SIMES Newsletter October 2013
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SIMES Newsletter October 2013
SIMES NEWSLETTER OCTOBER 2013 FEATURES
SIMES
History lesson
DEPARTMENT
3 Editor’s Note
6 Great Depression vs Great Recession
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SIMES ECONOMICS WEEK
Japan’s Deflation
26 Property Market :
Singapore vs Hong Kong
4 Highlights of SIMES Economics Week 2013
Reviews
35 National Day Rally 2013
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SIMES Newsletter October 2013
EDITOR’S NOTE The past five years have been a rude awakening for the world about the fragility of the global financial system. Banking systems around the world have been affected, whirlpooling in a mayhem of debt, bankruptcy, unemployment and inflation. Fortunes have been made despite it all, but many more careers have been destroyed. The aftershock is now weighing down on the emerging Asian economies. In this issue, we go back to the basics. We dedicate this issue to a few historic events which have shaped or are significant in the history of their country. The time bomb that exploded a few years ago should not be forgotten. It is imperative that we learn as much from it as we can. We feature a comparison of the Great Depression and the Great Recession, an analytical study of the monetary policies that shaped Japan’s Lost Decades and the Singapore and Hong Kong housing bubble. After the mini-history lesson, we take a look at what we have to look forward to. We feature a review of Prime Minister Lee Hsien Loong’s National Day Rally speech, where he motivated the nation, and pledged to make changes that make everyone happier. Do take note of our 6th Annual Economics Week. From 22-26 October, this year we focus on ‘Beyond Asia Economies’. We discuss the economies of some of the Southeast Asian countries that have been in the limelight recently, undergoing great internal changes, and strengthening their ties with the west. On a personal note, I would like to thank my core Research and Editorial team for their everlasting support and help. This issue is very special to me because of all the hard work we put in, and I don’t know what I would do without them. I am also eternally grateful to Dr. Seet Min Kok and Mr. Francis Chin for their unwavering guidance. For any queries or if you interested to write for us, please scan the QR code at the back of this newsletter, or contact me personally at sakshijain.me@gmail.com. Sakshi Jain
Disclaimer: All the views and opinions reflected in the articles are the authors’ own. Neither SIMES nor SIM are to be held accountable for the authors’ views.
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SIMES Newsletter October 2013
Economics Week 2013 Economics Week is organised annually by the SIM Economics Society, to provide a platform for our members to share and foster understanding of economic concepts and their applications. The week long exhibition is showcases the research work and analysis by our very own members. The mission is to not only to experience hands-on economics application, but to share the knowledge and encourage students to learn beyond the classroom. This year, we zoom back into Asia, focusing on the current economic situations of China, Japan, Korea, Myanmar and Singapore, taking a peak at the countries’ economic prospects.This year's exhibitions panels are the results of months of laborious research by the editorial team. Honouring this year's Economics Week is Professor Euston Quah, Head of Economics Division at the Nanyang Technological University. He is also the President of the Economic Society of Singapore. Professor Euston will be addressing students on “Environmental Economics”. We are privileged to have Professor Euston gracing us this year. There is never a dull moment when you learn economics with us. Climb on board a journey of learning through fun and games, from 22-25 October. While many cannot
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SIMES Newsletter October 2013
imagine associating fun with learning economics, at SIMES, we bring you a lifesized board game of Snakes & Economics, SIMES style. The society’s vision is to provide an environment for learning economics beyond the classroom context and understanding the applications of economics to the world around us. SIMES aims to stretch the potential of an individual to the fullest and attempts to prepare its members for the challenges they would eventually face in the working world. I would like to take this opportunity to invite individuals who are willing to join SIMES to write to us at sim.economics.society@gmail.com. We assure you that your time spent with us will be rewarding. Ethan Lim Vice President
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SIMES Newsletter October 2013
Great Depression vs Great Recession By Keetha, Louise Han, Stan, Bofi, Chieh Siang, Daemyoung, Samuel Choo
The Great Depression
The ‘Great Depression’ was a period of stark economic recession that flung the United States (US) into a state of desperation and despondency. Its effects were immediately felt worldwide after the onset of 1929 Wall Street Crash, otherwise notoriously known as ‘Black Tuesday’ late October that year, lasting for almost 1.5 decades. As share prices fell beyond redemption, investors were left panicky as no one was willing to repurchase their stocks, thereby paving the way to bankruptcy for many. Eventually, the crash spread well beyond US and into the economies of the rest of the world. Domestically, US had been suffering from a recession two months prior to the Wall Street Crash. At its height, there were massive levels of unemployment, poverty and social unrest. Notably, the Dow Jones Industrial Index 6
crashed by 89%, wiping out $40b ($537.08b in today) worth of value. As numerous banks had invested funds into the stock market, massive withdrawals of funds when people rushed to salvage their savings eventually led to the closure of banks leaving several people bankrupt.
Approximately 5,000 banks failed, taking away 9 million savings accounts altogether. Interestingly (and unfortunately), suicide rates jumped from 12.1 (per 100,000) to 18.9 in the year of the Wall Street Crash. Coupled with drastically lowered consumption, many businesses were unable
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SIMES Newsletter October 2013 to sustain themselves resulting in a plausible retrenchments weekly rates reached a high
and closed down, average of 100,000 as unemployment of 25% by 1932.
The Great Recession
The great recession is widely recognised to be the worst global recession since the great depression, originating from the US. It began in December 2007, mainly as a result of the sub-prime mortgage crisis. The US economy suffered from consecutive quarters of negative Gross Domestic Product (GDP) growth with a maximum decline of 6.8%, as a direct consequence. At the end of 2008, the world saw the infamous collapse of Lehman Brothers investment bank, then a giant in the US financial sector, as it filed for bankruptcy when it came to light that it owed a grand amount of $300 billion. Panic ensued given a likely threat of a total collapse of large financial institutions like Citibank, American International Group and Bank of America etc. More direly, the US lost a staggering $3.4 trillion in real estate wealth and $7.4 trillion in stock wealth, with a reported value of $14.5 trillion worth of global companies wiped out in the immediate aftermath. Unemployment rate stayed above 8% for 42 consecutive months since March 2009. Since the collapse of Lehman Brothers, US GDP growth has mostly stagnated at 2-3%.
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POLICIES IN ACTION Hoover, Roosevelt et al Administrations In 1930, President Hoover’s administration imposed the Smoot-Hawley Tariff to protect domestic farmers by making imports costlier, but at the cost of declining world trade by about 66%. Soon, natural conditions aggravated the severity of Great Depression in the ensuing years as droughts struck many parts of the US with millions of acres of farmlands damaged. Hoover’s successor, President Franklin Roosevelt’s first steps were to declare a 4-day bank holiday and pass reform legislations to reopen banks that were sound, in a bid to restore public confidence. Other legislations that aimed to stabilise economic productions and stimulate recovery chiefly include introductions of Tennessee Valley Authority and Agricultural Adjustment Act in the spring of 1933, alas to no avail. To counter the persistent hardships, Second New Deal which included domestic policies like Works Progress Administration and Social Security Act, was launched in 1935. By 1937, an increment in Federal reserve requirements coupled with a series of bitter industrial disputes with 8 million displeased workers across the country culminated in a sharp recession, thereby dragging the effects of Great Depression beyond the end of the decade.
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SIMES Newsletter October 2013 However, the turning point of the Great Depression was perhaps the outbreak of World War II later in other parts of the world, in which an interventionist Roosevelt took sides with the Allied Powers, therefore rapidly gearing up the US defence manufacturing sector in massive proportions. In effect, restoration of the production lines coupled with widespread conscription drastically reduced unemployment while boosting the US economy, thus ending its Great Depression.
Bush, Obama Administrations Even though the recession had already begun during George W Bush’s administration, and the economy was in dire straits, the onus of cleaning up was left to current President Barack Obama. Soon after his election, Obama promptly launched policies like the American Recovery and Reinvestment Act and the Public-Private Investment Program for Legacy Assets in an attempt to mitigate the financial meltdown in 2009. To address a worrying social fragmentation in times of hardships, Obama quickly signed the Lilly Ledbetter Fair Pay Act so as to relax the statute of limitations for equal-pay lawsuits.
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Other notable domestic policies include State Children’s Health Insurance Program and Don’t Ask, Don’t Tell Repeal Act of 2010. Also, the Fed adopted the unorthodox approach of quantitative easing (QE) to increase liquidity with hopes of stimulating the economy. The first round of QE (QE1, 2008-10) witnessed the US government incurring $7t in financial obligations: Wall Street bailouts, emergency lending, government guarantees on bank deposits, intrabank loans and home mortgages. QE2 involved an additional $600b in long-term treasury securities purchased by June 2011. QE3, introduced in September 2013, was a program of buying back mortagge backed assets, while keeping interest rates at a minimum. It is expected to be tapered down by December 2013. Albeit not the antidote, the rounds of QE resulted in a new surge of inflation and plummeting value of assets. While the US recovery is slow, Obama has successfully fulfilled a few key promises he made in the 2008 presidential campaign, a feat which later contributed significantly to his subsequent re-election in 2012, as a testament to his success over this daunting struggle thus far.
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SIMES Newsletter October 2013 ANALYSIS I: GREAT DEPRESSION Several hypotheses have been postulated as the prime drivers behind the Great Depression, namely: (i) ‘The Spending Hypothesis’ of shocks to the IS curve, (ii) ‘The Money Hypothesis’ of shocks to the LM curve, and (iii) ‘The Money Hypothesis’ of effects of falling prices.
this notion, because the decline in income is paired with a drop in interest rates. A collective set of factors have played a part in the shift of the IS curve: First, the 1929 Wall Street Crash reduced wealth and increased uncertainty about the prospects of the US economy. The crash was credited to a decline in spending and an increase in saving. A large drop in housing investments, which followed as a result of the excessive residential investment boom in the 1920s, was also responsible for the crash. However, other parties have also brought up the alternative explanation of a reduction in housing investments due to the reduction in immigration, in the 1930s. Second, the failure of many banks in the early 1930s, which was in large part due to frail banking regulations, exacerbated the situation.
(i)The Spending Hypothesis, IS-Shocks The spending hypothesis asserts that a massive contraction on the IS-side of the matter is the main cause of the Great Depression. A leftward shift of the curve was motivated by an exogenous fall in the demand for goods & services; attests to
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Banks play the role of a financial intermediary, transferring funds from households to firms that can optimise the utility of these funds. The closure of many banks resulted in inefficient transmission of capital to firms that had investment opportunities. Third, the contractionary fiscal policy that existed during that period did nothing to assuage the flailing economy.
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SIMES Newsletter October 2013 The goal of policy then was to maintain a balanced budget rather than to keep production and employment at their natural levels. This goal translated into a period of increased taxes and reduced government spending.
is depicted by a leftward shift of the LM curve, while holding the IS curve constant. However, this concept runs into two problems; the first being the behaviour of real money balances. Monetary policy leads to a leftward shift in the LM curve only if real money balances fall, yet from 1929-1931 real money balances rose slightly – implying a greater fall in the price level accompanied the fall in the money supply. The second complication is the behaviour of the interest rates. Intuitively, a contractionary shift in the LM curve must trigger higher levels of interest. Hence, there is sufficient reason to reject the money hypothesis.
This graph theoretically depicts the combined effects of the above-mentioned factors. The effects manifest themselves as a leftward shift of the IS curve. The Money Hypothesis, LM-Shocks The money hypothesis on the other hand, asserts that shocks to the LM are responsible for Great Depression. This conjecture was promoted because money supply fell by 25% from 1929-1933. Essentially, the blame is pinned on the Federal Reserve for allowing the money supply to fall by such a large amount. In the IS-LM model, the money hypothesis
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The Money Hypothesis, Falling Prices This money hypothesis then asserts that deflation is the primary cause for Great Depression. For a start, it is imperative to examine its putative effects, commonly known as the stabilising effects of deflation: Since real money balance is M/P, when prices fall real money balance must increase. This translates to a rightward shift of the LM curve, which brings about higher income. Another output-expanding avenue for deflation is called the Pigou effect. The
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SIMES Newsletter October 2013 effect theorises that a fall in prices raises real money balances, therefore consumers must feel wealthier, which must induce increased spending. However, the results predicted above were not evident. Hence two propositions were circulated to justify the adverse effects of deflation on the economy. The first is known as the destabilising effects of unexpected deflation, frequently known as the debt deflation theory.
debt. Naturally, this means creditors are enriched while debtors are impoverished. To tie the knots in this postulate, it must be that creditors have a lower marginal propensity to spend, as compared to debtors – this assumption is sound as it justifies the reason for debtors to be in debt, to begin with. The second proposition is known as the destabilising effects of expected deflation. Supposing that deflation is expected, this implies that the investment component in the IS-LM must fall in value, which results in a fall in output.
The theory postulates that a fall in prices must increase the real value of
USA annual real GDP from 1910–60, with the years of the Great Depression (1929–1939) highlighted.
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Notice that an ex-ante nominal interest rate, i=Eπ+r can be rewritten as r=i-Eπ, where a negative change in inflation must increase the value of r, the real interest rate. Given that investments depend on the rate of interest, a rise in real rates must necessarily crowd out investments.
ANALYSIS II: GREAT RECESSION The great recession is mainly the result of an acute fall in consumer spending and investment spending. In the years preceding this crisis, there was a substantial boom in the housing market, which was fuelled by low interest rates – used to counter the recessionary effects following the 2001 recession. The low interest rates made mortgages cheap, which drove the demand and, eventually, the prices for homes.
In conclusion, the IS curve shifts left and the economy ends up at a lower level of output.
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Additionally, the dramatic expansion of the mortgage market made it easier for sub-prime borrowers (individuals with
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poor credit history) to obtain loans. Simultaneously, the financial industry was participating in the sales and origination of mortgage-backed securities, through a process known as securitisation – the structuring of financial derivatives that were associated with all mortgage loans.
decline in aggregate demand and ultimately investments. The diagram above depicts the series of events.
The summation of these events contributed to the precipitous expansion of the housing market, indeed resulting in housing prices falling violently.
Two goals of economic policymakers are low inflation and low unemployment but these goals often conflict.
Due to the crash, prices reverted to their 2004 levels. House owners were left with mortgages that dwarfed the market value of their properties – mass defaults became widespread within the nation. Banks responded by reclaiming these houses in an attempt to recoup their losses, and as expected, housing prices experienced a downward spiral. The financial institutions were not immune as well. Their deep involvement on both sides, in the trade of high-risk mortgage backed securities was attributed to the bankruptcy of numerous firms. As such, distrust was pandemic; accordingly, loans circulation was impaired. Households started cancelling spending plans that very well led to the subsequent
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A lesson on the relationship between Inflation and Unemployment
In order to reduce inflation, the economy must tolerate high unemployment, or to reduce unemployment, higher inflation must be accepted. The relationship between inflation and unemployment can be represented in Phillips curve. The Phillips curve appears to show policymakers the combination of inflation and unemployment. In certain situation, there seemed to be no reliable relationship between the two indicators. The Phillips curve PC1 shows equilibrium in the US economy at E1, where unemployment is at U1 and expected inflation rate at π1. When the stock market plunged in 1929, it created an uncertainty in the market. Banks panicked and loan defaults forced thousands of banks to go out of business or merge with other banks.
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SIMES Newsletter October 2013
sheets led to a fall in investment spending and economic growth. Loss of confidence in the banking sector worsened the economy, as corporations cut jobs to reduce expenses, intensifying unemployment rate to U2 while inflation fell to π2.
Mass retrenchment was executed to reduce further costs, coupled with debt deflation from 1930-1933. An increase in the unemployment rate from U1 to U2 led the inflation rate to fall to π2, creating a new equilibrium at E2, at a higher unemployment rate and lower inflation. However, devaluation in the dollar boosted inflation to π3 with unemployment still stagnant at U2. At a higher inflation and unemployment rate, the Phillips curve shifted to the right, generating a new equilibrium at E3.
This created a new equilibrium at E2, at a higher unemployment rate and a lower inflation rate. To stimulate the economy, the Fed lowered interest rates and conducted an unconventional monetary policy in which it bought financial assets from financial intermediaries through newly created money. Newly injected money supply contributed to higher inflation rate. This shifted the Phillips curve to the right, from PC1 to PC2. At higher unemployment and higher inflation rate, equilibrium was achieved at E3.
A similar problem occurred during the Great Recession. At equilibrium E1, unemployment rate was at U1 and inflation rate at π1. When the Fed raised the interest rate in 2005 to curb inflation, it raised the cost of financing, resulting in massive default of sub-prime mortgages. A decline in banks’ balance
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Japan’s Deflation Economic Policy Review By Kainoa Blaisdell, Sakshi Jain, Irving Kwek, Jerry Chua
Since the mid-nineteenth century, with the opening of Japan to free trade and Western commerce after the decline of the Tokugawa dynasty, Japan saw two periods of rapid economic development. The first in 1868 until the start of World War II; the second following the conclusion of World War II in 1945, which extended across almost three decades allowing for unprecedented growth until the 1990’s. Real economic growth was 10% on average in the 1960s, 5% in the 1970s, and 4% in the 1980s.
In the mid-1970’s Japan began to see severe challenges to its growing position of influence. Between 1973 and1974 monetary tightening was implemented, for two main reasons stated by the International Journal of Central Banking; first, the global economy saw the collapse of the Bretton Woods agreement, and second, there was a recognition that the economy was overheating.
The most notable contributions to Japan’s maturing strength came from governmentindustry cooperation and mastery of technology. The ascent into a world power came quickly through drastic economic, social, and political changes, pushing Japan to the helm of global influence and attention, at one time only second to the hegemony of the United States. Growth slowed in the 1990s to an average of just 1.7%, due to significant economic difficulties that began earlier in the 1970s. 16
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SIMES Newsletter October 2013 The Bank of Japan’s discount rate was increased by 75 basis points in March 1973, and again in May following approval by Prime Minister Tanaka saying he would “tighten the credit squeeze in order to restrain total demand.” By definition, even non-monetary views of inflation seeing a positive output gap produce inflationary pressure, thus justifying a tightening of aggregate demand. Little did policymakers know deflation was right around the corner and the change in monetary policy came too late. The oil crisis in the 1970’s, set in motion by a proclaimed oil embargo by the Organization of Arab Petroleum Exporting Countries (OPEC), highlighted the country’s vulnerabilities to foreign oil prices as the country faced a severe contraction in production along with further economic slowdown. A Japan Times article on October 23, 1974 said that there still remained “a fairly solid and welcome consensus among government leaders that restrictive demand management policy should be continued for slowing inflation”, despite the post 1973 slowdowns.
assumption of information lag discussed by Taylor (1998), where “policy makers decide on interest rates in quarter t before they observe the current state of the economy.” The Taylor rule model of monetary policy assumes that central banks respond in a systematic fashion to deviations in expected inflation from desired level (by definition nominal interest rates minus inflation rate yields real interest rates). Thus, if inflation were to overshoot estimates the Taylor rule would suggest you must raise nominal interest rates enough to also raise real interest rates. The magnitude change in the nominal interest rate would need to be greater than the inflation rate. Japanese policy was and continues to be forward looking; previous work by Clarida et al. (1998) shows that the forward-looking
By 1975, inflation had dramatically fallen, yet was still considered a policy risk and economic threat. Thus, the Bank of Japan continued to increase discount rates in 1979 and 1980, citing “inflation containing action” as the reason. A resulting negative output gap occurred and Japan began to see disinflation and a sluggish economy. Missing the mark with policy formation could be attributed to an
nature of the Taylor principle fits Japanese interest rates well. This is matched by the Bank of Japan’s tendency to favour price stability,
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SIMES Newsletter October 2013 aversion to needed inflationary targets, as well as deflation when needed and a tendency to focus on “preemptive” policy measures. Recessionary pressure in 1985 was further exacerbated by a hit to Japanese exports due to an increasingly appreciating Yen as a consequence of the Plaza Accord. The Plaza Accord was a multilateral agreement between the G-5 nations of France, Japan, the United States, West Germany, and the United Kingdom to depreciate the U.S. dollar against the Japanese yen and the German Deutsche Mark by coordinated government intervention in the global currency markets. The reason was to correct “moderate growth patterns in the United States… and the growing U.S. current account deficit” which could “shrink world trade, increase protectionism, and lead to mutually destructive retaliation with serious damage to the world economy.” The Japanese yen saw about a 50% appreciation,
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from 242 USD/JPY in September 1985 to 120 USD/JPY in 1988, thus making Japanese exports more expensive. Recessionary pressure as a result caused an incentive for expansionary policy that led to further problems in the coming years. By the late 1980s, things began to get worse when inefficient investment from loose monetary policy led to inflation in the prices of real estate and stocks, resulting in an asset price bubble. Its subsequent collapse sent the economy into a tailspin. This caused a protracted period of firm debt, retrenchment of labour, and selloff of assets infamously called Japan’s lost decade, or by some - the lost two decades. Deflation became an extended condition for Japan’s economy and one of the most difficult challenges facing the country. The eyes of the world are still shifted towards Japan, but for different reasons. Unfortunately, the downward spiral into
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SIMES Newsletter October 2013 further intractability of economic hardships has left the market sentiment lost in a sense of foreboding. The lost decade and Japan’s continual battle with deflation has become an antithesis for monetary policy in other nations facing similar problems today. But, is contracting 0.5% in 2011 largely due to the March there really nothing Japan can do earthquake, tsunami, and nuclear disaster. Damages as to revitalize its economy? What a result are estimated to be between US$235 b-$310b. can we learn from this case study? Public debt continues to grow despite already being Measured on Purchasing Power above 200% of the GDP. Also, Japan has one of the Parity (PPP), essentially adjusting fastest ageing and shrinking population demographics for exchange rates between in the world, which will also prove to be a significant countries in order for the exchange obstacle in achieving economic strength in the near to be equivalent to each currency’s future. Such an increase in the ageing population purchasing power (calculated depletes the labour market of employable contributors as, S=P1/P2), Japan stood as the and heavily burdens state expenditure. The figure third largest economy in 2011. above shows the population pyramid for Japan, which illustrates the age and sex structure of the country China surpassed Japan in 2011 as the world’s second largest economy. After the 2008 financial crisis, sluggish demand for Japanese exports and a fall in foreign investment drove Japan further into recession and economic hardship. Government stimulus spending helped pull Japan into a shortlived recovery in late 2009 to 2010, http://simeconomicsociety.org/
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SIMES Newsletter October 2013 about a change in the dismal scenario. It is debatable, however, whether these signs of growth are prevelant in the short term or long term period. War on deflation/liquidity trap
Diagram explaining a deflationary condiiton
and gives insight into potential future political, social, and economic trends. There still exist further real risks to the Japanese economy. Even though real GDP growth expanded by 1.3% in the first quarter of 2013 followed by a 0.9% expansion in the second quarter, we cannot forget that Japan remains a heavily export-dependent country. Its exports of goods and services had declined 5.1% in the third quarter of 2012 as a result of falling demand from western nations and a boycott of Japanese goods by China over a Sino-Japanese sovereignty dispute in the East China Sea, both of which are causing a negative impact to economic growth. Exports have consistently been on the rise since January. Nationwide YoY CPI fell 0.3% in June 2013. However, it must be noted that the CPI has been rising steadily since January 2013. It is no longer debatable that Shinzo Abe is bringing 20
Deflation, the direct opposite of inflation, occurs when consumer prices fall – not to be confused with disinflation, which refers to a drop in the rate of inflation. For a rich, developed economy like Japan’s, deflation in the short-term can pose a greater threat than sustained inflation. Once deflation takes effect and prices are depressed, consumers expect prices to decrease further, hampering their propensity to consume. This expectation further tightens the grip of deflation as falling demand forces companies to continue decreasing prices, slowing down production, and reducing wages. In Japan, the most recent problems of deflation came about after a period of prolonged monetary expansion. After the signing of the Plaza Accord in 1985, severe recessionary pressure due to reduced exports from a stronger Japanese Yen resulted in the implementation of a looser monetary policy. In the years between 1986 and 1987, the Bank of Japan decreased the effective interest rate five times to 2.5%, hoping to bring back activity to its economy by
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SIMES Newsletter October 2013 spurring domestic demand. By 1987, which is often cited as the beginning of the bubble formation, the expansionary policy had taken effect, and Japan was experiencing a rising supply of money (in the form of credit), coupled with a rise in asset prices. As economic recovery became apparent, the BOJ considered changing course and switching to tighter monetary policy, but its attempt to curb inflation came too late. Only in 1989 did the BOJ make serious efforts to address the growing inflation, even then, amid discrepancies in evaluating
the future state of inflation in the country that prolonged its course of action. In May 1989, the BOJ made the decision to raise interest rates from the then level of 2.5% to 3.25%, citing inflation as their reason for doing so. Despite this action, inflation continued to rise, prompting the BOJ to further increase discount rates till they peaked at 6% in 1990. Soon,
asset
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drastically, with house prices following suit in 1991. The decade that followed was riddled with debt crises and a large bank bailout program by the government. Individuals were faced with a high debt burden and in some cases, a reduction of their house prices to 10% of pre-bubble values. Also characteristic of the lost decade was the over $900b of non-performing loan write-offs. The last half of the decade saw nominal interest rates collapse to zero. Most detrimental of all was that the deflationary pressure of the period pushed Japan into a liquidity trap, which is defined by Paul Krugman as an “awkward condition in which monetary policy loses its grip because the nominal interest rate is essentially zero, in which the quantity of money becomes irrelevant because money and bonds are essentially perfect substitutes.� By 2001, Japan was in a state of deflation, with prices continuously declining, a weak banking system riddled with debt, and recessionary pressure stemming from the Asian Financial Crisis of 1997 and the burst of the dotcom bubble.
dropping
The Bank of Japan implemented a round of quantitative easing, in which it radically expanded its monetary base. The effort was made in hopes that the influx of money in circulation through purchases of government bonds would lower the interest rates.
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SIMES Newsletter October 2013 the expectation of a rising money supply sustained into the future, monetary policy is counteracted by the public’s expectations and output and prices remain unchanged.
Quantitative easing attempts to decrease the real interest rate felt by borrowers and lenders by flooding money into the economy through asset purchases. With the central bank’s intervention, the price of the assets bought should, in theory,
The money demand equation shows the relationship between nominal interest rates and the money supply, where Md is the nominal stock of money demanded, P is the price level, and L is the real money demand and is a function of the nominal interest rate and output: Md ≥ L(R,Y) P When the interest rates are low, money demand becomes higher, as consumers are able to borrow money at a lower cost, and the returns to savings held in banks decrease. When interest rates are at a level of zero, however, consumers are indifferent between holding cash or short-term government securities, as both provide no return.
rise, giving incentive for individuals to purchase goods as expectation turn toward rising prices in the future. However, monetary policy can only be effective in this manner if in the public’s view, the monetary expansion will persist in the future (Krugman, 1998). This rationale stems from the standard argument of monetary neutrality, which states that prices rise in proportion to a rise in money supply in the current and all future periods. Thus for an economy in a liquidity trap, without
Thus, when the interest rate is zero, the demand for money becomes unknown. If this situation occurs and if the public’s expectations of the future are not improved, the effects of quantitative easing are
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SIMES Newsletter October 2013 absorbed because as the central banks buys up bonds, the money it pays the public in return is not only held, but becomes an alternative to getting bank credit. Further, banks could sell bonds and use the cash in return to boost their reserves instead of loaning it to the public, since in a zero interest rate environment, they too are indifferent between cash and bonds. An initial open-market operation increases the money supply, driving the economy down, where prices have increased and the interest reduced. As nominal interest rates cannot be negative, a further increase in the money supply is substituted with zero-interest bonds in the public’s portfolios, and has no effect on price levels of the interest rate. Despite the increasing money supply, the economy cannot go beyond the first point, as spending is no longer constrained by money. The newly elected Governor of the Bank of Japan, Haruhiko Kuroda, along with Abe has declared a war on the liquidity trap situation. He is following in the footsteps of Fed chairman Ben Bernanke and ECB president Mario Draghi by providing incremental stimulus to the economy. He expects to double the country’s monetary base by 2014, mainly by buying government bonds.
Current Situation: Shinzo Abe is prepared for his declared war against deflation. Abe and his Liberal Democratic Party, that have majority control over both the houses of the DIET, now have the political leverage to implement much needed economic reform through a far more aggressive central bank. Abe is implementing a three-directional approach in a bid to revive the economy.
I will stake my life on the recovery from the [2011] natural disasters and reviving Japan’s economy Shinzo Abe His policies follow a three pronged approach; Monetary Easing, Fiscal Expansion and Structural Reform. This follows a system of open ended asset purchases, setting an inflation target of 2% per annum, public spending on infrastructure and renewable energy, regulatory reform and creation of economic partnerships with other countries. The third approach is quite likely to turn out to be more important than the first two, given the now depreciating yen and strong competition from China and other emerging economies. Will loose monetary policy and further quantitative easing really boost the
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SIMES Newsletter October 2013 world’s third largest economy facing its fifth recession in 15 years? Yale senior fellow economist Stephen Roach argues no because “QE is good at containing the downside, addressing crisis and disruptive markets, but it definitely doesn’t give you traction in regenerating demand in the real economy.” Although asset buying may give a short-term boost in expansion, a sustainable recovery will not manifest due to the intractability of this deflation resulting from real structural problems and the consumer environment discussed above.
Structural reforms are the key to achieving the success that has escaped Japan for so long, the primary reason being that in recent history a myopic focus on palliative fixes in economic policy discussion has placed structural reform in the periphery. Thankfully, Abe recognizes the need for structural reform and its importance in pulling the country sustainably out of economic malaise. He is no longer delaying the implementation of comprehensive fiscal and social security reform. 24
Abe’s pledge to place economic recovery as his primary agenda has caused markets to rally along with sentiment among investors who have been sardonic about not only deflation, but also a severely damaging strong yen relative to inflation. We have seen a favorable everweakening yen as of late (fell 8.45% over September-December period), which will boost competitiveness and current account stance. It is to be noted that while Abenomics has improved the country’s exports, Japan is still highly dependent on imports of crude oil and energy (priced in US dollars), which are turning out to be more expensive, also thanks to the weakening yen. As an industry heavy-economy, this might just prove to help increase the inflation rate due to higher production costs. Investor confidence so far vested in hopes of Abe pushing his aggressive attack on deflation through expansion into true structural reform and policy change might not go to waste just yet. Japan’s economic problems are being tackled through bilateral consensus between the government and the Bank of Japan. The public sector, as well as the country’s central banking leaders, is breaking free from their stagnant paradigm notions of price stability and protectionism in order to move their country forward again.
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SIMES Newsletter October 2013 Abe is said to be eliminating Japan’s spending cap of 71 trillion yen (USD $901 billion) for the 2013 budget and is also looking to reform taxes, which previously included the doubling of Japan’s 5% consumption tax rate, instead raising it to 8%. These moves might just prove to be the key to solving Japan’s deflationary cycle. The removal of the cap could be used to implement a “fiscal jolt”. This fiscal expansion, in conjunction with zero interest rates, should be sustained even as inflation begins to take hold. Ideally fiscal stimulus will be slowly removed as the collective expectation of future inflation works its way into the minds of consumers and the private sector.
Following in the footsteps of previous Prime Minister Yoshihiko Noda, Abe is continuing to dismantle the protectionism that is plaguing key industries in Japan and open the markets to further market competition. Mr Abe is not the first Japanese politician to promise change, and he certainly will not be the last one. From having to resign 6 years ago amid derision from voters and colleagues alike, to gaining majority of both the houses of the Diet, Abe is proving to be quite an adept player.
Krugman suggests that it would be important at this point to maintain accommodating monetary policy, “not only to the point of full employment, but as inflation [rises] to the necessary level.” In this case it may be that the 2% target interest rate is not high enough and will need to be raised. Fiscal policy would need to be directed “more or less” at encouraging the same kind of spending that changing inflation expectations would achieve. Thus, an example prescribed by Krugman was “ an explicitly temporary investment tax credit.” These initiatives will have to be coordinated with the central bank and carried through with utmost commitment. http://simeconomicsociety.org/
The Japanese public and the Bank of Japan may just be taking a leap of faith by betting on him but they keep close eyes on him, following his every move. Whether he wins his own game remains to be seen.
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Singapore vs Hong Kong Of property bubbles and more By Benjamin, Benedict, Guan Lin
Growing concerns of a property bubble and its effects on the economy have been rising in many countries throughout the world, especially in Hong Kong and Singapore. The two countries are among the most developed economies in South East Asia, highly dependent on trade and their expanding positions in the financial services sector. Governments and many economists fear this predicted bubble since the Global Financial crisis, European crisis and the Asian financial crisis were triggered by the collapse of price bubbles in the asset market (i.e. foreign exchange, property market). Hence, to reduce the chance of another crisis, the governments and policymakers have been scrutinizing the forming bubble, taking rounds of cooling measures in order to detect this bubble and combat it.
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Although Singapore and Hong Kong are similar in many ways, the demographic of the housing differs. Not only does Hong Kong top the list on the Gini coefficient1 at 0.537 (2011), the higher percentile were made up of smaller household size, attributing to the larger percentage of private homes in Hong Kong. The correlation of the high Gini coefficient to the distribution in public and private housing is also reflected in a high percentage of public housing being rental units. The Gini coefficient, formulated by Corrado Gini is a classic measure of income disparity between the wealthy and the poor in an economy.
1
Typically, the value of the Gini coefficient ranges from 0-1 (0 indicating no disparity, and 1 indicating a very high difference in incomes) but theoretically, this value could be above 1, a situation in which negative income, or wealth exists.
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In comparison, Singapore’s Gini coefficient stands at 0.478 (2012, Source: CIA World Factbook), indicating lesser income disparity. As 2013 nears its end, property owners and investors are speculating what the future has in store. Million dollar questions are raised as to “Is it a buyers’ or sellers’ market? Will the government undertake more cooling measures or let things take their own course? What is the outlook for the year to come?”
Overview of the Property Market in Singapore Housing in Singapore is divided into Landed Properties, HDB (Housing and Development Board) flats, Condominiums and Other Apartments and Others.
HDB flats are built and managed by the government to provide affordable and quality accommodation to residents. Condominiums are generally privately owned, and typically cost higher than HDB residences. They also provide more security and utilities than the average HDB property. Landed properties can be owned by either the government or privately, depending on what it is being used for. Private property prices have grown by 120% from 2007-2012. The value of Residential Property Assets owned by households stood at SGD 813,189.9m (51.1% public housing, 48.9% private housing) for 2012, while the value of mortgages owed by households (to financial institutions and the HDB combined) stood at SGD 193,496m. 79.5% of the 1.27m units in Singapore are public housing (not just HDB flats) while 20.4% are private homes. In a survey conducted by market research firm, Blackbox Research, it revealed that 49% of home buyers and investors in Singapore believe that properties belonging to all categories are expensive. While this is true if one compares the property
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prices in Singapore to property prices elsewhere, but it has to be noted that for HDB type public housing, not a lot of countries around the world can boast of the affordability combined with the finishing and utilities provided by the HDB. Public housing in Singapore is not considered to be accommodation for only low-income families; it also caters to middle-income families. A recent report by Tricia Song, an analyst at Barclays Singapore, is based on warning signs of a residential property market correction in the next two years. This is due to the expected coincidence of the effect of the cooling measures i.e. higher interest rates and a large increase in housing supply over 2014-15.
Causes of Property Bubble in Singapore: Expanding Population Singapore has experienced substantial growth in population, however this were mainly ascribe to the increase of PRs and Non-Residents. The government has adopted loose immigration policy in the past few years and they intend to push population towards the target of 6.9 million.
The above table summarises the growth in residential units compared with the population growth. As is evident, there is a strong desire to match the increase in residential units to the growth in population. The intuitive logic behind this lies in increasing the supply of housing to a level where its value eventually starts falling, cooling down the bubble. We are in the last quarter of 2013 and this approach has not been very successful yet. Property prices continue to soar.
Along with an increase in demand for housing, the slow-down in supply exacerbates the situation, resulting in an upward pressure on prices. Around 29,100 new residential dwelling units were added in the year 2012, catering to an increase of 128,700 residents in the same time period.
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Eurozone Crisis Since the sub-prime crisis in the US in 2008, property prices have remained low and the property market has been stagnant. Investors are now turning their attention to Asian markets to capitalise on the stronger markets of Singapore and Hong Kong.
The low interest rate causes many to refinance their housing loan and many more to borrow Not a rosy picture
Similarly, fiscal problems in Eurozone are hurting growth and property markets are adversely affected.
While property prices skyrocket, tens of thousands of extremely low income citizens also live in ‘caged homes’ and ‘subdivided flats’ for survival. These caged homes can be as small as 6ft by 2 ft bedspaces, and the subdivided flats can have entire families living in a 50 sq ft areas.
These factors account for the huge inflow of funds into Asian equity and property markets.
money and purchase or upgrade their housing.
In an open flow in easily to drive up of the SGD foreigners to
economy like Singapore, funds and act as an external stimulus property prices. The strength also provides an incentive to invest in Singapore’s properties.
Property Market in Hong Kong Hong Kong is one of the fastest growing financial cities in Asia with a stable growth in GDP over the last decade.
In 2010, after recovering from the global recession, Singapore’s real GDP shot up 17 per cent. However, in a bid to resuscitate the US economy, the US Federal Reserve flooded the world with liquidity.
A city state with scarce land area and a constantly and consistently growing population, low interest rates supported by the government’s effort to help Hong Kong move out from the financial crisis, increasing amount of property speculators from main land China, housing related problems has always been posing a threat to the ruling state government in winning the residents’ support.
With the announcement of the third round of QE, interest rates in the US remain near zero and Fed Chairman Ben Bernanke’s pledge to maintain this level till at least 2014 has had a spill over effect on Singapore’s interest rate, pressuring it to remain low.
Being a small hilly city with a large population, available area for building purposes has always been scarce. Added to that was the Joint Declaration of the Chinese and British Hong Kong
The negative effects of “hot money” (short-term capital) flowing into Singapore has hit consumers.
Quantitative Easing
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government that from 1984-97, only 50 hectares of land per year will be sold. This was the earlier bubble in the Hong Kong property market. Since 2003, property prices were supposed to have been left to market forces to be determined, but this was not the case. The government still holds the monopoly on land and auctions it as and when it wants to. The average income has increased by only a quarter in the past 16 years, whereas real estate prices have grown only exponentially.
housing units and 52% are private units. The new Chief Executive CY Leung has been taking pre-emptive cooling measures ever since he became the head of the government, and the effect is finally showing. He has also announced more planned land reclamation projects, zoning changes and redevelopment of old residential sites.
Causes of rising property prices in Hong Kong Population Growth brought by immigrants
With the HKD pegged to the USD, any change in economic conditions in the US directly affects Hong Kong. New home completions in the 1990s averaged around 23,000 new units a year. This figure has fallen to 10,00011,000 units a year in recent years. Despite that, only 48% of the 2.16m residences in Hong Kong consist of public
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Over the last ten years there has been a steady growth on average of 6.64 percent in the total population in Hong Kong. Since Hong Kong‘s return to China in 1997, Hong Kong has always been seen by main landers as a place with more employment opportunities and better living standards as compared to mainland China due to years of civil war hindering its economic growth .
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It has been experiencing a significant increase of Chinese immigrants into the already sardine packed city state, due to the loosening of immigration policy by its own Chinese Central Government over the years. However, due to the opening up of the Chinese economy in the last decade, this comparative advantage that Hong Kong used to hold has been depleting, thus, influx of Chinese immigrants had been steadily declining. Nevertheless, according to findings in Asia, Hong Kong is still ranked the 4th most densely populated city in the world. The overall increase in populations in Hong Kong largely due to new immigrants coming in have definitely imposed an upward pressure on the demand of housing which is best reflected by the shooting prices. Low Interest Rate Banks’ interest rates have always been an important factor affecting the liquidity of the money in the economy. In particular, the demand of money increases as interest rates fall when loans become cheap and easily available to investors waiting to position themselves in what they perceive as the opportunity-driven property market. Historically, there has always been an inverse relationship between interest rates and property prices.
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It makes sense for investors to take on the risk to borrow cheap loans from the bank and speculate on the rising property market hoping to make a positive capital gain in the future. Inversely, it also makes sense for the Central Bank to increase interest rates to discourage speculators and investors. After the financial crisis in 2007, interest rates had been kept at all-time low by the Hong Kong government to boost investments within the economy hoping to cushion a portion of the impact caused by the financial crisis. At the end of 2008, the Hong Kong Government tried to salvage the economy by introducing loan guarantees worth up to HKD 100 billion allowing firms to apply. Previously, such measures were already in place but on a smaller scale. With such a stimulus package, each firm could get up to HKD 6 million worth of loan guarantee from the government. Tenants were also provided subsidies to help pay their rent.
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SIMES Newsletter October 2013 These moves helped to sustain confidence in the economy with banks more willing to lend at lower rates even in the midst of the financial crisis happening in the United States. However this move affected the property market heavily and adversely. What started as government aid to the needy became a tool exploited by opportunists. An influx of buyers with cheaply financed loans entered the market, pushing the demand for property further up. With the rate of supply of real estate unable to match it’s the exponential increase in demand, all else remaining constant, a drastic increase in property prices in subsequent months followed.
Part of these cash rich investors came to locate portions of their funds into the property market in Hong Kong. During that period, a huge proportion of new property sales were being made in Hong Kong, which was already helping to escalate property prices. This can be seen from the chart provided below; there is a spike in property prices in the year ended 2008, to the index of 250 points, which later cools down a little due to the global financial crisis. The prices picked up exponentially after 2009, partially caused by government policies that drove interest rates down.
China’s stimulation package In November 2008, the Chinese central government implemented a stimulation package worth a whopping USD 85 billion. This move was initially intended to boost domestic consumption and investment volumes within the mainland Chinese economy, but eventually pressured the property prices to sky-high levels. This was partly due to the results of the tight monetary controls by the Chinese government in restricting investors from sending the capital out of the country. 32
Measures by the Singapore and Hong Kong governments to cool the property market The first step to solving a problem is to recognise its existence. The governments of both Singapore and Hong Kong have had enough foresight to see the possibility of a property bubble and its effect on the economy.
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SIMES Newsletter October 2013 They have learnt from the past, especially from the mistakes made by the West, and they are bent on not repeating the same. The governments are urging their central banks and passing laws that would help to cool down the bubbling melting pot. The following table lists the respective measures undertaken:
Singapore
Hong Kong
Increase Increasing land supply/ releasing new Supply residential units
Increasing land supply/ releasing new residential units
Special Stamp Duties
Tax
Additional buyer’s stamp duty of 10% for foreigners and non-individual buyers Increasing Additional Buyer Stamp Duty for 2nd purchase onwards Tightening mortgage lending rules
Increasing stamp duty based on property value Tightening mortgage lending rules
•Loan-to-value (LTV) ratios on second •Maximum term of new home mortgages is mortgages were lowered to 60% of the limited to 30 years from 40 years. appraised value of the property (Jan 2011) •Maximum debt servicing ratio (DSR) •Capping loan tenure at 35 years (5th oct shall be lowered from the current 50% to 2012) percentage points to 40%. •First-time homebuyers who take out loans exceeding 30 years’ tenure will be able to Tighten borrow only up to 60 percent of the property’s Loan value (Lenders take the borrower’s debt Policies obligations in consideration while granting a loan)
•Maximum loan-to-value (LTV) ratio shall be lowered from the current 40% by 10 percentage points to 30%
•Mortgage applicants whose principal income is derived from outside Hong Kong, the applicable maximum LTV ratio shall be •Non-individual homebuyers will only lowered be able to borrow up to 40 percent of the property’s value, down from 50 percent. (5th Oct 2012) •The cash down-payment will rise to 25% from 10% starting from the second loan for buyers seeking second mortgages.
The high stamp duties have seemed to work, as is evident by the drop in volume of trade in the Hong Kong market. Though owners are refusing to sell at lower prices, buyers are not ready to buy. A correction in such a market is almost inevitable. Only 242 deals were reported in the office market in the second quarter of 2013, an alarmingly small figure for a city that is trying to increase supply by the thousands to bring prices to normal without the burst of a bubble. http://simeconomicsociety.org/
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SIMES Newsletter October 2013 When a property bubble forms in the early stage, it is often unnoticeable until the point where property prices were astronomically high. During the formation of a property bubble there is always an exponential rise in prices which often gives the general public a false impression that the economy is doing extremely well and that this growth is sustainable through time. Everyone wants a share of this lucrative pie. Banks loosen their credit assessment and lend to the less creditable firms and individuals in order to gain more profits. Thus we can always relate a positive relationship of the size of the property bubble to the amount of leverage the banks and financial firms are taking on. In the booming periods of the property market, banks are willing to take on more loans as the collateral (their property) provided by borrowers increases in value day by day. The amount of loans being borrowed increases drastically and it eventually reaches a point where banks often find themselves in a very risky position. A large portion of the collateral provided by their borrower consists mainly of property assets.
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This condition is often referred to as over leveraging in the property market. Due to this risky position banks find themselves in, any decrease in value of the property market will have a negative impact to the banks’ balance sheet. True enough, when a bubble bursts, a financial crisis with a fall in faith in the financial system follows. The number of defaulters multiplies and banks are often left with depreciating properties which are next to impossible to liquidate in a short period of time. Some are forced to write down their balance sheets and riskier banks that took on more leverage might even find themselves insolvent. If this problem is serious enough, it may even lead to a wide systemic risk in the banking sectors and even bank runs. In Singapore, the MAS has been urging banks aggressively to tighten their credit criteria, fearing bad loans since 2009. The chain effect caused by the burst of the property market bubble is always a going concern to the government. Looking at the West as a tough-love example of how sour the situation can get, the governments of both Singapore and Hong Kong are actively trying to avoid being the next to experience the horrors of the near collapse of their carefully nurtured financial systems.
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REVIEW National Day Rally 2013
By Ethan Lim
Read on as Ethan reports and comments on Prime Minister Lee Hsien Loong’s annual speech to the nation. Delivering the National Day Rally speech on 18th August 2013, Singapore Prime Minister Lee Hsien Loong addresses the nation on topics such as home ownership, healthcare, and education. Rising cost of living, public transport, widening income gap, ageing population, and other day-to-day problems are among the concerns causing anxiety in the hearts of many Singaporeans. In his speech, PM Lee assured the citizens of their uncertainty and outlined numerous initiatives to drive Singapore forward. Home Ownership Being the largest asset for many Singaporeans, and the main source of capital appreciation, home ownership has been and will continue to be an important way for the government to share the fruit of its progress with all Singaporeans and to help level up the poor. Unlike the rest of the world, housing to Singaporeans is not merely a shelter, but also an accumulation of wealth amassed throughout their entire life, or even a passed down in the form of inheritance.
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Over the few decades, housing prices in Singapore have increased exponentially, appreciated as much as five times in just this decade alone. Although measures have been taken to cool down the properly market to ensure public housing will be affordable to every Singaporean working family, we can still see that many new young families could only afford smaller flats despite higher income. These can be seen in increase in number of 2-room and 3-room flats being taken up and the longer housing loan terms taken. To negate this effect, the Government will be introducing new measures; families in 2-room flats can look forward to assistance in to 3-room flats later, as they increase their standard of living, through Step-Up Housing Grants. Lower- and middle-income households buying 3-room and 4-room flats for the first-time will also get more support - the Government will extend the existing Special CPF Housing Grant (SHG) to purchases of 4-room flats, extend it to middle-income households, and increase the SHG quantum. This is just the initial foundation laid for what the government has planned. The 6.9 millions target stated in the Population White Paper will evidently create a new surge in demand for housing in the long run. These new measures can be seen as steps taken to stabilise the property market as we work be towards the targeted population. Infrastructure Redevelopment In the long term redevelopment plans for Singapore, the Government is set to relocate Paya Lebar Air Base to Changi, freeing 800ha of land for building of new homes, offices and factories.
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SIMES Newsletter October 2013 The removal of height restriction on large lands around the area will set new heights for taller buildings in the vicinity. There are also plans in the works to relocate all ports currently operating in the southern tip of Singapore (Tanjong Pagar, Keppel, Brani and Pasir Panjang ports) to Tuas by 2027, freeing 1000ha of prime land for a brand new Southern Waterfront City. There are tremendous pressures for property price to increase in Singapore. The planned release of these two big plots of lands will increase usable land mass for new infrastructure, giving a boost to the supply of land for homes, office and factories in the near future, acting as a remedy to counter the expectation of the increase in prices. Although the move is more than a decade away, the early release of this news also have additional effect; giving assurance of government intention to intervene in the property market to ease the expected increase in property prices. Healthcare Another concern addressed at the rally was healthcare. With an ageing population and rising healthcare costs, it is increasingly taxing on the government to ensure that Singaporeans’ health is taken care of. As medical technology is advancing and more people are shifting towards a healthier lifestyle, life expectancy has been increasing. In response to this, the revamp of MediShield will cover people for life (previously up to age of 90) and coverage will also be widened, extending to those not currently covered, such as the elderly and those with preexisting conditions. The revamped MediShield, named as MediShield Life, will also provide better protection for very large bills. PM Lee pointed out that because benefits and coverage is better, premiums will be higher. He assured that the government would subsidise premiums for those who cannot afford it. Despite the expectation of the increase in healthcare expenditure, the government is ever ready to cope with the required spending. This can be attributed to the move by the government to turn the healthcare system in Singapore into an industry, commercialising medical care into a money-making business.
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SIMES Newsletter October 2013 Total expenditure on healthcare in Singapore has hovered around 3-5% of its GDP, below the average proportion of 11% in high income countries. Not only does this help to boost the economy, lessening the dependency on the Government, it pushes the citizens to be self reliant for healthcare needs through the use of insurance.Major changes will take place, but these policies will not work by themselves. PM Lee called on Singaporeans to work with him and with one another. “Together, let us forge our new way forward, to create a better Singapore for all of us.�
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NOTES
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