Take heed of heat over rising costs

SINGAPORE - Howls of anguish rang out around the room. You could almost feel the pain of those around the table.

The scene was a recent lunch meeting I was invited to with the leading lights of Singapore's retail sector, and top of their agenda was the unrelenting woes they were facing in the light of rising costs. They piled it on pretty thick.

"We are dying," cried one business chief, somewhat melodramatically.

"We are working day and night for our landlords," another chimed in.

A third added, more measuredly: "The impact on service is being felt, and this will hit Singapore's reputation as a tourist destination. It is not good for us."

Rising costs, mainly from higher rentals, but also from manpower shortages driving wages up, were plainly a source of much angst for this well-heeled group.

They are not alone. You hear the same squeals of pain every time you talk to a restaurant manager or just about anyone in the service sector.

Workers too have been voicing concerns about rising costs. Little wonder then that when news broke earlier this year that Singapore had been given the dubious honour of being the "world's most expensive city", according to a survey of expatriate living costs by the Economist Intelligence Unit, the story quickly went round, and resonated with many.

And, amid the slew of measures unveiled in this year's Budget, the one that caught attention was the hefty 25 per cent jump in alcohol taxes, which pushed the price of a beer at the local kopitiam to new highs.

Just last week, another lifestyle survey, this time by Deutsche Bank, cited Singapore as the priciest place in the world for some things, such as yes, a pint of beer, and as expected, cars, but also rather surprisingly, gym memberships.

In contrast, the cost of public transport and health insurance here is among the lowest in the world. For other items, like a pair of Levi's jeans, or an iPhone, and office rentals, Singapore ranks somewhere in the middle of the pack, the survey found.

One researcher summed up this mixed bag of results well: "If you're living in an HDB housing estate, sending your kids to a local school and using the MRT, life may not be horrendously expensive. It's not cheap... but it's not completely out-of-whack expensive."

Indeed, government leaders have been at pains to explain that these surveys are a little misleading since they reflect the lifestyles of foreigners, not locals. The goods included in the EIU sample - imported cheese, fillet mignon, "Burberry-type raincoats" and theatre tickets - are not the everyday fare of most Singaporean heartlanders.

The stronger Singapore dollar has also made the Republic a more expensive city to live in for expatriates, even as locals benefit from the lower inflation that the strong currency brings, they add.

Few, I think, doubt these explanations. Yet, the sense that daily living and business costs have been rising in recent times clearly continues to rankle with many. These gripes have not gone unheard, with several MPs telling this newspaper that they intend to raise the issue in the House during the debate on the President's Address at the reopening of Parliament, which kicks off tomorrow.

Yet, while the President's speech outlining the Government's plans for the next few years was long on big picture plans to help foster a smart nation, ensure social mobility, or boost savings for retirement needs, it was surprisingly short on the one issue that seems very much on people's minds - rising costs, and what the Government might do to help them cope.

No doubt, government officials will point to the statistics which show that employment rates are high, incomes are rising and inflation remains low, and wonder why there is this angst about rising costs. Some have been a little too quick to brush this off as the usual "noise" from a vocal minority. Rather unwisely, in my view, as these sentiments need to be addressed, and sooner rather than later.

In a sense, we have been here before. After all, the so-called bread and butter issues - or in Singapore's case, it might be more appropriate to talk of kaya toast and latte issues - have been a leitmotif of political debates over the years. Time and again, it has proven politically foolhardy of any government to be seen to be dismissive of these immediate concerns, wishing that voters would just focus their minds on the bigger, grander, longer-term programmes it has in the works.

So, perhaps it might be time for the Government to consider convening a Cost Review Committee or panel of sorts, if only to give assurance that it is mindful of the pressures people say they are facing, as well as the risk to Singapore's economic competitiveness, if indeed the anecdotal evidence of mounting costs is to believed.

Some issues that such a panel might address would include:

Are land pricing policies giving rise to a spiralling of business costs? Are these increases sustainable? Much has been said about how real estate investment trusts, or Reits, are driving rents up, and the Ministry of Trade and Industry's study published last week countering this notion was a welcome addition to the debate. Still, some remain unconvinced, indicating a need for further engagement on this score.

Is the policy of manpower curbs on foreign workers - aimed at boosting productivity, but also in answer to the public's demands for tighter immigration controls - taking a toll on Singapore's competitiveness? Are sectors like retail and services being especially hard hit? Will those in these sectors be able to survive the transition? And if not, what impact will that have on the wider economy?

To what extent are the high prices of some items here the result of a "what-the-market-will-bear" approach to pricing by some businesses? This was evident from the way some coffee shop operators cynically jacked up prices by more than the tax increases to see if they could get away with it. Apart from rents and manpower costs, perhaps this also explains why beer prices are higher than in other cities?

Are some providers, serving a niche clientele such as expatriates working in the Central Business District, establishing higher benchmarks for similar services used by locals - from gyms and playschools, to eateries and laundries - elsewhere? Is this why gym memberships cost more here, despite the competition among many players in the sector?

Is the well-intentioned effort to promote competition by curbing groups, such as the medical association, from having pricing guidelines making it harder for consumers to figure out what the proper market price should be? Remember how the cost of some medical treatments quickly adjusted downwards when then Health Minister Khaw Boon Wan moved to publish figures on what these cost across various hospitals?

Given the small market here, did Singapore go overboard in pushing for competition in various sectors at the height of the liberalisation wave of the 1990s, introducing multiple players in bus services, hospitals, cable television, the media and other areas - not always resulting in better deals and service for consumers? Just think of the sky-rocketing price for viewing the coming World Cup football games on cable TV - need I say more? To what extent do we need to recalibrate this? The major overhaul of public bus services proposed last week seems a step in this direction.

These are complex issues, with no alluring political soundbite answers. They are best discussed dispassionately, away from partisan fray, even though I grant that trying to keep politics out of any debate on price increases will be, and always has been, a challenge. A group of thoughtful, trusted minds brought to bear on them, perhaps over kaya toast and strong lattes, might help shed more light and cool some of the heat over these concerns. Failing to do so, alas, could well prove rather costly.

This article was first published on May 25, 2014.
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