5 Minutes With… is a new column on theonlinecitizen where we get a more immediate reaction to a news item of the day.
In this first installment, TOC chats with Leong Sze Hian, the President of the Society of Financial Service Professionals, about TODAY’s report on rising inflation in Singapore titled: “Growth, not handouts, the answer”.
TODAY says: However, Mr Lee cautioned against expecting unlimited handouts to tide Singaporeans through this difficult time. “Government revenues have been strong. But we must be realistic — not everything can be solved by the Finance Minister becoming the God of Wealth.
TOC: How strong actually are government revenues? Is it not “realistic” for the government to help more, especially poorer Singaporeans like those on public assistance?
Leong Sze Hian: I estimate the coffers of the GIC and Temasek to be about $400 billion. So, just 1% of the returns of say Temasek’s 18% a year over the last 33 years, may be enough!
TODAY says: Measures are in the pipeline, with some already underway. For example, further efforts are being made to diversify Singapore’s overseas food sources, to help contain rising costs, including the sourcing of frozen chicken supplies from Brazil and fresh fish from Chile.
TOC: How much will this help, realistically? Isn’t getting food sources from as far away as Chile and Brazil just as expensive? Or are they cheaper than say, Malaysia or Thailand or even China? Why wait till inflation bites before we go to Chile to get cheaper food?
Leong Sze Hian: You are absolutely right. Why wait for inflation to hit a 25-year high – then start to work?
TODAY says: And despite the growing pain of rising costs, a fresh report from the Ministry of Trade and Industry released yesterday shows that Singapore has one of the lowest rates of food inflation in the world…. The price of food in Singapore has risen 2.9 per cent from 2006 to 2007, while in Malaysia food prices have shot up 3.1 per cent and in Hong Kong by even more, by 4.5 per cent.
TOC: From which study or report is the MTI quoting from? Is 5% inflation “low”, internationally? Even if it is low, is it fair to compare our cost of living with that of Malaysia and Hong Kong?
Leong Sze Hian: As with many past cited reports, they should make the report public, so that you don’t have to ask this! Malaysia food prices are already much lower. So, just 0.2% higher food inflation than Singapore‘s still end up with much lower prices!
TODAY says: One surprising fact: Despite the rise in operational costs, a survey by the Department of Statistics also released yesterday showed that 75 per cent of 1,271 hawker stalls here have not increased prices.
TOC: If 75% of hawkers have not increased prices, then how did food inflation jump 2.9 per cent? Where did this rise come from? Why is it that Singaporeans seem to be experiencing a different scenario from the DOS’ statistics?
Leong Sze Hian: If the survey had interviewed the wrong hawkers, maybe those few who raised prices, increased a lot!
TODAY says: The CPI — which is used to measure inflation year-on-year — for food in Singapore had increased from 1.3 per cent to 1.6 per cent from 2005 to 2006, and then to 2.9 per cent last year.
TOC: Is it fair to say that the increase was more than 100% (from 1.3 to 2.9)?
Leong Sze Hian: Yes! Actually, it’s 123%!
TODAY says: The MTI expects that while the CPI is likely to be higher this year, especially in the first half, it would rise moderately in the second half….. Citing the turbulent financial markets and the slowdown in the United States’ economy, he (PM Lee) said Singaporeans “have to expect more uncertainties ahead as the US problem (credit crisis arising from sub-prime mortgages) has not worked itself out and we don’t know how bad it will be”.
TOC: What justifies the MTI’s confidence that the CPI will only rise “moderately in the second half” when the PM himself is citing uncertainties in the US’ economy?
Leong Sze Hian: Well, they were also very confident last year. So, notwithstanding confidence, I think I am more confident about the PM’s prediction, than the MTI’s!
TODAY says: Singapore has been buffeted by external inflationary pressures — especially on food prices — driven by a myriad of factors, including rising affluence and consumption in China and India; disruption in food supplies caused by droughts and diseases; and farmers switching from growing crops for food to biofuels in face of higher costs of food transportation.
TOC: If we are “buffeted” by “external inflationary pressures”, does that mean that food prices would have been even higher if we were not “buffeted”? What does it mean and how are we “buffeted by external inflationary pressures” – if indeed we are?
Leong Sze Hian: I am buffetletly (if there is such a word) confused too!
TODAY says: Singaporeans should not be unduly worried, said Mr Lee. “When we say that inflation will hit 4 to 5 per cent in the first half of 2008, it is already where we are in January, so we may not see another price hike going forward,” he explained.
TOC: The PM seems to be saying that we should be somehow happy or thankful that we, in January, are already seeing a 4 to 5 per cent inflation rate. Is it possible that this 4 to 5 per cent will stay with us throughout the rest of the year? PM Lee was also quoted as saying : “Last year, inflation was about two percent. This year, it could be five per cent, maybe even more.”(AFP)
Leong Sze Hian: I bet my last dollar against it! I bet it will be even higher!
TODAY says: Will the Government act to control food prices or subsidise the price of essential items? PM Lee said such a move would backfire, especially when Singapore imports all its food supplies.
TOC: What does PM Lee mean when he said such moves will “backfire”? Is it not possible for the govt to control even essential items?
Leong Sze Hian: Govt should cut or freeze HDB 1 and 2-room rentals, reverse the decision to increase the property tax on all HDB flats wef 1 January 2008, freeze or reduce rising new HDB flat prices, freeze or reduce utilities charges (I think it is about time that utilities companies take a temporary break from making ever increasing profits), freeze or reduce public transport fares (same reasoning as the above for utilities companies), freeze or reduce S & CC charges (isn’t accumulating more than $1 billion in town councils enough), reduce or freeze public healthcare fees, etc – need I say more!
TODAY says: Citing the chaos in countries like China and Malaysia as a result of panic buying, the Prime Minister added: “Price control is not something we can do and if you want the Government to subsidise, that’s also not a good thing to do because it is very expensive and most of the food will be consumed by people who are not poor.” The most astute solution is to grow the economy and increase wages, he said.
TOC: Is it true that price control is something the govt cannot do, as the PM said? Growing the economy and increasing wages are options which will take time to implement and materialize. By saying that, isn’t the PM being ignorant of the hardships which people are currently facing, especially the poor? Shouldn’t places like NTUC do more to help alleviate inflation?
Leong Sze Hian: Well, the Govt has always said that so many things are subsidised – HDB flats market subsidy, hospital subsidy, education subsidy, etc. So, maybe food is the exception. What’s the point of growing the economy, when the wages of the bottom 30% keep going down, and the number of low-wage workers keep going up!