Singapore is a major financial center in the world. It is also one of the richest countries in Asia. Unfortunately, it is not immune to the economic aftershocks caused by the Wall Street crash and the global financial crisis. Singapore’s economy is down today, the first Asian country [1] to be hit by a recession.
Tan Kin Lian enumerates the impact of the recession [2]:
a) Banks reduce their credit
b) Businesses do not have the operating capital
c) Consumers reduce their spending
d) Businesses cannot meet their operating expenses
e) They reduce the size of their offices, shops and factories and retrench employees
f) They cannot pay their rentals – so the landlords have to evict them (but they cannot find new tenants)
From a layman’s perspective, Simply Jean adds [3]:
“…less outgoing goods mean that more goods are being stuck in Singapore. More goods being stuck for too long means that the companies will try to reduce the amount of output, which may lead to the layoff of staff that they do not need. Laying off of staff means that employment rate goes down and the number of jobless people goes up. This in turn affects the spending power of people affected, i.e. people will spend less. People spending less means that there will be lesser business for companies out there, which means they will be struggling to keep afloat and will hence lay off more people to survive. Eventually, everyone gets laid off and all businesses will close because no one is buying anything.”
The recession contradicts Singapore’s reputation as a “safe haven” [4] for global investors. In recent weeks, Singapore’s economic fundamentals have been exposed to be less than solid: inflation [5] has worsened and income gap [6] is rising. Job losses will affect Singapore’s migrant workers [7].
To assure its citizens, the government announced that it will guarantee bank deposits [8]. This is good news. But some are asking the government to do more. For instance, DK wants to review the salary of government ministers [9], which is reported to be one of the highest in the world.
Curiously, unemployed investment bankers from London [10] are flocking to Singapore. Mr Wang Says So has interviewed one of them:
“During the good times, financial institutions in Singapore and Hong Kong were short of finance professionals. Due to the market shortage, their salaries climbed high (mine included). Now, however, a huge number of well-qualified banking professionals in London, New York and elsewhere have become unemployed and are flooding the market.
“Many will aim to come to Asia. I guess the overall median salaries will have to go down. They probably have already started going down.”
Investors are protesting in the streets
Many Singaporeans, including the elderly, bought financial structured products [11] (backed by investment bank Lehman Brothers) a few years ago. In the wake of the financial meltdown today, these investors lost a lot of money. Now they are protesting in the streets; they want the government to investigate Singapore banks which sold the investment products by misinforming their clients [12].
The government is now investigating [13] these banks and financial advisers [14]. Anonymous_X comments:
“How long the investigation is going to be remains to be seen. Till then I do pity those elderly who had (been) misguided to putting their live savings into such a screwed-up investment product.
“It has been confirmed that the Monetary Authority of Singapore is ‘probing allegations of misconduct in the sale of financial products linked to collapsed US investment bank Lehman Brothers and other institutions.’
“Also reported that it will focus on cases of mis-selling products [15] to ‘vulnerable’ customers, meaning the elderly and those who are not well-educated.”
The Online Citizen interviewed [16] some of the investors who protested in the streets:
“We didn’t know that our money was going to investment banks,” one man in his 50s told us. “We thought all along that it was just like fixed deposits, very safe, but with a high interest rate. The bank representatives never told us that we could stand to lose so much, just like that.”
“I didn’t lose any money from this, but I know some people who have lost their entire life savings, hundreds of thousands.” It was a sentiment that was echoed repeatedly around the field, as scenes of retirees, thirty-somethings and middle-aged Singaporeans breaking down into tears and pleading for help.
“We spent our whole lives building up this country from scratch,” he said. “We worked for thirty, forty years, and we saved all our money to put into the bank. More than one hundred thousand dollars, over all these decades. Then they got greedy, and they decided to invest all our life savings into companies like Lehman Brothers. And now, we’re the ones who have to pay, because they’re not doing anything for us. We spent our whole lives working for this country, and now our money is gone.”
Modern burrow [17] believes the government should not guarantee investments:
“The basic question is that should someone be responsible for the loss of investment? The government? The banks? The investors themselves?
“I am inclined to say that the investors should bear responsibility for their actions. However there is some doubt as to whether or not they were told exactly what they were buying. In this case I think the banks should be brought to court. Since it is a contract term that indemnifies the banks, perhaps suing under the Unfair Contract Terms Act might be a recourse for investors.
“I do not think the government should guarantee any of their losses. Investments should not be guaranteed. Saving accounts, checking accounts and fixed deposits should be guaranteed to some extent, but not investments. Investing is like gambling.”
Hard Hitting in the Lion City reminds the public about the risks involved when investing [18]:
“It is very sad and unfortunate for the investors that their money is gone, but we have to accept that there’s always an amount of risk in any investment. A month ago, who would have guessed that Lehman Brothers would wind up?”
Singapore Election Watch emphasizes that public funds should not be used to help “stock losers” [19]:
“Public funds should not be used to bail out stock losers, just as public funds are not to be abused to bail out casino losers. Not even in the name of saving the economy. The member of public who did not took part in these gamble stand to gain nothing, and thus should not lose anything on behalf of these greed driven losers. The more you rescue these losers the more emboldened they got to take risk on behalf of the public, and the less they will learn from their lessons.”
Simply Jean agrees [20]:
“I don’t think the investors, especially the elderly ones deserved what they got. However, if a government financial institution steps in to demand for compensation, I think it sets a precedence which will not be good for anyone. The next time some investors lose some money, the same thing might happen again and they may demand for compensation for apparent ignorance.”