Singapore, SWFs, and Other Countries: Part I

A common question is: how does Singapore compare to other countries with regards to its finances both other sovereign wealth fund countries and other countries.  Let’s examine that question as they do nothing but further demonstrate fallacies about Singaporean public finances.

From 1992 to 2012, Singapore ran the third highest average government budget surplus as a percentage of GDP.  The top ten countries by average budget surplus from 1992 to 2012 are below.

There are two things that make Singapore’s appearance in this table so interesting.  First, Singapore is the only non-oil exporter on this table.  The other countries in the table are the major oil exporters like Norway, Saudi Arabia, Kuwait, and the United Arab Emirates but also lesser known oil countries like Angola and East Timor.  These countries run government surpluses because they receive oil royalties from the extraction of oil not extraction of revenue from its people.

The second reason Singaporeans appearance on this is so interesting is how it has decided to spend the revenue it does raise.  If we look at the third column average government expenditure as a percentage of GDP, Singapore ranks last on the table.  In other words, of the countries with large structural budget surplus, Singapore spends the least amount of money on its citizen of these countries.

However, I can already hear the complaints that I am making an unfair comparison because these countries have so much oil money to spend on their citizens.  This is a reasonable concern about whether I am biasing the data so let’s expand our comparison to all other countries in the world.  Below is a Table of Singaporean and other countries with similar levels of government expenditure as a percentage of GDP.

Singapore ranks second to last in the world of government expenditure as a percentage of GDP.  In terms of public expenditure as a percentage of GDP, Singapore ranks ahead of only Myanmar and  behind such caring socialist paradises as Haiti, Sudan, and Bangladesh.

I am personally a strong believer in the free market with healthy competition but what we witness with Singapore is not limited government.  Instead, Singaporean public finances betray a modern day developed economy extraction of wealth from its people.  Singapore has built its sovereign wealthf funds by refusing to deliver public goods and services to its citizens.

Oil dependent countries run large budget surpluses because of the enormous ongoing royalties they receive from resource extraction.  The government of Singapore is running public surpluses not because the tax burden is incredibly high but because the spending on its people is incredibly low.  Singapore runs large budget deficits because it over taxes and under delivers public goods and services.  Singapore is treating its people as sources of wealth extraction.  Rather, people should be considered resources.

The people of Singapore deserve better than Myanmar and Bangladesh.

13 thoughts on “Singapore, SWFs, and Other Countries: Part I

  1. the extent of the limited spending from the govt is hidden by the media mainstream.

    the underperformance of their investment strategy is also hidden by the mainstream media.

    • it might not be ok to compare the percentage of expenditure because s’pore’s GDP is bigger than some of the poor countries and its population is smaller. So, a similar percentage spent when calculated, indicates a bigger number and when divided by the smaller population indicates a bigger number per capita.

      however, it is quite true that if Singapore is really so rich, then at least medical expenses will be affordable but it is not. same thing for education. if labor is really the source of singapore’s wealth then it is sensible for Singapore to protect its labour but we see something else happening. it is also as if the govt is doing an arbitrage on the people’s labour production and short changing them.

      if it is not to cover investment losses and to keep themselves in power, I don’t see any other reason why.

      • The reason you use percentage of GDP is so you can compare other similar countries. For instance, even if we compare Singapore to other small or other small and wealthy countries, Singapore ranks last. For instance, Hong Kong, Luxembourg, Norway (which has a small population), and others all spend more to significantly more than Singapore.

        I do completely agree however that covering investment losses is the primary reason.

  2. “The deterioration of every government begins with the decay of the principles on which it was founded.”: C. L. De Montesquieu – [Montesquieu, Charles Louis de Secondat] (1689-1755) Baron de Montesquieu – Source: The Spirit of the Laws, VIII, 1752

    In May 2011 the Workers Party created “Aljunied Magic” taking away the 1st GRC from PAP. Slowly but surely Singaporeans’ are awakening. Looks like there is no stopping the WP now.

    Look forward to more of your expose – keep them coming – Thank You.

  3. Hi Prof,

    1. This is such a damning indictment. However, critics would point out that Singapore is prosperous and one of the richest country in the world. This is a result of being prudent, efficient, tight-fisted, etc…. over a long period of time. She is the envy of many a nations and people around the world (including from USA). Eager to learn and maybe emulate her success. But, I suspect Singapore is very unique. And no such country has ever come close to doing it after all these years. From your research, is there any other country with similar systems in place? If not, and why not? Why this has sustained for so long?

    2. On economic/financial capture, if we look at it on a micro/individual level it is a virtue to be prudent, conservative, savings for your children/retirement, etc….. But, carried to the extreme we end up with Scrooge-like people or a Warren Buffet (maybe not him, he is transparent and complaining he is paying too little tax). Not much harm there. On a macro level, would I be wrong to say that such extreme/lopsided economic capture must come with consequences (economic, social, political, etc…) including affecting the ability of individuals on their own financial capture (higher education/health expenses, etc…)? In an extreme meritocratic Singapore, would you say that micro economic captures would be similarly skewed as well – as in huge income disparity?

    3. The theme of your write-ups imply a sinister set-up, opaque and unaccountable pointing to possible fraud or a black-hole somewhere. Assuming for one moment that there is nothing sinister here, just the opacity and unaccountability. Would you agree that such an economic capture of such epic world-record beating proportions would not be possible if not for exactly this same reason of being opaque and unaccountable? And that the sacrifice for such an accumulation of wealth is just national ignorance?

    4. Even if one’s own economic capture is healthy, one should not allow trust to blind oneself from verifying (“I trust you, but I need to verify this”) and disregard transparency and accountability. Future generations’ (one’s own included) economic capture can only be healthy if fairness/equality is also taken into account. Not just the “you die your business” meritocratic way. I say this, not as a political statement, but to friends and families. Alas, so far ignorance is bliss.

    5. I agree with Darkness that this is a “slow-burner”. I hope you have the fuel to keep on burning and we can see.

    6. Mundane issues. It would be helpful if you could indicate the source of the statistics quoted in your write-ups. For the benefit of readers, old and new, please reproduce all your previous write-ups on this new blog (as in one place). Or at least provide a link to them.

    Thank you.

    • There is a lot here that I need a little additional time to respond to but I agree with you that this is a slow burner.

  4. Or is it also that GDP is not a realistic measure as a significant part of Singapore’s GDP is virtual–it isn’t generated in the country and it doesn’t stay in the country. I recall reading somewhere that about half of the GDP leaves the country in the form of profits from MNCs, etc. It would seem that most of the GDP does not benefit the citizens or residents given the huge disconnect between GDP per capita and per capita or household income and buying power.

    • I will look up what percentage of profits from MNC’s are being repatriated out of Singapore but I doubt that could make up the enormity of what we are talking about. The reason that increased GDP has not translated into significantly higher standard of living is that the government through various forms is capturing that through forced public savings that the government controls. Government running a 10% budget surplus is a form of forced public savings. Running a structural current account surplus is another form of forced public saving.

  5. Interesting and thanks for highlighting issues for us. However a friend said
    that you are anti Singapore and the reason is that your application for a position at Temasek was rejected.

    • You can believe whatever you want to believe but trust me when I say, I am not anti-Singapore at all. I have never applied at Temasek. I had to turn down a position at NUS to accept my current position. I like Singapore. I have been there a couple times and always thought it was a nice place.

    • I think that’s quite uncalled for. Let’s be objective, unless you insist of behaving like the ostrich. The only thing clear so far is there isn’t any refute coming from official sources of Prof’s findings. Surely, if it’s complete nonsense, a junior officer would have jump out to shoot Prof down instead of the deafening silence we hear so far. This is very uncharacteristics of the normal practices if I remembered from the past.

  6. Hi Prof,

    Is there any way you can separate the components of GDP reported by Sg from various published data/info from the government or other agencies? I asked this question because I observed a lot of activities are underway building the MRT networks in Sg. These should contribute to the reported GDP numbers but I don’t know the percentage. If this is a major contributor then I’m quite worried because these are infrastructure investments and it’s in the transport area moving ONLY people and nothing else. I perceived there will be underutilised networks which will simply be white elephants. Also, when these networks are completed, what else will replace them as GDP contributors especially when the export/external sector may be on the decline?

    So, Prof, are you able to dissect the GDP numbers reported by Sg goverment and enlighten all if all is healthy with Sg? Would appreciate immensely if you can highlight to us what to look out for regards to the health of the Sg economy going forward.

    Thanks in advance.

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