Page 2 of 2 ASIA
HAND Fiscal finagling in
Singapore By Shawn W Crispin
automobiles, and motor-fuel excise
duties. Those reductions and rebates saved
Singaporean taxpayers S$3.18 billion in 1998,
according to Bank of International Settlements
statistics.
Most if not all those taxes
are now firmly back in place. Decades of tight
fiscal policy has crowded out private investment
and depressed the national standard of living -
unless, of course, you happen to be a salaried PAP
minister. The government has
frequently filled in the
investment gap, most recently with its big new
foray into billion-dollar casinos. But
historically the government has earned lower
returns on equity on its domestic-oriented
investments than its economic peers in the West
and many of its less developed Asian neighbors.
At the same time, Singapore's lower- and
middle-class taxpayers, who directly and
indirectly shoulder the tax burden, now face a
stagnant or declining standard of living - a hard
economic fact that even official government
statistics have recently acknowledged. The PAP-led
government, for its part, maintains it must pay
high salaries to attract top-notch talent and curb
official corruption. But the final verdict on that
correlation will not be known until the PAP is
eventually removed from power at the ballot box
and the national accounts are independently
scrutinized.
To be sure, Singapore
maintains a squeaky-clean reputation, rating near
the top in internationally maintained
anti-corruption rankings. But nobody knows for
sure how exactly the state generates and manages
its revenues because exact profit and loss
breakdowns for state-run entities are not publicly
disclosed. [1]
The PAP-led government
consistently argues that its management of state
funds habitually generates higher-than-average
market returns on the S$129 billion or so worth of
assets managed by Temasek Holdings. But because of
the investment arm's opaque finances, which on its
website details its investments by sector rather
than by name, it's difficult for independent
financial analysts to confirm or dispute those
official claims. But a growing list of managerial
missteps raises hard new questions about those
claims, particularly since Prime Minister Lee
Hsien Loong's wife, Ho Ching, took over Temasek's
top spot in 2004.
For instance, Temasek's
total US$3.96 billion investment in Thailand's
Shin Corp could eventually be written down to zero
if that country's new military government decides
to rescind the mobile-telephone and
satellite-communication state operating
concessions held respectively by Shin subsidiaries
Advanced Info Services and Shin Satellite.
Thailand's military government has already
snatched back Shin-controlled subsidiary iTV's
operating concession in a de facto nationalization
of a substantial Temasek investment.
More
worrying, perhaps, are the lingering concerns
about the financial health of the Central
Provident Fund, Singapore's national pension plan.
CPF beneficiaries receive a low, state-determined
interest rate on their required contributions,
allowing the PAP-led government to collect yet
another hidden tax on the actual investment yields
earned on the CPF's undisclosed investments. Some
financial analysts believe the pension plan could
eventually face a fiscal crisis, partly because
the government allows the CPF's already heavily
taxed contributors to tap the fund early for
expenditures such as home purchases and medical
expenses.
With the recent resurgence in
economic growth, some financial analysts believe
last year's total on- and off-budget surplus could
have been the largest ever collected by the
PAP-led government. That would go a long way in
explaining the PAP's recent controversial decision
to reward itself with substantially higher pay.
But it also indicates just how out of touch the
self-centered PAP's economic priorities have
become, which over the medium term augurs ill for
a small island country so highly reliant on the
state for its economic, financial and moral
direction.
Note 1.
Respected Morgan Stanley economist Andy Xie last
year abruptly resigned his position at the firm
after an internal e-mail he sent that referred to
Singapore as an "economic failure" whose "success
came mostly from being the money-laundering center
for corrupt Indonesian businessmen and government
officials" was published by Bloomberg. The
controversial correspondence also said "to sustain
its economy, Singapore is building casinos to
attract corruption money from China". The
litigious Singaporean government notably never
filed charges against Morgan Stanley for making,
or Bloomberg for publishing, the allegations.
Shawn W Crispin is Asia Times
Online's Southeast Asia editor.
(Copyright 2007 Asia Times Online Ltd. All
rights reserved. Please contact us about sales, syndication and republishing.)
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