Business Times of 03 May 2006

By JOSEPH CHONG

IT has often been said that life begins at 40. For most of us, the first 40 years of life are dictated by our parents or living through the consequences of decisions made on our behalf. Indeed, 40 is often the year of the mid-life crisis - either in personal relationships or in vocation, or both. We see it often in financial planning. Singapore turned 40 on Aug 9 last year amid economic and social restructuring and issues of confidence - a sort of mid-life crisis. However, I believe that life for us as a nation has begun at 40. As an investment professional, I had not been so optimistic about Singapore's next decade outlook in the last 10 years (disclosure: I am not a member of any political party). But there are reasons for optimism.

Progress Package - progress in economic philosophy?

The Progress Package dispensed $2.6 billion over the weekend. This stimulus is what US Fed chief Ben Bernanke would call 'a helicopter drop of cash', albeit correctly concentrated on the lower income. Many have been happy with the cash received although a few would claim it to be an election gimmick.

Relative to the size of our economy and our estimated 'true' budget surpluses it is actually not very significant as a domestic stimulus. Nevertheless, the signaling effect is significant. Indeed, the stock market appeared to applaud it with the Singapore stock market being one of the best performers in the first quarter of 2006. It appears to signal a change in economic development philosophy - recognizing that the dangers of a widening rich-poor gap cannot be arrested via trickle-down wealth creation. Indeed, I have written about this in BT ('Facing up to income inequality', Aug 3, 2005). It also recognizes the importance of expanding domestic demand, at least in line with the overall economy.

This would come in handy as a counter-cyclical boost in 2007 as the US economy slows. Economic management cannot be just focused on accumulating current account surpluses and stashing them away as reserves. It has to be a productive balance between investment, savings and consumption, with the goal of full employment and sustainable increases in the standard of living for all.
 

Moreover, I believe we need a vibrant domestic economy for entrepreneurship to flourish. Virtually all large US companies that we are courting today were once small companies selling to their domestic community.

Integrated resorts - the right bet on the future

At 40 we seem to be shaking off some taboos and rightfully so. Although I empathies with the arguments against gambling, they do not appear logical. Organized gambling in the form of the Turf Club has been around for decades and most Singaporeans have not degenerated into addicted gamblers. By allowing the IRs to feature gaming, we are cleverly leveraging on our international 'brand' of being clean and above board in commercial matters.
 

The financial numbers are compelling. Even before the start of operations, the construction of the two IRs is estimated to pump about $8 billion into the domestic economy over three years, or about a 1.5 per cent boost to GDP per annum. In real terms, the boost would be more significant than the construction of the first two MRT lines in the 80s.

Also, besides the creation of jobs capable of absorbing our structurally unemployed, I believe the IRs would be the catalyst to boost our position as a service centre for the global leisure industry - a long-term global growth story.

Temasek's Stanchart purchase - a banking champion on home ground

Temasek's purchase of the late Khoo Teck Puat's Stanchart stake was a coup. The potential is exciting not only for shareholders but Singapore as well. It is now realistically possible to create an Asian banking giant with its home base here. Yes, the logical consolidation in Singapore and the rest of world would initially result in hefty job losses but the growth thereafter would eventually make up for the initial cuts.

More importantly, it would help secure Singapore's position as an international financial centre - which indirectly would secure, if not create, even more jobs.

It is never a good practice to count one's chickens before they are hatched. Nonetheless, the asset markets appear to be discounting some of the future optimism, eg, the private property market in the prime areas. Indeed, the potential out-performance of this segment was predicted in one of our BT articles, 'The way to go in property investment' (Jan 16, 2004). The aggressive buying of large prime properties appears to reflect heightened long-term business confidence.
 

However, I believe that Singapore is still a work in progress. This is because progress is not only about economic potential but political and social development as well. There are risks that we might not execute well or fail to embrace greater political tolerance quickly enough. Nevertheless, what we have is hope for a better future and hope is the soul of all vision.

The author is CEO of financial adviser New Independent. He welcomes feedback at josephchong@ni.com.sg This article is for information only. Readers should seek independent advice before making any investment decisions.