I am still digging up Dr.M....long list of how much we pay for processing water in Johor, when he published those figures during his rant towards the PAP..many years ago...over how much we pay for the water.
It is somewhere archived...
A reply to ‘False justifications for water price increase’
March 3rd, 2017
An article in ‘The Online Citizen’ argues that my justification for the recently announced 30% increase in water price is false/wrong, partly because the media reports on my interviews were rather brief. I also received emails accusing me of being ‘unfeeling’, ‘disgusting’. I have time to outline only a few main points below.
I also received emails accusing me of being ‘unfeeling’, ‘disgusting’. I have time to outline only a few main points below.
As water prices have not been adjusted since 2000, and general inflation has exceeded 30% over the last 17 years (though negligible if not negative over the past few years), the announced increase will be less than catching up with inflation.
Water prices in Singapore compare favourably to European countries even as a proportion of per-capita incomes. True, water is much cheaper in Beijing. But I drink water in Singapore straight from the tap; dare I do this in Beijing?
I have frequently heard suggestions on the need and the methods to save water on radio. I seldom or never heard the need to save other goods. Why?
A likely reason is that water prices do not adequately reflect the costs of supply. Colin mentions the absence of cost increase from the Malaysian supply.
However, Singapore also supplies water by producing new water and by desalination (converting sea water into drinkable water). The costs of these supplies are much higher. At least from the viewpoint of economic efficiency, a good should be priced at the cost of the highest cost source, to encourage efficient saving. If the government makes money by this policy, such as it presumably has in its COE auctioning, it could then levy lower taxes on other areas, or have higher government spending on worthy avenues. As long as the government is efficient and not corrupt, the overall result should be better.
Most cities/countries underprice water, resulting in wastage and the need to urge people to save water and sometimes even in severe water restrictions. These create unnecessary costs and inconvenience. Much better to increase water prices.
True, water is essential for life. Everyone has to drink about 1-2 litres a day. However, this represents only about 0.5% of our daily consumption of water per person. 99.5% is used for less essential usages, not to mention much wastage.
True, the 30% increase, though trivial to a rich person, may impose significant burdens for people on low incomes. I also mentioned to reporters of the need to help them. The government also uses rebates in accordance to flat sizes to cushion the increase. Ideally, we should use income per-capita levels, but information may not be adequate.
Everyone, rich or not, should face the full costs of supply to achieve efficiency. The problem of inequality in income/wealth distribution should be addressed by the overall equality promotion policy, including taxing the rich more and helping those on low income levels.
To understand why this is a more efficient policy to achieve any degree of equality, please read my paper in theAmerican Economic Review 1984, or Ch.9 of my following open-access book, “Common Mistakes in Economics: By the Public, Students, Economists, and Nobel Laureates“. (Chinese Version: “从诺奖得主到凡夫俗子的经济学谬误“)
The reported parts of my interviews may give the misleading idea that I do not care for the low-income groups. I am certainly not unfeeling. I feel even for animals, not to mention fellow human beings, especially the lower income groups.
As a student, I was a left-wing activist.
Over the last 12 months alone, I donated S$50,000 to animal welfare causes, despite being not tax-deductible in Singapore; receipts available upon request. For more evidence of my concern for animals, please read my following articles* (links provided below) on animal welfare.
Colin also mentions the role of population increase in increasing water prices. This is another popular source of fallacies (discussed in the above open-access book, Chapter 1 and 10).
Unless our population is so small as to rely only on the Malaysian supply, a larger population actually helps to lower the average cost of large investment in desalination.
More importantly, especially for Singapore, a larger population lowers the per-capita costs of such public goods like defence, research, and broadcasting. Even ignoring public goods, a larger population (including from immigration, as long as social harmony is maintained) actually makes existing people economically better off, as immigrants in general cannot take away assets owned by existing people or the government without adequate payment.
With lesser people, the MRT could not have so many lines; the frequency of trains and buses would also be much lower. I lived in the old Nanyang University campus (same location as NTU now) as an undergraduate when the population of Singapore was less than 2 million. When we missed the only bus out of the campus, we had to wait half an hour.
Now, I also live inside the NTU campus and have occasions to catch the 179 bus. Once, just before reaching the bus-stop, I saw two 179’s passing. I thought I had to wait at least 15 minutes but the next 179 came in less than two minutes. This typifies the advantage of a larger population that most people ignore.
By Ng Yew-Kwang
Winsemius Professor in Economics
Nanyang Technological University
* Reply posted on The Online Citizen.
Reply to Prof Ng Yew-Kwang’s reply (BS)
I refer to the
2 Mar 2017 letter “A reply to “False justifications for water price increase”.
Bullshit 1: 30% hike cannot even catch up with inflation
Prof Ng said that general inflation since 2000 has exceeded 30%. However, according to MAS core inflation index ( LINK ), core inflation increase since 2000 is 29.959%. It hasn’t exceeded 30%.
More importantly, the price of raw water from Malaysia has remained at 3 cents per 1,000 gallons all this while and hasn’t been subjected to inflation. Since Singapore gets half its water from Malaysia (Straits Times, Singapore’s water success has H2O expert worried, 21 Mar 2016) and more from our local reservoirs, more than half of our water has not been subjected to inflationary pressures. Setting aside the low cost involved in treating fresh water, the average inflation that can be applied to our water should only be about ½ × 30% + ½ × 0% = 15%. Thus, Prof Ng is wrong to say that the announced 30% water fee hike cannot even catch up with inflation. It is about double the average water cost inflation.
Bullshit 2: Singapore water price compares favourably to other countries
Prof Ng likes to compare Singapore water price to those of European cities. But even amongst European cities, there are some with reasonably low water bills relative to their incomes ( LINK ):
City Annual water bill as percentage of median income
Dublin 1.30%
Stockholm 1.50%
Rome 1.70%
Madrid 2.20%
Luxembourg 2.50%
Helsinki 2.80%
London 2.90%
Paris 2.90%
Prof Ng selectively chooses Beijing as a comparator for Asian cities which he conveniently brushes off with the comment that he dares not drink straight from a Beijing tap. But the same can be said of Singapore; almost every household boils water to drink or install expensive water filters.
Japan, South Korea, Taiwan and Hong Kong have cheaper water than us that isn’t inferior in quality.
Bullshit 3: Often hear about water saving on radio
Prof Ng claims that he often hears about water saving on radio but not saving of other things and asks why. The reason is that our radio stations are government owned and broadcast what the government wants the people to hear.
Bullshit 4: Water prices do not adequately reflect costs
Prof Ng claims that our water prices do not adequately reflect costs. If that’s the case, then PUB should be suffering immense losses year after year. But no, PUB has been making positive net operating income and positive net income before grants all the way till 2013 and 2009 respectively.
Bullshit 5: Price goods at the highest cost source
Prof Ng says that water should be priced at the higher costs of producing NEWater and desalination even for raw water obtained from Malaysia for economic efficiency. But it is precisely a monopoly that prices goods way above costs which results in a dead weight loss for society that leads to economic inefficiency. So on the contrary, for economic efficiency, water should be priced near its weighted average cost of production.
Prof Ng claims that any extra money made by the government in producing water can be used to offset spending in other areas and lower taxes in those areas. But what we are seeing is a near simultaneous increase in the price of everything. Car park, electricity, conservancy and now water charges have all gone up. Tell us Prof Ng, what is going to go down? For all we know, all these increases are just being used to shore up investment losses by our government.
Bullshit 6: Most cities under price water causing wastage
Prof Ng likes to cite high water prices in European cities but yet claim that many cities under price water causing wastage. If so many European cities are charging high water prices, then surely there should also be many cities that are not under pricing water? Prof Ng flips arguments like flipping roti prata. Whichever way he flips, his logic is always, heads he wins, tail you lose.
Bullshit 7: Population increase does not lead to lower water costs
Prof Ng disagrees with the notion that population increase has led to water price increase. He can only make sense of this notion in a simple dichotomy of Singapore being fully supplied with cheap Malaysian water versus Singapore requiring expensive water over and above that supplied from Malaysia. The truth is more than that.
Let’s say the cost of purifying Malaysian raw water is $1 per litre while the cost of producing NEWater and desalinated water is $10 per litre. Let’s say at first we were producing 9 litres from Malaysian raw water and 1 litre of NEWater and desalinated water. The weighted average cost of producing water would be 0.9 × $1 + 0.1 × $10 = $1.90 per litre.
Let’s say due to population growth, on top of consuming 9 litres from Malaysian raw water, we now also consume 9 litres of NEWater + desalinated water. The weighted average cost of water is now 0.5 × $1 + 0.5 × $10 = $5.50 per litre. So the average cost of water has indeed increased as a result of population increase.
Let’s say in the long run, population exploded and on top of the 9 litres of Malaysian raw water, we consume 27 litres of NEWater + desalinated water. The weighted average cost of water will become 0.25 × $1 + 0.75 × $10 = $7.75 per litre, which is an increase again.
Bullshit 8: Larger population lowers cost of desalination
Prof Ng claims that a larger population helps lower the cost of investment for desalination. But that’s only for fixed costs, not running costs. The main cost of desalination is the cost of electricity and every extra litre of desalinated water will use an extra amount of electricity.
Bullshit 9: We are economically better off with larger population
Prof Ng says that we are economically better off with a larger population because immigrants cannot take away assets owned by existing people without adequate payment. But the issues involved are much more than that. As more people fight for the same amount of limited resources, prices go up for all. Also, the law of diminishing return will ensure that as more and more people crowd onto this island, the benefit from the extra people will become lesser and lesser until it actually begins to detract from rather than add to the well being of the society.
The leaders of this country must recognise the optimum level at which Singapore can perform and not force our country to go far into diminishing returns.
Ng Kok Lim
