Singapore Expats Forum

Huge hidden fiscal surpluses enrich the Sg state but impover

Discuss about the latest news & interesting topics, real life experience or other out of topic discussions with locals & expatriates in Singapore.

lotus sutra
Member
Member
Posts: 24
Joined: Sat, 05 Mar 2005

Huge hidden fiscal surpluses enrich the Sg state but impover

Postby lotus sutra » Tue, 15 May 2007 9:33 pm

Singapore -- Fiscal Predator: Huge hidden fiscal surpluses enrich the Singapore state but impoverish the private sector

...............................................................................

Austere fiscal policies hurt Singapore more than possibly any country
on the planet. Although Singapore markets itself as a low-tax country
with world-class social programmes, in reality the government taxes
heavily and spends little. The resulting huge surpluses -- largely
hidden and off-budget -- strengthen the ruling party but weaken the
economy. Unless the government drastically loosens fiscal policy,
businesses will lose competitiveness and long-term growth will slow.

Singapore's political system and fiscal strategy are inextricably
intertwined. Only a government dominated by a single party could
consistently post such large surpluses and only an extraordinarily
well-financed state could exert such extensive control over political
and economic life.

Big structural surpluses most benefit the ruling party, to the
detriment of the private sector. Unconstrained by tight finances, the
government pays cabinet members and civil servants some of the
world's highest public-sector packages. Although generous salaries
discourage corruption, they also lure the best talent to the
government and ruling party. Private enterprises -- and rival
political parties -- suffer brain drains. When campaigning, the
ruling party argues that the opposition lacks capable leaders.
Because high pay has attracted the island's brightest to the
government camp, the claim rings true.

A variety of analytical shields obscures the embarrassing size of
government surpluses. Accounting principles differ from global
standards. A bewildering array of statutory boards, government-linked
companies, investment corporations and holding companies transact
among themselves at undisclosed prices. Key data such as the
government's share of national savings and the profits of holding
companies and investment corporations are kept secret. One analyst
calls the national accounts a "masterpiece of obfuscation."

Actual surpluses greatly exceed the already impressive stated
numbers. From 1991 to 2001, the government reported surpluses
averaging 3.6% of GDP, but Mukul Asher of National University of
Singapore calculates an adjusted average of 9.7%, nearly triple the
announced figures. Official budgets exclude land-lease revenues,
investment income and profits from off-budget state bodies. Because
Asher includes only publicly disclosed revenues, his adjustments
understate real surpluses.

The high-surplus strategy lowers Singapore's standard of living.
Deprived of disposable income by numerous taxes, Singaporeans
consistently consume a share of GDP 10-20 percentage points below
Hong Kong levels, while Hong Kong maintains a higher per-capita
income. Their high-revenue, low-expenditure government leaves
Singaporeans a smaller slice of a more modest pie.



Overly stringent fiscal policies sap Singapore's competitiveness.
Excess surpluses depress the cost of capital and encourage firms --
many state-owned -- to overinvest. According to JPMorgan, listed
Singapore companies provided a return on equity below the non-China
developing Asian average in four of the last five years and half the
United States benchmark since 1996.

An excessively pro-fiscal design is contributing to a looming crisis
in Singapore's national pension plan, the Central Provident Fund, or
CPF. Rather than invest balances on beneficiaries' behalf, CPF pays
contributors a low, artificially determined interest rate. The state
pockets as a hidden tax the potentially huge difference between the
actual investment yield and what beneficiaries receive. In contrast
to most countries' schemes, Singapore allows working contributors to
pay medical bills with plan balances. The resulting outflow depletes
retirement funds but relieves the government of potential health-care
liabilities.

Arguably, provisions allowing home buyers to tap CPF balances work to
similar effect. State entities own an estimated 85% of the island's
land. If, as some analysts believe, CPF financing has contributed to
high land prices, the government gains from home purchases, while
pension balances dwindle. Largely as a result of its fiscally
friendly features, CPF will prove grossly inadequate for meeting
individual retirement needs.

Slower economic growth has eliminated reported surpluses this decade,
but the lack of change in broader fiscal policies indicates that
actual balances remain high. Until the dominant-party political
system that thrives on outsized surpluses undergoes fundamental
reform, Singapore will struggle with an underfunded pension plan,
inefficient businesses and sickly consumption.





.........................................

User avatar
sundaymorningstaple
Moderator
Moderator
Posts: 34782
Joined: Thu, 11 Nov 2004
Location: Still Fishing!
Contact:

Postby sundaymorningstaple » Wed, 16 May 2007 1:00 am

What, they let you out?

I see you are up to you normal do nothing say nothing posts where you can only cut & paste other peoples thoughts and nothing of your own. This forum is for discussion. Your point was?

User avatar
jpatokal
Moderator
Moderator
Posts: 3014
Joined: Tue, 09 Dec 2003
Location: Terra Australis Incognita

Postby jpatokal » Wed, 16 May 2007 5:27 pm

...and the essay also doesn't mention that not a small part of those hidden surpluses are plowed right back into the military, which chews up a huge part of Singapore's income. I'm not sure this is much better than just sitting on it like Scrooge McDuck, but at least the money's going somewhere...
Vaguely heretical thoughts on travel technology at Gyrovague

User avatar
Wind In My Hair
Manager
Manager
Posts: 2306
Joined: Tue, 19 Jul 2005

Postby Wind In My Hair » Wed, 16 May 2007 10:46 pm

Yes the Ministry of Defence has by far the largest budget of all ministries. Just wondering if this is true of all countries in general, or merely another aspect of Singapore's paranoia?

User avatar
sundaymorningstaple
Moderator
Moderator
Posts: 34782
Joined: Thu, 11 Nov 2004
Location: Still Fishing!
Contact:

Postby sundaymorningstaple » Wed, 16 May 2007 10:51 pm

Wind In My Hair wrote:Yes the Ministry of Defence has by far the largest budget of all ministries. Just wondering if this is true of all countries in general, or merely another aspect of Singapore's paranoia?


According to the CIA Factbook Singapore spends 4.9% of GDP on military. It's number 20 in the world. The US is at 26th and the UK is at 61st with only 2.4%. Israel is at number 7 with 7.7% but the middle eastern countries are the top 5 with all over 10% of GDP.

User avatar
Wind In My Hair
Manager
Manager
Posts: 2306
Joined: Tue, 19 Jul 2005

Postby Wind In My Hair » Wed, 16 May 2007 11:00 pm

Thanks. Within the US for example, does education, health or defence have the biggest budget?

one843
Regular
Regular
Posts: 139
Joined: Wed, 15 Mar 2006
Location: Ubi

Postby one843 » Thu, 17 May 2007 11:32 am

Windy-
Of the three in the US you ask- Military-educat-health

I am sure the answer is Military.

It is also the only of the three that Americans can be proud of.
Education and health care are both very disappointing traits of the United States of America.
"If you fear change, you fear success"


  • Similar Topics
    Replies
    Views
    Last post

Return to “General Discussions”

Who is online

Users browsing this forum: LarryJuh and 3 guests