I’ve been spending a little less time on the blog and focusing
more of my time on writing for the mainstream media in recent days. A part of
shifting focus has been work-related. The other has been the fact that there
are issues that need to be raised in a place where there’s going to be wide discussion.
The most prominent issue that has caught my attention and
the attention of many in Singapore is the issue of foreign worker dormitories.
The reason for this is simple, these are the places where the explosion in
Covid-19 cases have been found and the government has decided to throw a lifeline
to the dormitory operators by offering to foot the bill for the increased operational
costs that the dormitory operators will have to face. More details on that
story can be found at:
While the stay-at-home orders and lockdowns on the dormitories
has undoubtedly raised operational costs for the dormitory owners, one has to
ask why the government has decided to step in as their proverbial sugar daddy.
This is especially in a situation where the dormitory owners are in no danger
of going bankrupt.
As matter of principle, I’m against subsidies from the government,
whether its to individuals or corporations. Having grown up in the West, I saw
how noble intentions ruined. Welfare, which was meant to help the poor ended up
destroying the incentive to work. “Free” healthcare was often abused (think of
the 18 months it takes to get an appointment with an orthodontist in the NHS)
and then, there’s the well subsidized business of farming, which became very
lucrative for farmers who realized that farming was not about crops or
livestock but filling out forms.
I get why some subsidies exists. On a personal level, there are
people who are basket cases that you can’t leave to rot (think of the problems
they’ll cause as they rot). I think of Flesh Ball and her various men as an
example. When it comes to businesses, there are times when a subsidy is
necessary, especially when it involves bringing something to market that will
have eventual social benefits. Renewable energies for example, were highly subsidized
because they were expensive. However, those subsidies have paid off in that the
cost of producing renewables are now competitive and it has provided the world
with energy sources that don’t damage the environment.
Then there are exceptional circumstances where subsidies to
businesses help provide social collapse. Subsidies to businesses in the current
shut down of the global economy have helped keep people who might otherwise be unemployed
in a job. The alternative is mass long-term unemployment, which in turn would
mean social unrest.
So, the question is, does the dormitory operations industry
justify giving a subsidy? I believe that the obvious answer is no.
Firstly, there is no benefit to the tax payer in doing so. Unlike
renewable energy companies, they are producing anything that would add value to
either people or the planet in the long run. They are merely putting people
into a certain space and charging a fee for it.
Secondly, the dormitory operators are not in any danger of
going bankrupt and throwing people out of work. While a breakdown of their number
of employees is not available, a look at Centurion Corporation’s website would
indicate that they are still hiring.
As mentioned in two letters to the Straits Times (including
one by me), the dormitory owners are exceptionally profitable. Details can be
found at:
https://www.straitstimes.com/forum/why-foot-the-bill-for-dorm-operators-that-have-profited-for-years;
and
Numbers quoted in both letters were taken from Centurion Corporation’s
financial website at (Being a listed company, Centurion Corporation has to
publish its financial results):
The letter by Mr. Cheng Shoong Tat got the board of the Centurion
Corporation to scramble and they had to issue a “clarification” as to what their
$103.78 million profit on revenue of $133.353 million meant. They’ve made a
point that of that $103,78 million profit that they made includes a “one-time” net
fair valuation gain of $66.3 million on investment properties and assets held
for sale. The clarification also makes the point the worker dormitory business
is just 65percent of their total. More details can be found at:
What does this mean in layman terms? Is the company saying
that the $66 million in “fair-valuation” gains merely an accounting treatment
rather than actual cash?
Even if you take the “clarification” at face value, Centurion’s
profits are exceedingly healthy by any standards. If you take out the “one-time”
net fair-valuation gain, the profits before tax would be $44.735 million (Gross
Profit less expenses), which would mean profit margins of 33 percent (still very
healthy by any standard) and if you less income tax, there’s still $37.522 million,
which means a margin of 28 percent. Furthermore, the “one-time” net valuation
gain is also in the financial results for 2018, which would suggest that the one-time
gains are fairly consistent.
All these factors should not distract from the fact that Centurion
Corporation is sitting on a cash pile of some $48 million (cash at bank).
Nobody is saying that Centurion Corporation and its brethren
are not allowed to make profits. What is questioned is why the tax payer has to
subsidise them when there is a situation where they are likely to make less. The
point about going into business is that you take the risk and rewards
accordingly. When times are good, you are entitled to your profits but when
times are harsh, you take the losses. Other businesses have also taken hits.
SIA, for example has had to lay off staff because the global airline industry
has been badly hit. However, SIA provides jobs for many Singaporeans and actively
promotes Singapore, something which the dormitory owners do not.
The most crucial point to the case against footing the bill
is that many of the costs that are now being imposed on the dormitory owners
are now being forced to take on, were costs that should have been factored in
when the Foreign Employers Dormitories Act (“FEDA”) came into force in January
2016. This act essentially sets certain standards in the industry of providing accommodation
for foreign workers and the fact that the government introduced this act would
indicate that the government realized that it needed to have some oversight on
the industry. More can be found at:
This leads to the fact that half of all dormitory owner’s
flout licensing requirements on a yearly basis as the Minister of Manpower admitted
to parliament:
So, the question remains, why should the tax payer bail out
a highly profitable and cash rich industry from failing to fulfill its legal
obligations? What hold does this industry have over the tax payer that it can
demand a right to be subsidized to correct its own failings. When was it my
obligation as a tax payer to fund an industry’s right to make healthy profits.
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