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The 22nd Singapore Economic Roundtable (SER) was held in November 2014. The Institute of Policy Studies has been convening the SER since 2003. Our first goal is to provide a forum for assessing current economic conditions and how cyclical monetary and fiscal policies should be adjusted. A second aim is to conduct a deep dive into a selected issue of structural nature that was likely to affect Singapore and to determine how policy should respond to such a challenge. The first session of the 22nd SER addressed cyclical issues. In essence, the discussion found that the global economy was recovering and providing better conditions for Singapore to grow. Overall, the discussion suggested that Singapore was in a fairly good position in the economic cycle and that the main policy concerns should be on structural considerations such as the need to boost productivity, partly through capital deepening but more and more through improving human capital. The focus of policy not just in Singapore but in much of the global economy was three-fold. First, while global growth had recovered, headwinds remain strong; thus, policies were needed to achieve growth and create the jobs needed for prosperity and social harmony. Singapore was in a good position in this context as it had the policy space to use monetary and fiscal tools to contain such risks. Second, the crisis had taught us that increasing global financial linkages made for a degree of financial volatility, requiring carefully calibrated monetary policy complemented by macro-prudential measures. The increasing financialization of the Singapore economy could have raised risks for Singapore, which merited careful policy attention as the economy was likely to be subject to more boom and bust cycles. Finally, there was a need for much greater policy coordination at the international level. The second session of the SER looked at the issue of creating a sustainable model for public goods. Such a model had to balance among objectives such as cost effectiveness, quality and equity. Given the constant changes in the economy and society, no model remains optimal for long, and policymakers need to review the models regularly and adapt to changes. Singapore had a good healthcare system, with low costs and good outcomes. In the area of public transportation, the observation was that Singapore had yet to achieve an optimal model, but with the pragmatic approach the government had been adopting, a better model was emerging over time. -
The Twenty-First Singapore Economic Roundtable (SER) was held in May 2014. The SER is convened by the Institute of Policy Studies with two aims. First, to assess the prospects of cyclical monetary and fiscal policies given the state of the macro-economy. Second, each SER also analyses a structural challenge facing Singapore with a view to understanding what policy changes might be needed to resolve such a challenge. The Twenty-First SER was held at a time when global economic conditions were improving, with the G3 economies recovering and Singapore’s ASEAN hinterland also set to regain momentum. However, participants were concerned about the domestic headwinds that might constrain economic growth. In particular, higher labour costs arising from the policy-induced tightening of foreign labour inflows would hurt profitability and growth prospects: weak productivity growth combined with rising wages meant that unit labour costs were rising. Where higher unit labour costs were a risk to inflation in the near term, participants were concerned by the medium to long term risk disinflationary pressures. The correction in the real estate sector was one risk factor. Another risk was that the ASEAN Economic Community’s trade opening would bring about a cheap labour shock akin to that caused by China when it acceded to the World Trade Organization. As in previous Roundtables, the appropriateness of the exchange rate-based approach to managing monetary policy came under scrutiny. However, the view of most participants was that such an approach in combination with macro-prudential policies remained the most optimal among the policy options that Singapore had. With regards to structural challenges, Singapore had done well in recent years as a result of government policies to accelerate innovation in Singapore, with notable improvements in the development of a start-up scene in Singapore. Generous grants and the introduction of more funding mechanisms had encouraged talented individuals to start companies. Thus, the Government has successfully encouraged the formation of more companies. However, Singapore faces some fundamental disadvantages stemming from its high cost living environment, lack of scale and inadequate development of the financing of innovations. It was therefore timely for the government to review some of its approaches to innovation so that Singapore could progress further in innovation-led growth. New funding mechanisms could be considered such as crowd-funding. Local corporations and wealthy family businesses have considerable resources and market connectivity to add value to start-ups and policies could be devised to incentivise them to contribute more to funding or developing innovation in Singapore. -
In this report, it is seen that a confluence of demand-side and supply side factors arose to generate inflation in Singapore. High rates of population growth were a primary driver that led to shortfalls in housing supply. The supply demand imbalance accelerated home prices and construction activity. This led to overheating in the construction sector, which spilled over to the real economy given the strong output multipliers and backward linkages in the sector. In addition, global liquidity inflows as well as the liberalisation or privatisation of HDB resale, retail and industrial markets contributed to the acceleration of asset prices and rents. This in turn led to high growth in private household credit and property prices, and a feedback loop of rising credit and prices were averted through successive macroprudential polities and cooling measures. The high cost economy marks a shift towards a higher value added economy; but this has created a distribution of wealth towards the asset rich. High inflation in the context of stagnating productivity and wages – driven in part by high rates of immigration of low skilled workers from 2006-2012 – has led to major distributional impacts on the poorest in society, which have not yet been fully explored in a detailed study. In sum, inflation over the period was driven mainly by accelerating population growth – which overburdened existing infrastructure – and rising land use costs caused by global liquidity, supply-demand imbalances and institutional shifts in ownership and management of key resources. Other contributory factors included rising commodity prices, and in particular energy prices, which increase the costs of doing business. Based on our studies, several areas of concern for further discussion and research have been raised. These include the optimal level of public ownership of commercial spaces; the role of economies of scale and market structure in firm mark-ups, particularly in the case of dominant firms in a localised market; and the use of cost-function analysis to assess the dynamics of input substitution in relation to changing business cost structures. -
The current global economic slowdown is unprecedented in scale and has severe implications on policy formulation among emerging market economies. A prolonged period of sub-par growth driven by the substantial weakening of the financial sectors will have multiple effects on these economies. In this article we shall explore the transmission mechanisms through which the global crisis impacts emerging market economies, particularly South Asia. After studying the shock amplifiers and shock absorbers present in South Asia we offer some crucial policy suggestions. In the short term, with inflation under control, aggressive monetary policy easing would be appropriate. This should be complemented by cautious fiscal stimuli. Material currency devaluation should be considered only in the event of clear misalignment. Policy coordination at the regional level should also be practised. In the longer term, structural enhancements such as increased economic diversification, infrastructure development and augmented regional integration will be the primary tools to help bolster resilience against future external shocks. Manu Bhaskaran is the President and Director of Centennial Asia Advisors Private Limited, Singapore. -
This book determines what Asia as a whole is capable of achieving by the year 2050, and the related policies and reforms that are required to reach its development potential.
