Financial prudence in periods of boom will enable S’poreans to ride out bad times
MINISTER Mentor Lee Kuan Yew last night urged Singaporeans not to over-stretch themselves financially in a period of boom, so that in the event of bad times, they would be better able to ride out the cycle.
Describing the effect of the property cycle, he warned that property prices go in cycles and will not keep going up all the time.
‘They go up, then they go down,’ he said. ‘So when they go up, don’t believe that it’s going to go up further and further, and you start buying bigger and bigger, and mortgage for bigger and bigger amounts. Because the day it starts to fall, the cycle goes around, you will find yourself with a negative value asset.’
It is by such prudent attitude that the government has refrained from spending the hundreds of billions of dollars of reserves that it has built up over the decades. Pointing to the recent investments made by the Government of Singapore Investment Corp and Temasek Holdings, Mr Lee said the two agencies were able to increase the value of their assets because they hang on in a recession, and sell part of their assets and keep cash when the boom becomes too intoxicating. The strategy ensured that when international banks like UBS, Citigroup and Merrill Lynch needed cash, GIC and Temasek would have the cash to invest in them.
Mr Lee was speaking at the Tanjong Pagar GRC Chinese New Year dinner when he made those comments. The constituency dinner, held at Farrer Park Primary School, was attended by some 1,200 residents and guests.
At the event, Mr Lee also cautioned against failing to plan for old age, saying: ‘The government will not allow anybody to die of starvation, but we are not going to cover you for your indiscretions.’
Along with the guarded tone in his message, he spoke of a bright outlook for Singapore. While the rise in food and energy prices and the widening income gap are causes for concern, he said Singapore can mitigate these problems.
‘But we must press ahead and maximise our chances to break through in the coming five to 10 years to reach a higher quality of development,’ he said. ‘We are now into a period of steady growth and transformation.’
Apart from the massive foreign infrastructure investments Singapore has attracted, the Republic is also spending about $28 billion in new MRT lines and a new expressway. The city centre is undergoing a makeover with the upcoming integrated resorts, the soon-to-be-completed Marina Barrage, and a Formula One night race.
Mr Lee said that Singapore has become successful thus far ‘because we have assumed individual responsibility for our lives’. Without natural resources, the way Singapore has managed to attract investors has been to keep taxes low, and offer a highly efficient, non-corrupt system and an industrial climate where workers, employers and government can work together.
‘And that is the basis on which we have huge investments coming in, because they (investors) know that this system will ensure that there will be no sudden dive down,’ he said.
‘I therefore urge everyone to remember, individual responsibility and family responsibility for each other is the way to go forward and the way to build one of the best cities in the tropics.’
Source: Business Times 12 Feb 08