Singapore: An economy in the throes of change

August 9, 2001
Visiting Indians are unlikely to feel about Singapore that they have strayed into a typical Indian city, for no other reason than that they may not encounter any stray cattle on the city's tree-lined boulevards. But that has nothing to do with effective law enforcement against 'jay walking' of the bovine variety which, let it be said, the country indeed has an enviable reputation for.

No, the absence of stray cattle has to do with the simple fact that the economy boasts of practically no cattle in the first place. With a mere one per cent of the total land mass of the country being used for farming, agriculture is a negligible activity in the economic scheme of things in Singapore.

In fact, the Agri-food and Veterinary Authority lists a mere four goats and 123 oxen as having been slaughtered in its abattoirs during the year 2000. So, reverent Indians who are accustomed to starting the day with a darshan of the holy cow ought perhaps to try their luck at the Singapore Zoological Gardens rather than peer out of their hotel windows at the city streets below.

Forget cattle, on a weekday, beyond the central business district of the city, one is unlikely to see many human beings as well. The impression one gets is of a whole nation that is busy at work. That well might be the case. With an unemployment rate that is in the 3.5 per cent mark, a good 50 basis points lower than what the US economy experienced last year at the height IT led boom...  there.

Singapore owed an impressive record of performance on the unemployment front all these years, to a flourishing economy that made jobs available to practically all those seeking it. But in more recent times, there are signs that economy is under some strain.

For two consecutive quarters, the economy has posted a net decline in output. The current debate now is whether the economy is in the grip of a full-fledged recession or not. One school of thought is that it is a recession as the output has declined in two successive quarters compared to their respective immediate previous quarters after adjusting for seasonal factors.

But the more orthodox view is that the basis of comparison should be in terms of the same quarter of the previous fiscal, which criterion would still show the economy as growing. The consensus view tries to reconcile the two viewpoints by claiming that what is on now is a 'technical recession' -- the expression having the beguiling quality of softening the impact.

It is something like, "Well, actually there is recession but you know one has got to humour these economists and so let us call it a 'technical recession'."

But whether economists agree or not, Singapore's taxi drivers say that they are certainly feeling the pinch of a downturn in business. As with taxi drivers the world over, their complaint is that after setting aside money for car rentals that taxi companies charge them, there isn't much left to take home. Some that this writer talked to felt that people aren't spending enough or, more specifically, aren't going out often enough. In a way both are perhaps interlinked.

But whether the cutback in spending is true of the local population or not, it certainly seems true of foreigners. They aren't spending enough in real terms nor staying long enough in recent times than what they were doing earlier.

The average visitor to Singapore spent in 2000 the same 3.2 days that he did in 1999. But far more than the average number of days spent, what should be a cause of worry for policy planners as much as it does for taxi drivers in that country, is the amount spent by them daily while on a visit to Singapore.

In 1999, visitors spent pretty much the same amount as they did in 1998. More recent figures are unavailable. Indians, however, are a notable exception. They are coming in, in ever increasing numbers, and what is more, outspent visitors from every other part of the globe in 1999.

If one is looking for a criterion to assess the state of the Singapore economy, the premium paid for the right to own a car in the City-State is as good as any. The premiums are lower in the latest Government auction than they were in March 2001, when recession, technical or otherwise, was farthest from anybody's mind.

They may be lower now than they were at an earlier point in time. But there is no question that these are much sought after. A figure of something like S$ 27,000 as the price for acquiring the privilege of owning a car -- roughly twice the sticker price at the factory gate, suggests that there is a large pent-up demand for automobiles among Singaporeans.

But for all that, the system of granting this privilege operates in a transparent manner. Prospective car owners can enter their bids through an online auction system that is conducted every month, over a three-day period. The Government is now talking of a complete switch-over to open auction.

It is just as well that supply of automobiles in India far outstrips demand or that for all the chaos on city roads, Indian lawmakers have not thought of limiting demand through a Government licensing system.

From martyrs of Kargil conflict to victims of caste atrocities (freedom-fighter quota is now passe), all kinds of reservations within the over-all quota would have been set up. To top it all, there would be a general purpose discretionary ministerial quota in public interest, no less, for handing out these `certificates of entitlements' as these permits are called in Singapore.

That Indians do things differently was brought home to this writer in a stark fashion at the Chennai airport, on return. I saw any number of passengers with hand luggage, whose duty value should go some way in denting the Government's fiscal deficit, if properly assessed. But whether this is done or not is in the realm of speculation.

A customs official, waiting in the sidelines of the immigration counter, collected passports of these passengers after they got past the immigration formalities as they wended their way towards the baggage area. Now, was the handing over of passports a demonstration of good faith before the customs officials that negotiations, post baggage-clearance, would be satisfactorily settled? I wonder.
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- D. Sampathkumar (Recently in Singapore)

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The views of this column are the author's own, and do not necessarily represent the views of NRI Online.

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