By Shawn W Crispin
BANGKOK - Singapore's economy is booming, with gross domestic product (GDP) on course to expand 7.2% this year after racing ahead 7.9% last year. But the strong economic-growth figures mask a structural weakness in the island state's economic-policy mix, one that threatens its long-term international competitiveness, and one that the ruling People's Action Party (PAP) clearly has no intention of amending.
This week, the PAP-led government rewarded itself with a 60% pay increase, boosting ministers' annual base salaries to about S$1.25 million (US$823,000), the highest pay scale for government officials anywhere in the world. Big budget surpluses provide the financial power behind the PAP's political monopoly, which steers the national economy and maintains a strict system of social controls.
To generate that largesse, the PAP maintains a highly austere fiscal policy, taxing more and spending less than perhaps any other government in Asia. The government contends on its official website that fiscal policy is directed primarily at promoting long-term economic growth rather than cyclical adjustment or redistributing income through "fair" tax policies and "prudent" expenditure programs. It contends an "ethos of fiscal rectitude" extends throughout the public sector to help ensure price stability and confidence in the local currency.
Beyond the official jargon, Singapore's fiscal policy consistently generates outsized surpluses, which come largely at the expense of the island state's private consumers and businesses through a complex web of income and various other hidden taxes. As a percentage of GDP, Singapore's domestic consumption historically ranges between 10% and 20% less than that of Hong Kong, where average per capita salaries are comparable. Anemic consumption coincided with Singapore running a current-account surplus of 28% of GDP last year - far and away the highest such ratio of any advanced economy in the world.
According to independent financial analysts who spoke with Asia Times Online, Singapore's outsized surpluses are habitually hidden away off-budget, often through the use of accounting gimmicks that diverge from internationally accepted norms. They note that government-linked companies and investment corporations buy and sell among themselves at undisclosed transfer prices, obscuring their profit and loss profiles. Nor, they note, does the government publish statistics related to its share of overall national savings.
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