Letters from Bukit Timah / Frags of our Brothers

I was fortunate to be invited to attend a talk by Singapore's eminent economist, Dr Tan Kee Wee. Dr Tan is the Lilian Too of investors: while Lilian tells you what the stars have to say about the future economy, Dr Tan is more "specific" and "down to earth" in his speculations... i.e. he builds and uses econometric models to predict the future. In a nutshell, Dr Tan might be what you describe as a macroeconomic fortune teller.

Dr Tan's presentations are titled Investment Outlook Seminars and he has been doing them for a long while - Singaporean investors do listen to this sage and act upon his advice. However, what Dr Tan really does well is not tell people what to invest in; what he's good at is in explaining the intricate links between macroeconomic forces and current affairs, and why the world is in the funk it is in because of whose actions. It is a Macroeconomics 101 class that is a tour-de-force through the world shaping economic events of this century.

To illustrate his presentation, he uses movie themes. His theme this time round was inspired by Clint Eastwood's WW2 opus: Letters from Iwo Jima (which follows Flags of Our Fathers). With tongue firmly in cheek (Ed Note: I hate this phrase, but it is just so apt), Dr Tan titles his presentation 'Letters from Bukit Timah'. Following from here, I shall talk about what I understood of Dr Tan's presentation (which was interesting, humorous and a macro refresher for myself).

2006 was a year marked by a further ascent in the Chinese and Indian economies. In effect, the rise of the 2 nations are part of a bigger force known as Globalisation. As with any world moving force, there are both winners and losers in its wake. The winners are your i-bankers and MNC CEOs, who are laughing all the way to the bank because they can all buy low and sell high, that all-important principle. The losers are actually the low wage earners and workers of this world. While productivity has improved, wages have not followed suit. Tough luck workers.

Global Liquidity

Why has the world been able to globalise? It is all due to a phenomenon known as Global Liquidity (see this article to understand what it is; see this blog to know why it's a big deal). in a nutshell, global liquidity results in the world being flushed with too much money (none of which is going to people like you and I though). There were two factors that led to this situation:

1. The sinking of the Nikkei index - the Japanese economy tanked in the early 1990s (from its 40,000 high) and never recovered since then. What the central bank of Japan did was to lower interest rates in response, in the hope of stimulating entrepreneurship and investments (FDI). These macroeconomists all think we are motivated by borrowing rates: the lower it is, the more enticed we are to borrow money to start a business. However, what the lowered interest rates resulted in was a practise known as carry trade, whereby Morgan Stanleyish hawks borrowed in yen (cheaply, because the interest rate is low in Japan) and lend the borrowed funds in a high-interest currency, like perhaps the USD (at that point).

2. The dot-com crash - this had an effect because Alan Greenspan, at that time still Chairman of the Federal Reserves, decided to lower interest rates in the U.S. as well. For what reason? See factor number 1. What Greenspan inadvertently caused though was to make money 'cheap'. With borrowing rates low, the multiplier effect does its part in making more money available in the financial world.

To curb the effects that his action has caused, Greenspan has raised the rates again (this as of 2005 I think), but the effect of that won't be felt until much later. Therefore, the world as it is now is still enjoying (or suffering, depending on your point of view) the effects of global liquidity.

So what happens with money being so liquid is that the developing countries of the world, particularly your biggies like China and India, have a whole lot of USD in their pockets. A country like China is scared to be holding on to too much USD though. Why? Because buying too much USD with RMB will cause the RMB to rise, which will make its goods expensive, which will lower its exports, which means less income (ad infinitum as macroeconomic reasoning goes). So China uses its USD to buy US treasury bonds: low yield but stable returns. This is what every other emerging Asian economy does with its USD, to peg its currency artificially to the USD without causing its goods to cost more. Local Asian banks can thus keep their mortgage rate low and trigger what? You guessed it: property speculation (but that's another story...)

The Dominant Currency and Why no Hyperinflation

Come now to 2007 and we all start wondering why doomsday theorists all think this liquidity is supposedly a bad think. They naysaying economists all say so because too much money leads to that unhealthy economic phenomenon known as hyperinflation (my view of hyperinflation is that it is what makes the money we own as good as toilet paper, and I am not being lyrical here). However, we have not seen hyperinflation occur: Dr Tan says this is because all the money is being held by the ultra-rich (hence we are all not rich; hence we don't over-buy stuff and raise the demand curve; hence prices don't rise; ad infinitum reasoning ala macroeconomic theorists).

So... while there won't likely be hyperinflation (and you can bet your pants that the Fed will do all it can to prevent this by...... raising interest rates), there also won't be an alternative currency emerging anytime soon. The currency of the world is the USD.

Do you know why? Wow, Dr Tan's explanation of this conspiracy (it IS a conspiracy I tell you) totally blew me away. First thing you need to know was that, following WW2, the Bretton Woods Conference resulted in exchange rates around the world to be pegged to the USD, which was at that time based on the gold standard (i.e. you can buy USD and use it, at that time, to exchange for a fixed amount of gold... from Fort Knox I assume). What this did was to make the USD stable as a currency of choice: the European central banks love it, the Colombian drug barons love it even more.

The subsequent collapse of the gold standard and depegging of currencies did not diminish the dominance of the USD though: this was because another some Republican president had, by that time, convinced Saudi Arabia (and subsequently all of OPEC) to sell its oil in USD, and in USD solely. What to do? The oil-producing nations only want USD for their oil, therefore the economies of the world have to hoard USD to buy oil.

Okay, enough of a diversion into the USD as dominant currency. Serious contenders to this useless throne have been the Euro and, previously, the Yen. There might come a day though when the Chinese Yuan may prove to be THE world currency, but that won't be anytime soon (they don't want it either).

Bad for US, Good for ROW (Rest of the World)

So Dr Tan gazes into his crystal ball of an econometric model (200-300 equations of it; according to him, central bank models have >500 equations in their simulations). He predicts that a recession will hit the US in the 3rd quarter of 2007. To most economists, the recession has been looming for long enough: a treasury bond yield curve inversion has been observed for the last one year (see this article for an explanation of the power of this indicator). It is inevitable that it will happen sometime this year.

However, unlike the previous US recessions, emerging economies won't suffer alongside. Why? Because the US is no longer the main market for their goods and services. The world has shifted from doing business with the US to doing business with China and India. Most world trade is nowadays transacted with the Chinese and the Indians. Therefore, a US recession is unlikely to have the same repercussions as before.

On Singapore, Dr Tan says 'go for the champions'. The champs are your pharmaceuticals, financial services firms, building and construction firms (he always says there is a housing bubble building up... we're in the middle of a housing rush), the gaming industry (IR anyone?) and even something like the F1 (yay it's coming here!).

Sidetrack: Do you know that the Singapore economy is engineered to encourage you to SPEND? Spending stimulates the economy and it is what keeps a recession at bay (Macroeconomics 101 stuff). However, there are artificially designed laws which makes us spenders on a cyclical basis: COEs, which make a new car old every 10 years means that you WILL buy a car every decade; en-bloc sales, whereby property values will reach an optimum point every 30 years, this means property must be sold after 30 years (or it will depreciate). The Gahmen... it is very smart indeed.

WAR!

Dr Tan also thinks that there will be war in 2007. Who vs who? This is too easy: the US will attack Iran. (yup, this is starting to sound like a coffeehouse chat, but it REALLY is an economist giving his predictions here).

The big event of 2007 will be the US attacking Iran. The reasons?

1. Iran might have capability to develop nuclear weapons / it has too much influence over Iraq (civil war) / it can choke the Hormuz Straits etc. These are all very familiar doomsday theories which all have their inkling of truth.

2. The more wild reason is that the US wants to do that to protect the USD. Again I was floored by the reasoning, but it made some sense. Oil is sold in USD but there have been detractors in recent history. Prior to the 2nd Iraqi war, Baghdad started to sell oil in Euros. Of course, they got invaded and went back to the USD market.

Teheran has decided of late that it also wants to set up a euro-based oil exchange. This caused alarm bells to go off in Washington, leading to calls for an overthrow of the regime (and here we all think it's all cos the Americans are anti-Islamist).

But why protect the USD? Dr Tan's macroeconomic brain goes into overdrive at this point and explains how the US actually taxes the world economy through the depreciation of the USD. At this point, I thought it was a little too cheem to understand (and google / wikipedia aren't helping here, so I'll save the theory for examination another day).

So... do look forward to the next couple of months to be an interesting time in the Gulf: plenty of missiles in the sky, for sure.

Buy and Sell

Finally, Dr Tan gets to the part where all the crusty Singaporean uncles in the room wake up and prick up their ears: what to do and when.

Dr Tan says:

1. Don't hold the USD... it is going to weaken.

2. Gold is good. Buy gold. It is cheap and it won't depreciate crazily like that stupid paper called money.

3. If you can buy uranium, go buy and hoard it. Prices will go up. (So will your radioactivity and geiger meter count)

4. Buy bonds. But be careful what bonds you buy cos there're a lot of junk bonds floating around. Avoid these. SG government bonds are good though (even with the crappy return)

5. Avoid US stocks - they are weakening. Uncle Sam is like the plague. Buy Chinese stocks. Buy Indian stocks. The stock exchange indices are on a path to the moon and are not looking back (yet). So buy these. In Singapore, go buy trusty Singtel: Dr Tan says it should hit 4 bucks end of the year.

6. Only buy high-end property, not your crappy HDB flat. Also, avoid ulu places like Seng Kang and Yew Tee: they won't be going en bloc in your lifetime, guaranteed. Always always always (and always) look for condos with en bloc potential.

7. And finally... in summary, Sell in March, Buy in June.

And so concludes Dr Tan's investment outlook.



Notes:
1. Lilian Too is a famous geomancer in Malaysia who popularised the art of Feng Shui. She's also an astute businesswoman who profits from selling (IMHO useless) knick-knacks to boost your luck.
2. You can listen to a podcast of an earlier presentation of the same information at this website.
3. Dr Tan's profile and other information regarding his presentation can be found here.
4. Some of the views expressed here are my own and not Dr Tan Kee Wee's. However, all failed attempts at dramatization are Dr Tan's fault - wah lau... don't you think it's corny that he called his talk 'Letters from Bukit Timah'?

History Lessons

It is seldom that I blog about movies that I've watched. To escape the mundanity that was existence today, I sneaked off with a good buddy (out on an afternoon birthday treat away from work) to watch a movie about, of all things, dealing with the harsh reality of existence.

Ah, I'm being too harsh a critic. Half Nelson is a nice little film about a history teacher cum basketball coach who's also a drug addict. He teaches history primarily through the use of dialectics, the idea that opposing forces drive change, and history is about change.

The film also tracks his friendship with one of his students, a black girl who is quite self-reliant, and whose friendship with a drug courier shapes the other half of the plot. While the teacher descends into a drug-fueled life plunge just to escape a reality that he cannot change (even while he preaches it), the student finds herself confused into helping her brother's friend run drugs (it didn't help for her to also find out her teacher's a druggie).

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Anyhow, that is the plot. Oh, and lead actor Ryan Gosling is nominated for Best Actor for the Academy Awards (who won last year? I don't recall).

For me, what was more interesting was to hear about the notion of dialectics (Check out this very simple to understand website to read about Dialectics - they even make references to the film).

To understand change, Dialectics philosophers preach that there are 3 rules (Ryan Gosling above has just written down the first one for his class):

1. Every object and process is made of opposing forces or opposing sides: a historically relevant example for Singapore would be its independence from Malaysia. On one side, there is Lee Kuan Yew and the PAP, who do not want Singapore separated from Malaysia; on the other, there is Tunku Abdul Rahman and UMNO, who can't wait to get rid of the pain in the neck that is Singapore.

2. Gradual changes lead to turning points, where one opposite overcomes the other: Racial riots were rife in Singapore, fanned in part by accusations of unfair treatment of Malays in Singapore, while Chinese were incensed by the federal government's policy of affirmative action. Singapore was also economically better off - there was concern of a shift in economic power from the main capital of KL to Chinese-dominated Singapore. The turning point came when the Malaysian parliament voted to expel Singapore from Malaysia as a way of ending the racial riots and rid themselves of the problem once and for all.

3. Change moves in spirals, not circles: For Singapore, there was no turning back. The separation from Malaysia resulted in it moving in a direction that was of its own design, free of intervention from meddlesome Malaysia politicians. However, we see that the forces that drive us apart ultimately also bring us closer - but not to the point of re-unification. Through diplomatic efforts, one force (the force of 'unity') bring us closer again through better ties - economically, politically etc.

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I like this framework for change: I wished they had taught it in b-school or back in the consulting company I worked at. It would have made it easier to show people how system implementations are meant to change them (for good or for better, change is something to live with).

However, I don't think history's all about change: history is also about circumstances. Because of circumstances beyond our control, we are plunged into particular interesting crossroads in history. Because of circumstances which provides the power for one side to dominate another, that side can push change more effectively.

I think it is important to study change (or history for that matter) for the opposing forces there exist, the particular turning points (which is what leads to history teachers making us memorise meaningless dates), and the irrevocable but subtle movement of change in a spiral manner. It is also important to see why one side came to dominate another. It is also important to understand which circumstances made it possible for a change to occur.

Think about it.

Framing the Great Casino Debate as an Ethical Issue - Prelude

This was such a fun essay to write (over 2 days, little sleep, and hackneyed research done via the internet) that I thought it a waste not to put it on my blog. Here goes!

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Singapore’s Great Casino Debate

An individual perspective of the ethical dilemma posed by the ‘Integrated Resorts’ proposal to Singapore as a society


Executive Summary

The purpose of this essay is to retrospectively analyze the debate over the proposal to build casinos in Singapore. The debate took place among the general public, the press and within Singapore’s ruling government (both within the Parliament and cabinet of ministers). The proposal was one by the Singapore Tourism Board to build casinos in Singapore in order to boost tourism revenue.

Beyond the economic benefits of the proposal, the public at large and many concerned public figures brought up the issue of social problems that can result from having a casino in Singapore. This essay aims to explore the dilemma between the obvious – and measurable – economic benefits that can be achieved through revenues from casino operations, and the subtle – and often subjective – social problems that arise from the introduction of such an ‘evil’.

Note: from time to time, the essay will utilize the phrase ‘Integrated Resort’ (IR). The IR is a resort concept synonymous with the model of casinos as seen in Las Vegas and Johannesburg, i.e. where the casinos are a component of a larger themed entertainment facility that is (sometimes) targeted towards the family. It is the author’s view that adoption of the IR concept (by the government in its proceedings) is meant to 1) de-emphasize the gaming aspect of the proposal, thus softening the perception that it might be condoning vice; and 2) target a broader market of tourists (and not just high-rolling punters or ‘whales’). The phrase IR will be used interchangeably to mean casino, and vice versa.


History of the Casino Debate

The Singapore Tourism Board (STB) was established in 1964 with the mandate to promote Singapore as a tourist destination. The STB undertakes projects such as the construction of theme parks and targeted overseas promotional activities to boost tourism-related visits to Singapore. For a long time now, it has advocated the development of a casino in Singapore to attract more tourists and increase Singapore’s share of the Asia-Pacific tourism market. Until recently, the government has always rejected the idea of building a casino. During the early phases of Singapore’s development as a nation, the government’s focus was on building Singapore’s manufacturing and industrial capabilities: there was no economic need for a casino given the growth in GDP and the prosperity enjoyed by the nation.

Lately, however, the government had decided to reconsider the decision. In 2004, the idea was once again mooted. The proposal was internally discussed by the Members of the Cabinet and the decision was announced to the general public in April 2005. A parliamentary debate was held in the same month to debate the issue, and opinions both in support of, and against, the proposal were aired. Similarly, a public debate also took place among concerned citizens, with opinions largely expressed in the press and on the Internet.


The Economic Rationale for the IRs

The STB’s invitation for IR concepts attracted 19 submissions, and out of that pool, it was estimated that if 2 IRs are built, SGD 5 billion will need to be invested and 35,000 jobs will be created for the whole economy. The economic impact is significant: when fully operational, the 2 IRs’ contribution will increase Singapore’s GDP by 1% annually. The construction of the IRs will thus contribute significantly to boosting Singapore’s economy through foreign direct investment, the construction sector during the ramp-up phase, and the services sector in its day-to-day operations when completed.

On a related note, Singapore’s tourism industry has been on the decline. Singapore’s dollar share of Asia-Pacific travel has been falling: between 1998 and 2002, Singapore’s share of East Asia Pacific tourism receipts fell from 8.2% to 5.8% ; between 1994 and 2003, Singapore’s Total Expenditure of Visitors (TEV) fell 38% from SGD 7 billion (See Table 1). In considering the proposed IRs, the Singapore government was hoping to boost its flagging tourism industry – previously, the STB had experimented with theme parks, coordinated promotional sales events and contrived festivals. All had failed to revive an industry that is in decline – the only key success area has been in the promotion of Singapore as a location for business travel and Meetings, Incentive Travel, Conventions and Exhibitions (MICE). In effect, the Singapore government recognizes that Singapore (on the whole) as a tourist attraction is not viable with its current offerings and it needs to seek new means of attracting visitors to Singapore.

Table 1: Total Expenditure of Visitors (S$ Million), Yearly (Source: STB Website)
Year TEV (SGD Million)
1994 7049.8
1995 7350
1996 6755.5
1997 6207.4
1998 5493.6
1999 6033.3
2000 6292.6
2001 5699.3
2002 5425.8
2003 4315.6

Additionally, the Singapore government has recognized that its position as a desirable manufacturing base is no longer tenable. Investments in the manufacturing sector have stagnated at around SGD 8 billion and MNC capital expenditure have migrated to low cost countries in recent years. A recent case is California-based Maxtor Corp, a hard-disk drive manufacturer. In 2006 it closed two plants in Singapore and moved the operations to China – in addition to the retrenchment of 5,500 Singaporean workers, the move also affected small local suppliers of Maxtor Corp . The slow decline of the manufacturing sector has prompted the government to pursue growth in more lucrative sectors – in particular, a key growth area for Singapore is the services sector, within which the IRs are expected to generate investments, income and jobs when they are built.

Another compelling reason for setting up the IRs is that tourism within East Asia Pacific is booming. In particular, with China easing travel restrictions on its citizens there will be increasing demand for gaming facilities within a reasonable distance (in the future, the majority of Chinese travellers are most likely to be punters seeking to gamble, and current legislation in China forbids the construction and operation of casinos). Whether or not Singapore went ahead with the decision to build casinos, the surge in demand for such services will compel regional countries to compete and offer such services. The competitive situation is such that supply will rise to meet demand, whether or not Singapore chooses to compete for that particular tourist dollar.

While Singapore is able to attract investors due to its various advantages over its South East Asian neighbours, prospective investors are just as likely to set up casino resorts in locations such as Phuket and Bali – locations which are not far from Singapore in any case. As such, a pre-emptive measure to build IRs in Singapore might minimize the eventual impact of subsequent competition in the South East Asian region.


The Gambling Landscape in Singapore

The officially legal gambling channel comes in the guise of the Singapore Totalisator Board. It operates two businesses: the Singapore Turf Club, whose main source of revenue come from betting proceeds earned from horse-racing and totalisator operations; and Singapore Pools, whose revenue comes from running lotteries (operated via 3 distinct and separate means, namely 4D, Toto, and Singapore Sweep) and football betting. The proceeds from the operation of the two entities are channelled to charitable causes, the arts, community development and are generally meant to benefit other worthwhile causes in Singapore .

Other than the officially sanctioned means of gambling, Singaporeans also have access to ‘jackpot rooms’ in some country clubs and semi-union based clubhouses. These gaming facilities often take up a small area and only provide slot machines. Elsewhere, Singaporeans also punt on gambling sites on the internet, without regulation or restriction by the government.

Beyond the locally available options, Singaporeans also travel overseas for the purpose of gambling. The two most popular (and accessible) modes are Genting Resort in Malaysia and cruise ships to nowhere. Genting Resort is within a 5-hr coach ride from Singapore and offers full casino facilities along with a resort and theme park. Cruise operators in Singapore run cruise ships which operate casinos onboard (once they have sailed to international waters and are, legally, not within Singapore’s jurisdiction). The ships typically depart and return to Singapore without calling at any other ports.

It is thus a fact that Singaporeans can access gambling facilities easily. In a ministerial statement by the Prime Minister during the IR debate in parliament, he said that “Every year, Singaporeans spend $6 billion on legal gambling in Singapore, and another $1.5 billion in cruises and offshore casinos.” It appears to be clear that there is profit to be made from the $1.5 billion in gambling proceeds that go overseas.


The Social Problems

The first and foremost question in the debate was whether the casino components of the IRs will undermine societal values. As a society, the government perceived Singaporeans as valuing fairness, meritocracy, integrity and hard work. In some quarters, it is feared that the presence of a casino will erode the Singapore work ethic: the casinos might promote the idea of dependence on gambling and luck as a means of making money (as opposed to hard work). The prevailing view on this issue is that the government needed to act as custodian and enforcer of Singapore’s core values: in allowing IRs, it might be seen to compromise on this stance. The contrary view is that the government should not act in such a paternalistic manner, since such core values are hardly perceived to be accepted nationwide nor are they necessarily applicable to each and every Singaporean individual.

A concomitant danger was that the setting up of a casino might lead to increase in incidences of organized crime and law and order issues. Activities associated with the operations of casinos run the gamut of illegal money lending, prostitution, money laundering and criminal gangs. It has been observed that such a situation had already occurred in Macau: the involvement of triads in Macau’s casinos has led to rampant prostitution and other criminal activities. There is much concern that Singapore’s reputation as a safe and secure place might be ruined if the IRs ever degenerate to that level.

The third concern is that the presence of casinos in Singapore might lead to an increase in cases of problem gambling. This is particularly so in the case of pathological gambling, which is a mental health disorder much akin to a gambling disorder. Sufferers become preoccupied with gambling and are compelled to bet frequently and with increasingly higher stakes. Sufferers also experience withdrawal symptoms if prevented from gambling. Pathological gamblers have been known to gamble too much: to the point of both causing harm to self and family.

Two high profile cases during the period of the debate highlight the extent of the problems created by problem gamblers. Chia Teck Leng, 45, was formerly a finance manager at Asia Pacific Breweries. He got addicted to gambling in 1994 after going for a cruise and was taking on severe debt to finance his gambling habit. Later, he falsified documents purportedly from his company and cheated banks of a total of SGD 117 million. He was caught and subsequently sentenced to 42 years in jail. While in prison, Chia Teck Leng wrote a paper entitled ‘Taming the Casino Dragon’ exhorting the Singapore government to institute seemingly discriminatory measures to prevent Singaporeans from being addicted to gambling. This is a case of a problem gambler who took to crime as a solution to his problems – these are the kind of gamblers which opponents of the IR proposal have been most vocal in warning about.

On a more tragic (and also extreme) note, Simon Lee, 40, jumped to his death from his high-rise flat after killing his wife and two young children in a murder-cum-suicide pact. Simon Lee was found to have crippling gambling debts despite earning SGD 2,000 a month. He had also been gambling for more than 10 years on horses, numbers, soccer, and in casinos. Apparently seeing no solution to his plight, he decided to end his misery by killing himself and his family. This is an extreme case of a problem gambler who took his own life – most of them go into financial ruin but rarely go so far as to commit suicide. Unfortunately for proponents of the IR proposal, such high-profile cases make sensational news. Opponents of the IRs, whether they are religious groups or other social concern, argue that the IRs will accentuate the number of such incidents if left unaddressed.


The Decision

On 18 Apr 2005, the government announced the decision that the IR proposal will go ahead and planned to evaluate bids for two sites in the months to follow. A debate in parliament brought about opinions both for and against the proposal, but since the decision had already been made by the cabinet, the parliamentary debates in no way changed the outcome of the decision.

What it did achieve though was that it highlighted the divisive nature of the casino issue: on the one hand, proponents of the proposal tended to be biased towards their views of the economic realities of Singapore and recognize the potential upsides in building the IRs. Opponents of the proposal, though, tended to hark upon the social ills associated with casinos, but often do not have substantive evidence or data to support their claim – information on other cities which are exposed to similar issues were inconclusive as to the full impact, and mitigating factors, of the proposal to build an IR.


Preventive Measures Adopted

In addressing fears over the erosion of the Singapore work ethic and core values, it is perhaps notable that the Prime Minister made a mention towards a less paternalistic approach. Lee Hsien Loong, in his speech during the parliamentary debate, mentioned the role of schools, the family and religious and social groups, in the inculcation of values, and the transmission of civics and moral education . It is a clear signal from the government that, whether or not the IRs are built, the onus is on society to build its own value systems and transmit them to future generations of Singaporeans. The evils associated with gambling as a vice already exist (in its various guises) and values as they are now will not be significantly degenerated as a result of the IRs.

On the issue of increased criminal activity, it is no doubt that the authorities in Singapore will be strict in this regard: historically, Singapore’s enforcement agencies have been tough on vice and related activities. There will be the formation of a special police unit to supervise law enforcement in all activities related to casinos. A casino regulatory body will also be established to help manage some of the social impact of the casinos: for example, the regulatory authority will screen principal shareholders, directors, and employees to minimize any infiltration of criminal elements into casinos. The regulator will also monitor supplier relationships to ensure that all transactions are above board, and also seek international best practices for dealing with money laundering and other associated criminal activities.

Most of the debate focused on measures to curb incidences of problem gambling, and to proactively help gamblers and affected family members cope with such problems. Firstly, the IRs will put in place an entrance levy fee of SGD 100 per visit, or SGD 2,000 for visits over a calendar year. The entry levy is designed to signal to the public at large that gambling is to be considered an expense, and not a money-making enterprise. It is also meant to discourage casual gambling. The minimum age limit for entry is 21 years so as to prevent children and teens from being unduly exposed.

Another measure to limit the exposure of compulsive gamblers is in the institution of exclusion measures. Compulsive gamblers may voluntarily opt for self-exclusion, or they can be coaxed by concerned family members to be counselled and apply for self-exclusion with the National Council on Gambling (the authority set up by the government to regulate the gambling industry). The Council goes further: it will bar those also in poor financial health such as bankrupts, people with poor credit records and people on welfare, from entering the IRs in the future. The voluntary exclusion and other exclusionary measures are already used in other casinos around the world.

To deal with the problem of pathological gamblers, Singapore’s Institute of Mental Health runs a Community Addictions Management Program (CAMP). CAMP acts as a centre for treating addictions (among which are gambling addictions and substance abuse related addictions) and also conduct public education messages to that effect. With the spotlight now on measures for dealing with gambling addiction, CAMP now has the mandate to improve facilities and meet world-class benchmarks as set by experienced addiction centres in the US.

In addition to a treatment facility, the Ministry of Health also focused on public awareness campaigns in the mass media, investment in research on treatment practices, and working with voluntary welfare organisations to deal with problem gambling. Despite the small number of cases (an estimated 100 patients were treated for gambling addiction in 2004), the Singapore government has demonstrated an ample commitment towards dealing with the potential ills that might be introduced with the IRs.


A Personal Point of View

Singapore’s Great Casino Debate highlights the case of an ethical dilemma faced by the Singapore government. The decision to build the IRs was based on economic rationality: the IRs will bring in foreign investment, create jobs and spur the growth of the economy. In its decision making process, the government sought the feedback of its citizens and various social groups: however, no one other than the members of the cabinet had the voting ability to influence the decision – even when the issue was debated in parliament, the cabinet had already made the decision to go ahead with the IRs (having internally considered the issue over several months).

A more populist approach might be to hold a referendum on the issue (as advocated by a particular opposition party). In that way, the rational actor (in this instance the Cabinet of Ministers) can transfer the responsibility for making the decision to society as a whole, rather than bear the burden of the decision alone. However, this argument detracts from the fact that the government had been democratically elected by its people, and is thus given the mandate to act on their behalf on issues of macroeconomics (as far as the economic rationality of it is concerned).

What a referendum might have served to do though is to allow the public to shape the outcome of the decision based on its own values system. The argument goes that the government might not fully represent society’s values or moral concerns, and a general referendum will serve to better reflect the moral pulse of the country. On this note, I am somewhat more supportive of the notion that the public should be allowed to decide, although the imperative economic urgency of the situation did not warrant the government allowing a possibility of the motion being defeated.

Of more interest to myself as the author are the types of ethical values espoused during the debate itself. The majority of the opponents’ arguments centred on the effects that the IRs will have on society and the individual. The particular worries about erosion of societal values, crime and individual gambling problems stem from the adoption of a deontological point of view. Deontological ethics holds that decisions should be made solely by considering one’s duty and rules within which one operates. It is an approach with an emphasis on the how things are done rather than what things are achieved. The call among opponents to the IRs has been for the government to address issues of possible social problems and the measures adopted.

Another subset of the opponents comes from a religious context and they espouse a ‘virtue ethics’ perspective. The major religions in Singapore are Islamism, Christianity, Buddhism, Taoism, and Hinduism. Vocal opponents of the IR proposal have come mainly from among Muslims and Christians opposed to the immoral principle of allowing vice on what is viewed as a grand scale.

The proponents adopt a more utilitarian approach instead. Utilitarianism is an ethical dogma that holds that the right action is the one that produces the most utility for the whole of society (in our context), i.e. the ends justify the means, so long as most of the people benefit from it. As for what measure to adopt in the case of measuring the utility, the proponents of the proposal point to the obvious economic benefits, and look upon the social costs as somewhat minuscule in comparison to the huge benefits to society that the IRs will bring.

For the case of the IR proposal, the utilitarian argument won out in the end: the IR proposal makes good economic sense. As for the social costs associated with gambling and the presence of a casino, the measures seem to be substantial enough. On a more reassuring note, the government has promised that it will continually monitor and improve any social programs aimed at curbing problems stemming from the IRs.

Personally, in considering the various perspectives adopted in the Great Casino Debate, my research has drawn mainly on publicly available information, particularly from governmental sources. I am not personally an advocate of the actions of the PAP government, but with regards to the IR debate, I have found the speeches and statements made by various government ministers and MPs to contain concrete well thought out arguments for their case. From a civic perspective, I have also drawn upon information from other sources such as local news sites and other grassroots political commentary sites which are not regulated by governmental agencies.

Finally, to reiterate, I am of the view that the IRs, or the casino component of the IRs, will bring significant economic benefits to Singapore. The social costs as a consequence of the IRs will probably not be significant enough to overwhelm the benefits achieved, though this is something that can only be known in the future. As of now, the preventive measures put in place to curb the erosion of societal values, crime and problem gambling seem to me to be substantial and are ethically the right thing to do: in a sense, these actions are the social responsibility of the government given the economic action (the IRs) they have undertaken.

From my own moral standpoint, I do not think that gambling is immoral. I believe that gambling has the ability to ruin lives, but I believe in the right of the individual to exercise the freedom of using his financial resources as he pleased (provided it does no harm to others – here I adopt the deontological view). Researching the Great Singapore Debate has shaped my perspectives on gambling, the IRs, the ills, and the leadership exhibited by the Singaporean government.




Notes (Ed: Originally appearing as footnotes to the essay - I didn't have the time to figure out how to do it in Blogger):

1. ‘Whale’ is a gaming industry parlance for serious gamblers who are heavily funded and high-rollers, with the ability to stake millions in gambling transactions.
2. The Cabinet is composed of elected Members of Parliament (MPs) who are chosen by the Prime Minister to be Ministers. The Cabinet is responsible for all Government policies and the day-to-day administration of the affairs of the state. It is collectively responsible to the Parliament. Source
3. Total Expenditure of Visitors (TEV) is one of the key performance indicators of Singapore's Tourism Sector. TEV measures the total revenue received by Singapore from tourism activity. It includes all payments and prepayments for goods and services made by visitors, as well as high yield shopping expenditure.
4. Chia Teck Leng's paper also mentions his experiences, and details expounding why the ‘house’ always wins.
5. In May 2006 Las Vegas Sands won the bid to operate the IR on the Marina Bay site. Recently, in Dec 2006 Genting Resorts won the bid to operate the second IR on the Sentosa site.

Articles referenced (I've lost my bookmarks for these pages, so no links here):

• Alex Au, ‘Casino Decision: A Bigger Question Looms’, The Straits Times, 12 Nov 2004
• Seah Chiang Nee, ‘Tragedy and the Casino Debate’, Little Speck
• James Gomez, Workers’ Party Policy Statement on the PAP Government’s Casino Proposal

Parliamentary speeches referenced (I've lost my bookmarks for these pages, so no links here):

• Speech by Dr Vivian Balakrishnan, Minister for Community Development, Youth and Sports, on 21 Apr 2005 at Parliament House
• Speech by Prof S Jayakumar, Minister for Home Affairs, on 18 Apr 2005 at Parliament House
• Speech by Prime Minister Lee Hsien Loong, on 21 Apr 2005 at Parliament House
• Speech by Mr Khaw Boon Wan, Minister for Health, 19 Apr 2005 at Parliament House