Note: the opinions expressed here do not necessarily make sense.
Are we killing ourselves with the drive to attain a “First World” economy? For years now, it’s seemed that the one outstanding feature of “First World”-ism is prices that climb, climb, climb and never seem to come down to earth.
Just yesterday the Sunday Times featured the closure of Sembawang Music, once the biggest music retailer here with a history dating back to 1986. One of our local success stories has collapsed, and why? Not due to poor management – the founder did an incredible job of growing his company, and according to the article, his debts were negligible. Not due to music piracy – that aspect of the argument against illegal downloading is spurious, specious and smacks more of pig-headed refusal to change and innovate than of any sound economic reasoning. Not even due entirely to the recession, as hard as that has hit retail.
No – the single largest contributing factor to the death of another entrepreneurial dream was rent. $12,000 a month for a space in Raffles City, huh? That ought to pay the salaries of the outlet’s entire staff and then some, and anyone who thinks it low is either completely out of touch with day to day expenditure, or is so rich that they should just get the hell out of here and leave working people to get on with making a living. Granted, it’s in an upscale, well-furbished area where people are actually more likely to make purchases. But I shudder to think how large a percentage of operating costs that $12,000 takes up.
At almost the same time, I read another article mentioning the rental costs of a hawker stall: up to $4,500. Once again the rent is enough to pay the salaries of everyone working there, and then cover the utilities. It becomes even more ridiculous when compared to rents as they were in the 1960s – between $100-$300. Within half a century, rents and other operating costs have inflated more than ten times, but have earnings gone up correspondingly? The stories told by retailers suggest that the answer is no.
Is this really the best policy? Logic points out that if tenants cannot pay the rent, they will move out or just fold, and the higher the rents go, the lower the likelihood that they will be replaced even for the short term. The problem is tremendously exacerbated for retail businesses, whose income is restricted by that very space they are renting. Landlords ought to recognize this and do more than pay lip service to the concept of aiding their tenants – especially the small and medium-sized businesses. (Remember, if you will, that SMEs provide jobs for over 40 percent of our workforce.)
A lot has been said about encouraging entrepreneurship here and assistance has certainly been dished out. But assistance can only go so far before we turn into a welfare state. There is a point where larger corporations, such as the mall owners whose policy is apparently to squeeze their small tenants dry, need to realize that they are slowly bleeding themselves dry as well. The supply of tenants is not inexhaustible, particularly in recession times. Worse, the supply of entrepreneurs is not inexhaustible. It wasn’t so long ago that Guy Kawasaki said: “Singapore has 5 million people, six entrepreneurs and one opinion.”
One opinion, to me, is not as alarming as six entrepreneurs. And six entrepreneurs is not as alarming as the reason why there are not more entrepreneurs.
When our successful home-grown businesses, that we are so proud of, fail and fall because of policy holes that let them be literally choked to death by costs that rise unchecked regardless of the global recession, we are in trouble. There is something seriously wrong with a “First World” economy that kills off the very markers of its own achievement.
