Sunday, October 08, 2006

SIngapore Slung

After the September IMF / World Bank meeting in Singapore, JP Morgan Economist Andy Xie wrote a ‘wrap up’ internal email, which (coincidently) was followed by his resignation from the venerable house of Morgan. Dr Xie had the temerity to suggest that ‘Singapore's success came mostly from being the money laundering center for corrupt
Indonesian businessmen and government officials.’ He followed it up for an explanation as to why Singapore’s GDP per capita has been stuck at USD25k per person for the past 10 years – ‘Indonesia has no money, So Singapore isn't doing well’

Newspapers have carried a few tidbits, but Mergeright has a copy of the three offending paragraphs.

The dinner was turned into an Oprah with PM Lee Hsein Long at the center.The topic was on the future of globalization. People fawned him like a prince. Of course, he is. There are two reigning royalties in the world that the Davos crowd kiss up to, Jordan and Singapore. The Davos crowd are Repulican on economic issues and Democratic on social issues. Somehow, they manage to put aside their moral misgivings and kiss up to Lee Hsein Long and Abdullah.

I tried to find out why Singapore was chosen to host the conference. Nobody knew. Some said that probably no one else wanted it. Some guessed that Singapore did a good selling job. I thought that it was a strange choice because Singapore was so far from any action or the hot topic of China and India. Mumbai or Shanghai would be a lot more appropriate. ASEAN has been a failure. Its GDP in nominal dollar terms has not changed for ten years. Singapore's per capita income has not changed either at $25,000. China's GDP in dollar has tripled during the same period.

I thought that the questioners were competing with each other to praise Singapore as the success story of globalization. Actually, Singapore's success came mostly from being the money laundering center for corrupt Indonesian businessmen and government officials. Indonesia has no money. So Singapore isn't doing well. To sustain its economy, Singapore is building casinos to attract corruption money from China. These western people didn't know what they were talking about. Aside from the nauseating pleasantries, some useful information came out of it.

The concentration of slander re: Singapore, suggests that Singapore applied pressure on JP Morgan to cut Dr Xie loose. You can’t blame Singapore for being annoyed – especially as there is probably a grain of truth; and you can’t really blame JP Morgan for protecting their own interests.

Still, it’s hard to see how a few Billion of dirty money each year could deliver their 4.5 million people an average of USD25k per year. Recall that GDP is VALUE ADDED. So 25k per person is about USD110bn of value added per year. Even if you take a massive cut of the dirty money, You’d have to washing a heck of a lot of it to skim that much.

According to the CIA world fact book, 2005 GDP was 110bn at market exchange rates, and 125bn at PPP. The working population is 2.3m, so average labour productivity is about USD55k per annum, after adjusting for relative prices (or 48k at market exchange rates).

The idea that money laundering could be driving all this growth is plain silly. However, there’s probably sufficient truth in the assertion to get up Singapore’s nose. Besides, if you can put pressure on folks who say annoying things, you do – don’t you?