Memo to C.Y., Singapore isn't better off

PUBLISHED : Tuesday, 12 June, 2012, 12:00am
UPDATED : Tuesday, 12 June, 2012, 12:00am

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'With an economy just half the size of Hong Kong's 10 years ago, Singapore has now surpassed us.'

Leung Chun-ying, chief-executive-elect

Technically he's right. The Singapore economy is running at about US$260 billion a year at the moment and the Hong Kong economy at about US$245 billion. Ten years ago Singapore's economy was only half the size of Hong Kong's in US-dollar terms.

I could go for the easy explanation of this and say it is the result of the Sing dollar strengthening against the US dollar while the Hong Kong dollar is pegged to the greenback, but I won't.

I have a better explanation. Gross domestic product is not a foolproof way of measuring the wealth of an economy. If you value the appearance of wealth more than the actual fact of it, you can work the system to get the numbers you want. It is what Singapore has done.

Start with the fact that a third of Singapore's GDP is composed of an export surplus. This is all very well if your own people generated the export success and can then reap the rewards.

If this were so, we would expect Singapore's huge trade surplus with the rest of the world to be matched by equally huge investments abroad (the balance of payments always balances), which would in turn generate a rising tide of investment income from abroad, all of it flowing back home and making life more comfortable.

But it is not so in Singapore. We are talking here of a city-state that specialises in bureaucrats, not entrepreneurs. In Singapore, industrial investment comes predominantly from foreigners and they take their winnings back out again.

This outflow has long exceeded the inflow of investment income from abroad. Singapore's net income balance has been negative to the tune of an average of 5 per cent of GDP for the past 10 years. That big trade surplus, a third of GDP, is not doing much at all to help make Singaporeans wealthier.

It shows up when you look at the real measure of how well the man on the street lives - private consumption expenditure. The first chart shows you that the Hong Kong system gives its people 65 per cent of their economic effort to spend on themselves. The Singapore system gives its people barely half of that and the figure has been getting steadily worse.

Now let's factor in one other consideration. If you ever thought Hong Kong people foist their dirty work on foreign labour you can ease your conscience by looking at Singapore, where about 36 per cent is non-resident.

Let's be fair to these migrant workers and include them in our calculations. I now take you to the second chart - personal consumption expenditure per employed person. We now have things in their proper perspective. Hong Kong maintains a steady lead over Singapore.

Have faith in our free market economy, Mr Leung. It continues to be superior to Singapore's communist model.

In fact, I think the gap is wider than the chart indicates. The last time I went to Singapore I had the clear impression of people there facing harder times than people in Hong Kong. Although they have bigger homes, they have less money.

But you may need a better judge of the matter eventually. Singapore-bashing will get me turned back at Changi Airport one of these days.

It will be worth it, if it helps straighten out people like C.Y. Leung, who pay too much attention to Singapore government talk.

 

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