Currency
The S$10-bil..
How much will its value rise - or fall in 10 years' time?
Dec 26, 2000

Hit by an economic storm, the Aussie dollar has been flipping and flopping during the past year, falling to 95 cents to the Sing dollar.

The weakness has brought a lot of cheers to Singaporean tourists and students Down Under. It had plunged below the floor $1.00...90 cent.. and 89 cents before recovering but it is remains very versatile.

For the past few years the Aussie was trading around S$1.08-$1.10. down from $1.40 in 1985. This means that in 15 years, it has fallen by a third of its value in Singapore.

Why the historical weakness? Australia's Commonwealth Bank gave these reasons.

Firstly, it is the pressure on commodity prices, which are all-important to Australian exports. Gold and oil prices, in particular, fell to new lows.

Another is Asia's crisis itself. The devaluation of many Asian currencies and the slowing or negative growth in the region has had a significant impact on the demand of the country's raw materials. Asia accounts for 50 per cent of Australian exports.

I may add a third reason: the growing threat of chaos and violence in Indonesia and the prospect of Canberra's increased defence spending.

Which reminds me of a story about how impossible long-term prediction of a country's currency is.

In 1984, the Economist magazine organised a little experiment to test a point. Economists were famous for their forecasting failures, the magazine said, and it wanted to find out whether anybody could do better.

It formed a 16-member forum, made up of four different groups of people and asked them to predict what the world would be like over the next 10 years.

Four were ex-finance ministers, four chairmen of multi-national corporations, four Oxford students and four garbage collectors.

Among other things, they were asked this question: When do you think Singapore's GDP per person will over take Australia's?

At the time, Australia's per capita income was almost twice that of Singapore. Resource-rich, with plenty of skill and technology this lucky country had a lot going for it.

And what were the answers? Ten years later, in 1994, they compared them. Of the 16 people, seven replied "Never." Meaning Singapore would always be behind.

Only four people, two garbage collectors and two company chairmen, rightly predicted the Singaporeans could do it - but in 15 years. Close enough.

The right answer nobody got was eight years. In 1993, according to the World Bank, Singapore had moved ahead of Australia. And Australia had moved ahead of Britain.

What is the lesson? Simply this. Experts often base their evaluation on physical resources and statistics and ignore human endeavours (how do you measure them, anyway?)

At any rate, Singapore's efforts today are comparable to what America's some 90 years ago - minus the size and natural resources - when it unleashed a powerful spurt that allowed it to overtake its colonial power, Britain.

It also surpassed France and Germany, two major powers in those days.

For the Americans, it was a golden era caused by the human spirit, an ideal fighting for a better life.

I doubt if the best economists in Europe could have accurately predicted America's growth then. Probably no better than America's current forecast of Asia's future today.

Yet measuring the human spirit and the drive are no easy matter. You can't have an index for these things. Yet it is this which is fuelling the growth of countries like China, Vietnam, Malaysia (in a temporary setback) and others in the region.

Recently I received a postcard from a journalist couple which migrated to England 25 years ago. At the time the pound sterling was worth more than S$7.50.

They had cashed in their Frankel Estate terrace house, sold off a stack of DBS Bank shares left by a dead uncle and bought a little cottage on the outskirts of London.

They are still there living a low-profile, sub-editors' life and never did recover the value of their original savings.

The pound has plummeted and their terrace house would have worth several times more not to mention lost career opportunities. They were senior journalists here with good prospects.

They liked living in London, the wife told me years later, so there was no regrets going. But she admitted had badly misjudged the Republic's future, believing Vietnam would fall and so would Singapore.

They were half right. Vietnam did fall, but Singapore did not. What's your bet on the Sing dollar 10 years from now?
Seah Chiang Nee