(Please note that this article comprises on 5 short pages.)
In this article, I will be showing you how the PAP is hurting the Singapore economy. Please do read this – if you are able to have the broad overview of what is really going on in Singapore, you would realise how the PAP’s current policies might put Singapore in danger in the long term.
Let’s start with the basics – in an equilibrium economy, where everything is well-balanced, higher productivity would lead to workers earning higher wages. In turn, prices would increase due to higher wages but at the same time, prices would also drop because higher productivity will increase production and drive down the prices of things – which would result in a net effect of prices which would grow at a slower pace than wages. With higher wages, workers would also see their purchasing power increase.
Thus in a well-balanced equilibrium economy, everything will chug along smoothly and the economy will run efficiently. Businesses would charge a price which consumers would be willing to pay and which would allow them to earn enough profits.
The economy would keep rebalancing itself.
However, this equilibrium in Singapore has been tempered with by the PAP. How has the PAP done so – via four main strategies to temper with the macro economy in Singapore.
PAP Profit Strategy #1: Monopolise Companies To Increase Prices
You see, as I have explained previously, the PAP is mainly concerned with making more money for itself – in earning profits.
Thus instead of letting demand-supply determine prices and instead of finding out how much consumers are willing to pay and charge that price, the PAP has decided to unilaterally increase prices by themselves instead.
How does the PAP do this? As I had also written about before, the PAP owns the largest companies in Singapore, via its investment firms, Temasek Holdings.
Also, not only has the PAP owned the largest companies, it has also monopolised the market – meaning it has made itself the sole provider of essential goods and services in Singapore.
What do I mean by this. For example, Singtel, Starhub and M1 are all owned by the Temasek Holdings. They are also the only companies which provide telecommunications services in Singapore. As such, can you turn to any other telecommunication operator if you would want to? You can’t, unless you choose to stop any form of contact with anyone or you can build your own satellite – which is why they have made it illegal to install satellite dishes in our homes – this will diminish their profits.
As such, because consumers in Singapore don’t have a choice but to use Singtel, Starhub or M1, we effectively don’t have a say in how much prices are charged. You either pay or you don’t, and if you don’t, you lose communication – which means, well, you don’t have a choice.
In fact, the subscription for the FIFA World Cup has increased by 600% since 2006. Because, who’s going to stop them? You would still want to watch the match, so you either pay or find someone else who would be willing to pay and bunk in at their place to watch.
Compare what Singaporeans have to pay with the other Asian countries. Thanks to SGAG, we now know even Japan and South Korea can watch the World Cup for Free but Singaporeans are made to pay more than $100 – but for who?
Now, let’s take a look at Singtel’s profits. Before 2000, Singtel’s profit kept at below $2 billion every year. Look at how it ballooned to even nearly $5 billion after that.
Chart: Singtel Annual Reports
Yet, you would remember how the Singtel had famously “call(ed) on regulators to give telco carriers the right to charge WhatsApp and Skype for using their networks“. This, even when Singtel earns billions of profits and is the largest company in Singapore.
This monopolisation of essential services doesn’t just apply to telecommunications but public transport (SMRT and ComfortDelgro/SBS Transit) and public utilities etc as well.
Thus you see in this first illustration of how the PAP has interfered with the equilibrium economic model by unilaterally deciding how much prices should be charged.
So, instead of prices being negotiated by the demand needs of Singaporeans and supply abilities of the companies, Singaporeans are cut out of the equation. What happens is that the equilibrium economic cycle starts to break down – the purchasing power of Singaporeans start to drop and this affects their productivity downstream, and with it, wages.
But increasing prices isn’t the only way the PAP is earning money off Singaporeans – increasing prices is only the easiest way. They’ve already privatised these companies, then own them. So it isn’t too much of a hassle for them. Let’s take a look at the other strategies the PAP has created to earn money off Singaporeans.
PAP Profit Strategy #2: Own Real Estate Companies And Increase Rents
The second way they do it is to increase rents. How? The PAP owns some of the largest real estate companies in Singapore and as I’ve written before, companies in Singapore have constantly highlighted how high rentals are the main reasons for their rising costs.
But does the PAP bat an eyelid? Kenneth Jeyaretnam had also highlighted that the price index for industrial property has risen 27.2% in 2011 and 25.8% in 2012. Quite drastic!
Mothership had also explained that “what is really killing some F&B businesses is the increase in rent“. It was highlighted that Japanese-inspired cake shop Kki saw their rent increase by 140% and the gourmet burger restaurant Relish had to close because of a 40% increase in rent. Mothership explained that, “Malls managed by Reits (Real Estate Investment Trusts) tend to increase rents to grow revenue.”
And what are companies forced to do? Because of the increasing rents and business costs, companies have no choice but to depress the wages of Singaporeans, or risk going out of business.
As such, you can see that in the PAP’s want to earn more profits, they are willing to sacrifice Singaporeans in doing so.
PAP Profit Strategy #3: Import Cheap Labour To Depress Wages Of Singaporeans
But that’s still not all. The third strategy: the PAP opened the floodgates to an uncontrolled influx of cheaper labour, which forces the wages of Singaporeans to be depressed even further. And with the depressed wages, who benefits? The PAP – who owns the largest companies in Singapore, and thus higher profits.
As I had written previously, when migrant workers are willing to take $800 (since this would still be higher than the $150 they would have received back home), how would Singaporeans be able to ask for higher wages? Singaporeans wouldn’t be able to ask for $1,500, which would price them all the way out of the competition.
But the influx of migrant workers in itself is not the problem. The problem is in how lowly they are paid. If they are paid low wages, then Singaporeans would be forced to accept low wages. But if they are paid higher and fairer wages, Singaporeans would be able to ask for higher wages.
But this is still not yet it – there is something even more sinister – the PAP’s fourth strategy.
PAP Profit Strategy #4: Impose Foreign Worker Levy To Increase Business Costs
When Singaporeans complained about the influx of migrant workers, what we didn’t realise was that the main issue was not with migrant workers per se, but with the low wages that they were forced to accept, and thus what we were also forced to accept. Thus instead of advocating for higher wages, we thought that if we advocated for a stoppage of migrant workers, our wages would go up.
That’s when the PAP swooped in with their fourth strategy – oh, you are worried with too many migrant workers? Fine, we will fine the companies – if they don’t employ Singaporeans, we will fine them. And thus the invention of the Foreign Worker Levy. The government had claimed that the levy “is a pricing mechanism to regulate the number of Foreign Workers in Singapore“, however, evidently the levy had next to no effect in achieving this as the number of foreign workers in Singapore kept increasing.
Again, what is the root problem here? The root problem here is that workers in Singapore are receiving too low wages and the solution would be to increase their wages, so that the economy can move towards finding its own equilibrium where businesses would pay the right wage and workers would work for the right price (of their labour).
But herein lie the other problems – workers in Singapore do not have the ability to negotiate for their wages because the NTUC is an ineffective (and useless) union and there are no independent unions that can collectively fight for workers’ rights – the PAP has hijacked the unions and controlled them. Also, the PAP had refused to implement any effective law to protect the employment of Singaporeans (as I had discussed, the Fair Consideration Framework is an effective tool as it is not even a policy and there are no clear guidelines to be adhered).
As such, Singaporeans have no choice whatsoever but to accept the low wages that companies are willing to give. For the companies, since your government is not willing to protect you, who are we to play hero and save you by paying you higher wages? First, the government keeps increasing our rents such that it’s already so hard to earn profits, and next since there are no laws to protect you. So, in order to cut costs to deal with the increasing rents, the only way to do so is to cut down on your wages, whether businesses are comfortable to do that or not.
But what is the net effect? Companies still cannot hire Singaporeans because wages are too low for most Singaporeans to be able to have a decent living. So, they still have to hire migrant workers – and because the government keeps increasing the foreign worker levies year on year, what this means is that companies have no choice but to keep hiring migrant workers and have no choice but to keep paying more and more to the PAP.
You see what is happening here? Not only is the PAP cutting down on Singaporeans, it is also cutting down on the companies. The companies are forced to pay ever-increasing higher and higher rentals. Then, they are forced to hire migrant workers and to pay higher and higher foreign worker levies to the PAP.
This all causes the companies’ business costs to keep increasing. But who benefits?
You got it. The PAP.
In 2010, the total foreign worker levies collected were $1.9 billion and in 2011, it ballooned to S$2.5 billion. It is estimated that last year, the total levies collected would have been at least $3 billion!
Do you see what is happening here? Singaporeans said there was a problem – our wages were being depressed, so the PAP came out with “their solution” – let’s fine companies via the foreign worker levies! But instead of solving the problem, companies still face the same problem and not only that, the problem worsened and increased the business costs, but meanwhile, the PAP continues to earn more and more – from both Singaporeans and the companies.
Please note that there are 5 pages to this article:
Page 1: PAP’s Big Four Profit Strategies