I share Professor Tommy Koh's concern about Singapore becoming a rentier economy, especially with the rise of real estate investment trusts (Reits) here ("Is Singapore the new sick man of Asia?"; Dec 24).
Rising rents and commercial property prices benefit those who already own vast property portfolios, as they are able to attain greater passive income without putting in additional work.
However, the long-term problem with high rents is that they stifle innovation and entrepreneurship because they raise the barriers for small and medium-sized enterprises to overcome in order to succeed.
This is not something we can afford to do if we wish to attain our goal of building more national champions to strengthen the Singapore brand.
This is especially so as the movement of money, labour and goods across borders becomes quicker and easier with globalisation.
This will make it easier for talented Singaporeans to chase opportunities abroad instead, leading to a brain drain.
The big question is: Do we want to rely on value extraction or value creation for our next phase of growth?
In my opinion, it is the latter that has had greater success for all economies over the long term.
Lower rents reduce the barriers for people to overcome when they take responsible risks, such as setting up a new business.
Most economies do not correct automatically to address this issue.
Thus, the Government must play an even stronger role to discourage rent-seeking behaviour.
New taxes on speculation in the Reit market, for example, could be given further consideration.
Higher property taxes for multiple property owners could also be explored.
However, we must consider the needs of ordinary people, such as retirees who have scrimped and saved all their lives in the hope of owning a second property for some income for their own personal needs.
Hence, any tax increase must be progressive, based on the size of the property portfolio.
Addressing rent-seeking behaviour is necessary for our economy to stay business-friendly.
Lionel Loi Zhi Rui
