SOCIAL SECURITY: Singapore system starts to creak
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SOCIAL SECURITY: Singapore system starts to creak
By John Burton in Singapore, Financial Times
Published: Mar 14, 2007
Singapore would appear well-prepared to tackle the problems of an ageing population. Along with Japan and Malaysia, it is one of the few Asian countries that can claim near-universal coverage for its pension scheme. Its medical facilities are excellent and housing for the elderly is available.
Moreover, economists have lauded Singapore for avoiding the pitfalls of erecting an expensive welfare state that diverts government funds from economic development. Social security is largely financed by mandatory savings accounts for each citizen. The requirement that workers must contribute to personal savings accounts has meant that Singapore has among the highest saving and investment rates in the world.
The welfare-light practices of Singapore and Hong Kong are often favourably contrasted with those of Japan, South Korea and Taiwan, which have fully-fledged social welfare systems. Public spending in these countries is bound to rise as the population ages, putting pressure on government budgets and increasing the tax burden.
But doubts are emerging about whether Singapore can stick to its current policies or be forced to extend the social safety net. The outcome could determine policies in the rest of Asia, including China, which has studied the Singapore model of combining basic state support with private initiatives.
Singapore, along with Hong Kong, South Korea and Japan, will have one of Asia's oldest populations by 2030, with a quarter of people above 65 years of age. There will be only 2.2 workers to support each elderly person, compared with 10 workers in 2000, the result of a rapidly falling birth rate and increased life expectancy.
The reduced earning power of the elderly is already leading to a growing income gap between rich and poor, with Singapore ranked 105th in the world in terms of income equality, based on
United Nations data. That compares with the 2nd place ranking for Japan and 25th for South Korea with their stronger social safety nets.
Moreover, the mandatory savings programme, the Central Provident Fund (CPF), used to finance pensions and healthcare is showing signs of weakness. The goal of the CPF was to provide 40 per cent of pre-retirement income, with workers and employers each contributing 20 per cent of a person's salary to the individual accounts. But the employer contribution has gradually been reduced to 13 per cent in an effort to attract more foreign direct investment, although it will be raised to 14.5 per cent this year. In addition, the use of each individual's CPF account has been extended over the years to include healthcare costs and mortgage payments, mainly for apartments in subsidised public housing projects where 85 per cent of the population lives.
Many of the elderly who contributed to the CPF between the early 1960s and 1970s, when wages were low, are finding it difficult to keep up with the rising cost of living. Many have used their CPF savings, with government encouragement, to buy public housing apartments. But the value of these has fallen by 30 per cent since the mid-1990s, making it difficult for retirees to recoup fully their investment.
Critics say the problems expose a weakness of the Singapore system, which places a disporportionate burden on individuals unlike more developed welfare states where the risks are pooled.
Singapore's recognition of the challenge it faces has been underscored with the recent creation of a ministerial committee on ageing. The government has signalled that it prefers finding solutions based on market forces. Its only concession to increased public spending is the establishment of a programme, known as Workfare, that provides state subsidies to low-income workers with most of the funds transferred to the CPF instead of being given directly to them to spend immediately.
Workfare is also linked togovernment efforts to encourage the elderly to work longer instead of taking advantage of the current retirement age of 62. Lim Boon Heng, who heads the ageing committee, says Singapore wants to achieve 65 per cent employment for people aged between 55 and 64 in the next five years.
But two-thirds of older workers are now employed in low-paying jobs, as cleaners, clerical workers or machine operators, according to Singapore's manpower ministry. In addition, Singapore wants to enhance the traditional Asian system of family support. Children are already legally responsible for the support of elderly parents. The government is now looking at providing home support services for families that care for older people at home.
Singapore hopes to reverse the elderly dependency ratio by attracting younger foreign workers, particularly from China and India, with the government predicting that the population could increase from 4.5m to 6.5m in the next 20 years. A recent study bv the International Monetary Fund suggested that many of Singapore's policies could be adopted by other Asian countries.
But it also warned that other countries with less rigid regulatory systems may have problems managing state pension funds similar to the CPF because they could be subject to abuse by officials in financing risky investments. Moreover, Singapore's long tradition of employing large number of foreigners may be difficult to copy in other more conservative and homogeneous Asian societies.
http://search.ft.com/ftArticle?queryText=singapore&y=0&aje=false&x=0&id=070314000844 -
No wonder those foreigners become Spore PR refused to give up their original citizenship cause the strong exchange rate can enable them to buy houses
in their countries. Many Malaysian n Indonesian those got Spore PR after working here for many years decided to go back nbelieve it or not, their houses very big n nice to live in. -
Not new..... lets face it, given a choice..... do you really like to stayOriginally posted by will4:No wonder those foreigners become Spore PR refused to give up their original citizenship cause the strong exchange rate can enable them to buy houses
in their countries. Many Malaysian n Indonesian those got Spore PR after working here for many years decided to go back nbelieve it or not, their houses very big n nice to live in.
Only problem being most of us does not have a good enough skill that some other countires will want....... so no choice but to stay lor...... -
I read the southern part of Johor has been earmarked to be developed so as to build a resenditial n trading centre. The main aim is to attract many
Sporean to buy houses n set up companies there. Will this cause many local to sell their personal HDB flats n used them to buy properties in Malaysia? -
1) The govt fails to solve the problem low birth rate. Incentive is not the answer. The root causes of the problem are many, many govt policies.
The concept of meritocracy is flawed. Already we have students crying over 4 A level distinctions. What more next? Crying over 8 A level distinctions? We are all sick and tried of the narrow definition of meritocracy and thus success.
Govt organisation should stop hiring based on exam results but on a person's profile etc his resume, character, inclination etc.
2) HDB flats are not subsidied in the true sense of its meaning. The root causes of high cost of living, esp for the low income, are the cumulative charges, the double, triple etc charges levied by govt organizations on the citizen.
3) Public organisation, structurally, is not the same as private enterprise and cannot be treated as private enterprise when comes to collecting charges. -
The system started to creak after 1997 in the great currency crisis. Couple that to the tech bubble, the weaknesses in our economy were thrown wide open. If it hasn't become clear to anyone, it is likely the % of the population that will be permanently unemployed will grow. Never mind all the lavish casinos, it will still not be enough to employ all of them. Couple that with low wages and rising costs, you naturally run up a brick wall. Of course, the Govt has much to blame for this since it set itself up against the wall by taking every single opportunity to increase revenue, including housing, that eventually, you run into problems. The Govt's sell of housing essentially sets up a price floor, and everything follows from that point.
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Don't worry, the solution to this is to increase the population to 6.5 million.
Then maybe 10 million.
Hey, you need the 10 million to support the 6.5 million who will be growing old in 30 years time right?
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the huge problem here is the laughable 'market subsidised' hdb units which is draining much of the savings....new hdb units are probably worth not more than 1/3 in building costs by my reckoning, having previously worked in construction throw in some amenities costs and what else we're still over-charged by a handsome profit...if you factor interests and other incidentals, a 4 room flat occupant should have at least a quarter of million more by the time he retires...but he will not have that money because some folks need to increase their pay cheaques...
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Correct. If the prices of HDB flat were not allowed to run up like in the mid 1990s, many of us would not have negative equity and thereby forced to slog till death!Originally posted by countdracula:the huge problem here is the laughable 'market subsidised' hdb units which is draining much of the savings....new hdb units are probably worth not more than 1/3 in building costs by my reckoning, having previously worked in construction throw in some amenities costs and what else we're still over-charged by a handsome profit...if you factor interests and other incidentals, a 4 room flat occupant should have at least a quarter of million more by the time he retires...but he will not have that money because some folks need to increase their pay cheaques... -
Singapore actually could have but because its government has become too greedy to make monies it has lost a valuable opportunity to build a greater country. If the HDB flats were made truly affordable public housing, Singaporeans would have become loyal to the nation and leaders with a strong sense of ownership.
The government has turned itself into a money making machine very much like the NKF seeking every opportunity to make profits from the people instead of serving the people.
HDB flats were actually built using people's own lands and public funds yet there flats were charged at market price less a bit of developer's discount which was called subsidy.
When lands were acquired under the law for public use or low cost housing there is no justification to charge people once again for such lands used for public use or public housing.
Even for car parks of such public housing estates the lands occupied were already factored in upon sale of public housing and were already charged against the purchasers as part of the development of flats but HDB treated these car parks as separated from public housing by means of creative accounting and charges parking fees all over again as if these car parks were separately developed thereby making extra profits over and above the sale price of these lands. HDB is making double profits by charging for parking fees on the lands sold with the flats.
People were made to struggle their whole life just to pay for the HDB flats otherwise these public flats would have become their great assets which they could use to live, invest and enjoy.
Unfortunately the government has lost its sense of duty towards the people and people have to struggle to pay for more and more taxes and services which were supposed to be provided by the government using the taxes.
Many of the MPs and ministers were supposed to be talents or scholars but if our talents and scholars could not understand it is wrong and immoral to over-charge the people for housing or services, are they the schoars or leaders we the people really should support.
It is time to review the meaning of talents and leaders. Are these the type of talents or leaders people want being only concerned with their own rewards or narrow interest in clinging on to political power.
Certainly people should consider whether they want to elect highly educated elites who are of the uncaring type concerned only with their own rewards at the expense of people.
No matter how the government tries to justify their taxing and cost recovering through all kinds of GLCs and corporatization in the name to avoid welfarism it will not be able to convince the people that it is truly serving or after the people.