Thursday, 31 May 2007

Bill and Warren's Donations

Here's an interesting 1+1=2.

Warren Buffett recently donated US$37 billion to Bill Gates' charitable foundation. This is on top of the US$31 billion that Bill (yeah, we go way back) already gave before, making a total of US$68 billion.

Warren (I knew him through Bill) has already given most of his fortune (his estimated net worth is US$44 billion). Bill has another estimated US$50 billion to go.

So let's assume Bill will give most of that too and add another US$40 billion of that to the total, and so we have about US$108 billion.

Here's an interesting comparison.

The number of people the World Bank classifies as living in poverty just dipped below 1 billion this year, down by over 250 million since 1990. How do they arrive at the classification? Those that live on less than US$1 a day.

I think you kinda see where I'm going.

So let's say we take Bill and Warren's money and put it in a mix of T-bills, equity, loans and deposits. We take a blended return of about 7.5% and we arrive at returns of US$8.1 billion a year.

Divide that by 365 days and you have approximately 22 million.

So, basically, the charitable donations of 2 people are enough to double the daily income of 22 million people, without even affecting the value of those donations.


I dunno, I just thought that was interesting.

Wednesday, 16 May 2007

Singapore the Corporation (Part 2)

What is Corporativism, in a Singaporean sense? Search around on Google for "Corporatism" or "Corporativism" and you’ll find a few definitions. For brevity's sake, here’s Wikipedia’s:

“an authoritarian state, through the process of licensing and regulating officially-incorporated social, religious, economic, or popular organizations, effectively co-opts their leadership or circumscribes their ability to challenge state authority by establishing the state as the source of their legitimacy.”

As you can see, most people look at corporativism negatively. Marxists (all 18 of you out there in the world) compare it to Fascism because of the idea of class co-operation vs. class struggle - eg. all workers registered under one "trade union congress" which effectively kowtows to government dictates. On the other hand, liberals scream at the absence of individual rights in such a regime, the lack of transparency of the operations of the state, and the stifling of free enterprise.

But thankfully, Singaporeans are neither marxists nor liberals. They are simply pragmatists, and so, this blog entry will be an exercise in political framing, in a language all pragmatic Singaporeans can understand. Yes, Singapore is one big corporation, and therefore, you are all shareholders of that one big corporation. You figuratively and literally have a stake in the accumulated income of Singapore Inc., and should press your rights in such a fashion.

Certainly Singaporeans must get the message by now that the government prefers this arrangement. Two rounds of disbursements have occurred – the New Singapore Shares (NSS) in 2001 and the Economic Restructuring Shares (ERS) in 2003. A brief check at the combined NSS-ERS website shows this year’s dividend rate at 10.9%, a good return in any given year in terms of equity and a stellar one in terms of safer asset classes (presumably a claim on a country’s income is a safer asset class?)

However, from what I understand, the quantum of shares out there are miniscule and hardly worth a sneeze at. If I were a Singaporean, I’d smell an opportunity and use this avenue to pressure the government for more, as well as a higher dividend policy. Currently its 3% + the real GDP growth rate of the previous year. I’d say go for 5% and increase the entitlement. The question is, what level of ownership (i.e. the quantum of shares) is enough to create that sense of ownership in the average Singaporean, set at an optimum level which would not impede the cashflows of the state for crucial re-investment? (presumbly the Singapore government knows this and is not talking)

If the people of Singapore understand their country as a corporation and themselves as shareholders, then many things would become clear. Minister wages make sense. Rents and tolls make sense. The COE and the ERP make sense. Even taking care of expatriates, giving foreign customers better service, and $500 fines for spitting and littering all make sense. And then, Singaporeans would be able to press for reforms that the administrative elites of Singapore would also understand, because reforms would be along the lines of corporate governance and shareholder rebellions, not democracy (corporate governance as a rallying cry has the whiff of Enron; democracy, unfortunately, has the stigma of Tiananmen).

Among other things Singaporeans should ask for:

1. Increased dividend policy as stated above

2. Natural monopolies should have break-even targets (after accounting for necessary re-investment), not profitability targets (ie. like the United States Postal Service)

3. A clear immigration policy should be spelled out, with immigration to those who have added fundamental value to the Singapore economy over years preferred above all else.

4. Public KPIs for ministers and heads of statutory boards for accountability purposes. If they're paid like the private sector, they should be liable for punishment like the private sector – susceptible to demotions, firings, retrenchments and pay reductions.

The grumblings I hear in Singapore are reminiscent of employees in big multinationals bitching about their bosses and their directors getting fat paychecks. It’s time that Singaporeans understood that while they are employees in Singapore Inc., they are also shareholders, and should act as such. It would serve them better than grousing about it on blogs.

Conversely, the state-owned media (i.e. SPH) needs to collectively internalise this political regime and start to work as shareholder advocates, rather than simply management mouthpieces (i.e. move away from being the in-house company newsletter to being the research analyst covering the company). This would give the media greater credibility than it has now, while balancing the state's desire for some control over content.

To me, that would be an interesting development in political science. A new, viable political entity for the 21st century. How's that for putting Singapore on the map?

Sunday, 13 May 2007

Singapore the Corporation (Part 1)

I recently passed through Singapore on the way to the United States for a product exhibition. Most acquaintances and friends I met were surprisingly vitriolic of the recent government ministers’ pay raise, and had stories to counter-point, such as the growing income disparity there.

Most were of the opinion that the PAP would face a substantial backlash in the next election and lose more seats. One was quick to point out that in the last few elections, the PAP had won as few as 51% of the total electoral vote, and that if anything, the PAP might implode in internal fissures and factionalism similar to the fates of other former one-party states (the KMT in Taiwan, the GNP in South Korea). Only in this way would democracy come to Singapore.

I think I have to disagree. Not only do I support the PAP unreservedly, I think Singaporeans should abandon the language of western liberal democracy and embark on a new political journey, embracing the Corporativist regime they have created and pull the study of political science out of history and into uncharted waters.

Everyone knows that Singapore is structurally now more a corporation than a country. The GLCs have a major if not total share of the commanding heights of the local economy. Capable and well-run, the GLCs operate in those industries which favour natural monopolies (roads, airports, ports, mass transit) or compete against each other in those that don’t (power, retail banking, telecommunications, media). The PAP is a profit maximising regime in the “New Institutional Economic” sense – it seeks to maximise profits in the form of tax revenue, returns on state investment, and rents from ownership of local infrastructure.

In that sense, one understands why foreign investment is and always has been fundamentally a favoured policy. When a company sets up shop in Singapore bringing in expatriate workers, it bolsters local tax revenue through corporate, income and consumption taxes, and also provides rent revenue to the local monopolies and employment of the local workforce. FDI-driven export revenue in electronics, petrochemicals and pharmaceuticals remains a mainstay of the economy.

Besides revenue, Singapore's education system is geared towards identifying talented, driven individuals and streaming them at an early age depending on aptitude. Properly administered, it identifies the best and brightest to serve in the civil service, the aforementioned GLCs or statutory boards.

The success of this carefully implemented model of export promotion, FDI inflows and human capital management is undeniable. From 1966 to 2006, the economy grew over 20-fold from a GDP of S$9.7bn to $209.6bn. Growth in 2007 is estimated to be above 5% and based on current extrapolations, the economy of the island of Singapore (pop. 4.5m) might actually overtake its hinterland Malaysia (pop. 25m) within the next 10 years.

Which brings us to the issue of Minister wages. The uproar over this issue betrays a mental disjunct between the angry populace and the administrators of this economy, a disjunct partially created because the language of political science has not caught up with the economic reality of the way Singapore is governed – simply put, minister wages in Singapore should be aligned to private sector wages simply because Singapore now functions as a corporation. However, Singaporeans seem unable to accept this reality, as it has not been properly framed for them by the literate elite.

And that’s where bloggers come in. To be continued.