Why encourage rent-seeking?

Mr Conrad Raj suggests, in his commentary “One size does not fit all” (June 18), that “(property cooling) measures should be targeted to impact those (foreigners) we desire less, not all and sundry”.

Who are the undesirable foreigners he thinks should be the target of exorbitant stamp duty?

Mr Raj believes that we should welcome “ultra-rich” foreigners who invest in extremely expensive property. He suggests that modestly priced private property should be the subject of additional stamp duty on foreigners.

This targets middle-class, professional foreigners and their families; foreigners who contribute productively to the economy, foreigners who buy property here because they need a place to live here, not because they need a place to park their money.

It targets foreigners who pay income tax, Goods and Services Tax, Certificates of Entitlement, maid levies and other fees and taxes, which subsidise the “goodies” doled out to citizens in the Budget each year.

If differentiation is to be made in the private property market and among different sorts of foreigners, then Mr Raj’s suggestion is exactly the opposite of what the Government should consider doing.

Money streaming here from the world’s ultra-rich skews the property market, driving up prices across the board. In a market with limited supply, it signals to developers to build housing geared towards investment, such as shoebox units, rather than family home ownership. It also encourages rent-seeking rather than productive investment capitalism.

We should encourage the ultra-rich to invest productively in Singapore, such as in start-up companies, not encourage unproductive rent-seeking.

Recently, I lunched with an intelligent woman in her 20s from China who received a master’s degree from the National University of Singapore. She is keen on pursuing a career in journalism.

She sought a job here over the past year but was consistently turned away because she is neither a citizen nor permanent resident, a status she has little chance of achieving nowadays. After four years here, she left for Guangzhou to build her career there.

Singapore’s housing, transportation, education and other infrastructure have been put under strain by the rapid population expansion through immigration. This is something the Government is properly addressing.

But targeting middle-class professional foreigners as undesirable and driving away talent while encouraging rent-seeking, rather than productive investment capitalism, is not the way to do it.

From Eric Thompson

Source : Today – 2012 Jun 25

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