Monday, December 31, 2007
Year End Reflection - Role of Governemnt
The most common grouses people are making right now is, Price of Everything goes up, including ministers' pay!
What is the problem with our country? Many people ask. It is becoming a SOP (standard operating protocol) for the PAP government to raise prices all over right after election year! Public transport fares have risen TWICE amidst record profits since 2006. Public utilities, especially electricity has risen based on higher oil price in spite of the fact that our generators are mostly powered by gas. The runaway inflation is partly fueled by rising rentals which are mainly in the control of GLCs (Government linked companies) which own most of the retail spaces in Singapore.
On top of that, in spite of the relative ineffectiveness of the ERP (Electronic Road Pricing) of controlling traffic jams (its the numbers, stupid!), ERP fees has been raised again. In fact, MORE ERP gantries has been set up now. The most absurd thing about ERP is that at some roads, the time has been extended to late at night! The concept of ERP should be based on economic opportunities and not about controlling traffic jams. Traffic jams are merely the symptoms that leads to lost of economic opportunities. It is IMPOSSIBLE to totally eradicate traffic jams altogether without imposing unimaginable high ERP fees.
What difference will there be, when there are inelastic demand on road usage, to have ERP gantries set at all places, at all time vs no ERP gantries at all? Practically no difference. ERP gantries will only work if there are distinctive difference in pricing.... best at with pricing vs no pricing. For example, if I want one of the two roads that joint from point A to B which are running parallel to each other, to be free of jams, the only logical way of doing so is to put a pricing on road A, then road B will jam while road A will be relatively free of jam. Will there be any difference if we have both road A and B to be priced by ERP?
The original concept of road pricing is to stagger traffic flow according to opportunity cost concept. This is to price the road with time difference. It means that during peak hours, some business or jobs are more important than others to command a premium; i.e. for example, stock market and financial business. Those who work in these field will be willing to pay a premium to reach their office on time. This is because the opportunity cost of time is higher to them. The other jobs are less time sensitive and thus, could afford to use the road later. Thus the effective way to make sure traffic is diverted from critical peak period to off-peak period, ERP pricing should only be applied on certain time period, not all.
But LTA seems to have a weird logic in applying ERPs in Singapore. The Central Business District (CBD) has a whole day ERP applied. And now, even non economic-critical time period like evening time period, ERP is being applied! The pricing no longer adhered to the economic opportunity cost concept (opportunity cost of traffic jam to the economy) but rather, ironically, like plugging holes as and when they see jams! It is no wonder that many Singaporeans are beginning to wonder whether the ERP system is really about road pricing to reduce economic opportunity cost or just plain money squeezing machinery for the PAP government!
Of course, how could I forget to mention the increase in GST by two percentage amidst the various inflationary pressure and in contrast, the hefty increase in ministers' pay. PAP government claims that the increase in GST is to "help the poor" but up till now, we have not seen any concrete and comprehensive plans of welfare system. Ironically, there are already many cynical Singaporeans who are fast to relate the increase of GST to help increase ministers' pay as well as the top civil servants' pay! Why do they need to raise GST, in spite of the fact that the PAP government is enjoying surplus with a huge reserves backing it? In fact, I think tax collection from GST will increase even without the raise of the 2%. This is basically because of the projected increase in population size, all thanks to the open FT policy. With an increase of Foreign workers in Singapore, consumption will be expected to increase, thus, GST collection will increase accordingly. It is really a big puzzle on why the PAP government always feel that money no enough!
While singing the slogan of "increase of GST to help the poor", we are slammed with the ideas of Means Testing of healthcare policy as well as the Compulsory annuity for everyone. Now, these two monsters are in fact schemes to reduce government spending on the welfare of its citizens! It seems that the PAP government is practically saying that we are not willing to spend too much to subsidize healthcare for citizens, least, help elderly citizens to live a decent retirement life. You are all on your own! It is to me a very distinctive contradiction of PAP "sales talk" of their unpopular policies like GST!
PAP government has blamed the high oil prices for the rise in prices. PAP minister even question the opposition on whether we could "bring the oil price down". The truth is, petrol prices are controlled in Singapore and the tax imposed on diesel and petrol is pretty substantial. If the PAP government is serious about controlling inflation, the only logical thing to do is to reduce or even abolish the taxation on petrol and diesel. The PAP government could truly help to control inflation by making such moves.
What is WRONG with the PAP government, really? On one hand, they want to increase indirect taxes on the people claiming to help the people, while on the other hand, they are devising all sorts of policies that will reduce their funding to help citizens to cope with various costs of living, from daily expenses to old age financing.
PAP government has rejected "welfarism", claiming that it will bankrupt the government. Or that people will have to pay more taxes to finance welfarism. But the truth is, are we paying any lesser now? Or rather, how much lesser are we paying? There is a delicate balance between taxation and welfarism. A government is NOT a business entity. The primary role of the government is to manage the country, by collecting taxes or monies from the society and then, redistribute these monies to maintain balances within the society. Providing welfare to those less privileged or unfortunate citizens will be one of the primary role of the government. Subsidizing certain vital, critical functions of the country that serve the citizens are the role of the government. The government is not here to make money, squeeze every ounce of juice out of the people, claim credits to have surplus and then to self reward with million dollar annual salary!
Healthcare is one important aspect of citizens' general welfare. Taking care of the aged and elder is another important aspect of the government. PAP has always preached about "Asian Values" as in "Confucianism" but it seems that it is not behaving like one when it decides to leave the elderly and aged to fend for themselves by forcing them to buy compulsory annuity! Every citizens, after working for a lifetime (now, "implicitly forced" to work up to the age of 70!) has contributed to the development of the society in one way or another. It is thus, only right for the care taker of the society, the government, to take care of their needs in return when they aged! How could a self-proclaimed Confucius government not know of such simple reasoning?
It is really a horrendous sight when a government turns into a miser, money crunching machine. When a government begins to just give a token of welfare to the society while emphasizing in getting surpluses and each ministries or departments is to cut spending on the welfare of the people while giving themselves the World's TOP salaries as politicians, it is really time to rethink some of the most basic fundamental values our society holds as a people and a country.
I hate to do this but it is about time to make comparison with Hong Kong government. Hong Kong may be a capitalist city but it basically has a socialist government. Hong Kong government truly take care of its people, in a very different way. Although Hong Kong residents have to pay hefty prices to own their home due to the high land price policy, but the Hong Kong government has in return, put funds back into the society to help its citizens in various ways. Healthcare is heavily subsidized. Whatever illness you have, whatever operations you need or no matter how many blood pallets you need, you will be charged only HK$100 per day which is amount to about S$20.00 per day. You may think this will open to abuses but the truth is, private hospitals are striving in Hong Kong too. The shortage in public hospital supply will naturally force those well to do families to go to private hospitals instead. The ironic thing is, even with a higher healthcare cost we have here in Singapore's "restructured hospitals", the shortages in the supply could be quite acute as well!
Education is another area whereby the Hong Kong government has subsidized heavily. The new policy focused on kindergarten education for the less well to do families! This is to help them to break out of the vicious cycle of poverty and to even out education opportunities right from young.
The comprehensive welfare system that Hong Kong government has set up basically gives enough money and welfare help to those who could not handle the high cost of living in Hong Kong. Their help is based on per-capital basis instead of per-household basis. On top of that, every elderly residents could register and claim about HK$300 in CASH (about S$60) each month to buy fruits! It recognizes the contributions of each and every residents through such a scheme.
After having all these welfare spending on its residents, Hong Kong government did not go bankrupt. Although it wanted to impose similar GST on the economy, it has withdrawn it due to pressure of resistance from its residents. Even without GST, it has managed to accumulate substantial reserves through years of surpluses. And the best part is, Hong Kong has lower taxes than Singapore for many many years!
I would say that any direct or indirect taxes given to the Hong Kong by its residents are well spent. I mean, compare to paying tax to a government that is stingy in spending on the welfare of its citizens, would you be more willing to pay tax to a government that really spent money to take care of its people?
One part of the problem of Singapore is that PAP government is very generous when it comes to defence spending. It has spent more than 20% to 30% of its budget on military spending. This has inevitably crowd out spending on the welfare. While I would not deny the importance of defence, but it is about the balance in deciding how much is enough? Our defence spending per capital is one of the highest, if not in the world, then definitely in the region. Do we need to increase defence spending indefinitely?
The second point is that PAP government has more surpluses than we think. This is basically because it did not recognize revenue from land or assets sales as part of its budget revenue. It is a unique way of balance of payment accounting. Thus, with a "projected smaller revenue", obviously spending on the welfare of our citizens will be suppressed! This explains partly why there is exponential growth in our reserves while the people suffers higher cost of living.
It is totally absurd to have a rich, dominating government with a poor citizenry. It seems that there is no direct correlations between having a world class country and having a world class living citizens. Our "standards of living" (many people mixed up with "cost of living" but in fact, they are sometimes, inversely related) maintains at developing country status even though we have "world class paid ministers". Where is the promise of Swiss standards of living? It seems that we are fast catching up with Swiss cost of living but lacking in the standards of living!
My New Year resolution for the new year, is to hope to have an awaken citizenry in seeing clearly the mutated role of government we have here in Singapore. This could only be changed, if and only if, citizens exert pressure on the present ruling party through the ballot boxes. If we could not get this fundamental role of government right into the head of the ruling party, then we will only continue to suffer in silence under such mutated role they have now.
Happy New Year to all Singaporeans.
Goh Meng Seng