SINGAPORE may have reached the end point of its involvement in the global manufacturing market with the impending departure of Seagate’s plant. While this is not unexpected, it spells a deepening crisis that most Singaporeans may not yet fathom, thinking that the PAP government has the ready solution.
With 10,000 people under its payroll, Seagate is one of the biggest employers in Singapore’s corporate history. With its immense market share, its presence here has generated a whole segment of supporting industries which created many more tens of thousands of jobs for both locals and foreigners.
It is difficult to imagine the impact of Seagate's loss on our economy.
The great migration of low-end, low-skilled jobs to China began in the 1990s, which is one reason why Singapore decided to move up the value chain in the manufacturing industry. Theoretically, the move was logical and necessary. There were ample opportunities to scale up and higher-end jobs were largely retained here in line with the higher educational achievements of the average Singaporean.Fast forward 20 years now and most Singaporeans are facing a looming job crisis on the back of ever higher cost of living, no doubt a result of PAP’s unbalanced growth policies. The departure of factories not only badly affected the workers but the managers as well. The number of unemployed PMETs represent the gravity of the current situation.
The growing property bubble
The main culprit is the very wide pyramid that supports the top which is largely the result of high property prices. How did Singapore arrive at this crossroad? A relook at PAP’s policies provides us with the undisputable answer.
In the early days of S’pore, HDB flats cost below $10,000 and rose over the years. Even factoring inflation, the growth in HDB flat prices is unnatural and unsustainable for the future generations. The government’s claim that HDB flats are much subsidised compared to the market prices is a distorted view. Selling HDB flats at reduced profit compared to market prices does not do anything to reduce cost for potential buyers, and cannot be called a subsidy.
In short, each new generation will have to pay much higher prices for HDB properties to support the artificial price rise, creating a false sense of wealth and of property value in Singapore.
This form of property price engineering is sustainable only if we can continue to attract or produce enough MNCs to set up businessess and factories which in terms, generates jobs for the various segments of society. The consequences of a failing Singapore is dire compared to other countries due to a lack of natural resources and land for self subsistence. With a large percentage of the population serving mortgages on their properties, it is conceivable that the whole economy could collapse quickly, if large numbers of Singaporeans are no longer able to do so.
The sub-prime crisis in the United States serves as a vivid warning to the government of the perilous path that its policies have created. Ultimately, it is the vast majority of heartlanders who will bear the consequences of this devastating ‘bubble tsunami’ when it strikes.
What can we do?
What can be done to prevent this crisis from erupting? It’s not possible to prevent the crisis but it’s possible to create a soft landing. HDB must revert to its primary role of providing genuinely affordable housing to Singaporeans as in the past. A home is the single most important and most basic asset required for developing a sense of rootedness. The “Swiss way of living standard” is nice to have if not a mere rhetoric. However, the vast majority would consider that a luxury well beyond their reach.
With affordable housing, lower wages can be mitigated which in turn reduces business cost and makes Singapore a more competitive economy again. With less money going towards servicing mortgages, the average Singaporean can put more money into savings and more disposable income will help to drive the local economy. Mortgages are unproductive components of the economy benefiting few among which are the banks.
Higher consumption not only helps to drive the local economy but also helps to distribute income which leads to a more equitable society. As Singapore moves towards the services industries, namely finance, legal, entertainment, retail, and so on, Singaporeans will be extremely hard-pressed to compete with foreign labour for lower pays and jobs.
The government has opened the floodgates for foreigners to come in without much consideration for the average Singaporeans. With depressed wages leading to less financial freedom, the average Singaporean will have to continue to slog to pay for inflated housing mortgages and living costs. The rich, however, will continue to benefit disproportionately, giving rise to a widening social chasm.
There is much to be learnt from any crisis. If we do not, we are priming ourselves for an even more tumultuous calamity. If that happens, we have only ourselves to blame for playing into the hands of the economics of greed.