from the ground Up

by Jessica Cheam [the original version]

I RECENTLY came to a conclusion that ‘growth’ is overrated.
Or at least, the conventional definitions of economic growth are no longer relevant today.
To quote well-known Canadian environmental activist David Suzuki, I think it’s time we redefined what economics is, and put the ‘eco’ back into it.
After all, both concepts are derived from the same root word “oikos” (eco) which literally means house, referring to the environment we live in.
Ecology, as an extension, is the study of the house, or environment. While economics, is a combination of “oikos” and “nomos” (rules, management), meaning house management.
Somewhere along the way, however, I think we forgot about the ‘eco’ in economics.
What triggered these thoughts was the recent public exercise to gather ideas for a blueprint on Singapore’s green journey for the next 10 years.
Since its debut on July 28, the ‘Sustainable Singapore’ website has received 700 suggestions and counting on issues ranging from solar energy and cycling, to the country’s energy efficiency.
I noted with interest the quick assurances issued by the government that Singapore’s green steps will be taken “in a manner that will not upset economic development.” Finance Minister Tharman Shanmugaratnam added: “What will not be compromised is economic growth.”
These are statements often heard in debates on greening economies, even on the international stage at United Nations (UN) meetings or at regional economic summits.
On one hand, I fully understand why governments place utmost importance on economic growth, as it leads to increased wealth, job security, etc – perceived elements of a stable and happy country.
As Prime Minister Lee Hsien Loong pointed out in his rally speech, growth gives us the resources to solve problems.
Singapore, for example, has used its wealth to take steps in greening its economy, making investments into environment-related research and development.
But on the other hand, economic growth is sometimes used too easily by many countries as a cop-out not to take drastic actions that are urgently required.
When in town earlier this year, the UN Environment Programme’s executive director Achim Steiner said to me: “You can never expect a politician to say you’re going to lose your job, or I’m going to make your life more miserable, for the sake of the environment.”
But the sad fact is, he added, “many of those in charge of economies today permanently exxagerate the cost of moving towards greater sustainability and totally under-represent the returns of investment of such actions.”
“This has led many countries to defer decisions about the future for far too long and the result is it gets much more expensive,” he said.
The one common questions governments today grapple with: How to we balance the costs and benefits in greening any economy? How much gross domestic product (GDP) do we sacrifice?
To answer this, we need to first question and redefine this endless pursuit of economic growth.
Growth is only possible because we draw on earth’s natural resources and have built economies around it. The bigger consideration is whether our insatiable thirst for growth will tip the earth past a point where it can no longer support our global activities.
The problem with conventional economics is that nature, or environment costs, are treated as externalities and unaccounted for.
Take China’s growth story as an example. A recent Financial Times report highlighted the environment as the “devastating price” it paid for its rampant growth.
While millions of its citizens were lifted out of poverty, its growth model “left large swathes of the country devastated and unable to support even basic ecologies”, it wrote.
It’s an example of how GDP growth is a “narrow, artificial indicator” that captures economic activity but does not account for real costs, said Mr Steiner.
The effect is the burden of growth has fallen disproportionately on the poor, who struggle with water scarcity, food shortage, water and air pollution.
So what is China’s real growth? Some may ask. Some reports have put China’s economic losses from environmental degradation at some five to 10 per cent of gross GDP. A real indication would have been if China’s GDP growth calculated this environmental costs, said Mr Steiner.
The good news is, more economists are starting to realize this.
And in the near future, countries might have to change how they calculate growth. Mr Steiner reveals that the UN is working with leading universities and the World Bank to create a new wealth indicator for countries to account for the drawing down of “natural capital” – and the return of investment on conserving the environment.
As we in Singapore start to plan our sustainable development policies this year, we should keep in mind the changing definitions of wealth and growth.
While we try to perfect the art of “balancing costs and benefits” – we should ask what we are defining as the reasonable cost of greening.
Are we willing to take the necessary steps, or will our ‘greenspeak’ become just lip service?
And don’t get me wrong, I’m not saying we should stop growing.
On the contrary, climate change has presented tremendous growth oportunities for us in the clean energy, water and environmental sectors etc.
All I’m saying we can grow in a much greener way, which might cost more in the short-term but offer much longer- term return of investments.
And we must dare to do it.
Some suggestions offered by industry players range from giving subsidies to clean technology, to giving green tax rebates. The government has said it does not favour subsidies as it believes this will distort the market. But having a green tax structure seems like a viable option. As it is, hybrid and CNG cars already get rebates, and there are tax concessions on income from carbon trading.
Nominated MP Edwin Khew, who is chief executive of waste recycling firm IUT Global and chairman of the Sustainable Energy Association of Singapore, feels more can be done – such as introducing tax incentives for efficient and pollution-reducing equipment for businesses.
Others such as Singapore Environment Council executive director Howard Shaw thinks electricity prices, for example, can be made more expensive at higher consumption volumes. Perhaps even citizens can be given tax incentives for adopting big ticket, energy-saving items.
Some countries such as Sweden and Norway are ahead of the curve, adopting bold environmental policies that others have avoided (like a direct carbon tax on emissions) and have proved that it works.
One country Singapore could take a leaf from: Switzerland. There, residents have to pay for how much rubbish they throw. Here, we pay for someone to take our rubbish away, for the waste to be landfilled or incinerated. But we don’t pay for the damage or costs to the environment our rubbish causes.
If, like Switzerland, we factored the cost of our rubbish into daily life, our actions will be a lot more different.
People will start factoring the cost of their waste and recycing will become a natural progression.
Such are ideas we can suggest and lobby for, from our policy-makers, in this nationwide call for ideas to make Singapore greener.
Put the ‘eco’ back into economics, and chances are, we’ll get it right.

also published in The Straits Times, 28 August 2008

by Jessica Cheam, August 27 2008
Coming up in Bukit Panjang: 474 homes for sale, 300 for rent
HOMEBUYERS are being offered a further 474 new flats to choose from, with the launch of a new Housing Board project in Bukit Panjang yesterday.
Also, 300 units in two new rental blocks will be built nearby, for the first [...]

by Jessica Cheam, The Straits Times, August 26 208
HOME-GROWN contractor Lian Beng Group has clinched the contract to build Singapore’s most prestigious brand-name residences.
The mainboard-listed firm yesterday announced it has won a $99.5 million award to build the Ritz-Carlton Residences – the five-star hotel brand’s only such project in Asia.
The award marks Lian Beng’s entry [...]

by Jessica Cheam, The Straits Times, August 25 2008
Sustainable Singapore site flooded with over 700 eco-friendly tips in feedback exercise
IN JUST one month, the nationwide call for ideas on how to “green” Singapore has garnered more than 700 suggestions.
Some specific concerns have emerged, indicating what Singaporeans feel passionately about: solar energy, cycling, recycling and energy [...]

by Jessica Cheam, The Straits Times, August 20 2008

[Review] EN BLOC BATTLES

THE Strata Titles Board’s (STB’s) recent decision to throw out the sale of Tampines Court has put an end to a three-year en bloc saga. But the issues raised during the objectors’ hearings will no doubt resurface again in future en bloc sales. They deserve a closer look.
Essentially, STB killed the application because it was not done “in good faith, taking into account the sale price and the method of distributing the proceeds of the sale”.
Although there was no mention of financial loss, this was at the heart of the minority owners’ objections.
A financial loss is deemed if an owner’s sale proceeds, after deductions allowed by STB, are less than the price he paid for his property.
But the law does not specify what deductions are allowed. Based on precedents set by STB decisions, stamp duty and legal fees are allowed but interest and renovation costs are not.
In the Tampines Court case, a fair number of owners faced the prospect of financial loss. They might have ended up with no cash in hand and a big hole in their CPF accounts if the sale had gone ahead. No wonder they fought it with such determination, scrutinising the deal for every possible flaw.
This problem is not likely to go away, for estates can be sold en bloc once they are 10 years old. Many would have bought their apartments at, or near, the previous 1996 peak. Those facing financial losses will contest en bloc sales to the bitter end and STB may well be hearing many appeals.
Which begs the question: Is there a win-win situation for all? I believe there is, but this would require a tweaking of the rules. Let me explain.
The current procedures on how to deal with financial loss have been created by a combination of rules and rulings.
Under the law, the STB can reject an en bloc sale application if an objecting owner can show that he will suffer financial loss.
The sales committee and their lawyers usually make a provision for this by running a financial check on all owners to determine who might suffer losses and calculating the sums that would be needed to pay them. Usually this sum is deducted from the total sales proceeds, before they are distributed equally among owners.
Some other brokers, however, set aside a specific sum obtained from developers, as in the case of Tampines Court. In most cases, the industry way of doing things works out fine. But the problem arises for individual owners when there is a financial loss and it is the bank, and not the CPF, that has first charge upon the sale of the property.
If it is the CPF that has first charge of the property, then it is a straightforward case. Sellers will always have their CPF accounts fully reimbursed first and then the bank loan will be paid off with whatever money is left. If there are insufficient funds, the sales committee will compensate them from the total proceeds. Everyone is happy.
But if the bank has first charge, then it is possible for an owner to lose from the sale. The proceeds of the sale go first to repaying the bank loan. After that, the money goes to top up the owner’s CPF account – but in some cases, the remaining sum is not enough.
You would think that the law would require this CPF shortfall to be made good. But this is not the case, as shown in the Waterfront View ruling last year.
In that case, a couple tried to stop the en bloc sale by claiming financial losses. They said the $660,000 payout for their home was not enough to pay off their bank loan and top up their CPF accounts. The CPF Board had said the couple did not have to top up this shortfall.
As a result, the STB made a landmark ruling – upheld by the High Court – that since the CPF Board had not required them to top up their accounts they could not claim financial losses. This decision sparked an outcry. Deputy Prime Minister S. Jayakumar later explained in Parliament the principle behind the decision.
In a property purchase, CPF funds can be used to pay for three components: the initial downpayment, the monthly repayment of the bank loan principal, and the monthly repayment of the interest on the bank loan.
Professor Jayakumar explained that CPF funds that go into repaying bank loan interest are not taken into account. This is to distinguish between owners who take no loans at all or who take a small loan with little interest, and owners who take long-term mortgages with a high component of interest payments.
This seems to make sense, but not for owners who have been forced to sell their home and take a hit in their CPF accounts – which affects their ability to buy a new home, as well as their retirement savings.
If it is a forced sale, no owner should have to suffer financial losses just because he made a decision to take a big loan some years ago.
There are many who might be caught in this situation. The CPF Board used to have the first charge on private properties, but in 2002, banks were given first charge. For former HUDC developments such as Waterfront View and Tampines Court, the change was made as early as 1996 to give banks first charge.
There are two possible solutions to this problem. One is to reverse the policy and require all owners facing financial losses to top up their CPF accounts fully, regardless of whether CPF funds were used to pay loan principal or interest.
A second less drastic solution would be to mandate that the CPF Board should have the first charge for all en bloc sale cases. The CPF Board would not object and neither would banks, since it would not affect them: The current custom of compensating owners who suffer financial losses would continue, ensuring bank loans would be repaid.
To owners facing financial losses, however, this change would make a world of a difference. If they can be assured that they will not be worse off after a sale, they might drop their opposition.
The other en bloc sellers will, of course, need to share the cost of compensating financial losses. But this is a relatively small price to pay, considering that most will reap a windfall.
In the case of Tampines Court, there was a couple who claimed CPF losses of $69,000. Divided among the 560 units in the estate, this works out $123 per seller. Even in the unlikely situation of all 100 dissenting owners claiming this amount, it would have worked out to $12,300 per seller – still small compared with the overall profit, which might have amounted to $300,000 for some owners if the sale had gone through.
It will serve the interests of all parties involved to address the bank-or-CPF charge problem. When a home owner is assured that he will not suffer a financial loss, a forced sale in the name of urban renewal might begin to make sense.

by Jessica Cheam, The Straits Times, August 19 2008
THE sharp increase in the number of people seeking Housing Board (HDB) rental flats – it has tripled in just a year – has become a cause for concern, said Prime Minister Lee Hsien Loong.
Calling it a “worrying trend”, he said such cases made up the bulk [...]

I would just like to add to my piece on climate change investments published in The Sunday Times, August 17 2008.

Due to a lack of space, some advice on investing in such funds weren’t published.

The point I’m trying to make is that investors have to be pretty clear on their own values and ethics before they investigate the various funds they would like to invest in. So here it is:

So you have some money and you are looking to contribute to the climate change fight by parking your dollars in some worthy companies. What should you be looking out for?

1. Understanding the landscape
Basically, the same investing principles apply. It’s important to know the different green industries you are investing in, and have an understanding of their historical performances, trends and outlooks.

2. Investigate green credentials
With the rage on climate change themes, many funds may call themselves green but may not necessarily be.
Funds will also differ in their investing strategy, with some more stringent than others in screening companies.
Look at the specific companies in a fund’s portfolio to ensure these companies’ core activities are indeed tackling cliamte change.

3. Define your ethical boundaries
Some funds will not just invest in green companies. At Schroders, for example, Toyota and Philips are part of the portfolio as they have parts of their businesses that will benefit from climate change, such as Toyota’s Prius car.
But some analysts have pointed out that the returns from such activities are dwarfed by Toyota’s other businesses - like its conventional, polluting cars.
Biofuels and nuclear energy are also examples of a controversial investments.
Biofuels have been partly blamed for causing a global food crisis as farmers swtich to growing more lucrative biofuel crops. But many climate change funds have stakes in such companies.
It is important to know exactly which biofuel firms are being funded and if their feedstock is harvested sustainably.
Nuclear energy’s merits are not clear cut, either, but HSBC’s climate change fund, for example, invests in Alstom, a French energy firm with interests in nuclear energy.
So it’s important to clearly define your own values and decide if you want to be investing in funds which have stakes in controversial firms or activities.
Alternatively, investing directly in one stock which you are highly confident in is also another strategy. But generally, mutual funds are the better bet since they offer exposure in a whole range of stocks which lowers your risk.

by Jessica Cheam, The Sunday Times, August 17 2008

Climate change funds have made inroads into Asia. But how many of them have reached Singapore, and how attractive are they?

These days, issues surrounding climate change make the newspapers almost every day.
We hear about them, we know what is happening, and governments around the world are responding in varying degrees by making policy changes and advocating a greener way of life.
In Singapore, an Inter-Ministerial Committee on Sustainable Development was formed recently to study the nation’s sustainable development journey and chart its future steps in going green.
But fighting climate change is not a role that falls only on the public sector.
Companies can also play a major role by creating solutions and products that help to increase energy efficiency, or reducing the daily greenhouse gas emissions that are largely blamed by scientists for global warming.
At the individual level, people are equally important – whether in terms of practising a more sustainable way of life, or demanding goods and services that are environmentally responsible.
And as investors, they can do even more.
The good news is that people can help to save the earth while making money from it too.
With the increased awareness of climate change issues globally, many banks and fund managers have put together climate change funds from the growing number of companies that are trying to tackle global warming. These funds give investors a chance to turn a threat into a buying opportunity.
Some big-name companies that investors can buy into are Norwegian solar firm Renewable Energy Corp (REC), Danish wind turbine maker Vestas Wind Systems and United States-based Waste Management, just to name a few.
Some of these companies have their futures closely tied to Singapore. REC, for example, has picked Tuas for its $6 billion giant manufacturing plant, with construction set to begin next month, and Vestas has announced it will build a $500 million research and development centre here.
Leading US research house Clean Edge has reported that revenues in the clean energy industry hit US$55 billion in 2006, with a projection of US$226 billion (S$318 billion) by 2016.
As a result, climate change has emerged as an investment theme that is growing in popularity and attractiveness.
So what are climate change funds?

by Jessica Cheam, The Straits Times, August 15 2008
NEA grant to help lower risk and uncertainty for firms in such ventures
A NEW bag of carrots provided by the Government will make it easier for local firms to take on carbon credit projects.
The National Environment Agency (NEA) yesterday announced a $500,000 grant that will fund up [...]

Hong Fok Corp’s upcoming condo will offer views of Kallang River and the new Sports Hub.

by Jessica Cheam, The Straits Times, August 13 2008

Buyers are willing to pay premiums of up to 10% for properties that come with good views

WHAT do home buyers look for in their dream home?
No doubt, it is a combination of an affordable price, the perfect location and other sought-after attributes.
But if there is one factor that often makes or breaks a sale, it is the view.
Property agents agree that all things being equal, a great vista helps to seal the deal for many home buyers.
In fact, in the current softer property market, a captivating outlook might give a home that vital edge to ensure it sells, they add.
Buyers are willing to fork out a premium of anything up to 10 per cent for a home with a great view. For well-heeled home seekers, price is no issue if the outlook is stunning, they say.
As a rule of thumb, analysts say flat prices increase up to 1.5 per cent for each floor in high-rise properties – so a 15th- floor unit might be 15 per cent more expensive than a comparable fifth-storey unit.
Securing that room with a view is particularly relevant for a built-up city such as Singapore.
Recent developments such as The Sail @ Marina Bay – which has two towers, one of which is 70 storeys high – have increasingly catered to Singaporeans’ growing appetite for high-rise apartments with stunning views.
Depending on what type of view you get on the higher floors, another premium of 3 per cent can be added, said Mr Colin Tan, head of research and consultancy at Chesterton International.
To pin down exactly how much a view is worth, a “hedonic regression model” can be used, said Mr Nicholas Mak, Knight Frank’s director of research and consultancy. This method breaks down individual aspects of a home and estimates the value of each characteristic.
“This is mostly used by academics who want precise values. Developers tend to decide on the value of a view based on experience, or from valuers,” said Mr Mak. With the model, value is calculated based on past transactions, he added.
A view can change a property’s worth as much as 10 per cent, said Mr Mak. What is difficult, though, is guessing a buyer’s preference.
“One man’s meat may be another man’s poison. It’s hard to isolate the price difference between, say, a city view and a greenery one,” he said.
A buyer’s willingness to cough up money for a view depends on individual tastes.
Home buyer Victoria Ho, 25, prefers a city view over a green one any day. “I’ll pay up to 10 per cent more for a view, but not much more, because the location matters more than, say, if I were facing barren land or another block.”
But for 26-year-old Hoe Qing An, who is hunting for his dream home, greenery is of the utmost importance.
“We already live in an urban jungle; a home needs to have that green element and I won’t mind paying for it,” he said.
So where are the spectacular views in Singapore and how affordable are they?