Sunday, February 20, 2011

NSP Response to Budget Statement 2011

NSP Response to Budget Statement 2011

The National Solidarity Party is very disappointed that the PAP government has not addressed in this budget the fundamental question on whether the current economic growth model of “Growth at all cost” based on indiscriminate importation of foreign workers at ALL LEVELS of employment should carry on. Instead, it tries to address the “ill symptoms”, which are caused by this flawed economic strategy, in such an inadequate way.

While the excuse of low fertility rate is cited as the main reason to import excessive foreign workers into Singapore, the miserable $300 to $400 Child Development Credit is totally inadequate to address this problem. We would expect healthcare cost to be lowered or a comprehensive social safety net for children up to 18 years old or heavy subsidy for pre-school education etc. The little top ups to students’ Edusave by $130 could hardly offset the enormous increase in tuition fees over the years. Apparently there are not enough subsidies given to tertiary institutions to defray the rising costs. On the other hand, there are no new initiatives to strengthen work-life balance for couples so that they could enjoy family life with their children.

The only “real” solution to the low fertility rate provided by PAP government is to depend on the influx of foreign workers. Although PAP has increased worker levies but it falls short of giving us the assurance that the number of foreign workers, thus population, will not grow any further.

The first critical problem of having excessive foreign workers is, either citizens' jobs are displaced or wages are suppressed by them. PAP has chosen to increase workers levies while giving more workfare to citizens to address these problems. However, we believe that without a minimum wage scheme, the effectiveness of both the workfare and worker levies will be dampened (due to substitution effects).

The influx of cheap foreign labour has apparently suppressed wages and thus widened the income disparity. According to the chart shown in the budget speech as well as what the Finance Minister has said, the real income growth of the 20th percentile in the past decade would only be 5% instead of 8.1% if it was not for the workfare. The income disparity has widened when the real income growth for the 50th percentile is 20.7%!

There is no doubt that workfare has managed to close the gap of the widening trend just a bit but the most important question we have to ask: is this economic model sustainable in the long run? Can the PAP government guarantee that it will keep giving out more and more workfare in the years to come in a bid to cushion the impact of the widening of income gap?

We are very doubtful about the Finance Minister’s assertion that the real income of all our workers could grow by 30% for the next decade. While we are only able to raise the income of the 20th and 50th percentile by 8.1% and 20.7% in real terms respectively with a corresponding average growth of 4%-6% in GDP for the last decade, how can we possibly achieve a higher growth of 30% in real terms for ALL Singaporeans when our Finance Minister only expects our economy to grow at a slower pace of 3% to 5% for the next decade? We believe that only the million-dollar salaried ministers will enjoy more than 30% increase in real terms in the coming decade!


In the mad pursuit of more foreign workers, the PAP government has taken the lead to cultivate the mindset that only foreigners are “talents” while Singaporeans are not. The government should not put too much emphasis on foreigners as talents. Our homegrown MNCs should emphasise more on grooming our Singaporean PMETs instead of replacing them with “foreign talents”.

We do not think that the effort to raise productivity would bear fruits in raising our citizens' wages as long as PAP continues to let the whole world supply us with cheaper and younger foreign labour indiscriminately. The economic growth model needs a major overhaul. Comprehensive plans should be put in place to groom local SMEs as well as local talents with global view.

The sudden rapid increase in foreign workers has also caused a whole range of other problems, from rising inflation to inadequate public transport and healthcare infrastructure as well as high housing cost. However the PAP government has not effectively addressed all these issues at all.

The Minister says he wants to help Singaporeans to fight inflation but yet he has conveniently avoided mentioning anything about GST. Either GST should be reduced or at least stay permanent at 7%, but there is no commitment from PAP at all.

In spite of a shortage of hospital beds, the budget for Ministry of Health has been reduced for 2011 resulting from a cut in “development expenditure”. We are surprised that the government has cut healthcare funding but increased the defence budget by a substantial 5.4% instead.

On the property front, we believe that the key issue of high HDB price lies with the pricing policy of new HDB flats. NSP advocates cost-plus pricing for new HDB flats. Giving more grants to low-income buyers will not solve the burden of 30-year mortgage tagged on these flat purchases.

In conclusion, NSP would want to make an open call to the PAP government to set its priorities right. The PAP should not merely focus on giving away goodies to voters in this election year. but focus on the long-term structural problems of our economy. As long as the ruling party refuses to realign its economic growth model for the coming decade, we will forever face the critical problems raised above.

A responsible government should take the welfare of our citizens at heart in longer terms instead of engrossing itself in populist policies which may temporarily alleviate unhappiness on the ground but are totally unhelpful in solving our longer term structural problems.

Goh Meng Seng
Secretary General
National Solidarity Party

Afternote: I have some feedback, including from my wife, that some of the technical things are difficult to understand. Especially the part in bold.

The logic is this, the Finance Minister Tharman claims that in order to continue to have real income growth, we need GDP to grow continuously. But the question is, by this logic, how could we have HIGHER REAL INCOME growth with LOWER GDP growth? He was talking about 30% REAL INCOME GROWTH FOR EVERYONE! But, in spite of the fact that we had HIGHER average GDP growth in the last decade of 4%-6%, the real income growth for BOTH 20 percentile and 50 percentile is far lesser than 30%. He then projected that we will have LOWER GDP growth for the next decade at 3% to 5% but expect REAL INCOME growth to be HIGHER! On top of that, with the present economic growth model the real income growth is going to be unequal and income disparity will widen. It is really impossible to have EQUAL real income growth for everybody. It is really an amazing contradiction or simply MISSION IMPOSSIBLE.

7 comments:

Anonymous said...

Something is really weird with the budget. The real issues are not addressed at all.

Anonymous said...

Hi GMS:

I hate to say this cos I actually support the oppo, but this article which you slam PAP on their aim of achieving higher real income growth with slower GDP growth (which you feel is impossible) is really contradicting your previous article assertion that there is nothing wrong with a slower growth with higher growth in income per capital for Singaporeans.

PAP is essentially saying the same thing that you are saying but you are slam them for it?


NSP Response to Budget Statement 2011:
"We are very doubtful about the Finance Minister’s assertion that the real income of all our workers could grow by 30% for the next decade. While we are only able to raise the income of the 20th and 50th percentile by 8.1% and 20.7% in real terms respectively with a corresponding average growth of 4%-6% in GDP for the last decade, how can we possibly achieve a higher growth of 30% in real terms for ALL Singaporeans when our Finance Minister only expects our economy to grow at a slower pace of 3% to 5% for the next decade?"


Budget 2011 - Back to Basics:
"It is time for the PAP government to go back to the basics. There is nothing wrong with a slower growth with higher growth in income per capital for Singaporeans. There is nothing wrong to cut down cheap foreign labour substitutes which take our jobs and suppress our wages."

Goh Meng Seng said...

Hi there,

You can only achieve slower GDP growth with higher real income growth IF AND ONLY IF foreign labour is REDUCED significantly, with other factors equal.

But the problem is, there is no commitment from the PAP government in reducing the foreign labour at all.

On the other hand, setting such an UNREALISTIC target as 30% is totally unbelievable when the real income growth for the 20 percentile is only 5%. If the Finance Minister has set the target at a more realistic 10% and have a full commitment of reducing foreign labour, I would have no problem with that.

Goh Meng Seng

Anonymous said...

Hi GMS,

Thanks for your clarification.

I think it would be better if your can state your assumption in the article so that no one will be confused ;)

But you are right 30% is somewhat unrealistic. Unless you plan to increase wages for civil servants massively. Which they juz did. LOL...

But a point to moot, PAP had just increased the foreign workers levies and pledge to keep FTs' proportion of pop to no more than 1/3 of our pop. Isn't it an commitment to reduce FTs? If not what is?

I read from Straits times that NSP might consider contesting in Marine Parade. Pls come, I was denied of the chance when my area was drawn into MP at the last election (now you know my district lolx ;) ) and I am dying to vote!!

Anonymous said...

The Anon Commentator has made two very relevant points.
First one tells You not to have any ambiguity in your points in your article(blog). Very good call indeed.

Secondly, he is exhorting your party to contest Marine Parade which me hopes You would take on as well. Me believes that there are many voters in Marine Parade liked Anon waiting to kick out the Incumbents. Although the Constituency is helmed by a heavy weight cabinet member, his loud rhetorics have irked many Singaporeans which must certainly include voters in Marine Parade as well.

Please let Marine Parade voters a chance to pick an alternative for a change for the better.

patriot

coolingstar9 said...

Please select the places that you have familiar with.
Please work hard as the election is around the corner.

Anonymous said...

all these socialistic dreams only end up in financial ruin and a lower real standard of living for everyone. Just look at all the welfare states of Europe fall apart one after the other. They arrived to wealth through economic freedom, and dug their own graves with "progressive" policies.