Rising wage costs: Will it scare away business?

Rising wage costs: Will it scare away business?


But Singapore has other advantages, say analysts


Weekend • March 15, 2008


Lin Yanqin



THERE were higher earnings — and more jobs — for Singapore workers last year, but with productivity failing to keep pace with the record increase in manpower, the labour cost of producing each unit of output has increased sharply.


Unit labour costs (ULC) went up by 3.8 per cent last year, compared to the 0.5 per cent increases in 2006 and 2005, according to the labour market report released on Friday by the Manpower Ministry.


Nominal earnings went up by 6.2 per cent last year, or 4 per cent taking into account inflation — a result of the tight labour market, according to economists.


Productivity, on the other hand, declined by 0.9 per cent as reported earlier, contracting for the first time since the economic downturn in 2001.


This, combined with rising rents and service costs, could add to the cost of doing business in Singapore, potentially affecting Singapore‘s competitiveness.


A United States Department of Labor study last year showed that Singapore’s hourly wage cost increase for production staff — often used as indicators of competitiveness of manufactured goods in world trade — was the second highest out of 33 locations globally in 2006.


But economists Today spoke to felt that Singapore remained competitive in other aspects.


“I don’t think we can compete on wages,” said Ms Ho Woei Chen, an economist with United Overseas Bank.


“Other advantages such as a high quality of manpower, transparency and efficiency, and good infrastructure are what continues to attract businesses here.”


To ease spiralling labour costs, the Government may have to consider increasing the supply of labour in sectors especially short of labour by lifting the quotas on the number of foreigners employed, said Standard Chartered Bank economist Alvin Liew.


Artificially keeping wages low was not a solution in talent-short sectors such as finance, as it could lead to much-needed talent seeking jobs elsewhere, he said.


In all, according to the MOM report, employment rose by a record 9.4 per cent last year, with local employment growing by 90,400 — comparable to 2006’s gains — and foreign employment growing by 144,500 — confirming preliminary figures released earlier this year.


As was also earlier revealed, of the 2.73 million employed persons in Singapore, one in three are foreigners.


However, with a potential economic slowdown looming in the United States, the job market was likely to look less “robust”, said Mr Liew.


“Wages are also likely to grow more slowly, and this could eventually lower the ULC,” he added.


Last year, unemployment fell to its lowest in a decade, with the seasonally adjusted overall and resident unemployment rate declining to 1.6 per cent and 2.3 per cent last December respectively.


With the robust economic growth, structural unemployment also fell, with the number of residents looking for work for 25 weeks or longer falling to 8,900 in December last year.


’07 LABOUR MARKET RECORDSEmployment was up by a record 234,900 or 9.4 per cent


Employment of foreigners hit a new high of 144,500


Overall unemployment dropped to 1.6% in December, the lowest in a decade


The number of workers retrenched fell by 39 per cent to a 14-year low of 7,675.


Two in three retrenched in the private sector were re-employed within six months, the highest re-employment rate since 1997.


There were 37,400 job vacancies in December, with a decade-high ratio of 138 job openings for every 100 job seekers.


Source: TodayOnline

SC Global is title sponsor for F1 support race

SC Global is title sponsor for F1 support race


It will also field a car in this year’s Porsche Carrera Cup Asia series




(SINGAPORE) Luxury residential property developer SC Global Developments is zooming into the motorsports arena by fielding a car in this year’s Porsche Carrera Cup Asia series and becoming the title sponsor of the Singapore round of the race.


As a result, the September event will be officially named the ‘Porsche SC Global Carrera Cup Asia – Singapore 2008’ and it will take place before the inaugural 2008 Formula 1 SingTel Singapore Grand Prix as a support race.


‘The attention of motorsports fans around the world will undoubtedly be focused on Singapore later this year when it stages its first Formula 1 Grand Prix and the first ever Formula 1 night race,’ said SC Global chairman and CEO Simon Cheong yesterday in a speech to announce the sponsorship.


‘SC Global is proud to contribute to what will be both an enormously successful event, and one which will put the spotlight firmly on this dynamic city.’


SC Global will be the title sponsor for only the Singapore race, not the whole series, which begins with next weekend’s F1 race in Sepang, Kuala Lumpur, and ends with the Macau Grand Prix in November.


This means that during the Singapore race, all 18 Porsche cars in the competition will have the SC Global name plastered on the front windscreen – considered the most prominent spot on the car. In the other races, only the Porsche name will occupy that position.


No mention was made of the sponsorship amount, with Porsche Asia Pacific citing confidentiality agreements. But within motorsports circles, a title sponsor is understood to typically pay a six-figure sum for what is the highest level of sponsorship. In this case, it is expected to be more than 100,000 euros (S$213,703) but likely to be less than 500,000 euros.


In addition, SC Global will be paying up to 300,000 euros for running a team for the season total of seven race weekends.


This includes the Porsche 911 GT3 Cup car (under 130,000 euros), a services package (about 65,000 euros), parts and tyres, as well as travel and accommodation costs.


It was also announced at yesterday’s press conference that DBS would be the official financial services partner for the Porsche Carrera Cup Asia 2008 season. Like SC Global, Singapore‘s largest bank’s sponsorship will also have a ‘special focus’ on the race in Singapore.


SC Global and DBS will be joining international names such as Mobil, Michelin and adidas, among others, as Carrera Cup sponsors.


Meanwhile, the Porsche Centre Singapore has donated $50,000 each to the Mainly I Love Kids (MILK) Fund and The Straits Times School Pocket Money Fund.


Karsono Kwee, executive chairman of the Eurokars group of companies, ceremonially handed over the cheques yesterday at the Porsche Pit Stop Singapore held at the Padang.


S Iswaran, Minister of State for Trade and Industry, who attended the function said that preparation for September’s Formula One race was in ‘advanced stages’, with the completion of road works and the pit building expected by end May and end June respectively.


Source: Business Times

Why the US downturn had to happen

Why the US downturn had to happen


Americans are consuming less, and their assets are losing value


(WASHINGTON) Retail sales plummeting. The dollar at a new low against other world currencies. A 60 per cent jump in US home foreclosures. A major investment fund going kaput.


This is what a reordering of the world economy looks like in real time.


Don’t think of Thursday’s economic news as discrete events. They are small pieces of a much bigger reversal in a series of imbalances that made Americans feel richer than they were and created unsustainable distortions in the world economy that are now righting themselves.


Americans are consuming less, and their houses and other assets are becoming less valuable. Painful as they may be, in the long run both trends must happen to restore sustainable growth. But in the short run, they are wrenching changes that are probably causing a recession.


The weaker US economy, combined with low interest rates due to Federal Reserve rate cuts, has made traders around the world less inclined to buy dollars. Thus, the value of a dollar fell below 100 yen on Thursday for the first time since 1995, and slumped to a new low against the euro.


Unpleasant as that is for people planning European vacations, it should help cushion the blow to the economy by making US exporters more competitive.


On the way up, a worldwide boom of cheap credit fuelled consumer spending, kept the US economy strong and artificially boosted the prices of real estate and other assets. Now the reverse is happening.


Lenders made too much money available, taking on too much risk for too-low interest rates. The pullback is reflected in Thursday’s other big business news, the default of Carlyle Capital, a fund operated by Washington-based private equity giant Carlyle Group.


The Carlyle fund had increased its returns by borrowing money from banks to buy securities backed by mortgages. When the value of those securities fell and lenders demanded more collateral, lenders took control of the fund and began dumping its assets into a market that already is swimming in such securities.


Simultaneously, the lessening availability of credit is causing consumers to spend less. That causes lenders to be more cautious, making the credit problems more severe.


It is what leaders of the Federal Reserve call an ‘adverse feedback loop’. There was clear evidence on Thursday that Americans are spending less.


The Commerce Department reported that retail sales fell 0.6 per cent in February, a sign that consumers are bringing their spending more in line with what they can afford after a decade of spending beyond their means.


Car dealers and restaurants took the biggest hits, as people delayed purchases of new cars and saved money by eating in.


This pullback by consumers and reduction in credit availability are behind the increase in home foreclosures that RealtyTrac announced on Thursday.


The 60 per cent jump reflects the fact that US assets are becoming less valuable, making consumers poorer. With home prices down 8.9 per cent in the past year (according to the Case-Schiller index), the dollar lower and stock prices down, we aren’t as rich as we thought we were.


In economics textbooks, such a rejiggering of economic forces happens in a nice straight line. In practice, it happens haltingly, with world markets on edge, day after day. Days like Thursday, full of jangled nerves and creeping panic.


Washington policymakers are trying to keep this adjustment of the world economy as orderly as possible, trying to prevent the economic undertow from hurting too many Americans. — LAT-WP


Source: Business Times