Wednesday, January 21, 2009

Singapore faces the abyss and what I can do about it!

January 21, 2009
Singapore faces devastating exodus of foreigners
Leo Lewis, Asia Business Correspondent
From Times Online

Singapore faces an exodus of 200,000 foreigners as the financial services and manufacturing industries scythe through their workforces and the city-state grinds towards the worst recession in its 43-year history.

The expected exodus, predict analysts at Credit Suisse, could see the number of people living in the tiny but economically powerful island shrink more than 3 per cent to just 4.68 million by 2010 in a shift that would severely undermine the government’s 22-year efforts to boost the population through immigration.

A broad rule of thumb, said analysts at UBS in Singapore, is that nearly every new job created over the last few years went to a foreigner. The economic policies of the city state have overtly relied on its ability to attract talent and skills from abroad.

The departure of thousands of ex-pat bankers, lawyers and accountants between now and 2010 is expected to lead a secondary exodus of manufacturing, construction and service sector foreign workers.

Job losses will hit Singapore hard, said Credit Suisse economist Cem Karacadag, “because they affect more highly paid workers and could result in a semi-permanent drip in the population”. He added that the potential drop “would have far-reaching implications for the economy” including a possible sharp contraction in private consumption.

The knock-on effects of a Singapore exodus, some real estate analysts believe, could also see property prices fall by as much as 30 per cent from their current levels.

Credit Suisse’s grim population forecast comes amid warnings that among non-Japan Asian countries, Singapore’s open economy may be hit hardest by the global downturn. Consumption growth, said the report, could fall to almost zero.

Analysts at believe that the country’s GDP may contract by 2.8 per cent in 2009 as rising unemployment hammers domestic growth and the collapse of consumer confidence around the world hits exports.

Mr Karacadag raised a further red flag for Singapore’s economy by warning that there was a risk that forecasts were still underestimating the effects of a broad Asian downturn and further terrible news from the financial sector.

Singapore – the world’s busiest port by tonnage handled and the home of some of the world’s largest shipping companies - is already feeling the pain of an alarming slump in global trade.

With the credit crunch still affecting trade finance and the demand for Asian manufactured goods in acute decline, hundreds of container and dry-bulk ships now sit unneeded and at anchor outside Singapore. The stagnation, say brokers, is matched onshore.

In tandem with the warnings over a possible population crunch, concerns are growing among investors over the health of Singapore’s domestic banks. The “benign asset quality” environment in which Singapore banks have thrived, say analysts, has now reached an inflection point.

The ratio of non- performing loans is expected to rise sharply as the construction boom that has filled the Singapore skyline with towers and cranes begins to deflate.

Between 2003 and 2008, the population of the city state soared nearly 18 per cent in an increase driven predominantly by foreigners hired to meet Singapore’s endemic shortage of workers during the good times.

When global trade, investment banking and Asian stock markets were booming, Singapore successfully fashioned itself as a financial hub to rival Tokyo and Hong Kong and the expatriates flooded in – around 200,000 jobs were created in the financial and business services sector over the last four years.

A large number of jobs are expected to be lost in manufacturing, which accounts for about a quarter of Singapore’s GDP.

My comments:

Hi friends,

The article above makes grim reading.

On a first glance of the title, my initial response was,”So what’s so devastating about foreigners leaving?”

In my naiveté, I thought that Singaporeans (especially the lower income group) would benefit from less competition for jobs.

How wrong and how stupid I was as a more careful examination of the author’s analysis show that the exodus of all strata of foreigners will have profound implications to our GDP.

As anyone who has a rudimentary knowledge of Economics will tell you that in an open economy,

Gross Domestic Product (GDP) =C+G+I+X-M (read here)

C=Private consumption
G=Government spending

The author,Lewis, thinks, and I do not think anyone will disagree, that Singapore’s C, I and X will fall. I am also sure that although M will fall but it will be to a lesser extent than X, hence leading to smaller net export (X-M).

It is a given that no matter how much G (the last component) will be (and I wait with bated breath for Tharman’s budget speech on Friday 23 Jan 09 ), GDP growth will be negative ( duh?!).

Tax breaks there undoubtedly will be (eg decreased income/property tax) and these breaks would leave more money in the consumer’s pockets who, hopefully, will have less reason not to spend. Just as importantly, tax breaks will also lead to less companies turning “turtle up” or having to lay off workers.

I know many were cynical when SM Goh Chok Tong mentioned the “Paradox of thrift” and encouraged those who could afford to spend. In the coffeeshops, many were saying," Of course it's easy for SM to spend as he has million-dollar salary" etc . But he was just alluding to a Keynesian truism that is taught to all economics students. (read here)

Personally, I try not to be too miserly and do try to support small traders and shopkeepers.For example, I bought some "ba chang" dumplings and Meat “paus” yesterday even though I was not hungry (and was trying desperately and with little success to get back my BMI (Body Mass Index) below 27 much less the recommended 23!). (read here)

The elderly man and middle-aged woman from these 2 adjacent stalls were really looking forlorn and despondent. I didn’t think my few dollars would make their day but still, I think every bit helps. I have a soft spot for underdogs (as many of you would have surmised by now). I am also a chaser of lost causes - so be forewarned if you need my support for any worthy causes.

So guys (and gals), let us survive this recession together.

Keep your chins up. Keep your jobs (if possible). Spend ( if you can afford it).


Dr.Huang Shoou Chyuan


tony said...

Boy, how I love the experts! They seem to have all the answers when it’s too late, even though most of these experts did not see the present crunch coming. And the few solitary voices that did warn against it were jeered at and shouted down. And now these wimps seem to get a sadistic kick out of preaching fire and brimstone, how we are going to suffer, how bleak things are going to be.


The people in Gaza, after Israel’s destructive passage, are picking themselves up. They have gone through hell, but they know they can count only on themselves. Why should we, in our relative abundance and prosperity, be afraid of the future? Is it really that grim? Or have we all fallen into that hopeless and grim despair that seems to have taken over the world? It has almost become a trend to be pessimistic these days! Don’t try to look happy; it’s not in keeping with the times…

You know, Doc, having been a Singaporean myself, I think the people of Singapore have what it takes to confront this crisis, any crisis. Perhaps the time has come when the State will have to worry about what Singaporeans are capable of…

tony said...

It's me again, Doc! Just came across this Have you seen it?

nofearSingapore said...

Hi tony,
1. Singaporeans have become a dependent lot. We have been breast-fed and spoon-fed so much that we have forgotten what private initiative means. Entrepreneurship is even a rarer quality than leadership and the only animal I can liken us to is Sheep! Baa baa.

From the economics stats perspective- the immediate future does look less than bright. The man/woman on the street lives in fear of being laid off. I know someone who said his driver and the tea-lady spoke to him like this, “Sir, please do not retrench me- I am living from hand to mouth and barely making ends meet. I will work hard and do “anything” to show you that I deserve this job.”

Several employees from my hospital had already been laid off and the rest live in fear if the management would lay more off after the festive Chinese New Year.

Tony- for these people, keeping the job is everything.

2. Yes Chee Soon Juan is an orator par excellence. That is why the official media has manipulated him so that he is made to look like the court jester, whiner and the washer of dirty linen.

People will criticize his penchant for telling the whole world about Singapore’s imperfections and that Sg’s internal affairs should be solved by Singaporeans.But if we think logically- hasn’t Chee already tried everything ( short of self-immolation by dousing thinner on himself & lighting it) to try to persuade Singaporeans not to follow the PAP- yet he is unable to attract Sg’s middle ground. Hence, he has been forced to appeal to foreign powers to apply pressure on the PAP to change. But will PAP bend because of this?

Eaststopper said...

Dear Dr Huang,
if you would allow me, there is a slight error in your statement 'GDP will be negative'. I think a more accurate statement would be 'GDP growth will be negative'. Compared to last year GDP, this year's GDP figures is expected to show a negative growth number of 5%.
Best Regards,

nofearSingapore said...

Thanks for pointing out error.
Will make the necessary change.
Best wishes

Anonymous said...

Last year, at a gathering of old classmates, I debunked the decoupling theory advanced by LHL and George Yeo that the US economic problems will not affect Singapore as the China and India markets will make up for any loss in trade. I used only one statistic: the purchasing power of the US is US$7 trillion, that of China and India combined is only US$1 trillion. Needless to say, some in the group swallowed the government line and bought houses, cars and mini-bonds from DBS with the attractive 5% returns. Hah, the houses are now down 30%, COE is $200, and you guys know about the sweet selling relationship managers. The game plan now is to hang on to your money, cash is king, and look out for the slightest hint of problems at your bank - better to keep the cash in biscuit tins, than let those "financial advisers" lay their slimy hands on them!! And don't do what that clown did, spend $45,000 on cooking lessons!

nofearSingapore said...

Hi anon,
Since you mention about keeping cash in tins etc, all of us at our hospital know this chappie who is accumulating Brunei dollars and according to him, the Brunei dollar would surely decouple from the Sing dollar one fine day and as the Kingdom is so rich with oil, its currency is backed by assets and is undervalued! And he doesn’t trust banks and keeps them stowed away somewhere ( maybe under his pillows).

Maybe one day he will have the last laugh ( all the way to some celestial bank).

But then again this is the same guy who invested in Euros ( which has taken some beating recently).

And this is also the same guy who swears that his 4D habits had brought him heaps of thousands!

Anyway about Tharman’s budget- I did not get much from it as middle-class like me always get forgotten. I think I will only really gain from the prop tax rebate of my clinic. The rebate for owner-occupied prop is pittance ( and this is after the govt had hiked the same tax last year!). They take $100 and give you back $20 and expect us to be exhilarated? Corporate tax reduction only kicks in in YA 2010. The other stuff is just so many words!. GST & ERP affects us more.

Anyway, I’ll be happy if this helps some companies to keep afloat and many to keep their jobs.

Anonymous said...

An exodus of foreigners? If prospects are better back home of course they will leave. What if prospects arent rosy back home? Think they will go back? Maybe more will arrive on this island.

Either way a nation's fortunes should never be held hostage by foreigners.

I fear the real purpose of articles like these is really to hoodwink Sporeans into accepting more foreigners, because more will come, especially the economic refugees.

Anonymous said...


my friend who works in a factory say his boss tell him he got zero orders for the first quarter of 2009. No joke.

He say if government give him 12% to let me sit around in the factory, he might as well send me home with the money.

I sit there, he can't downgrade factory and turn off the lights.

nofearSingapore said...


Anon 10.57:
These articles are sometimes not written by the MSM or even Singaporeans- so I don’t think Sg’s recession or the bad shape we are in is just due to propaganda.

But of course the MSM is always there to lend the govt a hand to boost morale or to scare – whenever the need arises.

anon 9.04:

I think theoretically, as long as he and other employees remain on the payroll, the company stands to get a cash grant per employee of 12% up to $2500 ie max of $300/person/month which is not bad.

The boss can send the employees home, close the factory or run with skeleton crew ( hence saving on utilities) and still gets the 12%.

Norman said...

could you share with us the location of the ba zhang stall?

nofearSingapore said...

The Bak Chang stall is at Basement level at United Sq.
It is located near the exit point of the Cold Storage as you pay for the shopping at the cashier.
I think it is next to the Pau Stall- ( not sure if it is called Tanglin Pau).