A New Measure Needed

 

I know it’s not cool to admit to it, but I’m doing well. I am the official owner of a flat that, once you minus the outstanding liability (ie the outstanding mortgage), leaves me with a sum of at least S$200,000 plus. I have a main job in professional services (accounting) and statistically speaking, I produce around US$103,181 worth of value every year.

Yet, despite my statistical wealth, I am economically unsecure. My best hope is that my main job will keep me on for at least another 20-years and a significant number of you who are reading this will support the advertisers on this blog so that I can afford to buy an extra cup of coffee every month. If, God forbid, I have any serious ailments in the immediate future, my best bet is to die instantly so that I don’t become a burden to my family.

What I’ve expressed would seem strange to anyone living outside of Singapore. However, anyone from Singapore will understand because what I’ve mentioned reflects the disparity between “Statistic” Singapore and “Real” Singapore.

As part of “Statistic” Singapore, I’m doing well. There’s a property to my name (I avoid using the word own as there is a mortgage to my name), and property prices in Singapore are generally higher than in most places (logic of small land area and many people living in the area) and therefore my paper worth is comfortable. Singapore also has a relatively high Gross Domestic Product (“GDP”) for a small island with a limited number of people and if you look at the GDP per capita, the only nations with a higher GDP per capita are Luxemburg (Tax Haven for wealthy Germans), Macao (Gambling Haven) and Qatar (gas station). So, as part of “Statistic” Singapore, my share of the national wealth is US$103,181 a year. This makes me better off than my friends in Western Europe or the USA. Measures of our GDP success cab be found in the following links:

https://tradingeconomics.com/singapore/gdp#:~:text=GDP%20in%20Singapore%20is%20expected,according%20to%20our%20econometric%20models.

https://www.gfmag.com/global-data/economic-data/richest-countries-in-the-world

It goes without saying that my reality in Singapore is less rosy than what it appears to be in “Statistic Singapore.” Yet, despite this fact, the government has spent countless times talking about our economic statistics and leaving aside the economic devastation brought about by Covid-19, our government inevitably goes back to our GDP statistics.

In fairness to our government, it’s not the only government to fall back onto various economic indicators as how well they are doing. Donald Trump for example cannot stop talking about stock market highs whenever someone talks about his government’s record.

You could say that it’s only natural for everyone to want to show themselves in a good light and economic statistics are probably the best way to do it. So much of our lives are based on economics and I guess you could say that when governments talk about the economy, it’s a way of showing that there’s money to give us goodies.

However, as the differences between Statistic Singapore and Actual Singapore have shown, GDP is a flawed measure of how well a country is doing as it only looks at one aspect of life in a nation. So, could there be another way of measuring how well a country is doing?

I think one of the best ideas comes from the small Himalayan Kingdom of Bhutan, which came up with the concept of Gross National Happiness (GNH). To a certain extent, there are aspects of this measure of happiness which one could say are unique to the Bhutanese situation. We also need to remember that Bhutan is not the idealistic Shangri La that is portrayed to be and looks to India as a centre of economic assistance. There is also the problematic issue of having to conduct surveys on a yearly basis.

Having said that, the basic idea of GNH is right. The Bhutanese has qualified happiness into several aspects, which include things like the environment, health, cultural diversity and community vitality in addition to the usual economic measurements. A graph of what GNH comprises of can be found below:

Now, admittedly its harder to measure GNH with its various aspects than GDP. However, as argue, GDP is a flawed measurement as it only acknowledges the fact that life more than just economics. If you look at the situation in Singapore, you’ll find that our government is obsessed with GDP. All you need to do is to ensure that enough people are employed and nobody actually starves to think that you’ve done a good job. There is, for example, no need to look at the type of jobs that people are getting and whether things like whether I’m worrying on whether I might be able to afford to send my kid to school or whether I get sick or not.

Let’s go back to my personal example. As GDP indicates, I’m doing well. I have a job and a property in my name. The government can claim that it’s technically done well. People like me are producing USD100,000 plus a year and so on and so on.

However, GNH forces those in power to see that people are not just economic digits. Under the GDP measure, you’d be successful if you see that your people have a job even if that job pays $500 a month. However, under the GNH measurement, you have to ensure that people not only have jobs, but they can afford to send their kids to school, live in normal conditions and don’t have to breath toxic air as part of daily life.

Our traditional method of measuring things is too narrow and doesn’t portray things accurately. Isn’t it time we look at trying to measure things more accurately so that we can build a more livable society for the greater number of us?

The Problem with Buddies

 One of the most prominent items to be put on display as a result of the acquittal of Parti Liyani, the Indonesian maid who worked for Mr. Liew Mun Leong, the former Chairman of the Changi Airport Group, was the extent to which Singapore’s high-level businesses were connected.

Within moments of that rather damning verdict being made public and the explosion of anger towards Mr. Liew and the businesses where he was serving on proceeded to rush out and defend him in public. The most noticeable was our state-owned holding company, Temasek Holdings, which went out of its way to remind the public that Mr. Liew had contributed a lot to Singapore (which was an irrelevant point in light of the fact that Mr. Liew had very likely been involved in something where the legality was questionable). Why would such large organizations rush out to defend the reputation of a man whom had publicly been exposed for trying to illegally fix someone with so much less than him?

While I don’t have concrete answers for the individuals who defended Mr. Liew in public, the answer is probably because Mr. Liew was one of them and they were simply defending their own kind. This leads to one of the most problematic issues in Singapore – crony capitalism.

According to Transparency International, Singapore ranks as one of the top five least corrupt nations on the planet and it is the only Asian nation on the list. Lee Kuan Yew was very particular about ensuring that the public sector would be known for its integrity. His vision was for Singapore to be a shinning beacon of honesty in a rather turbulent neighborhood. He saw to it that there would be a stick for anyone of his public servants who had a whiff of corruption surrounding them (this is the man who gave a minister the choice of suicide or public humiliation) but at the same time he paid his public servants well (think of the world’s highest paid ministers). The system is seemingly good. As well as our ranking on Transparency International’s list, we are also praised by everyone else for having clean public administration. In Singapore, don’t even think about handing over a brown envelope with cash if you are dealing with any public servant.

There is, however, one slight problem to the Singapore system. While you cannot hand money to public servants, knowing people seems to work in business deals, hence while we may rank highly and alongside the Nordic Countries in terms of corruption, our ranking in the index of crony capitalist is closer to that of our neighbors and that bastion of honest government – Russia. Our ranking on the crony scale can be found at:

What’s particularly noticeable about this list is the fact that the “crony industries” or the industries where knowing people is an essential part of the game form a particularly large chunk of our economy. These would be things like construction, property and shipping.

The extent to which this was brought home to me came from a conversation I had with a director of company we had just put under. I told him that I didn’t understand how small subcontractors would make money. First you have to come up with vast amounts of cash to do the project. Then, at a certain stage, you send it a “progress claim” which is essentially telling your pay master what you think you should be paid. He (they usually are in construction) then has to verify the value of your work, and if he needs to keep the bean counters happy, its inevitable that he’ll find fault (in theory there’s a legal mechanism, in practice, the one holding the money is the one with the power). Once you agree to a price, then you send in an invoice and the credit terms are at least 60 days. I cannot comprehend how this power distortion makes it possible for small businesses to survive.  His reply was telling. He told me that I was looking at things as an outsider – the insiders always ensured there was a godfather inside the paying party’s organization that would take care of them.

There is, technically no corruption in Singapore. Yet, somehow contracts are inevitably awarded to the same people and since the industries like construction and property development inevitably involve large numbers of manpower and machinery, the sums we’re talking about are huge – hundreds of millions if not billions. If you study Singapore’s rich list, you’ll notice that the big fortunes are inevitably in one thing – property. It’s also a case of the same names coming up again and again.

Now, this is not particularly unique to Singapore. America’s rich list has also been pretty much the same. However, the American list isn’t in the industries that require you to have a “Godfather.” Gates, Bezos, Jobs and Buffet needed a vision and did create something different. Our guys built real estate and ensured that their profits would forever remain healthy.

While you cannot accuse anyone of dishonesty here, the hold of these industries and the practice of needing “Godfathers” to protect you cannot be healthy in any shape or form. Innovation for one, is never encouraged. More worryingly, government becomes compromised in times of crisis. Just look at the explosion of Covid-19 cases in worker dormitories. The whole world knew that the conditions in the dorms was essentially a breeding ground for diseases. There were previous cases reported in the press. The Minister of Manpower herself admitted that the dormitories were simply not up to standard and more worryingly she admitted that the government had known about this for sometime but never made the moves to force the industry to clean up because the industry complained about rising cost.

What’s a little less spoken about was the fact that the dormitory owners had “Godfather’s” to look after them. Think Centurion Corp, which is admittedly one of the better run dormitories. The main characters were involved in the grassroots. The compromise, the government stepped in to pay for cash rich companies to make conditions livable. No matter how you spin it, it cannot be right for a government that prides itself in honesty, bailing out a cash industry to do what it should have done in the first place.

You can’t bribe people here but if you are in certain dominant sectors of the economy, you need to find a godfather to look after you. Sure, who you know is always important but it cannot be to an extent where who you know becomes a driving force in getting things done. We need to build up dynamic sectors, those with creative destruction rather than those which function on back scratching. It’s the only way we’ll progress to the next level.

 

“Not competitive at all.”

One of the highlights of my working life in corporate insolvency came from a meeting which involved one of Singapore’s foremost insolvency and restructuring practitioners. I was part of a team bidding for a case that was being held up in the American courts and my employer felt that it was necessary to rope in a “brand” name practitioner and so got this particular practitioner into the coalition that we were trying to assemble. Towards the end of the meeting, the solicitor who was trying to build the team turned to this practitioner and asked, “Are your fees competitive.”

At that very instant, the practitioner said, “I’m NOT competitive at all,” and he said so with a certain amount of pride.

I think of this moment and the way this man took so much pride in being “NOT competitive at all,” because it underlines one of the most fundamental aspects of doing business – price. One of my favourite clients said it best when he told me – tell me:

1. 1.      What can you do?
2. 2.      How quickly can you do it?
3. 3.      How much will be cost me?

As someone who was inevitably desperate for the job, the answer to these questions were as close as one could get to the following:

1. 1.      Anything you want?
2. 2.      It was done before you even thought of it?
3. 3.      Nothing at all.

Quite often, the most important factor in deciding who got the job, often boiled down to the third point. It is in the buyer’s interest to get away with paying as little as possible and the seller will inevitably try to show that he or she can give the buyer the price that he or she wants.

If I look back at my freelancing days, I realise that I had one key advantage over my competitors, who were inevitably sizeable companies – price. I could do the job at a certain standard at price that my competitors could not do. When I took my last big job in the industry, I was presented with a quote that the client had gotten from a multinational and was told – “It’s yours if you can do it at half the costs.”

I was hungry enough to agree and we ended up settling at around 40 percent of what the competitor had quoted. However, while I had won the job on the third point, the client had high expectations about the first point. I was expected to deliver coverage on a multinational level without the multinational team (which would have required a budget). I managed to deliver the expected results at the expected budget (so much so that they told me to invoice and paid on the spot) by working through a relationship that are not commonly used by conventional practitioners.

Business is inevitably about balancing points one and two with point three. The adage is that success inevitably boils down to being able to be “good, fast and cheap.”

I’ve noticed that national economies, particularly the Asian ones do something similar. Japan, the most advanced economy, built itself up by being able to make things cheaper and better than the West. Gradually, as prices rose in Japan, manufacturing moved to South Korea, Taiwan, Hong Kong and Singapore.

Being able to work cheap has done wonders for Asia. Millions have left poverty because we were able to give the multinationals a cheaper alternative. This went into hyperdrive when China started becoming the world’s workshop and India the back office.

However, while price is often an important factor, I have to ask if this is sustainable, particularly for the mature economies like Hong Kong and Singapore. Our politicians are particularly fond of reminding us that in order to stay competitive in the global economy, Singapore needs to be competitively priced.

I don’t think they’re wrong to suggests to say that Singapore needs to be “competitive.” We are a pipsqueak island with no domestic market or resources. Our larger neighbours have more to offer and so we got to be on our toes and constantly find things to offer the world.

While I do understand that we need to be competitive in the global economic arena, I do question if the “need to be competitive,” is becoming an excuse to justify unacceptable practices, especially when it comes to making life better for the poor and needy. Just think of the two most common instances when the need to stay competitive is brought up to stop a discussion. They are inevitably:

1.      Having a minimum wage – common argument is that this will make us less competitive (read cheap) and therefore our economic system and well being will collapse;

2.      When it comes to slave labour from South Asia. Once again, the common point is that if we gave the slaves a dollar an hour more (and actually gave it to them) and got them to spend an hour less in the sun, our infrastructure costs would sky rocket and our economic system would collapse (believe it or not, even when Covid-19 was showing us very clearly that slave hovels were endangering the rest of us, there were people fretting that improving the lot of slaves would endanger our economic survival).

Shouldn’t it be clear by now that a mature economy like Singapore’s can no longer compete on being cheap and we need to reinvent our focus on being good instead of being cheap. This is not to say that price will not be an important factor – merely that we need to compete on something other than price.

I go back to my freelancing experiences and the insolvency practitioner who is proudly not competitive. I competed on price because I went to look for my customers. The insolvency practitioner has reached the stage where customers look for him. He does not need to be cheap. He does not need to do every job to stay alive – merely the ones that pay very well.

There are examples of this. The most famous example of Apple, which designs products and reinvents the way we do things. Apple is an example of a company and business that creates our need to need their products. This is an example of what type of business Singapore Inc needs to aspire to.

Unfortunately to be good, you need to pay and this where Singapore needs to get away from its obsession with “cheap.” Let’s face it we will never make things cheaper than China or 3D printing or do back office work cheaper than India or AI and that’s even if we give away factory land away and exempt foreign multinationals from paying CPF contributions to locals.

Our economic role models can no longer be other developing countries. I think of the German model as an example. Germany has one of the highest hourly wages in the world:

https://worldpopulationreview.com/country-rankings/minimum-wage-by-country

Yet, at the same time, Germany is also the third largest exporter in the world. Germany with one third of the population of the USA and not even 10 percent of China’s, competes in the global market.

https://en.wikipedia.org/wiki/List_of_countries_by_exports

What does Germany export? It exports good quality products. The ones that come to mind are Mercedes and BMW, which are known as some of the best cars in the world rather than the cheapest:

However, there are others. The German economy or Europe’s largest and the world’s fourth largest, is driven by SME enterprises that specialize in unique goods for very niche industries. I think of the Rational Combi-Oven that every chef I’ve worked with used to drool over as an example.

Isn’t it time we moved away from trying to be the world’s cheapest for the world’s big boys? Why can’t we be proud of being good and not being embarrassed of getting the world to pay for Singapore Inc’s products what it pays for that of the West.

We’re a small economy but in the interconnected world we live in, there’s no reason why we can’t do big things on the world stage? Surely this is something the government should drive us towards.

The Richest Man in the Cemetery

Steve Jobs, Apple’s legendary founder, is reported to have said on his death bed that he felt that his life had been an absolute waste even though he was judged to be an absolute success by every metric society used. His reasoning was simple, he had spent his time pursuing wealth and “success” which was at the cost of the time he could have spent with his loved ones. He said, “There’s no point being the richest man in the cemetery.”

I think of this at a time when earning a living has become exceedingly tough. If you’re like me, working on contract or part-time basis, its especially tough. The guys who used to give you lots of work can no longer do so in as much as they don’t have the business to give you the work.

My blue-collar existence vanished because restaurants are no longer allowed to have dine-in customers, hence there’s no need for service staff. My income from the white-collar existence is curtailed because nobody wants to meet, so I can’t “sell” the services. The media is also not interested in anything beyond the outbreak of infections in worker’s dormitories, hence there’s also not much prospect of drumming up publicity work. If I was to take a job as an “essential” worker in say, a hospital, the wife and kid would shoot me for putting them at risk.

In the meantime, bills need to be paid. While the banks are supposed to be more sympathetic, they still demand loan installment payments and so on. So, what can one do? In my case, it is a case of living very simply, staying in touch with the people who may be in the position to give you work so that they’ll remember to give you work once they can and also looking for other things that might earn you a few bucks. I’m blogging more than I used to. While what I earn of advertising revenue barely buys me a cup of cheap coffee, I keep the brain active and stop myself from rotting.

So, I am actually sympathetic to people who have been protesting against lockdowns and stay at home orders. I think of people who are demanding to go back to work. The desire to earn money isn’t just limited to “ruthless” billionaires who want more money. Worrying about money is a very common thing and I am living the frustrations of people who see their financial resources being depleted and the bills continuing to pile up.

However, I’m reminded of what Steve Jobs said. There’s a reason why businesses are not opening and why stay at home orders have been issued. With the exception of perhaps North Korea, countries around the world loosened up the restriction of movement of people because this brought prosperity and by extension more revenue for governments. So, when revenue hungry governments shutdown the movement of people and start dolling out cash, there has to be a good reason.

As Steven Jobs said, “There is no point being the richest man in the cemetery” and if you apply that to a state or national level, there’s no point having a roaring economy if you have a virus that cripples people.

Uganda’s President, Yoweri Museveni has described the current situation as being akin to being in a war, where you should be glad you focus only on the basics of survival. He’s right, the coronavirus has maimed and killed people and the only proven way that the virus has been kept in check has been through social isolation methods.

The statistics are very telling. In the USA, there are now 49,845 deaths as a result of the covid-19, that was in a matter three months. By comparison, the US lost 54,246 lives in the Korean War over a period of three years. Who is to say that the figures won’t rise further?

The best part of the coronavirus is that it’s a silent killer and you never know who might have it and who can give it to you. I remember discussing this topic with a Belgium fellow who felt that people were overreacting. My line to him was “How do you know I’m not infected and can’t pass it to you?” In such situations, a dose a paranoia is healthy survival.

Furthermore, its not just a case of “my body – my choice.” You might be healthy and fit but the fellow next to you may not be. If you get the virus, you may be able to survive but if you pass it onto other people, they may not be able to. Unwittingly, you became a case of death.

Then there are those who complain that Covid-19 kills less than the flue. Well, that may be true but then again death isn’t always the worst outcome. Studies have shown that those who have recovered end up getting infected again and being weakened – not exactly the best thing to keep the economy thriving.

Yes, stay at home orders are bad, especially when you have bills to pay. The alternative is worse. So, what do you do, except wait out the period and figure out how to tide things over? Losing patience could lead to losing more.