Perspective Unlimited

Tuesday, May 29, 2007

On Citizens, Permanent Residents and Bumiputrification

I have wanted to write something about this for some time already, and my previous post serves as a convenient lead-in.

Three Reflections

Of the many national day rallies I have watched over the years, there is one that will be forever etched in my mind. It is the one when the then Prime Minister Goh suggested that Singaporeans who chose to leave were quitters, barely moments after praising Jing Junhong for winning us the Commonwealth gold medal and chiding Singaporeans for not accepting her as one of our own. Some amongst the audience must have turned to look at Jing. The camera too was trained on Jing's face, and the whole of Singapore watched. It was a moment of supreme irony, of contradiction, and of the tension that was globalisation. I think it was a TV moment that ranked up there with MM Lee's tearful interview after Singapore was ejected from Malaysia.

Two weeks ago, I was having my usual Wednesday coffee with some faculty members and colleagues. A lady researcher from Italy proclaimed that she was really proud to be an Italian when we were on the topic of football. A Swiss faculty member, Fred, replied in jest, "That is the stupidest thing I have ever heard. How could you be proud of something which you practically have no choice in?" Fred was right of course. Had the Italian lady been born English, she would have had nothing but football heartaches instead of two world cup victories in her lifetime.

My father was an economic immigrant from China. He had never wanted to make Singapore his permanent home. He arrived to a colony sometime in the late 1950s, but on the stroke of midnight 9 Aug 1965, he was suddenly a citizen of Singapore. Like many other Singaporeans, he found himself an accidental citizen of an accidental country. I, by default, became a Singaporean. If my father had gone to America instead of Singapore, his children would have been Americans.

Reduction of PR Benefits

Childcare subsidies for PRs being phased out over 2 years - Straitstimes 9 May 2007

Hospital subsidies for PRs to be revised from Oct 2007 - CNA 10 Dec 2006

Learning to make a distinction; PRs, foreigners to pay up to 80 per cent more in school fees over next two years - Today 6 Dec 2006

Levelling the Playing Field?

Much has been written, particularly in blogosphere, on the economic competition immigrants pose for locals. Three separate policy announcements on childcare, healthcare and education, but the overall thrust is the same. The Government, probably responding to popular pressure, is trying to show that it will put Singaporeans first.

The euphemism we often hear is that these policies are designed to 'level the playing field', which of course rest on the presumption that Singaporeans are economically disadvantaged compared to immigrants. Or it could be some assumption that citizens should always be treated better as a "legitimate sense of entitlement". Considering how accidental citizenship often is, the natural sense of entitlement is hardly a product of rational thought. Furthermore, as Wang points out, the fact that PRs do not get to vote sits badly with the principle of no taxation without representation. Not only do we not allow them to vote, we are now reducing the benefits they enjoy, even as they pay the same income tax, GST and COEs as the rest of us.

Let me now address the bugbear that is national service since so much has been written about the sacrifice Singaporean males make. We Singaporean males do national service because we are born Singaporeans by the chance of nature, and we basically have no choice about it. Some get on with it and with life, others perpetually turn it into an issue. If the government will to allow male Singaporeans the choice of reducing their benefits to the level of PRs in return for not having to serve, I think enlistment into SAF will drop by half. Besides, the female half of the citizenry do not have to make this national service 'sacrifice'. Are they then second-tier citizens? Who is balancing the equation or levelling the field there? It is an exercise in futility trying to always keep a benefit and sacrifice scorecard.

Softly Softly we Bumiputrify

When one looks at the various changes, it is just a couple of hundred dollars worth of benefits here and there between citizens and PRs. If national service is indeed such a big sacrifice as it is made out to be, we would be fools to think that a couple of dollars worth of subsidies can level the playing field. The difference is probably also too marginal, thankfully, to make Singapore less attractive to would-be immigrants.

Unlike Singaporeans born here, PRs choose to be in Singapore, their being here are not accidents of birth. Jing had to take up Singapore citizenship in order to represent us. Many PRs however continue to remain citizens of their own countries because of family ties, residual loyalty, and of nostalgia - perfectly understandable reasons, the same reasons why many Singaporeans choose to keep their Singapore passports even though they reside overseas. There is really no need to push PRs into taking up Singapore citizenship as many are already as Singaporean as you or I, having studied and lived here for years. A pink IC is no proof of loyalty to Singapore. Conversely, if many PRs became citizens just to advantage themselves with a few more hundred dollars of benefits, we should be very concerned indeed.

Though these changes are mostly cosmetic, an unhelpful precedent has nonetheless been set. Symbolic as they are, these new measures are acts of discrimination against permanent residents, which are aimed at placating locals who feel threatened by the perceived economic advantage of immigrants. The original bumiputra policy also began this way. If it is politically necessary to have these symbolic differences, so be it. But let's have the good sense to guard against any further bumiputrification of our socio-economic policies. We either welcome immigrants or we keep them out. Only an insecure nation discriminates against them.

Saturday, May 26, 2007

The Taste of Welfare

Two months ago, I mentioned on this blog that my daughter Elena was born without any out of pocket expenses, courtesy of Britain's NHS. It was not immediately apparent to me then that the delivery and hospitalisation were only the beginning of a long list of benefits our family would receive.

In the weeks after Elena's birth, we were visited at home by a midwife named Estry from the hospital once every 2-3 days, for a total 5 visits, to check on Elena's development and also that mother was coping. There is also a drop-in clinic where we could turn up every week for the midwives to check on Elena's progress. There is even a baby massage class every Monday.

Two weeks ago, Elena developed a scaly condition on the face and around the neck. It was diagnosed by the doctor to be baby eczema. Once prescribed by the NHS doctor, child medication is completely free in the UK until age 16. This week, Elena underwent two rounds of immunisation, again completely free of expenses.

Healthcare is not the only form of welfare benefit we are receiving. Soon after we were discharged from hospital, we were provided with an application form to the Child Benefits Office. We received a letter this week from the office that child benefit for Elena has been approved. Child benefit is not some kind of tax credit, it is not means-tested, but outright cash for every child. Eighteen pounds a week (around S$54) would be credited into our account and it would be backdated to the week Elena was born. It is not a huge sum of money, but it is certainly enough for milk and diapers.

As Singaporeans, Grace and I feel are not used to receiving state benefits. We are constantly surprised that Britain's welfare benefits extend even to non-citizens. Unlike citizens who grow up in a welfare state, we will probably never learn to see these benefits as a right. The experience is therefore novel enough for us to feel a deep sense of gratitude every time we receive benefits.

And a Row over Housing

Last week, a British minister Margaret Hodge suggested that Britons should be given priority to public housing over immigrants - a "legitimate sense of entitlement". What sounded like sensible policy (and a vote winner?) was anything but, considering mainstream British political attitudes. Cabinet colleagues and labour party bigwigs almost immediately launched scathing attacks on Ms Hodge. Housing should be allocated on the "basis of need" and not some kind of criteria that favoured one group over another. To the extent that humanitarian concerns override political consideration, Britain is indeed Blair's "special country".

If someone were to suggest in Singapore that Singaporeans should be given priority on housing or healthcare, I wonder what would the response of the Singaporean public be? How many of us would support such a policy on the basis of it being a citizen's birth right, national service sacrifices and so on? How many of us would actually support a policy that treats immigrants the same? The answer to this question will say a lot of us as a people.

Saturday, May 12, 2007

Farewell Prime Minister Blair

"I have been very lucky and very blessed. This country is a blessed nation. The British are special, the world knows it, in our innermost thoughts, we know it. This is the greatest nation on Earth. It has been an honour to serve it." - Tony Blair.

He was a special politician, very special. How many could utter these words after 10 years in power without sounding trite or cheesy?

Back in 1997, I was a young student studying in London when Labour swept into power with this youngish looking prime minister - very good looking, very fresh, but not many back then knew what a Labour government, or indeed the prime minister, would be like. In the past decade, I have spent six years in the UK - three of which were when Blair first came to power, and three of which were in his last term. I witnessed first hand how the British society was transformed during his time in office. The prime minister, if nothing else, has been a great political performer.

Britain, under Mr Blair, continued on its economic revival first started under the Tories. Many scholars today agree that Britain has Margaret Thatcher's reforms to thank for. While Mr Blair harped on social justice, he had mostly maintained Tory-like economic policies. Taxes went up a little to fund public services, but generous tax shelters were offered. There were 5 billionaires with he first came to power, there are 68 today (converted to USD, it will be even more) - many are foreigners attracted by the generous tax regime.

Britain continued its hands-off attitude when foreigners bought their companies - such as making loud noises when MG Rover had to close down, but mostly adhering to free market principles. BAE wanted to quit Airbus, thereby threatening the jobs located in Britain, no problem. Spain taking over its airports, go ahead. The truest test of a country being global is when foreigners are allowed to buy national icons, and when foreigners are allowed to compete for jobs. It is a test Britain passed with flying colours, further entrenching capital, talent and industry on its shores.

"Look at our economy - at ease with globalisation, London the world's financial centre. Visit our great cities and compare them with 10 years ago. No country attracts overseas investment like we do."

But this was not why Blair was so good. Tories would have arguably continued on economic management with a globalised outlook. Thatcherism however left the society divided, suspicious of the fruits of economic growth, and pissed off with itself. Mr Blair accomplished something Mrs Thatcher never managed - he reached into the hearts and minds of the British people and made them comfortable with economic progress, and above all, with themselves.

How did Mr Blair manage what the Tories couldn't? Primarily by mixing economic hard-headedness with persistent rhetoric for social compassion. I use the word "rhetoric" because even his own supporters would agree that he under-delivered on many of his promises on social justice. Nevertheless, by constantly espousing high ideals - whether it was the Commission for Africa, climate change, intervention in Kosovo and Sierra Leone, and later tragically in Iraq - he injected into the nation a sense of moral purpose that Mrs Thatcher never did, simply by appealing to the better instincts of people. Thatcherism is the steel and spine of Britain, but Blairism is its heart and soul.

Take for example Africa. By constantly reminding the world of its obligation to the wretched continent, he reminded the British people of social justice in its widest sense - it is not enough that you care for your fellow country men, you have to care for your fellow men. His words, mere words, were enough to help Britain, despite its problems, see past itself. Without these high ideals, the British society would have been more fractured by the income, race, religious and political divides.

"This is a country today that, for all its faults, for all the myriad of unresolved problems and fresh challenges, is comfortable in the 21st Century, at home in its own skin, able not just to be proud of its past but confident of its future."

Of course, high hopes often lead to disappointment. Even his own supporters were disappointed that he achieved less than what he promised, and Mr Blair himself admitted as much. It showed the measure of the man (and the cunning of a great politician) when he asked the British people to forgive him for the missed expectations.

"I give my thanks to you, the British people, for the times I have succeeded, and my apologies to you for the times I have fallen short."

Mr Blair's critics are many. But here, I suggest they miss an important point. His politics gave the British people a sense of hope and mission, measured from which they might be disappointed, but without which their national life would surely have been poorer. And I, a bystander, was lucky to have watched this great political performer in action.

Wednesday, May 09, 2007

Retirement and Housing

Lucky Tan usually has some rather wild analysis and last week's post is no exception. The causation implied by the post is clear: (i) Govt forces Singaporeans to save in CPF; (ii) Govt allows Singaporeans to buy property using CPF; (iii) Singaporeans have no choice but to work longer since they do not have enough funds in their CPF accounts to support retirement.

This is obviously a seductive theory: simple enough to understand and conspiratorial enough to appeal. Not enough for retirement, blame government policies (again)! Despite his flawed reasoning, Lucky was essentially right on the point - many Singaporeans sit on a highly valued housing property but otherwise do not have enough cash for retirement. Though there are ways to monetise the asset to fund retirement consumption, the problem is in fact more than just that.

Before I continue, I will digress a little here. My uncle is a taxi driver who has worked hard all his life, lived frugally, and saved assiduously for his retirement. Looking at his bank account, you would hardly have guessed that he is a humble taxi driver. Already nearing retirement age, he nonetheless continues to work hard to the extent of taking the physically taxing night shift. I once asked him why didn't he retire since he had already built up a substantial retirement account. In the end, the answer was as simple as it was illuminating, "Don't know when I will die."

The Retirement Conundrum

In one short sentence, he has summed up the retirement conundrum. Two days ago, this story was reported in the British media. A man was suing the NHS because the hospital had informed him that he was dying. Like a rational economic agent, he then went on a spending spree and consumed all his savings, only to be told later that the original diagnosis was a mistake! This comi-tragic story again illustrates the same simple point.

As my uncle wisely points out, no one has perfect foresight when it comes to preparing for death. Unless the budget constraint is incredibly lax, this obviously makes any financial decisions concerning retirement tricky. It is not a matter of how much asset or cash one has, but how much is enough against an unknown future?

In a state pension system, the individual is effectively insured against his own longevity. Once retired, a person simply collects state pension until he drops. The current working generation pays the taxes to support the retirees. The question becomes one of actuarial sustainability of this form of inter-generational transfer but it is no longer the problem of individual retirees.

Lack of Insurance

The nature of CPF - individual accounts - transfers the risk to individual retirees. If one knows the time of death, perfect foresight will make financial planning so simple: reach retirement age, cash in on the property asset, and spread consumption until the last day. It is therefore incorrect to blame the lack of retirement funds on CPF liberalisation for property purchases. Of course, those who entered the market during the bubble years would have suffered losses but there would always winners and losers in investment. Barring episodes of price correction, property prices have mostly risen over the past few decades effectively boosting retirement returns. Not allowing CPF for property purchases would in fact deny individuals an avenue for investment.

However, as many academics have rightly pointed out, the major shortcoming of the CPF system is the lack of insurance for the individual against his longevity. There is always the risk that the individual outlives his retirement cash, and this may to a large extent explain why many retirees like my uncle take the "kiasu" approach and continue to do some work to supplement post-retirement income. Not because they are hard up for cash per se, but because they need to guard against an unexpectedly long life. It is a little ironic to think that medical science has increased the life expectancy of people only for them to run the risk of old age destitution.

While the risk is mitigated by working past retirement age, it will never really go away. Retirement can be postponed for some years, but sooner or later work has to stop for one reason or another. The current working assumption is that the family will effectively become the insurance when the retirement cash runs out. By and large, I imagine this assumption to hold for most retirees. But with families getting smaller and more individuals remaining single, it will be more difficult to assume this in the future. To solve the retirement conundrum, it is this part of the CPF policy that needs re-thinking rather than the housing bit.