Tag Archive | "Lim Chong Yah"

Countries with lower wages might overtake us if we’re not careful: PM Lee

Countries with lower wages might overtake us if we’re not careful: PM Lee

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So it’s official: Singapore’s Prime Minister has his doubts on raising wages in the country, because other countries, like the Philippines, are cheaper.


The argument isn’t new: If we raise wages without raising productivity, companies will move out and Singapore will be hit with unemployment big time. But if we improve productivity and move into less labour-intensive, knowledge-intensive industries, Singapore has a chance to survive.

But what I found particularly noxious about the article that was shared, is this little paragraph:

“We got the new equipment, and had an attitude to embrace new things,” he says. “We still have that.”

Teleserv’s Raffy David says low labour costs mean the company can invest in technology

A decade later, labour costs remain low (a Teleserv agent currently earns about $4,800 a year) and Mr David says that a substantial proportion of the money this saves goes into investing in new techniques for improved customer service.

“It’s all about enhancing the customer’s experience,” he says. “We want to give them a fast, efficient and highly personalised service.”

If I’m interpreting the possibly slip correctly, what PM Lee was impressed with the Philippines for being able to overtake India in the call centre industry with the use of technology, even if it didn’t translate to better-skilled or better paid workers. 

Now, Singapore’s median wage stood nicely at S$4,358.33/month in 2010, which means we’re not competing in the industries that the Philippines and India will be fighting in. They have tons of excess labour and a high unemployment rate to bring down. We have a declining population and are importing people en masse to fill up the lower wage jobs that Singaporeans mostly don’t want.

If I recall correctly, we have a niche in finance & services, biomedical manufacturing, and are trying to position ourselves as the startup hub of Southeast Asia. These are not industries that can be easily priced out. Engineers in Vietnam and the Philippines for example, work for a heck lot lower than Singaporeans but they’ve been struggling to attract venture capital on the scale of Singapore because of their lack of infrastructure.

So why PM Lee? Why look at the industries which we were looking at 30 years ago?

If it’s a warning for Singapore not to be complacent, then shouldn’t we be looking at the real and immediate threat of losing our status as the most competitive city in Asia?

In the latest report by the Economic Intelligence Unit, Singapore was ranked first in Asia, ahead of Hong Kong and Tokyo. According to the report:

Singapore’s strong position to its efficient transport system, lean bureaucracy and safe environment. It also took into account Singapore’s ability to attract capital and business.

Those, dear Prime Minister, are what we’re good at. But less so these days. Our trains have been breaking down frequently, and the spate of corruption cases this year and last year bring attention to the questionable ethics of certain members within the bureaucracy.

Or maybe the local papers are getting better at what they do.

The report also quoted experts saying that Singapore needs to do more to boost its human capital, entrepreneurship and risk attitudes and needs to continue to invest in physical infrastructure, and continue to have open transparent policies. Let’s go through them one by one.

On human capital investment: Singapore ranks number 26 on the Human Development Index. I could spin some bullshit about how this is impressive compared to The Philippines or Indonesia, which ranks among the three digits, but that wouldn’t be a fair comparison. Singapore’s direct competitors — Hong Kong and Japan, rank 13 and 12 respectively.

There’s lots of stuff on SGEntrepreneurs.com on why the entrepreneurial culture here isn’t enough.

The risk taking attitude in the country is simple a reflection of its country’s leaders. Make the wrong choice and repent, so said Lee Kuan Yew; one wrong labour policy and we’re doomed, various ministers say; it only takes one slip and terrorists will be all over the island, the military says. We’re just following your call — if you’re going to scare your own people all the time, of course we’re not risk takers. Duh.

In fact, much of the risk taking seems to be done behind curtains. The EIU says that Singapore’s sovereign wealth funds have to be more transparent about what they’re doing. So if you’ve lost Singaporeans a bunch of CPF money, come out and say it. Or you’ll get guys like Christopher Balding educating the rest of the country on their pensions.

We’re facing direct and fierce competition alright. But from countries that can provide more services for the S$5,000/month that the average worker commands.

By the way, to put things in perspective, unions in Switzerland are calling for a minimum wage of 4,000 francs a month (S$5,380). A 50% increase for those earning less than S$1,500 really isn’t that much to ask.



Singapore’s domestic economy is unsustainable, has low efficiency

Singapore’s domestic economy is unsustainable, has low efficiency

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Ho Kwon Ping, SMU’s board of trustees’ chairman, says liberal import of unskilled workers led to low wages and productivity.

The domestic economy cannot be sustained with cheap labour as more and more of them are needed just to keep pace with growth. Infrastructure such as our transport system simply cannot cope.

Singapore has a peculiar problem: We have a two-tiered economy that is not sustainable.

There is the high-productivity and skills-competitive economy, which includes manufacturing and financial services.

And then there is the low-efficiency, unsustainable domestic economy, which is defined as all the businesses catering to customers in Singapore. These include small and medium-sized enterprises dealing in retail, hospitality, construction and cleaning industries, and so on and so forth.

This sector’s low wages and low productivity is due to the liberal import of unskilled workers.

As a result, this relentless increase of such workers to satisfy the growing domestic economy has already outstripped the ability of transport and housing infrastructures to keep pace.

Ho Kwon Ping.

Look at what is happening to our public transport system now. Rough ride, you know.

Moreover, it is this low-efficiency domestic sector that requires restructuring the most: Wage increase coupled with rapid productivity will be game changers.

And this is where Professor Lim Chong Yah’s much talked about “Shock Therapy” can be applied, provided specific sectors are first identified.

Industry-specific measures and a high level of coordination are necessary for therapeutic effects to kick in, and wage increase must go hand-in-hand with rapid productivity without delays.

It shouldn’t become a chicken-and-egg issue to see whether productivity or increased wages come first to drive the other. They should work in tandem.

It is also disingenuous of Prof Lim’s critics to use scare tactics such as “scaring investors away” and “drastic economic decline” to reject his “Shock Therapy” proposals.

Critics of the plan should run their economic models and make their findings available.

The merits of the proposals can then be debated with coherent arguments that are grounded in data and reason.

This is a 60-second reduction of the original article published in The Straits Times on April 25, 2012.