March 23, 2017

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Authors Posts by Ryan Ong

Ryan Ong

Ryan Ong
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by Ryan Ong

BUSINESS Times just published a report on how Singapore may be experiencing a two-speed economy. By that, it means our entire economy is not operating at the same pace; one side of it is doing very well, and the other side is about to grow its hair long and drop out of school. The divergence seems to be between export oriented businesses, which mainly make money from customers abroad, and domestic businesses that rely on a local customer base. Here’s what it all means:

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by Ryan Ong 

LATEST tweaks to property rules are not going to cause prices to shoot up again. There, everyone can relax now. Contrary to the rumours you’ve heard, the cooling measures are not lifted, banks are not giving out loans like door prizes, and you are not going to get a mortgage by replacing your income statement with a pinky swear. The changes will have a positive effect on property prices, but nowhere close to the sudden surge we saw between 2009 to 2013.

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by Ryan Ong

EMPLOYMENT regulations have come a long way in Singapore. Earlier in our history, this was a country with a strict “no-strike” policy and a lot of power vested in employers; all part of an early-days survival method. But with the step into first world status, Singapore’s employment scene has become more progressive by the year:

 

1. TAFEP and the Fair Consideration Framework

In 2006, the Tripartite Alliance for Fair Employment Practices (TAFEP) was set up to promote responsible employment practices. The “tripartite” element refers to co-operation between employers, unions, and the Singapore government to further this goal.

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One result of having TAFEP is the Fair Consideration Framework (FCF). The FCF ensures that hirers stick to merit-based hiring, using competence as the deciding factor instead of elements such as age, gender, and nationality.

One example of this is the Jobs Bank. Before hiring an Employment Pass (EP) holder, a company must* advertise the job on Jobs Bank for at least 14 days, making it available to Singaporeans. Only after this period can the company apply for an EP.

This ensures that companies cannot show an unfair preference for hiring foreigners. They must show they tried to hire a Singaporean first.

(*Some exceptions exist, such as if the company has fewer than 25 employees, or only needs to fill a temporary position for no more than one month. You can see the list of exceptions here.)

In addition, anyone can report to the Ministry of Manpower (MOM) if they see a discriminatory job advertisement. An example would be an ad that says “only foreigners”, or imposes restrictions irrelevant to the job (e.g. requiring a worker to have certain religious beliefs, for an accounting position).

Furthermore, TAFEP has an online system for complaints about workplace discrimination. Employees who feel they are treated poorly, or penalised for non-work related issues (e.g. age, gender, religion, political views, sexuality) can raise a complaint (their confidentiality is protected).

 

2. The Human Capital Partnership Programme, to encourage good workplace practices

The Human Capital Partnership (HCP) programme is an initiative open to companies with a good track record in employment and workplace practices. Companies that are part of the HCP (called Human Capital Partners) commit to investing in the development of Singaporean employees across all levels.

In return, Human Capital Partners enjoy priority access when having work passes processed, and have a dedicated hotline for transactions with MOM. Human Capital Partners will have privileged access to government support and resources, and have the right to display the “Human Capital Partner” mark, which helps to attract needed employees.

Human Capital Partners, for example, have account managers assigned to them from HCP to cultivate good workplace practices. This ensures that the concept of fair employment cannot just be a temporary front.

This is in stark contrast with old-school methods; traditional systems of employee protection just use penalties and fines as threats, which places the burden of fair employment on government regulators.

HCP instead provides positive incentives for companies, to encourage the hirers themselves to maintain good practices.

 

3. Skills Transfer Initiatives

One of the HCP’s goals is to turn foreign workers into a complement to our workforce, instead of competition. The formula is:

1/3 + 2/3 > 1.

That refers to how one-third of our workforce is composed of foreigners, and two-thirds are Singaporeans. By having the two complement each other, we develop synergy and results that are greater than the sum of our parts.

One example of this is skill transfer programmes that HCP encourages. 3M, the manufacturer of the famous Post-It notes, is engaged with this initiative. The manufacturer has several programmes in which foreign workers can teach or transfer skills to local employees (and vice versa). This ensures that each worker is more versatile, and can be moved into new roles quickly. The result is a more nimble and adaptable company.

Endorsing skills transfers is a progressive take; rather than set up an adversarial relationship between locals and foreigners (the old “they’ll eat our lunch” argument), Singaporean employers are instead encouraged to merge the two, to make our companies more competitive.

A more competitive company means better wages, more room for career advancement, and greater job security.

 

Building the workforce for the new era
The Singaporean worker today is, by and large, no longer an easily replaced resource. As we see more talented programmers, engineers, managers, and salespeople, it is clear the dynamics of the workplace will change.

No longer are employees wholly dependent on the whims of their employer; rather, the reverse is often true. Many companies are now dependent on the skills and talents of their workers, who have no shortage of options when it comes to finding work elsewhere.

In light of this, any adversarial relationship between employer and employee will be a tremendous disruption to local business (and by extension, the wider economy). It’s time we discard outmoded notions of “worker versus employer”, lest all of us fall behind.

The simplest way to do that is not with over-regulation and fines, but to ensure that companies themselves see the value of treating employees right.

 

This article is part of a series on employment in partnership with the Ministry of Manpower.

 

Featured image by Sean Chong.

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by Ryan Ong

SINGAPORE has had an expansionary budget two years in a row now, so it’s not surprising the budget surplus will shrink a little. Most of it is caused by an urgent (read: expensive) need to upgrade our workforce; as we head into a future of further automation and digital trade, it’s unlikely that Singaporeans can manage first world costs of living by being an assembly worker or cleaner. But where does this money come from, what are the Net Investment Returns that supposedly fund it?

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by Ryan Ong

BUSINESS survival is usually measured on a sliding scale of how many bad cheques your boss writes you. Once you get three in a row, you know the corporate vision of a DIY vasectomy kit in every home is doomed. You see, no matter how smart a business idea seems, or how much it could pay off in the long run, it’s the near-term support that matters for everyday survival:

by Ryan Ong

BUDGET 2017 doesn’t have much of a theme, beyond upgrade yourself really quick. There’s a huge sense of urgency in this budget, and it’s not hard to see why. The events of 2016, which range from Brexit to the election of Donald Trump to China’s growing assertiveness, won’t be good for us. And the only way forward is, ironically, to look backward:

 

New budget, old strategy

Budget 2017 is out, and it’s all about forward progress in the industry. But in another sense, it’s also about looking backward, and returning to the root of what made Singapore successful in the first place.

When Singapore (unwillingly) gained its independence in 1965, the situation it faced was quite similiar to today. There was tension in South East Asia, and a sense that the future was a total unknown. In order to run our economy, we focused on producing a highly skilled and educated workforce. Singapore powered through its first decades on the back of that principle: That the Singaporean worker was more productive, more driven, and worth a higher salary than neighbouring counterparts.

But over the last decade, we’ve begun to lose steam. Not too long ago in 2015, for example, Minister for Trade and Industry Lim Hng Kiang pointed out that some industries had to restructure quickly, as productivity goals were not being hit.

Budget 2017 seems to be going back to an old formula. In the face of growing uncertainty, all we can do is rely on the Singaporean worker being better. Better skilled, better adapted, and hopefully better paid for it. That’s not an easy thing to ask, because our success in the mid-60s can be attributed to us being South East Asia’s (arguably) best workforce at the time. But our neighbours have had a lot of time to catch up since then.

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Here are the three harsh things that the budget implies:

 

1. Get with the programme or get left behind

Over $80 million will be spent on helping on Small to Medium Enterprises (SMEs) go digital, under the Go Digital Programme.

About $100 million is for the Global Innovation Alliance and Leadership Development Initiative, which basically encourages Singaporeans to go abroad and work.

Some $26 million will go to the Lifelong Learning Endowment Fund and Skills Development Fund, to train workers in skills relevant to fast growing industries.

A recent comment I read on Facebook asked: Does this mean we want a painter to become a programmer? The answer is yes. Budget 2017 is part of a life raft the government is building for workers.

Remember that retrenchments were at a seven year high, within the first nine months of 2016. Many workers, whom we assumed to be highly trained, were precisely the ones who found themselves out of a job. When you have large layoffs despite a (in terms of paper qualifications) highly skilled workforce, that means workers lack relevant skills.

That’s due to the rising number of disruptive business models (e.g. Uber and its effects on the transport industry), which have forced companies to value different skill sets. It’s bad news for Singaporean workers in their 30s and 40s, who may find their qualifications – which they paid good money to learn – become useless.

Now consider the urgency with which the G is driving at this:

Budget 2017 allocates $1.4 billion to upgrading jobs and the economy. Prior to that, Budget 2016 and Budget 2015 saw the development of the SkillsFuture programme, and emphasised support for robotics and digital technologies. It’s pretty clear what the G’s rescue plan is:

They want Singaporeans to be the innovative ones who are doing the disrupting, not the ones losing jobs from the industries that are disrupted.  Singaporeans who refuse to take big risks, and won’t step out of their comfort zone to learn new skills, are shark bait. The G isn’t taking steps to protect dying industries, or playing at protectionist moves.

 

2. Businesses might pass on the water costs

Pass it on to you, the buyer, that is. The price of water is increasing by 30 per cent, starting in July 2017. It’s estimated that this will come to less less than $25 a month, for 75 per cent of businesses; although I’d contend we don’t know how many businesses there are, and 25 per cent of all businesses in the country is still a huge number of businesses.

It wouldn’t be unreasonable to guess that certain businesses – such as laundromats or restaurants – will be hit much harder by rising water costs than others. Now the purpose of the hike is to “raise awareness” of the importance of water, because without the government doing that none of us would know we’d die without it. But businesses tend to react to price hikes in two ways:

One, the G could have “raised awareness” of the importance of water, and businesses take steps to cut back. Or two, businesses could just factor the costs into their pricing. So we may see more places charging for water, higher prices at laundromats and car washes, higher costs on canned drinks, and so forth.

Now I’m not totally against the government’s intentions, by the way. I’m sure they just want us to waste less water, because over-consumption is the result of cheap supply. But it would be just as easy to set a water cap, and then impose a fine on over-consumption. And have some way to notify the household via text message when they’re nearing the water use limit.

Why punish those who have been conscientious about water use?

 

3. Carbon taxes can mean higher costs to consumers

I like to think most of you aren’t reading this from your ivory-backed chairs, while eating fried Pangolin and resting your rhinoceros-horn water on a coaster made from an endangered tortoise. Like most of you, I’m entirely for carbon taxes.

I’ll even say it’s an admirable and gutsy move: after the Trump election, I expected our pragmatic government to pivot in the other direction, and abandon environmentalism. We have financial inclination to do so, since Singapore has deep penetration into the oil and gas sector.

Nonetheless, from 2019 carbon emitters will be charged $10 to $20 per tonne of greenhouse gas. As with the water situation, businesses can go either way. Some might try to cut down on emissions, but some will try to pass on the costs to consumers. Knowing what big corporations are like, we’d better get realistic and plan to spend more.

On a related note, diesel will be taxed at 10 cents per litre. Cars pay $100 less annual diesel tax, and taxis pay $850 less. Diesel is more environmentally friendly than gasoline, so hopefully transport businesses will consider moving in this direction, rather than raising prices.

 

Budget 2017, along with the last two budgets, seem to be a polite way to remind us the clock is ticking.

Last year may have been the tipping point, in the way the global economy has changed. Stragglers who can’t adapt to the new economy are trying to fight back, by electing governments that impose protectionist measures.

But Singapore hasn’t got the luxury of doing that – we’re too small, and too vulnerable, to play the isolationist game. It’s clear we’re not catering to those who can’t adapt; that’s what all these expensive incentives are about. The clock is ticking, especially for those who refuse to re-skill and upgrade.

 

Read the first part, Economic Realities: 3 harsh takeaways from the Committee on the Future Economy, here.

 

Featured image by Pixabay user jarmoluk. (CC0 1.0)

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by Ryan Ong

WHY do venture capitalists (VCs) need such big offices? It’s a common question, but if you know any, the answer is obvious. It takes about 1,500 square feet, minimum, to house the ego of one VC.

But VCs have some right to that kind of arrogance. They’re the ones who drive innovation, at huge risks to themselves. They’re the cowboys of the financial world, who take extreme risks to advance society. And now, we’re likely to see more people participating in venture capital, with the Monetary Authority of Singapore (MAS) simplifying the rules:

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by Ryan Ong

SENTOSA Cove is becoming a ghost town, with vacancies estimated at 9.6 per cent in the fourth quarter of 2016. On top of that, more than half of Sentosa Cove’s property sales last year (15 out of 21) were losses. Not the kind of $10,000 loss that a retiree complains about at the coffee shop either; at The Turquoise, one of the more prominent Sentosa Cove projects, a unit that was bought for $7.16 million was resold at $3.8 million.

Now in 2015, when Sentosa Cove properties fell 36 per cent from their last peak (2011), it was thought that prices there were “bottoming out”. But if anything, the downward trend seems to be accelerating. Here’s why Sentosa Cove may be locked in a policy-created tailspin:

by Ryan Ong

PRESIDENT Donald Trump disappointed the markets last week, when his news brief failed to touch on expected stimulus measures. Last year, Japanese Prime Minister Shinzo Abe announced a USD$73 billion (SGD$103.7 billion) stimulus measure, in the vain hope he might actually convince a Japanese person to spend a yen someday. And with Singapore’s upcoming Budget 2017, business owners are probably hoping for policies that provide a stimulus. But what exactly is a stimulus?