Many will cut back on luxuries this year
And we're not just talking about low-income S'poreans


By Zhen Ming


SO it's now official: 2008 wasn't too bad a year, after all - that is, when we look at things from the point of view of ouraverage monthly household income from work.

Significantly, the income gap in Singapore last year narrowed for the first time in 10 years, as families in all income groups enjoyed higher earnings. (See table, above.)

Presumably, a key reason for this rise in income in 2008 was the buoyant labour market, which saw more Singaporeans with jobs and drawing higher salaries.

Fortunately, even the higher consumer price inflation in 2008 did not eat into our pay cheque.

Real income up

Real income for the average Singapore family, in fact, went up by 5.7 per cent.

According to figures released on Tuesday by the Statistics Department, the narrowing of Singapore's income gap is shown in the decline in its so-called Gini coefficient (or Gini), which measures the degree of income inequality.

Gini is theoretically equal to zero in the case of total income equality and, at the worst, equal to one in the case of total inequality.

Singapore's Gini - somewhere in the middle of 0and 1 - fell to 0.481 last year from 0.489 in 2007.
But if last year's 'surplus sharing' help from our Government is taken into account, this figure drops even further - to 0.462, from 0.479.

But this year will probably see a reversal of last year's Gini trend, warns economics professor Tan Khee Giap of the Nanyang Technological University.

Poor suffer

This year, expect the income of the lowest-income earners to possibly deteriorate because of the worsening economy - 'unless the Government takes drastic measures like vastly improving Workfare by giving more payouts in the scheme', said Prof Tan.

Budget 2009 announced on Thursday introduced measures to help our lower-income and middle-class families.

Cutbacks

Meanwhile, as global economic conditions worsen in the days ahead, expect more Singaporeans to swing effortlessly from being spendthrift to being frugal.

Expect most of us to cut back on almost all fronts, regardless of how much we earn.

In fact, 'scrimp and save' and 'scrape up some cash' are not concepts alien to us.

Anecdotally, we're already cutting back on travel for the holidays, eating out at restaurants, and entertainment (such as going to the movies).

Even the relatively wealthy among us are already trimming back on unnecessary spending. After all, many of them led simpler lives not too long ago.

Back in 1998 (just 10 years ago), as many as 18per cent of the wealthiest families in Singapore (in terms of per capita household income) did not even think it necessary forthem to install any air-conditioner in their homes.

Fewer toys

Back then, 31per cent of themalso did not own an audio/visual CD player or a handphone while 29per cent could actually make do without any personal computer.

Expect more high-income Singaporeans to become stingier, if need be, as they've watched the value of their stock investments plummet.

Expect them to also cut back, if they must, on eating out at restaurants, picking up takeout, buying home furnishings and even drinking specialty coffees.

That may not seem like much, compared to those who can't even afford to pay for the fare to ride a bus or the MRT to work.

But, emotionally and financially (like it or not), the wealthy in Singapore are definitely feeling the hard pinch of this global recession, too.


Source: The New Paper, Sat 24 Jan 2009

SINGAPORE BUDGET 2009
Hongbao how big?


By Zhen Ming


EXPECT a soon-to-be-announced revised growth forecast to tell us the obvious — that our GDP will probably shrink by more than 2 per cent this year or, at best, stay flat.

So what relief can the middle class wish for in Mr Tharman’s Budget Speech on Thursday to help them soothe the pain of an Ox Year burdened by wage freeze and cuts?

Also, will Budget 2009 feature a bold stimulus plan that deftly combines the right amount of increased Government spending with an appropriate tax cut?

That is, will Budget 2009 emulate the audacious US$825 billion (S$1.23 trillion) "American Recovery and Reinvestment Bill of 2009" unveiled by US lawmakers last Thursday?

On a year-on-year basis, the Singapore economy expanded by 1.5 per cent last year (no great shakes, when you compare it to the 7.7 per cent growth achieved in 2007).

What’s disturbing, however, is the speed of the economy's deterioration, as it actually contracted at an annualized pace of 12.5 per cent during the last quarter.

To figure out how Singapore can remedy this situation, let’s check out what US lawmakers will vote on in late January (when we’re still celebrating the Chinese New Year).

Firstly, the new US$825 billion fiscal recovery package — equivalent to US$2,700 for every American (now that’s a big hongbao!) — will feature roughly US$550 billion in spending increases and US$275 billion in tax cuts.

But that’s not all.

This huge deficit spending — possible only because America is the only country still privileged enough to print all the paper money it requires — will be supplemented by another US$350 billion still available to help bail out US banks.

All in all, it’ll be an unparalleled US$1.175 trillion in extra government spending to allow President-elect Barack Obama to shore up the tottering US economy.

Expect Mr Obama (who will enter the White House on Tuesday) to immediately start work by pumping in billions to boost US healthcare.

Expect him to pour in additional billions to support US schools and colleges.

Expect him to invest billions in infrastructure spending (including highway construction and repair).

And expect him to also spend billions to encourage energy production from renewable sources.

For Singapore, this public spending aspect of Budget 2009 is a no-brainer.

Expect Finance Minister Tharman to announce measures to expand or improve our infrastructure (to prepare for better times) — not by printing money out of thin air though, but by dipping into our vast pool of hard-earned reserves built up over the years.

And then there’s that across-the-board income tax cut promised by Mr Obama.

Under his just-unveiled stimulus plan, each American worker will now receive up to US$500 (and each family up to US$1,000) through a cut in payroll taxes.

For Singapore, this aspect of Budget 2009 is tougher to call.

Expect Mr Tharman to offer Singaporeans some sort of a hongbao tax break — perhaps an anti-recession dividend or even another GST offset package.

The US stimulus package also includes billions for extended jobless benefits and retraining as well as billions to help the jobless keep their health coverage.

And for the poorest Americans, it includes additional billions for a temporary increase in food stamps (government vouchers to buy staples at US grocery stores).

This safety-net aspect of Budget 2009 — how best to help and retrain the down and out (without eroding their work ethic) — is probably the most touchy.

But, as in past recessions, expect tweaks in the way we dole out assistance to the jobless and the destitute.

In the end, Mr Tharman’s biggest challenge is to devise a Budget that can help keep the Good Ship Singapore afloat in the midst of a global economic tsunami.

Hopefully, a fat stimulus hongbao in Budget 2009 can help convince Singapore consumers and businesses that worst will soon be over, thus paving the way to a speedier recovery.

Expect one of three global economic scenarios (totally beyond Singapore’s control) — a prolonged depression (unlikely), a quick recovery (wishful thinking), or an extended period of anemic growth (most probably 3-5 years).

Come what may, however, expect Budget 2009 (and subsequent budgets) to definitely help ease the pain.

Source: The New Paper, Sun 18 Jan 2009

Raju & Madoff - Tale of Two Scams

While Satyam founder flounders in Indian jail, Wall Street fraudster stays in penthouse home


By Zhen Ming


IT was only last week that Mr Ramalinga Raju - the 54-year-old founder of giant Indian software company Satyam - was enjoying a lifestyle befitting his US$1.3 billion ($1.9billion) fortune.

Over the weekend, however, Mr Raju got thrown into jail in the Indian city of Hyderabad - after admitting that he had orchestrated the country's biggest corporate fraud.

It was a swindle worth at least US$1b, and Mr Raju admitted that he had wildly inflated Satyam's profitability and assets for years.

Halfway around the world, Bernard Madoff, a 70-year-old Wall Street money manager turned self-confessed Ponzi-style swindler, has been allowed bail while awaiting trial.

Mr Madoff has already admitted to stealing as much as US$50b. If so, that would make him the biggest fraudster in global financial history.

Yet, on Monday, a US district judge ruled that Mr Madoff could still remain under house arrest in his penthouse apartment on the Upper East Side of Manhattan.

Today, while Mr Raju languishes in an overcrowded Indian jail, Mr Madoff is probably lounging in his living room watching news about himself on his flat-screen TV.

This, despite Mr Madoff having sent 16 watches (including diamond-encrusted timepieces from Tiffany and Cartier), four diamond brooches and an emerald ring to family and friends.

This, despite him having some 100 signed checks worth US$173 million lying around in his desk ready to be given to others.

To be sure, any American without Mr Madoff's bank account (or influence) would surely be locked up in jail by now.

'What a crock,' said an irate ABC News user in a website posting. 'If I went downtown and shoplifted a loaf of bread, I'd be in jail quicker than you can think... And Bernie goes off smirking at the American people.'

Double standards

Welcome, critics say, to America's supposedly two-tiered justice system - one for the very rich, the other for ordinary Joe six-packs.

In the US, wealthy white-collar crooks like Martha Stewart and Bernard Ebbers have found clever ways of staying out of prison until trial (typically by posting huge bonds).

Astonishingly, despite his own self-admission, Mr Madoff hasn't been charged yet.

What's more, his own sons have remained mum about how they could have worked at their father's firm for decades without noticing that the money he supposedly managed did not exist.

In India, when the Satyam fraud was unveiled last Wednesday, the country's benchmark Sensex index fell by 7.25 per cent in one session - a steeper drop than that which followed the Mumbai terror attacks in Nov.

Aghast institutional investors are seeking compensation in India and in the US, where several class-action suits have been filed.

As of Friday, Satyam was valued at only US$330m as compared to its market worth of more than US$7b six months ago. In other words, Satyam investors will probably recover less than five cents for each dollar invested.

But for Madoff investors, the prospect of getting back their US$50 billion is much bleaker - at the last count, what's left is only two cents for each dollar invested.


Source: The New Paper, Fri 16 Jan 2009

SIGN OF TROUBLED TIMES
Typical US home now cheaper than HDB flat


By Zhen Ming


SO, how bad are things over there, really?

Hungry for first-hand news from the US “economic warfront”, I posed this delicate question about the US economy to Sok (a visiting sister-in-law back from Los Angeles for her year-end break).

It’s truly bad, she lamented, with an atypical grimace on her usually-beaming face.

When we last met in LA around Christmas in 2007, they were happier times.

Back then, our families shopped and dined at The Grove — a boutique outdoor shopping mall located across the street from the world-famous LA Farmer's Market — where, on a good day, you might just stumble upon a Hollywood celebrity (or two).

Meltdown woes

“But today The Grove is much, much quieter,” Sok reported. “You can feel it in the frigid air. And it’s all no thanks to the meltdown on Wall Street.”

To be sure, both Sok and her husband Murali hold relatively stable jobs. She works at an LA library while he teaches at the University of Southern California.

But, not unlike many other Asian expatriates living in America, they, too, worry about whether home prices in the US will ever stop dropping — what with the median home over there now costing only US$180,800 (S$268,500).

Yes, the median American home is now cheaper than most HDB flats in Singapore.

More importantly, my “Chindian” in-laws also worry whether some of their friends, especially those working in California’s Silicon Valley, could soon lose their jobs.

Latest figures

All in all, US employers shed a total of 2.6 million jobs in 2008 — the worst-ever year since 1945.

This latest job loss figure point to a US jobs market that’s still in a free fall.

Many US companies across all sectors of the economy have, in fact, resumed mass layoffs (after a brief respite over the year-end holidays).

Last week alone, insurance provider Cigna Corp, aluminum producer Alcoa Inc, data-storage company EMC Corp and computer products maker Logitech International have announced large job cuts.

"The toughest six months will be the just-completed fourth quarter and the first quarter of this year," said Mr Robert Barbera, chief economist at the Investment Technology Group, a research and trading firm.

Hope and recovery

But Mr Barbera also noted that a widely-anticipated trillion-dollar stimulus package should begin to revive the US economy in the second half of 2009.

Meanwhile, US President-elect Barack Obama has said that the alarming job figures showed that Washington should act quickly and decisively to enact his stimulus plan.

Behind the numbers were "real lives, real suffering, real fears", said Mr Obama.

Overall, US unemployment rate jumped to 7.2 per cent in December — the highest since January 1993.

But that’s just the tip of the US job-loss iceberg.

"Factoring in discouraged workers, unemployment is closer to 9.4 per cent," said Mr Peter Morici, an economist at the University of Maryland. "Add workers in part-time positions that cannot find full-time employment and the hidden unemployment rate is 14.5 per cent."

Nevertheless, the official total of more than 11 million jobless Americans — about 2.3 times the entire population of Singapore — is already quite staggering.

I read, with personal concern, the report that US aerospace giant Boeing expects its 68,000-person workforce will shed 4,500 jobs in the coming 12 months.

The big majority of Boeing’s layoffs will occur in the Puget Sound area of Washington state. That’s where a cousin and her American husband (a Boeing engineer) live.

Back home

Back in Singapore, the local labour market is also showing signs of softening.

The jobless rate among locals (seasonally adjusted) actually rose to 3.3 per cent in September — up from 3.1 per cent in June.

Expect retrenchments in Singapore to pick up pace in 2009.

In the third quarter of last year, a total of 2,346 workers were retrenched — up from 1,798 in the previous quarter.

So, it’s the same everywhere during this global recession.

Expect the “things over here” (in Singapore) — just like the “things over there” (in the US) — to get worse first (before they can get better later on).

The current global economic flu, after all, must be allowed to run its full course.


Source: The New Paper, Sun 11 Jan 2009

Here's how to drink with colleagues in Asia


By Zhen Ming


IN VINO veritas.

It's a well-known Latin phrase which means 'in wine, truth'.

It applies to people who become uninhibited when they drink too much alcohol and start to say what they really think.

The Chinese and Japanese also believe that drinking will enable a person to tell all.

But beyond drunkenness, drinking in Asia (just as in the West) also serves another important purpose - to size up the character of a foreign business partner.

Imagine this all-too-familiar scenario:

It's 2am. You're an expatriate sitting in a dark karaoke club somewhere in China.

Your colleague is making a tired but brave attempt at singing 'My Way'.

Your local partner (the host for the evening) has just fallen asleep again while a hostess pours you another glass of wine and enquires whether you're happy.

And your head is screaming out: I have a wife and two children back home. Must I be doing this?

Yes, you must. But there's a cleverer way to handle nocturnal activities in Asia.

So advise Professor Chow-Hou Wee and Mr Fred Combe in their 408-page book entitled Business Journey to the East: An East-West Perspective on Global-is-Asian.

It's perhaps the best (what they never taught me at Harvard) idiot's guide I've come across so far 'to understand better how Asians strategise and practise business'.

In this highly-readable book (published by McGraw-Hill Education), the authors blend the practical, cultural, and historical realities of doing business in Asia with many down-to-earth anecdotes and refreshing insights.

Throughout the book, our dynamic duo of cross-border consulting explore why Asians and Westerners think and operate differently, examine how the West needs to urgently reappraise its role in Asia and propose that the West adopt a new business approach that combines Asian and Western strategies.

According to Messrs Wee and Combe, the typical office executive in Asia puts on a mask in the office. So do his bosses, customers and other business associates.

However, after several rounds of drinks, the real feelings begin to spill out.

'For example, some people, under the influence of alcohol, start to crack colourful jokes, talk nonsense, or engage in harmless small talk... Worse still, they may even leak corporate secrets,' they wrote.

The whole purpose here is to shed inhibitions with business partners, colleagues, and friends.

And other activities

The authors also offer a useful tip on whether it's okay to turn down 'other extracurricular activities' (beyond drinking or karaoke).

'Unlike the pressures of drinking or singing, this situation is very different. It is very much discretionary, and they will respect your decision,' they wrote.

But the authors also offer this cautionary advice: Do NOT gloat about what happened the night before.

'In the West, it is common to find people talking and discussing about the good fun they had the night before.. Now this is something that you must never do in Asia.'

This 'as if nothing happened the night before' stance is a cardinal rule that is to be respected and strictly adhered to.

'Indeed, this is one of those very rare incidents where many Asians make a clear demarcation between what can or cannot be divulged about their social activities, especially those that occur at night... Any betrayal of this implicit trust and prohibition will not be easily forgotten or forgiven. It is a taboo not to be broken,' they wrote.


Source: The New Paper, Thu 08 Jan 2009

Prices taken from Singapore Department of Statistics in its latest press release on the Retail Sales Index and Catering Trade Index and from the recent issues of the Monthly Digest of Statistics Singapore.

9 prices to track in 2009
These 9 items have cost more in the last year


By Zhen Ming


WHAT you see above is my personal list of nine grocery items whose prices have shot through the roof as of October last year.

There are of course some items whose prices have declined.

With the Chinese New Year buying binge coming up, prices of my nine items have to be watched.

Then, there's the eating-out.

For me, eating out with the extended family is a pleasurable weekend experience.

These days, however, this social-gastronomic experience can be quite a budget-buster for the middle class.

Take the price of an average meal at a typical fast food outlet in October (barely three months ago, when there was financial mayhem in global stock markets).

For each meal then, you had to fork out an astonishing 17.8 per cent more than a year ago (based on the latest-available price comparisons).

Put differently, for the same amount of money spent on seven trips to a typical fast food outlet a year ago, you could afford to make, at best, six.

And the well-to-do are also not spared in this industry-wide price hike.

For those who prefer fine dining, their average up-market meal at a typical restaurant now costs 11.8per cent more.

Those who eat at hawker centres and food courts, however, can take comfort that prices there rose by only 9.1 per cent in the 12 months ending October.

The good news for everyone on a tight budget for 2009:

Eating in can now be just as pleasurable as eating out - more so, ever since the price of food and beverages, on the whole, dropped by a surprising 6.3 per cent over the same 12-month period.


Source: The New Paper, Sun 04 Jan 2009

Sleep well, S'pore


By Zhen Ming


THIS year has been one filled with sob stories - from everyday investors who have seen their life savings shrink to some others losing their jobs.

(I know of an over-leveraged friend who could soon lose his home.)

But in every downturn, there'll also be winners and what has happened in 2008 is no exception.

So here's my take on how Singapore, as a people, has weathered 2008's financial firestorm:

Our resilient economy

As of last year, Singapore was the world's 44th or 45th largest economy, depending on whether you wish to rely on comparative data provided by the International Monetary Fund (IMF), the World Bank or the US' Central Intelligence Agency (CIA).

Singapore then went on to tote up a nominal Gross Domestic Product of S$255.5 billion in the 12 months ended September 2008 (in the month the US credit crunch first turned into a full-blown global financial crisis).

In terms of our nominal GDP per capita, as of 2007, we're now anywhere among the world's 19th - 24th richest people.

On a purchasing power basis, our economic achievement is incredibly impressive.

Depending on which international monitoring agency you choose to rely on, we're now either the world's 3rd (World Bank), 5th (IMF) or 6th (CIA) richest people - definitely well ahead of our financially-beleaguered American friends.

Our strong dollar

And oh, what a volatile year for currencies it has been.

And yet, ironically, we're now roughly back to Square One vis-a-vis major reserve currencies like the US dollar and the euro as well as vis-a-vis the Malaysian ringgit.

Back on 1 Jan, for instance, S$100 could be exchanged for US$69.01.

By yesterday afternoon, the same S$100 could still be swapped for almost the same amount of greenback - that is, US$69.36, to be exact.

Vis-a-vis major Asian currencies like the Japanese yen and the Chinese yuan, however, we've weakened somewhat.

For instance, the money-changer at the mall will now give you only 6,263 yen for your $100 as compared to 7,756 a year ago - down by nearly 20 per cent.

But vis-a-vis currencies like the Australia dollar and the New Zealand dollar, we've seen our purchasing power grown much, much stronger.

A year ago, for example, S$100 could get you only A$79.43 in exchange. By yesterday, however, the same S$100 was worth A$100.56. That translates into a hefty currency appreciation of 26.6 per cent in less than a year!

Overall, however, much to the relief of many traders, the Singapore dollar remains fairly stable vis-a-vis a trade-weighted basket of reference currencies.

Our bulging reserves

Back at the end of 2006, barely two years ago, our official foreign reserves already totalled a humongous S$209 billion.

It is still growing, albeit at a slower pace in recent months (mainly because of the global financial crisis).By end-October, however, our reserves stood at around S$241 billion.

This money will surely come in handy to help us weather the bad economic storm that's still brewing in 2009 and beyond.

In fact, a good chunk of this money has already been set aside to guarantee all regular deposits in our local banking system, thus allowing Singaporeans like you and I to avoid the kind of panic that has engulfed savers in many other countries.

In short, sleep tight, my friend, knowing that all is still well with Singapore.


Source: The New Paper, Wed 31 Dec 2008