On the budget, off the cuff

This article was contributed and first published in Business Times on 16 February 2013.

ABOUT five weeks ago, I was asked to write an article that might be relevant to the upcoming Singapore Budget. "I know", I thought, "I'll write an article about Singapore's population dilemma."

After all, I had been banging on about it for years, so maybe something on the topic was worth at least one last shot. As history will tell, I was lost in the stampede of articles, opinions, and feedback in the wake of the White Paper issued at the end of January on the topic.

Rather than throw petrol on an already suitable blaze, I realised it was clear another topic would need to be chosen. But after a period of scratching the wooden stuff (and getting only painful splinters), I was fortunate enough to have lunch with Vikram Khanna, of this august publication, who kindly informed me that after being weighed down by serious material for weeks on end, the reader might appreciate something "off-the-cuff".

So here goes. But not without warning the reader that what I am about to pour forth is completely un-researched idle speculation. Off the top of the head, off the cuff, or off any other part of the anatomy which, a posteriori, might seem most appropriate. But hopefully, food for thought.

OK something needs to be said about the population. I do not believe there is anything more need be said about whether and to what extent foreign labour, talent or just plain foreign bodies need to be brought in to Singapore.

What I will say though is that, if every male Singaporean (of requisite age and marital status, of course), went home this evening and did his national service, it would still be a good 18 to 20 years before the ensuing offspring began to be economically viable units (around 2031 to 2034).

A bit of a time-lag in anybody's book, during which time the happy bunnies need to be fed, watered, and educated at somebody's expense (This reminds me of Cyril Fletcher's joke about the cost of education. He said, "My friend wrote to me and said that he paid school fees of 10,000 quid per annum. I asked why he didn't just pay through the nose like the rest of us.").

But let's do a back-of-the-envelope calculation, assuming that 30 per cent of the female citizen population (about 500,000) is of child bearing age, that 20 per cent of males of that general age are unmarried, and a fertility success rate of 80 per cent (ignoring infant mortality) for those in the zone.

This would produce 320,000 new Singaporeans by the end of the year (which is to be contrasted with the current annual rate of 36,000). Assuming national service was delivered a second time, same time next year (perhaps Valentine's Day should be made a national holiday), we would have 640,000 new national babies.

Obviously, this pro-generation cannot go on annually, as penguins seem to manage. So the new baby population would remain static until, as suggested above, they could start to produce their own. In the meantime, mortality (currently at a rate of 18,000 per annum) would erode that base by 360,000, leaving 280,000 (a few short of the projected increase of 400,000 by 2030). But is this realistically going to happen? Draw your own conclusions.

The other point I would make is that, just possibly, at a macro level, converting a birth-rate of 1.12 (births per female head of the population) into 2.1 (the replacement rate) just simply cannot be done, however much money or how many tax breaks are thrown at the concept(ion).

The more affluent a nation becomes, the lower its birth-rate (proven supposition - see above). Applying simple mathematics then (F = Gm1m2/r2 - familiar to most as Newton's formula for acceleration due to gravity), it should be clear that, organically speaking, the citizen population of Singapore is in a downward spiral. Foreigners are here to stay. It's how you integrate them. Enough said.

Bi-polar disorder

For no other reason than pure interest, I was recently reading about trading routes, and was intrigued to see that Singapore was applying to become a member of the Arctic Council, "as an observer".

The Arctic Council is, not surprisingly, a body that brings together the Arctic nations, ie America, Canada, Denmark, Finland, Iceland, Norway, and Russia plus representatives from indigenous Arctic people (basically Eskimos).

So why is a country on the equator wanting to observe the goings-on above the Arctic Circle? It seems about as logical as Iceland applying to become a member of Asean. But while I cannot comment on the reticence on the part of Iceland to be a member of Asean, I can certainly take a stab at Singapore's interest in the Arctic.

It is, quite simply, that the polar ice cap is melting - and at an alarming rate. What this means of course is that, should the "Northern route" (the route between Europe and Japan around the top of Russia) become navigable for extended periods, this would cut in half the shipping time from East to West compared with the traditional route (through Singapore) that is now the only option.

Admittedly, the availability of a consistently safe and predictable shipping route is many years off. But it is possibly only years and who knows how quickly the ice will melt?

This led to me thinking about other threats to one of Singapore's best competitive advantages - its geographic location on the shipping routes between East and West.

So along comes Myanmar, almost out of nowhere. Not an obvious threat you would think, with all the political turmoil surrounding it, until you read about the 800-kilometre gas pipeline which will connect Kunming, capital of Yunnan province in China, to the Bay of Bengal.

This will apparently reduce China's dependency on the Malacca straits (read Singapore?) by a third, for oil from the Middle East (Financial Times Jan 31, 2013). With this will come road and rail links and, undoubtedly also, a route for Mongolia's mineral exports and capital imports.

Finally, although Thailand and Malaysia do not always seem to see eye-to-eye, they have already forged an alliance with a land bridge between KL and Bangkok. Potentially, it is only a hop and a skip to realising that the isthmus at their border is only some 100km wide and ripe for a similar coast-to-coast transport arrangement.

Black swans, possibly, but hopefully not so black that they will be allowed to glide in under cover of darkness. Though little seems to be happening on the surface with swans, there is a shed-load of paddling down below. So watch this space.

Finally, and at a more international level, it has always struck me that quantitative easing, or printing money as it is more accurately known, lacked a certain logic. Akin, it seems, to holding yourself up with your own bootstraps.

We have also heard much of the fiscal cliff that faced the US earlier in the year when the Bush tax reforms came up for renewal, and of the debt ceiling, both of which seem to have been swept conveniently under the carpet (relevant as the US is Singapore's largest trading partner).

So far so good though, as the can has again been kicked down the road and everything moves swiftly on without apparent ruction; but when you try to kick a can down a road while suspended on your own bootstraps at the top of a cliff, something suggests it is all going to end in tears, unless of course, Newton's theory of gravity turns out to be total bunkum. As second officer Scott in Star Trek said: "Aye captain, ye cannae change the laws o' physics."

Difficulties ahead? Of course there are, which is why there is a need for Singapore to remain flexible and light on its feet; and while the Budget this year will inevitably focus on local and perhaps micro issues that keep the population happy, we cannot ever lose sight of the very things that provide the country's prosperity in the first place.

So there we are. Some off the cuff remarks for what they are worth, which hopefully do not earn the writer a good cuff round the ears.