Monday, July 31, 2006

Singapore to ban outdoor protests at IMF meeting

I decided to post this article for our foreign readers because I haven’t seen the story in the major foreign newspapers.

Singapore to ban outdoor protests at IMF meeting
A.P. Friday, July 28, 2006

Singapore will not allow outdoor demonstrations during the upcoming annual meeting of the IMF and World Bank, but will set up an indoor venue for registered civil groups, the police chief of staff announced Friday.

Soh Wai Wah told a news conference that outdoor protests during the Sept. 11-20 meetings would compromise security, could be exploited by terrorists, and disrupt the day-to-day activities of the area, making things "unpleasant" for residents.

"In the current security climate, the priority is to ensure the safety and security of our residents, visitors and delegates to the meetings," Soh said.

But in recognition of the IMF/WB's tradition of "constructive engagement" with accredited civil society organizations, Singapore will set up a private area in the lobby of the conference venue for these groups to gather and engage with delegates.

"The police recognize the importance of the participation of civil security organizations in the event. We have made maximum effort to facilitate their involvement, within the framework of our laws," Soh said. "However, we are unable to waive the current rules which prohibit outdoor demonstrations and processions, so as not to compromise security."

Under national law, permits are required for any outdoor gathering of more than four people, Singaporean or foreigner, amounting to an effective ban on protests and demonstrations. Singaporeans can freely hold indoor meetings without a permit as long as the topic does not deal with race or religion. Foreign groups or foreign speakers must apply for a permit.

Soh said the civil groups must be accredited by the World Bank to gain access to the indoor venue.

The police official said Singapore was mobilizing its entire police force and its police national service to provide 24-hour security for the meetings, which are expected to gather 16,000 delegates and visitors. Security measures would include aerial monitoring of the venue and screening of visitors to the country.

"If any laws will be broken, the police will not hesitate to take firm and fair action to prosecute or to arrest any individuals. The action that we take will be proportionate to the actions of any lawbreakers," Soh said.

Home Affairs Minister Wong Kan Seng said earlier this year that Singapore could use severe punishments _ such as caning _ against protesters who commit violent acts such as vandalism, arson or causing harm during the IMF meetings.

Sunday, July 30, 2006

Wal-Mart to Abandon Germany

Wal-Mart to Abandon Germany – New York Times

Wal-Mart Stores, admitting defeat in Germany’s giant but cutthroat retail market, announced Friday that it would sell its 85 stores here to a German retailer, incurring a loss of $1 billion.
For those of you who aren’t familiar with the American company Wal-Mart, it is the largest retailer in the world. It has been extremely successful in the U.S., Canada, and Mexico but has had mixed results in other countries. The company receives constant criticism for, among other things, using its size to push around its suppliers. It appears that Wal-Mart was less successful when the suppliers had less to lose.

While Wal-Mart’s vast size gives it enormous leverage in purchasing clothing and other goods, it must buy much of the food for its German stores locally. And there, it lacks the muscle of Aldi, which has 4,100 shops and a presence in nearly every town in the country.
The article also mentions a couple of cultural gaffes committed by Wal-Mart such as instructing clerks to smile at customers. Seems Germans aren't used to service with a smile. Maybe Germany needs a 4 million smiles campaign like the one Singapore instituted to greet the attendees of the IMF and World Bank meetings in September.

Saturday, July 29, 2006

Do Economists Have Any Answers?

Mark Thoma of Economist’s View writes

Do Economists Have Any Answers?

I am asked repeatedly what the solutions are to the problems that occur with globalization and increasing inequality, but the answers I give are not the answers people are looking for. Economists have done a good job documenting and highlighting the problems, but have had far less to say on how to overcome them.

There are some questions in economics that are not yet well understood. Many smart people have spent long careers searching for good answers and are still looking. And the answers that we currently have aren’t panaceas. Mark’s analogy is eye-opening:

I know a lot of you like to beat us up because we don't have the answers, and it's useful to motivate us to look all that much harder, but I'm not any more embarrassed for our profession because we can't solve every problem than doctors are who can't cure the common cold. And (this will make some of you mad) they, like us, have to listen to a lot of folk remedies that supposedly work, be told they are idiots, etc. And though every once in awhile the folk remedy is valid, generally the suggestions come from people who really don't understand all facets of the problem. You can't argue with them, they really believe their folk remedies work, so it's best to listen to them attentively, smile and nod, and not engage.

I don't think that economists can take the approach of pleasant disengagement. A public ignorant of basic economics is vulnerable to charlatans and quacks. One often opens the newspaper or clicks on a blog and reads opinions and remedies offered with unwarranted fervor and conviction, or even worse, with insidious intention. Economists have to better inform the public of the policies that work and those that don’t. Unfortunately, economists face a real dilemma professionally. Blogging and writing for a broad audience is not rewarded and often is frowned upon. Academic research is what drives careers.

Wednesday, July 26, 2006

Traffic Congestion in Singapore

Traffic congestion plagues almost all large urban areas. It's one instance in which economists believe there is reason for government intervention. Singapore is one of the few countries that regularly intervene.

Driving to work is what economists call a negative externality: an action taken by one person that affects the well-being of another. For example, my decision to drive my car to work makes the road a little more crowded, making your commute a little bit longer. My contribution to traffic congestion is small, but when there are thousands of other drivers like me, the problem becomes huge.

Economists dislike negative externalities because they cause inefficiencies. This simply means that people drive even though they shouldn’t from a societal point of view. For example, if you calculate that the benefits of driving - such as a more comfortable and flexible commute - outweigh its costs, such as petrol and maintenance, you would drive to work.* But you have left something out of the calculation, namely, the cost of a longer commute that you inadvertently impose on others. This is why too many people drive: some people drive even though the benefits of driving are not greater than the total cost to society.

To discourage people from driving, the government can intervene to make commuting more expensive to better reflect its true cost. In the US, the government often does not intervene in the market, maybe because individuality rules. As expected there are huge rush-hour backups in cities like New York and Los Angeles. On the other hand, in Singapore, given its small size, urban planning is viewed as essential and has allowed the implementation of two programs designed to reduce traffic congestion, Electronic Road Pricing (ERP) and the Vehicle Quota System.

The ERP is an electronic system that charges drivers when they use certain roads at certain times of day. Each car in Singapore has a device called an In-vehicle Unit that sits on the dashboard. Before driving the car, the driver inserts a type of debit card called a CashCard into the device. Money is deducted from the CashCard automatically when the car passes through traffic checkpoints across the city. In May 2006, passing through central business district checkpoints cost between S$.50 and S$3.50 (US$.32 and US$2.22), depending on the hour of the day and the location.

Under the Vehicle Quota System the government controls the number of cars on the road by limiting the number of new car registrations based on traffic conditions. The government then sells the registrations in twice-monthly auctions. In December 2004, there were 7,332 registrations available. There were 8,605 bids, with an average winning bid of S$20,893 (US$12,745).

So how does car ownership in Singapore compare to major U.S. cities? According to an AC Nielson survey the rate of car ownership in Singapore is 39%. According to the US Census Bureau, the lowest rate of car ownership in a large U.S. metropolitan area is 58% in New York City. Chicago and Los Angeles have car ownership rates of 89%, which ranks 8th.

How do commuting times compare? The average commuting time in Singapore is 33.6 minutes. The average commuting time in New York City is 38.4 minutes, in Chicago 32.7 minutes, and in Los Angeles 28.5 minutes. The U.S. numbers are actually too low because they include city residents only and not suburbanites who commute to these cities.

These numbers provide some evidence that the Singapore programmes have been effective. Of course, these numbers are suggestive and only meant to provide food for thought.

* Costs should include the opportunity cost of driving, the value of your best alternative such as taking the train.

Tuesday, July 25, 2006

Mr. Wangs says so about a singaporean economist

Mr Wang Bakes Good Karma has mentioned a singaporean economist. Thanks, Mr. Wang!

Check out Mr. Wang's blog if you are interested in Singapore current affairs. Pay particular attention to his legal analysis as Mr. Wang is a lawyer.

the first link to a singapore economist!

Mark Thoma of Economist's View has added a singapore economist to his blogroll. Thanks, Mark!

If you haven't checked out Mark's blog, I highly recommend it. It's a must read for me every morning.

Monday, July 24, 2006

How good or bad is the GIC's performance? (hint: it's a trick question.)

The Government Investment Corporation of Singapore (GIC) is an investment management company established in 1981 to manage Singapore’s foreign reserves. According to its web site, GIC “strives to achieve good long-term returns on assets under our management, to preserve and enhance Singapore's reserves” by “invest[ing] internationally in equities, fixed income, foreign exchange, commodities, money markets, alternative investments, real estate and private equity.”

Although GIC is state-owned, it has never publicly disclosed details on the performance of its investments until recently. GIC announced that the average rate of return on its investments was 9.5% in U.S. dollars over the past 25 years. Following this disclosure there has been extensive debate in the Singapore blogosphere over whether such a return is good or bad. For one particular example see Mr Wang Bakes Good Karma: Sad Performance in which Mr. Wang describes GIC's performance as "dismal," "sad," and "shocking." Strong words for sure but can they be supported by facts?

What can be said about GIC's performance? Unfortunately, not much. To say a return of 9.5% is bad or good has no meaning since we do not know the riskiness of GIC's investments. This may seem surprising to those who envision Wall Street as chock full of investors who earn great returns based on their smarts and savvy. But the truth is that investors are constrained by the effects of what economists call the "efficient market hypothesis." In a nutshell, this hypothesis says if there is a large number of reasonable investors then the price of a stock reflects all available information. As a result no one can "beat the market" because the price is a good measure of the stock's value. That is, if a stock is priced at $5, then there isn't anyone lurking around who knows that the stock is really worth $10. To put it succinctly, there are no opportunities to make easy money, even for the shrewdest of investors, when there are many others searching for these same opportunities. Economists have a lot of faith in this particular hypothesis; it is supported in varying degrees by enough research papers to sink a battleship.*

As a result of the efficient market hypothesis we know that investors face a tradeoff between risk and returns: an investor can only expect to earn higher returns if he or she is willing to hold riskier stocks. To evaluate the performance of an investor, we ask whether an investor could have obtained higher returns while incurring the same amount of risk.

Against this backdrop, there is now something we can say about GIC's performance if we are willing to make a big leap of faith or two. Turning back to GIC's website, we see that the GIC lists prudence as one of its core values: "Prudence means being conscious that we have a broader fiduciary responsibility than most fund managers; that we are in the public eye and must therefore consider investment risks and reputational risks; that we exercise sound judgement and discretion." Let's intepret this statement to mean that GIC's objective is to avoid "too much" risk and be conservative. (Big leap of faith number 1.) Now that we have assumed the amount of risk GIC is willing to accept, we can measure its performance by comparing GIC's returns to an appropriate benchmark. That is, we can compare GIC's returns to the returns of stocks of similar riskiness, and, a singaporean economist cannot emphasize this enough, from the same time period, the past 25 years. Let's take the S&P 500 index and Dow Jones Industrial Average as our benchmarks. (Big leap of faith number 2.) Over the past 25 years, the average yearly return of the S&P 500 index is 9.3%. The Dow Jones Industrial Average average yearly return is 10.3%. So it seems that GIC's return of 9.5% is in the ballpark.

So why is asking whether GIC's performance is good or bad a trick question? It's a trick question because judging performance is more than looking at absolute returns. We need to know at the very least GIC's risk tolerance and its portfolio, which are not available, to make an objective evaluation.

* Alternative theories of market behavior have been developed but most economists continue to think in the framework of efficient markets.

Sunday, July 23, 2006

sporadic posting for the time being

a singapore economist will post sporadically for the time being. I hope to post on a regular basis sooner rather than later.

through an economist's looking glass

a singapore economist has become familiar with the state of the Singapore blogosphere. Frankly, I am underwhelmed. I see lots of ranting sprinkled with speculation and anecdotes, particularly in the realm of finance and economics. Singapore, there is a need for critical thinking supported by data. To that end, a singapore economist hopes to be the looking glass for those who are interested in an economist's view of the world, a view guided by objective analysis, facts and figures.