The price of rising cost pressures

The price of rising cost pressures

EDITORIAL

ONE league table that Singapore did not wish to see itself at the top of was the ranking of the world's most expensive cities.

Having been given the dubious honour by a British media organisation, the country will now have to live down this unfortunate label. Quite rightly, this has been described, in official and private circles, as misleading.

In contrast, Mercer's 2014 quality of living index which also measures costs placed Singapore as tops in Asia, but 25th overall. (Top three were Vienna, Zurich and Auckland).

A more representative guide is the United Nations Development Programme's human development index which evaluates income indices, besides life expectancy and education. Singapore was placed 18th in last year's report. (Top three were Norway, Australia and the United States).

Context is relevant in the "most expensive" comparisons made by the Economist Intelligence Unit. Costs of leases, food and services consumed by multinational companies' assigned staff in Singapore bear little relationship to the experience of local households or Singaporean executives.

For example, rents at spots like Orchard Road, the price of table wine and the cost of private schools were taken into account. Prices were converted into US dollars. The report noted that over the past decade, a "40 per cent currency appreciation" and "solid price inflation" had pushed Singapore steadily up the ranking.

The generalised conclusion is not disputed: Singapore is an expensive place compared with many other cities vying for international investors and skilled expats.

The reality is that severe resource constraints do make housing, transport and utilities costly in comparison with more well-endowed societies. Many business leaders have voiced concerns about persistently high commercial rents as well as labour shortages driving wage costs up.

To be sure, the downside of Singapore's higher costs is made up for by many pluses. Infrastructure, safety, good schools and health care are important factors that indeed warrant a premium.

But no country can afford to see its attractiveness and cost competitiveness eroded.

While the rankings relate more to costs faced by expatriates, locals also feel some cost pressures. Singaporeans too aspire to some of the finer, and costlier, things that their foreign counterparts enjoy.

Shops and businesses in the city have been known to price some services based on what the market - driven by expatriate demand - will bear, thereby edging up prices for everyone, giving rise to more calls for the Government to mitigate rising living costs.

These will have to be carefully watched, given how such bread and butter (or jam) issues have proved critical in many elections.


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