Sunday 30 March 2014

Singapore ranked 60th among major cities for average residents' cost of living: Asia Competitiveness Institute

Think-tank ranks Singapore 60th most costly city for residents
Local institute says findings from its 2012 annual living cost survey put Republic on par with cities in the region
By Xue Jianyue, TODAY, 29 Mar 2014

To better reflect the cost of living for average citizens, a local think-tank is considering the creation of a new affordability index that measures transport, housing, healthcare and education costs.

The announcement yesterday by the Asia Competitiveness Institute (ACI), a research centre at the Lee Kuan Yew School of Public Policy, came amid a renewed debate on the rising cost of living in Singapore.

It led Deputy Prime Minister and Finance Minister Tharman Shanmugaratnam to explain during the Budget debate in Parliament that the EIU report had measured the cost of higher-end products, such as imported cheese, filet mignon and branded raincoats. These items are typically bought by expatriates.

Thus, the cost of living differs between expats and locals due to currency movements and the different goods and services consumed, said Mr Tharman.

ACI academics yesterday also released the findings from their annual cost of living index, which showed that, in terms of affordability for residents, Singapore ranked 60th among 109 major cities in 2012, after taking into account the consumption habits of average residents.

The ACI’s findings put Singapore’s cost of living similar to that in Seoul (59) and Hong Kong (58), said economist and ACI Co-Director Tan Khee Giap.

The institute also found that compared with New York, housing in Singapore for average residents was 27 per cent cheaper; medical costs were 75 per cent lower; and education costs were 73 per cent lower.

However, the costs of alcohol and tobacco as well as transport costs were higher in Singapore by 86 per cent and 22 per cent, respectively.

“This is because we have years of (government) subsidies on these three areas and I think after 2011, we found even more targeted subsidies for these three areas,” said Dr Tan.

On the higher cost of living for expats in Singapore, he said: “It is most expensive for expats who have high-end consumption with a very high quality of life, made possible by their company to compensate for the fact that they were relocated from their country. So, that shouldn’t be confused with the cost of living for average citizens.”

He added that Asian cities, in particular, have a lower cost of living for average citizens, in contrast to cities in developed Western countries, such as New York.

ACI research also revealed that rising costs for expatriates were almost entirely due to the appreciation of the Singapore dollar by 25 per cent against the US dollar from 2005 to 2012. If such appreciation had not occurred, Singapore would only be the 16th most costly city for expatriates.

As for the ACI’s proposed new affordability index, healthcare, education, housing and transport have been chosen because they have public services that the Government facilitates, said Dr Tan.

Since education, healthcare and housing in Singapore are subsidised, the Government has to monitor the cost of these items and work out how much funds are needed from its coffers.

“Subsidising education is an investment, not welfare ... Healthcare is also investing in people and sometimes to recognise their contributions,” said Dr Tan.

Hence, the index could help the Government monitor costs of living and plan subsidies in a sustainable way, he added.

Singapore 'likely to stay pricey for expats but okay for citizens'
By Chia Yan Min, The Straits Times, 29 Mar 2014

SINGAPORE is likely to remain one of the world's most expensive cities for expatriates due to its strong currency, said the Asia Competitiveness Institute (ACI).

However, the cost of living for the average Singaporean is expected to remain manageable as long as the Government continues to keep a close eye on the prices of essentials like education, health care and housing, said the think-tank.

The ACI, a research centre at the Lee Kuan Yew School of Public Policy, releases an annual cost of living index that distinguishes between living costs for expats and average residents.

Its 2012 study ranked Singapore the most expensive among 109 cities for expats, but when living costs for average residents were measured, it came in 60th. The rankings for 2013 will be released in November.

An Economist Intelligence Unit survey released earlier this month raised eyebrows for naming Singapore the world's costliest city. That survey was targeted more at expats and was for 2013. Although the Singapore dollar weakened against the greenback last year, the Japanese yen weakened far more, making Tokyo for example, relatively cheaper.

"As far as expat cost of living is concerned, Singapore will stay at the top since our currency is unlikely to weaken any time soon," said ACI co-director Tan Khee Giap. The Singapore dollar, which appreciated 25 per cent against the United States dollar between 2005 and 2012, bumped up the cost of living for expats, who are usually remunerated in foreign currencies.

If the exchange rate had held steady at 2005 levels, Singapore would have been the 16th most expensive city for expats in 2012. The Republic still remains much cheaper for the man in the street than cities such as New York, Paris, Tokyo and London - largely due to lower prices of education, housing and health care - the study showed.

"This is likely to remain the case as long as the Government remains committed to subsidising these essential services," said Dr Tan, who conducted the study with fellow co-director Tan Kong Yam and adjunct research fellow Grace Aw.

The difference between the cost of living for expats and Singaporeans is partly due to characteristics peculiar to Asian cities, he added."For example, in Asian cities, cheap food is more readily available," Dr Tan said.

At yesterday's briefing to announce next month's launch of a book on the study, both co-directors emphasised that the indices are not intended as a measure of income or wealth disparity.

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