FT : Singapore Shrinkage

Singapore, one of the world’s most open economies, fittingly expects to be one of its fastest sinking.  After a ghastly first quarter the government forecasts full-year shrinkage of between 6 and 9 per cent.  What to do?  By “recentring” the policy band that pegs the Singapore dollar to an (undivulged) basket of currencies, the Monetary Authority of Singapore gains a pitifully modest devaluation – estimated by analysts at about 1-2.5 per cent.  MAS was careful to attach some suitably tough language, in effect putting currency traders on notice that more aggressive action will not follow.  In truth, there is not much more Singapore can do.  Sharper depreciation may help exporters, but any gains would be modest so long as global demand is in hibernation.  Meanwhile, a weak currency would encourage capital flight, the Asian leitmotif of global risk aversion.  Net capital outflows for the region as a whole were $145bn in the second half of 2008, according to the World Bank, or more than net inflows in the whole of 2007.

The city state has few other tools at its disposal.  It has already pushed the boat out on fiscal stimulus, where it is among Asia’s biggest spenders with a $13.7bn package worth about 8% of gross domestic product.  The breakdown of first-quarter output illustrates the difficulty of stimulating demand in an island of under 5m people.  Swooning external demand resulted in the manufacturing sector falling 29%, almost treble the contraction in the fourth quarter of 2008.  Construction bucked the trend, up 26%, due in part to a strong pipeline of housing projects.  But falling house prices, down 14% in the first quarter according to official data, mean this offers limited comfort.  Scariest of all, of course, is Singapore’s role as a leading indicator for the Asian economy.  Expect more downgrades to follow.

Reference : http://www.ft.com/cms/s/1/43469e32-24e7-11de-8a66-00144feabdc0.html

Singapore Tops Innovation-Based Competitiveness List

ITIF uses 16 indicators to assess the global innovation-based competitiveness of 36 countries and 4 regions.  This report finds that while the U.S. still leads the EU in innovation-based competitiveness, it ranks sixth overall.  Moreover, the U.S. ranks last in progress toward the new knowledge-based innovation economy over the last decade.

(click image for report)

Reference : http://www.itif.org/index.php?id=226

FT : Singapore In A Sling

In good times, governments have the luxury of fretting about an ageing population.  In bad times, they start to worry about a vanishing one.  Singapore, the beneficiary of a population that grew by almost a fifth during the economy’s recent fairytale years of high growth and low inflation, is undergoing a sharp reversal.  Almost two-thirds of 796,000 new positions since 2003 were filled by foreigners, mostly in construction and financial services.  Of them, 200,000 will leave by 2010, reckons Credit Suisse, causing the population to fall 3.3% to 4.68m.  As harsh as that looks, the prediction implies that the economy merely gives up the jobs it created in 2008 and a portion of the new jobs in 2007.  The reality could be far worse.  Many expatriates took their leave during a shallow Sars-related recession in 2003, causing population growth briefly to dip below zero.  This time, companies will cut deeper.  Fourth-quarter gross domestic product contracted 12.5% – the worst on record.  The electronics assembly sector, accounting for two-fifths of non-oil exports, has been hard hit.

Data from CEIC, an Asian research house, suggest that unlike in previous slumps, labour productivity had already been declining long before this recession – as early as 2007.  Employers may therefore turn a deaf ear to entreaties from the national wages council to freeze or cut salaries.  The withdrawal of highly paid financial services workers will hurt output, as well as all the satellite industries – domestic helpers, taxi drivers and restaurateurs – that depend on them.  UBS, part-owned by the Singaporean government, may be the only big foreign bank not shrinking with impunity.  Thursday’s budget should be a masterclass in pump-priming; the government has already changed a law allowing it to tap into managed reserves as a source of fiscal stimulus.  But stopping the reverse diaspora looks beyond it.

Reference : http://www.ft.com/cms/s/1/c13515fc-e6cc-11dd-8407-0000779fd2ac.html

Singapore IR Gambling Addiction : We’ll Just Say ‘No, No, No’ To Rehab

Interesting data point from the Illinois State Lottery system -

(click thumbnail for larger image)

FT : Singapore Government Nails ex-Citibank Staff

Seven former Citibank employees have been charged by the Singapore government with breaking client confidentiality laws in a case that reflects fierce recruitment competition among private banks and Singapore’s need to uphold tough bank secrecy rules.  They were accused of taking information on private bank clients from Citibank, a part of Citigroup, before they joined rival UBS in 2006.  They face a total of 1,223 charges under Singapore’s computer misuse act and bank secrecy law for accessing Citibank’s computers without authority and downloading or printing out client information.

The charges were filed after the Singapore police’s commercial affairs division conducted a year-long inquiry.  The police began their investigation after Citibank filed a lawsuit against six of the former employees in 2006.  That case was settled out of court last year with the payment of undisclosed damages.  Citibank also filed a complaint with the police and the Monetary Authority of Singapore, the city-state’s financial supervisor.  In its civil suit, Citibank alleged that some of the bankers had taken S$50m ($35m) worth of business to UBS by persuading clients to switch accounts.  Only three of the seven are still em-ployed at UBS and have been suspended pending the outcome of the case.  Singapore has some of the world’s strictest bank secrecy laws, which have helped make it the fastest-growing wealth management centre.  This was the first time that the authorities have used the computer misuse act and banking laws to prosecute the disclosure of bank customer information.  The accused face up to 20 years in jail and fines of up to S$125,000.  Most of those indicted were relationship managers in Citibank’s Citigold operation which caters for rich clients.  Jonathan Seah, a former Citibank branch manager who was among the seven indicted, acknowledged in a 2006 interview with the Financial Times and in a court affidavit that he sent client information to his personal e-mail address so he could work from home.  He denied he had forwarded the data to any other party or used it to benefit UBS, and had returned the information when Citibank requested it.  He alleged that Citibank had filed the civil suit to deter others from leaving Citibank to join rival private banks.  Citigroup dismissed such suggestions…..

Reference : http://www.ft.com/cms/s/0/7bbc62ec-cae8-11dc-a960-000077b07658.html