Cutting Subsidies for Non-Singaporeans

I have written in the past about the reduction in subsidies for non-Singaporeans, and what I thought about it.

In this week's the Edge Singapore, an article was also written on this topic, as part of the larger review of where Singapore currently finds herself in.

To this article is quite an eye opener. For instance some of the statistics qouted are quite jarring.
1) By cutting the subsidies for PRs and foreigners, the total savings realized per year is only 66 million, which is 0.86% of the total Singapore healthcare spending. The article goes to qoute that only 7% - 9% of PRs and non-PRs' treatment is subsidized, which means most PRs and non-PRs either do not use the public heatlthcare system here or are already going through the private route.

2) By increasing the GST, the cost of living and doing business in Singapore would have increased by 2% points, which could translate to roughly 3 - 4 billion in increased takings for the government. The GST cost will be bornes by everyone, regardless of whether they are visitors, Singaporeans, PRs, Expats, Aliens, Cats, Dogs and the like. BUT the support package will only benefit Singaporeans.

I hate to say it, but how fair is this? I most probably could say that it would not affect me much, but it would definitely affect the average factory operator who are PRs and non-citizens (and I believe there will be a lot of them!) I recall that when I was working in production, while we preferred hiring Singaporeans, we find that most Singaporean operators we hire would not last long due to the perceived hardship of the job.

3) The other area of the article that I was truly surprised was the GINI coefficient.

Wikipedia explains the GINI coefficient as:
"The Gini coefficient is a measure of inequality of a distribution.....

The Gini coefficient is often used to measure income inequality. Here, 0 corresponds to perfect income equality (i.e. everyone has the same income) and 1 corresponds to perfect income inequality (i.e. one person has all the income, while everyone else has zero income)."
Source: http://en.wikipedia.org/wiki/Gini_coefficient

Singapore's GINI coefficient is 0.425, which sandwiches us between Burundi and Kenya. (Source)

The most ideal country: Azerbaijan, Denmark and Japan.
THe least ideal country: Botswana, Lesotho and Namibia

Now isn't it shameful that Singapore, which prides itself as a first world country could have such a low (relatively) GINI index?

So what happened? Is it the relentless pursuit of wealth? Is it the relenless pursuit of attracting high net worth individuals to relocate to Singapore that skewed the index? Or is it that the wealth that Singapore has amassed is actually concentrated on a few thousands of people, whereas the rest of the people still struggle.

With my very own eyes, I see that the riches of the country is spread among the upper strata. Those who could dish out 2,000+ psf for a 99 year leashold apartment, or give blank checks to property agents to "chope" choice units at 6th Avenue.

So much so that even I, who humbly consider myself in the slightly upper-middle class find it hard to swallow and comprehend how to survive in such a market. In the words of Alan Greenspan: Irrational Exuberance in the property market, and it sure looks like another bubble is forming or has formed.

Yet on the other side of the coin, we see families with 6, 7 people living in a 1 room flat, with the older kids resorting to sleeping at the void-decks or parks to get more "fresh air".

So what should the assistance package comprise of? GST offset for Singaporeans? Cheaper h0using for Singaporeans? More New Economy shares for Singaporeans? One time disbursement into Singaporean's CPF SA account?

THe problem with many solutions traditionally tried and tested recently results in an instant gratification feeling among those the package was meant to help. No long term plan, just instant redemption of the benefits.

I feel instead the government should allocate the money into education and pre-sickness education.

Perhaps better would be to not to raise the GST at all and then identify inefficiencies in the system to find ways to reduce cost.

But then again, how do you resolve robbing from peter, paul and mary and give back only to peter?

GST Increase

The PM had announced the GST increase in FY2007 from the current 5% to 7%.

The primary reason behind the increase was to assist the lower income group to close the income gap between the bottom and top quartile.

As a consumer, I do not look forward to this increase, as it would impact everything that we do on a daily basis. However, it has been eluded that the corporate and individual (not sure about this) tax would be lowered to maintain the competitiveness of the country. If it means lower taxes, then it is good.

But how does it stack up? I guess the rationale is that the rich folks would not mind spending more to purchase that $ 10,000 plasma or LCD TV or home theater system, but the not-so-rich would only spend, perhaps $200 to buy a normal TV. Therefore, the state coffers would increase without taxing the no-so-rich too much.

While I have not taken the time or effort to analyze all the possible scenarios, I do worry about how the government would spend the extra money to assist those who need the financial help. Many commentators have openly questioned if this was the start of a welfare state?

More intriguingly, I see some commentators pushing for early childhood education as a way to get the needy get out of their povertry trap, and I think this is a fantastic idea. While I am a proponent of the meritocracy system here in Singapore, I do see certain downsides to this system, especially when it comes to awarding scholarships to students.

Most scholarships are based on grades (even if not, a big chunk of the consideration is based on grades), but if 2 persons of the same age, but not of the same social status were to compete for the scholarship, the odds are that the student whose parents are from the upper-middle class to upper class strata would have better grades than the one who is not on this strata.

Why? Primarily because this kid would have had the benefit of the best pre-school, tuition, enrichment and whatever classes that you can think of, that money can buy. Whereas the other kid (from the not well to do family) may not such opportunties, but nonetheless strives to suceed the best they can.

So who deserves to get the scholarship? If it were me as the parent, I'd let the poorer kids have a chance, especially if I could already pay for my kids' education by myself. If the poor kid who got the scholarship goes on to become a manager, a VP, a minister, then the system would have done its job for this kid.

What do you think?