Border cash saves fingernails
Jake van der Kamp
Right then, get your fingernails between your teeth and start chewing. Singapore has become so worried about its ageing population that it has revamped its entire Central Provident Fund (CPF), but our own ageing problem is even worse.
Oh my, oh my, what shall we do? As the first chart shows, the average age of Hong Kong's population weighted by age group is about 36 years while Singapore's is only 33. What is more, that disparity is growing year by year. We already have proportionately far more older people and far fewer infants.
Singapore's answer to its lesser problem was announced just this week. More of the money that Singaporeans put into their CPF will have to stay there for retirement and medical benefits and less can be withdrawn to make property and other investments.
It is no small matter. The Singapore Government stressed that it is retaining the long-term target of CPF contributions at a whopping 40 per cent of employees' salaries, which means that employers can expect their contributions to rise to 20 per cent again from the 12 per cent they pay at the moment. CPF contributions are a big source of funding for home ownership and Singaporeans jump at every chance they are given to get their money out. They have recently jumped so much, in fact, that the overall balance of money in the CPF has gone down despite a resurgent economy.
You cannot blame them. The CPF is one of the lowest-return pension schemes in the world. Things are a bit murky here, not surprisingly, but when you marvel at Singapore's enormous airport and its other glorious public works just remember it was largely the CPF that paid for them.
Payback to CPF beneficiaries? Well, yes, that's another question. Bit on the low side but just look at that splendid architecture. Money isn't everything, you know.
And that's why you can take your fingernails back out of your teeth again. We have a better record than Singapore of putting our money to work properly to generate income for our retirement years. We will do it better with our Mandatory Provident Fund than Singapore does with the CPF, but we already do it in other ways.
Look at the second chart. It shows you how non-entrepreneurial Singapore really is. Almost 80 per cent of manufacturing investment comes from foreigners, and that's a lot when manufacturing still accounts for 28 per cent of gross domestic product.
It should not be surprising, however, when the domestic pool of investment is channelled by government into projects that are, in financial terms, largely wastrel.
Equivalent figures are not available for Hong Kong and we, in any case, have only about 5 per cent of our GDP in manufacturing as, unlike Singapore, we have let market forces tell us where to put our money. But it would be an entirely different picture anyway. We are the manufacturing investors, not the investees. Just go across the mainland border if you want proof.
Let Singaporeans chew their fingernails. They have reason to. We are in a much better position to provide for ourselves.