The u/m perhaps explains why the PAP despite the triumphalism of itself and its wallies of our Swiss standard of living, our massive (but “secret” reserves), and massive budget surpluses (last yr’s estimated $2.4bn is likely to be $6.5bn according to economists. Gd TRE post on this http://www.tremeritus.com/2014/02/18/sg-surplus-for-this-fy-may-hit-6-5-billion/) refuses to spend our money on ourselves. I’ve always blogged that a Hard Truth born of meanness is, “Don’t spend money on making life more comfortable for S’poreans, better to cheong on markets”. But maybe we juz don’t have the $. It belongs to MNCs.
Incidentally, the article shows why local investment is preferable to foreign investment: the profits stick around. The PAP govt rightly takes credit for attracting MNCs here in the 60s and 70s to create jobs. So it should accept responsibility for not diversifying away from this reliance on MNCs, especially as attracting MNCs is not conventional wisdom. In the 60s and 70s, attracting MNC was seen as neo-colonialism.
In Singapore, personal consumption expenditure has steadily fallen over the years as a percentage of GDP and, at 35 per cent, is now barely half of what it is in Hong Kong. This is an oddity characteristic of a startup economy, not of a wealthy town like Singapore.
But it means that, on the basis of our money-in-your-hands measure, Hong Kong at US$24,000 per capita still outranks Singapore at US$21,000.
The second chart gives you a clue as to why the two economies are so different on this measure. Industrial investment in Singapore, always predominantly foreign, has become even more so in recent years, accounting for an average of about 80 per cent of total investment over the past 10 years. I do not have the equivalent figures for Hong Kong but, at a rough guess, the foreign-local ratio would be the reverse.
This foreign investment in Singapore has in turn produced a huge trade surplus in both goods and services. Over recent years, it has run at about 30 per cent of GDP. And most of this money goes right back out again to pay foreigners for all the confidence they have shown in Singapore by investing in it so heavily.
In short, Singapore’s high GDP numbers are mostly an anomaly created by very generous industrial concessions to foreigners. They do not really reflect domestic wealth.
In another way, however, these GDP measures of Hong Kong and Singapore do not mean much as a yardstick of the comparative efficiency of either system. The fact is both are parasite economies feeding off much larger neighbours, the mainland in Hong Kong’s case and Indonesia and Malaysia in Singapore’s. They are both wealthy because they perform services that their neighbours cannot or, for reasons of policy, will not perform.