22 Jan 2005

No economic clout = no political constituency = no audible political voice

Singaporean spending not central to Singapore economy
by Robert Schwartz, 20 Jan 2005

Writing about Singapore's economic outlook is boring. It's not that there is nothing to say, it's that there is nothing to say about Singapore itself. A pertinent discussion of Singapore's near term prospects for the first half of 2005 has to start with the effects of the tsunami. This then would segue over to the actions of America's Federal Reserve Bank, which in turn would be followed by a pithy, yet substantive, look at the global electronics cycle.

Where do the people of Singapore fit into this analysis? Hopefully as readers of this piece, but that's about as far as it goes.

In 2001, the Ministry of Trade and Industry published a paper that looked at the four primary, long term drivers of Singapore's economy. The number one influence was growth in the United States. Number two? Growth in the economies of Indonesia and Malaysia. Third was global semiconductor sales. And rounding out the top four was domestic construction.

But wait, you might say, what about Singaporeans' love of shopping? Certainly that has to count for something? You're right it does. The problem is that Singaporeans love of shopping is usually done someplace other than Singapore. The fastest growing component of private consumption over the past decade or so has been Resident Expenditure Abroad.

Of the spending done in Singapore, the fastest growing type of retailer (by far) has been motor vehicle dealers. From 1997 to the third quarter of 2004, dealership sales had increased by a total of nearly 260%, not including the effects of inflation. The next fastest growing category was supermarkets, which grew by a total of nearly 32%. Overall, non-motor vehicle retail turnover grew, excluding inflation, by a total of 7.1% from 1997 through September 2004.

The key to Singapore's retail sector is not the average Singaporean. The key to retail in Singapore is the overseas visitor. If you want to get a handle on how well the sector is doing, look at the growth in visitor numbers. These have traditionally led the retail numbers.

So again, where does this leave the people of Singapore? In their government housing units voting for the PAP every so often and that's about it. As far as making the economy move forward, the average Singaporean is a non-event. And as such has little say in the political environment. No economic clout = no political constituency = no audible political voice. [This might be read as an enraging statement, but then again, being Singaporean you'd probably just shrug your shoulders...]
The consumer's share of Singapore's economy is around 42%. This compares to about 55% in Japan, a country notorious for saving, and close to 70% in the United States. It is not coincidental that the average American, who is such a vital part of the US economy, has such a central role in the political sphere.

In fact, the average consumer in the United States has more power over the direction of the Singapore economy than does the average Singaporean. It is the continually increased spending on ever more gadget-filled electronics equipment or on a new lifestyle drug done by a typical American that drives the sales which drive Singapore's production.

To be fair to the government, it knows that any money spent on boosting the consumption of average Singaporeans is money that will very quickly find its way to foreign shores. As such, the PAP has decided that it would prefer not to spend its hard-earned tax revenues boosting the local economies of Batam, Johore or Bangkok.

This is also why the government's interest in the domestic consumer economy is limited to construction. This is a section of the economy that can't be taken out of the country. The problem here is that by the mid-1990s the residential property was way ahead of the average Singaporean in terms of price, affordability and location. As a result, the property sector took a serious dive. Furthermore, neither the public nor private housing markets have come close to hitting the highs reached in 1996/1997.

The problem with this emphasis on property is that it has handcuffed many Singaporeans. A typical private residence bought between the beginning of 1994 and the beginning of 1998 has, at best, not appreciated. At worst, this homeowner could have held onto this asset for over a decade and have it being worth less today than when it was purchased. This means that a Singaporean family could been paying off a mortgage that was higher than the value of the property itself. This negative equity is extremely depressing, both economically and psychologically.

Alright, so where does this leave us? Talking about things far from Singapore's borders. And, quitefrankly, it's a bit boring, not to mention impolite, to talk about other people's lives instead of yourown. But when your lives don't count for much,economically, there just isn't much point to a conversation.


Agagooga said...

No economic clout = no political constituency = no audible political voice?!

It's not like Singaporeans, or indeed citizens of any country, would or could co-ordinate their spending patterns, even if that would give them a political constituency or political voice.

True Flight said...

I thought it was a rather obvious point - Singaporeans matter to the Singapore economy because it's their skills which drive the economy, and probably to a greater extent than in the majority of other countries, because (as we have been told ad nauseum) we have no natural resources to speak of, and nothing to depend on except our own skills.