• Fri
  • Aug 1, 2014
  • Updated: 4:52am
Jake's View
PUBLISHED : Tuesday, 04 February, 2014, 5:57am
UPDATED : Tuesday, 04 February, 2014, 3:00pm

Singaporeans not as wealthy as GDP figures suggest

HK performs better than the Lion City on the basis of personal consumption expenditure


Jake van der Kamp is a native of the Netherlands, a Canadian citizen, and a longtime Hong Kong resident. He started as a South China Morning Post business reporter in 1978, soon made a career change to investment analyst and returned to the newspaper in 1998 as a financial columnist.

... the average growth of Singapore's gross domestic product and GDP per capita has outperformed Hong Kong's over the last 45 years. Its GDP was only half that of Hong Kong more than 20 years ago. Today the Lion City's GDP is slightly ahead and GDP per capita is 25 per cent higher than in Hong Kong.

Letters to the editor,
SCMP, February 2


OK, let's play games with GDP numbers as these are what Singapore bureaucrats love to play and as the numbers are not quite what they seem.

We shall start by conceding the headline figures. Yes, as of the latest statistical releases, GDP at prevailing rates of exchange runs at an annual rate of about US$52,000 per person of the total population in Singapore and US$37,000 in Hong Kong, which puts Singapore about 40 per cent ahead, not just 25 per cent.

The point about GDP, however, is that it is meant to be a measure of wealth. It does not mean much to you unless it represents wealth that finds its way into your hands, that is, unless it takes the form of a component of GDP called personal consumption expenditure.

I now refer you to the first chart. In Singapore, personal consumption expenditure has steadily fallen over the years as a percentage of GDP and, at 35 per cent, is now barely half of what it is in Hong Kong. This is an oddity characteristic of a startup economy, not of a wealthy town like Singapore.

But it means that, on the basis of our money-in-your-hands measure, Hong Kong at US$24,000 per capita still outranks Singapore at US$21,000.

The second chart gives you a clue as to why the two economies are so different on this measure. Industrial investment in Singapore, always predominantly foreign, has become even more so in recent years, accounting for an average of about 80 per cent of total investment over the past 10 years. I do not have the equivalent figures for Hong Kong but, at a rough guess, the foreign-local ratio would be the reverse.

This foreign investment in Singapore has in turn produced a huge trade surplus in both goods and services. Over recent years, it has run at about 30 per cent of GDP. And most of this money goes right back out again to pay foreigners for all the confidence they have shown in Singapore by investing in it so heavily.

In short, Singapore's high GDP numbers are mostly an anomaly created by very generous industrial concessions to foreigners. They do not really reflect domestic wealth.

In another way, however, these GDP measures of Hong Kong and Singapore do not mean much as a yardstick of the comparative efficiency of either system. The fact is both are parasite economies feeding off much larger neighbours, the mainland in Hong Kong's case and Indonesia and Malaysia in Singapore's. They are both wealthy because they perform services that their neighbours cannot or, for reasons of policy, will not perform.

All that their relative state of wealth really tells you is one has fewer scruples than the other about how low it is willing to go. On this measure, I definitely rate Singapore as the more successful.


For unlimited access to:

SCMP.com SCMP Tablet Edition SCMP Mobile Edition 10-year news archive



This article is now closed to comments

Kudos to Jake for once again for knowing what really to count....
Doesn't personal consumption mixes with cost of living as well. GDP gives an indication of income while personal consumption gives an indication of spending. Its a combination of both ie the gap between income and consumption that should be viewed as wealth. For example that the cost of living in developed world will be higher (than developing world) and therefore the former's consumption figure is high even though they may be in that country's poverty line. In an earlier comment from someone else he said median household income (being the highest number) could be a better indicator of wealth and I agree.
Jake, great article. I wonder if the per cap GDP of China, low as it is, also overstates the wealth of the people. Their personal consumption % of GDP is also very low.
Parasitic economies?? Only in a derailed mind of an economist who has forgotten that economy is peoples desire to improve their lives through voluntary cooperation amidst state oppression. To be consequent the author should label all countries accepting refugees from other territories parasitic too. Because every individual is property of the masters in the country they were born.
Alice Ng
Nice article!
There have been recent eruptions in Singapore, indicating a simmering hatred towards FT (referred to by Singaporeans as "Foreign Trash").
The Singapore government has introduced new measures to curb the influx of FT's, making it more difficult for Singapore-based companies to find required resources.
Within my personal circle (engineering background), a seemingly large number of companies are relocating HQ's to Thailand (e.g. Siemens, Foster Wheeler) and Philippines (e.g. Emerson). The Singapore office remains but expansion will take place elsewhere. None of this is reflected in the Singapore Press. The Government controlled press does not mention, and the Singaporean Online community of "Netizens" (TR Emeritus, TOC, The Real Singaporean) are on the war path, shooting down any target that resembles FT's.
How do you reckon, this will affect the Singapore economical landscape?
well said. both parasitic except for those who know water is definitely muddier over there.
can you me some examples of how it is definitely muddier in Singapore?
Search on extradition treaties. How many returned after fleeing economic crimes back home. Giving honorary degrees to ministers and head of foreign countries. Just about anything even taxis are gov owned. That says a lot about its clout and means to achieve it.
Isn't Median Household Income a better way to proxy personal well-being?
S$7,570/month ($5,929.95) vs. HKD$22,000/month ($2,833.23)
median is the midpoint, doesn't say anything about the spread. median household income in Hong Kong is unbelievably low given its per cap GDP because the spread is very wide.




SCMP.com Account