March 23, 2017

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by Jason Tan

THE first quarter of 2017 is nearly behind us and the global economy seems to have also put its travails behind itself. The world economic outlook is indeed brightening and the world is set for a rosier rest-of-2017.

World trade flows, after a sluggish recovery since the financial crisis of 2008, are increasing steadily; the falls in commodity prices are also likely to be over, putting an end to fears that the world economy may be in deflation mode. Manufacturing in various large economies stands at multi-period highs, driven by rising exports.

This economic upswing on a global level is primarily supported by an accelerating American economy. The United States (US) has certainly taken its time to get back to its feet after the debilitating sub-prime mortgage crisis and its aftermath. The US Federal Reserve’s recent hiking of the Fed Funds Rate – the policy rate which is used as a reference for interest rates worldwide – by 0.25 percentage points in March reflects burgeoning confidence in the US economy.

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The American acceleration is ably supported by a nascent revival in the other large, advanced economies, namely, the Eurozone and Japan. China – a source of global uncertainty in 2015 and 2016 – has also embarked on a path of lower but more stable and high quality growth. This has had the effect of injecting impetus into the global economy through trade and investment flows.

East Asia, including Asean countries, has benefited from the export turnaround and will enjoy greater economic gains in the year ahead. Export-oriented economies such as Singapore, Malaysia, Thailand and Vietnam will be outsized winners from the resurgence of the G3 bloc and the consequent boost to global trade flows. Even Indonesia and the Philippines will stand to gain from the increased demand for raw materials and other commodities.

This will come as a relief for economies in general as we put behind us the unsettling episodes of the recent past such as the oil price collapse in late-2014, the Chinese stock market crash in mid-2015 and subsequent fears about dwindling foreign reserves as capital outflows fled from China, Brexit and the election of Mr Donald Trump to the presidency in the US.

However, there remain salient risks which could upset the applecart.

First, US President Trump’s fiscal policies remain largely unknown. He has mooted a trifecta of deregulation, corporate tax cuts and large-scale infrastructure development as the cornerstone of his fiscal plans. Yet this fiscal stimulus could cause an accelerating US economy into overheat and force the Fed to adopt a tighter monetary policy stance.

Second, US-China relations remain clouded by Mr Trump’s rhetoric of China being a currency manipulator and unfair trade partner. Any unilateral trade sanctions imposed by the US on China will have knock-on effects in Asia, given the interconnectedness in the region. Furthermore, it will darken the already dimming mood for globalisation and free trade – which Asia is so dependent on.

Third, North Korea is the most pertinent geopolitical risk that could derail the rosy economic outlook. The recent death of Mr Kim Jong Nam, brother of North Korean leader Kim Jong Un, at the Kuala Lumpur International Airport, ostensibly at the hands of North Korean agents, brought the spotlight onto an increasingly unstable regime in the Democratic People’s Republic of Korea (DPRK). Any implosion in the Korean peninsula will definitely lead to financial market turmoil and currency fluctuations in the region.

The bottomline: The world will likely be a better place in 2017 as the global economy re-awakens on the back of strength from G3 and China. Rising world trade stemming from increasing global demand will feed into economic upswings in export-oriented economies in East Asia and Asean. However, some risks loom large. In particular, political spillovers from the Trump Administration in the US could lead to economic detriments as will a regime implosion in the DPRK.

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Jason Tan is an economist at Centennial Asia Advisors, focusing on macroeconomic and geopolitical developments in developing Asia. He delves into social, political and economic issues facing Singapore on the side.

 

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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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A group of employment pass workers at Changi Business Park during lunchtime.

by Suhaile Md

SINGAPORE is too small a base for global-minded businesses to experiment and refine innovative ideas. At least that’s the view of tech entrepreneur Mr Tan Min-Liang and venture capitalist Mr Isaac Ho, reported the Business Times (BT) on Monday (Mar 13). If entrepreneurs intend to expand beyond Singapore, they should test-bed in larger markets from the start.

Simply put, a test-bed is a space to experiment and develop innovative products before bringing to market. Last month (Feb 7), the Committee on the Future Economy (CFE) proposed in its report that the G set aside “special test-bedding zones” for Singapore based enterprises to develop products that can be exported.

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But there are three reasons why Singapore might not be the best place to test-bed.

First, you need entrepreneurs and Singaporeans are not “hungry” enough, said Mr Ho. “Most entrepreneurs know there’s always another job for them… Singaporeans are well taken care of by the government.” Which is why he proposed that the G focus on youth exposure to technology and innovation through overseas attachments for instance. That way they “will be exposed to real hunger and passion, and see how fast the other countries are racing ahead”. Mr Ho is the CEO of Venturecraft, a Hangzhou based biotech and medtech incubator.

Second, to grow the business, an entrepreneur will eventually have to enter larger markets like the United States (US) or China.”By the time you’re done with test-bedding in Singapore, somebody’s already tested” the same idea in China or the US. So “you’re better off starting in the US or China from the get-go”, said Mr Tan. In other words, being based in Singapore could make startups too slow to capture a large global market share. Mr Tan is the CEO of Razer, a San Francisco based gaming hardware company.

Third, a product catered to the Singapore market may not be suited for larger markets. “If startups test-bed here, they will need to expend effort to undo what they’ve built for use in other markets,” said Mr Ho. This raises business costs. Besides, delivering products in Singapore does little to develop a start-up’s capacity to handle “large volume transactions”. This could “result in under-building a product”.

Contrary to Mr Ho and Mr Tan, the G sees Singapore’s size as a selling point. Said Prime Minister Lee Hsien Loong at the Founders Forum Smart Nation Singapore Reception in 2015: “It’s (Singapore) compact… If you can make it work in Singapore, you can have the chance to adapt and apply to other contexts. If it doesn’t work in Singapore, it’s probably worth a rethink.”

More recently, the CFE report stated that Singapore’s small size has its advantages. Similar firms are found close to each other and so, can “attract talent, create critical mass for shared infrastructure, and generate knowledge spillovers among firms and people”. In other words, it’s easier for ideas to cross-pollinate. When new ideas arise, there’s better coordination between different firms and G bodies to make it work.

Mr Kevin Foo, head of investment at venture capitalist firm Cap Vista Singapore, agreed with the G on this, reported BT on Monday: “The level of infrastructure development within our small cityscape allows for close cooperation between different organisations, public or private, to co-develop and test technologies.”

Last October for example, Straits Times (ST) reported that the Economic Development Board together with national water agency PUB successfully completed the initial stages of its renewable-energy test-beds.

10 different floating solar panel systems, from both foreign and local companies, were installed at Tengeh reservoir. The test-bed will establish how viable the 10 systems are – both in the economic and environmental sense. If viable, then the systems can be scaled up for large-scale use.

There are other test-beds underway too, in water technology, and maritime and port services for instance. As the CFE report states, Singapore can be a “living lab for innovative urban solutions” like experimenting with new modes of transport, sustainable energy usage, and water and food resilience. Read more in the report here.

Test-beds are not to be confused with the regulatory “sandbox” the Monetary Authority of Singapore (MAS) proposed last June.

The financial world is kept in check with numerous regulations. But these can stifle the growth of innovative financial technology, or fintech, startup firms. A sandbox relaxes, for selected fintech firms, certain rules like credit ratings, minimum paid-up capital, and so on, to encourage innovation.

That is not to say however, that the sandbox is exclusive to the financial sector only. The CFE report cited this regulatory innovation by the MAS positively. It suggested that like MAS, the G “design a regulatory environment that supports innovation and risk-taking, even as it balances this against risk” such regulations are meant to reduce.

At the end of the day though, is Singapore’s small size a boon or a bane as a test-bed for global innovation?

It’s hard to answer definitively. But the fundamental issue, it seems, is market access. A mass market app based product like Uber for example, would likely do better to test-bed in a larger market like the US and not in Singapore. Here, the arguments of Mr Ho and Mr Tan would make sense.

But if the product is more complex, requires the coordination of multiple sectors, and the main customers are not mass market individuals, Singapore is likely to run ahead. Singapore helping build the new capital city of the Indian state Andhra Pradesh comes to mind.

 

Featured image from TMG file.

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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.

by Lee Chin Wee

THE Labour Market Report 2016 released today (Mar 15) revealed that the annual average resident unemployment rate rose to 3.0 in 2016, after holding steady at 2.8 per cent for the last four years. This is the highest figure since 2010, when the resident unemployment rate was 3.1 per cent.

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Compared to data from 2015, residents aged 30 – 39 (2.3 per cent unemployed, up from 1.9 per cent), and 50 & over (2.7 per cent unemployed, up from 2.4 per cent) were particularly affected, while those aged 29 & below saw the unemployment rate decrease from 5.1 per cent to 5.0 per cent.

 

Taken from Labour Market Report 2016, Ministry of Manpower

 

Part of the high unemployment rate can be explained by seasonal and frictional unemployment due to the cyclical nature of the global economy. Singapore tends to be buffeted by forces outside our control. The manufacturing sector, for instance, shed 15,500 jobs in 2016 because of flagging global demand for products. This figure would have been far worse, had it not been for the manufacturing sector unexpectedly expanding by 6.4 per cent in Q4 2016. Plunging oil prices have also badly affected the offshore marine industry, with retrenchments picking up in 2015-16. One would expect unemployment figures to improve as the global economy recovers.

However, the unemployment rate can also be attributed to structural unemployment: As Singapore adjusts to the disruptive impacts of new technology on traditional businesses, people’s skills no longer match up to market demand. Singapore’s continued economic transformation, therefore, may lead to underskilled or wrongly-skilled workers left by the wayside. As firms reorganise and restructure to become manpower-lean, longstanding jobs like accounting and secretarial work may be cut, while new business interests – financial technologies, for instance – are developed.

There are now 17,000 long-term resident unemployed (refers to those unemployed for more than 25 weeks), compared to 12,700 in 2015. This figure is the highest since 2009, when the 2008 Financial Crisis led to thousands of Singaporeans losing their jobs.

 

Taken from Labour Market Report 2016, Ministry of Manpower

 

Most worryingly, the long-term unemployment rate for degree holders rose to 1.0 per cent in 2016, the highest since 2004. Does this mean that more university graduates now hold paper qualifications that are ill-suited for the modern economy? Possibly. A bachelor’s degree in programming or software engineering received 10 years ago, for instance, may bear little relevance to the sought-after skills of today. Without a constant push for skills upgrading and on-the-job training, many graduates will find themselves either underemployed, or out of work.

As the economy becomes more complex, the need for specialised skills has soared. This has challenged the traditional view that higher education guarantees a stable career, as demand for specialised skills can change overnight with the introduction of new technology or sudden industry transformation. Professionals, Managers, Executives and Technicians (PMETs) formed 75 per cent of all residents made redundant in 4Q 2016 – a disproportionate figure.

Statistics seem to suggest that there is a growing mismatch between employee skills and job requirements; especially at white-collar managerial and technical levels. And even when tertiary-level education does meet market demand, the rapidly-evolving jobs landscape means that employees must be willing to continually upgrade themselves. Given this context, policies to help workers gain new skills or encourage businesses to leverage new technology are extremely important.

Whether Singapore will be able to bounce back stronger from this period of slowing growth and higher unemployment depends on how well we can react to technological disruption. If our workers and businesses do not stay ahead of the curve, one should be prepared for more grim news ahead.

 

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by Lee Chin Wee

DURING the Committee of Supply debates on Mar 6, Manpower Minister Lim Swee Say clarified that if you work in the gig economy, it doesn’t necessarily mean that you are a freelancer.

Mr Lim explained that there is “no official definition of the gig economy”. The Organisation for Economic Co-operation and Development (OECD), he said, instead uses the term “platform economy” to refer to workers who use online platforms such as Uber and Airbnb to find “short-term, piecemeal jobs”.

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So who is, and isn’t, protected by labour laws?

Not all gig economy (or platform economy) workers are freelancers. An employee of a transport company who uses Grab to find customers, for example, can be considered a gig economy worker but is not a freelancer. These workers are entitled to labour law protections, such as mandatory minimum leave days.

Hence, in terms of labour protections, it does not matter whether you use an online platform to find work or use more traditional avenues like taxi company rental. What does matter is your contract status – if you are a freelancer, you have entered a contract for service while if you are a contracted employee, you have entered a contract of service.

As employees are, in theory, subject to an asymmetric employer-employee relationship, a greater scope of labour laws applies to them. In contrast, freelancers are considered to be self-employed and are therefore not legally entitled to statutory protections and benefits accorded to employees. The legal rights and obligations of freelancers are largely dependent on the terms and conditions of the contract they enter into with their hirers.


What are the differences between freelancers and employees?

The Ministry of Manpower (MOM) website sums up the differences in this convenient table:

 

Contract of ServiceContract for Service
Has an employer-employee relationshipHas a client-contractor type of relationship
Employee does business for the employerContractor carries out business on their own account
May be covered under the Employment Act Not covered by the Employment Act
Includes terms of employment such as working hours, leave benefits, etc.Statutory benefits do not apply

 

  1. Central Provident Fund (CPF) contributions: Freelancers earning an annual Net Trade Income (NTI) of more than $6,000 need to contribute to Medisave. There is no legal obligation to contribute to the Ordinary or Special Accounts, but freelancers can do so on a voluntary basis. Comparatively, employees are entitled to monthly employer CPF contributions and also are obliged to pay into their CPF accounts themselves.
    • The median Medisave balances of self-employed persons was $21,700 in 2014, compared to $14,300 five years ago. This is still lower than the median Medisave balances of employees, which was $27,700 in 2014.
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  2. Employment Act: Freelancers are generally not covered by the Employment Act. This means they do not get paid public holiday entitlements (min. 11 days per year), sick leave (min. 14 days of paid outpatient leave and 60 days of paid hospitalisation leave per year), paid annual leave (min. 7 days per year), timely payslips (monthly salary within 7 days, overtime pay within 14 days), etc. Freelancers must instead seek recourse through the Small Claims Tribunal or Subordinate Courts instead.
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  3. Work Injury Compensation Act: Freelancers are generally not covered by the Work Injury Compensation Act. This means, if they get injured while performing a task or job, their client does not have to pay the legally stipulated amounts corresponding to the work injury. Freelancers must instead seek recourse through a civil suit.
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  4. Union Membership: Freelancers can still be NTUC members. This means they enjoy membership benefits such as subsidised skills retraining workshops run by NTUC partners and rebates on grocery shopping at NTUC FairPrice. However, the Trade Union Act, along with the Industrial Relations Act and the Trade Dispute Act, does not apply to freelancers. NTUC will not engage in collective negotiation or mediation on behalf of freelancers, as there is no traditional employee-employer relationship.


What is the problem?

Some will no doubt argue that freelance workers in the gig economy were not coerced into taking up these jobs. The lack of labour protections, the argument goes, is not a problem as one is not subject to the same employee-employer relationship that is characteristic of contracted full-time work.

In the particular instance of companies like Uber, the question is whether the driver-Uber relationship is that of a freelancer-client or employee-employer. Uber drivers do exhibit many employee-like characteristics such as working for only one contractor, and have “fixed” working arrangements – not contractually, but in terms of the minimum hours or peak periods one must work to remain marginally profitable. It is arguable that these workers are freelancers in name but employees in substance.

The legal lacuna created by Uber has given rise to a number of lawsuits filed against the company in other countries. The claimants argue that Uber misclassifies drivers as independent contractors, rather than employees.

In 2013, 385,000 current and former drivers in California and Massachusetts launched a class action lawsuit against the company, alleging that Uber was legally obligated to give them employee pay and benefits. Uber settled for a $84 million ($100 million if the company goes public) payout, to be distributed to drivers based on how many miles they had driven. More recently, the London Central Employment Tribunal ruled that Uber drivers should be classified as employees, earn at least the national minimum wage and get paid vacations. Uber appealed, and the case is still ongoing.

Moreover, recent Ministry of Manpower statistics show that out of the 200,000 freelancers in Singapore, 19 per cent do not consider freelancing their preferred choice. This means that, in some cases, the gig economy is substituting rather than complementing the traditional economy.

In other words, someone working as a contract employee of a private transport company may have little choice but to drive an Uber: In today’s slowing economy, either he keeps his existing labour protections and takes a pay cut, or he potentially earns more by joining the gig economy but loses his employee benefits.

A further problem is that freelancers do not pay into their CPF Ordinary or Special Accounts. As the number of gig economy freelancers grows due to the proliferation of online platforms that disrupt traditional industries, the G will have to deal with increasing retirement insecurity among older workers. What this means for national savings and government investments remains to be seen.

 

Featured image by Sean Chong.

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Lady using Pair taxi app by the road, while a blue and yellow taxis pass by.

by Wan Ting Koh

WORKING in the gig economy doesn’t necessarily make you a freelancer, said Manpower Minister Lim Swee Say in Parliament today, in his Committee of Supply speech on the gig economy in Singapore.

In fact, according to Mr Lim, you can technically still be an employee under contract with an employer even if you work in the gig economy. Mr Lim termed these group of workers “gig employees”. But this distinction means that gig employees should be covered under labour laws, such as the Employment Act – a right which freelancers are not entitled to.

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And this throws into uncertainty the fate of full-time Uber and Grab drivers here, who are currently considered self-employed.

Responding to questions from Members of Parliament (MPs) about the increasing number of freelancers in Singapore, Mr Lim said that whether a gig worker is an employee or freelancer depends on his or her contractual arrangement.

He raised the example of a private car driver. If this driver joins a transport company with an employment contract, but primarily takes on jobs offered via an app, he is still an employee of that company, even if he is on a short-term employment contract. In other words, gig employees are no different from those employed under “contract of service”.

Freelancers, on the other hand, are those who do not enter into employer-employee relationships. They provide service for a fee and are not overly constrained by the conditions imposed by the platform owner, or a service buyer, said Mr Lim.

Mr Lim’s announcement is timely as it follows a booming gig economy where an increasing number of workers are turning to “on demand” gigs to gain an income, instead of conventional, stable nine-to-five jobs. The phenomenon raises issues of employment rights for a group of workers who often go unprotected by labour laws.

Although there is no official definition of the gig economy worldwide, said Mr Lim, gig workers are commonly referred to by the Organisation for Economic Cooperation and Development as workers who work on the “platform economy”. This “platform economy” refers to online platforms which match service buyers with workers who take up the short-term jobs.

New survey findings released by Mr Lim in Parliament showed that there are about 20,500 gig workers here. Of these, around 10,500 come from the private car driving industry such as Uber and Grab, while workers from the professional services, creative services, delivery services and media and communications make up the rest.

The survey also found that of a total of 200,000 freelancers here, some 167,000 freelanced as their main job, while the rest did it part-time alongside other jobs.

A further breakdown of survey findings revealed that more than eight in 10, or 81 per cent of freelancers chose freelance work as their preferred job, while the remaining 19 per cent did not freelance as their preferred choice.

The survey also asked freelancers their top concerns or worries, and these were: The lack of income security, the lack of employee benefits and savings for housing and retirement, and the possibility of untimely payment from clients, said Mr Lim.

The growing numbers of freelancers are enough to make the G look into providing more employment protection for them, so the G will be forming a tripartite workgroup, comprising of representatives from the labour movement and employers, to study the issues they face.

He said: “While these concerns may not be new to freelancers, we are taking them seriously. This is because the number of freelancers may grow in our future economy, in tandem with the growth of the platform economy.”

The National Trades Union Congress (NTUC) has also been giving freelancers some coverage. It set up the Freelancers and Self-Employed Unit about two years back to provide a range of benefits for members for a fee of $117 per year. Read our article about it here.

Even though Mr Lim did not mention any names, his example of the private car hire industry brings to mind the situation of Grab and Uber drivers in Singapore. They are currently considered self-employed, that is, they do not have CPF contributions, are not equipped with insurance, and have no leave days.

With distinctions between gig employee and gig freelancer being made, Uber and Grab might have to do something about their practices here, which might conceivably affect their bottom-lines. Hopefully, this won’t affect their fares. Conventional taxi drivers, who often complain about the competition, will be pleased though.

 

In other countries, the employment status of Uber drivers has become a source of contention between drivers and their employer.

In the US, a group of drivers representing 5,000 Uber Technologies drivers in New York filed a lawsuit against Uber last June, accusing the company of depriving drivers of various employment protections by misclassifying them as independent contractors. On one hand, drivers say they were promised decent wages, but a majority of earnings went toward company surcharges and vehicle payment. On the other hand, Uber insists that their drivers are self-employed and hence have no contractual obligation to subsidise rental or surcharges.

By October, two drivers had successfully sued to be considered employees of Uber rather than independent contractors. The court’s decision meant that the two would be entitled to unemployment benefits from their work with Uber, according to the New York Taxi Workers Alliance.

In the UK, a landmark ruling by a London employment tribunal last October ruled that Uber drivers are not self-employed and should be paid “national living wage”.

The ruling by a London employment tribunal involves a case taken by two drivers, Mr James Farrar and Mr Yaseen Aslam, who argued on behalf of a group 19 Uber workers that they were employed by Uber, rather than working for themselves. Uber said in response that it would appeal against the ruling.

 

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by Bertha Henson

SO, MINISTER for the Environment and Water Resources Masagos Zulkifli said this in Parliament yesterday: “If we needed any additional water, where would it come from? How much would that additional litre cost? That is what we call the Long Run Marginal Cost (LRMC). That is the cost which consumers must see.’’

Except that we can’t see it because LRMC is a state secret. Revealing this would compromise future bids to build desalination plants. I don’t know how this works but it’s probably like a businessman who doesn’t want to tip his hand to a potentional contractor by telling him what kind of money he has to pay him.

So you can’t see LRMC but you have to “feel’’ it. Which is why the price of water is going up by 30 per cent after staying put for 17 years.

He did give an idea of what went into the computation: a blend of NEWater and desalination costs. Singapore would have to depend more on desalination in the future as there’s only so much water in an urban city that can be recycled as NEWater. And desalination is much more expensive than making NEWater.

Going by what he said, if there was no NEWater invented in 2002, the price of water would have shot up. That’s because after threats by Malaysian elements to cut off water supply from Johor in 1997, we scaled up desalination. To match the cost would have meant a jump in water tariffs. Price did go up from 1997 to 2000 before holding steady. Was there much of a fuss then? A check with the archives showed that Singaporeans were accepting of the increase. Doubtless, it was because we were faced with a clear and present danger of going without water.

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This little history lesson Mr Masagos gave is more illuminating than merely general statements about water security.

Minister in the Prime Minister’s Office Chan Chun Sing put it more starkly: “How many more desalination plants and NEWater plants must we build in order for water to never be a weapon pointing at our head?”

He also warned that water needs of people in the southern Malaysian state are increasing, and Malaysia is also extracting water upstream of Linggiu Reservoir — which Singapore depends on to draw water reliably from the Johor River.

This is a point that is seldom stressed, that Malaysia’s “upstream” venture,  Johor’s Semangar and Loji Air water treatment plants, along the Johor river means less water “downstream” for Singapore to extract. Can we rely on Johor for freshwater? We already have 17 reservoirs in Singapore.

He sounded a little testy when he suggested that MPs should get the basics right: That water is an existential issue. The former army chief added that a whole generation that has worn uniforms know what this means.

Which is as good as saying, do you really want to see the day when fresh water supply from the north gets cut off or Singapore is subjected to some kind of blackmail over a resource that countries go to war over?

I suppose politicians are constrained from saying things this bluntly but it’s a logical conclusion given the threat that the Linggiu Reservoir might run dry this year if hot weather persists, as Minister for Foreign Affairs Vivian Balakrishnan noted last month in a parliamentary reply. The water issue was raised at the leaders’ retreat in December with both Singapore and Malaysia pledging to look for new ways to increase fresh water supply.

According to the 1962 Water Agreement between the two countries, PUB can draw up to 250 million gallons (mgd) of water from the Johor River each day. In return, Johor is entitled to buy treated water of the same volume as up to 2 per cent of the water extracted by Singapore on any given day, or about 5 mgd if Singapore draws its full entitlement of water from the Johor River.

Dr Balakrishnan described the agreement as “sacrosanct to Singapore”.

“Should Linggiu Reservoir fail, there will be many more occasions when it will not be possible for PUB to abstract its entitlement of 250 mgd, and the current abstractions by Johor’s Semangar and Loji Air Water Treatment Plants will also be affected. This will cause severe problems for both Malaysia and Singapore.”

I can also speculate that the water increase was timed now because of the dire straits of the Linggiu reservoir which was at 27 per cent capacity on Jan 1.

But there’s still this niggling question of why the G didn’t look ahead and had to impose such a high increase. Was it so happy with NEWater being a substitute? Did it get complacent over the water problem or think there’s always enough in the public coffers to build yet another plant? Because it’s likely.

If the water price hike was put starkly and clearly in strategic terms, it’s likely that people will be more willing to pay the price.

I would.

 

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Tengku Dato' Sri Zafrul Aziz (Group Chief Executive Officer, CIMB Group) and Shahnaz Jammal (Group Chief Financial Officer, CIMB Group) at the CIMB Group Holdings Berhad 2016 Full Year Financial Results Press Conference in Kuala Lumpur

by Daniel Yap

CIMB is setting their sights on the SME market with the new BusinessGo account, a high-interest current account which waives many banking transaction charges.

The announcement came just ahead of CIMB’s FY16 group performance report, which was headlined by a record group revenue of RM$16.07 billion (S$5.09 billion). CIMB’s Singapore profits shrank by 36.2 per cent to RM241 million (S$76.32 million), however, on the back of slower loans growth and higher commercial banking provisions.

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In Singapore, CIMB hopes to capture SMEs with attractive terms under BusinessGo. It offers 0.78 per cent interest on accounts that meet the minimum monthly average of $30,000 and an additional 1.1 per cent on the first $100,000 as long as the company makes $20,000 of outward telegraphic transfers a month. This beats typical business current account interest rates that hover at or are barely above 0 per cent.

Fee waivers are also part of the BusinessGo offer. Cheques are free, as are GIRO and payroll transactions, while outward telegraphic transfer fees are waived on transactions above S$5,000. Banker’s guarantee commissions, which can be as high as 1.5 per cent at other banks, will also be waived if the client places an equivalent-sum fixed deposit.

Ms Ng Wee Lee, Head of Commercial Banking at CIMB Bank Singapore, said that the bank is able to offer this deal to customers because of its low overheads – CIMB runs only two retail branches in Singapore. She added that the bank would “just barely break even” on this offering.

Ms Ng said that SMEs are typically unable to access better banking terms because they are considered too small for banks to spend time customising solutions for, and that CIMB hopes to be able to offer them cost savings in hard times so that they will remain loyal customers when times get better.

 

Feature image courtesy of CIMB Group.

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by Bertha Henson

TODAY, MPs will be talking about the Budget that was announced on Feb 20. Here’s a speech which I am hoping NOT to hear. At the very least, MPs should move away from the clichés.

 

Madam Speaker, I applaud the Finance Minister for a comprehensive budget that positions Singapore securely not only for today, but for the future. With the world in turmoil, Brexit and the protectionistic stance of the Trump administration in the United States, it is right that we take steps to make sure that Singapore remains competitive in an uncertain environment.

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We live in a small country. We have no natural resources. We can only rely on our people. We must do our best to harness our collective energies and look for synergies that will increase our competitive advantage. In this regard, the Global Innovation Alliance is a step in the right direction.

The budget is a good follow up to the report from the Committee for the Future Economy, which the good minister, despite recovering from a stroke, chaired. The report had many good points, such as strengthening enterprise capacities, enabling innovation and growth through partnership, and developing a vibrant and connected city.

Some people have described the Budget as underwhelming. They expect more specific measures or a magic bullet. This is understandable. The focus of the Budget is on transforming the economy so that we can seize opportunities that come our way. We must be agile. Nimble. Flexible. This Budget is to help us achieve this goal.

The Budget’s emphasis on the future economy is therefore appropriate and timely. The sharing economy is on the rise as demonstrated by the presence of Uber and Grab. But it also causes disruptions. We must strike a balance between welcoming new technologies and ensuring that Singaporeans are not left behind. People must be trained and re-trained. I note that many schemes have been put in place. More should be done to make sure that people know what are the resources available to them and how to access them.

Although the G and the National Trades Union Congress have done a great job in ensuring that the unemployment rate remains among the lowest in the world, according to a REACH survey, PMETs worry about their job security. (Insert clichéd anecdote here) We must deal with the problem of skills mismatch, by offering more incentives for training. The SkillsFuture system is one way to change the cultural mindset. It is an excellent scheme. Can more be done to get more people to sign up for courses? Can we be more flexible?

Our small and medium-sized businesses, however, are complaining about the lack of relief in the Budget. Although the Minister has been generous in extending and enhancing the corporate tax rebate, can he re-look other fees and charges as well as rents? Our SMEs are the backbone of the economy. We must help them restructure their operations, upgrade their processes and utilise robotic technologies so that they can compete in the global marketplace. The Industry Transformation Programmes launched last year will help them. I note that this will be extended to more industries. This is a welcome move.

I am also cheered that this is a green Budget. It has incentives for those who use cleaner cars and green technology. It is important that we understand the threat of climate change especially to a small country like Singapore. I look forward to the day when all the buildings in Singapore are environmentally-friendly. We have already done much in this area. However, more can be done.

As for social policies, I am pleased that the Budget is an inclusive budget with help for the disabled and caregivers. This shows that this is a Budget with a heart.

Now, I turn to the rise in water price. People are not happy. This is natural as no one likes a price increase. As Mr Lawrence Wong said, there is no ideal time to raise prices. It is important to educate the people on water security and to treasure the resource. I welcome the G’s move to phase in the increase in two stages so that people have more time to get used to the new price. The rebates will also go some way to lessen the impact on lower income families.

Madam Speaker, it might be timely to introduce incentives to get people to save water. We need both a carrot and stick approach. People who save water deserve to be rewarded for their efforts. This will impress on them the importance of conserving this scarce resource.

In conclusion, this Budget is a blueprint/roadmap for the future. Not only for our future but for the future of our children and our children’s children.

 

Featured image by Sean Chong.

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