What is Meritocracy?

The US Fed Chairman, Ben Bernanke, recently gave a speech to the graduating class at Princeton.    He shared 10 lessons, and it was No.3 that caught my eye.   Here is an excerpt:

“3. The concept of success leads me to consider so-called meritocracies and their implications. We have been taught that meritocratic institutions and societies are fair. Putting aside the reality that no system, including our own, is really entirely meritocratic, meritocracies may be fairer and more efficient than some alternatives. But fair in an absolute sense? Think about it. A meritocracy is a system in which the people who are the luckiest in their health and genetic endowment; luckiest in terms of family support, encouragement, and, probably, income; luckiest in their educational and career opportunities; and luckiest in so many other ways difficult to enumerate--these are the folks who reap the largest rewards. The only way for even a putative meritocracy to hope to pass ethical muster, to be considered fair, is if those who are the luckiest in all of those respects also have the greatest responsibility to work hard, to contribute to the betterment of the world, and to share their luck with others…”

When I was growing up, my family, like many others, was poor.   But like many others, we have seen our lot improve tremendously by reason of the education and opportunities we received.   So, I always believed strongly in the concept of "meritocracy".   Except, I never thought deeply about what it really meant.   To me, it was always about your rewards being determined by how hard you worked.   But, it is not that simple.

Recently, some have questioned whether meritocracy is truly fair.   As Bernanke questioned: “fair in an absolute sense?”.   Of course not.   But we need to compare something with something.    To compare meritocracy with a system of absolute fairness and then criticise its shortcomings does not advance the debate because no system is absolutely fair.   At the moment, meritocracy is the fairest and most efficient system we have. 

But to deal with its undesirable effects, we have to recognise its limitations.  One is what Bernanke pointed out – that the success of an individual may have as much to do with luck and happenstance.   Another, as pointed out by President Obama in an election speech (for which he was attacked), is that an individual’s success is not entirely the result of his own work, but the support he receives from those around him.    I would not be where I am today but for others - the great teachers I had, the Foundation which helped pay my university fees, my mentors who taught me the practice of law, etc.    The list is long.

Everyone who has succeeded has received help, and also has had some measure of luck.    Seen from this perspective, the call for those who have done well to contribute more is a powerful one.     Such debates are often reduced to discussions on taxes and redistribution.   In Singapore, there is a good amount of redistribution.   For example:

(a)  about 70% do not pay income tax.   In fact, 20% of households account for 80% of income tax paid;

(b)  about 85% of GST is paid by the top 40% earning Singaporeans and foreigners; and

(c)   middle income households will receive $1 in Lifetime Benefits for every $0.80 in Lifetime Taxes they pay.  

Nonetheless, income inequality is an issue and we must do a better job of helping those who get less.   We should have constructive debates about whether there should be greater redistribution and, just as importantly, how we should do it so that we continue to reward work, enterprise and risk taking. 

But the debate should not be dictated by numbers alone.    It should be about the kind of society we want.   We should recognize that we become a better, stronger community where there is incentive to succeed, and at the same time, the weaker amongst us continue to have the opportunities to forge a decent living.  

The problem with much debate in Singapore (and elsewhere) is that it often involves people criticising the current, but not dealing with, or being full and frank about, the risks and problems of the alternatives they are advocating.   They make nice-sounding statements, but avoid the difficult questions.    We are not dealing with academic matters, and there are no prizes for best speaker or the funniest put-down.     Decisions we make affect the lives and futures of real people, and we must never forget that.      

What can we afford to lose?

A couple of weeks ago, a college friend of mine lost his teenage daughter. Cancer is not supposed to happen to someone so young. My friends and I are at the age where we are losing our parents - I lost both of mine some years ago. To lose our children is not something we even dared think about.

 

I attended the service the night before the funeral. At its close, my friend gave a heartfelt speech. I was struck about how positive he was. Little mention of pain and suffering. There was no blame, regrets or recriminations. He shared the good things about his daughter's life and the family's happy moments together.

 

It got me thinking about how little attention we pay to the important things in our lives, and how we often forget to acknowledge the good we have. A friend of mine once remarked that when a group of Singaporeans get together, they will inevitably find something to complain about. It would appear that the love of good hawker food is not the only tie that binds. Are we really so negative in our outlook?

 

So what is "important"? I applied a simple test for myself - what could I lose which would change my life permanently for the worse. I went through a whole list of bad events (in no particular order):

 

- lose my job
- lose my home
- lose my parliamentary seat
- lose my health or mobility
- lose my money
- lose my bicycle/car
- lose my phone etc

But all these setbacks can be overcome, and many people have done so. I realized that it really came down to just one thing:

 

- lose my family (including friends I consider part of my family)

Nothing else is really "important". They are irreplaceable, both in substance and in my heart. If we lived our lives for our family, and they did the same for us, it is difficult to think of any obstacle that cannot be overcome.

HDB for all Singaporeans

I read in papers that Minister Khaw is thinking about doing away with the income ceiling for new HDB flats. I am in favour of that. In fact, I have suggested the same thing in Parliament: see https://www.facebook.com/notes/hri-kumar/executive-condominiums/504055682974367.

Why do we have income ceilings?

Initially, it was thought that public housing should be for some, not all, Singaporeans. Those who could afford it should buy private housing. HDB imposed an income ceiling as a way of separating between those who could not afford to buy private housing, and those who could.

The income ceiling is simple to administer, but is a blunt tool. It does not take into account the expenses the applicant may have eg. where they have a large family, medical issues or elderly parents to support. Further, the high price of private property makes it difficult for those just above the ceiling to buy a home.

Besides, a Singaporean couple who earns more than $10k or $12K a month may still want to buy public housing because they want to be frugal or consider that HDB estates provide good value for money, have many amenities and are well-maintained. They may also enjoy the experience of living in a HDB estate - a very Singaporean experience. Why should they be denied?

Some people say that Singaporeans who earn more than $12K a month should not receive subsidised housing. Others say that the additional applicants will cause a longer wait for everyone. These are legitimate concerns, but any policy will have its downsides. Never believe anyone who claims he has a perfect solution.

How do we balance everyone’s concerns?

The question always is which policy does the greater good and has the lesser evil.

I think the greater good is to help all Singaporeans, regardless of income levels, buy affordable housing so that they can better plan for the future.

But we should not stop there. Consistent with our objective of encouraging home ownership, we must discourage speculation or the use of HDB flats as investments. We should lengthen the Minimum Occupation Period and review the rules which allow renting out of entire units. If you do not need to live in your flat, do not buy one or sell it to someone who does.

True, the rental issue is complicated. We are at a time when demand has outstripped supply. There is also a sizeable part of our population that requires rental accommodation, and for whom buying a flat is simply not feasible. There are also many Singaporeans who derive a good income from being landlords.

One solution may be to impose some form of rent-control for HDB units to make it less attractive as an investment, but will still allow owners to rent them out. But that gives rise to other problems.

These are difficult questions. I am sure there are many different opinions on how we should deal with this. As always, I welcome your views.

In my next post, I will deal with a disturbing aspect of subsidised rental housing that is on the rise.

COEs and the Ownership of Cars

The COE system was introduced over 20 years ago, but cannot shake off controversy. Never has so much been said by so many over so few pieces of paper.

Most people accept the logic in restricting the number of cars on the road and the need to keep traffic moving smoothly. But no one likes to pay more. As a result, we have heard many suggestions on how to change the system, usually with a view to keeping COE prices low for some. I say “some” because there is no one suggestion that benefits everyone who wants a car. So, we have had suggestions of balloting for COEs or allocating based on need. But these suggestions are also not without difficulties, such as defining “need” or determining how one person's “need” is greater than another's. Do those with elderly parents have a greater need than those with infants? What about those who have to work odd hours, or need to move around Singapore as part of their jobs? So long as we agree that car numbers must be controlled, there will be no solution that pleases everyone.

The real question is what is the Government's role when it comes to determining who gets a car? The problem is that there has been no consistent policy when it comes to cars.

When then Minister Dr Yeo Ning Hong introduced the COE system in 1990, he said that the rationale for having categories based on engine size was to “benefit the lower and middle income owners”. In other words, there was an element of social equity in the system. That rationale appeared to be premised on the fact that back in the 1990s, luxury car makers generally produced cars with larger engine capacities. But this has not been the case for some time. European emission standards and the introduction of forced-induction techniques (turbocharging / supercharging) has seen luxury car makers move into the small-car market. So, today, luxury car makers dominate the small car category as well. Lower and middle income owners no longer benefit. The original purpose of engine categories no longer applies. So, why do we maintain this system?

The latest changes to the ARF reaffirm the principle of social equity, making those who purchase large, luxury cars pay more. That is the intention, but what is the likely consequence? It may mean driving more people to the small car market, which will push up COE prices for that segment. And the latest MAS curbs on car loans will make it difficult for low and middle income persons to own cars in any event.

So is there a principle that governs car ownership? I don’t see any. I think we get into these difficulties because we try to fit different and sometimes conflicting principles of free market, social equity and financial prudence. It does not work, raises expectations and ends up frustrating many.

I therefore ask the Minister to review the system and the principles of COE allocation. It’s time to pull the handbrake on the current COE system, and send it back to the workshop for a complete overhaul. First, let us have simple and clear objectives which most, if not all, can agree to. Since we cannot please everyone, I suggest that instead of focusing on who gets a COE, we should look at what kind of cars we want to have on the roads. What kind of car exacts less cost on the rest of us, and benefits everyone more? The answer is simple: those which harm our environment the least.

Car should simply be categorized by their emissions, or other environmental factors. The Europeans have done this well. They are car manufacturers. Over time, they have enforced higher emission and other standards for their cars. The result is that European car manufacturers have had to step up their game, and today, most Europeans buy cars which are well engineered, cleaner and more fuel efficient, compared to say, American cars.

We do not manufacture cars, but with the COE system, we can effect similar change. The engine capacity of cars we buy should not matter. Neither should it matter if they are diesel, petrol, LPG or hybrid. Such cars occupy the same space and contribute to congestion. But it will make a difference if we promote cleaner, more fuel efficient cars. Therefore, substantially more COEs should be allocated to those which are environmentally friendlier, and a smaller number for “dirtier” cars. This will set a clear and defensible policy, and a send a strong message about what we value. It will also indirectly help those who can only afford to purchase smaller and cheaper cars as these tend to have lower emissions and be more fuel efficient.

My second point is about the timing of changes to policies. We have a habit of springing them suddenly on people, such as the recent curbs on car loans, and property cooling measures. This makes it difficult for individuals and businesses to plan, and where plans are affected, it causes frustration and resentment. Why can we not give reasonable warning so that everyone can plan and make informed choices?

I can predict the response - if we had given 6 months’ notice before imposing the loan curbs, everyone will rush to purchase a car in those 6 months. Yes they may, but so what? Those who rush in will know others will do so as well, and they should be prepared to pay more. Others can choose to wait the market out, in the expectation that prices will fall. For the rest of us, there will still be the same number of cars on the road.

The concern is for those who may over-extend their finances. That argument is over-stated. First, it will affect only a small group of car buyers because only so many cars can be purchased in that period. Second, even when there were no loan curbs, there were no significant numbers of defaults for car loans. Thirdly, and more fundamentally, Government should a step back and let people make their own financial decisions, even if it turns out to be a bad one. We cannot protect Singaporeans from every poor personal decision, and even if we could, we should not. Worse still, by acting without warning, the Government has, in the name of protecting some Singaporeans, affected others. It has caused frustration among individuals and companies planning to buy a car and who could well have afforded to service a larger loan, and businesses selling or holding stocks of cars.

We should give everyone more time to understand the new rules and their implications, work out their options and make considered and informed decisions. Such moves by the Government have real consequences on the present and the future plans of Singaporeans. The least we can do is signal early before changing lanes.

Executive Condominiums

The key to assessing the success of any policy is to distinguish the will from the deed. In other words, do not look at what the intention behind the policy is, but what its effect is. Nowhere is that more relevant than in public housing.

As the salaries of Singaporeans, especially professionals, rise, and as they marry later, a good number of couples will have combined salaries which will disqualify them from buying a new HDB flat. But at the same time, they find private properties out of reach. Executive Condominiums are intended to help this growing group.

The problem is that ECs are also an attractive financial proposition. Minister Khaw recently described the scheme as offering residents a Lexus for the price of a Corolla . That is a good analogy. But because it is such a good deal, those who could otherwise have afforded to purchase private property, are buying ECs as well. Some who cannot afford it are doing it with the help of parents or others.

The critical question therefore is whether ECs are only being sold to the class of people they are intended to benefit. The selling prices of ECs suggest that they are not. This is best illustrated by the recent sale of $2m EC penthouses. And even for more regular-sized units, prices have risen in tandem with the private property market.

You cannot blame Singaporeans for taking advantage of a good deal. Neither can you blame developers for high prices – they bid competitively for the land, they take the risk and therefore, they want to maximize their profits. Developers are not the least bit concerned that their units may not be affordable to couples who earn up to $12k a month, because that is not their only pool of buyers.

This also means that tax payer’s monies are effectively being used to subsidise the purchase of ECs for those who do not need a subsidy, and no doubt in some cases, to make a profit. Subsidies should be used to help Singaporeans buy homes, not make windfalls.

The Ministry has implemented measures to deal with some undesirable aspects, such as capping the size of EC units. However, that does not address the problem I have highlighted.

I accept that it would be difficult for MND to investigate the financial backgrounds of purchasers to assess if they belong to the class of Singaporeans we are trying to help. But if we cannot ensure that the objectives of the EC policy can be met, perhaps we should reconsider having the policy in the first place.

The problem is this concept of hybrid housing – public in some respects, private in others, and in the case of ECs, public evolving to private. Again, I understand the intention behind these policies to give Singaporeans more choices, and better quality of housing if they can afford it. But what is the result? In my division, there is a running battle between the residents and the developers of The Peak (DBSS) over quality issues. One of the residents’ complaints is that HDB is not more active in resolving matters. I can understand why HDB is not – because the contractual relationship is between the purchaser and the private developer, and HDB has limited powers to intervene. But as far as the purchasers are concerned, they bought these flats under HDB rules and restrictions, and deserve more help by the HDB.

The intention of DBSS was to provide Singaporeans with better quality of flats. What is the result? They pay high prices for flats, but end up angry and disillusioned; unhappy with their homes. They end up blaming those who were trying to help them.

I therefore urge the MND to government to focus on providing good quality public housing for the masses – for the benefit of most, Singaporeans. MND can offer a suite of choices with different sizes and amenities, but retain ownership of the process and the legal relationship with the purchaser. Let us keep separate private and public housing, and not have one morph into the other, so that everyone functions and benefits at the same level. Those who aspire something different should look to the private market.

At the same time, Singaporean couples who earn more than $10,000/mth should also have the option of public housing. To prescribe salary limits is too blunt a tool, as different people have different circumstances. Some couples have to take care of children and up to four elderly parents. There are medical and other costs to consider. Committing themselves to a large loan forces both to continue working, and does not allow the option of one of them stopping work or working part-time to spend more time with family. It also assumes that both will be able to keep their jobs for the tenure of the loan, which may not happen.

I therefore repeat the call I made some years ago to lift the salary limits for public housing, or at least set the upper limit at a much higher level. Since then, MND has raised it from $8,000 to $10,000. I urge it to go much further. Give more Singaporeans the choice of going public. Some may prefer to keep their expenses low. And at the same time, prescribe conditions which discourage gaming of the system. We have introduced measures preventing owners of private properties from purchasing HDB flats. The rule should work both ways. Any person who decides to purchase and live in public housing to take advantage of subsidies, should not at the same time complain that he is being shut out of the private market.

Budget Speech

During the Budget Debates in Parliament today, I gave a speech on NS and the thorny issue of integrating our citizens, new and old, PRs and foreigners in our society. My speech stemmed from my proposal for a national defence tax which I mooted online a few weeks ago.

I shared with the House what I learnt from you. Ultimately, as I said, something needs to be done about the current situation. In my speech, I outlined some measures that the government could adopt: promoting integration, sharpening distinctions, introducing compulsory service for PRs and dealing robustly and effectively with those who seek to undermine our efforts and values.

I concluded my speech with a personal anecdote about how proud I felt to be a Singaporean when my friends and I were recognized in Thailand as Singaporeans because of the racial diversity of our group. Somehow, where integration is concerned, we have lost our way. However, we should not shy away from this topic. It is time for the Government to take the lead on the national debate on integration, and to do so boldly.

Here is the full text of my speech.

Together

I am part of the post-65 generation of Singaporeans, born here after independence. I served my national service in the infantry. I carried my M16, wore my No. 4 and ate what the SAF optimistically called “combat rations”. I spent time in the soil of the jungles of Singapore and Taiwan with other Singaporean males, who have become my friends.

I view my NS with pride, just as I am sure many Singaporeans do. NS is a common touchstone for us. We will never do anything else quite like it for the rest of our lives. Even decades later, we talk about it with friends. It brands us as Singaporeans. When people talk about a “Singaporean core”, NS is one of the ingredients that lie at the heart of it.

Last month, I wrote a series of posts on my facebook page suggesting that we impose a national defence tax on non-citizens as a way of sharpening distinctions between citizens and non-citizen residents, and using the proceeds to benefit our NS men.

I was happy that my posts sparked a lively debate. It brought into focus the larger issue of whether Singaporeans, new citizens, PRs and foreigners are successfully integrating in our society, and the implications for us if they do not. The problem is that we have largely dealt with these issues on a superficial level.

What I Learnt from Singaporeans

I would like to share with this House some things I have been told online and in person in the course of the debate. I believe they represent the views of a good number of Singaporeans. They raise serious issues which I hope the Government will look into.

First, many Singaporeans recognise and appreciate the contributions of new citizens, PRs and foreigners. They have no desire to discriminate against them. They acknowledge that this country would not be the success that it is without their contributions.

Second, many want to see new citizens and PRs genuinely integrate better with Singaporeans and be part of our society. We want them to demonstrate that they regard this land as their home; that they believe in our cause; and that they too have a stake in Singapore’s future. What grates most on our nerves is the thought of those who seek the privilege of citizenship and permanent residency do so purely out of convenience or economic gain, and that they will abandon us at the slightest risk or sign of trouble.

That is why National Service is such an emotional topic. Doing National Service, or giving an undertaking that your son will do it, is a tangible demonstration of that commitment. Many talk about shedding blood, sweat and tears. But it means more than that. It forges a common bond which is unique to us, and in some ways, helps define who we are. There is also a real financial sacrifice. For men from poorer Singaporean households, it means two years of earning a nominal allowance when they could have joined the workforce and helped supplement the family income.

So it disturbs us when we perceive others avoiding NS by playing fast and loose with the rules, and taking easy rides in the system. That is the true cheapening of National Service.

Thirdly, most demand that those liable to do NS must perform their duty. It is not enough that NS-dodgers pay a penalty and are barred from returning to Singapore. We rather that they stay and serve with us. But we must accept the reality that some PRs will arrange for their sons to leave when they reach a certain age. Not a single person who has posted or given their views believes that the current sanctions against this are adequate.

That was why I proposed the National Defence Duty - as a practical response to a practical problem. We cannot force people to remain in Singapore who do not want to stay here. But we can make it so costly that they would think twice, three times before taking PR status or arranging for their child to dodge NS. As with all proposals, some liked it; some criticised it; some felt it did not go far enough. Some even accused me of proposing that PRs who were liable for NS be allowed to pay their way out of their obligation. Of course, I never made any such suggestion.

But one thing most appeared to agree on: something needs to be done. The status quo will not do.

An Action Plan

This issue should be tackled as part of a national effort to promote integration. We can and need to do a number of things.

First, at a macro level, we need to explain better the importance of keeping Singapore an open society with an open economy. “Singaporeans first” does not and cannot mean “Singaporeans regardless”. These issues are complicated, and frankly, we do not do a good job explaining things. This is sad because we have such a compelling story to tell. Neither will the approach that people should trust us because we know what we are doing. We cannot take the people’s trust for granted.

Second, we need to convince Singaporeans that Singaporeans remain central to Singapore and its future. This year’s Budget takes a step in that direction. More is being done for members of our Singapore family who are in need of more help – increasing incomes for low wage workers; securing their children a better education; helping the elderly age with more dignity. More is being done to share the prosperity that Singapore has achieved. We become a better, stronger society when the lot of all Singaporeans are improved.

Thirdly, while foreigners and PRs are important, we must also demonstrate that there are privileges in being a citizen. We have thus far largely dealt with this on a piece-meal basis, with different Ministries announcing changes or measures at different times, whether it is securing places in primary schools, differentiating medical fees or property ownership. We should have a comprehensive review of all these measures and look at how we can make changes on a fair and principled basis. Some have said that such a move would be xenophobic. By that definition, any privilege given to a citizen is xenophobic. Of course, it is not. It is legitimate for a government to draw distinctions between its citizens and non-citizens. In any case, I firmly believe most Singaporeans are not xenophobic. But they are genuinely unhappy because of perceived unfairness of treatment. We in this House need to address this squarely and rationally. If we ignore this, we will only give cause and strength to the less rational voices.

Fourthly, we should review our approach to granting citizenship and Permanent Residency. It has to be more than satisfying criteria and completing forms. I have a constituent who is Singapore citizen. His wife, a Malaysian, gave birth to their son in Malaysia, and he became a Malaysian citizen. The boy is now about 20 years old, not well educated but hard working and wants to improve himself. He has been working as a cook in Singapore for about 2 years on a work permit. The boy wants to live in Singapore with his father, become a citizen and do NS. His application for PR has been rejected several times. Why? Is it because of his lack of education? But he is the son of a Singaporean, who wants to live with his father and do NS, and does a job which Singaporeans apparently shun. Why do we regard him as less qualified to be here compared to sons of PRs, who may or may not choose to stay and do NS when they come of age?

Fifthly, we should have new citizens and PRs perform some form of compulsory service. If NS is not suitable by reason of age or other circumstances, other forms should be introduced. This can be for short periods annually, much like how Singaporean men do reservist training. The point is not to discourage foreigners from sinking their roots here, but to emphasise that they now have a stake in this country as well. One commenter on my facebook page mooted the idea of having them serve in the Volunteer Special Constabulary (VSC). It is worth exploring. There are even practical benefits as it helps with the current manpower shortage in the Home Team. In fact, there are currently 52 PRs serving in the VSC. At a recent award and appreciation ceremony, I met one of them, Cpl (V) Yanase Yoshitaka, a Japanese who has lived here for 12 years. He was proud to serve in the VSC, and told me that he wanted to become a Singaporean. Others can do the same. Give them a chance. They may surprise us.

Finally, we need to have a more robust and effective response to those who undermine our efforts to integrate. I have spoken about PRs who send their sons away to avoid NS. We also need to deal with the allegation that some employers favour hiring foreigners at the expense of Singaporeans, or retrench Singaporeans before releasing their foreign staff. The story is always different depending on who you speak to – employers who say they cannot find Singaporeans despite their best attempts or that Singaporeans are unrealistic about pay and benefits; Singaporean employees who say they have been discriminated against because their employers want to hire cheaper foreigners or help their fellow nationals.

I know of cases where my constituents have gone to the CDC looking for jobs, only to be told that nothing was available, or to be sent on interviews which proved a waste of time. This should not be happening in our tight job market. What is the real problem? Let’s get to the bottom of it and show where the truth lies.

Some have mooted rules or laws to compel employers to prove that they cannot find Singaporeans before they are allowed to bring in a foreigner. We should find simple ways of doing this. The CDCs and NTUC can help by offering a comprehensive job matching service, not just for low income workers, but PMETs as well. To make sure that efforts are sincere, we can have them certify that job matching has failed before an employer can make an application for a foreign worker. In this regard, an employer who has proven that he is unable to secure a Singaporean for a reasonable wage should be given some leeway to bring in foreign workers. For some industries, you can only improve productivity so far, and workers are needed to keep the business going.

But it cannot all be one way. Singaporeans must also bear responsibility for themselves. Singaporeans who unreasonably refuse to take up jobs or to improve themselves should not expect to keep getting support from others, whether through the Budget or otherwise.

One Day in Bangkok

Integration is a long and complex journey. It was something that Singapore did very well. In one of my first speeches after becoming an MP, I told of an encounter which made that clear to me. In 1991, shortly after my final university exams, I undertook a backpacking trip with some of my friends around Asia. On a hot day in Bangkok, my two Chinese friends and I walked towards a street vendor selling drinks. Before we could say a word, he looked at us and said “Singapore”. We asked him how he knew. He said: “Different colour, walk together; must be Singapore.”

We laughed at the incident, but you know, I have never felt prouder being a Singaporean. I hope always to feel that way.

Conclusion

We have lost our way somewhat on integration. It is not too late to get back on the right road. The Government must lead the national debate on immigration and integration. It should come up with a comprehensive package which Singaporeans, PRs and foreigners can accept as sound, compulsory community service, monetary and non-monetary measures, carrots and sticks.

We should not avoid this sensitive topic, but embrace it as part of the evolution of our young country. It is a fallacy to think that a country can stand still, frozen in time, and never change. Change is inevitable, and change can be a good thing, provided we manage this process fairly and rationally, involve Singaporeans, and most importantly, act in the interests of Singapore.

We are very different from the Singapore of the 1970s and we will be a different Singapore in 2030. Nonetheless, we must remain a multi-racial, multi-religious society defined by values embodied in our pledge of unity, democracy and equality to achieve happiness, prosperity and progress for all. 

Letter published in the Straits Times on 25 Feb, in response to its editorial on Saturday

Below is my letter published in the ST on 25 Feb, in response to its editorial on Saturday:

The editorial "NS Tax would cheapen a solemn duty" (ST 23 February) says all the right things, but avoids the difficult issues.

The editorial agrees with me that distinctions between Singaporeans and foreigners "can be sharpened", but warns against the danger "of going too far". But what is "too far"? The editorial also acknowledges the problem I highlighted of PRs skipping their NS obligations, and states that "measures ... can be tightened". Again, the crucial question is how?

Motherhood statements are fine, but the devil, as always, is in the details.

It is also wrong to label proposals to sharpen the distinction "xenophobic", because that assumes that current policies are already fair and incapable of rational change. We should not resist reviewing and changing existing policies, provided such changes are logical and principled, and in the interests of Singapore.

My proposal of a defence tax is a specific proposal. It does not put a price on NS obligations. NS obligations are important and must be enforced by law and punishment if necessary. But what about those who escape their NS obligations or who have no such obligations? They benefit from others doing NS. They should contribute too.

Taxation is not a unique solution. A Swiss citizen who is liable to perform military service, but is unable or fails to complete his obligation must pay an exemption tax. It is a practical response to a practical problem. It is not seen as cheapening national service. My proposal does not go so far as the Swiss. I do not agree that anyone should be able to avoid NS obligations by making payment.

It is easy to use a loaded word such as "cheapen" when talking about taxes. But it is unfair. If we offer tax breaks for families to have kids, are we "cheapening" children? And did the ST label the $9000 grant to NSmen announced by the Prime Minister as cheapening NS? The fact is that taxation is a legitimate means of distributing benefits and burdens. All I am suggesting is to have foreigners and PRs share the burden that our NSmen already shoulder."

PS: The Budget just delivered by DPM Tharman evidences a significant shift in our taxation policy. Those who are wealthy will pay more in taxes to help those who are less well off. Taxation has long been used as a tool to effect social change, and we are likely to see more of such changes in the future.

National Defence Duty – A Brief Rebuttal

There were two main criticisms of my proposal: it is xenophobic, and it “cheapens” National Service placing a monetary value to its performance. Let me briefly deal with them.

Xenophobia

Some label the proposal xenophobic because it is “populist” and “pandering”, and pits Singaporeans against others. The problem with this argument is that it makes the fundamental assumption that the situation we have now is already equitable and therefore any change can only be for populist reasons.

I think many will disagree with that. Indeed, the responses that have been posted debunk any suggestion of xenophobia – see my post “National Defence Duty – A Consolidation”. Most want a re-balancing, but in a principled way that will enable better integration and that those who come to Singapore simply for economic reasons should acknowledge that they are able to do so because of others who do National Service. I do not see that as being xenophobic.

The question is therefore simple: is the current situation equitable? If yes, we leave things be. If not, how can we make it fairer? And to answer this question, we need to have practical and effective solutions, otherwise the issue will not be resolved.

Money

Having spent 2.5 active and many reservist years in the infantry myself, the last thing I want to do is to “cheapen” National Service.

Taxing foreigners to make up for their ineligibility to serve NS does not equate to putting a value on NS. Neither does giving monetary rewards. But we do that anyway, such as giving reservists a modest tax break every year. We all know it is symbolic and no one argues that it puts a value to, or cheapens, reservist duties.

Indeed, placing an economic value on National Service is not a new concept. As one commenter pointed out, in Switzerland, any person who does not fulfil his military service obligation must pay an exemption tax of 3% on his taxable income each year. It is not about valuing the service or buying your way out. It is about giving recognition to those who do their duty, and tax breaks, benefits and penalties are often used as a tool to facilitate that. We also do it for other causes too, like parent relief for our income tax. No one argues that values or cheapens the obligation of looking after loved ones.

I had in my first post talked about the real and significant economic cost which Singaporean men pay when they perform National Service. Most of us served because we believed in the cause, and we do not begrudge that cost. That is however, a separate issue from getting those who do not perform National Service, but benefit from it, to contribute like the rest of us, albeit in a different way.

As I said in my first post, it is not a perfect solution. But it will be difficult to find a practical and effective solution with universal appeal, as the many different views I have received amply demonstrate.

Thanks for reading.

National Defence Duty – A Consolidation

My suggestion of a national defence duty has sparked a lively debate. I would like to thank you for the many comments and suggestions you have posted. There has certainly been a wide spectrum of views.

Notably, very few have suggested leaving things as they are.

My takeaway so far is that while most believe the system can and should be made more equitable, it is also important that we improve our efforts to integrate Singaporeans (new and old) and non-Singaporeans. As part of that integration, we would like to see new citizens and PRs demonstrate that they do not regard Singapore simply as an economic opportunity to be exploited. That is why National Service touches a raw nerve – it is the clearest marker we have of loyalty and commitment. It therefore rankles when we perceive others as having an easy way out.

It is clear that most want some form of re-balancing. The issue is what form that should take - whether monetary, compulsory service or a combination of both. The sense I get from the responses is that it should be different for different groups: more emphasis on compulsory service for PRs and new citizens, and more emphasis on monetary for foreigners (excluding low wage foreign workers).

There has been confusion of terms – with some equating “foreigners” with “new citizens”, and applying them inter-changeably. By “foreigner”, I mean those who are here temporarily, on an employment pass or work permit etc. I think it is impractical to insist that such a person does some form of compulsory service. They are, by definition, here to exploit economic opportunities. So, any contribution they make should likewise be financial.

There is the question of PRs (or their sons) who are liable for NS, but avoid it by leaving the country before enlistment age. While we would prefer them to stay and do National Service, we cannot stop them from leaving. If we are prepared to accept this, we need not do anything. If we are not, we should have a practical and effective response. That is why I had suggested imposing the duty/tax, as this imposes a significant cost on that decision to leave. Unfortunately, some have misrepresented this as a way to allow PRs to pay off their obligation. The proposal keeps the existing sanctions and imposes additional financial measures so that they and their parents think harder before taking that step. Some have asked “why always talk money?” – but what are the practical alternatives? One is to forfeit the parents' PR status. That is a serious step which requires more consideration.

Finally, there are some who say that if the aim of the proposal is to give more benefits to NSmen, can’t the Government simply do that now? That does not address the issue of equalization. In any event, the point is not inconsistent. Giving more benefits means all of us paying more, which is fine. The question is whether those who do not sacrifice their time should be asked to contribute more financially.

Ultimately, it is for Singaporeans to collectively decide what works best, and it is clear that no single proposal will be immune from criticism or disagreement. I hope to hear more of your thoughts.

I share below a small sample of the responses:

Dil Preet: The suggestion by mr ashok kumar about reducing or eliminating income tax for parents of singaporean males sounds better. Or maybe for NS males who enter the workforce, no income tax for first couple of years of work or reduced fee rates in local unis should they go to uni after ns?

Ed Chan: Here are some suggestions of penalties that would really hurt under current context,

- No access to national universities or to enterprises set up or jointly set up by local national universities, only allow to access private educators. And even then, NSmen get priority.

- Families with children who escape NS should be required by law to take up private property and not be eligible to stay in HDBs, DBSS and ECs even under the private market.

- Families with children who escape NS are ineligible to any tax benefits or business subsidies or future handouts from the government.

- Families with children who escape NS shall pay higher fees for all government procedures and applications

- Companies who employ those who escape NS by paying this NS tax must ensure that all NSmen applicants are hired first or face stiff penalties and potential loss of business license.

Khoo LW: Also cancel long term visit pass for parents/parents inlaws of FT/PR. It should only be for spouse and kids.

Nick Lauw: When someone makes the choice to become a PR here, he should implicitly agree to bear the physical burden of national defence. I think that a form of physical national service should be implemented for new PRs (not just their children). Surely even PRs can contribute for 2 weeks a year while they are below 40 to things like civil defence or acting as volunteer police officers. Prior to doing so, they can undergo a basic course, which can last 1 or 2 months that can form part of their obligations. If that is deemed too onerous, perhaps PRs can spend the 2 weeks helping out at charities or the Peoples Association

Serene Chew: Make them do a compulsory no. of hours of community service instead.

1) This is more meaningful than money. This will let go some of the anger from the locals towards new immigrants.

2) It will also let the new immigrants understand and know more of our local cultures and help in their integration.

3) Also, doing community service is not sexist. By asking PRs to do NS you are targeting only the males. Why should the female PRs get away with it without doing anything to contribute to the country?

Randy Chan: Having a combination of tax & service (1 yr min) for PRs might bring better balance.

Dexter Boo: Sir, I would like to suggest that PR will pay this tax plus they will do a modified term of NS, in terms of weapon handling and range shooting be whether its from SPF/SAF. They must also serve community service like 1) additional watch group for the neighbourhood spp. 2) A quota to be completed by reporting defects in the ward they are staying weekly/monthly (eg - report of lost drainage cover, building defects etc) and areas the TC needs to touch up, may it be in terms of cleaning or landscaping. 3) attend a weekly/forthnightly/monthly meeting organise by cc to be introduced to our singapore culture and a chance for them to show us their culture. Once the participant had completed his terms of duty(2 years or more) the amount of money he paid for this tax will be returned to him, or if he had a son a certain part of money will be retained and this amount of money will be confiscated if his son escaped from NS. If he is not married but had serve the service term, the money will be returned to him but on the birth of his son, the tax will commence.

Peter J Edwards: I think you do not appreciate just how unpredictable and xenophobic proposals like this make Singapore appear to Foreigners, especially those who have been in Singapore a long time. This gradual but ever increasing lack of predictability and hostility to foreigners is one of the reasons I left the Singapore Government service to pursue opportunities in the much less hostile, more predictable and more welcoming country immediately north. New policy changes affecting foreigners every year doesn't make them become citizens , it makes those with the talent and skills to work elsewhere pick up and leave, because such changes can have a critical impact on costs that Singaporean employers fail to appreciate. Suggestions like this only increase foreigners concerns about new tax or restriction will be passed on this year. When will the PAP learn that there is a difference between being pro singaporean and anti foreigner. Immigrants like stability , and choose singapore because of that stability, however with every passing year that stability is being eroded by populist xenophobic policies like this.

Chew Jing Wei: Implement this and Singapore might just lose its status as a tax haven in the eyes of the USA and significantly reduce its attractiveness to expats, investors and overseas students.

I suggest Nair to seriously consider the root cause of such discontentment - widespread xenophobia - rather than simply tackling one of its many symptoms. Treating this fear would be unpopular and choppy, but is essential for Singapore to ride the waves of globalisation a la New York and London. Singapore must not fear stepping out of its comfort zone.

National Defence Duty (2)

Thanks to all who have responded.

I thought it might be useful at this stage to clarify a couple of things.

One is the assertion that my proposal enables rich PRs to avoid NS. It does no such thing. All those who are obligated to do NS must do NS. That would include sons of PRs. The question is what happens if their parents send them away before they reach enlistment age? This does happen. The proposal provides an additional disincentive against them taking that way out. It does not encourage them to do so.

Some have also confused new citizens with foreigners. There is merit in the argument that new citizens should serve some form of National Service, which can be modified depending on circumstances. My proposal however, deals with foreigners, not new citizens. There is no question of foreigners buying their way out of NS, as they are not liable in the first place.

Some have said that it would be wrong to put a price on serving National Service. That misreads the intent and substance of the proposal. I will deal with this in detail at a later date.

What is important is whether we think the current situation is acceptable, and if not, how it can be improved. I accept that some will not like my proposal. If so, I would like your views on what we can do better.

Please keep the comments coming.

Thanks

Time For A National Defence Duty

In my speech in the White Paper debate, I said that one of the things we need to do going forward is to create sharper distinctions between Singaporeans and others who live or do business here. I had not mentioned any specific proposals as I did not want them lost in the wider debate. I offer one now.

The National Defence Duty

I propose levying a National Defence Duty on PRs and foreigners living in Singapore. I should make clear that it is not my intention to add to any xenophobic hysteria. As I will explain, my proposal addresses a current imbalance.

We know the sacrifice all Singaporean males make, spending two years of their lives doing National Service, and doing reservist training for several years after that. It is a sacrifice not just of blood, sweat and tears. There is also a significant economic cost we pay - two years of our lives, at the time when we are about the join the work-force or enter university; perpetually two years behind our female peers in terms of pay, experience and job opportunities; two years behind in the property ladder and therefore having to pay higher prices; less attractive to employers because of reservist commitments. This has more pronounced disadvantages for poorer families. At the time when their sons reach a working age and ready to contribute to the families' finances, they spend two years earning a modest allowance. They cannot even work part-time to supplement the family income.

I believe the majority of us accept this as something we must do for the good of Singapore. And having a strong armed forces, with a significant reserve force, has no doubt contributed to the security and growth of Singapore. The same is true of having strong police and civil defence forces.

The thing is everyone living in Singapore benefits from this sacrifice - including PRs and foreigners. We cannot expect equal treatment as it is unrealistic and unworkable to have foreigners do National Service. And while we can impose National Service obligations on PRs, there is practically little we can do if they leave Singapore before enlistment, never to return.

My proposal is therefore a simple one. All PRs and foreigners must pay additional income and property tax to be called a National Defence Duty. In short, we do duty, they pay a duty.

The rationale is simple - since PRs and foreigners cannot contribute manpower to our SAF and Home Team, they make a financial contribution to the protection and preservation of their lives, families, jobs, investments and properties.

Those who have sons who are liable for NS will be exempted. Those who send their sons away before enlistment will have to pay back- taxes and penalties, over and above the bond which is forfeited. Likewise, those who give up their PR status. This should take care of what I think is a current anomaly. When PR parents send their sons away before enlistment, it is the son who is penalized in terms of not being able to return. I think this is too small a price to pay. More importantly, the decision would have been made by the parents. They should pay a cost for that decision. Paying back-taxes and penalties is a fair solution. The PR parents may of course decide to leave Singapore for good without paying. But such a move would be a real cost to them as well as that would mean ending their careers or businesses here. They are not likely to take that decision lightly.

The National Service Trust

However, the revenue earned should not simply go the general state coffers. There should be a real and direct benefit to National Servicemen.

I therefore propose that the revenue earned be placed in a National Service Trust. The trust funds can be used to supplement the allowance of NSFs from poor families. It should compensate NS men who have been injured in the line of duty. It can even provide an income for a period of time to families of NS men who have been killed. That will never compensate for their loss, but it may make a real and tangible difference to families who have been deprived of their father's or son's contributions. It will also give confidence to our NS men that should anything happen to them in their training, their families will be taken care of. If there are sufficient funds, we can even offer a grant to NS men towards their first homes, and address the inequity I spoke of earlier of NS men entering the market later than their peers.

Will this proposal cause PRs and foreigners to flee our shores? I doubt it. Even with an increase, our tax rates will still be among the lowest of developed countries, and we will still be one of the more attractive places to live and work in.

Taxation is not a fool-proof way of addressing this thorny issue, but at the very least, it ensures that everyone contributes to the defence and security of Singapore. Beside, I believe that if foreigners and PRs see that their financial contributions directly benefit NS men, they will view the duty as less of a penalty, and more of an opportunity to make a meaningful contribution towards the security they enjoy thanks to our NS men. A chance to do their duty, as it were.

I intend to raise this proposal in the coming Budget debates. I would be grateful for your views, and any suggestions you may have to improve it.

Thanks for reading.

A Matter of Trust (2)

Thanks to everyone who posted your views. Not surprisingly, views are divided. It shows that different people are concerned about different issues and have different perspectives. That is only natural as we are dealing with issues concerning our future.

Some have said that I was too aggressive with the Workers’ Party (WP). There is a certain amount of cut and thrust in Parliamentary debates, but anyone viewing it live will know that all speeches (both from ruling and opposition parties) are delivered in a measured way. But views have to be scrutinised, tested and challenged, so that their full implications will be understood. That is what the debate is for.

We now know that the WP’s proposal of freezing foreign worker numbers will in effect create haves and have-nots. If you have a home, good; if you do not, you wait longer to get your house. If you have a job, great (provided your employer does not fold or send his business elsewhere); if you are graduating or joining the work force, you may have to wait or leave Singapore to get one. If you have a maid, hold on to her; if you are new parents, or have elderly parents, and need someone to help you, too bad as no additional maids will be allowed in.

If your business folds, and you have to lay-off your Singaporean employees, tough, but the Government should think of a solution to help you. And we all have to wait much longer for more trains, buses, hospitals and other public services.

If you put aside all the rhetoric, this is really what it amounts to. The WP then glosses over the ill effects of its proposal by arguing that only businesses will be hurt, and Singaporeans will not. Everyone can see how absurd that is. The simple truth is that the WP is advocating a figure of 5.8m, not because there is any logical basis, but because it sounds better.

One thing the Government keeps getting blasted for is that it appears to rule with its head and not its heart. That is a valid point. But that does not mean it should completely swing the other way. I think both head and heart are equally important, and must feature in every policy decision. So while we should formulate policies with the aim of helping Singaporeans (heart), there must be logic to that policy and its implementation so that Singaporeans are in fact helped (head).

The Government has much to do to re-capture the hearts of Singaporeans. The best way to do that is for Singaporeans to feel that the Government’s plans and initiatives have meaningfully improved their lives and give them confidence for the future.

White Paper – A Matter of Trust

Hi all,

I set out below the speech I delivered in Parliament this evening on the White Paper. I look forward to receiving your views.

In the aftermath of the 2008 global financial fiasco, the editor of Newsweek International, observed that the crisis had demonstrated one thing: that democracy has a genetic defect – it emphasises the current, usually at the expense of the future. Intuitively, we all recognise this. So while politicians often speak eloquently about promises of the future, they know that what really matters is that they deliver on the real and tangible problems of the present. Policies are often driven by this reality.

Singapore is not immune to this genetic defect. It would be foolish to think we are different.

However, when we were a young nation, we showed strong resistance to it. When former Prime Minister Mr Lee Kuan Yew said that the Government was going to transform Singapore from a swamp to a gleaming metropolis, not many believed it could be done. The key was that Singaporeans allowed the Government time and space to embark on its vision, to effect medium and long term strategies – on the economy, housing, transport, health. Singaporeans took a leap of faith with the Government, and were rewarded for doing so.

Did some Singaporeans suffer as a result of these policies? Some clearly did. Take land. In order to build housing and hospitals, roads and rail network, industries, the government acquired property from Singaporeans. This included farms and business premises. Some were dislocated, lost their homes, their inheritance, even their livelihoods. I have some residents who still complain bitterly about this difficult time in their lives. We can all understand why they are unhappy. But is there any doubt that these measures were necessary and have benefitted the vast majority of Singaporeans? Few today would argue against it.

Today, we are the beneficiaries of these long term policies, of this long term strategic thinking and of the hard work of the previous generation, many of whom are no longer around to enjoy its fruits. But it is also common for people to view the past with rose-tinted glasses. Despite the current and legitimate unhappiness about over-crowding, high property prices and such, we are today far better off than our parents’ generation. All the objective figures – education, home ownership, employment, wealth and household income, quality of life, health and longevity – prove that.

But today, we are also an older society – less resistant to genetic defects. The current has become as important, if not more so, than the future. The White Paper is very much about the future. But its acceptance by Singaporeans will depend very much on how we deal with today’s problems. That will determine if Singaporeans will give the Government time and space to re-shape the future, like they did before.

So to persuade Singaporeans to come on this journey, we have to do two things:

(a) paint a full picture of the future for Singaporeans, highlighting both the good and the bad;
(b) give Singaporeans confidence that the Government will be able address the challenges of the future.

Chief among these challenges are the questions of over-crowdedness and the advantages of being born a Singaporean.

Some in this House and many outside have questioned the numbers and assumptions in the White Paper. They say that the Government has over-stated the problems of the elderly to working adult ratio, that we have not done enough to boost productivity and birth rates and that the elderly can retire later and work longer.

But we are all crystal ball gazing. No one wants to hit 6.9m. Every member in this House wants a stronger core of Singaporeans. Everyone supports the Government building ahead of demand. We all want the TFR measures to work so that we may have less need for foreigners. Future technology and advances in health care may well help our seniors remain active and productive longer. Other innovations and mechanisation may reduce our dependence on unskilled foreign labour. Technology can change life dramatically in the next 20 years, as it has in the last 20 years. But no one can say with any certainty what will happen.

The issue is therefore not 6.9m, 6.5m or who can assert a more acceptable number. Numbers will change over time as circumstances change, and assumptions are either confirmed or debunked. However, as DPM Teo said, we have reached a turning point, and we have decisions to make today about what we do about our future as we see it today. We have to take the next leap of faith.

The issue is therefore one of trust and confidence.

The Government has done the right thing to talk about the future, and show its vision of it. It has stuck its head up and is prepared to take the blows. As DPM Teo said, it would be far more politically convenient to do or say nothing. There are many who have written that the Government is politically naïve for doing this. But would Singaporeans be better off if the Government had kept silent? Would you trust a party that ducks difficult questions?

No one can predict the future, and as Minister Lui said, it is very difficult to visualize how the future will look. So we do what comes naturally – we project what we see today as a basis of what will happen in the future. The problem is that many Singaporeans do not quite like what they see today.

The White Paper plans for a “good quality of life”. But that means different things to different people. To most Singaporeans, day to day issues weigh most in their minds. How will the building of new MRT lines and housing make our lives better if we are, at the same time, growing the population? Will the added capacity only be sufficient to cater to the increased population? In basic terms, will Singaporeans have to wait longer, shorter or the same for their flat or the next train? Or are we, as in Alice in Wonderland, running as fast as things move, just to stay on the same spot?

The distinctions between Singaporeans and foreigners must also be carefully reviewed, as that is a matter which will have growing significance as the Singaporean core diminishes. How do we deal with the issue of PRs not doing National Service? How are we going to ensure that jobs which Singaporeans are ready, able and willing to do are not given to foreigners? How do we help our children secure places in good schools and universities? How do we ensure that foreigners do not speculate and drive up property prices, and put it beyond the reach of Singaporeans? Essentially, how do we ensure that those with no skin in the game do not walk away with all the prizes?

We need to address these and other difficult questions now. If we do not, few will trust the Government to get it right in 2020 or 2030. That is why I support the amendments proposed by the Hon. Member Mr Liang Eng Wah, as it puts the issue in better perspective, better context.

Just as important, we should not mislead Singaporeans by simply telling them what they want to hear. It is easy to discount projected population figures by a million or so, and then say that the work force shortfall will somehow be made up by foreign brides and productivity, that we can simply decide how many % of GDP we want (as if there is some magic machine to input numbers) and that we can all live happily ever after with lower growth. There is a difference between a vision and a fairy tale. We have to compare something with something. This debate will not be served by comparing the Singapore envisioned in this White Paper to one which exists in utopia.

Singaporeans are best served by details, not posturing. And I do not mean simply throwing numbers around. Let's deal with the real effects on real Singaporeans. For example, what will low growth mean to employment opportunities for young Singaporeans? All around the world today, youth unemployment is increasing at alarming rates. The ILO 2012 report puts Youth Unemployment for Developed Economies and the European Union at 18% for 2011 and projected to be the same for 2012. As at July 2012, Spain and Italy had youth unemployment rates of 52% and 35% respectively. This is because businesses are not investing or growing, and cannot absorb the young who are graduating from schools each year. Why do some assume Singapore will be different? Businesses in Singapore will not invest and expand if labour is tight and growth is low. To say that we can have the same growth as other mature economies is no answer as it ignores the problems these other countries already have.

So, this is not about having good GDP numbers. Having a job makes a world of difference to a person and his family. If you have no job, no prospects, no hope, everything else is pretty much moot.

What about other effects? Will we have to pay more taxes? What will it mean to our retirement age? Willl we have enough workers in essential services, such as domestic, health and geriatric care, and construction to meet the additional infrastructure and health care services we need? These are important to the daily lives of Singaporeans.

Under the Workers' Party plan, there will not be, and it is a pipe dream to believe that Singaporeans alone will make up the difference. These and other questions have to be answered if there is to be a credible alternative or at least, a meaningful debate. It is not enough to simply say that there has to be "structural changes". It is clearly not enough to say you empathize with local SMEs which will be killed off by your plan, and then say your solution is for the Government to solve the problem. It is also not intellectually honest to suggest that shareholders will suffer and Singaporeans will not, when we are dealing with Singaporean businesses, Singaporean owners, Singaporean employees, Singaporean shareholders, all supporting Singaporean children and families.

Ultimately, we are engaged in this debate because we want all Singaporeans to have a better life and future, and to help Singaporeans understand and deal with the realities on the ground. We should not be disacted by numbers, nor should we use numbers to distract.

I hope the Government will deal with the issues of today and give confidence that it will be able to solve those of tommorrow. New plans, programs and initiatives, like those announced by MND and MOT are good. But Singaporeans need to see them work and feel their lives improve. That I believe is the only way to ensure that Singaporeans will take the next leap together with the Government.

Goodbye To ECs

The recent news of a $2m Executive Condo (EC) has prompted many to call for a review of the rules governing ECs. MND has responded to say it will look at building regulations.

There is a simpler solution – get rid of ECs altogether.

What was the rationale for such housing? Government wanted to help those who aspire to, but could not afford, private housing. It was a noble intention – but that is the problem. As is the experience with many countries (we are by no means unique on this score), government policies are usually founded on good intentions, but have altogether different consequences.

What has been the consequence of the EC scheme? While there is an income limit to restrict applicants, the fact is that many applicants can afford private properties, usually through savings or help from their families. On the other hand, many who qualify but do not have help, would rather purchase a cheaper HDB flat because they do not want the burden of a large mortgage or have other commitments (children, elderly parents, etc). Of this group, those who earn over $10k a month have fewer options as they cannot purchase a HDB flat.

The result is that large government subsidies are being given to some who can otherwise afford to buy private property. Developers who are in the business of making money – not their fault – have been quick to pick up on this. They know that there is a ready market for large EC units because an equivalent sized private unit will be far more expensive, and there are many Singaporeans who have parents or relatives who will help them buy an EC because they see them as a good investment. So they build them. And can sell them.

The other unintended consequence is that there is there is a group of Singaporeans who do not qualify to buy HDB, but who find themselves priced out of ECs or end up competing with those who can afford more expensive housing.

What we also have is a minefield of rules and regulations on the differences between HDB, DBSS, EC and private property many do not understand, so that there are no loopholes. But these will always exist, and we should never under-estimate the capacity of people to exploit a system to make money.

So, the Government should get out of the EC/DBSS market altogether. Government’s role is to provide public housing for the masses. It is not to help people own private property. The latter is an aspiration individuals can work towards. Not everyone may want to stay in private property, and there is no reason to subsidise those who do. Where private property is concerned, government’s primary role should be to ensure that there are no distortions in the market which would adversely affect the overall economy – speculation, over-leveraging etc.

So what should HDB do? Here are my simple suggestions:

(1) Focus on building affordable, practical, good quality, public housing;

(2) Increasing the income ceiling so that most Singaporeans have the option of buying HDB flats, and fewer people are priced out of either segment;

(3) At the same time, do not allow HDB flats to become financial instruments, so that those who can afford private housing will find it not worth their while to venture into the HDB market. This can be achieved by simple rules, such as mandating anyone who owns a HDB flat to stay in it. There is no reason to stop HDB dwellers from investing in the private property market – but if they want to hold on to their HDB flat, they must live in it. We should put a stop to private property dwellers renting out HDB flats. That is another subsidy to those who do not need it. There is no public interest in allowing this; and

(4) Use subsidies to make smaller HDB flats more affordable so that more poor families can get out of rental flats. 1 and 2 room flats should be priced such that the mortgage can be serviced with the same amount families are currently paying for rental. That gives them a stake in their homes. Home ownership can make a huge difference to the financial well-being and progress of poor families. It also encourages families to stay together and promotes stability. That is the foundation on which Singapore was built. Building more rental flats is a short-term solution which will only put more poor families into a cycle they will find difficult to get out of.

Some of these suggestions will sound familiar, as that was what HDB first started doing. HDB needs to go back to its roots, and not try to be all things to everyone.