Quoteworthy: "If you want to change someone’s view, if you want to change someone’s action, you can’t slap them on the hand; you have to hit them in the face." — Former Salomon Brothers economist Henry Kaufman urged the US Fed to “act boldly” to control inflation.
DPM Lawrence Wong signals rich may have to pay more taxes
Singapore’s next prime minister signalled that the wealthy might face more taxes as the government seeks more inclusive growth in the city-state and looks for ways to shield the most vulnerable groups from the impact of high inflation.
While the country’s income inequality based on the Gini coefficient has been narrowing, the government probably needs to “lean some more in the direction of more inclusive growth,” Lawrence Wong, 49, the country’s Deputy Prime Minister, said in an interview with Bloomberg News editor-in-chief John Micklethwait on Aug 15. Wong was making reference to an index developed by Italian statistician Corrado Gini in 1912, which measures income distribution across a population.
“Everybody pays some form of taxes but certainly the ones with greater means — the rich and the higher-income — will have to pay more,” said Wong, who is also the Finance Minister, reiterating a message he has communicated before. “It’s not only done through the taxation system, but we also can do it through transfers and spending and make sure that spending is targeted at the lower-income and those with greater needs.”
His comments follow an assurance from Prime Minister Lee Hsien Loong that the government is prepared to do more to help lower-income households deal with price gains hovering at a 14-year high. The city-state, which earlier raised taxes on its wealthiest 1% and imposed other levies, needs more cash to sustain its inflation fight, given an expected budget shortfall of $3 billion — or 0.5% of gross domestic product — this fiscal year.
See also: ECB’s Schnabel sees only limited room for further rate cuts
Wong expects inflation to peak by the end of the year before easing, adding that the government will provide more assistance should prices rise further. The country’s consumer prices rose 6.7% in June, the quickest pace since mid-2008, while the core measure gained 4.4%.
“But the big uncertainty is what is the extent of the easing and where will the new inflation rate stabilise at,” said Wong, who expects inflation to settle at a higher rate especially considering the geopolitical environment, supply issues, and spending on the green economy transition. “We have to prepare for that new equilibrium where inflation is concerned.”
Singapore’s central bank has tightened its monetary policy four times since last year to tame inflation. In contrast, the government has targeted measures, including unveiling a $1.5 billion package in June, at the most vulnerable to blunt the impact of supply-driven price shocks.
See also: Stubborn US inflation set to reinforce Fed’s go-slow approach
Wong said the government intends to stick with its plan to raise the consumption tax next year to 8% from 7% while clarifying that built-in buffers are in place to protect the lower-income households from the increase.
“That’s the system we have but we’re continuing to see how it can be enhanced, how it can be improved and how can it be fit for purpose, increasingly in a world that’s going to be more uncertain and where there will be more forces that will stretch incomes and wealth apart,” Wong said.
In the same interview, Wong talked about rising geopolitical risks and the importance of a multilateral rules-based trading system to support global growth. Wong was named the leader of the so-called fourth generation (or 4G) team in mid-April, making him the heir-apparent to Lee. The economy he’s poised to inherit is grappling with slowing growth on top of elevated prices. He said: “It’s not just an inflation risk and, in fact, the growth risks are starting to increase as well for next year and that’s what we’re watching carefully, too.”
Singapore recently trimmed its full-year economic growth projection to a range of 3% to 4% — from 3% to 5% seen previously — citing significant downside risks to the global economy, including the war in Ukraine and financial instability owing to tighter monetary policies in advanced economies. — Bloomberg
Thumb drive inventor pleads guilty to cheating, falsifying company financial statements
Henry Tan (also known as Henn Tan) — the founder and former CEO of Singapore Exchange (SGX)-listed Trek 2000 — has pleaded guilty to five charges of conspiring to falsify accounts, forging documents and cheating external auditors on Aug 15.
Tan, who is the inventor of the thumb drive, will be sentenced on Sept 22. The judge will also consider four other similar charges. Tan has been on remand for one and a half months and offered bail at $400,000.
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Tan had allegedly worked with Gurcharan Singh, the chief financial officer at the time, to falsify entries in Trek 2000’s financial statements from 2006 to 2011. It went unnoticed until the company’s auditors Ernst & Young (EY), discovered that Tan had altered the figures for the financial year 2015 (FY2015 ended Dec 31, 2015) because of the company’s dismal performance. Tan, at the time, had worked with other company officials to inflate its revenue and pre-tax operating profit. When asked about the transaction, Tan and his colleagues tried to convince EY that the statements were correct and that the sale was genuine.
Tan was fined $80,000 in August 2020 after he pleaded guilty to two charges under the Securities and Futures Act (SFA). His son Wayne now leads Trek 2000 as the company’s president and executive director. In an interview with The Edge Singapore in April 2021, the younger Tan said: “Based on what we know, there has been no misappropriation of funds in the company, no malicious intent, no losses incurred to our shareholders and the company”.
He added that the incidents were “a foolish mistake on the part of the past management”. “Nobody, no company is perfect or infallible. We have looked into it, and we have improved. Have complied with what the authorities want us to do, and we continue to look into how we can strengthen our internal process and corporate governance to prevent future incidents from happening again.” — Felicia Tan
Singapore’s NODX expanded by 7% in July
Singapore’s non-oil domestic exports (NODX) grew by 7% y-o-y in July, extending from the 8.5% y-o-y growth in June. The y-o-y growth was mainly attributable to the change in non-electronics NODX, which increased by 6.1% y-o-y.
Specialised machinery (+12.2%), pharmaceuticals (+9%) and structures of ships and boats contributed the most to the growth in non-electronic NODX. During the month, electronic NODX also expanded by 10.3% y-o-y, led by change in integrated circuits (ICs), parts of ICs and disk drives, which rose by 18.5%, 83.2% and 110.2%, respectively.
On a m-o-m seasonally adjusted basis, NODX increased by 1.4% to $17.8 billion, with growth in electronics and non-electronics during the period. In July, NODX to the top 10 markets rose as a whole, with the most significant contributors being the EU 27 (which refers to the 27 European Union countries after the UK left the EU), Malaysia and Taiwan, with growths of 22.9%, 29.9% and 24.4% respectively.
NODX to the EU 27 expanded thanks to the growth in pharmaceuticals (+87.3%), specialised machinery (+21.5%) and ICs (+52.5%). Meanwhile, NODX to Malaysia grew mainly due to ICs (+61.8%), non-monetary gold (+109.3%) and primary chemicals (+104.8%). NODX to Taiwan increased in July due to specialised machinery (+66.1%), parts of ICs (+161.4%) and ICs (+5.8%).
During the month, NODX to China, Japan, Hong Kong and Thailand declined, while NODX to emerging markets expanded by 34.1% in July due to the higher exports to CLMV or Cambodia, Laos, Myanmar and Vietnam (+90.3%), Latin America (+36.4%) and the Middle East (+29.4%).
In July, non-oil re-exports (NORX) grew by 25.2% y-o-y, easing from the 31.4% growth in June. The increase in NORX during the month was thanks to expansions in both electronics and non-electronics.
On a y-o-y basis, electronic NORX grew 8.4% due to ICs (+10.9%), diodes and transistors (+33.8%), and personal computers (+39.1%). Non-electronic NORX grew 47.4% in July, mainly due to non-monetary gold (+775.5%), non-electric engines and motors (+81%), and specialised machinery (+102.3%). On a m-o-m seasonally adjusted basis, NORX fell 0.9% in July to $33.6 billion. Electronic NORX fell while non-electronic NORX grew.
NORX to the top 10 markets as a whole rose in July, with the top three contributors being Indonesia (+76.5%), Malaysia (+39.3%) and the EU 27 (+45.6%). Meanwhile, oil domestic exports grew by 97.1% in July on a y-o-y basis, extending the 66.2% expansion in June as a result of higher exports to Malaysia (+199.6%), Indonesia (+137.6%) and Australia (+83.1%).
In volume terms, oil domestic exports grew by 13.4% in July, following the 11% decrease in the previous month. On a m-o-m seasonally adjusted basis, oil domestic exports rose by 11.7% in July, after the 3% decline in June.
In July, total trade grew 31%, slightly higher than the 30.8% expansion. During the month, total exports expanded by 29.1%, and imports grew 33%. On a m-o-m seasonally adjusted basis, total trade rose 3.3% to $127.4 billion. — Felicia Tan
