You Singapore bureaucrats, wake up and smell the coffee
Perhaps van der Kamp can share his wisdom on the many foolish things that Singapore has committed over the years for him to repeatedly taint its achievements with abandon.
Letters to the editor, July 1
Okay, here’s one. In national as well as personal affairs when you invest your money outside of your own home you expect a return on your investment, some dividend, rental or interest income from it.
In national affairs you get the money to make these investments principally from exporting more goods and services than you import. This balance in trade earnings is called your country’s current account on the balance of payments.
The matching capital account then details what sort of foreign investments you make with this money. If the pluses and minuses of the current and capital accounts don’t quite match, the difference is made up by changes in the foreign reserves.
Now let’s look at how these things stand in two countries, Singapore and Taiwan. The first chart shows you the record since the beginning of this century in their current account balances as a percentage of their gross domestic products.
Singapore stands out here as a big saver. It has enjoyed consistent current account surpluses averaging 19 per cent of GDP over the last 16 years. This is very high. Very few economies ever hit such numbers and Singapore has done it consistently.
Taiwan also shows consistent current account surpluses and they have been rising steadily with the figure for the latest year coming in at 14.5 per cent of GDP, not as high as Singapore’s but still impressive.
Next we look at how things stand in returns on the investments made with these current account surpluses. In balance of payments jargon this is called primary income and here the second chart shows a considerable surprise.
Taiwan comes in pretty much at what you might expect, a net primary income surplus running at 3.3 per cent of GDP. But in Singapore the figures are negative. Singapore shows a consistent primary income deficit running at 4.4 per cent of GDP.
How is this possible? How is it possible to invest huge current account surpluses abroad and yet, rather than receive a big stream of investment income, wind up paying out big to foreigners?
There are two reasons it has happened. The first is that Taiwanese investors own Taiwan’s industrial base but Singapore’s is predominantly owned by foreigners. These people have done very well. “Thank you, Singapore,” they say and then they take the money they made in Singapore back home.
The second reason is that the Singapore government itself has a poor investment record with the consistently big fiscal surpluses it generates.
But it all comes down to one big reason. Singapore used to be an entrepreneurial place. It is now a nation of bureaucrats. The foolish thing about this is that bureaucrats easily fool themselves that they are good at business. And here is the wisdom: Wake up and smell the coffee, fellows.