Retail, as we know it, is dead. With online shopping taking root, our shopping centres are emptying out. But the problem goes beyond a mere shift in consumer behaviour. High rental and other business costs are the bane of many a retailer.
Take it from someone who is intimate with the industry: Cathay Organisation's executive director Choo Meileen. Ms Choo pointed out that private developers and landlords have to bear the high costs of development such as submission fees, fees to engineers, and development charges to the Government. “It is not the landlord who is the beneficiary of all these fees and costs,” she said without mincing words, “it is the Government.”
As a result, brands such as Marks & Spencer, John Little and Coca-Cola have moved out to cheaper locations in the region. Local food chains like Sakae Sushi and Baquet Foodcourt have also had to shutter, or at least close multiple outlets in Sakae's case, due to high costs.
In the oil & gas sector, between 10 and 20 multinationals – including Subsea 7, McDermott, Technip, and Saipem – have made the exit to Malaysia over the last few years. All cite cost as the primary driver behind the exodus.
Not far behind are the pharmaceutical companies. In the last 5 years or so, Eli Lilly, Pfizer, GlaxoSmithKline, and Novartis have all left the island.
Banks are also down-sizing or shipping out. In recent months, ANZ, Barclays, Standard Chartered, HSBC, the Royal Bank of Scotland, Credit Suisse, Deutsche Bank AG, Goldman Sachs, and ING have trimmed their operations in Singapore.
All this has hit office rental hard. In 2015, new office leases declined by more than 50 percent.
Runaway costs don't just affect businesses. Singaporean households increasingly find themselves struggling in debt due to high living costs here. Household debt in Singapore has grown dramatically in recent years stemming mainly from housing loans.
As a result, nearly half of Singaporean households either have little or no savings. These families, according to the CLSA (Credit Lyonnais Securities Asia), “do not have enough funds readily available to cope with unexpected financial expenses” such as a sudden medical crisis or retrenchment.
On top of this, a majority of older Singaporeans, feel that they will be unable to pursue a secure retirement with their current savings and investments. Only 36 percent of Singaporeans between 40 and 60 are confident that their savings are enough for retirement.
As for younger Singaporeans, a shocking 80 percent have no savings at all. A study by DBS-Manulife revealed that “the average Singaporean graduate spends 40% of their salary on rent, while another 9% is spent on student loan repayments”.
Young or old, middle- or working-class, most Singaporeans have it tough. And if you think that there's always your HDB flat to fall back on as a nest egg, then there's a businessman in Nigeria who has a million dollars he wants to transfer to you.
When he was prime minister, Mr Goh Chok Tong assured Singaporeans that “[i]t is in your interest to ensure that the value of your flat continues to rise.” Translation: Vote PAP. “Every 10% increase in the value of your flat means a huge increase in several thousand dollars in your wealth.” Yes, and elves are feverishly helping Santa assemble toys in the North Pole.
The minister in charge of public housing, Mr Lawrence Wong, brought home reality when he recently admitted that as HDB flats aged, their prices would diminish until they are worthless upon the expiry of their 99-year lease.
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And so just like that, Singaporeans' long cherished dreams of monetising their property, whose value they thought would forever be on the ascendance, came to a crash. In the meantime, retirees (and soon-to-be retirees) are still saddled with the unedifying truth that they don't have enough funds to retire on.
The picture gets grimmer. As China embarks on its Belt and Road Initiative (BRI) carving out alternative trade routes aimed at by-passing Singapore, our pre-eminence as a trading centre will rapidly diminish. As it is, ports in Shanghai, Shenzhen, and Tanjong Pelepas are more productive than ours.
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Then there is the offshore and marine industry. Once a powerhouse of our economy, the sector is presently exhibiting all the vitality of a sloth. As oil prices fell and off-shore drilling decreased, rig builders Keppel Corp and Sembcorp Marine took a direct hit in their bottomlines. In the haunting words of Keppel's chief Mr Loh Chin Wah: “What we are going through is a very long harsh winter.”
Our status as a premier airhub is also being eroded. With the majority of humanity amassed north of Southeast Asia, travellers are increasingly using Dubai instead of Singapore as the transit between Asia, Europe and North America. Improved technology will also allow aircrafts to embark on long-haul, nonstop flights that will by-pass Changi Airport.
Additionally, Chinese and Middle Eastern airlines have surpassed Singapore Airlines (SIA) in terms of passenger load and quality of service. SIA came in behind Qatar Airways in the best airlines' ranking. As this Bloomberg report warned: “Intense competition from Emirates, Qatar Airways and Etihad...has crushed profits at Singapore Air.” Our flagship carrier sank into the red with a loss of $138 million in the quarter through March this year, the first time since 2012.
These developments have conspired to deliver the worst economic situation here since 2009. But unlike the 2008 global financial meltdown, there is no international crisis this time around.
The employment figures make for depressing reading: There were nearly 20,000 lay-offs in 2016 pushing up the unemployment rate to 2.1 percent, the highest since 2010. The number of degree holders who were long-term unemployed last year (those who could not find work for at least 25 weeks) was highest since 2004. This does not include the 10,000 people who have given up looking for jobs. More than 50 percent of residents could not find a job within six months of being laid off – the first time the proportion exceeded this level in seven years.
The situation for PMETs (Professionals, managers, executives and technicians) and degree holders is worse: their re-employment rates are only 43.9 percent and 42.5 percent respectively. PMETs formed three-quarters of those laid off in the fourth quarter of 2016. Many have resorted to driving taxis as a fallback. But even this option will disappear as transport companies turn to self-driving vehicles in a few short years from now.
The future would be less dispiriting if the government had a game-plan. Instead of coming up with bold and creative solutions, the PAP cobbled together yet another committee – the Committee for Future Economy (CFE) comprising five cabinet ministers and 30 committee members – that produced a publication that was effectively an old report that had undergone a botox treatment.
The CFE's recommendations were widely panned by experts as a rehash of old solutions that had been tried and found wanting. Economics professor Dr Linda Lim said that the solutions proposed by the Committee are “exactly the same” as the ones in years past: the Strategic Economic Plan in 1991, Committee for Singapore Competitiveness in 1997 and the Economic Review Committee in 2003. “Essentially, [the CFE report] is saying the same thing in different words,” she noted. Economist Mr Jason Tan wrote that it is “disconcerting” that the Committee “cannot come up with refreshing policy directions to bring Singapore forward.” Former Today and The New Paper editor Mr P N Balji lamented that the report “is a reflection of how broken the top-down system of economic development has become.”
For example, SkillsFuture, a key feature of the CFE's recommendations, is a scheme designed to enhance innovation and productivity. But the initiative is just the latest in a long line of dubious projects on which the government has spent more than $20 billion to little effect. A 2017 survey showed that among 11 advanced economies, Singapore came in dead last in labour productivity.
Then there is Orchard Road. The belt has lost its lustre in recent years as shoppers stay away and tourists prefer to do their buying in cheaper Kuala Lumpur and Bangkok. Minister for Trade and Industry (Industry) and co-chair of the CFE, Mr S Iswaran, proposed that we fully pedestrianise Orchard Road to rejuvenate the area. He forgot that the government did that in the past but abandoned the idea as crowds remained thin. Cathay Organisation's Choo Meileen had this to say: “Unless the root of the problem [of unaffordable rent] is addressed, all the money that is going to be spent on pedestrianising, bringing in shows and so on is not going to save Orchard Road.”
As for China's BRI threat, all the CFE could muster was to propose building a “next-generation” seaport in Tuas which, according to the planners, will consist more than just ships and containers. Cafes and retail stores providing lifestyle activities will be incorporated in the sprawling terminal to attract crowds.
First, if people are forsaking Orchard Road right smack in the heart of the city, what makes the authorities think that they'll take to the far edge of the island to visit the same shops and dine at the same eateries? Second, the government is silent on how it would respond if and when China re-directs its vessels (to which the majority plying the Malacca Strait belong) to alternative routes and ports. If there is a significant reduction in ships calling on the port, our economy – let alone the Tuas terminal – will be in great peril.
Clearly, the PAP is lost. Its top-down, state-directed, cronyistic, and extractive-rentier economy – an off-shoot of the one-party rule that has dogged Singapore for more than half-a-century – has proved to be ill-suited to a changing world economy where inspiration counts more than perspiration.
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Singapore desperately needs a shift in our economic paradigm to one where innovation and inclusiveness is prized, where creative destruction continually disrupts and then regenerates growth and development, and where people are informed and willing to take risks.
To bring about such changes, we require an enlightened political leadership that is genuinely people-centric, transparent and, ultimately, democratic.
Don't hold your breath, though. Mr Ong Ye Kung, a contender for the next prime ministership, has signalled that one-party rule should continue in Singapore. Recent machinations demonstrate the PAP's intent. The recent somersaults and contortions of logic to justify the change of the Elected Presidency rules, the continued legal action against activists and bloggers, and the proposed changes to media laws ostensibly to counter “fake news” are some instances of the further tightening of political space in Singapore.
In other words, the party will drag the country down before it relinquishes its hold on power.