Wednesday, November 28, 2012

SMRT Strike - The National Interest Perspective

Photo: TOC
I was waiting for the various opposition parties like SDP, WP and NSP to issue statements with regards to this SMRT saga but after 48 hours of this incident, none of them have issued any press statement.

The irony is that Workers Party seems to be disinterested in labour issues like this one, least about protecting workers' right regardless of race, sex or nationality. National Solidarity Party is no longer interested to stand in solidarity with the workers' right to point out the flaws of the inadequate labour law we have in Singapore. Most surprisingly of all, the most vocal Singapore Democratic Party which has fought so hard on human rights and democratic issues has been unusually silent when human rights of the drivers were violated when they were forced to have medical check up against their will. 

Most likely, they thought that this is all about foreign workers and have nothing to do with Singaporeans. Furthermore, it is obvious that the PRC drivers were right in claiming unfair and discriminating wage treatment but partisan politicians fear that by acknowledging this simple fact, they may agitate their supporters. This is especially so when anti-FT policy and xenophobia is running all time high in Singapore.

Thus, it is "politically savvy" to stay away from this hot potato! It is quite disappointing indeed.

We Singaporeans do not like strikes or industrial actions, especially those that could cause great inconvenience to us. This applies to a strike in the public transport system like the one we have in SMRT. There are rules and laws to be followed. Many Singaporeans have expressed their anger on why these PRC drivers who went on strike didn't get locked up and charged in court. Apparently, the PAP government is reacting to this pressure now.

While we want preserve our rule of law and our good image as a "stable country with harmonious industrial relationship" in order to attract foreign investors, we must also understand the bigger picture and the implications behind this industrial relationship hiccup. 

Now, take a good look at the above data sheet derived from SMRT on the wages it set for its drivers. What's wrong with it?

It classifies wages according to Nationality. The simple fact that SMRT has classified wages according to Nationality is in itself a discriminating act. It is totally unacceptable.

I have talked about the lack of Anti-discrimination Employment law in Singapore since many years ago. Places like Hong Kong has set up Equal Opportunity Commission to look into complains of discriminating employment practices. In spite of having Anti-discriminating concept written in Singapore's Constitution (Article 12), there is nothing written in our Employment Act that uphold this spirit of Constitution at all. It just stays as a "Highfalutin" idea.

This SMRT strike has put Singapore in a very bad spotlight internationally. It exposes Singapore as a place that condones discrimination in employment. It is in our National interest to right this wrong and opposition parties should be pushing for anti-discrimination employment law! We do not want to be seen as a place that condones modern slavery, do we?

Some Singaporeans may cry foul and argue that why should we treat foreigners equally in employment in Singapore? Why should we give them equal or fair wages?

It is in the interests of our workers to uphold equal and fair wages for foreign workers. PAP and businesses have claimed that they only turn to employing foreign workers because they can't find local Singaporeans to take up the jobs. But is this true?

When you allow businesses to use lower wages to employ foreign workers, just like the case in SMRT, inevitably you will be encouraging them to displace local Singaporeans as much as the FT quota allows! The reason for them to employ foreign workers have changed; it is not due to the difficulties in finding Singaporeans to employ but rather, they are substituting the more expensive Singaporeans to reduce cost!

If we have anti-discrimination law that dictates that everybody will have to be paid on equal terms, then the cost of employment of foreign workers will be higher than employing Singaporeans when government levies are taken into account. This will discourage companies from employing foreign workers indiscriminately just to replace Singaporeans for the sake of cost cutting. Companies will only turn to foreign workers when it is totally necessary because it would incur higher cost. This will align us to the concept of letting companies to employ foreigners if only if they cannot find Singaporeans to do the job.

Thus, insisting equal wage terms for foreign workers will in fact protect Singaporeans from being displaced. This will cut down our over reliance on foreign workers which could become a vital factor in unstablizing our social structure.

So far, both SMRT and PAP government have mismanaged the SMRT Strike quite badly. Apparently they don't understand the PRC's culture well enough. Strikes in China are very common nowadays and they should not be ignorant about that. Unlike Singaporeans, they will fight for their rights when there is a perception of unfairness. Furthermore, PRCs are very Nationalistic in nature.

Well, from the observation of how the PRCs reacted to the DiaoYu Dao dispute, you will see that they will go all out on Nationalistic sentiments. The new Chinese leadership has tried very hard not to be seen as weaklings when it comes to sovereignty issue. Japan is a large country and it may be forgiven for not able to resolve the matter easily.

However, if the PRCs are to be seen as being discriminated and bullied by a little red dot like Singapore, the new Chinese leadership will face even greater pressure and obstacles in establishing  its legitimacy. How would it react?

If the PAP government is to use its usual hard ball political methodology to deal with the PRC drivers in SMRT who went into strike, it would be seen as a "persecution " over discriminating practices. Even if the Chinese leadership does not want to do anything about it, what do you think the common citizens in China would do or react? When Nationality is involved in discrimination, it will no longer be our "internal issue".

It is not in our National interests to endanger the lives of thousands of Singaporeans who are working and doing business in China over some disgraceful discriminating acts of a GLC like SMRT. I have no problem in making sacrifices to defend our land and sovereignty but it would be very silly for us to make sacrifices for the disgraceful discriminating acts of a company which exploited the FT policy for its own benefits.

Some may argue that these PRC drivers should go according to their contracts but when a contract defies good nature practices, breaches natural justice and fairness, it should be viewed as invalid.

On the other hand, SMRT has forced these PRC drivers to be medically examined even though they may have provided Medical Certificates to apply for medical leaves. Such act is unacceptable and has created unnecessary doubts on the professionalism of those doctors who have issued the medical certificates in the first place! Such move has further damaged Singapore's international image and has unnecessarily put our medical doctors on international trial.

SMRT and the authorities should back track, resolve the issue with proper tact. The only way the government could resolve this issue is to handle it FAIRLY and JUSTLY. 

For a start, the government should denounce SMRT's disgraceful discriminating practices and order it to right the wrongs. It could even take a step further to declare that it will look into enacting anti-discrimination laws to protect the rights of workers. It should also review its FT policy as well. On the other hand, it could issue a formal warning or reprimand to the PRC drivers and set up a union or mechanism for them to utilize in future similar event. 

Even if the government chose to charge these PRC drivers in court, the negative impact would be significantly reduced because the SMRT has been dealt with for its discriminating practices. Charging these PRC drivers without addressing the perceived wrongs of discrimination by SMRT would put Singapore in a very bad light internationally and may even ignite anti-Singapore sentiments in China which could put our citizens at risk there. 

SMRT and the PAP government are only concerned about the damages this strike would do to them as in compromising their authority. They should look at the bigger picture on the international impact of this strike. It has far more implications on the good image and reputation of Singapore as a modern country internationally. 

We should not be viewed as country that condones unfair and discriminating practices of exploiting nature. We should not let this saga damages our medical doctors' international standing as well. We have suffered enough as a Nation from the various mishandling of this strike and we should demand PAP government to right the very wrong, the root of the whole problem by enacting Anti-Discrimination laws in our employment act. 

Goh Meng Seng

After Note: Two opposition parties have finally put up their views through press releases on this matter:

Finally the Opposition parties have issued statements regarding the unprecedented strike by SMRT employees.

Singapore Democratic Party (SDP) -

National Solidarity Party (NSP) -

Singapore People's Party (SPP) -

Thursday, November 08, 2012

HDB Housing Policy Revisit

Recently SDP has launched and introduced its Housing Policy Paper. While I applaud SDP's effort to work on such policy paper, I would have to make it clear that its proposal doesn't make sense to me.

Some may think that what SDP has proposed is "similar" to mine when it uses "cost plus" (minus land cost) pricing mechanism but this is not true at all. I did make reference to "cost plus" pricing during last General Elections but I did not elaborate on the finer details because that was intentionally left for the debate with Mr Mah Bow Tan that I have challenged him to attend. Of course he has side stepped and the rest is history.

Let me revisit the issue of Housing policy, the last piece of puzzle that I have not put up during last GE.

Land Acquisition Act & Obligations of Government

To understand the issue of public housing fully, we must first go back to history to understand the first conceived architectural structure of Land Reform plus Land Re-distribution that pioneers like Dr Goh Keng Swee has set up.

The understanding of the issue of public housing in Singapore would not be complete without understanding the combined effort of Land Acquisition Act and HDB set up.

During the early days of Nation building, massive amount of land was owned by individuals and companies due to the past economic model of having rubber plantations and such. It created a situation that there was an imbalance distribution of limited land resources for housing the growing population as well as modern development. Modern city planning would not be possible without acquiring land from these land lords. But for the government of the day, PAP, to acquire massive parcels of land at market prices, would mean asserting a great pressure on government finances. Thus Land Acquisition Act was enacted to facilitate the land redistribution and modern city planning. It allows the government to acquire land at dirt cheap prices. However, with such power comes the obligations for the government to provide cheap public housing for the masses. This is the unwritten social contract that comes with the empowerment of Land Acquisition Act.

Some may think that the obligation of the government only applies to housing the people at that time but this is totally mistaken. The 99 lease implemented on HDB flats is one of the ways for the government to recycle the land for future generations' use. Technically speaking, any government at any time in history, present or future, would have the obligation to provide such basic needs of housing to the citizens. This is especially important for a land scarce island state which is facing the impact of globalization.

The Land Acquisition Act is not meant solely for the government to earn extraordinary profits (in the form of accumulating reserves) on the expense of the various land lords, big or small. It is meant for land reform and land redistribution to the masses. That is why I am so angry when Mr. Mah talked about "raiding the reserves" if we were to sell HDB cheap to our citizens. He doesn't understand the balance between of the power and obligations of the government implied by the Land Acquisition Act.

Globalization & its impact on Citizens' Housing Needs

This is one of the major topic I am supposed to talk about in the coming talk I am going to give at Hong Kong City University. (The talk will take place on 12 Nov 2012)

Free Market economic principles dictate that we will only have real Free Market if and only if we have free mobility of labour, free mobility of capital,  free flow of information and free flow of goods and services. Most of the time, globalization aims to achieve all these.

However, such concepts may have detrimental impact on our citizens. Land supply is more or less LIMITED in Singapore and we can't possibly increase TOTAL land supply indefinitely by land reclamation. It means that supply of land and thus, properties, would be limited as a whole. On the other hand, we could possibly, technically speaking, have UNLIMITED supply of liquidity if we open our doors for foreigners to come in and speculate on our properties. Housing is first, a basic needs to our citizens. But due to the nature of limited supply of properties, they are always viewed as "store of value" or "investment" that could provide extraordinary returns. This is especially true for small city states like Singapore where land is scarce. However, property speculation would be bad for local residents. Speculative investment in properties could only push up prices, rentals and eventually overall inflation to the whole economy without productive contributions other than initial building and construction activities in the economy.

Such speculative transactions in property are devastating to local residents' well being, unlike speculation on the stock markets or scarce commodities like gold or coffee beans.  Price fluctuation or inflation on gold hardly affect the majority of the population, especially the lower income segment of the society. For commodities like coffee beans and such, its impact is limited because supply of coffee beans can be increased in the long run. For oil prices, it may have impact on the population but that is another issue for another day.

The Main Issue of Contemporary Public Housing Policy

When you have theoretically unlimited foreign funds (due to globalization) chasing after limited land resources where housing is the basic needs of the local residents, you will have teething problems here. The main issue is how policy makers could shield local residents or citizens from the adverse impact of globalization in terms of the basic housing needs. To go even further, how to turn the adverse impact of Globalization in terms of property inflation into something that the local residents or citizens could benefit from?

PAP's initial land redistribution plan via Land Acquisition Act and HDB policy of cheap, affordable housing would be a perfect wealth redistribution effort if it is not for its greed in exploiting more profits or money from the system. The "Asset Enhancement Scheme" pushed by PAP since 1990s is in effect, an attempt to enhance government's coffers and transferring the burden to the future generations. At the same time, exploited as a means to buy votes from Singaporeans. I would consider such act as irresponsible and in effect, breaching the social contract embedded in the Land Acquisition Act, dishonouring its obligations to take care of the citizens' most basic needs of housing.

PAP government has not only cut back rental flats for citizens (ironically, at the same time, supplying more rental flats for foreign workers) but it has exploited the HDB flat ownership scheme to beef up its coffers in terms of higher land cost. It has even gone into overdrive by limiting supply of new HDB to exploit its monopoly power to such a stage that it would push up the HDB housing prices in a short span of a few years . Coupled with its liberal FT policy, granting record number of  PRs and new citizens, it pushes HDB prices to record high. In return, through the pricing mechanism that linked to the market, it benefits from higher prices for new HDB flats it sold even though cost of construction and building these flats have barely increased over time.

This is the fundamental reason why I have advocated to have cost-plus pricing mechanism in the very first place, to prevent the government, any government of any time, to exploit the system, the monopoly power it held as the biggest supply of housing flats.

Aim of Policy Options: Protecting Citizens from Adverse Impact of Globalization

Whatever policy options we proposed, we must address the fundamental ills of globalization but to make a balance by not crashing the whole market totally. We must also try to allow our citizens to ride on the benefits of globalization at the same time, if possible. We must be cautious that our policy may end up creating a class of citizens who might be trapped in the poverty cycle unintentionally.

There are some people who view that we should ban PRs from buying HDB flats, even from resale markets. This is NOT a feasible policy option. PRs make up 20% to 30% of HDB resale market and if we are to ban them from it, it will result in a devastating crash of the market and the value of citizens' HDB flats. It will affect those who have bought resale HDB flats very badly.

Some people may have a very simplistic, overly simplistic, policy recommendation of increasing the grants for first time buyers. This may sound good but it doesn't solve the main problem of the extraordinary HIGH property inflation rate (i.e. the rate of growth in prices) embedded in the present pricing mechanism due to the linkages to the resale market prices. The resale market prices were adversely affected by Globalization, the free inflow of foreigners who become PRs and brought with them, excess liquidity into the market.

The NOM HDB option proposed by SDP may look good at first instance but if we take a second look and second thought, it is actually not a good policy option. Although it has addressed the ills of pricing mechanism linking to the resale market pricing by proposing the cost-plus, minus land cost structure, but the restrictions applied on these NOM flats would mean that Singaporeans who owned these flats will be left out in the long run and would not be able to upgrade themselves if their NOM HDB could only be sold back to HDB at LOWER prices than they have bought! They could not even rent out their flats to increase income!

They are not paying for a flat that they "own" but prepaying their rents to HDB! This option is worse than renting from HDB on a monthly basis because they would not be able to save as much money as they could when they have to fork out more money (as compared to those who rent) each month to pay their mortgages. This will create a poverty trap unintentionally for these NOM flat "owners".

Creation of the Parallel Market Segment

SDP is trying to create a parallel Market Segment but the restrictions imposed, would mean that Singaporeans will never benefit from the capital gains brought upon by globalization.

There is nothing wrong for the government to allow citizens to benefit from capital gains because, if you remember what the first part of this article says, the land reform or redistribution effected by Land Acquisition Act is basically aimed at that: redistribution of land and wealth to the masses, using the government as the medium.

We have inherited a good system in HDB from our forefathers like Dr Goh Keng Swee because it could be used to create a parallel market segment that shields our citizens from the adverse impact of Globalization by selling very much cheaper flats to them at cost-plus while at the same time, whenever they need, they could cash out on the resale market.

And due to the 99 year lease, this could technically be repeated indefinitely for future generations of Singaporeans! More importantly, we cannot stop globalization and the fact is, we will be stuck with a substantial number of PRs and foreign workers on our land as well.

We must also think strategically on how to house all of them on this tiny little island. If we are to prevent Citizens from selling or renting their flats to these PRs and foreigners via SDP's NOM scheme, we may end up with lots of problems later on. It is impractical to impose such restrictions on a national wide strategy. We must well allow our citizens to have the option to sell their first flats to these PRs, earn from the capital gain, and go back to buy from HDB again for a new flat that would also be cost-plus but include land cost as well. This would be a win-win situation for the nation as well as the individual citizens.

Ironically, it was Hong Kong that have a more advanced housing policy. Under its Housing Ownership Scheme (HOS), the government will sell its flats to Hong Kongers who have lower income (classified as Green Card category) at cost plus minus land cost. For those who have rented flats from the government, they could convert their rental flat into their ownership by paying that at a discount, under cost-plus minus land cost (CPMLC). Those HOS flats owners, could sell their flats on the open market under Green Card Category. If those having higher income level (classified as White Card Category) wanted to buy these flats from the resale market, they will have to pay the additional land cost to the government.

CY Leung's administration is now thinking of changing the rules so to allow the White Card category to buy new HOS flats directly from the government at higher price (cost plus with land cost).

The unfortunate thing that happened for the HOS scheme in the past is that the Hong Kong government back in 2003 was forced to stop this scheme due to the pressures of property developers, legislators and the public (who own private properties) at large. It is good to see that the Hong Kong government under CY Leung is now reactivating the HOS scheme in a more aggressive way.

So far, in my opinion, the scheme adopted by the Hong Kong government is the more appropriate one, targeting at those who really need help in getting housing and allowing them to hook up with the housing inflation eventually. At the same time, such policy option will not create a big unnecessary burden on the government of the day.

In SDP's proposal, it allows present HDB flat owners to "convert" to NOM and forcing the government to pay up hefty price premium to these owners, This will create a potentially huge financial burden on the government finances unnecessarily.

I would instead, adopt the Hong Kong's model with a slight modification. If the HOS flats under Green Card Scheme is sold on the resale market at over 100% or 150% more than the initial price of purchase (i.e. 200% or 250% of initial price paid), the seller will have to capital gain tax on the additional excess price. This will curb excessive property inflation and act as an automatic cooling measures.

The Necessity of strengthening Rental Flats scheme

Having written so much on home ownership scheme, we must not overlook the needs of those families who may not be able to afford to purchase or continue their mortgage payment for their HDB flats. This is part of the obligations of the government under the Land Acquisition Act.

In Singapore, when we talk about rental flat scheme, it always brings to mind those one room (basically no bedroom) flats. This is not necessarily so. If HDB could provide 2 room or even 3 room flat for rent to foreigners, I don't see why they shouldn't provide similar size rooms for rent to our own citizens to fulfil their needs..

Young couples who cannot afford to buy HDB flats even with that cost-plus-minus-land-cost scheme at first instance, should be given the option to rent the flats cheaply with necessary size (cater for family planning and needs) while with the future option of buying these rental flats later on with further discounts taking the rent they have paid so far into considerations. These rental flats could exist even within the new HDB flats that are sold. As such, it will not create gutter cluster and provide good housing options for young couples.


My housing policy proposal may not be the perfect one but it covers several important concepts and direction.

First, it is an important obligation for the government to provide the citizens their necessary basic housing needs. The land acquisition act could bring capital gains to the government when it sold land for commercial use or to private property developers but it should not make extraordinary profits out of the citizens because it was meant to be a land-wealth redistribution scheme in the first place.

Secondly, the policy option should shield local citizens from the adverse impact from globalization. This could only be done by de-linking the pricing mechanism of the new HDB flats for first time buyers from the resale market which is filled with excess liquidity brought by foreigners or PRs.

Thirdly, the creation of a parallel market segment that could be linked to resale market segment again for the citizens to benefit from the excess liquidity brought by globalization when they sold their flats there. There is nothing wrong for the government to allow citizens to benefit from capital gains. After selling their flats, they could buy from HDB again but at higher price that include land cost this time. This would be truly the idea of "second bite of the cherry".

Forth, this policy option will also help to mitigate and cater to the needs of the growing population due to globalization. By allowing citizens to sell their flats in the resale market and buy from HDB again, it will help to increase the housing supply to cater to the growth in PR population.

Last but not least, by providing the intermediate rental scheme to young couples, we will promote early family planning and minimize the hassle of relocation for these young families when they could well afford to pay for their own flats. By locating these rental flats within the sold flats, we will not create the unnecessary class awareness among citizens. The young families would be more willing to convert their rental flats into ownership in such environment and would minimize the wastage of resources in building cluster of rental flats that would become vacant when tenants upgrade.

Goh Meng Seng