When I look at China, Korea and Japan, I see them as a giant manufacturing plant, when I look at Saudi Arabia and Aust, I see them as a storage plant with almost inexhaustible commodities, when I look at America, I see them as a capital magnet that everyone doing business would love to have their company listed there.
However, when I look at Singapore, we only have a small port that is consistently under the threats from Msia and Thailand, our so called tourism only revolves around zoo, orchard road and sentosa, our manufacturing industry is already at the sunset stage and it is our financial services industry that plays a major role in attracting FDI which contributes significantly to our GDP.
This brings us to a question, why would people want to invest in our country in the first place?
There are a number of reasons but the most important reason is because we have a triple A credit rating which assured investors that it is safe to invest here.
What does AAA means for investors? It means that the risk of defaulting is extremely low due to factors such as economic growth, low government debts, ample reserve, political stability and debt to maturity etc.
What does it mean for us as a nation? It means that our cost of borrowing can remain low as our nation doesnt need to pay a sky high interest rate for our sovereign debt and our currency can also stay strong because there is a strong demand for our bonds as foreign investors are buying into SGD indirectly.
What is a good measurement for economic growth then? It will have to be our GDP with the twin PMI (Manufacturing and services) as its vanguards, and with the profit margin of listed manufacturing companies in Singapore shrinking due to weak global demands and rising cost(shortage of low cost labours), we are now almost running on a single engine to maintain growth.
Should our triple A rating dropped one day due to political instability or the depletion of reserve due to our government spending more than what it can receive either from the returns of our sovereign funds and taxation (we are not going to having surplus every year), the rates for government borrowing will rise and the nation will erode the reserve faster as we keep on borrowing to ensure the funding for all the programs that will make Singaporeans happy.
This will undoubtedly accelerate our decline as investors will no longer feel confident thus resulting in the reduction of their investments and with the wealthy gone, the drop in corporate tax and the inability to raise tax from the middle class, our credit rating will drop further and the downward spiral will see the end of a nation.
By Charles Chen Junhao
There are a number of reasons but the most important reason is because we have a triple A credit rating which assured investors that it is safe to invest here.
What does AAA means for investors? It means that the risk of defaulting is extremely low due to factors such as economic growth, low government debts, ample reserve, political stability and debt to maturity etc.
What does it mean for us as a nation? It means that our cost of borrowing can remain low as our nation doesnt need to pay a sky high interest rate for our sovereign debt and our currency can also stay strong because there is a strong demand for our bonds as foreign investors are buying into SGD indirectly.
What is a good measurement for economic growth then? It will have to be our GDP with the twin PMI (Manufacturing and services) as its vanguards, and with the profit margin of listed manufacturing companies in Singapore shrinking due to weak global demands and rising cost(shortage of low cost labours), we are now almost running on a single engine to maintain growth.
Should our triple A rating dropped one day due to political instability or the depletion of reserve due to our government spending more than what it can receive either from the returns of our sovereign funds and taxation (we are not going to having surplus every year), the rates for government borrowing will rise and the nation will erode the reserve faster as we keep on borrowing to ensure the funding for all the programs that will make Singaporeans happy.
This will undoubtedly accelerate our decline as investors will no longer feel confident thus resulting in the reduction of their investments and with the wealthy gone, the drop in corporate tax and the inability to raise tax from the middle class, our credit rating will drop further and the downward spiral will see the end of a nation.
By Charles Chen Junhao
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