Saturday, June 28, 2008

SO CHEAP!

Paul Pondadouri, the lead guitarist at Harry’s Bar in the Esplanade provided one of the best explanations for why Singaporeans get ripped off in Malaysia. He said, “Don’t you realise that shop keepers have the ears open every time you yell ‘SO CHEAP,’ to all the prices they have?”

Well, to be fair, life in Singapore is getting expensive and not having to pay millions for a toilet or hundreds of thousands for old banger must seem like paradise. However, as Ravi Veloo, Managing Director of The Media Campus says, “You always hear Singaporeans say ‘SO CHEAP,’ you never hear them say ‘SO GOOD,’ –makes you wonder about our values.”

That got me thinking. Are Singaporeans so obsessed with everything being ‘SO CHEAP,’ that we have become ‘CHEAP.’ Well, let’s start with the defence. Singapore may be the most expensive country in the region but it is also easily the wealthiest per capita. The average Singaporean earns far more than the average Malaysian, Thai or Indonesian and we don’t even have to discuss Vietnam, Laos and the rest of Indochina. Things may be more expensive here but on the whole we earn more money.

You also have to take into consideration that the system in Singapore is designed to take spare cash away from Singaporeans. As the economy improves, subtle taxes like the goods and services tax go up just a few percent to make life a bit more expensive. So, just you rejoice at having more money in your pocket, you actually have to spend more of it. And lets not forget, the system does not encourage you to achieve financial independence – interest rates on bank accounts are deadly low (so much so that an offer of 2 percent annual returns on your cash sounds like Christmas coming), and investment products like insurance policies and unit trust have high front end charges that it takes three-years for you to see profit.

So, when you take all this into consideration, it’s no wonder why Singaporeans have become obsessed with things that are CHEAP. The national obsession with CHEAP is particularly evident across the Causeway, when freed from ideas like fines for littering, Singaporeans go utterly wild. Back in the days when Malaysia used to subsidise petrol, Singaporeans would find ingenious ways to fix their tank gauges so that they could have the thrill of driving up to Johor where is it was SO CHEAP to buy petrol. My late grandmother even went as far as to take a bus up to do some grocery shopping – and then proceeded to cook me lunch and tell me how much she had spent on groceries.

As comical as all of this sound, it does make sound business sense to look for low prices. People who pay more for something just to say that it gives them class are equally as comical as the people who look for things that are SO CHEAP. I once had a good laugh at one of my best friends who paid $70 at Toni & Guy for the hair cut I got in the army barber for $2. He said it made him feel ‘high class,’ but as far as I could see, we both had the same hair cut. Then I look at Han Li, who easily makes over S$15,000 a month but at the same time shops wholesale whenever possible.

However, there is a difference between being CHEAP and smart with money. In the case of Singapore, the national obsession with looking for CHEAP things has not made the nation capital efficient. What little money that exists in the economy is horded away by the government and then, whenever the government has a project it throws money at the project until it gets the desired results. My favourite young politician points out to Temasek and GIC as examples of companies that “We should be PROUD of.” Personally, I think they’re a sign of the biggest threat to our economic system – poor understanding of the difference between VALUE and CHEAP. These companies take unlimited resources and throw them into investments that are seemingly CHEAP. If it works – hip hip hurray, we are clever. If it fails, journalist suddenly become responsible for the national interest and news only appears in Bloomberg – a place that has the honour of being sued by Temasek.

Compare that with Hong Kong, where the tycoons that own the economy actually have to look at the value of things they buy. Although wealthy, the tycoons understand that resources are limited, so they have become clever with money. Li Ka Shing for one has spent enormous amounts of capital on unproven 3G licenses but has the good sense to accept good offers when they appear (Hutchison Esser’s sale to Vodaphone in India being such an example.) Another example of some one who understands the difference between VALUE and CHEAP is Warren Buffet, currently the world’s richest man and easily the world’s greatest investor. Did anyone remember Mr Buffet rushing to buy stock in UBS or Citigroup, despite their apparent CHEAPNESS on the stock exchange?

Why can’t we be obsessed with things being SO GOOD instead? Look at Europe, particularly Scandinavia and Germany. Things are not CHEAP but when you buy a product made in any of these parts of the world, the quality is outstanding. Unlike Singapore, which is obsessed with coming up with all sorts of statistics, the Europeans actually understand this thing called quality. Look at German cars as an example. It takes years to develop a Mercedes and bring it to market. But when you buy a Mercedes, the quality of the car is SO GOOD; you actually save money by keeping a car that remains in tip top condition longer than cheaper models.

Then there is of course the service industry. You get taxi drivers in Singapore who don’t know the way down the road – allot of them claim to be new. You will never get a taxi driver in Western Europe who does not know the directions to the outskirts. Taxi’s are relatively CHEAPER in Singapore but the taxis in Europe are GOOD. In Europe, you have governments that understand that taxi drivers need to get a fair share for their efforts, in Singapore it’s more important for the government owned trade union to get its dues from the efforts of the taxi driver. Likewise in restaurants – Singapore is probably the only place where waiters can’t tell you if a dish is available. On the other hand, while Europeans and Americans gladly tip some 10-15 percent of the bill for good service, Singaporeans would not tip if restaurants did not come up with a mandatory service charge.

What do Singaporeans understand by the term QUALITY? I don’t know. I just remember being told by someone from Standard Chartered Bank when I was going to quote for a regular job – “I would rather see a decline in quality than pay those prices.” So, there you have it – this is our economic and social system as it is.

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