SS
This is an interesting story told to me by an NUS tutor a couple of days ago.
******
Around two months ago, I was on the interview panel for an MNC hiring for executive positions in their sales division. There were 20 candidates; 18 Singaporean, one PRC, one continental Indian. There were eight people on the panel, including myself and two others with no corporate affiliation to provide independent perspectives; we had all been specifically instructed to prefer the Singaporean candidates as far as possible.
The Singaporean candidates went first. They were all punctually, well-dressed, good speakers and obviously bright. They handled themselves satisfactorily and fit what we were looking for. They all also stumbled on one particular question – they were each quizzed on a specific not-very-successful and hence not very well known product of the MNC’s. They were asked for their opinions regarding why it failed to impress.
Every single one of them struggled. They either had never heard of this product before, or had only vague knowledge. None passed this hurdle.
Then came the foreigners. They also handled themselves well throughout the interview, if a little less fluent in their speaking; the PRC talked too slowly and too little, the continental Indian too fast and too much. Not that much of a difference, just enough to be noticeable.
When we brought out the killer question that had beat the Singaporeans, both foreigners immediately rose to the task. Each had brought with him a thumb drive packed with information – spreadsheets, saved web pages, pie charts, graphs, even presentations – of the MNC’s products and marketing strategies going back five to ten years. I don’t even know how they got all that information, and the company insiders all confirmed it was original work – that is to say, not stolen and passed along by employees. In any case, the foreigners had even taken the initiative to include their own analyses and suggestions. That isn’t something that can be copy-pasted or copied.
The choice at the end of the entire interview process for all 20 candidates becomes obvious. You kid yourself if you believe that we ended up hiring the foreigners because they are cheaper or so the MNC can skimp on CPF or some anti-NS consideration. To an MNC like this one, that kind of money is peanuts. But staff who push so hard and so far to deliver the additional value, who prepare for such eventualities – who are so hungry and paranoid that they actually prepare for such an improbability – are invaluable.
Eighteen to one to one advantage and the Singaporeans lost. Singapore had eighteen chances and got nothing. China had one, India had one, and they hit the target so hard they wrecked it for the next guy.
******
The tutor is herself North Indian, having studied and worked in the US before arriving in Singapore 20 years ago as an NUS tutor, and has done management consulting as well. That is to say, precisely the sort of person with perhaps the best-informed perspective regarding labour immigration on both micro and macro levels.
Piaroh-Cze:
The hidden danger behind not keeping score.
Line
Watching an old friend return – locking up a guy and lying about poisoning him – does wonders for putting me into a good mood.
My temperament aside, DBS deserves a shout-out and a slap on the back. It’s quite unfair that when SMRT and PUB foul up we’re all over them like white on rice, but when DBS does a job as good as this no one can be bothered to offer a compliment.
I appreciate what they’ve done for the card-skimming scam so far. It was quickly reported on the mainstream news (score one, but then nobody keeps count for them), DBS moved quickly to assure customers that their losses will be covered and investigations are underway. Experts were immediately put on air not to put a spin on why it’s not a big deal, but rather explain concisely how the scam probably occurred and is being carried out. It is the information dissemination muscle of the old-school media in a very quiet demonstration that hasn’t been seen in all of 2011.
No hand-wringing. No delays. No PR disasters. No idiot of a GM trying to say that “customers should be more careful” and exposing himself to mudslinging. No opaque processes; anyone who lost any money is clear on how his or her account was compromised, and how he or she can get the money back from the bank.
So despite the potential damage that could have been caused by this scam, probably greater than any MRT breakdown, the matter has been contained within a couple of days. It’s by no means over and won’t be until the perpetrators are arrested and charged, but at least this isn’t going to be a crisis for anyone. Not you, not me, not any DBS customer, not DBS itself. Thta’s the great job marvellously done.
What can SMRT and PUB learn from this? Not that many, as it turns out. DBS just got a few things right, and those few things have massively disproportionate impacts.
First. Concentrate on solving the problem, not putting a spin on it. We’re east of the Suez and west of Hawaii, in a land where the residents are far more concerned regarding what you’re doing rather than what you’re saying, unless what you’re telling us in a concise fashion what you’re doing. That’s the focus of PR; it’s disseminating outgoing information, not deflecting incoming ones, that should take priority. People are simply less likely to panic and lash out when they feel assured that they are being kept in the loop.
Second. Long-term solutions are the holy grail, but always be prepared to take stopgap measures to contain damage in the short-term even if they will be expensive ones. I highly doubt DBS could have figured how much money had been scammed in those few hours between the first reports and their announced blanket guarantee. They went ahead anyway and it’s paid off handsomely. Long-term solutions certainly go a long way in preventing future mishaps but they do nothing to roll back damage inflicted in the meantime.
Third. This is speculative, but DBS possibly benefited from being a bank in the first place. The financial tension since 2008 has placed retaining the trust of savers and investors near the top of the agenda for many banks, and banking has often emphasized precisely that trust anyway (even if it be merely a romanticized perspective). In the case of DBS, that effectively helped it recognize and keep in view its position of public trust, as well as working to keep it. SMRT and PUB may lack such a culture.
For SMRT and PUB’s debacles they’ve been roundly criticised, and I’ve seen more than a handful of barbed comments referring to their well-salaried executives, as though high pay somehow reduces the incentive to do a good job. I should like to point out that however little my opinion of such poor excuses for thinking, it nonetheless cuts both ways regardless of the silliness of the paradigm; a job well done by well-salaried DBS executives is as much evidence for high pay works, as a muck-up by SMRT and PUB executives ‘proves’ the opposite.
In any case, I believe we should all show some appreciation to DBS. After all, simply criticizing all the time without offering credit when it is due makes for a terrible lack of good examples and standards to aspire to. As a sideswipe, I should like to point out our cyberspace already has too many hypocrites who enjoy taking potshots, always attacking and never healing, whilst at the same time banging away on the education system is not conducive to multi-faceted, creative and positive learning.
Now because talking about our netizens always puts me into a foul mood, I shall go play FM 2012 now. It is excellently amusing to watch the AI offload David Silva at bargain price because there’s no rich sheikh in the game to inject 50 million pounds every six months. Almost as funny as marking Rooney with five centrebacks and watching him get stretchered off after ten minutes.
Piaroh-Cze:
What doesn’t kill you.
Oblong
This time around, there’s no real need to wait for further developments. I’m basing my remarks entirely on the review committee’s findings after all, and not the opinions of the netizens jostling for space on the Internet. I’m already late, but there were other matters for me to attend to. Matters that actually put some cash in my wallet. Of course it’s the money.
To make my own home base clear, I think I should express that I don’t buy into the dollar-for-talent theory. I think of attracting political talent as the responsibility of the party, not the state, so tax money shouldn’t have a role to play. I do however put stock by the notion that high pay deters bribery and corruption. It is easy to say it doesn’t make sense to pay someone to not be corrupt, but I think of it as always being the highest bidder.
Now, two people can dicker for weeks at end over the various conspiracy theories concerning corruption and nepotism. As far as I’m concerned, the lack of correlation between the respective lists of highest-paid politicians and richest politicians settles the case.
On another point, I strongly believe that a person should be paid proportionate to the work he’s doing. The Cabinet ministers clock fourteen-hour days with distressing regularity, and frankly I’d feel a bit guilty if they didn’t get paid well for it, public service and duty or not.
Anyway, despite my opposition to the dollar-for-talent principle, I’ll accept for it here for the sake of a workable commentary. It’ll provide the backdrop and paradigm within which I shall work for now. Another sidepoint: if they had only grasped the opportunity better, the Government could had upped the ante and delivered a knockout punch with this review. But they left too many weaknesses exposed. Good try, but no cigar.
Nobody can honestly say they were expecting cuts as deep as these. Well, the SDP’s pet jackals will say they were expecting more, but then again half of them are deluded, another half are so cynical they were never expecting cuts to begin with and the last half are lying through their teeth. I know that makes three halves, but simple mathematics never seemed to apply to the SDP. That’s the only reason I conceive of for their bald-faced claim of having garnered ‘overwhelming support’ for their own salary review proposal some time ago.
Back to the cuts. Deep? Yes. Exceeding expectations? Yes. Acceptable? Probably. Sensible? Possibly. Sustainable? Unlikely.
Pegging pay to 60% of the median income of the top 1,000 citizens is hopelessly top-heavy. It’ll be stuffed with bankers and lawyers and surgeons and their golf coaches, and more importantly it doesn’t account for how growth at the top of the income scale has been outstripping every other rung on the ladder.
Yes I know, low-income growth is accounted for in the National Bonus. But isn’t it a bit distasteful for the basic salary to be pegged to the top and the add-on bonus to the bottom? How about the other way around? Why not a “this is the low-peg basic salary we are paying that’s nowhere near as good as your old job’s paycheck, but if you do a good job your bonus is going to be heavier than that old paycheck” method? I think that preserves the idea of sacrifice in public service without shorting the high-pay theory? Of course, with the in-principle modification that now instead of dollar-for-talent it’s dollar-for-merit.
Another thing about the low-income peg for the National Bonus. The payoff for the ministers if terribly out of whack. A 100% bonus payout for real income growth of 2-3% at both the median and 20th percentile levels? 200% for 4% growth? Woah. You’re kidding. That’s aiming low and paying high. If any blackjack table offered odds like that it’d be the one time the house doesn’t win. It doesn’t make sense to me, not with the current recommended National Bonus scheme.
By the way, one shouldn’t get too distracted by the theoretical maximum 8-month GDP Bonus Cabinet ministers are eligible for. They’ll get that much only in the case of phenomenal GDP growth, so I wouldn’t worry too much about that. Aside from asking if they’re sticking GDP multipliers in too many places and double- or triple-counting the same statistic. Just sayin’.
Besides, both the numbers 40% and 1,000 seem rather arbitrary to me. I don’t know how they have been justified. Probably a matter of ‘this feels right.’ Now that can’t be easily questioned since everyone is going to ‘feel’ differently on the matter, but that 1,000 at least can be made a broader measure. Say,26th-75th top earners from each of the top 20 professions? Otherwise, this ’1,000′ formula runs the risk of over- and under-representation. Still, I take the 40% in good faith. It is a big number and at least it shows the desire and willingness to make cuts even if they’re not too wise in deciding how the cuts are made. It’s gone quite a distance in inclining me to go easy on the cynicism.
It would be helpful as well to insert a mechanism whereby MPs can call quick vote to dock a particular minister’s pay on an ad hoc basis whenever something very dis-satisfactory happens within his portfolio. Like another ponding incident.
Well, I’ll talk a little on what I do like. (This shall be a short post, as I’ve got work to attend to.)
Getting rid of the pensions is good. Even better if they had gotten rid of those already on pensions, but I can settle for this. I also like the transparency of the new formula, although it could be improved even more by ordering all ministers to disclose all sources of income. I’m less inclined to compromise on that, but I don’t see it as an urgent concern at the moment.
And that’s all I like. OK, I like seeing the big percentage figures representing the cuts but I’m not very satisfied with the reasoning and methodology that came up with those figures.
So, overall, thumbs up or thumbs down?
Up. All the way. Why? Easy. Because the world is bigger than Singapore, you fool.
Read what Tharman has been saying for the past few days, if you can tear your eyes away from that pointless gossipy did-Pritam-Singh-say-this-or-didn’t-he. A tough two years are expected ahead, and a recession is likely. A convenient acid test. If the new formula doesn’t work, it’ll be painfully obvious to everyone. The PM will want to correct it, and he’ll have left himself with sufficient time to do so before the next GE. That’ll help take the teeth out of the Opposition. The empirical method in its glory.
Of course, if the PM forgets to do so we’ll remind him even if the WP MPs don’t. New normal and all that. Not just the ministers, but netizens gotta bear that in mind too.
Piaroh-Cze:
I wonder if this is it.
Railroading
I fell into my habit of refusing to write on major events until at least a few days later, when some perspective has been restored to the picture. That explains why I’ve been away for about two weeks, because updates on the SMRT failure keep coming in quicker than- well, quicker than the damn trains themselves.
Also in keeping with my habits, I’ll make my attitude clear from the beginning. The failure begins with SMRT’s inability to cope with the initial technical fault. Leaving passengers stranded in a poorly-ventilated metal tube is obviously stupid. So obviously stupid I do not believe it is up to any individual to take the blame. Nay, when something so incredibly inane happens and is allowed to persist as a situation for more than an hour, it’s probably an organizational problem.
I have no proof. I seek only to present what I think would be a reasonable account of what actually happened and led to the massive cock-up. I could of course continue waiting even longer for the public inquiry to finish its job first, but who knows how that would take? I’ll compromise and settle for scaling down on condemnation.
By all accounts, the evacuation, once it did get underway, went smoothly and without incident. This suggests that SMRT does drill its station staff appropriately regarding such a predictable emergency. The failure therefore must be with management. Because you see, if an evacuation could be carried out so efficiently and effectively, but was not activated and instead the decision was delayed for over an hour, it’s a sign of buck-passing somewhere higher up.
It might not be anything as spineless as everyone seeking their asses and not wanting to make the call. It could be a matter of no one knowing whose call it is to make. The CEO? The COO? The CTO (If they have one)? The GM? The Fire & Safety Manager (FSM)? Whose responsibility is this? Who is authorized, not only by the corporate bosses but by regulators?
I’m guessing that hour was spent first by whoever was in charge at management that night troubleshooting the system without evacuating passengers, because hey if the trains get to made to move in ten minutes or so there’s no need to get everyone panicked over a minor fault.
Then when the engineers report back that they absolutely need to clear the tracks, management didn’t know if they could make the decision so they contacted senior management. And senior management assumed someone else would make the decision, and so didn’t give any instructions and just headed back down to office to do crisis control. Upon arrival, they all realize nothing’s been done for the past forty, fifty minutes and waste a dozen or so more minutes yelling and cussing and in general adding to the confusion before collectively ordering an evacuation.
For an analogy, say Singapore were suddenly invaded by an unidentified landing force in the East. I hope MINDEF has its defence plans sorted, but someone still has to push the button that says GO. Who would that be? The PM? The DM? The President? Can the CDF go ahead on his own initiative without waiting for the politicians to wake up properly and find their glasses? MINDEF probably worked this out a long time ago (any modern military does so) but SMRT doesn’t look like it has.
This is an organizational/operational problem. Something they want to think about putting on job descriptions from now on.
Now, there is also the matter of the mess at the nearby stations, with passengers being left confused and without information regarding what is going on. Again, an organizational/operational problem and a massive PR failure. The corporation is not organized to deal with rapid information dissemination and management. They, like every other great beast on this island, hasn’t caught onto the role of the lightning-quick Internet and social networks as mediums of news yet. It is probably true that they experience lingering distrust of any news they receive from such informal, dubious means and therefore are averse to using it themselves.
Well it’s not like they’re running political campaigns or attack editorials. Simply public message alerts. SMRT needs a shift in its worldview.
Speaking of the chaotic state of affairs at the stations and platforms, I’d like to point out that pretty much everyone has forgotten that the police pretty much have four NSFs patrolling every stop downtown during the weekend peaks. It seems to me that those guys have not been adequately trained in crowd control then.
To be fair, those NSFs were probably trained more as conventional law enforcers, not emergency management techniques. They were probably told that in a security situation, backup would arrive to take over on-site. Well, a train failure is not a security situation so there’s no backup.
I could point out that if a terrorist just tossed a gas canister onto the tracks and ignited that’d cause a train failure and general chaos again, in a copycat incident. But that would be massively idiotic of me, because that’ll be a security situation, in which case TRANSCOM would take over all operations of the stations, including their staff. And I can tell you, TRANSCOM wouldn’t suffer from the same organizational inadequacies and ambiguity SMRT has. Ops NORTH STAR and all that.
So it seems to me that SMRT needs to get its act together and drill for such emergencies the same way SPF or SCDF do. The ground staff conducted the evacuation well; now they have to learn crowd control. The management staff has to delineate responsibility and authority clearly, as well as fix their PR problems. In other words, change the big red button to a keyhole, and make someone wear the key around his neck.
Now, there is clearly a technical failure as well which led to exposing all the other dis-satisfactory aspects of SMRT’s corporate governance. This is jumping the gun, but I have a hunch that SMRT sort of believed its own ‘world-class’ propaganda so much its staff started thinking that failures simply can’t happen, not to them. So maintenance checks slipped up. This is something the PAP and entire cluster of government-linked corporations need to pay close heed to – don’t let your own illusions of invincibility do you in. Stay on your toes.
And of course, the now-infamous remarks by a certain MP which seemed to lay the blame on minorities for lacking a good command of English to understand instructions. He has since claimed to be misquoted and misinterpreted.
Of course he has. I’ve seen the transcript and the video. He has definitely been very misinterpreted. Any interpretation would had been misinterpretation. He was junking words together in a thoroughly confused, jumbled and meaningless order. He as good as held English at gunpoint, which is kind of ironic. The only way it could get more garbled would be if he stammered, and stammering is at least a valid excuse. As it stands, the only right interpretation of his thoughtless remarks run along the line of “oink oinkoinkoink oinkoink oink-oink-oink-oink…” (but that might be offensive to Muslims too).
Anyway, as far as I can tell this episode has illustrated brilliantly the weakness of the dear MP’s English, as well as the TOC’s. They jumped the gun there. They definitely jumped the gun. Instead of holding back a bit, not for long just maybe a few hours while trying to figure how to handle a delicate potato, they just went with all weapons blazing like 2012 had come a year early. And no, they couldn’t just point out the statement for what it is – a hopelessly entangled and messily knotted hostage situation of the English language – they had to go for the worst possible conclusion. This is not how a site aspiring to be the leading online news portal should be behaving.
On another note, I’ve seen and read about the PAP trotting its minority MPs out to wage damage control. Probably not very effective, but effort is effort. On the other hand, where’s the opposition minority politicians? WP has Pritam Singh sitting in Parliament, don’t they? I’ve given him days, and I’ve not heard so much as a squeak.
In any case, I take the point that SMRT may be lacking qualified ground staff. No, don’t give me bullshit about their being perfectly accredited and well-trained. If they have difficulty with English, they shouldn’t be in positions of responsibility or leadership. If the problem is that there weren’t any such English-fluent engineers around to lead the maintenance crews going out, then hire more of them. SMRT will have to step up its recruitment and hiring terms, attraction of talent and all that. If it hurts the bottom line, cut the salaries higher up. You can’t run a transportation business the same way you run a finance company; in the former the grunts are a hell lot more important. The pay structure has to be different too.
Now, on the PR disaster. This debacle should go into the textbooks as a case study on how not to handle a crisis. Military colleges and economists around the world study the Vietnam War and Great Depression as negative examples; perhaps NUS, NTU and SMU should do the same for this incident in their Comms classes. It would be a suitable way to drive home the message that the current generation of corporate leaders are turning Singapore into a nation with a foot permanently affixed to the mouth.
Furthermore, I have a short message for the CEO. Your ‘apology’ is not accepted. Let me explain why.
This is you: “I apologize……”
This is the PM back in May: “I’m sorry.”
See the difference? Here’s a hint: one of those two is an apology, the other isn’t.
She can take a lesson from SIA. Just over a decade ago, I remember SQ006′s fatal accident at an airport in Taiwan. The jet tried to take off at the wrong runway, resulting in 83 deaths after it got hit by a typhoon when trying to take off. The flight crew were complacent in their duty, but the Taiwanese were greatly at fault themselves; poor lighting, signage and directions resulted in the plane ending up on the wrong runway (although the flight crew should had realized so themselves rather than sticking to instructions).
Rather than engage in a blame game or wait out the subsequent investigation, SIA immediately flew top management in and took complete responsibility for everything. They paid out all the compensation and more. They paid for the damage, put up everything that could be bought with money. The Taiwanese didn’t have to fork out a cent. As a result, SIA successfully preserved its reputation as a responsible company which took the incident seriously; so seriously they expected their pilots to get it right even when traffic controllers are wrong. SIA didn’t shirk to avoid embarrassment; they had the corporate maturity to know they were going to hit rock bottom anyway and might as well try to strike it as early as possible on their own terms and begin the rebound as quickly as they can. SMRT’s CEO should use this as reference.
Speaking of this CEO, I note that her background in retail rather than transport operations is being cited again as a possible reason for failure. I don’t think that’s very fair. CEOs after all don’t usually pay attention to the nuts and bolts at the micro level (unless the CEO runs an IT company, or his name is Clarence Johnson). To wag the finger at the retail-centric CEO is to let the COO and CTO get off free.
What I do have a problem with is SMRT going into the retail business at all. I consider it a distraction from their core service, and something that can be run by another firm. Like say CapitaLand. Besides, the talk about retail profits subsidising transport prices is all fluff. Any CEO would know to maximise revenue by separating the accounts for train, bus and retail services, then demanding decent profit margins from each. In effect, the transport and retail divisions operate independently, so making money here doesn’t justify slimmer profits there.
The organizational, operational, technical and corporate problems highlighted above will take time to mend. There are however punitive measures that can be taken immediately. Simple ones which literally require a simple flipping of a switch. Like reversing the most recent fare hike, and imposing a moratorium on further hikes for the next five years or so (when the new trains they say they ordered arrive, and the signal system is upgraded, so the hike is actually justified by an accompanying improvement in service). It is alright that they have given passengers refunds for affected trips, although why it has to be done at Passenger Service Stations I do not understand; it is a simple enough matter to update the value on the cards when they next pass through the gates.
I’m not so hot on the resignation thing. Fine if it happens, OK if it doesn’t. My own preferred solution is temporary nationalization; let Parliament pass a bill mandating the takeover for a fixed period of say, twelve months without option to extend. Do the house-cleaning, then re-list as a private firm. It’ll cost some tax money, but not really all that much since SMRT is a proven to very profitable. Twelve months isn’t enough time for bureaucratic inertia to choke the life of the enterprise. There’s a very good chance of breaking even or maybe making some money out of the deal if the IPO goes well.
Oh by the way. I’ve seen something recently that points out SMRT pays out high dividends every year, and Temasek Holdings is one of its chief shareholders. This sorry limp husk of an argument then goes on to conclude that transport fares are therefore a hidden form of taxation.
Please don’t take that seriously. First of all, a tax is by definition money paid to the state for which no good or service is rendered. A transport fare, regardless of whether there is profit or not, is therefore not a tax. Second, hell, Temasek has to pay the interest on its funds and CPF somehow. If one wants to be an ass about it and insist that any money Temasek makes from Singaporeans is as good as hidden tax then the only way to avoid that would be Parliament forcing Temasek to invest overseas only. In which case it’d be the Mainland Chinese who’ll be making money off us, and you all jackals know damn well if that happens you’ll all be howling about the traitorous PAP selling our utilities and infrastructure to foreigners.
Whilst I’m ranting, I’ll like to comment on one particular interview on the news some time ago, when the trains starting running again after the big breakdown. They started up late, and one member of the public described the consequence for her as a ‘miserable day.’
A late train = a miserable day? Woman, jump onto the tracks and die.
Piaroh-Cze:
The alternative is a sandbox.
Prick
The explicit foreigner-targeting of the new stamp duty taxes on property purchases are, shall I say, bound to be immensely popular, at least with citizens. It is also fairly difficult to criticise negatively. Try as I might, I find little reason to object, except of course for the obvious drawback of making the country a less attractive destination for non-PR foreign professionals. That however isn’t that much of a big deal, since short-term stays are a lot less important to our growth plans then those who do stay long enough to attain PR status.
I consider this the wisest move the PAP has made since the May GE, and frankly astounding in its simplicity. Stamp duties are usually fairly blunt tools and thus easily overlooked even when their blunt undiscriminating scope is precisely what the doctor ordered. It is good that that hasn’t happened.
That said, whilst I approve of the this cooling measure, it is for a reason different from what others would assume. I do not expect stamp duty taxes to actually produce a sustained drop in property prices aside from the ‘shock therapy’ decline that can be expected when it is first put into effect. I’ll explain why.
In examination of the stamp duty and the private property market, I find that the duty isn’t likely to influence prices as much as one might assume on first thought, excepting the high-end centrally located properties. Private property prices are decided by three key factors in Singapore: intent to stay (residence), expectation of future prices (speculation) and the rental market (investment).
The new stamp duty taxes cool foreigner demand for residence, and both foreigner as well as citizen demand in speculation. One would have to be very optimistic regarding property prices over the next decade in order to just break even should these duties persist for that entire period.
This measure however, is an excellent boost for the rental market. Foreigners no longer willing to purchase apartments whether due to consideration of affordability or profitability will be forced to rent for the duration of their residence in Singapore. That boosts private property as a means of generating reliable, consistent income for the citizen owner, which then boosts a citizen’s valuation of an apartment as an investment and incites greater demand for it.
So even the duties cool demand they also stimulate it in a different but related way. The market will thus end up with two forces pushing in opposite directions, giving us a stabilizing effect. Indeed after the initial shock has passed, in the medium-term of six to twenty-four months one probably shouldn’t expect property prices to decline as a result of this stamp duty. The good news is, it probably wouldn’t rise either, as the opposing forces produce greater inertia in the market valuation of each apartment. In other words, existing apartments are likely to retain most of their value and continue generating income; the only big drop we can really expect is in market activity.
The volume of transactions can be expected to fall, since there will be fewer foreigners willing to buy apartments. This drop I will suppose is most likely to be reflected in second-hand sales from locals to foreigners, since locals are likely to prop up demand for new properties to take advantage of higher rents they can bargain for.
High-volume, high-activity markets are volatile and exaggerate market fluctuations; by exorcising them it is effectively another stabilizing, rather than cooling, measure. Since the decade-trend has been for the deregulated second-hand market to lead the way when it comes to rising property prices, with developers generally more reactive and simply pricing new properties at whatever level they estimate best exploits the hot market, stabilizing price levels there by reducing volume has a vanguard knock-on effect stabilizing the rest of the property market as well.
In a way, this allows the PAP to have its cake and eat it too. Property prices stay relatively high without running out of control, allowing them to both placate the angry citizenry as well as stick by their asset appreciation policy at once. Not only that, but the same cake is being used to bake more cakes and saved for rainy no-cake days too. I’ll explain that as well.
The biggest beneficiaries of the stamp duty are actually likely to be high-income and upper-middle income Singaporeans, as they stand the most to gain from the likely inflation in rentals. They after all, are the social class with the most cash to be investing long-term in property. One might argue that perhaps rentals should face higher taxation as well, using the very-popular widening income gap argument again, in order to avoid the benefits being disproportionately shared, but I consider that both unlikely and undesirable. For one thing, it would be unintelligent to actually actively aim for property deflation at a time of international economic uncertainty, and it would also be unwise to to suddenly deprive the entire property market of all elasticity at once – something must be left a little loose to adjust for free-market shocks, and one is likely on its way.
The property market is unhealthily displaying the characteristics of overheating, with the endlessly climbing prices despite repeated attempts to slow it. I no longer call it bubble because that term has been used to the death even by the government; a ‘bubble’ to me is by definition something no one sees coming. But whether it be overheating or a ‘bubble’ it is functionally very similar, and both in consequence and in prevention.
The biggest problems after a bubble bursts or an overheating market implodes is not the drastic loss in value and prices. Those are paper losses which can be restored, and like all paper losses are only ever symptomatic of other problems. The issue to deal with in the aftermath is always the lack of market activity. While the initial phase ‘shock therapy’ market correction plunges prices, it is the resulting lack of transactional volume which prevents the correction from completing itself by stabilizing at the healthy, free-market level. The greater the volume plunge, the more chronic the aftermath. Recovery is stunted by oversupply, and there will always be oversupply since developers do not initiate, let alone build, new properties overnight – the greater this oversupply quantity, the more severe the difficulty.
As asserted before, the new stamp duty hike as an effect of depressing activity volume now, rather than waiting for the eventual crash to come. By starting on the downward decline in activity early, we stand a much better chance of hitting a relatively soft landing. The market is still elastic enough to keep adjusting price smoothly throughout, rather than being overwhelming in one blow and letting price get dragged down by quantity. I figure that this last reason is probably the foremost in the minds of the Cabinet; that might explain why no one’s been very eager about claiming credit. That’s because they all know the storm hasn’t hit yet.
It is overall a good move, and stands a splendid chance of achieving a lot using very little. What’s left is for us to observe whether the authorities got their timing right, and that no one other than themselves should be able to say, since only they have the relevant data and statistical tools.
Piaroh-Cze:
Hydra at the beginning and the gates at the end.
