• Tue
  • Jul 15, 2014
  • Updated: 12:16am
Monitor
PUBLISHED : Tuesday, 18 February, 2014, 4:34am
UPDATED : Tuesday, 18 February, 2014, 10:36am

Immigration and reclamation won't raise living standards

Our financial secretary wants to import more workers and create land, but Singapore's experience shows that will not make Hongkongers richer

BIO

As the writer of the South China Morning Post’s Monitor column, Tom Holland attempts each day to make sense of the latest developments in business, finance and economic affairs in Hong Kong and mainland China.
 

John Tsang obviously doesn't read the South China Morning Post.

That's a shame, because if he did, Hong Kong's financial secretary might just save himself some embarrassment.

In his latest weekend blog posting, Tsang compared Hong Kong's economic performance unfavourably with Singapore's.

He wrote that between 2003 and 2012, Singapore's gross domestic product per head grew at a robust average rate of 6 per cent a year. Over the same period, Hong Kong's per capita output expanded at a relatively meagre 4 per cent rate.

Singapore, he claimed, had achieved its enviable growth by adding some 1.2 million immigrants to its workforce while increasing its land area by 30 square kilometres through massive reclamation projects.

In contrast, Hong Kong is suffering dire shortages of both labour and land, Tsang argued; shortages which threaten severely to handicap the city's future economic growth.

In short, Tsang implied that Hong Kong's people had better get behind the government's immigration and reclamation plans pretty damn quick, or face a future of penury.

If only he read a little more widely, he would see the gaping holes in his argument.

Yes it is true that according to the bald figures, over the past 10 years Singapore's gross domestic product per capita has grown faster than Hong Kong's when measured in US dollar terms, as the first chart shows.

But Singapore's apparent outperformance was entirely due to the Singapore dollar's 40 per cent appreciation against the Hong Kong dollar over that period.

That's important. Currency appreciation might lower the price of imported goods, but it does nothing to reduce the cost of non-traded goods and services, like housing.

As Monitor has pointed out before, if you look at real GDP per capita in local currency terms, you find that Hong Kong has averaged a 3.9 per cent growth rate over the past 10 years, Singapore just 3.6 per cent. So on Tsang's GDP per capita indicator, Hong Kong has actually outperformed Singapore.

However, as readers of Jake van der Kamp's column will know, GDP per capita tells you nothing about how well or badly off ordinary people really are.

As Jake pointed out in these pages just a couple of weeks ago, if you use household consumption spending as a proxy for household income, then Hongkongers are considerably better off than their Singaporean peers.

Jake noted that Hong Kong people spend an average of US$24,000 a year each, while Singaporeans can manage only US$21,000.

Actually, I'd argue that Jake exaggerated Singapore's household spending. Believe it or not, stuff is more expensive in Singapore than Hong Kong.

If you apply the World Bank's formula to adjust for the differences in purchasing power between the Hong Kong and Singapore dollars, you find that whereas Hongkongers spent US$24,000 a head in 2012, their opposite numbers in Singapore splashed out the equivalent of just US$16,000.

What's more, over the past 10 years the differential has widened in Hong Kong's favour. As the second chart shows, in 2003 the average Hongkonger was 20 per cent better off than the average Singaporean. In 2012 he or she was nearly 50 per cent better off.

Clearly, while all of Singapore's immigration and reclamation might have inflated official egos, it has done little or nothing to boost ordinary people's living standards.

There's little reason to believe it would achieve any more in Hong Kong.

Tsang's eagerness to expand the city's labour force and land area merely exposes the government's twin obsessions with GDP - a measure even the economist who invented it stressed is flawed - and pouring concrete.

But if he read more, he would realise that.

tom.holland@scmp.com

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This article is now closed to comments

kongshan2047
What HK can learn from Singapore is the way it attracts highly-skilled and high-educated individuals to the country. For example, if you are a foreigner with a PhD who have worked in Singapore for a year, it entitles you to apply for permanent residency. However, here in HK, regardless of your education level or skills, one has to wait 7 years for permanent residency. Of course we cannot just copy from Singapore, but if some policies are worthwhile, why not give a try?
THC
JT and CY will not be able to work in their offices once they implement what SG did. The HK people will block all the city roads like the Thai protestors including all the Govt. buildings. Be very careful, there are much more vocal and aggressive people in HK.
cal10ten
To albbynov03,
Because of the 12 million migrant workers in Singapore??? What nonsense are you spewing? Where did you get the 12 million figure from? Or do you mean 1.2 million migrant workers? Singapore's population is 5 million plus, with Singapore natives making up over 3 million and the rest being foreigners. Do your math!!!! If Singapore had 12 million migrant workers on an island of about 700 sq km in size, it would be in a far worse situation than HKers complaining about the influx of mainlanders.
Byebye
Perhaps this is a crazy idea, at least from China's standpoint, but I do think this may be viable. How about giving some land near the border to Hong Kong so it can expand and create something to compete with Singapore, with as much spirit and driving force of HK? HK is part of China, and when HK loses, China also loses. How about China give this some thought?
MOSNT
There isn't any land over the border to use!
dynamco
Well basically CY's hierarchy is bereft of any credible figurehead to wheel out in support of what the tycoons have via China, told CY what to do next
They can't produce Chan Mo Po or Edward travelalot Yau so they wheel out the old dufferettes
****www.independent.co.uk/news/what-is-it-about-rita-fan-that-makes-hong-kong-hate-her-so-1294450.html
ex Emperor Group employee Rita Fan
+ en.wikipedia.org/wiki/Elsie_Leung ('public interest' not to prosecute Sally Aw) to speak to the press, who for some unknown reason best known to themselves continue to interview them when the public knows they are has-beens & pays them no heed whatsoever
albbynov03
Because of the 12 million migrant workers, Singapore's ruling party has lost a by-election with the widest margin in 3 decades! To soothe the discontent caused by the massive influx of migrants, the government is also rapidly tightening its immigration policies. John Tsang will never tell us that!
SpeakFreely
Tom n Jake, last night I watch the property channel on Nowtv, they show a so called luxury condo in happy valley with 1700 sq ft and asking 64m HKD. Honestly, the rooms are small, not a great view, club house are just average. But 64m. I figure I need at least 100m to 200m of wealth in hk to have a "acceptable" or "comparable" live style vs. mY US vacation home which is backing on golf course, with my own swimming pool, and a clubhouse of 27 holes golf, 8 lid tennis course and and 4,000 sq ft gym, and a 30,000 clubhouse. So if you use PP, hk is not a nice place to live at all...for my 2,000 sq ft golf home with own swimming poor and even a full fledge outdoor garden, and 300 days of sun, only cost me HKD 4m....that's why always tell my friend I'm a poor man in hk...
SpeakFreely
Sounds exactly as typical complacent hk people. Yah we have more real money to spend but things are expensive in hk. Very basic, Singaporean lives double the size of hk and has much cleaner air. Tom, did u put a else number on these 2 items? I guess you live in mid level and u don't see the problem. 80% of its population live in subsidized housing that is better and bigger than hk private housing. If hk people are not complacent and not selfish, complacent and selfish as most of those well off people are ok in hk and they don't care. Why rock the boat? Why giving up one or two parks for people living in cage home? Why care? If you are a new gard in hk and your parents are not wealthy to give you a flat to live in, where are you going to live today? Come on...
SpeakFreely
Jake, hk people can afford to spend 24k a year, how much is on housing? Vs how much is Singaporean spending on housing that is 80% subsidized n bigger n nicer?

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