commission staffed by aviation experts – local and international – appointed and formed by the government. While the commission’s objective will be to provide recommendations on SIA’s future, its terms of reference must be broad enough to permit members to ask tough questions, including those which may make many Singaporeans uncomfortable.

Singapore’s future is intertwined with the world. As a city-state, the Little Red Dot cannot isolate itself from the world. The country’s port and airport are vital to ensure Singapore’s status as an important node in an interconnected world. 

Nevertheless, Singaporeans deserve greater openness and accountability on the use of public funds to keep SIA flying. The public must be assured there is a coherent and coordinated strategy in place to revive SIA and Singapore’s aviation sector.

As Singapore’s first Prime Minister, the late Lee Kuan Yew once said to the Singapore Air Transport Workers’ Union, “[The airline was not a prestige project,  if they could not turn in a profit then] we should have no compunction in closing a service down."

SIA’s fate is not yet at the stage where discussions about closing it down are warranted. However, the size of public sector support to SIA requires greater transparency in the form of a government sanctioned independent review of SIA’s operations.  

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Imran is a Singapore based Tour Guide with a special interest in arts and history. Imran has lived and worked in several countries during his past career as an international banker. He enjoys traveling, especially by train, as a way to feed his curiosity about the world and nurture his interest in photography. He is available on Instagram (@imranahmedsg); twitter (@grandmoofti) and can be contacted at imran.ahmed.sg@gmail.com

Singapore's Achilles heel: foreign workers?

Singapore's foreign workforce has been in the news lately. It seems to happen every so often – generally for the wrong reasons.

The last time Singapore's foreign worker presence hit the headlines was in December 2013 with the infamous Little India Riot. (Yes, riots in Singapore and that too within the last decade!)

Today I would like to shed some light on Singapore's foreign worker presence and put forward some ideas for managing the situation in the coming years.

Let's start by putting the situation in context.

Modern Singapore's skyline (Photo: Wikipedia)

Size wise Singapore is about ten percent smaller than New York City at approx. 720 square kilometers versus NY's 780 sq. kms.

Singapore – though small in size – is an economic powerhouse. According to the recent estimates by the IMF, Singapore's GDP per capita on a Purchasing Power Parity (PPP) basis is equivalent to USD 105,700 which makes Singaporeans the third wealthiest people on earth.

In 2019, the World Bank also ranked Singapore at number three with a GDP per capital on a PPP basis of USD 101,500.

In case you are not aware, Purchasing Power Parity is a method which converts a country's local currency using "a theoretical exchange rate that allows you to buy the same amount of goods and services in every country." In other words, PPP allows one to measure and compare a citizen's ability to purchase goods and services across different countries using the same yardstick.

Because of its wealth Singapore has been a magnet for foreign labor – at least in during the last few decades. Consider the island's population.

In 2019, Singapore's population was 5.7 million with 1.7 million people or almost 30 percent being foreigners. By contrast, in 1990, Singapore's total population was three million of which 300,000 or ten percent were foreigners. By 2010, Singapore's total population was 5.1 million with a full one quarter or 1.3 million being foreign residents.

In other words, we've seen Singapore's population grow from 3.0 million (three million) with a ten percent foreign participation rate in 1990 to 5.7 million with a 30 percent foreign participation rate today.

It was in the 1990s that total population and foreigner numbers increased dramatically.

These are staggering numbers and come at a time when Singapore's own fertility rate has been falling from approx. 1.8 in 1990 to 1.14 in 2019. Only 35,300 babies were born in Singapore versus 49,800 in 1990. 

Singapore had more natural deaths than live births in 2019.

Singapore's subway system built with extensive participation of foreign workers (Photo: WIkipedia)

Unlike many other developed countries, Singapore's foreign worker population does not for the most part comprise of illegal immigrants. Foreign workers are tightly controlled by the government based on a complex quota system.

Singapore's system works well because employers of illegal workers face a fine of SGD 5,000 – SGD 30,000, or twelve months imprisonment, or both.

As at 2019, there were a total of 999,000 foreign workers on Work Permits in Singapore. Included in this one million number are 262,000 Foreign Domestic Workers or maids and 293,000 construction workers. Add in approximately 300,000 foreign professionals, management and other higher skilled foreign employees from the Employment and S-Pass permit categories and one gets a clearer picture.

Singapore has approximately 1.3 million foreign residents, including 300,000 foreign construction workers (Photo: Wikipedia)

Foreign workers are not only tightly controlled but also a healthy source of revenue for the government by means of an employment tax called the Foreign Workers Levy (FWL). 

For each foreigner employed in Singapore, employers must pay a Foreign Worker Levy. The amount of the levy varies depending on the skill level and category of the employee but generally ranges between SGD 300 – 700.

While it is not possible to obtain an exact revenue number for the FWL, Singapore's 2017 budget data stated SGD six billion (or USD 4.2 billion at present exchange rates) was raised under the following four heads: Foreign Workers Levy, Annual Tonnage Tax, Water Conservation Tax and (land) Development Surcharge.

Using only the figure of 293,000 construction workers one may guesstimate the amount raised (only for construction workers) to be in the range of SGD 1 – 2.5 billion (or USD 700 million – 1.8 billion); one billion if the levy was to be SGD 300 on each worker or SGD 2.5 billion if the levy was SGD 700 per worker.

Once levies from the other one million foreign workers are included it is safe to conclude the FWL is a nice source of income for the state – possibly SGD 3 billion or more annually (USD 2.1 billion).

By comparison, in the same year (2017) Singapore raised SGD 1.8 billion in liquor and tobacco taxes; SGD 2.7 billion in betting taxes from the local casinos; SGD 4.4 billion in property taxes; and 10.7 billion in personal income taxes.

Singapore's foreign workers are here voluntarily. Most will speak positively of their experiences in Singapore. Nonetheless, low skilled foreign workers are not paid generously.

Based on data collected in 2018 by a Singaporean NGO, Transient Workers Count Too (TWC2), the average monthly starting salary for a Bangladeshi or Indian foreign worker was SGD 400 – 465 (USD 282 – 328) versus the average Singapore monthly salary of SGD 3,100 (USD 2,200). To be sure, foreign workers are provided with basic accommodation and medical coverage by their local employers.

To be sure, one is not suggesting a cleaner be paid the same as bank manager. However, there are dangers to keeping the foreign worker community on the margins of Singapore's society – not marginalized but on the margins.

Presently, foreign workers are seen but not heard. They do but cannot say.

The quality of life of Singaporeans is dependent on the continued stable supply of cheap labor. As the Singapore Minister Minister for Home Affairs recently said, "They clean Singapore, they build our HDB flats ... they handle our waste management... they are helping us build our prosperity."

In other words, Singapore's wealth and competitive advantage are to some degree based on the availability of a steady and uninterrupted supply of cheap labor. For example, high quality public housing -  85 percent of Singaporeans live in owner occupied public housing – are not only constructed but also maintained on an ongoing basis by foreign workers.

Likewise, Singapore's world class public transport subway system is constructed by foreign workers. Additionally, some of those qualities which we tout as being intrinsic to Singapore's identity, e.g. clean public spaces and well maintained green spaces are in reality a result of foreign labor.

The dangers of dependency on foreign workers came to the fore in 2013 during the Little India riot and again during the present Covid-19 pandemic crisis.

Singapore's iconic structures such as the Marina Bay Sands rely heavily on foreign construction workers (Photo: Wikipedia)

During the present crisis, the authorities were so focused on maintaining the health of Singapore citizens and Permanent Residents that the almost one million foreigners on Work Passes were virtually overlooked.

It was a costly oversight which has affected the Singapore brand which prides itself on good governance and typically places the country on the top of most ranking lists. Additionally, it has set back the island's efforts to restart and normalize its economy by at least several weeks.

As an aside, by publicizing Singapore's one of Singapore's not normally talked about open secrets, its large foreign worker community, there is a feeling Singapore's dirty laundry is being aired in public!

Surely, Singapore has at least partly redeemed itself by ensuring there is sufficient testing available for all foreign workers. Additionally, the government has committed and continues to provide quality health care to all foreign workers in need, including world class Intensive Care health facilities all at taxpayer expense.

Singapore's dependence on foreign labor is at best an irritant and at worst a national security risk. Hence, there is ample reason to reduce the country's reliance on this demographic (dare one call labor a commodity?).

Innovation and adoption of new technologies are two ways forward; replacing human activity with robots and / or artificial intelligence makes a difference. For example, consider certain factory production lines where humans have been replaced with robots for many functions.

Simultaneously, Singapore must improve living conditions of foreign workers. Improving living conditions is a social responsibility. It cannot simply be left to the authorities by building new and better dormitories, etc. It requires a broad understanding by Singaporeans of the critical role foreign workers play in keeping the city-state functioning.

Implicit in this understanding is the need to more equitably compensate foreign workers. Surely, higher pay will necessitate a general increase in Singapore's price level as the cost of construction, waste disposal, cleaning, gardening, etc. (the list is long!) is directly linked to foreign workers wage levels. Pay more and Singaporeans must pick up the bill. No escaping that fact.

Singapore's treatment of foreign workers is a reflection of Singapore society and its people's values. Singapore must do better for its foreign worker community in the coming months and years. The country's excuses for not doing so are wearing thin.

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Imran is a Singapore based Tour Guide with a special interest in arts and history. Imran has lived and worked in several countries during his past career as an international banker. He enjoys traveling, especially by train, as a way to feed his curiosity about the world and nurture his interest in photography. He is available on Instagram (@imranahmedsg); twitter (@grandmoofti) and can be contacted at imran.ahmed.sg@gmail.com.

Trump is good for Islam - no joke!

No, the title is not an error. Yes, the man who wishes to ban all non-resident Muslims from entering the United States is good for the Islamic world![i]

Why is it good for America's Republican party's presidential frontrunner to treat Muslims like a sub-human species? The answer is quite simple: disruption. Trump will give significantly disrupt the status quo, hopefully ushering in a new, better era.   

Trump - you the man! (Photo: Wikipedia)

Disruption is a concept more familiar to entrepreneurs and start-up entities: disruption. Disruption may be defined as a "disturbance or problems which interrupt an event, activity, or process." Industries ripe for disruptions are generally bloated, stagnant and slowly heading into oblivion.

Alright, no one argues Islam is heading towards extinction. Nonetheless, there is little doubt Islam requires a radical rethink about its place in the world and the religion's relevance to a globalized 'Digital Age' population.

Islam's traditional prism for viewing the world no longer works. By most measures, the Islamic world is isolated and backwards. The post-colonial Islamic world has desperately clung onto linkages, economic and military, with former colonial masters to maintain power and preserve the status quo. Hence, peacefully (yes, peacefully!) disrupting the present state of affairs will be no bad thing; peaceful disruption, not regime change engendered by American bombs and NATO soldiers.

The 2003 US led invasion of Iraq transformed one of the Islamic world's most secular and well integrated multi-religious societies into a war zone and crucible for Islamic extremists.
(Map: Wikipedia)

Theoretically, peaceful disruption provides more time for nations to adapt and modify – not creating vacuums for extremists like Daesh to conveniently step into. 

A Trump presidency will prompt some soul searching among political elites in most Islamic countries. Some might even be forced to dispense with the crutches of Western economic and military dependencies provided by Western nations.

In poorer Muslim nations such as Egypt and Pakistan, politicians will realize leadership comprises of more than receiving and dispensing financial aid from bilateral and multilateral agencies. For wealthier oil rich nations the choices will be more difficult. Oil riches and the lifestyle it engenders are predicated upon a dependency on Western nations. In fact, in several oil exporting Gulf states it is the US Federal Reserve Bank which dictates local monetary policy!

So the question vexing the Kings of oil rich Arab nations will be, "Shall we continue to sell oil to countries like the US in the face of ongoing humiliation and being treated as second class citizens of the world? We may have oodles of money and even property in the right zip codes but we pray in the wrong direction and to the crescent and not the cross."

It's not an easy question to answer when trillions of Dollars are at stake.

This is not the first wake-up call heeded by Islamic intellectuals. In the early post-colonial period, a group of left leaning secularists Muslim modernizers arose. People like Syria's Assad senior, Egypt's Nasser and Iraq's Saddam were ready to shun religion for socialist ideology. In the new millennium that era has been relegated to the annals of history.

The current environment appears ripe for a new wave of Muslim modernizers; for Islam's reinvigorated intelligentsia to address the problems faced by Muslims in the Internet Era. The new paradigm must emerge following meaningful debates about governance, transparency and civil rights.

Muslim faithful pray at the main mosque in snowbound Pristina, Kosovo. (Photo: Wikipedia)

1960s Westernizing secularists demonstrated that blindly aping Western liberal democratic societies is not an ideal solution for Muslim societies. Seamlessly synthesizing modernity and Islam will only work if the new structure respects the unique cultural traditions of different Muslim cultures and geographies.

A Trump presidency will call into question many of the assumptions about civil relations between many predominantly Muslim countries and the US dominated Western world. This reset may act as a catalyst for Islamic political and social elites to redraw their own social contract within their own nations.  

Many analysts argue the present status quo is sustainable due to inequitable wealth distribution and poor state delivered social services. The violence perpetrated by extremists, e.g. Daesh, Taliban and Al-Qaeeda, outside the established political structure suggests most Muslim countries are crying out for some form of change.  

A divided era reminiscent of the historic Crusades? (Illustration: Wikipedia) 

So, Mr Trump, your insensitive and racist rhetoric may actually be helping those against which you spew your hatred. The possible earthquake to the established 'business as usual' modus-operandi may force the Islamic world to stand on its own feet. For that, Mr Trump, the entire Muslim world thanks you and your multitudes of supporters disgorging your regular obscenities.

Now if I were an American Muslim living and working in America I may have a very different opinion of Trump's popularity!

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[i] How such a blanket ban will work in practice is difficult to imagine. For example, will all Muslim crew members of a Singapore Airlines flight landing in the US be made to stay on the aircraft overnight? How will Muslim foreign diplomats and functionaries dealing with Washington go about their business? Ultimately, there may be so many exemptions that the ban becomes a mockery ... that is, of course, if any Muslims wish to visit the country voluntarily simply to be humiliated and possibly put themselves in harm's way. But that's a topic for another day.

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Imran is a Singapore based Tour Guide with a special interest in arts and history. Imran has lived and worked in several countries in his career as an international banker. He enjoys traveling, especially by train, to feed his curiosity about the world and nurture his interest in photography. Imran can be contacted at imran.ahmed.sg@gmail.com. Follow Imran on twitter at @grandmoofti and Instragram at imranahmedsg. 

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.