Think-tank ranks S’pore 60th most costly city for residents

SINGAPORE — 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.

The debate was sparked off by an Economist Intelligence Unit (EIU) study earlier this month, which ranked Singapore as the world’s costliest place to live in.

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.