An Familiar Tale of An Ordinary Singaporean and His Problems with An Unsympathetic HDB Bureaucracy

Screen Shot 2014-04-21 at 22.11.27Recently someone posted to my timeline on Facebook an account of another person who claimed to have received unsympathetic treatment from HDB. I have inserted a screenshot of the Facebook post above. The post received nearly 5,000 likes very quickly. After reading about it I invited Mr S to come and see me at the Reform Party office. He came down to see me yesterday afternoon accompanied by a neighbour, Mina, who has been assisting him in his  brush with the HDB and CPF bureaucracy.

I will summarise his case briefly. Mr S was forced to sell his HDB flat in May 2012 because of debt problems.  He is married with three children, two girls aged 19 and 16 and a young boy. Since he sold his HDB flat he has been living with his sister and her husband in their four-room flat. However his sister’s family now need the space back. Very sadly Mr S has recently been diagnosed with late-stage cancer and is no longer able to work. Previously he had his own business but I understand it was closed down due to insolvency. He is currently receiving $1,000 a month from ComCare, which is insufficient to cover his and his family’s needs.

However, despite his lack of liquid assets or income, Mr S has over $200,000 tied up in his CPF Ordinary and Special Accounts.  He applied for a BTO three-room flat last year and was successful in getting one. He put down a $1,000 deposit, which did not come from his CPF savings. Unfortunately the new flat will not be available till 2017 . He needs to find new accommodation immediately. He returned to HDB in November 2013 and requested to be put on the HDB subsidised rental scheme, as he cannot afford to rent a property on the open market. Mr S claims that the HDB rental officer told him that he could not be placed in the scheme, as he had already been successful in applying to buy a new flat. He then went and cancelled his application and forfeited his $1,000 deposit.  However, after cancelling his application, he was told that he was ineligible as he had sold his former HDB flat less than 30 months before and furthermore his level of CPF savings was too high. HDB are denying that they gave him this advice and that they told him from the outset that he would not qualify for a rental flat.

Mr S had ended up in the Uniquely Singaporean trap of having substantial savings in his CPF but being unable to use any of it. As the PAP government has broken its promises and unilaterally and repeatedly tightened the rules on withdrawal, introducing first the Minimum Sum Scheme and now replacing that with CPF Life, it really looked as though Mr S and his family would end up homeless. The letter from HDB, which I reproduce here (with the names redacted), seemed to suggest that it was an acceptable solution for Mr S to send all his children to India while he and his wife rented a room.


IMG_0026Mr S and Mina told me that HDB was advised that Mr S was of the seriousness of his medical condition and that his life expectancy had been reduced. Therefore I find it staggering that none of the staff could advise him that there was a simple solution to his problem. CPF allows those who have a medical condition that significantly shortens their lifespan or who are permanently unable to work to withdraw their CPF savings provided they leave the Medisave Minimum Sum in their account. Mr S obviously qualifies. Since CPF and HDB are so closely connected it seems inconceivable that the staff are so poorly trained as to be unaware of this fact. Perhaps they are incentivized only to sell flats and not trained to give appropriate financial advice. Or they are told not to tell customers of this scheme as it might encourage Singaporeans to contract a terminal illness just so they can withdraw their CPF savings early? That would be exactly  the PAP government’s way of thinking. I recall the PM in his National Day Speech 2013, advising Singaporeans that the best way to keep medical expenses down was just to stay healthy.

Anyway I am pleased that I was able to point out there was a fairly easy solution to Mr S’s problem though sadly there is no miracle cure for the poor man’s illness. Tomorrow I will assist him in filling in the online application for early withdrawal.  I will also go with him to see his MP in Jurong GRC at the next MPS and to HDB in order to try to get his deposit back. Mr S also wrote to PM Lee on his Facebook page and was contacted by an individual who took down the details. That was two days ago and he has yet to receive a response.




In PM Lee’s Coalition “Naive” is the new “Daft”.

PMLeeMany readers will have seen PM Lee’s  recent “Lunch with the Financial Times” interview. That interview was no doubt aimed at a UK or global audience but actually it is vitally important for us Singaporeans, giving us a rare opportunity to see our PM perform without the protection of PAP control.  Here in Singapore we are unable to see or hear anything about or by the PM  that hasn’t been scripted beforehand or edited afterwards.  The PAP has total control over our  media corporations through the management shares and the rights this gives them to appoint directors or in fact over the hiring and dismissal of any member of staff of a media company.   These rights are enshrined in the Newspapers Printing and Presses Act and not some  speculation on my part.  Check the Act out here.

So how does our PM perform away from the cosy protections of a media controlled by his own government?  The answer, for all to see in black and white, is not very well.  His interview is  best summed up by a comment left on the, “In Memory of JBJ” Facebook page. “what a lame duck interview” .

I hadn’t been expecting any great insights but even so I was surprised by what seemed to be random thoughts or coffee shop musings more bluntly referred to as mind fa**ts.  He was overwhelmingly unimpressive and I was surprised that there is no sign of him being a pundit like his dad.  Maybe he was trying to be “his own man” in which case I recommend that he immediately start trying to be someone else instead.

This pathetic interview is the perfect illustration of why having no competition in government has been bad for Singapore.

There were multiple gaffes but it was the one where the PM seemed to admit the possibility of a change of government in Singapore and even the PAP going into coalition that caused them to rush around in panic later. This is the passage in question:

So can he envisage a day when the PAP is not running Singapore? “It could well happen,” he replies mildly. “I don’t know how it will work but it could happen.” A little later, he hints that the PAP is beginning to consider the possibility of one day forming a coalition government. “It may not be one team in, one team out, it may be more complicated – you’re getting used to more complicated than that in Britain now.”

 It seems abundantly clear to any ordinary reader that when the PM talks about things becoming “more complicated” in Singapore and then says “you’re getting used to more complicated than that in Britain now” that he must be referring to the fact that the UK has a coalition government.

However this interpretation resulted in some hurried backtracking on Facebook, presumably when he realised he might have given the impression that Singapore might progress one day to something more resembling a democracy. To quote his loyal States Times:

“PM Lee sought to clarify that what he meant was that he could imagine a situation in the future where the PAP is not dominant, but that he had no idea how that would work, “or whether it could be made to work at all”.

“To think that instead of PAP dominance we will have a stable two party system is naïve,” he wrote.

“Just look at the UK today – even there the two party system is no longer what it was. A coalition govt for Singapore was not on my mind.”

It is always a bad sign when your PM needs to clarify in his own newspaper and then again on his Facebook pageDespite his attempts to correct the situation and warn that Singapore would descend into chaos if we ever had a functioning democracy, the PM unwittingly provided the best argument in democracy’ s favour. It is because of the lack of competition in the political arena that we have a situation where the PM is clearly not able to think fast enough to avoid being caught out by even the mildest of questioning by an independent journalist.

This is particularly true when he has to face the novel experience of not being able to subsequently re-edit what he says. Typically even with all his clarifications, the PM was not able to produce a single argument why political competition would be bad for Singapore, just alarmist hints for consumption by a domestic audience fed misleading facts about gridlock in Western democracies.   I note here that the new term of denigration for his voters is ‘naive’. Previously we were “lesser mortals” and then “daft” . Our people quite rightly angry got angry with being called names by their leaders and turned daft back on them so it seems that naive is the term du jour.

As I said in a Reuters interview in 2010,

“Firstly, do not be afraid. You have a right to exercise, to have a say, in how your country is run,” Jeyaretnam told Reuters in an interview at his apartment…

“Singapore is not going to collapse. Competition in politics is as necessary as it is in economics to ensure efficiency.”

 Instead 50 years of repressive measures to prevent the development of an alternative government have left us with is a clear demonstration that where the Darwinian  laws of competition are not allowed to operate survival of the weakest triumphs. Lame duck is a good enough term but Dodos are what the PAP are actually turning themselves into.   The PM is as environmentally ill-adapted to the bracing world of competition outside Singapore as the Dodo was when new predators invaded its sheltered Mauritian environment in the seventeenth century. The longer the PAP continues to resist the development of political competition, the further Singapore will fall behind the advanced democracies in terms of creativity and innovation. dodo


Meanwhile our people are trapped in this authoritarian state. If our people are naive then they are naive only because the PAP controls all sources of information, blocks transparency, provide no accountability and  keeps them in a childlike state of dependency.

CPF and HDB: 10 Real Dirty Tricks.

housing bubble

Roy Ngerng of  Heart Truths, today published an article to expose the raw deal Singaporeans get from HDB and CPF. He makes many valid points, most of which I have made before on  Unfortunately in his overeagerness to convict the PAP of fraud he makes an elementary error and simply gets it quite wrong. Whilst the error does not invalidate the fundamental point about the raw deal it does allow the PAP IB Brigade to seize on it and draw us away from valid criticisms.

Roy’s fundamental error also distracts from the fact that CPF amounts to a regressive tax on lower-income Singaporeans and that the government uses its control over land to ensure that we overpay for a wasting asset which should belong to us rather than them, once we’ve paid for it.  This is the real dirty trick.

What are Roy’s mistakes?

He makes the point that CPF requires us to pay interest on any withdrawals we make from our accounts both when used to purchase housing and also to service the loans. This is in addition to the normal interest we have to pay on any housing loans that we take out.  So far so correct.

To digress a little: Having to pay interest on our own money is itself unusual. If this were a private savings scheme or pension fund then of course it would be up to us to decide how much money we wished to save. However this is a mandatory scheme. Despite the fiction fed to foreign think tanks that Singapore has a laisser-faire economy this mandatory scheme is in fact a stealth tax on our citizens.

This interest only becomes payable when we sell the HDB unit.  Roy’s error (whether intentional or not) is in saying that this interest is lost to the government.  It is in fact interest that is paid to ourselves and it is not true that we lose it.  The accumulated interest remains in our account and can subsequently be withdrawn for new property purchases though interest will again be payable on the fresh withdrawal unless we have reached an age and have enough in our accounts to withdraw our money without having to pay it back.

It is true though that the government makes it difficult for us to withdraw what should be “our” money. It should be unnecessary if Temasek and GIC are making the returns they claim.That in itself means we should be asking the government why it is so desperate to hang on to our money if its funds are making so much?

It is also difficult to understand why we have to pay interest to ourselves on money we withdraw. From the government’s point of view making us pay back our borrowed CPF contributions is plugging a loophole that Singaporeans could use to withdraw most of their CPF. One way they could do this is by purchasing a property and then immediately selling it. But the government does not have to pay interest on those borrowed contributions so why should we have to pay ourselves back for borrowing our own money?

Another error that Roy makes is to say that it was WP’s Mr Giam who suddenly discovered the hidden scandal of HDB’s 99-year leases. In fact giving HDB leaseholders the freehold of their units was part of the Reform Party manifesto in GE 2011. Before that I believe my late father advocated a similar policy in Parliament.  “The Problem with HDB Part 2” on my blog was concerned with the fact that HDB flats would be worthless when the lease expired. To quote:

“However there has been a fundamental mispricing in the HDB market in which decreasing time to expiry of the lease has not been taken into account.  HDB properties can be taken back by a future government at the expiry of the lease for no compensation. Yet properties with sixty years or less to expiry trade at very similar prices to new flats with ninety-nine year leases in the resale market. This is completely different from how leaseholds on private property are valued in Singapore. This is also completely different to how leaseholds are valued in any other country in my experience.

 The buyers have been sold the fiction that an asset that has to be handed back to the government in at most ninety-nine years, and in many cases much less, will somehow ignore the laws of economics and keep on appreciating forever. Let me repeat that there has been a fundamental mispricing in the HDB market.

 Singaporeans have been told by PAP ministers and in particular LKY over and over again never to sell their HDB properties, as they can only go up in value. No government that I am aware of has made such an explicit promise and it can only be characterized as highly irresponsible.  If a financial investment had been promoted in this way by a broker or corporation without any mention of the risks and investors had subsequently lost money, the buyers would be entitled to compensation.”

 So here are the hard truths (or hard questions) about CPF and HDB which I first wrote about some three years ago.  Some of these hard truths Roy has covered but all of them have been written extensively about before by me (see links below):

dirty tricks

  1.       Why do we still need a compulsory savings scheme if Temasek and GIC are doing as well as they claim?  The PAP claim that Temasek is self-funded yet the government continues to inject assets (like Changi Airport Group) for free into Temasek. Even this capital injection is vastly undervalued allowing Temasek to use the valuation surplus to conceal that the majority of its investments like its panic rescue of Olam do not meet its internal rate of return hurdles.
  2.       Why has the PAP repeatedly broken its promises to allow Singaporeans to withdraw their CPF in full? First we were supposed to be able to withdraw it in full at 55 then this was postponed. Now we have to buy an annuity through CPF Life, which is a bad deal for Singaporeans as the government can alter the payout every year if it has done badly, or if life expectancy changes. In effect Singaporeans have written a free put to GIC. We do not directly share in its returns if it does well but have to bear the losses if the value of its assets falls below that necessary to repay CPF holders.
  3.       CPF is a tax since it pays holders well below what they could earn in the market for investments that were locked in for similar durations and only could be withdrawn under limited circumstances. This tax was significantly higher in the past when global interest rates were higher but still provides a big “endowment effect” which boosts GIC’s returns.
  4.       Furthermore CPF is a regressive tax since it is capped at an income level of $85,000 per annum The top earners in Singapore pay vastly less of their income in CPF than do those on low incomes. Even though they also get less Employer contributions it is likely that much of the Employer contributions are borne by the employees themselves in the form of lower wages.
  5.       CPF is not paid by expat workers and the hypothetical market value of a $ of CPF contributions is significantly less than a $ of disposable income. This gives foreign workers an unfair advantage over Singaporeans and allows them to undercut Singaporeans in the labour market.
  6.       Why is it necessary for there to be a PAP monopoly over the supply of housing? This, combined with mass immigration inflows, results in Singaporeans massively overpaying for 99-year leasehold housing of inferior quality.
  7.       I discussed above the mania that seemed to afflict Singaporeans because of irresponsible promises by LKY and the PAP that HDB was an asset that would constantly go up in value. I pointed out that the SERS scheme, in which Singaporean swap their old flats for new smaller ones with a fresh lease in much higher-density estates had encouraged this illusion. To quote again from my previous article, “The problem is that there is a fundamental conflict of interest between the government’s roles as provider of supposedly low-cost housing for the masses and as monopoly owner of at least 80% of the land in Singapore. This is why the PAP government has had a vested interest in pumping air into the housing bubble.  Until now they have been happy to maintain the fiction that the length of the leasehold does not affect HDB valuations. This is because with the deliberate creation of huge excess demand for housing the HDB finds it profitable to acquire existing HDB blocks from their owners and pay them compensation which is close to the price of new BTO flats. That is because they can vastly increase the density of housing on that area by doubling or tripling the size of blocks and building them closer together.”
  8.       However, as I explained above and Khaw Boon Wan admitted in his Parliamentary answer to Mr Giam’s question, the viability of the SERS scheme depends upon the redevelopment potential of the site. In other words, as long as redevelopment continues to be profitable for HDB which in turn is dependent upon other factors like continued population inflows and high economic growth rates.
  9.       KBW stated for the record that if SERS does not make economic sense then the government will allow the leases to expire meaning that HDB owners will get nothing. At some point (certainly when the majority of estates have less than fifty years to run but probably much earlier) the factors that have inflated the HDB bubble will go into reverse. Singaporeans can expect a big fall in HDB prices particularly for older estates where the lease has fewer years to run.  This is a ticking time bomb which could have serious adverse consequences for all Singaporeans leaving the majority who are financially naïve or too trusting of the PAP government with negative equity.
  10. We do not need to make unsubstantiated accusations of fraud , as Roy does, to demonstrate that Singaporeans are getting a bad deal from allowing the PAP to have control over housing and our savings.   Owning the freehold of our properties and the freedom to decide how to save are essential elements in creating a property-owning democracy.  A property owning class is the basis for a strong middle class and the government ownership of land and housing is the single biggest obstacle to the creation of a strong middle in Singapore.  That is why you see such a disparity between the 10% of plutocrats at the top and the 87% of the rest who have the pleasure of the government as their landlord. With a strong middle HDB housing could return to its original function as social housing for the truly needy and provide a valauble safety net.

Sadly every article I write seems to end the same way. So here I go again! Until we start standing up for our rights we will continue to get the kind of raw deal that citizens of any democratic country would see through and not tolerate.


An Open Letter to the Chairman of the Securities Industry Council

18A Smith Street




 25 March 2014


J Y M Pillay


Securities Industry Council

25th Storey, MAS Building
10 Shenton Way
Singapore 079117


Dear Sir,

I am writing to you in your capacity as the Chairman of the body responsible for seeing that market participants adhere to the provisions of the Singapore Code on Take-overs and Mergers (“the Take-over Code”).

There has been overwhelming public interest in seeking an explanation for the unusual price movements and trading volumes in Olam International Limited (“Olam”) from 4 February 2014 to 13 March 2014 when the stock was suspended immediately prior to the takeover announcement the next day. During this period Olam’s stock rose just under 40% without any announcement. By comparison its peers in the same sector, Wilmar and Noble Group, rose 11.2% and 12.6% over the same period. The STI index only rose by some 2.3% over the same period. Average daily trading volumes in Olam more than tripled in the month prior to the announcement. While volumes also rose in the other two stocks the increase was much smaller. Moreover the rise in the share prices of Noble and Wilmar and increase in volume is likely to have been driven by index rebalancing and quantitative trading as a direct result of the rise in Olam’s share price.

The Stock Exchange (SGX) put out an announcement on 17 March 2014. This drew attention to the obligations of the Offeror and Offeree companies under the Take-over Code to monitor trading activity in their stocks and make an announcement “if there appears to be a leak of information on the possible offer which is material.

The announcement went on to say:

Under SGX’s listing rules, listed companies may temporarily withhold material information relating to a matter under negotiation. However, companies should make an immediate announcement of the yet-to-be disclosed material information or call an immediate trading halt if market activities suggest that the requirement of strictest confidentiality is no longer satisfied.

 From 3 March 2014, listed companies are also required to notify SGX on a confidential basis if they are in discussions which are likely to lead to a takeover. We do not discuss our dealings with regards to individual companies including notifications as required under the listing rules. If there are possible breaches of rules or requirements, we will investigate and take appropriate action.”

SGX refused to disclose whether Olam or Temasek had notified them of take-over discussions on 3 March when the new rules came into force. The rest of their announcement was devoted to an extraordinary explanation of why Olam’s share price movement had not been unusual and boilerplate language about SGX’s commitment to maintain the highest standards.

This failed to convince most market participants and independent observers that there was still not a case to answer of breach of the Take-over Code and SGX rules as demonstrated by this Wall Street Journal article on the same day:

“Even after all those upgrades, the consensus target was only 1.68 Singapore dollars (US$1.33), according to FactSet, just a single Singapore cent higher than at the start of the year and far below the S$2 the stock hit just before the deal was announced. Back in November 2012, before Mr. [Carson]  Block’s accusations, analysts had a consensus of S$2.33. The stock then plunged to S$1.40, not reaching that consensus price, ever. Temasek’s buyout bid is priced at S$2.23. Nobody said explaining markets is easy, but this begs another look.”

Similarly, in a March 16th article, Bloomberg Business Week quoted Mr. Sachin Shah, a special situations and merger arbitrage strategist at New York based Albert Fried and Co, on his concerns that “there’s been leakage in the deal process”.

It may be your Council’s view that only foreign short sellers have suffered actual loss as a result of the movement in Olam’s share price prior to the bid announcement. However many Singaporean small shareholders lost out as well either because they were short the stock or because they sold out too early.

Reform Party therefore believes that in order to maintain the integrity of our public markets you are obliged to conduct an independent investigation as to whether there have been breaches of Articles 2 and 3 of the Take-over Code, dealing with Secrecy before Announcements and Timing and Contents of Announcements respectively.

SGX cannot be said to be independent of the Offeror in this case, as Temasek indirectly owns at least 23% of SGX through SEL (even though they may be precluded from voting their stake).

Similarly the SIC also contains at least nine members who have potential conflicts of interest arising from their employment with government-linked companies or with companies where a former Minister is Chairmen of the Advisory Board. In addition one of the members is a currently serving MP from the ruling party. I am also concerned that the other members of the SIC drawn from the legal profession may be partners of firms where a substantial portion of the revenue comes from government, statutory boards or government-related companies.

In view of the potential conflicts of interest it is Reform Party’s view that any investigation should be conducted by an entity with no ties to the government. The investigation should take evidence from those affected and its conclusions should be made public as soon as possible. If there is evidence that suggests insider trading then this should be passed to the AG as soon as possible with a view to potential prosecution of those suspected to be responsible. Any breach of the Take-over Code should be subject to sanctions.

 Reform Party believes that swift and decisive action on your part will prove that we have a robust regulatory regime and that we do more than pay lip service to the rules. This will boost confidence in our stock exchange and Singapore globally as a transparent and investor-friendly trading centre.



Kenneth Jeyaretnam

Secretary General

Temasek Loses the Plot

LostLast week I pointed out * that it made no sense for Temasek to pay a huge premium for Olam’s equity when Olam’s short-term debt refinancing was likely to be problematical, to say the least.  Lenders would likely have become increasingly nervous about extending more credit and rolling over existing facilities without a convincing strategy to achieve positive free cash flow and worries over the transparency of Olam’s accounts,

If Temasek saw long-term value in Olam,  the moment at which lenders would no longer extend credit  would have been the ideal moment to step in. They could then have offered to buy the debt at a substantial discount to face value, taking control of the company in that way.  Instead of waiting for Olam’s credit problems to become unmanageable and swooping in to get our citizens a bargain,  Temasek has in effect bailed out the foreign lenders. By doing so they are providing them with the reassurance of state ownership, even if not a direct guarantee.

For those of you who are sentimental about our sovereign wealth fund stepping in to save a Singaporean company from going under and believe it is worth the cost, I should point out that all of Olam’s production and most of its employment is overseas in places like Nigeria. Originally headquartered in London, it only moved to Singapore in 1995 and the CEO himself is a relatively new citizen.

On Monday Moodys, the US credit-rating agency called Temasek’s inexplicably generous offer for Olam “credit negative” **

This is what Moodys had to say about the Olam acquisition:

“Bringing a new company under the Singapore umbrella negatively pressures portfolio liquidity. Furthermore, Olam’s dividend yield in 2013 of 2% is well below Temasek’s overall dividend income yield of about 3% in the year to March 2013.

 In terms of currency, 65% of Temasek’s investments are in Singapore dollars. The high concentration of investment in Singapore-listed companies and the large size of each shareholding reduce portfolio liquidity. This feature is markedly different from the typical, more broadly spread sovereign wealth funds that can adjust their holdings rapidly without moving markets or requiring placements or trade buyers to effect disposals.

 It is highly unusual for investment companies to seek full control of a business.

If you want to know how a Sovereign Wealth Fund should be run for the benefit of its citizens,then look at Norway.  The Norwegian Sovereign Wealth Fund takes stakes of 1% or less in the equity of most of the companies it invests in and has a maximum stake size of 5%.  Some might object that a significantly concentrated portfolio leads to significantly higher returns. However the concomitant of higher concentration is significantly higher risk.

The Moodys report also highlighted the relatively weak state of Olam’s finances:

“Olam’s credit profile is relatively weak with gross debt of SGD9.1 billion and a reported last-12-months EBITDA of SGD1.2 billion as of 31 December 2013. Now with Temasek firmly in the picture, Olam will benefit from the financing halo effect, although Temasek does not guarantee the debts of its operating subsidiaries.”

Singaporeans should be very worried by this acquisition. It casts doubt on the  investment competence of  Temasek’s management.  However if this acquisition is worrying,  an investment company that acts in complete contradiction to its stated strategy is even more worrying. In a recent Reuters article about Temasek and Ho Ching’s new strategy,  “Temasek’s pivot to private investment heralds billion-dollar listed asset sales,  Temasek was described as cutting back on big stakes in publicly listed firms and putting more emphasis on private equity.

To quote from the article:

Under the guiding hand of chief executive Ho Ching, the wife of Singapore’s prime minister, the $170 billion state investor is morphing into a leaner form. The firm’s returns have often lagged its own internal metric in recent years due to its focus on big stocks.

Which goes on to say:

“Now they’re allocating capital in smaller chunks to these publicly listed firms, so that they are no longer a significant stakeholder in the company,” said Melvyn Teo, a professor of finance at Singapore Management University who has observed Temasek’s strategy closely over the years.

So lets just recap here.

  • Temasek invests the citizens’ money for the citizens’ benefit
  • Temasek is morphing  into a leaner form
  • Temasek is no longer going to take significant stakeholder positions
  • Temasek aims to raise its returns relative to an internal metric
  • Temasek is shifting its focus towards stakes in smaller companies and private equity investments

I fail to understand how Temasek’s takeover of Olam fulfills any of these aims.

So is Temasek fit for purpose and is our money safe? I am not convinced.This complete contradiction provides yet more evidence that the management of Temasek do not know what they are doing. Far from investing for the long-term (which again is almost certainly being used as a way of justifying ex-post any number of poor short-term investment decisions), in making the offer for Olam in such haste and overpaying they appear to be reacting to short-term pressures (possible bankruptcy?)

It has been suggested that Olam was on the verge of collapse and Temasek were trying to shore up the banking system. But that hardly makes sense as Olam’s debts of $9 billion are not that significant in relation to  total deposits in our  banking system.

It may be that Temasek are deliberately paying far too much for Olam because they want to mark their existing shareholding to the offer price and book the  resultant goodwill on their balance sheet as profit. It is ironic that this is exactly the tactic that Carson Block accused Olam of using to artificially boost their profit. By keeping Olam listed with negligible free float they may be able to  claim further mark to market profits by pushing up the share price. That is why we had Nomura coming out with a recommendation yesterday ( that investors hold on to their shares because they are likely to rise further.)

It is no coincidence that the Lead Nonexecutive Director of Olam  happens to be the Chairman of Nomura Singapore. The Securities Industry Council (SIC) need to look at whether parties allied to Temasek but outside the “Concert Parties” (as defined in the offer document) were involved in pushing up the share price. Given the conflicts of interest that the members of the SIC have, an independent investigation is unlikely to happen.

Another worrying sign is the fact that both Josephine Teo and Inderjit Singh spoke  in Parliament (“Govt spending needs won’t drive GIC, Temasek investments”) in an obviously choreographed performance to deliver the message that Temasek and GIC must not be put under pressure to deliver short-term returns to meet spending demands.  Josephine Teo said that “GIC and Temasek “must continue to invest with the aim of achieving good, risk-adjusted returns over the long term”.  As Keynes said about returns over the long-term, “In the long run we are all dead”.

If the returns are as the managers of Temasek and GIC claim they are, then why does the PAP give the impression that its idea of the long term will be well past the lifespan of any Singaporean alive today or even their grandchildren? Why are Singaporeans willing to put up with this nonsense. We need proper accountability and transparency now and this can only be achieved by listing Temasek and GIC and distributing shares to Singaporeans?

Temasek claims a track record of 17% p.a. annualised. I hope I have shown my readers over the last three years that the track record quoted  was only achieved because when Temasek was set up the government transferred its shareholdings to Temasek for close to zero consideration. When these companies (SIA and SingTel are two prominent examples) were later floated, Temasek claimed the revaluation gain as part of its returns. This blatant padding of Temasek’s real track record would not have passed muster with an independent regulator if Temasek were a private sector investment company marketing funds to the public.

This practice still continues. A case in point is the  injection of Changi Airport Group into Temasek in 2009 at a book value of around $3 billion or less when the real value of the airport is probably upwards of $16 billion or so (see my article “Has Temasek Found A Cure for Balding?”).

As I first said in an interview*** in 2010 (which was quoted all over the world), if Temasek were a private company, heads would have rolled by now. That was in 2010 but the situation has not improved.  The irrational investment decisions, the contradictions of policies announced just days before and inability to stick to an investment strategy, coupled with the lack of transparency and use of dubious accounting to artificially boost returns would all raise red flags with investors. I can tell you that if I were a private investor I would not be putting my own money into this company.

Ho Ching

*Questions for the Prime Minister’s Wife on Temasek’s Olam Acquisition

**Temasek Unit’s Offer for Olam Is Credit Negative, Moody’s Says


SGX denies wrongdoing and possibility of insider trading in Olam takeover.


In my blog yesterday I wrote about the inexplicably high offer that Temasek had made to buy out Olam, a Singaporean commodities firm hemorrhaging cash and burdened by debt repayments falling due.  As this offer was inexplicably generous and the timing irrational I feared that at least US$2.1 billion that belongs to the citizens of Singapore was being squandered  recklessly and that Temasek was trying to mask its real performance by increasing the proportion of  private companies in its portfolio.

I also said that in the period before the deal was announced, it appeared that Olam and Temasek had breached the Singapore Takeover Code which is regulated by  the Singapore Securities Industry Council.

Yesterday I said “ (the code) places very clear obligations on both the offeror and offeree companies to keep any offer discussions secret. In the event of an unusual movement in the share price of the offeree company or an increase in turnover they are required to make an immediate announcement as to the possibility of an offer.” 

I believed there had been a breach of the Code because I saw “unusual movement” in Olam’s market price that to me looked like absolute evidence of failure to protect the secrecy of the deal process.  That is not to say there was a deliberate leak or intention to commit the offence of insider trading but more that, with so many players involved, leaks do happen and that is why SGX and Temasek need to be vigilant. Temasek must have seen the increase in volume and upward movement and  should have made an  immediate announcement.   Trading in the stock should have been suspended earlier by SGX so as not to penalise the minority shareholders and to give everyone  a fair chance. Not to make that announcement was  a breach of the Takeover Code and has allowed those with prior knowledge of the Olam deal to profit unlawfully.

Temasek eventually made the official announcement of an offer to buy all the remaining shares in highly leveraged and cashflow negative Olam,  on March 14th.  However in the month preceding that offer being made, Olam’s shares rose by 35%, with no good news announcement to explain that rise and no similar rise being seen in its peers or the market itself.  The Straits Times Index only rose by 2.3 % in that period, for example. Once the official offer announcement was made the preceding 35% rise in Olam’s price looked like evidence that the cat had got out of the bag early.

I am not the only person who noted this. In a March 16th article Bloomberg Business Week quoted Mr. Sachin Shah, a special situations and merger arbitrage strategist at New York based Albert Fried and Co, on his concerns that “there’s been leakage in the deal process”.

there’s been leakage in the deal process

In fact you wouldn’t need to be an expert in M&A activity as I am or an analyst specializing in this area like Mr. Shah, to have serious concerns over “deal leakage”. Any reasonable observer would reach the same conclusion and apparently many of the minor shareholders who sold early in the process are already crying foul.


I seem to have hit a nerve with my article because today SGX has published an astoundingly defensive statement that not only fails to rebut my concern that a breach had occurred but even seems to give evidence to support it.

Naturally, I stand by yesterday’s blog when I stated that the movement in Olam’s share price was “unusual” by the definition of the takeover code and the failure to make an earlier announcement had been a breach.

Here is what SGX said in reply:

“Market commentaries noted that in the six weeks from 3 Feb 2014, Olam’s share price increased 34.8%, higher than those of its peers such as Wilmar International which rose 11.2% and Noble Group which rose 12.6% over the same period. During the period, the Straits Times Index rose 2.3%. Such comparisons should be conducted with care as the financials and outlook of individual companies may differ even if they are within the same industry. While we do not prescribe a view of value or pricing of stocks, we note that of the 13 analysts who issued reports on Olam in February 2014, seven raised their target price by an average of 10.4% with the highest increase being 21.4%. The 13 analysts had target prices of $1.50 to $2.00 for Olam. In the case of Wilmar, eight analysts raised their target price by an average of 2.6% with the highest increase being 4.8%.  For Noble, one analyst raised the target price in February. Trading in these three stocks were within the price ranges set out in the research reports, suggesting they were trading within the general market view of these stocks with Olam shares reflecting a more positive market view.”

The so called clarification by SGX fails to answer the question as to why Olam rose so much more than its peers pre-announcement. A 34.8% rise was three times more than the average of 10.4% by which analysts raised their price target for the stock.

SGX quotes the rise for peers Noble and Wilmar but the statistics for Noble and Wimar only back up my assertion that Olam’s rise was unusual. The rises for those two companies were much smaller and completely in line with the general movement in the MSCI agricultural commodities index over the same period. In any case the large movement in Olam would have the effect of pulling up its peers due to technical activity driven by index rebalancing and quantitative trading.

Nothing that SGX has said above allays my suspicions that there had been “leakage” and that failure by Temasek to respond with an immediate announcement broke the Takeover Code with consequences that regulation is supposed to prevent. A defensive and unclear statement by SGX is not sufficient in the light of the failings being exposed.  There are a large number of investors who sold the shares in ignorance of an impending deal who will need to be compensated and there may be other investors who bought the  same shares, in the same month, in full  knowledge of the imminent takeover.

So, not only has the Code had been breached but the Stock Exchange also needs to conduct a convincing investigation into possible insider trading. If evidence  is found that anyone with prior knowledge of the deal profited from that knowledge, then prosecutions MUST follow. Unless SGX and other authorities responsible for regulating the market act and act swiftly, investor confidence could be fatally damaged.  Singapore’s reputation as a financial centre will be indelibly tarnished.


However who is going to conduct such an inquiry?  SGX is itself not sufficiently independent since SEL, a Temasek holding company, controls 23% of SGX (and a further percentage could be held by nominees).  The chairman of SGX, Chew Choon Seng, is also the chairman of the Tourist Promotion Board and the former CEO of SIA. It thus has a clear conflict of interest making its statement of little value and  SGX clearly cannot investigate itself on suspicions of insider trading or violations of the Code by either or both parties.

How about the Securities Industry Council responsible for the Takeover Code?  Similarly the composition of the Securities Industry Council needs to be proven to be independent.   What we do know is that Lee Kuan Yew’s son and our Prime Minister’s brother sits on the Board of SGX and Lee Kuan Yew’s daughter–in–law and the Prime Minister’s wife, heads Temasek.  At least 7 members of the Securities Industry Council are connected with the Government or Government Linked Companies.

I therefore urge SGX, SIC and the government to appoint  an independent body to investigate this The investigation will need to come from outside Singapore as an investigation of accusations of possible misconduct by a Government-owned company is likely to face difficulties in finding individuals who do not have a conflict of interest given Temasek and the PAP government’s pervasive control over the economy and given that members of the same family are in key positions at Temasek, in the government and at SGX.

Meanwhile I repeat my offer to assist naturally extends to any aggrieved investors.

Questions for the Prime Minister’s Wife on Temasek’s Olam Acquisition

Olam Share Price

Olam Share Price

My suspicions were raised yesterday by the news that Temasek has put up $2.1 billion dollars to buy out any remaining shares they do not already own in Singaporean commodities trading firm Olam International Limited (“Olam”).  The offer was inexplicably generous. Though Temasek is only offering 12% above the stock’s last traded price, the offer is in fact  a staggering 55% above where the shares had been trading on February 4th  2014.

Why would Temasek be willing to pay such a high price for Olam no matter what the cost to its stakeholders, the citizens of Singapore? Naturally, at that 55% premium it can expect to get the vast majority of the shares except for those held by the founding shareholder and the company’s management, who have agreed not to tender their shares beyond a set percentage.  It would also seem that upon acquisition Temasek intends to take Olam private which means it would become unlisted. Unlisted holdings within an already secretive Temasek are bad news for Singaporean citizens.  Being unlisted allows a firm to hide a weak balance sheet or even catastrophic losses without the pressure of Singaporean public scrutiny and without the need to publicly report quarterly and annual earnings.

As you all know I am at the forefront of demanding greater transparency from Temasek. One of the reasons I have campaigned for Temasek to be listed publicly is so that we CAN apply public scrutiny and have complete transparency over its reported earnings. At the very least Temasek should produce the level of detail and transparency in its annual reports that Norway’s sovereign wealth fund does, allowing the figures to be scrutinized by Parliament.

My concern is that Olam is part of a movement by the government led by the Prime Minister and Temasek led by the Prime Minister’s wife, towards further secrecy. In the past few years I have been highlighting discrepancies and black holes in our government’s accounting procedures and simultaneously raised serious doubts over Temasek’s published rates of return. In the two years since Chip Goodyear suddenly left, Temasek has increased the percentage of private firms in its portfolio by 22%. As of March 2013 a very significant 27% of Temasek’s portfolio was in privately listed companies whose accounts are invisible to us. That percentage of private companies
may be even greater by the time the next reports come out around July.

The move towards private companies and accompanying secrecy may not matter if those companies are profitable but what better way for Temasek to hide its losses in a company they have made a bad bet on than by acquiring more than 90%, taking it private and burying it?  Is this in fact what they’ve done with Olam?  Did Temasek in fact, put up billions of our dollars in what amounts to a face saving exercise or to inflict financial pain on anyone who dares criticise them?

On the face of it Olam does not present as a good bet at a 55% or even a 12% premium. Olam’ has had a turbulent stretch recently after its weak balance sheet and its accounting practices came under the scrutiny of Carson Block and his research firm and short-seller Muddy Waters (“MW”) in November 2012.

carson blockFor those of you who don’t know MW they were behind the exposure of the Canadian-listed Sino-Forest Corp for misrepresenting its timber assets. Sino-Forest subsequently filed for bankruptcy in 2012.

In November 2012, Carson Block labelled Olam another “Enron”, described its equity as worthless and its accounting as highly questionable and announced that he was shorting it.  MW pointed out that Olam was burning up cash. Even on the company’s own figures it would not have been able to generate sufficient cash to meet the large debt repayments falling due over the next couple of years.

Enron, I’m sure you all remember, was a US energy-trading company with creative accounting whose apparent profitability relied on revaluing assets using dubious financial models. At the same time its cash flow was consistently negative and it was only managed to survive as a going concern on the generosity and gullibility (or venality) of its bankers. When it collapsed in 2001, as a result of the recession, there was a huge scandal and most of the top management ended up with long prison terms.

I have told you before that Temasek have an unerring ability to find the only banana skin in the room and promptly slip up on it (see “Chesapeake Energy and Temasek: A Tale of Two CEOs and Shareholder Democracy”) So my readers will not be surprised to learn that Temasek were the biggest shareholder in Olam, apart from the founders of the company, at the time that MW came forward with its negative assessment.

Olam’s stock dropped 20% on MW’s announcement and hit a three-year low in December 2012. In fact the company may have collapsed if Temasek had not come to Olam’s rescue within days of the MW announcement by agreeing to buy a US$750 million debt issue with warrants. This move may also have relieved the company’s debt refinancing issues temporarily and been a precondition for the banks to roll over short-term maturing debt. However the rapidity with which Olam turned to Temasek for assistance and the high cost of the new debt indicates that the MW hypothesis that Olam had been in danger of collapse was probably correct.

In addition Mr Verghese, the CEO of Olam and a true son of Singapore even though he is a new citizen, threatened to sue Carson Block and MW for defamation. There are some things we do so well in Singapore and using defamations suits to silence criticism is certainly one of them. Mr Verghese, reported to be politically well connected in Singapore, actually started proceedings, with Olam as the plaintiff, in the Singapore courts. However he decided to drop the suit after realizing that Olam would be unlikely to be able to enforce any judgement obtained in a Singapore court against a US company with no assets in Singapore. Furthermore the suit was not helping the stock price or Olam’s credibility.

Returning to the subject of why Temasek chose to make an offer to the shareholders at this time, I would quote Carson Block’s comments: “The Singapore sovereign wealth fund’s timing is interesting given that Olam has $1.2 billion of debt maturing this year and is still burning cash, and that the stock has inexplicably outperformed in the past month.”

As I described above Olam has continued to hemorrhage money. As of June last year, Olam already had long-term debt of S$5.9 billion compared with S$4.3 billion at the end of June 2012.  Temasek’s bail out via Olam’s Convertible Bond and Warrant issue was only a stopgap replacing cheap debt with expensive debt. Olam continued to be over-leveraged.

More importantly by February of this year Olam still faced an enormous re-financing problem with billions of dollars of debt falling due in the short-term without any positive free cash flow to draw on.
Even with the lifeline provided by Temasek through new lending, Olam would likely have been unable to continue as a going concern just as Carson Block of MW had predicted.

Given the circumstances, the timing of Temasek’s offer is peculiar and I am afraid inexplicable.  So is the offer’s huge premium to where the stock was trading in early February. Even if Temasek genuinely sees future value in Olam as a global commodities trader and producer they have a fiduciary obligation to their shareholders the citizens of Singapore not to overpay.  The rational strategy would have been to buy the debt of Olam at a big discount to face value and then take control of the company by forcing a restructuring, wiping out the equity holders in the process. To make an irrationally generous offer for a failing company with public money is rewarding foreign shareholders at the cost of the Singaporean taxpayer and CPF holder. Temasek has a case to answer here and questions need to be asked.

Some analysts have argued that the massive premium was justified because of a turnaround in fundamentals for the company. They point to rising agricultural commodity prices as well as better capital spending discipline by Olam. However it is hard to see that this is the case. Olam last month posted a 12.5 percent drop in second-quarter profit on weaker sales and commodity prices. While Earnings Before Interest, Tax, Depreciation and Amortization (EBITDA) rose slightly over the previous half-year, cashflow from operations continued to be strongly negative and debt continued to rise.

Undoubtedly the company had addressed some of the concerns raised by Block’s report but I don’t see this as anything approaching a turnaround. It certainly does not explain a 55% rise in the share price in one month. The MSCI agricultural commodities index only rose by 13% over the same period.

In fact I would go so far as to say that Olam and Temasek might have breached the Singapore Takeover Code.  This mirrors the UK Takeover Code and places very clear obligations on both the offeror and offeree companies to keep any offer discussions secret. In the event of an unusual movement in the share price of the offeree company or an increase in turnover they are required to make an immediate announcement as to the possibility of an offer. The movement in Olam’s share price was clearly unusual and should have led to an announcement much earlier. The stock exchange also needs to conduct a convincing investigation of possible insider trading and if evidence is found prosecute those responsible. If any MPs, NCMPs or NMPs wish to raise this issue as well as the broader question as to why Temasek chose to pay so much for Olam, then I am more than happy to assist them.

This episode only seems to demonstrate that the managers of Temasek and in particular the CEO, the PM’s wife, do not seem to feel under any capital discipline or fiduciary obligation to achieve the best returns for their stakeholders, the citizens of Singapore. Singaporeans should rightfully be angry that money can be so gratuitously and unnecessarily squandered in this manner. Foreign shareholders and lenders have not only been let off the hook but rewarded generously.  This seems to be for no other reason than to administer a painful lesson to those who would expose the mistakes made by Temasek’s investment managers. The irony is that the virtually unlimited resources of our sovereign wealth funds that enable their managers to do this have only been built up through our sacrifice.

Value destruction on this scale is only possible because of our willingness to allow the PAP government to get away with not giving us the true picture of our public finances. Instead we meekly submit to conditions of austerity that are totally unnecessary. The next time we are told by the government that taxes will have to rise to finance greater social spending, or that we have to queue in tents at SGH like some Third World war zone, we should remember what our refusal to stand up for our rights is really costing us.

The PM Burdens Every Generation of Singaporeans with His Outmoded Economic Ideas

PMLeeIn a Facebook post on Wednesday night, the PM made another statement of breathtaking economic illiteracy. He said, “Singapore must never fall into the same hole as some countries which spend more than they can earn,” Perhaps it is the fact that he studied Mathematics rather than Economics that has led him to make such a fallacious statement.  As every first-year student of Economics learns, while one country may be able to increase its savings as long as other countries are willing to go into deficit, if all countries simultaneously tried to increase their savings and run current account surpluses, the result would be a catastrophic slump. This is what caused the Great Depression and fiscal austerity has unnecessarily prolonged the Great Recession since 2009.

However I suspect his motivation is political rather than economic. As the head of Singapore’s elite he has a vested interest in stopping spending on the bottom 80% of the population if it might conceivably lead to a rise in taxes for him and his cronies down the road.

But such fears are unfounded. Singapore is in no danger of spending more than it earns for the forseeable future. We run a current account surplus (which represents our external saving or forgone consumption) of around 20% of GDP year after year.  This is already attracting attention internationally from the US and the IMF because of the drag it exerts on world growth.

Singapore has no external debt and while the PAP rip off CPF holders by forcing them to lend money to the government at below-market rates of return, all CPF debt is owned by Singaporeans. So if we were to spend more than we earn we would be borrowing from ourselves. However we are very far away from this ever happening. In fact the rate at which government reserves are accumulating, at least on paper, is accelerating.

As I wrote about in Budget 2014: A Very Generous Amount of Wool Pulled over Your Eyes, the PAP government is hiding a surplus of around $30 billion a year from its citizens. Over the last six years to 2012 the cumulative surplus amounted to $187 billion, even with the poor returns the government has been able to achieve with our captive CPF money.  Even the Pioneer Generation Package, which the PM said MPs from both sides of the House had paid tribute to for its generosity, only represents $260 million of current spending and not the $8 billion headline number, which is unlikely ever to be spent. Why then, for goodness’ sake, is the PM talking about taxes having to rise? To quote the PM, “We are alright for the next few years. Beyond that, we must think about raising more revenues.” 

One might suspect he has taken leave of his senses. On present trends, using the figures the government reports to IMF, the cumulative surplus to 2020 is likely to be in the region of $250 billion.  So either he is mad, mendacious or we should be afraid, very afraid, that our vaunted reserves are not all they are cracked up to be.  Government secrecy can be used to hide a multitude of sins.

I wrote about this in “Where have our reserves gone”, “Sherlock Holmes and the Case of the Missing (or Merely Hidden) Reserves“, and “An Unappetizing Picture.” It is one of the classic signs of an autocracy that the government treats the people as children, who cannot be trusted to make decisions for themselves. The Finance Minister’s Budget presentation is certainly like a nursery story for children.  It serves to cover their political motives in not wanting Singaporeans to realise how badly they are being short-changed.

However I will reserve further discussion of the contradictions in the PM’s statement to another time. Here I just wanted to make one simple point. If the PM and the PAP were serious about not burdening future generations then why not give HDB owners the freehold of their apartments once they have paid off their thirty-five year loans?  As everyone knows, HDB leases are only for ninety-nine years, which means that future generations will have to start the process of paying for a home all over again because the property will revert to the government at the end of the lease.

In his National Day Rally Speech in 2011,  the PM said “The way we have done it which I think has been successful has been to give people assets, especially an HDB flat;”. As usual the PM is being economical with the truth, as in an actuality the HDB purchase price should be amortized over the life of the lease. At the end of the lease the asset will be worth zero and our descendants will inherit nothing.

If Singaporeans collectively own the freehold of our HDB properties then we can manage the estates ourselves and make our own decisions about upgrading and redevelopment. The full rise in the value of the land will accrete to us rather than a large part being siphoned off by the government. If the majority of us can never aspire to owning (a share of) freehold property, then we can never become a true democracy, because we will always be dependent on the government.  Just as at Cheng San in 1997, the PAP government will continue to try and use Singaporeans’ insecurity over property ownership to ensure that they stay in power. This cannot be to the long-term good of our country


Madame L from Pioneer Generation Package to Cardboard Collecting Pittance


With Budget 2014 fresh in our minds I thought that now would be a good time to update my readers on the case of Madam L. You can read the previous blog entries from September last year, if you are not familiar with the case or need to refresh your memory. (“Homeless in Singapore’s Island Paradise” and “Homeless with a Handcart against Singapore’s Grand Prix”).

Mdm L has been homeless for 2 years, sleeping on the streets and turned away by everyone until she came to me for help.  So, I was not her first choice! But she had always been a supporter of JBJ so she came to me.  She has been living in the street on around $8:00 she earns a day, on days when she is well enough to push her trolley around collecting cardboard.

Despite repeated calls to the Social Service Office in the months following our first meetings, dealing with her case we seemed to have hit a brick wall. Despite Madam L being homeless and destitute it seemed impossible to unlock the aid to which according to the ComCare website she was entitled. ComCare promises $450 a month Public Assistance to those unable to work and without any other means of support. Madam L does have children but is estranged. In any case I went to visit her son and they have several children of their own to support and are in the low-income bracket.

The refusal of the authorities concerned to give her the support that she was promised is typical of the way our government operates. At Budget time our Finance Minister always waxes eloquent about the support given to the poor and needy in Singapore and the myriad schemes that are available but the situation on the ground doesn’t bear the fruit being promised.

Who can forget our PM’s comment at Davos”If you’re poor in Singapore, it’s no fun, but I think you’re less badly off than in any other country in the world, including in the US”. This breathtaking falsehood, fed to foreign journalists, politicians and academics, has unfortunately been swallowed without any independent corroboration by Nobel Prize winners like Stiglitz. This is Stiglitz’s original article and my rebuttal, which the NY Times declined to carry.

Anyway there is some good(ish) news to report. Mdm L has now been granted an allowance of $300 a month from Comcare for a period of six months. I feel this is a measure of some small success.  It wasn’t really hard to take her around to the various agencies and to keep phoning and pushing the various parties who should be assisting her.  All she needed was some guidance, hand holding and someone to unravel the bureaucracy for her.

She was adamant at all times that she didn’t want charity despite the many offers we received from readers because she lives in fear of being “put away “. She was also offered a shared room soon after I took up the case on her behalf but the proposed room-mate was unsuitable.  However, I believe that once she does have a room of her own she will be in need of your generosity to furnish that room and provide her with a buffer to pay the rent so that she can ease back into a home situation with less stress.

The aim is still to see Mdm L suitably housed. She also needs medical care. I will make sure to review with ComCare before the end of the six-month period and to pursue her other needs.  Mdm L and I are due to visit HDB together next week. I hope that the evidence of offers of support and donations and the Comcare allowance will persuade HDB to find her a room, this time.  I am still questioning HDB over the action they took in evicting her in the first place.

Before I finish just wanted to say a word about the much hyped Pioneer Generation Package. How does that help Madam L and the thousands like her who were never formally employed and thus do not have any CPF funds?  So many like her are from the Pioneer Generation and yet are reduced to collecting cardboard and hawking tissues.

In any case the Pioneer Generation Package and its hyped $9 billion cost is a fraud. As I pointed out in Budget 2014: A Very Generous Amount of Wool Pulled over Your Eyes, the actual projected cost is more like $400 million a year of actual spending. And the actual overall cash cost is likely to be considerably less.  The Finance Minister provides no breakdown of the estimated cost of the different elements. However 40% to 60% off Medishield Life premiums is not a cash cost when the Medishield fund is still massively in surplus. The government may recoup the cost by raising premiums for the rest of Singaporeans. In any case Madam L and many like her are not enrolled in Medishield and could not afford the premiums anyway.  The same is true with the Medisave top-ups, where only a tiny fraction of the fund is withdrawn each year. Madam L has no Medisave anyway. Finally the Disability Assistance Scheme will doubtless be as difficult to access as Public Assistance has been for Madam L.

We will be having a meeting at the Reform Party office at 18A Smith Street in Chinatown  this Monday evening from 7pm to coordinate donations and help for Madam L. All are welcome.

Mdm L was born in 1948. She is truly one of our Pioneering Generation. She wants what is her due, just a room of her own and she surely deserves that. Is that so much to ask?

Please watch the short video interview with Madam L above



Budget 2014: A Very Generous Amount of Wool Pulled over Your Eyes.

woolovereyesMinister Khaw Boon Wan has called Budget 2014 “very generous …by any measure” so naturally, I want to see how it holds up by my measure but because the budget contains information black holes and inexplicable discrepancies measuring it is almost impossible.  This leads me to believe that Minister Khaw Boon Wan is singing a tune without the benefit of the sheet music. No wonder his song strikes a discord with the ordinary citizen.

First let’s remind ourselves of Budget 2013 which I analysed in an article entitled “How To Make A Surplus Disappear without Anyone Noticing”.  This is what I said:

“There is an accepted format for the layout of budgets prescribed by the IMF. Last year I asked why the Budget could not be set out in the format prescribed by the IMF. In July 2012 I wrote an open letter to Christine Lagarde (see here) asking this question in more detail and that latter was published by the Huffington Post.  I said there that :

 The foreword to the IMF manual sets out an analytical framework for budgets and states that one of the aims of the framework is to provide an early warning system as to when things start to go wrong.”

 And also:

“Specifically lacking in  Budget 2013 are the figures for  net interest earned and investment gains or losses on financial assets and liabilities. It also does not include a value for the state’s land holdings or for receipts from land sales.

The only information available to us is the Statement of Assets and Liabilities [of Singapore which the Finance Minister is required to publish every year]that is more than a year out of date. This barely helps us gain some picture of the true state of the government’s financial position and the size of our net assets particularly as it comes without any explanatory footnotes or an explanation as to what accounting policy is followed.

 As the stocks of financial assets and liabilities are more than twelve times the flows represented by revenues and expenditures any losses in the former can easily dwarf any surpluses in the latter.  We see no reason not to have full transparency, as secrecy can only be conducive to lack of accountability, even to mismanagement and potential corruption.”

I have read through this year’s Budget Speech and my first thought was, Yipee!  I don’t have to do any work I can republish the piece I wrote last year.  Seriously, nothing has changed and that is not a good thing. The Budget presentation continues to be a joke, using a format that does not follow the guidelines prescribed by the IMF described in the Government Financial Statistics Manual 2001.

I wonder why our Finance Minister was appointed head of a key committee of the IMF when he does not even follow IMF procedure.  Presumably this has got something to do with the speed and willingness with which the PAP committed to giving away $5 billion of our money (more than 60% of the money promised to our Pioneer Generation!) without bothering with democratic niceties like Presidential or Parliamentary approval.

Christine Lagarde, the head of the IMF, must be pleased with the way our courts have moved so swiftly and efficiently to prevent us from challenging the legality of the government’s actions by saying we do not have locus standi.

I have been pointing out the lack of transparency and the use of smoke and mirrors in the government’s accounts since the Reform Party’s critique of Budget 2012, which was repeated with Budget 2013. I also wrote open letters to the Finance Minister asking him why the Budget was not presented in the format prescribed by the IMF. I have also written an open letter to Christine Lagarde about the discrepancies in the government’s accounts and their failure to provide a full picture of the government’s finances. In particular I highlighted the failure to provide figures for net investment income, capital receipts and revenue from land sales. This was republished in Huffington Post.

In “Where have all our reserves gone?”, “Sherlock Holmes and the Case of the Missing Reserves” and “An Unappetizing Picture”,  published in September 2012, I highlighted the fact that the then Statement of Assets and Liabilities (SAL)  rang further alarm bells as forensic analysis suggested that the returns achieved by GIC would have had to have been much lower than the quoted returns in order to reconcile the stated figure for total net assets with Temasek’s assets and estimated revenues from land sales:

“It is only by reducing the rate of return on assets to 5.2% that one gets to a theoretical total assets level of roughly $720 billion which is close to the figure for total assets shown in the government’s SAL…

However, when one adds in Temasek’s assets and the likely revenue from land sales, returns appear to have been much worse. I calculated what would be the theoretical rate of return on assets to equal the total assets shown in the government’s balance sheet at 31 March 2011 minus Temasek assets of $180 billion and estimated revenues from land sales of $100 billion. It is only when the return on assets is reduced to a shocking 2.5% in S$ terms while keeping the rate the government pays on its debt to CPF holders at 3.5% that we are able to reconcile our theoretical calculations with what is shown in the government’s balance sheet.”

 This was of course a theoretical exercise and, in the absence of any light from the Finance Minister on this black hole, the real picture could be better than laid out above or conceivably much worse. We have no way of knowing. I have not had a chance to bring my analysis up to date with this year’s SAL but I am confident my conclusions there would be unaltered.

Even if the government is barred from spending past reserves without Presidential approval, which in any case can be overridden by a two-thirds vote of Parliament, surely Parliament and the people are entitled to know the true reserve position and how well the government has performed that year in managing them. Nations like Norway, which also have substantial Sovereign Wealth funds, have adopted full transparency and present the results to their Parliament each year.  We should be doing this.

This year the Finance Minister has become even braver in his determination to mislead Singaporeans as to the true state of the government’s finances. Perhaps he is emboldened by his victory in court allowing the PAP to proceed unchecked.  Particularly as the Opposition in Parliament are unlikely to ask any tough questions and will certainly vote for the Budget.

So let’s look at how he misleads us this time over the disturbing question of our abnormally large surplus. The difference between the estimated surplus for 2013 of $2.4 billion, according to the PAP’s format, and the revised surplus for 2013 of nearly $4 billion announced in Budget 2014 is already embarrassingly large. That figure pales into insignificance when compared with a likely government surplus of nearly $30 billion (extrapolated from the six months’ figures shown in the Monthly Digest of Statistics for January 2014. ) And the government surplus is likely to be considerably narrower than the general government surplus, which includes the results of Temasek and other GLCs and statutory boards not under the GIC and MAS umbrella.

However I cannot say for certain what the figures are as the government has started to make it more difficult to find out what the true surplus is.  This may be because many other commentators are now starting to follow my lead, albeit somewhat timidly, and point out that the surplus is vastly larger than the Finance Minister would have us believe.

The problem is that the Yearbook of Statistics used to contain details of the general government surplus in addition to the government surplus but now the format has been changed so it merely presents the surplus in the format the Finance Minister uses, which as we know not only contains no useful information but is deliberately misleading.  The Statistics Department has even started restricting online access to anything but the current issue of the Monthly Digest of Statistics (MDS), which only has six months worth of data on last year’s government surplus. Back issues have disappeared. Fortunately the Finance Minister is still obliged under the Constitution to publish the annual Statement of Assets and Liabilities, though this is completely opaque as it is unaccompanied by any explanatory footnotes and is in any case a year out of date. What first world country swims against the global tide towards more openness and transparency by going backwards and trying to restrict its citizens’ access to information?

In Budget 2013 the Finance Minister used his usual trick of transferring the entire Net Investment Returns Contribution (which is meant to provide resources for current spending) straight back to the reserves by allocating most of it to Top-ups to Endowments and Trust Funds (which do not represent current spending). I wrote about this accounting trick  previously in Smoke and Mirrors in the Government’s Accounts. This is what I said then:


  • The setting up of funds  appears to be a way of bringing the Overall Budget Balance close to zero and mirroring almost exactly the Net Investment Returns Contribution. $7 billion  set aside for new funds in 2012 and $7 billion in net investment returns contributions.  This is despite the fact that monies appropriated to these funds may not be spent for many years, if at all. Again this deviates from the IMF framework, which would require that these appropriations show up as part of net acquisition of financial assets. ( see and for details of how our accounts fail to follow IMF accepted procedure)
  • The $41 billion in the funds’ assets is a sum of money conveniently removed from the direct control of Parliament. In other words the Finance Minister  has unfettered control over their budgets and disbursements.
  • The legislation requires that these funds produce annual reports and accounts that the Finance Minister is supposed to submit to Parliament. However a preliminary inspection of Hansard uncovered no evidence that this had ever happened. [I later discovered that while some of the funds have been audited by the Auditor-General others, such as the National Productivity Fund and the Bus Services Enhancement Fund, do not even appear in the SAL. More on this soon]
  • These funds appear to be a way of injecting capital into the statutory corporations (mainly Temasek, GIC and MAS) almost exactly mirroring the outflow from the Net Investment Returns Contributions (NIRCs). However I have not been able to discover any information as to how these funds are invested. In the Statement of Assets and Liabilities their assets are pooled with the rest of the government’s assets.  If it is indeed the case that these monies have ended up being invested in Temasek or GIC then this would seem to violate Article 7(A) of the Financial Procedures Act.
  • Finally and most seriously, if these funds are invested in Temasek or GIC, then they may be being used as a way of alleviating the stress these funds are under as a result of poor performance. In particular they ensure that cash outflow is minimal which might otherwise put pressure on the funds to sell some of their investments. If these are illiquid then there could be a considerable drop in their price. While I would hesitate before saying that there is any mismarking or overvaluation of assets we do know from the government’s own balance sheet that the performance of the sovereign wealth funds appears to have been extremely poor.

In this year’s Budget the Finance Minister pulls off the same feat by using this years NIRC to fund the whole of the Pioneer Generation Package of $8 billion. In actuality annual spending, on the Finance Minister’s own figures, is likely to only be around $400 million. If history is any guide, the PAP government will, through its customary stinginess as exhibited in the way the surplus invariably turns out to be higher than expected, likely considerably underspend the amount budgeted.

I will return shortly to discuss the other aspects of the Budget, which pale into insignificance beside the signal fact of how badly Singaporeans are being short-changed by this PAP government. I cannot understand the gushing praise that seems to have come in from many pundits and commentators from civil society and elsewhere.

If we look at the Statement of Assets and Liabilities and the MDS, government net assets have grown by some $100 billion over the three years 2010-2013.  Why is that level of continued accumulation of assets necessary and why is the Finance Minister making such efforts to hide the true fiscal situation from the people, even by resorting to subterfuges that would not be permitted if Singapore’s accounts had to be audited like a corporation’s? After all the PAP often pride themselves on claiming to manage Singapore like a corporation. Yet if Singapore were Apple, for example, corporate activists would be demanding the return of a sizable portion of its cash pile to shareholders in the absence of compelling reasons from the management for keeping it. Singaporeans should be demanding answers and, if none are forthcoming, voting to change this country’s management.

Singaporeans have lived too long in completely unnecessary austerity. To cite just one example, while your government has quietly accumulated another $100 billion, you have been forced to wait in tents for medical treatment at government hospitals. These are service standards that would shame a third world country and in any advanced democracy would lead to the government being voted out. There is no justification for such penny-pinching when the stock of the government’s financial assets keeps growing. It is time we awakened to our rights as citizen shareholders and force the PAP government to either return part or all of the surplus to us or else make the case as to why they should be allowed to keep it. Are the returns they can achieve from holding on to our money so much better than we can achieve by entrusting it to private managers or investing it ourselves?  Does the PAP need the money to invest in some new invention that will miraculously transform our lives? I doubt it.

 Finally you may by now be able to guess my answer to Khaw Boon Wan’s contention that this is a very generous Budget. My answer is that this Budget is not only not generous, it is quite breathtaking in the audacity with which it attempts to fool Singaporeans. Singaporeans, it is your money. You may think you are  a free people but so long as you work to provide cash for a government which feels no pressure to live up to basic standards of accountability and transparency then you are actually enslaved.

An Open Letter to the Minister of Finance

Tharman20 February 2014

An Open Letter to the Minister for Finance

Mr. Tharman Shanmuguratnam
Ministry of Finance
100 High Street
#10-01 The Treasury
Singapore 179434

Dear Minister,

You recently called in the Auditor-General to audit the accounts of Aljunied- Hougang – Punggol East Town Council (AHPETC) because the auditor’s reports raised serious questions about the reliability and accuracy of the town council’s financial and accounting systems. The report raised equally serious concerns over alleged discrepancies in the accounts of the former PAP-run Aljunied Town Council. At issue is the sum of 1.12 million dollars, which the former Aljunied Town Council had recorded as a receivable  due from the Citizens Consultative Committees for improvement projects and whose validity has now been denied by both the Ministry for National Development (MND) and HDB.

I would remind you that the Reform Party, in its budget analysis for 2012 and 2013 and my open letters to you and to Christine Lagarde, has repeatedly raised serious questions about discrepancies and missing information in the way you present the Budget and the picture therein of the government’s finances.  In particular the Statement of Assets and Liabilities does not match with the total returns that Temasek and GRC claim to have earned since inception and the revenues earned from the sale of land.

We have repeatedly asked you for an explanation for these discrepancies and to supply the missing information. I therefore have great sympathy with my colleagues in the Workers Party who say that they have been unable to get data from government bodies for an item in the accounts run by the former PAP town council.

My experience has also been that lack of transparency and freedom of information makes obtaining critical data an impossibility.

May I remind you that the Auditor-General’s report for the financial year 2011/2012 given to the President and publicly available since July 2012 contained an item under the heading Ministry of Finance, “Presidents concurrence not obtained for promissory note issued.”  

 In short your Ministry had been found to have breached the Constitution and unlawfully granted a loan using taxpayers’ money to the International Development Association, the soft lending arm of the World Bank without obtaining the President’s approval as required under Article 144. The promissory note had to be returned and reissued in order for your Ministry to comply with the law. We were not informed what had happened to the monies the IDA had already drawn down. A junior civil servant was blamed and your ministry promised to put new procedures in place. I would ask you to let our taxpayers know what those new procedures and checks and balances are so that we can have confidence that the controls in your Ministry are sufficiently robust, reliable and accurate.
I believe your recent address to Parliament on 21 January 2014 when introducing a motion for increasing Singapore’s capital contribution to the IBRD (International Bank for Reconstruction and Development) raises further cause for concern over the reliability of your Ministry’s accounting treatments.

In Parliament you describe an accounting treatment for the above IBRD capital contribution which if correct renders  the treatment that you argued in court last year,  applied to Singapore’s loan commitment to the IMF false.  (in Civil Appeal No. 154 of 2012 (Jeyaretnam Kenneth Andrew.)

In court I argued that the IMF loan commitment was a liability and therefore caught by Article 144(1) of the Constitution and you argued at that time, that it was an asset and therefore not caught by 144(1). The judges accepted your version that it was an asset and therefore 144(1) did not apply and I lost my case.

I am writing to you to ask you to explain how you could now give a description in Parliament for a similar scenario, where Singapore is agreeing to provide callable capital to the IBRD on demand, explaining that this represents a liability not an asset.

The two bilateral pledge agreements are in fact very similar structures and therefore you cannot at the same time argue that one is accounted for as an asset and the other as a liability.

If I may refresh your memory the Hansard record for the IBRD motion records you as stating:

“The remaining 94% (of Singapore’s subscription), known as callable capital, will not be drawn by the IBRD except in extreme circumstances, when it cannot meet its obligations on borrowings or guarantees.  To date, the IBRD has never had to call on the callable capital.  It is an AAA-rated institution with a sound balance sheet for over 50 years.  Nevertheless, the full increase in Singapore’s subscription to IBRD’s capital will be charged to the Consolidated Fund, as the callable capital represents an increase in the Government’s financial liabilities. “

I thank you for pointing out to our people that no matter what impeccable history a AAA rated institution has, there can be no categorical case for stating that the callable capital will NOT be in fact called upon. In fact as you will be aware supranational financial institutions, such as the IBRD and the IMF, are awarded their AAA rating and quasi-sovereign status precisely because their member countries, including Singapore, guarantee to bail them out.

I refer you instead to the sentence in italics in which you agree with my previous arguments that a callable capital subscription of this nature represents an increase in the financial liabilities of the Government. In lay terms callable capital is callable- however unlikely- and therefore must be written down in our balance sheets in the Liabilities column not the Assets column.

At the time when it is finally called upon it then swops sides and becomes an asset though you have chosen to write down its value to zero. We are agreed on this – that an actual loan or called upon capital commitment must be listed as an asset. Our subscriptions to the IBRD give Singapore voting rights and allow us to influence policy and thus qualify as assets. I agree that until such time as our commitment is called upon it should be defined as a liability.

This is in fact exactly what I argued in court re the IMF.  You argued the opposite.

Your different explanations on two separate occasions now make you vulnerable to accusations of contradicting yourself or even knowingly misleading the court by presenting two opposing descriptions for the same thing. The only way you can avoid such accusations would be to argue that a loan commitment to the IMF is qualitatively different from a callable capital subscription to the IBRD. However nonsensical that argument would be.
Nonsensical maybe but it does not surprise me that Hansard shows that in the very next sentence you do indeed bravely attempt to defend the indefensible, namely to argue a distinction between the callable capital of the IBRD and that of the IMF. You do this by saying the IBRD subscriptions are ‘unlike’ our loan commitments to the IMF.  It is deeply significant that this reference to the IMF loan commitment is missing from your Ministry’s Press release. And it can only be found by scrutinizing Hansard.  Presumably you would not wish to widely publicize this explanation, not only because it is bunkum but also because it contradicts your previous statements in court and in Parliament.

Let us look at your exact words to Parliament and our people:

“Our subscriptions to the IBRD are hence unlike MAS’ subscriptions to the IMF’s capital, or what is called the “IMF quota subscriptions”, or its loans to the IMF, which are neither expenditures nor liabilities, but assets that remain part of our Official Foreign Reserves.”

In fact Minister you are being economical with the truth and attempting to mislead the people by lumping the commitment to make a loan to the IMF with the loan itself or with an increase in Singapore’s capital subscriptions to the IMF. Here are the three descriptions that you use to describe financial resources provided to the IMF that you run together in the above sentence:

1.”MAS’s subscriptions to the IMF’s capital”

2. “IMF quota subscriptions”

3. “Loans to the IMF.” 

No. 1  is a contingent liability until it is called then it becomes an asset.  

No. 2 is a different way of describing  No. 1

Once they are made, actual loans to the IMF (No. 3) are treated for accounting purposes as assets (though in line with US Budget practice a reserve should be taken against the risk of loss and the fact that they may never be repaid) but so long as the IMF loan commitment remains undrawn it represents a contingent liability for the government, whether when it is drawn it represents a loan or becomes an increase in Singapore’s capital subscription to the IMF.

This can be further demonstrated by examining your answer to a Parliamentary question on 12 May 2012:

“5   These are however temporary resources, provided to the IMF in advance of the expected increase in its permanent capital subscriptions (or quota subscriptions) that will be decided in early 2014.  Participating in the current round of bilateral contributions to the IMF will in effect bring forward part or all of Singapore’s likely share of the increase in the IMF’s capital base in 2014. [my italics]

 6   Singapore’s US$4 billion contingent line of credit to the IMF means that Singapore is expected to lend the funds when the IMF considers necessary.”

Your argument in court that the IMF loan commitment is an asset is furthermore contradicted by MAS’s own accounts for 2012-13. The accounts show our republic’s obligations to the IMF under Commitments, which includes other contingent liabilities such as capital expenditures, leases and a guarantee to Singapore Deposit Insurance Corporation in the amount of $20 billion.

Even you must be aware that a commitment to lend money to the IMF carries risks, however negligible you want the people of Singapore to think these are.

As the Finance Minister and head of the International Financial and Monetary Committee of the IMF, who regularly meets with the US Treasury Secretary, you will know that the US treats commitments to the IMF as contingent liabilities requiring approval by Congress (see here). Furthermore as required under the US Federal Credit Reform Act of 1990 loans made by the US Government are scored to reflect the degree of subsidy or risk of loss. In 2009 the US Congress appropriated US$5 billion to cover the risk of loss on the US commitment to the IMF.

Would you not agree that the government should establish a similar reserve in respect both of our subscriptions (whether called or not) and our loans (whether made or commitments)?

If the IMF loan commitment increases the financial liabilities of the Government  (including within the Government the assets and liabilities of the MAS as defined by Article 142 of the Constitution) then you have clearly breached Article 144(1). This follows from former AG Chan Sek Kheong’s opinion in 1998 that “transactions captured by Article 144(1) are those that, logically, increase the financial liability of the Government.

 There can therefore be no doubt that our loan commitment to the IMF should have received Parliamentary and Presidential approval. It further follows that by representing a liability as an asset to the Appeal Court you led the Court to rule that it was an asset and to dismiss my appeal.

Whilst you may use sophistry and a constitution re-written by the PAP government to be so vague as to be unfit for purpose and hoodwink our people – it will not pass on a global stage. Already our republic’s banking secrecy laws are bringing us under increasing pressure to comply with global money laundering regulations. We have become known as a haven for dirty money. Our love of accepting ultra rich individuals and large institutions that take advantage of our low tax regime and preferential treatment for non-citizens is also under fire.

As the budget is due to be presented tomorrow, I would hope recent events will persuade you to set out Budget 2014 in an internationally accepted and transparent format as prescribed by IMF and not the deceptive and incomplete format that your Ministry presented in 2013 and in previous years.

Yours faithfully,

Kenneth Jeyaretnam

Secretary General

Indonesia Reopens old Wounds


Recently Indonesia has taken the decision to name a warship after one of the marines who bombed MacDonald House on 10 March 1965 during the period of armed confrontation (known by the Indonesian word konfrontasi) between Malaysia (of which Singapore was then a part) and Indonesia.  For those who were not around and do not know the history the state of Singapore did not actually exist then.

I was born in 1959 and would then still have been a colonial subject of Her Majesty the Queen though at the time of the bombing this would have become Malaysian citizenship. I have a personal connection to that tragedy besides the geographic one. My mother,  Margaret Jeyaretnam who had come over to the Straits Settlement in 1955 to marry my father later became one of the first citizens of the new republic of Singapore.  She also became one of the first lawyers of newly independent Singapore . In fact she was senior to my father who was in the Government Legal Service at the time. She also later set up the Samaritans of Singapore as well as being Registrar of the Anglican Diocese of Singapore and Malaysia. In 1965  she was working for the law firm of Donaldson and Burkinshaw who were  situated at MacDonald House.

MacDonald House

Looking at that building today  it is hard to believe that it was the first modern office building with central air conditioning in Malaysia and our early version of a sky scraper. Presumably the reason why it was targeted.

I was only six at the time of the bomb blast. I remember being pleased at first, because my mother came home early from work that day. She then described how there had been a loud bang, that the whole building shook and that she was evacuated via the fire escape. I still remember how upset she was over the people who were killed and particularly over the death of the lift operator, a young Malay boy, whom she said always smiled and said hello to her every morning. It was a very real tragedy and very close to home.

This is a grossly insensitive act by Indonesia. The most simplistic comparison is with the Japanese PM’s decision to visit the Yasukuni shrine but in fact those were uniformed soldiers who were waging a war, which is not to downplay the war crimes committed by the Japanese against civilians and POWs.

In the case of   Osman Haji Mohamed Ali and Harun Said, the men in question may have been following orders but they committed a terrorist act that led to several civilian deaths and injuries.  In order to carry out the atrocity they had to take off their uniforms and wear civilian clothes . This is what enabled  Malaysia to hang them rather than treat them as  soldiers and POWs entitled to the protections of the Geneva Convention, which Indonesia clearly feels they were.    All of us globally have to take a hard line against terrorism. Sometimes it is hard to tell where war ends and terrorism begins but in that case I think  the line was quite clear because there wasn’t actually a war on at the time.

It is curious that the Indonesian government should choose  right now to bring an unpleasant episode between our two countries to the fore. A conspiracy theorist might think that the Indonesians are giving the PAP a helping hand, for motives unknown, to rally Singaporean support behind the government as the defenders of Singapore’s sovereignty.  LKY always traded very heavily on  external threats, the ‘danger at the gate’  theory keeping his citizens in permanent fear of imminent war.  With his health in such a grave condition and a  recent order for the electoral register to be revised,  the conspiracists who often maintain that LKY has already passed away will say that this is a manufactured fear to bolster PAP’s  standing.

Conspiracist theorists are not known for rational thought.  I am grateful to my readers for suggesting more rational  motivations.  What is more likely is that the old wounds being opened here are the criticisms over the Haze coming from Indonesia.  Indonesia is also about to go into Presidential elections so this kind of sabre rattling plays well for them at home.

What I find both unnecessary and unhelpful is that right on cue some of the Opposition parties  have taken this opportunity to call for the slashing of defence expenditures.  Bizarre! For the record, I believe that Singapore can easily INCREASE its defence spending AND  its spending on Health Care and  other safety nets. We need to increase our spending on defence not because of  Indonesia’s action but because  we will be better off with a professional army. Two years of National service is simply not long enough to train a really professional army. At the same time we should gradually reduce National service.

So far the Indonesian government shows no sign of backing down which is unfortunate for relations between our two countries but hopefully this is a blip and we can achieve a diplomatic solution.

MOF Tharman World Bank Bombshell

misdirectionIn October 2013 the Court of Appeal dismissed my argument that the PAP government’s US$4 billion line of credit to the IMF needed Parliamentary and Presidential approval as required under Article 144(1) of the Constitution. The learned judges ruled that I had failed to make a prima facie case and that furthermore I lacked standing to challenge the government. The judges accepted without question the AG’s arguments that a loan was an asset and not a liability and took the opportunity to belittle my knowledge of finance at the same time. I  had  argued that a loan commitment was a liability and not an asset.  To quote from my article criticising the Appeal Court judgement:

I produced evidence from a wide variety of sources, including the US Federal Deposit Insurance Corporation’s Manual, the Bank of England’s Yellow Folder and the last published accounts of J P Morgan, the leading US bank, to show that banks were required to record loan commitments as contingent liabilities on their balance sheet. As the judges mention, I pointed out that the UK Chancellor of the Exchequer himself referred to the UK’s loan commitment to the IMF as a “contingent liability.”

This is reinforced by the fact that the interest rate on loans made to the IMF is virtually zero. It is therefore inexplicable how Singapore’s IMF loan commitment could be considered an asset.  Since the government pays CPF holders 4% to borrow their money the IMF loan, if drawn upon, must be a money-losing proposition from the moment it is drawn down.

In support of the argument that the loan commitment was a liability not an asset I cited US Statement of Financial Accounting Standards 133.  This requires that loan commitments be treated as options on bank balance sheets and marked to market. A loan commitment is in the nature of a call option granted to a potential borrower that gives them the freedom to draw on the money at a time of their choosing. An option cannot be worth less than zero and should normally have a positive value while the writer of the option would have to record a corresponding liability. The option could not be worth less than the present value of the difference between what it would cost the IMF to borrow in the open market and the interest rate that it would pay on the loan if drawn down (effectively zero).

Yet the judges chose to misunderstand my point and claim that they were surprised that as an economist I did not understand the difference between a loan commitment and an option. There may be a legal difference but clearly in economic terms a loan commitment is an option because the borrower has the right to draw down the loan but is not obliged to do so. It is the learned judges who demonstrate their basic ignorance of modern finance theory.

 However on 21 January 2014 Minister Tharman  dropped a bombshell in Parliament when he moved the following motion in Parliament with reference to our subscription to the International Bank for Reconstruction and Development.. In the following he explains how the government accounts for the loan commitment and this new explanation is in complete contradiction  to the information given by the MOF and the basis  on which the government had won its case . Both versions can’t be correct. Read the motion and see for yourselves.

“That this Parliament, in accordance with Section 7(3) of the Bretton Woods Agreements Act (Chapter 27 of the 2012 Revised Edition), resolves that the subscription of Singapore to the International Bank for Reconstruction and Development be increased to a sum not exceeding Six Hundred and Seventy-Two Million United States dollars (US$672 million).”

 In support of the motion he went on to say that we will be paying 6%, or US$38 million, as paid-in capital” while  “The remaining 94%, known as callable capital, will not be drawn by the IBRD except in extreme circumstances, when it cannot meet its obligations on borrowings or guarantees.  To date, the IBRD has never had to call on the callable capital.  It is an AAA-rated institution with a sound balance sheet for over 50 years.  Nevertheless, the full increase in Singapore’s subscription to IBRD’s capital will be charged to the Consolidated Fund, as the callable capital represents an increase in the Government’s financial liabilities.”

 Please refer to the sentence in italics.  How is callable capital fundamentally different from a loan commitment? Both represent an option given, in one case to the IBRD and in the other case to the IMF, to call upon the Singapore government to provide the capital in the first case and in the second case to make the loan.  In his Parliamentary speech Tharman points out that  “To date, the IBRD has never had to call on the callable capital.  It is an AAA-rated institution with a sound balance sheet for over 50 years”.

This is how Tharman describes the US$4 billion line of credit when answering a tame Parliamentary question on 12 May 2012 from a subordinate member of his Jurong GRC team:

4  More than 30 countries including Singapore have so far committed to provide bilateral loans to the IMF, amounting to more than US$430 billion as at end-April 2012. Singapore has committed to the IMF a contingent line of credit worth US4 billion as part of this international effort.

5   These are however temporary resources, provided to the IMF in advance of the expected increase in its permanent capital subscriptions (or quota subscriptions) that will be decided in early 2014.  Participating in the current round of bilateral contributions to the IMF will in effect bring forward part or all of Singapore’s likely share of the increase in the IMF’s capital base in 2014.

6   Singapore’s US$4 billion contingent line of credit to the IMF means that  Singapore is expected to lend the funds when the IMF considers necessary. 

 Again the italicized sentence is highly significant. If the US$4 billion contingent line of credit is to become part or all of Singapore’s likely share of the increase in the IMF’s capital base in 2014 then how is it different from the callable capital portion of the increase in Singapore’s subscription to the IBRD. Also note the last sentence which states that Singapore is committed to provide the funds when asked to do so by the IMF.

Tharman’s explanation means that I did not need to bother to go through a lengthy citing of precedents from other countries and  standards set by accounting bodies. The government uses the same accounting treatment. Had I been able to cross-examine the FInance Minister or one of his officials or submit written questions this would have been established. However the lawyer who represented me previously before I decided to argue the case myself advised me this was not possible. What this new information makes clear is that in order to win its case and prevent embarrassment the AG pretended that the loan commitment (or contingent line of credit) was an asset and not a liability. The government succeeded in pulling the wool over the eyes of the judges.  However the judges, like spectators at a magic show, were happy to be taken in by this gross misdirection , “citing former CJ Chan Sek Kheong’s “green-light” theory of administrative law”  and “saying there has to be “extremely exceptional instances of very grave and serious breaches of legality” to warrant allowing an action by an individual in the public interest.” If this is not a very grave and serious breach of legality then what is?

Now we have ended up with a situation where the government, and the Finance Minister, have been caught out in misrepresenting and lying in court in order to get away with breaking a Constitutional provision that it itself drafted.  It is demonstrative of the contempt the PAP feel for Singaporeans and their belief that they are above the law. In any democracy the Finance Minister would be forced to resign and might face criminal charges. Unfortunately the judiciary has now come to the rescue of the executive by ruling that we have no  locus standi  to challenge illegal government actions.  The PAP government can safely continue its long tradition of doing as it pleases without bothering with such niceties as accountability, transparency, rule of law or even simple honesty.

SMRT- fare hikes not the only shock.

finger-in-socket-1An unfortunate Singaporean student has hit the news this week after she was taken to court by LTA,  for the offence of having used an empty socket at a station to recharge her mobile phone. She pleaded guilty and was fined $400 which presumably means that this is now on her record. Singaporeans are permanently angry with SMRT for poor service  and  that this girl has been shown no empathy, is seen as just the latest outrage. But is it that simple?

Many of us think that it is totally acceptable to plug our devices into any empty, available socket anywhere but at home.  But let’s face it, that’s theft. Of course this is theft from SMRT and we could argue that they have been robbing us blind for years so it is justifiable. Up above  ground, Starbucks and others offer up sockets freely to their clients, so it would be easy to presume that any open socket, in an establishment where you are a bona fide customer, is fair game.

On the other hand 3G is available in MRT stations so unlike in London and other large urban cities, Singaporeans don’t have to disconnect to go underground.  Of course SingTel and Starhub and M1 don’t supply that service out of the goodness of their hearts or because they really understand why you need to be on FaceBook right NOW!  It’s in their commercial interests. The longer you are on line the more data you use, the more advertising they sell.

What worries me more than the question of theft is the question of safety for everyone involved.  Adults can and do ask complete strangers if they can borrow their phones if they get caught out in an emergency. Children and others may be too shy to ask for favour. For vulnerable groups the phone is often for security as much as for entertainment or communication. So, if that student were my daughter I wouldn’t like to think of her stuck with a phone with a dead battery. I would fully understand why she might want to plug it into a socket for few minutes at a station.

I would also understand why SMRT might find that unacceptable ( but not why LTA would take her to court).   What if the re-charger was faulty? One of those cloned ones that shorts and blows up. The last thing SMRT needs is an electrical outage or heaven forbid, with the way our stations are overcrowded, a fire underground.  Even apart from these hazards the cord from the re-charger is in itself a trip hazard.


But this brings me to the hazard of the socket itself. Looking at the photo above, the socket is at the bottom of a pillar, presumably placed down there for cleaning equipment or power tools.  It is at mid-calf height for an adult which is the perfect height for a toddler to stick a finger, a pen, a chopstick, a stylus or anything else into. Toddlers die each year from doing just that to unprotected sockets. Why are these sockets open, vulnerable and at child height?  We’ve already seen one child lose her legs on an inadequately protected platform. If anyone wants to take SMRT to court for professional negligence  - or to use a non legal term for being BLUR – they’ve got my backing. In fact that girl’s parents should counter sue for reckless endangerment, the damage that could have been caused to their daughter had the socket been faulty. At the least they should Appeal.

SMRT are under obligation to ensure that stations are safe for public use. They should and must keep their unused sockets covered or protected and supply warning signs. As well as being adequately labelled, electrical outlets should be moved high up out of the reach of prying fingers.

Better still there is new technology out there designed by Sony which enables outlets embedded with an IC chip to identify who is plugging in and whether they must pay for the power. If the system identifies you or your device as an authorized user, the power is free. If not, you’ll be denied access, or you may have the option to pay via an app or your card. Apparently coffee shops are keen to get this technology to stop table squatting.  A high tech solution for coffee shops to replace those, “No Homework”signs.

We live in a connected society that used to be known as the ‘wired’ society. Until of course, it became wireless. Now the only wires we need are for our re-chargers and what a nuisance that is.

Our MRT stations are new and we’ve been ahead of the curve in being able to use our phones on the train.  Still it is predictable that our government has reacted to the cyber noise by calling for a review of SMRT’s rules rather than trying to come up with an innovative solution. Let’s give the customers more of what they need, what they want and what they are paying for. Let SMRT start thinking about safety first.

A simple low tech solution  would be to install re-charging boxes or kisoks. These are common all over the UK and Europe in stations, at airports, at bus stops and in malls. The ones provided by UK company ChargeBox,  that I have seen in shopping centres,  are actually free to use.  You may have seen something similar in Singapore at Ion or Vivocity or Changi although they are not free and seem to have some teething problems. It seems to me they would be even better placed in transport hubs. The service should be free of course, as you’re paying for the data bundle already.  I’m sure the telecoms corporations would happily reimburse SMRT for the electricity costs rather than lose the customers.

chargebox_kiosk (1)
Meanwhile at SMRT stations keep your children away from those sockets . I will be writing a blog on the fare hikes and this silly idea that SMRT should be Nationalised very soon.

Official Statement In Support of Blogger Alex Au re AGC Action

After the AG’s Chambers was given permission on Wednesday to take action against blogger Alex Au for contempt of court, the following statement was issued. I am pleased to say that  nearly 170 people signed it, including academics and civil activists. Sadly there are only a few politicians included in the signatories, John L Tan and Teo Soh Lung of the SDP, Osman Sulaiman and myself from the RP. Like everyone else I would like to see Mr. Au’s claims rebutted in public. We need to uphold public confidence in the judiciary and that means the public must be allowed to form their own opinions on judicial processes.

This is part of a larger picture in which the Law Society had its independence removed by Lee Kuan Yew along with the right of appeal to the Privy Council after my father’s conviction in the Singapore courts was overturned by a Privy Council judgement. We also lost trial by jury. In 2012 the UK Law Commission recommended abolition of the offence of scandalizing the judiciary saying, “You might commit the offence if you do or publish anything that ridicules the judiciary “. But what ridicules the judiciary more, removing the Law Society ‘s independence and abolishing the right to trial by jury, a fundamental right of the English legal system since Magna Carta in 1215, or subjecting the judiciary to some degree of public scrutiny.  You might find it helpful to read my letter to the Wall Street Journal in support of Alex Au in which I mentioned that defamation suits in the Singapore courts are used to silence critics of the regime.

Singapore 29th November 2013

We are deeply concerned that the Attorney General’s Chambers (AGC) has been granted leave to take action against Singaporean blogger, Mr Alex Au, for “scandalising the judiciary” in his blog post, “377 Wheels Come Off Supreme Court’s Best Laid Plans”.1


The right of free expression is enshrined in Article 14 of our Constitution.  We believe that robust public debate is necessary for national progress.  The AGC’s action, however, reflects an overzealous desire to police public opinion.  This cannot be healthy for a mature, first world nation.  If Mr Au had erred, then his claims should be rebutted in public. This would enable Singaporeans to make up their own minds.

We agree that it is important to uphold public confidence in the judiciary.  However, this cannot mean that our judges should not be subject to scrutiny.  The AGC’s action, rather than enhancing confidence in the judiciary, might weaken public confidence.  It also implies that the public is not allowed to form opinions on judicial processes.

International legal opinion supports the advancement of the law in respect of public comment. In 2012, the UK Law Commission recommended abolishing the offence of “scandalising the judiciary” because it is “an infringement of freedom of expression and out of step with social attitudes”.  The Commission noted that the offence,

“belongs to an era when deferential respect to the judiciary was the norm.  But social attitudes have changed.  Enforcing the offence today would do little to reinforce respect for the judiciary and, if judges are thought to be using it to protect their own, could strengthen any existing distrust or disrespect.”2

We note that the AGC action against Mr Au is not in keeping with the spirit of Singapore’s position at the 2011 UN Universal Periodic Review of Human Rights that “Political postings on the Internet are prevalent, including many that are highly critical of the Government.  No blogger or other online publisher has been prosecuted for such postings.”3 Further, this AGC action contradicts Singapore’s obligations in the ASEAN Human Rights Declaration, adopted on 18 November 2012. Article 23 states, “Every person has the right to freedom of opinion and expression, including freedom to hold opinions without interference and to seek, receive and impart information, whether orally, in writing or through any other medium of that person’s choice.”4

We call upon the AGC to help the Government of Singapore uphold its ideals and its international commitments, for the continued progress and prosperity of our nation.


Simeon Ang

K Z Arifa

Dr Charan Bal

Jacqui Ch

Sharmeen Nina Chabra

Xin Hui Supanee Chan

Qizhong Chang

Kenneth Chee Mun Leon

Jeremy Chen

Chew Kheng Chuan

Leslie Chew

Tania Chew

Priscilla Chia

Joshua Chiang

Damien Chng

Brendan Chong

Bryan Choong

Jean Chong

Chong Kai Xiong

Chong Wai Fung

Chua Chuen-Seah

Lucy Davis

Fazlur Yusuf

Fong Hoe Fang

Foo Hui Shien, Catherine

Assoc Professor Cherian George

Jessica Goh

Johannes Hadi

Han Hui Hui

Kirsten Han

Helmi Yusuf

Gerald Heng

Ivan Heng

Dr Russell Heng

Adrian Heok

Irene Ho

Sam Ho

Vanessa Ho

Isrizal Mohamed Isa

Kenneth Jeyaretnam

Kwan Jin

Shawn Kathiravan

Dr Khoo Hoon Eng

Koh Boon Luang

Dan Koh

Patrick Koh

Ronald Koh

Stephen Koh

Joses Kuan

Annie Kwan

Ken Kwek

Dana Lam

Vincent Law

David Lee

Lee Gwo Yinn

Howard Lee

Kevin Lee

Lynn Lee

Richard Lee

Lee Shiuh Meng Kevin

Philip Selwyn Lemos

Tricia Leong

Leow Zi Xiang

Dr Liew Kai Khiun

Corinna Lim

Angie Lim

Gary Lim Meng Suang

Lim Jialiang

Lim Kay Siu

Lynette Lim

Michelle Lim

Nicholas Lim Yew

Andrew Loh

Loh Chee Leong

Dr Loh Kah Seng

Andee Loo

Low Yit Len

Braema Mathi

Marayd McElroy

Haron Mong

Neo Swee Lim

Ng Mei Fay

Ng Yisheng

Roy Ngerng

Dr Noor Rahman

Brian Nugawela

Irene Oh

Kay Omar

Ong En Hui

Yanchun Ong

Stephan Ortmann

Pak Geok Choo

Vivian Pan

Engsien Pek

Ravi Philemon

Francisco Raquiza

Indulekshmi Rajeswari

Gene Sha Rudyn

Alfian Sa’at

Mansura Sajahan

Nora Samosir

Katerina Sandiman

Seet Cheng Yew Michael

Ariffin Sha

Rev Miak Siew

Siew Kum Hong

Frederique Soh

Onh Solly

Dickson Su

Osman Suleiman

Assoc Prof Paul Ananth Tambyah

Alvin Tan

Alvin Tan Cheong Kheng

Bian Tan

Caryn Tan Sun

Eugene Tan Siah Yew

Joe Tan

Joel Bertrand Tan

Jolene Tan

John L Tan

Tan Joo Hymn

Kenneth Tan

Kirsten Tan

Netina Tan

Petrus Tan

Dr Roy Tan

Serena Tan

Shawn Tan

Sylvia Tan

Estee Tay

Jennifer Teo

Kathy Teo

Teo Soh Lung

Professor Tey Tsun Hang

Callan Tham

Thaw Win

Melissa Tsang

Kelly Then

Shelley Thio

Ivan Thomasz

Dr Pingtjin Thum

Jeremy Tiang

Dawn Toh

Toh Boon Hwee

Jason Wee

Lawrence Wee

Jolovan Wham

Dr Vincent Wijeysingha

Andy Wong

Brenton Wong

Wong Chee Meng

Dexter Wong

Joe Wong

Melissa W S Wong

Wong Tong Kwong

Teresa Woo

Dr Woon Tien Wei

Terry Xu

Benjamin Xue

Julius Yang

Rev Dr Yap Kim Hao

Dezmond Yeo

Yeo Yeu Yong

Antoinette Yzelman

Rachel Zeng

Zeng Ziting

Zulkarnain Hassan

The Judgement in the IMF Loan Appeal Confirms Government Is above the Law

The judgement in my appeal against the IMF Loan Commitment confirmed what has long been apparent: that the government is to all intents and purposes above the law. Furthermore, the judiciary are not there to act as a check on the executive (a “red light” in CJ Chan’s parlance) but instead to “green-light”  illegality by preventing citizens bringing actions to have the illegal behaviour stopped.   In a uniquely Singaporean version of jurisprudence, the judiciary is essentially subordinate to the executive. In my response I will deal first with the merits of the argument and then with the issue of locus standi.

“The Appellant has failed to establish a prima facie case of reasonable suspicion”

 The learned judges dismissed my appeal on the arguments on the grounds that:

  1. It was clear from the initial draft of Article 144 when the bill was first put before Parliament that the giving of loans was to be excluded from the need for Parliamentary and Presidential scrutiny
  2. While admitting that they were ill-placed to comment on the validity of the financial arguments that I put forward to show that a loan commitment was a contingent liability and in nature akin to a guarantee the judges went ahead anyway and dismissed my arguments. In doing so they made some shocking mistakes and misinterpreted an excerpt from a US Federal Deposit Insurance Corporation manual whose meaning should have been abundantly clear. They also argued that, despite the overwhelming evidence I had produced to show that regulators and banks treated loan commitments as contingent liabilities in the leading financial centres of the UK and the US, the accounting treatment might be different in Singapore. If that is the case, the IMF should kindly explain why they selected our Finance Minister to be Chair of the International Financial and Monetary Committee if Singapore differs so markedly from accepted practice in major countries.
  3. Though this was only touched on peripherally the judges also reiterated the nonsensical argument that MAS was an entity separate from the government.

 I will deal with the arguments in (a) above first. I argued at the appeal hearing that it was only necessary to look for the original intention behind the legislation if the natural and ordinary meaning of the words was not clear. To any layman, the words “no guarantee or loan should be given or raised” would mean that both nouns could be paired with either verb. The fact that the proposed wording of Article 144 when the Bill was introduced into Parliament suggested that each noun was to be paired with a corresponding verb (the reddendo singular singulis argument) does not mean that we should use that interpretation. The words “debt” and “incurred” had been left out of the Article as enacted by Parliament so the original wording is an unreliable guide. It is equally likely that Parliament wished to have tighter financial controls rather than looser and thus intended both the giving of guarantees and loans to require Parliamentary and Presidential approval.

The Appeal Court judges do not address this issue only saying that they sided with the original judge in his interpretation. They also say that it is not ordinary parlance to speak of “raising” a guarantee and that therefore “raised” in Article 144 must be applied to “loan” only and “given” to “guarantee” only. I fail to follow the judges’ logic here. Just because one noun may not make sense when paired with one of the verbs, it does not follow that therefore we can exclude the other noun from being paired with both verbs if it makes perfect grammatical sense to do so.

In any case I showed that it is common parlance to speak of raising a letter of credit. A guarantee is to all intents and purposes very similar to a letter of credit. Both instruments require the issuer to pay out if the party that is covered by the guarantee or letter of credit fails to do so. The judges say that they are different instruments and serve different purposes.  However as their accounting treatment and risk profile for the issuer would be identical it is difficult to see why the example for letters of credit should not apply to guarantees.

However whilst it may be possible to argue about the meaning of the words the judges completely failed to deal with my main point as set out in (b) above. This is that this is a loan commitment and not a loan. If they were ill-placed to comment on the validity of my arguments, not having seen any written submissions from either me or the AG, then why not call for written submissions from both sides after the hearing was over. Alternatively they could have adjourned the hearing to allow both sides to make written submissions. Counsel for the AG called for my submissions to be stricken from the record on the grounds that they involved complex financial and accounting matters for which she had not prepared. This was disingenuous since counsel also refused my offer of a short postponement to allow her to prepare. It is unfortunate that the judges, despite taking nearly seven months to deliver their verdict, did not allow me more consideration given the gross disparity in the resources available to me as a litigant in person as compared with the government.

I produced evidence from a wide variety of sources, including the US Federal Deposit Insurance Corporation’s Manual, the Bank of England’s Yellow Folder and the last published accounts of J P Morgan, the leading US bank, to show that banks were required to record loan commitments as contingent liabilities on their balance sheet. As the judges mention, I pointed out that the UK Chancellor of the Exchequer himself referred to the UK’s loan commitment to the IMF as a “contingent liability.”

This is reinforced by the fact that the interest rate on loans made to the IMF is virtually zero. It is therefore inexplicable how Singapore’s IMF loan commitment could be considered an asset.  Since the government pays CPF holders 4% to borrow their money the IMF loan, if drawn upon, must be a money-losing proposition from the moment it is drawn down.

In support of the argument that the loan commitment was a liability not an asset I cited US Statement of Financial Accounting Standards 133.  This requires that loan commitments be treated as options on bank balance sheets and marked to market. A loan commitment is in the nature of a call option granted to a potential borrower that gives them the freedom to draw on the money at a time of their choosing. An option cannot be worth less than zero and should normally have a positive value while the writer of the option would have to record a corresponding liability. The option could not be worth less than the present value of the difference between what it would cost the IMF to borrow in the open market and the interest rate that it would pay on the loan if drawn down (effectively zero).

Yet the judges chose to misunderstand my point and claim that they were surprised that as an economist I did not understand the difference between a loan commitment and an option. There may be a legal difference but clearly in economic terms a loan commitment is an option because the borrower has the right to draw down the loan but is not obliged to do so. It is the learned judges who demonstrate their basic ignorance of modern finance theory.

The judges made other basic errors. The judges said that I had quoted Christine Lagarde as calling the new lending commitments by IMF members a “fireball”. In fact what I had said was that The IMF (actually our Finance Minister Tharman) had called the new loan commitment a “firewall”. In Tharman’s own words:

“We all agreed that it was absolutely essential to have the firewall built up at this time. It’s not a day too early to be building up the firewall,” 

I pointed out that the commonly understood definition of a firewall was to construct a scorched earth perimeter around a fire to stop it spreading. This was precisely what the new loan commitments were supposed to do, i.e. they were resources to be sacrificed to save the world financial system. To quote Christine Lagarde (see here):

“These resources are being made available for crisis prevention and resolution and to meet the potential financing needs of all IMF members,” Lagarde stated. “They will be drawn only if they are needed, and if drawn, will be refunded with interest.”

The judges said that the sheer risk inherent in an asset could not turn it into a liability. However they misconstrued my argument. I was arguing that the commitment to make a loan to the IMF was a liability. If properly accounted for, it would have a negative value on the government’s (including MAS’s) balance sheet not only because there was likely to be a negative spread between the cost of funding that loan and the zero interest that would be earned on it but also because of the risk that by the time the IMF drew down the loan both the creditworthiness of the IMF as well as global credit conditions could have substantially worsened.

The judges went on to misinterpret the first sentence of the passage from the FDIC manual that I quoted, which states “In reviewing individual credit lines, all of a customer’s borrowing arrangements with the bank (e.g. direct loans, letters of credit and loan commitments) should be considered” as referring to the customer’s contingent liability.  Yet clearly the examiners are referring to the contingent liability of the bank and not the customer. This can be seen further on in the passage which states “Additionally, many of the factors analysed in evaluating a direct loan…are also applicable to the evaluation of such contingent liabilities as letters of credit and loan commitments. When analysing these off-balance sheet lending activities, examiners should evaluate the probability of draws under the arrangements and whether an allowance adequately reflects the risks inherent in off-balance sheet lending activities”. Clearly from the context the manual is talking about the contingent liability of the bank making these loan commitments and whether the allowance that should be made adequately covers the risks. The allowance would appear on the liability side of the bank’s balance sheet and reflect the possibility of loss if the loan is drawn down.

That the judges get wrong something so basic here undermines their claim that their selective interpretation of Article 144 is correct.

To conclude, while the judges accuse me of trying to draw a tenuous connection between a loan commitment and a guarantee, it is the judges who have tried any stratagem, no matter how tenuous and lacking in logic, to avoid having to deal with my arguments. To claim that Singapore follows a different set of accounting standards from the rest of the world will make Singapore a laughing stock globally. Furthermore the fact that the Finance Minister has only survived this court challenge by relying on such a perverse refutation of generally accepted accounting principles makes it clear that Euromoney made an egregious mistake in naming him Finance Minister of the Year 2013.  Tharman should be grateful that the judgement was not announced till November 2013, just after the Euromoney award.

In addition the government has had since 1997, when the government’s ability to make loans without getting Parliamentary and Presidential approval was first questioned, to amend Article 144 so that the meaning supports their interpretation. They have failed to so. This is because having ambiguously worded legislation or very widely drawn powers without any checks and balances, as is the case with the Broadcasting Act, suits their purposes and gives them the widest possible leeway in interpretation.  However such ambiguity and wide discretion given to Ministers without the possibility of appeal to an independent party is incompatible with the rule of law.

“The Appellant does not have the locus standi to challenge Art 144″

I am not a lawyer so I will make my remarks here brief. The ruling on locus standi effectively puts the government beyond the law except for the most “egregious” breaches. This nevertheless marks a slight advance on the original judge’s ruling that Singaporeans had no right to sue the government unless their private rights had been breached.

Let us leave aside for the moment the question of whether I had suffered damage as a result of my public rights being violated. I argued that as a CPF holder and taxpayer I have suffered damage as a result of the government making a loss-making loan commitment to the IMF.

However the fact that this case involved an alleged unlawful loan commitment of $5 billion and a breach of the Constitution begs the question of what would the judges would define as a breach of the law of sufficient gravity to allow a citizen to sue. The basis of rule of law is that it does not leave discretion in the hands of bureaucrats. By leaving it to the judges to decide on a case-by-case basis what is a flagrant breach of the law surely seems to be admitting that the judiciary are susceptible to political pressure. Will a flagrant breach be different for a PAP government from a future Opposition one? And citing former CJ Chan Sek Kheong’s “green-light” theory of administrative law reduces the judiciary to being merely an arm of the executive, there to facilitate executive decisions rather than act as a check on the executive.

It is a pity that our judges believe that following the way English administrative law has developed since 1977 and applying the “sufficient interest” test would “seriously curtail the efficiency of the executive in practising good governance”. They even go beyond CJ Chan who leaves an avenue for the courts to intervene when the state breaks the law by saying that “the courts can play their role in promoting the public interest by applying a more discriminating test of locus standi to balance the rights of the individual and the rights of the state in the implementation of sound policies in a lawful manner”. Now the appeal judges are saying has to be “extremely exceptional instances of very grave and serious breaches of legality” to warrant allowing an action by an individual in the public interest. Yet the example they cite, of a Cabinet Minister’s abuse of his powers as opposed to the actions of a low-level government officer, is surely engaged here.  Even in the case where a low-level government officer breached the Constitution, the Auditor-General considered the issue of sufficient seriousness to make the Ministry of Finance go back and get the President’s approval for the issue of promissory notes in the relatively insignificant amount of US$16 million to the International Development Agency!

The judges also devoted a lot of paragraphs to precedents from the UK about how the courts there have not allowed judicial reviews of the discretion applied by government agencies such as the Inland Revenue in how they deal with classes of taxpayers. However that is irrelevant to the current action, which is concerned with a breach of the Constitution by the Finance Minister. It seems that the judges were clutching at straws in an effort to make their stance on locus standi seem not too far out of step with the UK.

The judges’ argument that Parliament or the President would have intervened if there was a serious breach of legality rather begs the question of how Parliament is meant to intervene in cases in which the Minister is alleged to have broken the constitution by bypassing Parliament.  And where the ruling Party has over 90% of the seats despite only winning 60% of the votes and until 2011 won a walkover at every election it is difficult to understand how Parliament can be an effective check on the executive.

As for the President, he failed to intervene in the case of the IDA promissory notes until the Auditor-General pointed out that MOF had breached the Constitution.  The judges say that the President could have used Article 100 of the Constitution to convene an advisory tribunal of three judges to consider this question and the fact that he did not choose to do so supports their contention that I should be denied standing. However JBJ requested that the then President convene a tribunal in 1997 to decide the same question and he declined to do so. If the government chooses to bypass getting Presidential approval then the President is unlikely to make a fuss. We are all aware of what happened to Ong Teng Cheong and his decision not to run for a second term after his requests for greater transparency were rebuffed.

My aim in bringing this case was to ensure that we had tighter financial controls over what the government does with our money and to prevent it squandering the huge surpluses it has extracted from the people through bad investments, influence-buying exercises and excessive compensation for the managers. This is a government that would rather give away your money to foreigners than see it spent on your welfare. Ironically the President’s only financial controls are to prevent spending from the reserves on Singaporeans. On the basis of this ruling there is nothing he can do to prevent the money being given away in the form of loans. In a climate where the PAP government is already under scrutiny for banking secrecy, a ruling that we have no ways of controlling a rogue government that breaches the Constitution shows that we have no standards of governance and no rule of law. It is inexplicable how Singapore can be rated one of the most transparent and least corrupt countries when there are such glaring loopholes in financial controls.  The judges say that allowances should be made for the cases of the most serious illegality. However in practice, given the award of costs to the AG, this judgement will have a chilling effect on the willingness of citizens to act as watchdogs of the public interest and gives a “green light” to government illegality.

Court of Appeal gives green light to unlawful governance

The Court of Appeal has just handed down judgement in Kenneth Jeyaretnam’s IMF loan case. The case is crucially important and it raises two key points. Can the government lend away the wealth of the nation without Presidential approval? And can an individual citizen challenge the behaviour of the government in court, if it is alleged that there has been a breach of the constitution? The ruling of the court is against Kenneth on both counts. The government apparently can lend away the reserves without Presidential approval – effectively making the role of the President as the holder of a “second key” worthless. And furthermore, an individual citizen does not have the right to challenge the government in court, even if the case is of such gravity as this one where a breach of the constitution has been alleged. In stating as they do, that “the nature of the issue is entirely political” – the judges have completely misconstrued the reality of the case and the nature of the constitution. The decision is a difficult one to agree with. Upholding the law is not political.


For now I will only address the question of locus standi, which is the question of whether or not a private individual has the right to challenge the behaviour of the government through the courts. Long time readers of my blog will understand that I have a particular interest in this question since a government with free rein to act unlawfully without the oversight of the courts is not much more than a dictatorship.

To begin with, the court quite carefully and correctly explains that the right to bring a case is completely separate from the merits of the case itself. If one is not allowed to sue, then one cannot come to court and sue, irrespective of how likely one may be to win or lose. With this in mind, we can put aside briefly the arguments and reasons on why Kenneth lost the case, and just focus on whether he does, or should, have the right as a citizen to bring it in the first place.

locus standi is apparently a very complex and misunderstood aspect of law, and as I am not a lawyer, I do not pretend to understand it fully. My concerns with the case mostly flow from what I hope is an educated but common sense understanding of the arguments presented, as well as a reaction to the apparent lack of internal consistency in the Judges’ reasoning. The ruling on this point covers some background and case-law on the topic. Suffice to say a couple of distinctions are teased out which are crucial. Citizens intrinsically do have the right to challenge the behaviour of the government – but not automatically – there are limitations. The most important distinction appears to be between unlawful behaviour and poor policy or administration. It is much easier to sue in the case of the former than the latter.

To judges explain this (hopefully obvious) point well, and I shall quote from the ruling directly:

every public authority has the duty of observing the law … it hardly follows that every official action or decision is appropriately subject to judicial review

Later on they write:

On the other hand, it is equally important that the courts do not by use or misuse of the weapon of judicial review cross that clear boundary between what is administration, whether it be good or bad administration, and what is an unlawful performance of the statutory duty by a body charged with the performance of that duty

Clearly, the distinction exists between the allegation of unlawful government behaviour, and the allegation of poor policy, or poor administration. One of the central cases cited in the judgement is from the UK, where the tax authorities declined to prosecute a set of casual workers for providing false information. This is a case of policy and administration on the part of the authorities. There is no legal or constitutional obligation for the authorities to prosecute every supposed tax dodger. The authorities have to make a policy decision on who to prosecute, and who not to prosecute. The authorities must reasonably balance the public interest, the sums of money involved, the likelihood of a prosecution and myriad other factors before bringing a case. This public interest balancing act however doesn’t apply to the question of the government breaking the law. The government, as the judges note, “has the duty of observing the law”. Observing the law is not optional.

The judges then are abundantly aware of the distinction between the “duty of observing the law” and the pointlessness of subjecting “every official action or decision” to judicial review. The judges are also well aware that this case is about observing the law, in fact the constitution. Elsewhere in the judgement they devote some paragraphs to examining the wording of the constitution, the behaviour of the government, and in finding that the constitution was not breached. So the distinction clearly exists, the judges are aware of it, and they aware on which side of the distinction this case falls.

In finally coming to their point, the judges frame the question perfectly:

We also note Lord Diplock’s concerns where he lamented the emergence of a ‘grave lacuna’ (omission) in the system of public law if applicants were to be denied locus standi by virtue of standing rules that would stop them from bringing matters ‘to the attention of the court to vindicate the rule of law and get the unlawful conduct stopped’

This point bears repeating. Kenneth’s case is fundamentally about “get[ting] the unlawful conduct stopped”. The judges write, citing case-law from the UK, that it would be a grave omission if the system prevented citizens like him from doing so. But yet that grave omission is exactly what they inflict on us in the very same paragraph. Reading around this very obvious and well supported point of law, and without citing any other authorities, the judges suddenly let the mask slip, and a green light to unlawful governance is given. The judges state that the principle of “get[ting] the unlawful conduct stopped” should not extend to “all” forms of unlawful conduct. A citizen cannot “always” come to court if the government has broken the law. Yet no explanation for introducing these caveats is given. The judges introduce the argument that the “gravity of the breach” must be considered. In this case, the gravity of the breach is the most grave imaginable – a breach of the constitution itself. Yet despite introducing this condition, the judges decline to assess the “gravity of the breach”. The judges decline to explain why they allow this “grave lacuna” to occur. They skirt around the issue, stating:

neither Parliament nor the President had thought fit to question the propriety of the promised loan. If the President was indeed concerned and inclined to veto the commitment, he would have done so

In this, the judges completely mis-frame the case, the wording and the supposed purpose of the constitution. There is no legal scope for the presidential “veto” they refer to. It is frankly bizarre for the judges to even suggest this. The constitution makes it clear that Presidential approval is required when article 144 applies:

Article 144.
—(1) No guarantee or loan shall be given or raised by the Government —
(a)except under the authority of any resolution of Parliament with which the President concurs

The whole question of this is to prevent a mischievous government going behind the President’s back and bankrupting Singapore. Stating that the President decided not to intervene is to misconstrue things entirely. By phrasing things this way, the court seems to paint seeking Presidential approval as a subjective administrative decision rather than the mandatory constitutional requirement that it really is.

In making this ruling, the court has effectively given the government a green light to rule unlawfully. If the government flagrantly and deliberately breaks the law, and you as a citizen are outraged, there seems to be little you can do about it. You certainly cannot come to court to “get the unlawful conduct stopped” – as Lord Diplock of the United Kingdom would expect. In Singapore, you do not havelocus standi. This may seem like a terrible way to run a judicial system, it certainly caused the authorities cited by the judges great concern, but it did not stop them from making such a ruling. One can only wonder as to why.

Andy Xian Wong

The people need to speak up for the people.

Protesting against the censorship of the internet

Free my Singapore everything!

Andrew Loh’s recent  status update on his Facebook page (no offence Andrew) shows how muddled our thinking is on  media freedom no matter how well-meaning.

Andrew says in his latest Status Update

“What, really, gives the Govt the audacity to do as it pleases is when newspaper people – past and present – do not stand up or speak up against the Govt’s irrational behaviour and unsubstantiated reasons for Internet rules and regulations.”

Why would Andrew or any other Singaporean expect “newspaper people” past or present  to speak up against the government? Newspaper people ARE the government. How could they speak up against themselves? And there is also nothing irrational about the  PAP Government’s behaviour and attempts to control the internet.  Surely for them it is the next logical step.

Let me explain, as it is vitally important that we get to grips with the issues of the PAP’s unfettered power and start blaming ourselves for giving it to them.

There are two types of newspaper people and the media organisations that employ them.

The first type is those who have simply disappeared, who have been sued into non-existence, packed up and gone elsewhere or who still publish here but have been effectively gagged by distribution agreements.

The second type is the newspaper people still remaining – PAP people.  I’m not referring to balance or slant in favour of the PAP.  I am talking about absolute control over the Media Organisations’ very right to exist and absolute  control over management and hiring and firing through the Newspapers Printing and Presses Act. This Act is what makes our newspaper people, government people.

The PAP brought in The Newspapers Printing and Presses Act  after Lee Kuan Yew decided he could not tolerate the first and only independent newspaper in Singapore, the Singapore Herald.  I remember on the last day before their licence was revoked they published a cartoon of Lee Kuan Yew in a tank crushing the Herald which was depicted as a baby.

This Act controls the media by way of deciding first of all who can set up a press here.  Once a newspaper company is approved, the PAP then controls the management of those newspaper companies . The management shareholders of a newspaper company have to be persons approved by the PAP Minister.

Additionally, the management shareholders have 200 votes for every share that they hold in relation to hiring and firing decisions. As a result of this arrangement, the government approved management shareholders have effective control over the newspaper companies.

Newspaper companies are not even in a position to refuse the appointment of these management shareholders. They can appeal but the PAP Minister’s decision can only be appealed to the President.  Whether it is to do with our media or our internet, the President is required by Law, by Acts passed by our PAP parliament, to act in accordance with and upon the advice of the cabinet. That’s Article 21 of the Constitution. It’s a perfect closed circle.

So what takes away the freedom of our media is this closed circle issue again . In this case Media organisations can only appeal decisions made by the PAP to the President but the role of President as I keep telling you, is a farce!

Make no mistake, I am not talking about Tony Tan or any other President real or wannabe. I am referring to the way the President’s role is structured and subscribed by law. No independent President is going to save you on this issue.

And so with the internet. The real threat to the freedom of our internet is not any later amendments to the Broadcasting Act but the very Act itself and the powers it gives the MDA. The Act is so badly worded that it is broad enough to be defined as rogue or lawless. Precisely because it is so broad and vague and badly worded, the MDA can do anything and everything and never be accused of breaking the law.

The Free My Internet Campaign, is brilliant. They worked hard and quickly and were very effective but with a very narrow focus. I am one, as you know, who never shies away from speaking up for our bloggers and freedoms and was myself vilified in the WSJ by the MDA for speaking up against defamation laws. Yet, I would not put up ‘Free My Internet’ on my Facebook timeline because that would be to miss the point.

What we all have to wake up to – the new generation of bloggers and old-fashioned pen pushers alike – is that Parliament enacted these Laws and we let it happen. We allowed our parliament to pass a law that gave them unfettered power with no check on that power because anything and everything they do is within the ( very broad and vague) law. Once again I tell you that our parliament doesn’t function as it should in  a democracy

Actually if there is one area where the PAP are going to come up against the limits of their ability to exert total control over the citizenry, it is the internet. Probably of all of our freedoms it is the least in danger. It is hilarious to think of the PAP even attempting to curtail it.    As demonstrated so ably by Anonymous , the PAP will simply fail here.

The rather narrow focus of the Free My Internet Campaign on some new amendments to an Act that is lawlessness itself,  distracts from the real issue.  The real issue is bad laws that can be enacted by a parliament that has no check on its power because democracy doesn’t function.

Where the government meets no check on its absolute power you also have no rule of law. No wonder people are talking about a revolution and wondering why we even bother having elections.

Newspaper people are never going to speak up against their own employers. That is like puling out a nail that sticks out in the hull of a rotten sampan and expecting that to make the vessel seaworthy.  When a sampan is rotten the whole ship needs scuttling  with an axe and replacing with something more fit for purpose in the 21st century and beyond.

Disclaimer, I am not a lawyer: Read Subra for a better explanation of the various laws

Homeless with a handcart against Singapore’s Grand Prix.

Singapore Grand Prix 2013IMG_0118


This is an update on thee homeless in Singapore case.

At about the same time that Sebastian Vettel roared across the finish line at the Singapore Grand Prix on Sunday, Madam L was also crossing the daily finishing line in her own race to collect enough cardboard to survive.  She is the one in the lower picture. You can recognise her by the absence of champagne.

While the details of the deal between Formula One and the PAP government are not disclosed, the one thing we can be certain of is that the Grand Prix is only possible because it is heavily subsidized with taxpayer funds and GLC monopoly profits.  Madam L, who by contrast is a model of self-reliance, only collected $8 yesterday from her six to seven hours of hard work.

However we still had a  win of sorts on Monday .  After our calls to various offices last week  two representatives from the Ang Mo Kio Family Service Centre (FSC) came down to  our office on Monday afternoon to interview Madam L.  (They were accompanied by a young woman from the Thye Hua Kwan Moral Charities)  As I only started working on Madam L’s case on Thursday I am pleased by what has been achieved  in 5 days. Especially when you consider that Madam L has been  living on the streets for over a year now. We should pause for a moment to appreciate our overstretched social workers. Their job is frustrating, often thankless and always poorly paid. They  do a commendable job despite the meanness and contradictory ideology of our PAP government.

The social workers listened patiently to Madam L. pour out her very real grievances with the manner of her  treatment by HDB and other government bureaucracies. Their first response was that it would be a time-consuming process  for her to apply for Public Assistance (PA) although I believe that she is undoubtedly entitled to it.

Next the social workers cautioned that she could not expect to collect the whole $450 since her children would be required to contribute as well. I pointed out that this was going to be difficult as her son already had three young children to support and Madam L had told us he was not in regular employment and only had work as an odd jobs man to support them.

But at least we got the ball rolling. We submitted Madam L.’s NRIC to them and they will make the application on her behalf.  We can work on the actual amount later.

The representatives from AMK FSC asked what Madam L’s immediate priorities were. I felt that after a year on the street getting a roof over her head came first. Medical care is another priority as she has not seen a doctor in over a year. When she lost all her possessions as a result of her ejection from her flat she had also lost some braces supplied to her after an operation.

I asked about the possibility of putting her up in a hostel. They said that was going to be too expensive and suggested she enter a home for the destitute. This is a s 20th century Singaporean version of a Dickensian workhouse. Their idea was that she could stay there while her family circumstances were checked out and start receiving medical care whilst that was happening. Madam L was very adamant that she would not enter a home for the destitute or the elderly.  She is also suspicious of charitable hostels. She is after all only 65, doesn’t see herself as fit for the scrap heap and just wants what she feels are her rights.

Another suggestion from the  leader of the AMK team was that they would supply a mattress so that she could sleep on the floor in her son’s unit. Again we explained that her son and his wife already have three young children and only a small flat. Clearly Madam L has some pride  and deserves to be able to keep her dignity. Apart from that we suspect some history there. Like Facebook says, “It’s complicated”

The social workers then said that if she were unwilling to enter the home for the destitute then they would not be able to do anything further till her application for PA was processed. In the meantime they said she should liaise with the young woman from the charity for help although I have to say that with Madam l’s hostility to charities that is unlikely to happen. Clearly the  Ministry needs to be able to provide immediate and temporary  emergency accommodation in situations like this where the social workers need time to investigate the family background.

While we wait for the PA application to  work its way through the labyrinth of bureaucracy,  our next step is HDB. I want to try to find out exactly why she was evicted and her possessions lost , including her medical equipment and her birth certificate. In fact I have noticed that Madam L gets very agitated on the subject of her birth certificate. It clearly has enormous symbolic importance to her integrity as a person.

According to Madam L , HDB said they would  arrange alternative accommodation for her by matching her up with another single renter but that was over a year ago and she has heard nothing. Actually that’s a lie. She has heard from HDB. They are vigorously pursuing her for over $5,000 in arrears via letters sent to her son’s address, Charming!  The social workers suggested this sum might also include lawyers’ and debt collection fees. I don’t really care where that sum comes from.  I  find it incredible that they would pursue a homeless person for this and not write it off.

After listening to Madam L’s outpouring of the injustices done to her, in which she switched from Hokkien to Malay to Teochew to Cantonese to Mandarin, the social workers hinted that there may have been a problem with hoarding which led to her eviction by HDB. Given that hoarding behaviour often has an emotional or underlying mental health issue , it seems even more incomprehensible that HDB would evict her rather than refer her for treatment. Finally our social workers got up to go , promising to get back to Madam L and us as soon as possible with positive news about her application for PA.

You will recall the woman from the Charity. She was a nice young woman from Hong Kong but Madam L was never going to  see herself as a charity case. After all she works for a living.  Well the young woman presented Madam L with a large yellow bag from the Goodwood Park Hotel. It contained a packet of cookies and a box of mooncakes. I was struck by the absurdity of giving this poor woman, with all her other pressing needs, a box of mooncakes as though that would somehow solve her problems.

Madam L is no fool, though. Once the social workers had gone she looked at the cookies as though they might contain poison. “I won’t be eating that”,  she laughed. “Any  hand-out from the PAP is always past its sell-by date. “

I might make that my quote for the week.

Homeless and Living on the Streets of China Town update.

Just to let you know that today  Ms J from the Family Centre in Ang Mo Kio did call us back but only to say that Madam L’s case has been referred to the China Town office. This leaves Madam L homeless over the weekend. We are actively trying to find her a space in a shelter. If you have any suggestions or information about vacancies please do let me know asap. Donations of food and clothing would also be appreciated. You can leave your suggestions in the  comments here.
Thank You. Kenneth.

Homeless in Singapore’s Island Paradise

madam L

You may recall that I wrote about the sad case of Rebecca Loh and the tragic consequences of our government’s callous policy of self- reliance at all costs. Recently I was saddened again by the plight of another victim of similar callousness though as yet still mercifully without the same tragic consequences.

I know of Madam L’s case because she had called our office to ask for help.  Yesterday I met up with her along with the assistance of one of our Hokkien speaking members. Before this our means of communication had been restricted to Malay. (My generation of Singaporeans were taught in English but non-Chinese learnt Malay as a second language.)

I will tell her story as she told it although we are still working on her case and no doubt more details will emerge.   I believe it is not atypical.

As with the case of Rebecca Loh , Madam X had been through a divorce and her ex husband had in fact passed away some years back. She had been renting an HDB unit until last year when she was evicted. Which is why she is now living on the streets.  She is currently being pursued by HDB for rental arrears of over $5,000 (US$4,000).  Strangely Madam L keeps the letters of demand from HDB on her person, folded into her clothing inside a plastic envelope. They constitute one of her few remaining personal possessions.

This is more remarkable for the fact that she is illiterate and has no job other than a small amount that she is able to make by collecting cardboard (according to her she gets paid about 8 Singapore cents a kilo).  She looked as though she had not been able to wash or launder her clothes for some time.

It is the cornerstone of PAP policy that elder citizens who hit a rough patch must move in with their children. Naturally HDB told her to go and live with her son. However he is already a non home owner, renting and subsisting in a one room HDB unit which he shares with his wife and three children. He survives by doing odd jobs.  Madam L says she has never had a regular job and thus had no CPF savings. Apart from her son she has a daughter but had become estranged from her many years back and has since lost touch.

The address on her NRIC card is that of her son and this is how HDB are able to contact her regularly with demands for the arrears.  In fact I wonder if this listing of relatives on NRIC cards is how the PAP are able to claim that there are no homeless people in Singapore? Technically I suppose she is homed in the one room unit with her son and his family.   HDB rules do not allow single people to rent a room and as moving in with her son was impossible, HDB had promised to match her up with someone to share with. However that was over a year ago now and the only communication she has had from them was in connection with the above mentioned arrears.

Although we were able to help her with her most immediate needs she clearly needs somewhere to live long-term as she is still only 65 and this is where she was primarily asking for my assistance. Madam L had immediately recognised the picture of my late father in our office saying, “Ah there is JBJ.” Unfortunately she mistakenly believed me to be a lawyer too. I’m not sure that being a lawyer would have been much help anyway. In fact, after going through this case and seeing how she had fallen through one gap after another I felt like I was back writing to the President of Singapore asking his office for a straight answer to the question, “ Did you approve this loan”. We all know how that got shunted from pillar to post.

As she was destitute I thought that she should qualify for Public Assistance. In the last Budget this was raised to S$450 (US$360) per month for a single person. She met the qualifying criteria since her lack of qualifications and advancing age would make it difficult to find a regular job and she had no other source of income. Her son already had several dependents and was presumably earning below the limit of $1700 (US$1360) per month.  Though S$450 is not a princely sum, she told us that her HDB rental used to be S$50 (US$40) per month so she should have had something left over for living expenses.  Clearly collecting cardboard is not something our elderly citizens should be doing.

We phoned ComCare but they referred us to the Family Centre in Ang Mo Kio. When we called that office their attitude at first was that of not being bothered. Eventually however an employee phoned us back (we will refer to her as Ms J).  She at first tried to fob us off by asking us to call Samaritans of Singapore, though it is hard to see how a counselling service for the suicidal (incidentally set up by my mother in Singapore) could help an elderly woman who was destitute. We asked that they send somebody down to interview the woman and see how they could help her, given that she clearly qualified for Public Assistance. Finding a roof over her head is obviously the most urgent priority.  I said that her situation was pretty desperate and she should not have to wait too long. Would they be able to come down on Friday and meet her at or near our office?

Ms J did not sound very hopeful but said she would get someone to call us back about possibly coming down on Friday at 4pm or failing that on Monday at the same time. As of today we are still waiting for them to call us.

It seems incomprehensible to me that the public housing agency would make a senior citizen without a job or any means of support homeless, even if she had run up rent arrears. They could at least have referred her to ComCare for assistance. Madam L had also used up her savings and meagre CPF on medical treatment which involved having a body brace fitted. She also told us that she had lost all her personal belongings when she was evicted including some medical equipment that she was using after that operation. Naturally, I will be following up the arrears demands with HDB after we deal with the more pressing needs.

Just as in the case of Rebecca Loh, it seems incomprehensible that a country where the government has accumulated surpluses amounting to several hundred billion dollars over the last few years should place so many obstacles in the path of its citizens in genuine need. After all the reserves belong ultimately to the people not to the government and the people produced that money that is the reserves.  They are the financial equivalent of Hotel California. You can put them in any time you like but you can never take them out! If you want to know more about our reserves read here and here. For my views on the losses accumulated by MAS read this.

I also wrote that Rebecca and Gabriel were known in her neighbourhood, that they were not recluses behind hidden doors.  Madam L is also known to the organisations that should be assisting her.  Although I have found again and again that even the limited amount of assistance available is frequently not taken up because those who need it do not know it is there or have trouble accessing the information. When people do apply then mean-minded bureaucrats often reject their applications on dubious grounds. Even in the case of something that should be automatic like Workfare, many of the poorly educated are not even aware of the scheme’s existence or how to apply.

I will update you shortly on whether the Family Centre has responded to her need for assistance. Meanwhile we are contacting various voluntary organisations to find Madam L a place in a hostel where she can have access to a bed and washing and laundry facilities. That can only be a temporary situation and really I don’t see why our genuinely deserving are reduced to begging for charity in the midst of so much government affluence?

I feel the same way about the Straits Times pocket money fund. Every year they raise a few million dollars and this amount is celebrated. But why should families be reduced to asking for charity to provide meals, clothing, basic stationary and books so that our children can attend school because in fact education is not yet free? After all the Straits Times’ profits are inflated because it enjoys a government monopoly through the Newspaper and Printing Presses Act.

I will finish up here by quoting from my piece on Rebecca Loh where I explained my use of the rice bowl metaphor:

“….Remember I wrote this in February 2011 two and a half years before Gabriel died. If it sounds prophetic it is not. I was only stating the facts of life under the PAP then and they have not changed. Here is what I said,

“Sometimes the rice bowl slips from our fingers and cracks or breaks through sheer ill luck. There will be precious little sympathy for you in a porcelain rice bowl State should you be foolish enough to be retrenched, to have elderly parents, a chronic or terminal illness, a child with special needs or to be caring for a mentally or physically challenged dependant.”

Singapore’s Economic and Immigration Policies are Insane

FT article

On Friday the Financial Times carried an excellent article by the eminent and long-standing economic commentator, Samuel Brittan. I have reproduced a screenshot of his article above. I remember as a student at Cambridge, always  looking forward to his articles which came out every Monday.

In this article he talks about economists having “an excessive preoccupation with real gross national or gross domestic product.” He goes on to say that “promoting GDP at all costs would be an insane objective for long-term economic policy. GDP would be maximised by opening a country’s frontiers and promoting mass immigration…so long as there is a net addition to the labour force, the country’s GDP would almost certainly rise, however overcrowded and unbearable the country might be to inhabit.”

Wow- is he talking about us? Clearly Sam Brittan considers that such a policy would be so patently ridiculous that it can serve as what in logic is called a “reductio ad absurdum”. His words perfectly describe the policies pursued by the PAP government in Singapore and echo much of what I have been saying in Singapore since 2009 except I tend to self-censor and Mr Britten doesn’t feel that need.  In the 1990s Singapore began to open the floodgates to the import of labour from Asian low-income countries, nearly doubling our population. As I keep telling you, this has resulted in real wage stagnation for the bulk of the working population and declines for those in the bottom quartile. Particularly because our work force isn’t protected by a minimum wage so wages can keep getting lower and we enjoy minimal labour protections.

Meanwhile returns have soared for the owners of fixed factors of productions such as owners of land and property. This has produced a bonanza for the government which owns nearly 80% of the land. As everyone reading my blog should know by now the majority of Singaporeans do not own property. We have no property owning middle class so no property owning democracy.  90% of us live in public housing leased for 99 years from the government. This sector has seen housing costs rise much faster than incomes while the average size of apartments built by the monopoly state housing supplier has been cut by close to 20%.  The rising cost of housing keeps young couples from getting on the ladder clearly affecting our fertility rates and the PAP openly uses its control over the estates’ freeholds as leverage during elections by threatening to withhold refurbishment and upgrading.

The government is making all this money from the influx to the population but doesn’t use it to improve the infrastructure let alone our daily lives Opening the floodgates means that public infrastructure and amenities, such as the transport system, become ever more overcrowded while waiting lines to see doctors at government clinics have lengthened to several hours. A shortage of beds at government-owned hospitals means that patients often to wait hours or days before being admitted. Until recently lack of school buildings meant that most schools had to serve two sittings to accommodate pupils. Luckily there are few of these double-session schools left.

When these policies are questioned, the PAP government usually responds with the fallacious argument that if Singaporeans oppose curbs on foreign labour then they will have to put up with slower economic growth without any explanation as to how faster economic growth, which has so far failed to produce rising real incomes, will work differently in the future. The people are often told that they need to endure short-term pain for the sake of long-term gain, a consistent cliché in the government’s rhetoric since the 1980s. Yet the pain seems to always be the people’s while the gains accrue to government ministers, who justify higher pay and bonuses on the basis of the economic growth that they have “miraculously” generated. Private property owners are a rare elite who also prosper.

These “insane” policies, which would be rejected by the people in any country with free and fair elections, have had the desired effect of boosting not only GDP growth but also that of GDP per capita. On this measure, Singapore is now one of the highest-ranked countries in the world (though if it is ranked more correctly against comparable global cities such as New York, London, Paris or Tokyo its record even on this measure is far less impressive). This is largely due to the fact that the immigrants have increased the ratio of the employed labour force to total population, since they bring no dependents with them and will be immediately sent home should they lose their jobs. The human rights cost as the imported labourers enjoy almost no protections is also not insignificant.

Samuel Brittan suggests that a less bad approximation would be GDP per worker “but even that borders on the absurd-for it might be maximised by compulsory increases in working hours at the expense of leisure”. It is no coincidence that Singapore has the highest number of hours worked per person employed among 20 advanced countries according to the US Bureau of Labour Statistics. While increases in working hours are not compulsory de jure they become de facto compulsory as with no minimum wage and very few curbs on imported labour Singaporean workers are acutely aware that they can easily be replaced by foreign imports. Very long working hours boost Singapore’s GDP per worker though the effect is not as marked as at the GDP per capita level.

I suggest that a better proxy for comparisons between countries would be GDP per hour worked, or productivity. On this measure Singapore ranks near the bottom of twenty advanced countries previously surveyed by the BLS and now by the US Conference Board. While US GDP per hour worked has grown by nearly 6% since 2007, or 1.1% p.a., Singapore’s has only just recovered to its 2007 level.

To illustrate the disconnect between the PAP government’s policies and the people’s welfare, a UBS survey in 2009, comparing global cities, put Singaporean median workers’ wages on a par with those in Kuala Lumpur and far behind those of workers in Taipei, Seoul, Hong Kong and Tokyo.  The UBS survey was much criticised by the government. However in the following year Singapore was dropped quietly from the survey which seems hard to justify given that Kuala Lumpur and other Asian cities continue to be included.

Singapore’s example shows how an authoritarian state capitalist government can win plaudits from a largely ignorant international audience by adopting insane objectives that ignore the welfare of its own people. Back in the 1950s Western commentators were similarly dazzled by the seemingly inexorable rise of the Soviet Union and we all know what happened to that.

The sad case of Rebecca Loh

The tragic life of Rebecca Loh and death of her son Gabriel has moved me more than any story to come out of Singapore in recent years. Who cannot be horrified by the thought of that poor boy’s last moments without also recognising that his mother must have been struggling with mental and physical trauma  beyond our normal capacity to comprehend. I have thought long and hard before deciding to write on the matter. Firstly I don’t know the family or enough of the details  to write in any qualified manner, secondly it seems almost callous to reduce the family to a set of circumstances and finally Gabriel’s grandmother now has to bear not only his passing but the trauma of the trial. I  extend my deepest condolences to the family.

Nevertheless I was encouraged by Rachel Zeng’s sensitive handling of the case in her blog and so on the basis that we  do less harm by talking about this with compassion than by sweeping it under the carpet, I have decided to  write a few words.  Read Rachel’s thoughts here.

When I first started this blog over two years ago I wrote an intro which you can find under the ABOUT button on the menu. This explained my choice of the name “Rethinking the Rice Bowl”. Looking back on it today it seems like a load of guff. The intro talks about iron rice bowls and porcelain rice bowls in an attempt to demonstrate how the PAP government model is faux communist but with a harsh, ” spur in the side” element.  Please do spend a couple of minutes reading that Intro if you can.

As you read further down the page you will find the following. Remember I wrote this in February 2011 two and a half years before Gabriel died. If it sounds prophetic it is not. I was only stating the  facts of life under the PAP then and they have not changed. Here is what I said

“Sometimes the rice bowl slips from our fingers and cracks or breaks through sheer ill luck. There will be precious little sympathy for you in a porcelain rice bowl State should you be foolish enough to be retrenched, to have elderly parents, a chronic or terminal illness, a child with special needs or to be caring for a mentally or physically challenged dependant.”

I regret not having added single parent to that list back then. Rebecca’s rice bowl did slip from her fingers and Gabriel died. But Rebecca didn’t exactly slip through the net , she was not invisible. The media reports said,

“.an unemployed single mother, she was often seen pushing Gabriel around in a pram.

She would lift him from the pram to the chair and back at a nearby coffee shop, neighbours told The Straits Times.”

Rebecca was known in her neighbourhood, Gabriel was known, they were not recluses behind hidden doors.  The Police were even called out several times due to violent arguments at the home.

It seems that Rebecca would have qualified for Public Assistance and the PA grassroots organisations in West Coast GRC have not come forth with any information as to whether she received assistance or not. We do know she was totally reliant financially on her mother, Gabriel’s grandmother who worked full time to bring home $1000 a month. Caught by Catch 22 this took Rebecca’s sole contact, her mother, away from the home all day. Her future must have seemed interminably bleak.

I am reminded of the work of Raymond Fernando who often writes about the stress of taking care of  a dependent relative full time.  You can read a piece he wrote on this blog called, ” Who Cares for the  Care-Giver”, here.

Life sometimes deals you a series of circumstances which you cannot overcome by hard work alone. That is why i wrote that back in 2011. With the hindsight of this case surely there are few amongst us who can defend the PAP’s harsh an regime.

Here comes the economics- Make no mistake, I am not advocating a Welfare State. Particularly as those Nations with bloated welfare systems are desperately trying to cut them back as we speak. The last thing I want is for Singapore to regress to some 1950′s Socialist model with an iron rice bowl mentality. What we need are safety nets and a tiny fraction of the assistance that citizens in developed Nations enjoy- ( not to mention the freedoms).  We don’t even have free education! Look how many millions have to be raised by charities every year to allow children of needy families to go to school with breakfast or to buy pencils and text books or lunch.

Anyone who reads my blog or follows my work will be familiar with the list, Minimum Wage, freeholds to our property, HDB reform, pension reform, CPF reform, NS at slave labour rates reform,  joined up health care , free education and so on. What has also always been clear is that there simply is not enough provision by our state for children with special needs. For every child who is lucky enough to get a place at the one flagship school for autism- a centre of excellence in fact_ there are 5 more children shut away and denied an education or a place in our society at all. Any support for these young people is derived solely from charities and religious organisations. That is better than nothing but every charity supporting a family is letting the PAP off the hook.

Naturally the PAP demonstrates no remorse. Here is what they said in response to an article  critical of our  government’s failure to provide safety nets which appeared in the Economist back in 2010. (anyone who has read the Economist or  its sister publication, the Financial Times, recently such as Gillian Tett’s puff piece on our health care system based on her experience of being treated  as a private, fee-paying Ex Pat will hardly recognise the Economist of 2010)

Reply to the Economist’s  “The stingy nanny” of Feb 13th.
“Each society has to decide for itself the appropriate balance between unconditional welfare and self-reliance. Singapore has concluded that we cannot afford European-style state welfare, not because of dogma, but because our circumstances are different. We face competition from some of the most vibrant economies in the world, we have no hinterland or natural resources of our own to fall back on, and our future depends on being a dynamic and self-reliant people who strive our utmost to excel and create wealth for ourselves, our families and our society. Each generation must earn and save enough for its entire life cycle.

Our approach is based on time-tested values of hard work, self-reliance, family responsibility and community support for those in need.”

What was Rebecca supposed to do?  Her Community dd not support her evidently. There was no way this young woman could ever have saved up enough  for her and her son’s life cycle. Notice in all this story there has been no mention of the absent father. How was Rebecca supposed to create wealth for herself, exactly? Did Gabriel die because Rebecca failed to be dynamic and self reliant enough for the PAP model?

While we are here that story about no natural resources is wearing thin. We inherited one of the busiest ports in the region which was  historically already prosperous under the British who left us the deepest dry dock in Asia and a large well educated middle class. We are at the centre of the world’s trade routes. Most of the world’s oil passes through the Malacca Straits via Singapore.  We don’t have any rural areas either and we should compare ourselves to Manhattan or central down town Tokyo or London.

This is the regime that likens Democracy to gang rape. Shameless. But do we bear any less shame for turning our heads away from Rebecca and for unquestioningly swallowing the PAP’s dogma. As my father liked to say, Wake up.


Should we pay Indonesia to stop poisoning us?

hazeThe recent flare-up of the Indonesian forest fire problem and the deterioration in our air quality is understandably also causing temperatures to rise in Singapore. Our neighbor Malaysia is also equally if not more severely affected. This happens year after year causing severe respiratory problems for those afflicted with asthma, forcing schools to cancel outdoor activities and keeping people inside. Yet what is notable is that our government seems unable to come up with any solutions despite the fact that this has been going on since 1997.  In particular they do not seem capable of applying some simple lessons from economics.

Economics teaches us that pollution is an example of a negative externality. A negative externality occurs when a third party has to bear the costs or negative impact of the production of another party.  An example within Singapore would be congestion on the roads.  As the roads become congested due to the increasing number of private cars, public transport users and non-car owners have to bear the negative costs in terms of longer and slower journeys, pollution, noise and congestion.

A positive externality is when the third party benefits from the action or production of others. Those who choose to forgo the comfort of a car are benefiting others.  Growing plants for our own pleasure or use on our balconies ( so long as we guard against mosquitoes) actually benefits the whole environment not just us. A government that invests in education produces a host of positive externalities.

In the case of the haze from Indonesia the negative costs are primarily the additional health expenditures required to treat the problem as well as any economic losses arising from people having to take days off work. There is also the damage to the tourist industry, both short and long term. There is also the possible long term damage to health resulting from the pollution. This damage is all capable of being quantified yet it does not seem to have occurred to the government to do so. I would confidently estimate that the costs run into billions of dollars.

Now Iam going to bring in some theory. A government familiar with the Coase theorem (named after Ronald Coase who won the Nobel Prize in Economics in 1991) could have gained some insights here.  Problems with externalities can be viewed as problems of the distribution of property rights.  The right to pollute can be viewed as a property right as can the right to clean air. Now, in an efficient market without transaction costs this property right should go to the highest bidder, i.e. the party to whom that right is worth most.

Is there any way to stop this menace? Well, the economic loss if not the misery could be solved by the Indonesian companies involved paying Singaporeans for the additional health and other costs that we incur as a result of the pollution. However Indonesia as a sovereign state feels no necessity to compensate Singaporeans and Malaysians for the costs incurred. Disappointingly ASEAN has set up no legal mechanism for dispute resolution of this kind and the awarding of compensation for damage suffered from externalities that cross national borders. It shouldn’t surprise us that the PAP government appears unable or unwilling year in year out, to do anything beyond telling their Indonesian counterparts that the situation is serious. It shows how ineffectual ASEAN is. So penalizing Indonesia or fining them clearly isn’t workable given the current framework.

I have a much better idea based on The Coase theorem. Rather than seeking damages for the costs of the pollution we should just pay Indonesia for our clean air. Singapore could pay the Indonesian farmers and plantation owners responsible for the haze to use other methods to clear their land.  We are a wealthy Nation and because we lose billions of dollars to this haze every year, this right (the right to clean air) is worth a lot of money to us.

Lacking an international legal framework to award and enforce compensation claims, Singapore and Malaysia should offer the Indonesian government a sum sufficient to compensate the farmers and plantation companies for the additional costs incurred by switching to another method but obviously less than the value to us of having clean air.  The problem is that the prospect of financial payments is likely at the margin to induce new companies to enter the “industry” of slash-and-burn clearance just to receive compensation.   For example if I pay my neighbours on the left to stop growing flowers in their garden because I have hay fever then the neighbours on the right would immediately start planting flowers to get me to pay them to stop.
Therefore it would be better if the compensation took the form of a lump sum payment to the Indonesian government to be given to those responsible coupled with a continuing payment towards the costs of rigorous enforcement of a total ban on such methods. This cannot be too difficult given rapid developments in drone technology to allow intensive monitoring of large areas.  Singapore could also contribute towards the development of low cost but less environmentally harmful methods of land clearance.

Objections have been raised, particularly by Indonesia, that a large part of the pollution is produced by plantation companies listed in Malaysia and Singapore. We are able to raise a levy on these companies sited on our homeland. Perhaps part of the costs of compensating Indonesia can even be defrayed by levies on these companies. They are unlikely to be able or willing to escape the levy by relocating elsewhere.

So,  I offer a simple solution.  I am sure there are many other suggestions. The real question is why our government has done nothing about it for the last fifteen years. As always I am convinced that they have no long term plan or model capable or reacting to evolving situations. I have many times said that their plan is a super tanker set on course. They can calibrate it slightly on route from A to B but super tankers are notoriously difficult when it comes to turning a circle or changing direction.   The one child policy is a perfect example of a PAP super tanker route. Population rates are particularly difficult to change and once affected almost impossible to put into reverse. Another example is the PAP economic model of growth essentially based on low cost labour which is now increasingly obsolete in the face of disruptive technologies like advanced robotics, 3D printing and automation of knowledge work.

The PAP ministers cocooned in their million dollar salaries are largely  indifferent to our health and well being or are simply incapable of  coming up with positive policies.  Let us return to those negative externalities.  I often berate Singaporeans for being prepared to put up with conditions of austerity that citizens of advanced democracies and economies would never tolerate. Maybe it would be more obvious if we were to look at what I call austerity as a negative externality.

Let’s turn this on its head. If the PAP was a farmer burning and causing haze the negative externality it produced would be obvious to you.  It is not a factory of course but citizens as the innocent third party are forced to bear the negative costs of the PAP policy of unnecessary savings. Savings far beyond any level that would be considered necessary for a reserve fund, as a buffer against a rainy day. The negative externally is borne by you as over a 50 year period the PAP wilfully under spends and under invests in its citizens’ education and health. This causes me to ask once again, who do our huge reserves (even taking into account the discrepancies I have highlighted before) actually benefit? And do our people vote for the PAP believing that bearing the negative externalities is a good way of existing or have they simply had the wool pulled over their eyes?

Finally I will compare Temasek Holdings with Norway’s sovereign wealth fund. As you know I often bring up Norway’s SWF as a model of good governance and a model of transparency.  Bearing in mind that Norwegians of course enjoy a full welfare state although this is not something I would advocate for Singapore.  A couple of years ago Norway’s SWF made a major policy shift. They decided to invest a significant part of their funds into environmentally responsible companies.  Norway’s Ambassador speaking at the time said the investment strategy was “just the start” of her country’s use of state – backed financial mechanisms to halt environmental degradations. Meanwhile Temasek is using state finance to invest in plantation companies. In 2005 it acquired CDC group’s plantation interests in Indonesia including Sumatra in partnership with Cargill. So ironically if we do pay for our clean air we could be paying our own government for the right to clean air.

Dismantling the Apparatus of State Capitalism

BenChongThe last post  was a piece by another author,  Benedict Chong countering my proposal that Temasek and GIC be floated, publicly listed and a stake distributed in some form to Singaporeans and posing some interesting questions.  I appreciate that even though he has a, ‘Vote PAP ‘ badge on his Facebook page Benedict is coming at this from an economic angle  and not a political one. As I have also received a lot of questions about this proposal  I will answer Benedict in full  here and hope that everyone benefits. I believe Ben’s arguments can be summarised as follows:

BC: There will no change in relative wealth as a result of the distribution.

Therefore there will be no net benefit to those who receive the additional wealth since everyone receives the same amount.

Singaporeans would therefore be better off if they never receive any ownership stake in our SWFs.

KJ: “There will be no change in relative wealth” I do not see how Ben arrives at this conclusion, which is mathematically nonsensical.  By definition adding a fixed absolute amount equally to both sides must lower the ratio between two numbers, i.e.:


where x is the lower number and y is the ratio between the numbers before the addition of an additional fixed amount.

We can see this if we imagine a scenario in which the top 10% have average assets of $1,000,000 and those in the bottom 10% have average assets of $50,000. Currently the ratio between the average assets of the top 10% and the bottom 20% is 20:1. After the distribution those in the top 10% will have average assets of $1,100,000 and those in the bottom 10% $150,000. The ratio is now 7.33 as compared to 20:1 so the income gap is considerably reduced.

In any case my intention was not redistribution but to ensure that those with very few assets currently had access to additional resources that could provide a potentially life-changing opportunity. I did go on to say that the distribution probably should be progressive so that those at the bottom of the wealth distribution received relatively more shares. I was not concerned with the relative wealth distribution so much as with absolute levels of wealth for those at the bottom. This example in fact serves to define my socio-economic philosophy as a whole and why I say that I am not a socialist. I believe in creating greater equality of opportunity. I am more concerned with raising up the level of those at the bottom of the income distribution than with levelling down from the top.  The original intentions of the  philosopher  Rawls also propagate this view.

In any case my intention was not redistribution but to ensure that those with very few assets currently had access to additional resources that could provide a potentially life-changing opportunity. I did go on to say that the distribution probably should be progressive so that those at the bottom of the wealth distribution received relatively more shares. I was not concerned with the relative wealth distribution so much as with absolute levels of wealth for those at the bottom. This example in fact serves to define my socio-economic philosophy as a whole and why I say that I am not a socialist. I believe in creating greater equality of opportunity. I am more concerned with raising up the level of those at the bottom of the income distribution than with levelling down from the top.  The original intentions of the  philosopher  Rawls also propagate this view.

“There will be no net benefit to those who receive the additional wealth as everyone receives the same amount”.  I also fail to see how this follows even if everyone received the same amount.  Assume that part of the gain would be used to finance consumption or to diversify into investments in other assets or education. Only if all the additional expenditure went on goods and services whose supply was completely inelastic would prices rise by the full amount of the additional expenditure.

To take the most obvious example of an asset in inelastic supply, we might see property prices rise as a result of the additional wealth in the hands of Singaporeans but this would also benefit the less well off particularly if Singaporeans were given the freeholds of their HDB flats as I have also proposed. It  could  also be counterbalanced by moves to abolish current subsidies to investment in property such as allowing CPF to be used for property purchases.

In any case (see last but one paragraph) I have suggested that it would be better for the distribution to be progressive.  Those with less wealth would benefit more. Even if equal amounts were distributed the marginal utility of that wealth would be much greater for the less well off than for those who already were wealthy.

BC: Issuing  new shares will cause the  overall monetary base to rise substantially resulting in one of two damaging scenarios.

Inflation as Singaporeans spend the money from the sale of their shares.

Or  share prices will plunge and there will be a rush for the exit with those who sell their shares first benefiting most

 This will be a demonstration of the failure of democracy.

“The monetary base will rise substantially as a result of the issue of the new shares leading to inflation”.    I can see where BC’s concern arises but as I mentioned in the original article, macroeconomic policies may have to be fine-tuned to  offset some of the extra demand created by the household sector’s probable desire to hold a lower level of assets and thus ease the economy’s adjustment to a new stock-flow equilibrium.  “Of course if and when shares in our SWFs are allocated to citizens there may be a period of adjustment during which the government would have to run a bigger budget surplus to offset additional spending by the private sector as it adjusts its stock of financial assets to the desired level rather than the artificially high one imposed by government.”

The new shares will be distributed free to Singaporeans. That is just a change in holdings of wealth between the government and the private sector. The assets side of the government’s balance sheet goes down while the household sector’s goes up. Anyone wanting to buy these shares from initial holders will have to use cash that will have to come from selling other assets or existing cash holdings. Therefore assets will move from the public to the private sector but there will be no overall rise in the level of assets.

 The MAS could also tighten monetary policy by allowing the Singapore dollar to appreciate in response to hot money inflows rather than providing an offsetting supply of local currency. However this would risk making our tradable goods sector uncompetitive

“Alternatively share prices will plunge hurting those who are unable to sell their shares fast enough”.  Since foreigners should be allowed to buy the shares it is difficult to see why they would be undervalued. In fact they may trade at a premium to book value if investors believe that the management team are undervaluing assets or able to add value over and above that of the underlying assets themselves. As part of the flotation process the investment banks involved would prepare prospectuses and provide a valuation range for the shares and other banks and brokerage firms would issue reports valuing the underlying assets.

One way of providing a more transparent and simpler method of valuation would be if shares in the domestic listed companies in Temasek’s portfolio were to be unbundled and distributed directly. The international and private equity arm could then be floated as a separate company. Far from leading to a price plunge, the share prices of these domestic companies may rise because of the emergence of a potential takeover premium which was previously not there. In addition the additional weight that these companies would take in global indices (because of the increased free float) would result in buying by funds that have to passively mimic the relevant indices. This is likely to be a source of share price appreciation in the short run.

To ensure that there is not too much selling pressure on the shares there could be a lock up or vesting period before successive tranches of shares could be sold. If markets are rational the expected additional selling will already be incorporated in the share price and a lock up should make no difference.

This will demonstrate the failure of democracy Ben uses the phrase “so much for democracy” to describe how he thinks the scheme I propose will end up hurting those who are unable to sell their shares fast enough. I have already explained why this is unlikely to happen. However Ben’s comment does betray where he is coming from. It is similar to the PAP’s thinking that only an elite should be entrusted with running the country and that the common people would only squander any assets given to them, no matter that austerity policies were responsible for building them up in the first place. In addition increased social safety nets would only lead to citizens bingeing on welfare. At the limit Ben is saying that Singaporeans would be better off never getting to enjoy the fruits of their labour.

BC: KJ has been irresponsible in advocating that future governments should run a balanced budget or even a deficit. This is extremely irresponsible given the example of the Eurozone or the US.

Benedict has misrepresented my position here. I have said that currently we have an excessive level of assets held by the government and accumulated through years of unnecessary austerity. Once we have decided what the appropriate level of government reserves should be to cope with potential additional expenditure then the balance should be returned to the people, particularly to the generations that underwent austerity to build up that level of assets. In macroeconomic terms it is just as irresponsible and a drag on growth to run budget surpluses as it is to run budget deficits.

Some other comments have said that revenues from land should be excluded from the distribution. However land is not an exhaustible resource and this land bank has been accumulated by the PAP government basically through expropriation from the citizenry in a manner that was inequitable because it was arbitrary in its application. There is no reason for the government to own 80% of the land and the revenues from past land sales can be distributed back to the  people.

In future, fiscal policy should be aimed at macroeconomic stabilization rather than accumulating as high a level of reserves as possible. A future government should aim to balance the budget at a high level of economic activity and employment. Substantial surpluses should be returned to the citizens in the form of higher spending or lower taxes.

I am grateful to Benedict for bringing up some  questions which gives me the opportunity to provide  clarification.

BC: What happens if those former SWFs meet insolvency issues in the future? Should the government backstop them or let them fail, keeping note of their huge presence in the markets?
KJ: This is similar to whether these newly privatized companies should continue to enjoy a government guarantee. Obviously they should stand entirely on their own feet and not benefit from any government subsidies or guarantees so that they compete on equal terms with the private sector. Given their monopolies in certain key domestic sectors it would also need a more powerful competition regulator to assess whether the underlying companies should be broken up prior to privatization to prevent exploitation of the local consumer.

If they subsequently ran into financial difficulties and threatened to collapse a decision would have to be taken by the government then as to whether to rescue them. However unless their insolvency was likely to cause massive economic losses or systemic collapse, e.g. due to a banking failure, it is difficult to see why the government should step in.

BC: Is the securities market in Singapore liquid enough to sustain such a listing?
KJ: Yes of course for such  a large cap stock (or stocks) that would be widely followed. Any liquidity problems would be more likely because the stock was small cap or not widely held so that the free float was small. This would not be a problem here. In addition it would probably have a secondary listing in NY or London. A large part of Temasek’s assets consist of stakes in other listed companies so in determining the total addition to market cap of SGX resulting from the flotation of Temasek and GIC for the purposes of index calculations one would have to eliminate any double counting first. As I said earlier the additional free float will result in more liquidity not less and the buying that would be required by index tracking funds would boost share prices in the short term at least.

BC: Will the government regulate the company or allow is to determine its own risk profile?
KJAs I stated above the company or companies will be in the private sector so it will be up to management to determine its risk profile. Regulation or divestment of stakes will be required in the case of monopolies or near monopolies that currently Temasek possesses in several key areas of the economy. 

BC: Who will lead the former SWFs? A government appointee or member of the general public? Since they will now be public listed companies the boards of the companies will choose the management. Ultimately shareholders will decide if the management is performing in line with the market’s expectations since they will have the right to dismiss the management at the AGM. The threat of the share price falling making the company vulnerable to a takeover offer is likely to provide enough of a spur in the sides of management to make them perform or for the board to dismiss them pretty quickly. This would be the best case of our leaders being forced to practise what they preach. Pay incentives for management would be transparent unlike the case at the moment and shareholders would have the power to ensure that they were aligned with their interests.

BC:Should the incumbent government issue a set of guidance, directives or risk parameters to the company?
KJ: In areas where there are existing monopolies there would obviously have to be regulation or divestment with concrete steps taken to ensure a much greater degree of competition to the benefit of the consumer.  It also may be necessary to subsidise the provision of essential public services, like public transport, where the companies are unable to capture the consumer surplus. However any such subsidies would be transparent and arms-length rather than hidden as at present.

Also since Temasek’s assets comprise controlling stakes in most of Singapore’s largest companies it would also be desirable to have the possibility of referring acquisitions of these companies by foreign corporations referred to a Committee on Foreign Investment with the presumption that acquisitions by state-owned or controlled companies would be illegal.

Finally,  it is good to see that this proposal has already caused a lot of debate. I believe I have demonstrated that the problems Ben has raised are either based on a misconception or else are easy to deal with. My main objective initially is to ensure that we get transparency and accountability by going for a public listing with all the disclosure requirements that entails. This will hopefully accelerate the dismantling of government monopolies in several key areas of the domestic economy.

However the next question was how to allocate the shares that the government holds. Since the government does not have a revenue problem raising money through a share sale, is not an issue. By distributing shares free to Singaporeans we not only ensure that our people receive the fruits of years of austerity and that the assets that have been built up by these policies are explicitly managed for their benefit with management being held directly accountable for poor performance. We also ensure that all of our citizens have significant assets without which any true equality of opportunity would be impossible.

Last but not least we dismantle the apparatus of state capitalism that has served the interests of an authoritarian government and its cronies for so long and been a vital factor in maintaining their hold on power. This is perhaps the most important reason for distributing shares and giving ownership directly to the people.

Last but not least we dismantle the apparatus of state capitalism that has served the interests of an authoritarian government and its cronies for so long and been a vital factor in maintaining their hold on power. This is perhaps the most important reason for distributing shares and giving ownership directly to the people.

Are Singaporeans Fit to Be Masters of Their Own Destiny?

1363346917_MastersBenedict Chong, I don’t know if that’s his real name, has responded to my recent piece about wanting to give Singaporeans a stake in the wealth of  our country.  I reproduce it here as a separate article. He makes many interesting points and it is well worth reading.  Please feel free to comment on it.

With regards to your article on the privatisation of both Temasek and GIC, I note certain solutions and process that you (KJ) are suggesting the Singapore government implement in order to “create a true property owning democracy”. While I like the idealism of such an idea, I am afraid that practically, it is unrealistic. And I give you the reasons below.

I will of course, focus on the answers to the questions you broached and add a few of my own.

The figure you give shows that every citizen would have a claim of up to $100,000. While this figure itself is disputable and extremely subjective, as you have stated yourself, let me bring your attention to the crux of the issue. Will the issuance of such a huge and nominally equal sum of money to every citizen in the country really make the lives of the general population better? Based on comparative analysis, the relative wealth of citizens in the country will remain equal. There is no net benefit between me and my neighbour since we are both receiving the same amount. On a ceteris paribus assumption, I would be no better off.

The injection or rather, distribution of such a huge amount of shares to the public will also result in the need to increase the monetary base/supply of SGD substantially. I assume that cumulatively, GIC and Temasek as a whole will be worth around 500 billion SGD. The distribution without payment of such shares will result in sudden inflows of apparent “wealth” that increases the total market capitalisation of SGX listed companies by up to 55%. But the money to purchase or even sell such shares has to come from somewhere. This will lead to two possibilities; inflation as money “earned” from sale of distributed shares are pumped into the economy or plunging prices as supply of such shares outstrip demand for it, making those who sold their holdings first more advantaged (so much for democracy) since transactions are carried out on basis of price and first come first serve.

Your comment on the government no longer required to make budget surpluses or even balance the budget is perhaps extremely irresponsible. There is little need for me to point to the problems in Eurozone countries as well as USA as evidentiary support for my stand. In addition, your comment on the government investing possible surpluses into SWFs also brings a moral issue to the table.

Whether you like it or not, government money in any entity means that that particular institution has been given an unquantifiable asset of implicit sovereign guarantee. In this case, will the SWFs be considered private corporations or mere Government Sponsored Enterprises? GSEs have shown throughout history to be less than prudent in their finances, regardless of whether they are publicly traded or not. So much for transparency that comes with a stock listing..

The other questions that you are merely scratch the surface. I would like to pose a few of my own questions which I hope you can answer.

1) What happens if those former SWFs meet insolvency issues in the future? Should the government backstop them or let them fail, keeping note of their huge presence in the markets?

2) Is the securities market in Singapore liquid enough to sustain such a listing?

3) Will the government regulate the company or allow is to determine its own risk profile?

4) Who will lead the former SWFs? A government appointee or member of the general public?

5) Should the incumbent government issue a set of guidance, directives or risk parameters to the company?

Who Deserves Our Wealth?

whodeservesourwealthBaby621I am very pleased that Jeremy has set out in writing his reasons why he disagrees with my proposal for the privatization of Temasek and GIC and the distribution of shares to Singaporeans.   I hope we will see more of his ideas on this subject or anyone else’s for that matter. Unfortunately Jeremy’s disagreement seems to stem from a basic misconception and a failure to grasp what the process of privatization and public listing of a previously nationalized  asset entails. As he has misunderstood the process much of what he has written makes little sense.

Before we get into that mess let’s start with areas of common agreement. Happily we both agree that there needs to be more transparency. However Jeremy seems to accept the government’s own figures for its budget surplus which I most definitely do not.  Our government’s budget figures are not set out in the format described as  ‘best practice’ for governments by the IMF and in general use by advanced democracies worldwide.  As a result our budget contains discrepancies which makes it impossible (even for me) to decipher and gauge true values. I first alerted Singaporeans to these discrepancies in 2012 here.

Jeremy also agrees with me that one possible way to achieve transparency without privatization and public listing and distribution of shares is the Norwegian model, where the SWF is required to achieve an extremely high level of transparency and is responsible to Parliament for its performance each year. I’ll come onto Norway later because Jeremy gets mixed up by that as well.

Jeremy worries that $6 billion a year of extra spending is being unduly profligate and talks about finding savings in the defence budget to pay for it. This is despite my pointing out that the true surplus in 2012 was at least $36 billion.  I also pointed out that even the Net Investment Returns Contribution of $7 billion which is supposed to be allocated to current spending, in fact went straight back into the reserves.  The savings to be made in the defence budget are miniscule compared to the surpluses and the amount MOF likes to give away to other nations.  In any case I contend that we should be increasing our spending on defence in line with the rest of Asia not reducing it.

I was completely confused by Jeremy’s contentions that privatization (allowing public listing and trading in the shares of our SWFs) would not bring about transparency and accountability and wondered why he brings up the global financial crisis of 2008 as having some relevance to my proposals.  I do not see how this is an argument that listing the shares of our SWFs will lead to less transparency.  Also why would Jeremy would have brought up MERS as an example?  MERS (which stands for Mortgage Electronic Registry Service),  is an electronic registry operated by a privately held company (MERSCORP, Inc.) designed to track ownership rights and mortgage loans in the United States. Since this is a privately held company it is not listed on a public stock exchange.
Could it be that Jeremy simply didn’t know what is meant by the term ‘privatization’ when proposing  that we allowing public listing and trading in the shares of our SWFs.  As his arguments make no sense I am guessing that Jeremy has confused the process of ‘privatization’ with privately owned  or he may here be thinking of private equity buy outs. Jeremy is fiercely refuting a proposal that was never posited in the first place.

I don’t see how he could have made this mistake.  I even give Warren Buffet’s publicly listed company, Berkshire Hathaway as an example of how transparency is a spur to better performance in my original article.

After mixing up private and publicly listed and so forth Jeremy says that transparency did not prevent the global crisis of 2008.  Here Jeremy is correct. But did I say transparency would somehow prevent financial crises?  No, I make no claims for transparency by itself. I do not say that it will prevent future financial crises.  The cause of that crisis was indeed not a lack of transparency. If anything there was too much data, as Nate Silver makes clear in his excellent book, “The Signal and the Noise”. The problem lay in the interpretation of that data and the conflicts of interest to which certain key institutions like rating agencies were prone. These examples of willful blindness to the fallacies in the analyses by ratings firms were then compounded by the mistakes of policy makers, at least in the initial stages, which almost brought the global financial system to its knees.

There is no argument to be made that a public listing will not bring about a much greater level of transparency. Of course it will.

How about accountability? At present there is very little information available to judge the performance of our SWFs. We do not even know what the real level of assets is. What we do know is that historically there is a strong statistical correlation between the level of secrecy in an organization and the likelihood of mismanagement or fraud.

Privatization and the disclosures that would be necessary if the SWFs were listed would make it much easier to identify underperforming management. It would provide a spur in the side of management, to use LKY’s favoured term. Accountability is like everything else- we have to demand it.

By listing Temasek holdings and GIC, shareholders would be able to vote against the re-election of the board or individual directors at the company’s annual meeting if they felt that the company was underperforming. It is notable that no heads rolled after both Temasek and GIC lost a significant percentage of their value, even though they claimed to have recovered their losses remarkably quickly.

Having to publish regular audited accounts would also allow a spotlight to be shone on the way the management of these companies value their positions.  I believe that Singaporeans want to know how the PM’s wife is doing and to be able to move her on if her and her team’s performance is subpar.

Of course just as transparency doesn’t guarantee good governance so even a public listing might not prevent fraud altogether. UBS, in which GIC invested so much and lost most of its investment, is a good example. On balance, if our assets are being squandered and lost through poor investment decisions then I would rather know than not.

Nevertheless a system that allows the government and the managers of the SWFs to transfer assets into the fund at grossly undervalued levels, see “Has Temasek Found A Cure for Balding?”, is one where one should be suspicious of the performance claims by management. Notwithstanding the fact that the current CEO of Temasek got her job purely on merit, as our State-controlled media frequently remind us, privatization would also ensure a separation between management of our SWFs and the government, which is necessary to fulfill any standard good governance requirements.

Jeremy agrees with me on Norway but after that his ideas fall down because he has failed to grasp the fundamental difference between Norway’s situation and that of Singapore. The Norwegian fund has been built up by taxes and royalties on the earnings from the exploitation of the country’s gas and oil reserves. As these are exhaustible resources that, by definition, cannot be replaced, there is a strong argument that they should be represented on the nation’s balance sheet as an asset.  They belong not just to the current generation of Norwegians but also to future generations. As they are used up, they should be replaced by financial or real assets such as infrastructure investment. The current generation should only be able to draw on the income from those assets.

Singapore is a different case entirely. The assets of our SWFs represent forgone consumption by present and past generations of Singaporeans. There were no resources that were used up to earn those assets only sacrifice and austerity by Singaporeans past and present.  In other words, the sweat of your grandfather’s brow, people being denied medical treatment that is freely available in most other advanced countries and our old people, the disabled and those in single parent households having to live in hardship. I could go on but I have made the point repeatedly that our people live in wholly unnecessary austerity to accumulate surpluses that will never be spent even if they are not frittered away through poor investments.

There is no obligation to pass on these assets to future generations and it should be up to individuals to make their own decisions as to how much they want to leave (in economics we call this their intergenerational time preference function).

One can say with certainty that with productivity growth averaging at least 2% per annum in advanced countries like the US (though maybe only half that in Singapore due to the PAP government’s preference for cheap foreign labour over automation) that future generations as a whole will definitely be much richer than current generations. Likely technological advances may raise this productivity growth by several orders of magnitude.

Thus it is difficult to make a case as to why the state needs to maintain a reserve beyond what is needed for genuine emergencies or to defend the currency. At the moment the MAS has to hold down the Singapore dollar to prevent our currency appreciating too far and making our economy even more uncompetitive, so arguably it does not need to hold excess reserves.  In a succinct and admirably clear article (see here) Andy Wong also supports the contention that the reserves are much bigger than they need to be. Furthermore it has not been explained to us why we need to go on accumulating assets at the same rate nor why the PAP government is so anxious to keep postponing the CPF withdrawal age and the minimum sum.

We can think of Singapore as being like an enormous hedge fund, though apparently with only subpar returns. A few government functions are added on, though one day a future government might want to divorce itself from the people entirely and just keep the assets! As a hedge fund, it is in an admirable situation compared to the rest of the industry. This is because it can coerce its investors into keeping their money in the fund and make withdrawals more and more difficult.  I am sure a lot of real hedge fund managers would like a similar situation.

This brings us of course to a further reason why the current situation is so unfair to the present generation of Singaporeans.  If there were no immigration then future generations would be the descendants of Singapore citizens today and one could argue that to retain a substantial pool of assets in the state’s hands for the benefit of future generations at least had some merit. As an economic liberal who believes in individual choice, I would still prefer those decisions to be made by the individual.

However, the PAP government seems determined to dilute the current generation’s stake in the SWFs by enfranchising millions of new citizens. It has been suggested that the underlying reason behind this is to maintain its grip on power. While it still has control over the people’s assets it has an enormous carrot to use to induce foreigners to become citizens and to bribe them once they do so.  We can already see that happening in a limited way with the foreign scholarship programmes that our SWFs have set up.

Thus, while I would support some form of progressivity in the distribution of shares to try and ensure that more of the assets go to those at the bottom of the wealth distribution in an effort to promote genuine equality of opportunity, as opposed to the present fake meritocracy, I do not see any rational argument why the bulk of the assets need to be held back by the state as Jeremy advocates. His self-confessed collectivist bent is not radically different from the PAP’s and does not represent genuine reform. Despite saying he wants more transparency he seems to favour keeping the status quo. While he may feel that readers may be impressed by his knowledge of simultaneous equations from O Level Maths, it does not really buttress his arguments which have shaky theoretical underpinnings and some serious fundamental errors.
Nevertheless it is great that he has come forward to provide a rationale and hopefully we can have more reasoned debate in the future.  As Jeremy is an SDP policy author, the more common ground we can establish now the better.

Using Funds “Wisely”?

TRE recently posted up an article by Jeremy Chen with the opening salvo, “This is something of a response to a proposal by Kenneth Jeyaretnam to privatize Temasek Holdings and GIC and distribute shares to Singapore citizens. “  The author  was  attempting to rebut my Ricebowl article of 4 May 2013,  “How to Create A True Property Owning Democracy through The Privatization of Temasek and GIC.

The author gives his opinion that my proposal is flawed and comes up with a counter proposal. Supposedly.  Let us begin with the so called flaws. Actually we can’t because Jeremy says, “There are more problems with the proposal,” but puzzlingly he fails to say what these so called further problems are.

Then again he says, While I respect KJ’s work……this is simply not one of his best. I believe his proposal is flawed. “Actually he neither demonstrates why my proposal is flawed nor counters it. Which is a pity. I put up an idea, it is just an idea and I would enjoy engaging in intellectual debate over it.  It is not an economic manifesto and it is certainly not a blue print for using funds therefore it cannot be countered by a complete manifesto on using state funds. Jeremy’s article is merely a clever bit of name dropping, using my article as a hook, to get his own political manifesto out there.

He does write “ Firstly, there are problems related to who is entitled to how much.” That is correct, although it is a question of fine tuning rather than being a problem.  I have talked about distributing shares equally although another option would be to weight them in favour of citizens current asset holding status. The fundamental point is to endow Singaporeans with ‘property’. The amount could be credited to CPF and it needn’t be the total share holding. We are talking about Temasek and GIC not the MAS official reserves after all. These are all ideas it would be timely to discuss.

When he does attempt to get to grips with my proposal he simply gets it wrong.
He writes, Furthermore, he (KJ) states that the fundamental problems his proposal sets out to address are transparency and accountability, which privatization does not directly address.
Jeremy fails to spell out why this is the case.  Of course privatisation addresses transparency. Since my proposal would involve an IPO of the shares of Temasek and GIC on the stock market the companies would have to fulfil rigorous disclosure requirements. As for accountability it begins with transparency and we Shareholders can actively seek the removal of managers who perform poorly in investing our funds.

There is an alternative method of achieving transparency but not endowment, which is for Singapore to adopt the Norwegian model with regard to their sovereign wealth fund (SWF). In Norway there is a highly detailed report on the performance of the SWF and its positions are published annually and debated by the Norwegian Parliament. Norway is in fact a model of transparency in many areas and even posted up (in English) their debate on the IMF loan. I have often advocated that we adopt their model and use the accepted IMF framework for our budget reporting also.

So who is Jeremy and what is this alternative manifesto he outs here. In the interests of disclosure I am presuming that everyone who reads my blog here or reproduced on TRE, knows who I am.  Jeremy Chen may not be as well known and I find it disingenuous that he does not let readers know where he is coming from. (But then that is me and this would not be Ricebowl if I was not agitating for transparency.) So in the interests of transparency, allow me introduce him to you.  Jeremy is a member of SDP.  I can’t say for sure whether Jeremy is a Cadre/CEC member or not.  He is however definitely the author of recent key SDP policy documents particularly the one on housing and therefore responsible for the manifesto contained therein.

Which is great! Whilst I would really like to debate policy with the authors of the PAP manifesto, it is a good start to be doing it with the SDP. If we are to develop a tradition of democracy or normalise democracy in Singapore then it is about time we started debating manifesto and economic policy. At least that way there is some ideological base to the debate as opposed to the skin deep ideological veneer of the ‘ranters’ in our midst.  It is good to see the big State paternalistic policies of the SDP out there and stack them up against my pro market small state ideas.

In fact Jeremy spends barely a paragraph on my proposal before unashamedly launching into a totally unconnected promotion of his manifesto. To be fair Jeremy probably thinks that my small idea is a complete manifesto for endowing Singaporeans with wealth. His manifesto is the same old Big State socialist with a capital S ideas with the added PAP favourite of believing peasants to be “daft” and unable to manage their own wealth.

He writes But I appreciate the intent to transfer wealth back to citizens.  Well my intent as I said was to force some transparency out of Temasek and GIC.  I do believe that we have been hoodwinked into living in conditions of austerity that the citizens of the countries we lend our money to would refuse to accept. We should all be richer by now not just an elite 10%. However I do not really seem much mileage in Robin Hood proposals. A major proposal I put out some time ago for transferring wealth back to the citizens was a proposal that they be allowed to buy the freehold of their HDB flats.

From reading Jeremy’s posting, “Using Funds Wisely and Investing in Our Seniors”, as well as his housing policy proposal, it is apparent that there is a strong collectivist and paternalistic streak in much of his economic thinking. Instead of wanting to free Singaporeans from government-controlled monopolies in every sphere of economic life and virtual serfdom in housing and employment, Jeremy seems to want to reinforce state control. This is the kind of thinking that the less well off do not deserve autonomy because they are going to make unwise decisions and squander the cash they receive on frivolous expenditures rather than “worthy” ones like education and health.  From here it is only a short step to believing, like the Communists and the PAP, that government is much too important to be left to the people and that democracy is dangerous.

Jeremy’s idea of converting state housing purely into a subsidised long-term rental market would entrench the government’s control over Singaporeans and make them more dependent. By contrast my idea, which is RP policy, is to return state assets to the people to whom they should belong by right. Singaporeans should have the right to own the freehold of their HDB flats so they are no longer dependent on the government for upgrading. Town councils should be merged with the PA and directly elected so that citizens have more control over expenditures at the grass roots level and so that one party does not have a monopoly of power. And the state assets built up by years of unnecessary austerity, and invested badly by the current government, should be returned to the people. By distributing shares in Temasek and GIC and other state assets to the citizens we create a true property-owning democracy and go some way to solving the normative economic dilemma of how to reconcile a free market, with the demonstrated efficiency gains that go with it,  with widely differing starting endowments between economic agents. People can then to a large extent make their own decisions over education and health and provision for old age.

However, distributing the shares of Temasek and GIC to Singaporeans was in many ways secondary to the principal objective of forcing them to be transparent and accountable. I have repeatedly called for transparency in the whole government budgeting process and drawn attention to the Finance Minister’s deliberate use of “smoke and mirrors” to hide the fact that even the Net Investment Returns Contributions are not spent but instead allocated to unaccountable funds not subject to clear Parliamentary control. This thwarts the supposed purpose of allowing the NIRCs to be used for current spending and hoodwinks the people into believing that they are seeing some benefits from the austerity needed to generate these returns. The contribution of $7.7 billion in 2012 was in any case dwarfed by the government surplus (let alone general government surplus which is usually much larger) of $36 billion.

Instead of privatizing Temasek and GIC and distributing shares to Singaporeans Jeremy instead calls for free pre-school education, university education and an old age pension. These are commendable objectives although not new or original to Jeremy as some of them were part of the Reform Party’s’ manifesto in 2011. Sadly the figures are way off. An additional $6 billion to be returned to Singaporeans is meaningless in the context of tens of billions of dollars of apparent surpluses that are accumulating each year and over which the PAP government feels little pressure to be accountable. Jeremy seems to be accepting an implicit OB marker concerning discussions of the appropriate size of the reserves and what is the ultimate objective of reserve accumulation. Instead he echoes the PAP mantra that higher taxes will be necessary if we are to have higher welfare spending though he also mentions cutting defence expenditure on hardware and finding other savings by increasing efficiency. While a review of defence expenditure is needed it is probably the wrong time to be cutting it at the moment when Asian defence spending generally is rising. Savings from reducing NS, as per RP’s policy, would be counterbalanced by the increased costs of a professional army and high technology weapons.

In conclusion, Jeremy’s article misleadingly purports to be a critique of my proposal for a property-owning democracy. However he does not even begin to come to grips with my arguments instead using my name as a hook to set out his own pet policy ideas. These mainly consist of tweaking existing PAP policies to produce higher social spending but with even greater state control. Instead my ideas aim at devolving state political and economic power to the people to develop a free Singapore.

How to Create A True Property Owning Democracy through The Privatization of Temasek and GIC

property owning democracyIn my last blog post (see here) I pointed out that since 2009 I have advocated the privatization of Temasek and GIC and the distribution of shares to Singapore citizens. This was also a plank of the Reform Party manifesto in GE 2011 (see here).  Naturally there has been a lot of interest in this idea, if not controversy, including an attack by some YPAP activists back in 2009.  Most of their criticisms were simplistic and easy to answer.

However there has continued to be a lot of interest in the mechanics of how such a privatization might be achieved and how the shares would be distributed. Recently an anonymous commentator asked posted this question on TRE:

Kenneth, what about future generations of Singaporeans? How does it work? Every Singaporean gets one share? How?

 This article attempts to address these questions.

But before then I would just like to answer the question as to why I am proposing privatization in the first place.

The most fundamental reason is transparency and accountability. Temasek’s charter says it aims to “create and maximize risk-adjusted returns over the long-term”.  There is no definition of what long-term means. GIC merely says that its objective is to deliver  “good long-term returns for the government” which is defined as  “good long-term returns for the Government – a reasonable risk-adjusted rate above global inflation over a 20-year investment horizon. “As any economist knows “investing for the long-term” can be used to cover a multitude of sins. Almost any period of poor performance can be explained away by saying that it is temporary. Without the discipline and transparency of a market listing and need to provide full information to investors there has to be the suspicion that management will seek to enrich themselves and/or tolerate poor performance. I wrote about these issues and the need to privatize Temasek in particular in my blog post, “Chesapeake Energy and Temasek: A Tale of Two CEOs and Shareholder Democracy” where I said:

It is instructive to contrast the power of shareholder democracy in shining a spotlight on management conflicts of interest and excessive compensation with our own powerlessness in finding out what is the real picture at our own sovereign wealth funds. Of course an incorruptible government ensures that there is no egregious wallowing at the corporate trough, like the shenanigans at Chesapeake, even though the PAP elite believes it is not in our interests to be told very much of what is going on. Even our (s)elected President has little power, and seemingly little interest, in keeping an eye on the investment performance of our SWFs, despite his choice of a pair of spectacles as his electoral symbol.

And also:

“…as a first stage to transparency and the privatization of our SWFs we need to separate the stakes in domestic companies from foreign investments. Temasek should be split in two. In fact if it had been a listed company in the US, for instance, management would have taken that route in order to raise shareholder value. With the split, the market is likely to value the two successor companies as a whole more highly than the original. This is because of the improved management focus and transparency resulting from the split. As a rule investors prefer to construct their own bundles of different businesses rather than have to invest in a company where management have made that choice for them.

Another reason for privatizing and listing Temasek and GIC is so that management compensation and incentives can be made transparent. Shareholders can check whether the incentives of management then are in alignment with the objective of increasing shareholder value. If there is excessive compensation for mediocre performance, then shareholders can vote against management at the AGM just as at Chesapeake. In the last resort they can vote with their feet by selling their stock which is why companies with poor corporate governance trade at a lower multiple than similar companies, ceteris paribus.”

As I explained in my last article, “Has Temasek Found A Cure for Balding” the lack of information and the valuations placed on assets that the government has injected and continues to inject into Temasek leave large question marks over the true track record of the managers. There is no reason for this excessive secrecy. After all look at Berkshire Hathaway, Warren Buffet’s investment vehicle, which is around the same size in terms of net assets which publishes quarterly and annual reports as required by the US Securities and Exchange Commission with exhaustive explanations of its accounting policies. Having to release so much information has not affected its ability to generate returns.

Both Temasek and GIC give their shareholder as the Government of Singapore. But the shareholders should be the people of Singapore and the managers should be accountable to the people. This is the rationale for my plan to privatize Temasek and GIC and distribute shares to Singapore citizens. By doing so, together with allowing Singaporeans to own the freehold of their HDBs, we create a true property-owning democracy rather than the fake “porcelain rice bowl” model that the PAP government is so fond of.  The 99-year leasehold coupled with the right to move us with inadequate compensation whenever there is a profitable development opportunity is akin to feudal land tenure for the 90% of us who cannot afford private property. In fact it is even worse since there is no asset to pass on to one’s children.

To distribute shares equally to all Singapore citizens would also be a powerful boost to wealth equality without having to resort to redistributive policies on taxation, which by reducing the incentives to work and invest for the most productive may reduce potential output. A rough guesstimate using the deliberately opaque and inadequate information provided in the government’s annual Statement of Assets and Liabilities suggests that this could be potentially worth more than $100,000 per citizen.  Obviously with a listing the valuation would depend on the market and the greater the transparency and measurable alpha generated by the managers the more likely the shares would be to trade at a premium to book value. On the other hand if Temasek and GIC’s portfolios are very optimistically marked in terms of valuation and the less liquid the portfolio the lower the market valuation is likely to be.

There are of course a multitude of questions that would have to be resolved. These are some of them together with some possible answers:

How should the shares be distributed? In my view it should be equal shares for everyone though consideration could be given to allocating more shares to those who had done NS as compensation for the economic sacrifice.  Of course this might be opposed by women who could justifiably point to the economic sacrifice entailed by child-bearing though most women who have children do so as one-half of a couple. The sacrifice affects both parties.  A fairer way might be for Singapore citizens with less than ten years citizenship to be excluded unless they had done NS.

 Should shares be given to those under 21 at the time? Probably not on the grounds that they have not made the economic sacrifices that the older generation has to build up the stock of assets. New citizens would not get shares though perhaps consideration could be given to keeping back a certain proportion of shares to allocate to those who had done NS.

What happens to CPF contributions in future that have been a big source of cheap funding for GIC? I have advocated privatizing CPF and making contributions voluntary (while keeping their tax deductibility).  Even with the endowment effect of cheap CPF borrowing GIC’s performance has been lamentably low (see link).

What would happen to future government surpluses? There is no reason for the government to run surpluses once an adequate level of reserves has been reached. Of course if and when shares in our SWFs are allocated to citizens there may be a period of adjustment during which the government would have to run a bigger budget surplus to offset additional spending by the private sector as it adjusts its stock of financial assets to the desired level rather than the artificially high one imposed by government. Budget surpluses could be invested in the SWFs and the new shares created held back to reward new citizens who had done NS or children of existing citizens.

Is there not a risk that Singaporeans would just squander their new wealth or be cheated by unscrupulous individuals with inside knowledge? Privatization and the distribution of shares in state-owned enterprises was given a bad name in the former Communist bloc. The selling off of state assets cheaply to the former managers of the companies with the use of loans from state banks helped create the class of Russian oligarchs who became billionaires literally overnight. However in this case the problem would be avoided as there is no requirement for the state to raise money through privatization. Instead shares would be distributed equally. Some Singaporeans might want to see some sort of vesting process imposed to ensure that Singaporeans could not squander their new-found wealth. However such fears are undoubtedly ill-founded as well as being patronizing and elitist It is exactly the same kind of attitude as the current government has towards our citizen’s rights to know how our assets are being managed and even to know the true extent of the reserves. If markets tend towards efficiency then the share price should broadly reflect the mean value of the probability distribution of future returns.  The shareholders would be the best judge of whether the share prices of our privatized SWFs were overvalued or undervalued on this basis.

How would you prevent foreigners gaining control of Singapore’s crown jewels by buying up the shares held by Singaporeans? Firstly most of Temasek’s domestic investments are not in high technology areas but in mature industries.  Temasek has sold several of the companies in its domestic portfolio to foreign buyers in the past.  It is difficult to argue why the management of a privatized Temasek should not be able to recommend a bid by a foreign company for any of its assets or even for Temasek itself and why Singaporeans should not be free to accept.  Adequate safeguards could be put in place by requiring any takeover offer from a foreign company for a Singaporean company above a certain size or in a strategic sector to require approval from a Committee on Foreign Investment (like CFIUS in the US or the FIRB in Australia).  It should also be coupled with a strengthened competition regulator given that Temasek holds many quasi-monopolies in the local market.

These are a few thoughts on the issue.  I advocated privatizing Temasek and GIC primarily to impose transparency and accountability on the management through the discipline of the market. There would be a transparency premium to the valuation. Distributing shares to Singaporeans would also establish a direct nexus between our citizens and the managers of our reserves and give them the power to replace them in a direct manner as opposed to the indirect method of having to replace the government.   At the same time it would give ordinary citizens a significant endowment which would greatly reduce inequalities in the distribution of wealth and thus contribute to much greater equality of opportunity. This would be along the lines suggested by Rawls, the American philosopher, in his later ideas on the creation of a property owning democracy. Given that Singapore’s state should already be wealthy enough to provide everyone with significant property assets, the conflict and loss of economic efficiency resulting from redistributive taxation could be avoided. My ideas may be too radical, even heretical,  for the current orthodoxy that state capitalism works best.  However Singaporeans can increasingly see that the current model has failed to raise living standards significantly for the past decade or more.   My hope is that this will start a debate and I look forward to your comments.

Has Temasek Found A Cure for Balding?

BaldnessThe question of the transparency and proper accounting of our reserves has been a primary concern of mine for some time, in fact ever since 2009.  A major theme has been that currently we have inadequate safeguards to prevent them being frittered away by an irresponsible government instead of being used for the benefit of the people whose hard work and sacrifice have built them up.  In the RP responses to Budget 2012 and 2013 (see here and here) I complained that our Budget presentation was a masterpiece of obfuscation and misdirection and that there were several glaring discrepancies in the accounts. I followed this up with two letters to the Finance Minister (here and here) complaining about discrepancies and a further letter to Christine Lagarde, the head of the IMF (here).

I have also written extensively at on the question of the transparency of our reserves and why the numbers do not add up(see here for just one example). A further list of links is given at the bottom of this post.

Thus  as the person who raised this issue first I am well qualified to adjudicate on the issues raised in the recent argument between Christopher Balding and the person calling himself “Kok Ah Snook” .

After I had been writing about these issues for some time, I found that Chris had in April 2012 been writing in a rather alarmist and sensationalist style and making unsupported allegations of fraud about what he believed to be large shortfalls in our reserves. However his analysis was merely speculation until I spoke to him and pointed  where on the MOF website he could find a sub-standard balance sheet, without any explanatory notes, which the Finance Minister is required to publish annually under the Constitution. The balance sheet is supposed to represent Singapore’s assets and liabilities.

After some discussion I then flew out to meet him in Hong Kong where we agreed to work together towards a joint presentation of what we had found.  While looking at his work I noticed certain errors or implicit and unjustified assumptions that he appeared to have made in his calculations of what should the theoretical total of Singapore’s gross and net assets and pointed these out to him.

However despite what I thought was an agreement he started publishing fresh articles independently using some of the information that I had sent to him.  Since it seemed to be difficult to work with him I went ahead and published my conclusions in the article above where I cited some of the errors he had made in his analysis. However despite this I broadly agreed with his conclusion that the theoretical level of gross and net assets should have been much larger differing only in the order of magnitude.  Whereas Chris calculated that there was potentially over a trillion $ in missing assets my more rigorous assumptions reduced the theoretical shortfall on conservative assumptions to the level of  $300 billion or so.

In later articles (see here and here) I argued that GIC would have had to have earned less than 2.5% p.a. in S$ terms, even  allowing for a cost of government borrowing from the CPF of 3.5%. to generate such a low level of net assets . This was after subtracting Temasek’s publicly stated level of net assets and a conservative estimate of revenue from land sales from the total of gross assets shown in the Statement of   Assets and Liabilities. This was actually much more damning because it established that even the most careful analysis suggested cause for concern that the managers of our reserves appeared to be achieving very poor returns.

So let us get back to the current controversy. I read what  Mr. “Kok” wrote (and also met up with him). He is technically correct that there is no theoretical difference between owning assets worth $100 directly and owning shares in a company with net assets of $100. However I do agree with Chris that it is a cause for concern if the assets are injected into the company for free or not for fair value and that the managers of the company subsequently revalue the assets and claim the gain as their own investment performance.

The view that Temasek’s presentation is unorthodox and misleading is supported by current accounting practice (as exemplified by US Financial Accounting Standards Board (FASB) Statement No. 141 which can be found here). This requires that:

20. The acquirer shall measure the identifiable assets acquired, the liabilitiesassumed, and any noncontrolling interest in the acquiree at their acquisition-date fair values.

 In the case of a “bargain purchase”, one where the fair value of the assets acquired is above that of the consideration paid, the “the acquirer shall recognize the resulting gain in earnings on the acquisition date. The gain shall be attributed to the acquirer.”

 Accounting Standards Classification (ASC) 805 has superseded FASB Statement 141 but the instructions remain the same. The International Financial Reporting Standards (IFRS) has very similar, if not identical guidelines on how to treat acquisitions of undervalued assets.

Of course Temasek as an exempt private company is not required to publish its audited statutory consolidated accounts though presumably these should be in accordance with US Generally Accepted Accounting Principles (GAAP) or  IFRS.

At the time of Temasek’s acquisition of these group companies from the government, even if there was no fair value determination for the companies transferred, Temasek should have recorded them at the book value they were showing in the acquiree company’s accounts. Temasek paid $354 million for the 35 companies by issuing shares to the government. It is hard to believe that this was book value even then. It is likely that Singapore Airlines alone even in 1974 had a book value of close to that figure.

If Temasek had chosen either to use fair values or book values for the assets acquired then the resultant gains should have been taken to income on the date of inception and added to the reserves.  The starting base for calculation of returns would then have been much higher and subsequent returns correspondingly lower, probably by a significant amount. Even if the acquiree companies’ book value was used it is highly likely that there would have been a higher starting value for Temasek’s initial assets and a significantly lower rate of return since then.

This does matter if you are a publicly listed company because investors will look at the track record of the managers. If you were a hedge fund manager and your returns were inflated because they include returns that belong to prior periods then that would be highly misleading and probably fraudulent. Regulators would definitely be concerned.  If the fund’s returns were padded by the injection of undervalued assets from other funds then this would also be misrepresentation of the true performance of the fund.  Before regulators tightened their rules on marking of assets and liabilities to fair value, which should be market values as far as possible, it is probably true to say that it was fairly common for investment bank proprietary trading desks to build up hidden reserves by undervaluing some of their assets.  These could then be released when necessary to cover losses or when bonus payments were calculated.

It has been argued by “Kok” among others that the glaring undervaluation of Temasek’s initial portfolio does not matter in the case of Temasek because it is a government-owned company and it is not marketing shares or investment funds based on its performance.  It was just a choice of accounting treatment and after all no money was siphoned off.

However, this is far too naïve a view. Singaporeans are the investors in Temasek and ultimately the owners of the assets. If the government is able to convince them that they are better managers of these assets then they really are then the voters may be swayed to vote for them when they otherwise would not. Also the CEO of Temasek has talked in the past of co-investment funds to be sold to Singaporeans and others to allow them to invest alongside Temasek. Should these come to fruition then investors need to know what the true performance of the current managers is. The remuneration plans of Temasek’s managers are also linked to long-term investment returns. If these appear better than they really are then payouts to managers may have been larger than they should have been.

Finally a future group of managers may decide at some stage to partner with a private equity firm or firms to make a buyout bid for Temasek’s assets that a future government might accept. If some of the assets in the portfolio are still significantly undervalued, and only the future managers know about it, then Singaporeans may be seriously shortchanged. This is unlikely but not inconceivable. After all Nomura’s private equity division bought the Ministry of Defence housing stock in the UK for a fraction of its true worth generating reported profits for Nomura of US$1.9 billion and setting Guy Hands, the then head of Nomura’s Principal Finance Group, on thr road to a reported personal fortune of £100 million by 2011.

Despite Balding being on the right lines his analysis is unfortunately vitiated by some elementary mistakes as usual. These unfortunately undermine the credibility of his case though they do not affect the main argument.  He mentions Changi Airport Group  (CAG) and says that the government invested $5.68 billion since the late 1970s and is then selling it at a loss to Temasek for $3.2 billion in 2009. However he omits to take account of any dividends paid by CAG to the government since its inception. Given that their profit after tax in the first year after corporatization (2009/10) was S227 million the positive cash flow since Changi’s inception may have been several billion dollars. This would have reduced the headline investment figure of $5.68 billion probably significantly. Against this must be set the unexplained entry in the consolidated cash flow statement showing $580 million received from CAAS. Perhaps this represents revenues collected by CAAS prior to corporatization and subsequently paid to CAG.  In this case the purchase price of $3.2 billion should be reduced by this amount. In addition CAG’s balance sheet showed cash of another $500 million as well as the $580 million and both amounts should be deducted from the purchase consideration to determine the enterprise value.

The purchase price was purely notional anyway because the purchase was financed with a simultaneous capital injection by MOF of the same amount. While the capital injection will add to Temasek’s asset base but not increase its returns, the purchase price of $3.2 billion is well below what such an asset with predictable and growing cash flows should fetch in an open auction.  Recent airport sales  (Edinburgh, Stansted) have achieved  Enterprise Value/Earnings Before Interest Tax Depreciation and Amortization (EV/EBITDA) multiples of 15 to 17 times. Putting CAG on a EV/EBITDA multiple of 17 times implies that in 2009 it should have been worth at least $7.3 billion and on the basis of the latest results that would have risen to nearly $16 billion.

 So exactly the same thing is happening as in 1974 despite recent accounting standards updates that mandate that acquired assets should be recorded at fair value in the acquiror’s books with gains recorded on acquisition. All the previous reasons why this is wrong apply here. Yet again, the Singapore citizen and taxpayer gets a raw deal because the value of the assets concerned is not being maximized as they would be if CAG was put up for auction. It would be interesting to see how the value of CAG is treated in Temasek’s statutory consolidated accounts.  Of course undervaluing the asset creates a very useful reserve for a future rainy day for whoever happens to be the managers of Temasek then!

Unfortunately Chris Balding also harms the useful points he makes by the wild accusations of fraud and Bernie Madoff he flings around for which he has no evidence (though it cannot be disproved either). This risks the very valid questions about the management of our reserves being ignored or not taken seriously. Given the recent rising trend of threats of defamation suits to try and silence critidism, culminating in a government body threatening to sue an ordinary individual for the first time, there is a real risk that someone in Singapore could repeat Chris’s accusations and end up getting sued.  It is notable that no one has threatened to sue me yet despite the very serious questions I have raised (though Kumaran Pillai at TOC lied and told me he had received a phone call from Temasek ordering him to take down one of my posts but could not produce any evidence when asked). This is because I make sure that what I write is accurate.

Ultimately the only way we are going to answer these questions is through transparency. That is why I have called since 2009 for the privatization of Temasek and GIC and the distribution of shares to Singapore citizens. That is the only way we will get to know what our reserves are really worth and whether the managers have been turning dross into gold or, as I suspect, the reverse.

Ding Dong the Witch / Wizard is Dead?

Margaret-Thatcher-Oz-620Last week saw the funeral of one of the most divisive and controversial figures in modern British history.  Her family should take comfort from the strength of the opposition to her, which is surely an indication of her strength as a leader. Meanwhile many of you have been asking me what I think of her economics or suggesting that we are ‘pro –market’, kindred spirits. So I will try to touch on her legacy and set forth my views below. If you can’t read the whole thing I will sum it up thus: Thatcher was a reckless gambler who knew no economics.

Above all else, Mrs. Thatcher sod for free enterprise and individualism. Her model was Hayek’s The Road to Serfdom and she believed in rolling back the state (State with a capital S) and reducing the share of GDP taken by the state in taxes.

While this was a commendable objective, her abandonment of Keynesian economics and misplaced faith in Hayek and the Monetarist School (via Sir Keith Joseph her intellectual mentor) proved disastrous for the UK economy, initially.   Her experiment in fiscal austerity has parallels with the general enthusiasm today, not least by her heirs in the UK Coalition Government for the benefits of fiscal austerity.  This enthusiasm is based on shaky theoretical underpinnings and its supposed benefits have no empirical support. Recently the most often cited statistical work in support of austerity, Kenneth Rogoff’s and Carmen Reinhart’s study purporting to show a negative correlation between growth rates and debt levels, was shown up by a Ph.D student to have elementary statistical errors. Mrs. Thatcher had in any case scant knowledge of macroeconomics to which she added her own homespun common sense. Not altogether successfully.

Her father was a grocer and she used to help out in his shop so it is perhaps not surprising that her grasp of economics did not rise above the level of elementary bookkeeping. Indeed she treated the British pubic to endless lectures about the virtues of thrift and the importance of not spending more than you earn often accompanied by a Micawberish exposition on the dangers of going into debt.

When I was studying at Cambridge the economic fallacies of her Medium Term Financial Strategy of cutting public spending and tightening monetary policy and the disastrous effects it was having on the UK economy were the most discussed topics in my tutorials. This culminated in 364 economists, including the Head of Cambridge Economics, Frank Hahn, otherwise a vocal critic of woolly left-wing thinking, signing a letter urging her to change course, in 1981.  Of course Thatcher was not one to change course. ‘This Lady is not for turning’ and all that.

She would undoubtedly have lost the 1983 election, ending the experiment with free enterprise and privatization but for a reckless gamble on the Falklands war. By winning that war she instead won a landslide in the 1983 election. With a new Chancellor, Nigel Lawson, at the helm she embarked on a loosening of fiscal and monetary policy that created a housing boom and let the Tories win another term comfortably in 1987.

Ultimately her success went to her head.  She became increasingly overconfident in her abilities and inclined to ride roughshod over her Cabinet colleagues and public sentiment. In a small, newly independent island Nation where the leader is always able to invoke the threat of racial conflict or invasion and economic meltdown to justify repression this may work but not in the UK. Worried about losing the upcoming election the Tory party ditched her in 1991 in truly unsentimental fashion.

I cannot help but respect Mrs. Thatcher’s views on the Soviet Union.  She proved prescient about the collapse of the Soviet Union and foresaw better than most left-wing economists that the system was founded merely on adding more inputs without any fundamental rise in productivity.  To show how unfashionable this view was at the time, I can still remember a BBC programme in which my Economics Professor at Cambridge urged the UK to adopt the Soviet model and leave the EU.  In the same way those who criticize the Singapore model as sharing many of the features of the Soviet one are still very much in a minority here.

In fact in the last years of the Soviet Union their economy imploded and productivity growth went into reverse.  Mrs. Thatcher must get some credit for having hastened this collapse though the main spur was higher US defence spending spearheaded by Reagan, which the Soviet Union had to match but could not afford to.  Reagan was Thatcher’s staunchest foreign ally and they were indeed kindred spirits though Reagan was much too pragmatic to be hung up on the supposed evils of debt!

It is a pity that while Mrs. Thatcher was so prescient about the Soviet Union, she seems to have been blind to the real nature of Singapore’s success.  Like many English people of her generation, she felt that the diverse ( i.e. darker skinned)  peoples of Britain’s former colonies needed a firm hand. Who better to give it to them than rulers like Harry Lee, whom the former British foreign secretary George Brown is supposed to have described as “the best bloody Englishman east of Suez”.  Her boundless admiration for LKY manifested itself in such stunning displays of ignorance as her comment  here that “Her ( Singapore’s)  leaders knew that in a free society it is the people who own the Government, not the Government who own the people.”  Most of her other speeches abound with such fulsome praise for our dear leader’s achievements.

To be fair her sentiments were probably driven more by diplomatic convention rather than by deep-seated conviction. The greatest irony is that many of Thatcher’s policies of privatization and creating a property-owning democracy from the 80’s have yet to be adopted in Singapore.

In Singapore in the intervening years, the degree of state control over every sphere of our economy has increased, as has the size of the surplus extracted from the people. It is difficult to see how an economy where the state owns 80% of the land and 90% of the population live in leasehold public housing can be squared with the Thatcherite vision of a free enterprise economy where share ownership is diffused throughout the population.

Mrs. Thatcher was moulded by the Conservative government’s humiliation at the hands of the miners in 1973 and fixated on reducing overweening trade union bargaining power, which she did through both legislation forcing the unions to adopt a greater degree of democracy and through privatizing and reducing state support for the traditional mining and heavy manufacturing industries. However the direct control exercised by the PAP government here over trade unions through their control of NTUC and through the unions over mush of the workforce would have been seen by her as a violation of fundamental rights to freedom of association and more akin to the Communist model.

As we approach the inevitable end of a similarly controversial and divisive  home-grown  figure we might wonder how history will reassess his legacy once he is no longer there.  I have said before that it will be similar to Tito’s death in Yugoslavia. The iron fist in a velvet glove  who, according to his own spin,  held the country together by a ruthless but necessary suppression of  minority rights and dilution of political power through measures such as the Ethnic Integration Act. Unlike Tito he has been able or willing to use immigration as a tool to maintain what he sees as a favourable racial and religious balance. However , in another echo of the policies of our former colonial masters and something Mrs. Thatcher would have been familiar with, he has also shamelessly made use of and exaggerated racial and religious divisions in order to maintain and extend his hold on power.

About the only thing we can be sure of is that there are unlikely to be any protests or similar marks of disrespect at his passing, though perhaps more out of the customary apathy and fear than from deep-seated affection. Not to mention that in Singapore, protest is illegal.

Singapore, Lagarde Stealing from the Poor to give to the Rich


With reference to my legal action to block our government’s loan commitment to the IMF you may have heard me say that I am not necessarily opposed to giving the IMF more resources.  I must now admit that in light of continuing events in Europe I may have to revise my original statements.

I said that I was not necessarily opposed to the IMF goal per se, for two reasons.  Firstly, it may be beneficial if it prevents another financial crisis like 2008 that led to a catastrophic slump in demand for our exports.  Secondly, my opposition to the loan pledge is founded on considerations of rule of law and democracy. In my view, and that of a majority of other Singaporeans, who find the AG’s arguments extremely evasive and nonsensical, our loan commitment to the IMF is caught by a law that requires it to get Presidential and Parliamentary approval first.

So, I stressed that I had no objections to the IMF’s firewall fund, per se, in order not to co-mingle an issue affecting our rights to representative democracy at home in Singapore, with general opposition to the IMF, already out there.

In fact my action was just a mirror of that taken by the Auditor General who caught a soft loan to the World Bank’s International Development Association, in breach of the same Act.  That loan was scrapped, raised again and put through the correct procedures, namely that Presidential approval was sought (see here).


Before you read any further let’s have a quick quiz. Rank the citizens of these States and Cities in order of standard of living from prosperous to conditions of austerity. In Europe consider the citizens of Italy, Germany, Greece and Portugal. In south East Asia consider the citizens of Taipei, Singapore and Kuala Lumpur. OK, now read on.

I have repeatedly said that (see here) everyone knows that the hidden objective of Christine Lagarde’s request for an extra $430 billion firewall, to which our Finance Minister on behalf of the PAP government readily agreed to make a generous contribution, is to prop up the Euro and to support the struggling peripheral members and their insolvent financial systems. Don’t be fooled by the fiction that Minister Tharman was careful to propagate in his answer to a carefully stage-managed Parliamentary question from one of his backbenchers.  Then he said “There are firm commitments to increase resources made available to the IMF by over $430 billion… These resources will be available for the whole membership of the IMF, and not earmarked for any particular region.”


Anyone who doubts that the bulk of IMF lending is going to the Euro Zone has only to look at the latest IMF quarterly report which shows that 88% of lending is to Europe and the top three borrowers are Greece, Portugal and Ireland.


New evidence has emerged that these countries may not be so meriting of our charity after all.  A new study by the European Central Bank (ECB) (see New York Times report here) has suggested somewhat controversially that the Germans may be being misused. Germans considered the prosperous people of Europe, have been asked to dig deep into their own pockets to bail out the rest of the Euro Zone. But are they actually poorer than the citizens of many of the countries they are being asked to support?


More than that , when I read the New York Times article I got the eerie feeling that that author was talking about Singapore. See this extract:


“The study was based on an exhaustive survey of 62,000 households in 15 of the 17 euro zone countries, which showed that the median net wealth of German households was only half that of Greek households, less than a third of Spanish households and less than one-fifth of Cypriot households. Much of the gap stemmed from the low rate of homeownership in Germany. In the other countries, real estate was the main source of household wealth.”


 While German households were well ahead on measures of income and comparative unemployment rates the survey did have some surprising conclusions such as that Italians are land-rich even if average incomes are low. However, in language that seems uncannily reminiscent of how Singaporeans live, the article goes on to say that

“The fact is that many Germans struggle economically…Although extreme poverty is relatively rare, millions of Germans live in drab concrete apartment blocks, ride the subway and do their shopping at Aldi, the ubiquitous discount grocery chain.”


 Now read this and tell me whether this describes Germany or Singapore? :

“Germans are intentionally misled to believe there is less poverty at home than there actually is…People think we’re the richest country in the world, that we have an especially strong social safety net, but these are just half-truths.”


 Substitute HDB for “concrete apartment blocks” and NTUC Fairprice for Aldi and the article could be describing Singaporeans. The big difference is that we are not intentionally misled to believe that we have strong safety nets. Rather we are told that safety nets will ruin us and that we need a “spur in our hides.”

Of course part of the difference in wealth stems from the lower rate of home ownership in Germany due to greater difficulty in obtaining mortgages and a large stock of rental accommodation. This may be why there is so much grassroots opposition in Germany to lending to the European countries that have been hit particularly hard by the collapse of their housing bubbles.  However when they do buy the majority of homeowners own the freehold of their properties. They are not forced to buy their apartments of average to low quality but steadily decreasing size from a monopoly supplier who retains the freehold. Neither are they forced to buy from government monopolies or cosy Public-Private oligopolies when it comes to the bulk of purchasing decisions. Of course our State managed media and the PAP government relentlessly drums home the message of how fortunate Singaporeans are and how well off they are compared to the citizens of other nations.   I recently saw some propaganda on a PAP support group Facebook page that said, “Just because other people are rich doesn’t mean that you are poor.”


In fact as I have pointed out here, when measured by GDP per hour worked, Singaporeans ranks near the bottom of the leading industrialized nations and well below Ireland, Italy and Spain, three of the Euro Zone economies with the most severe financial problems. (Sadly these international comparisons by the US Bureau of Labor Statistics are ceasing because of the budget cuts forced by the recent US sequestration. This means one of the most important independent comparisons of Singapore’s economic performance will be lost)


Ireland is already one of the major recipients of IMF loans under its recent debt restructuring and bank bailout.  Spain has  received a Euro 100 billion facility from the ECB to restructure its banks. Both Italy and Spain are likely in the not too distant future to require a similar debt restructuring   to the smaller Euro Zone economies such as Portugal, Ireland and Greece.  At this point both countries will probably receive support from the IMF under the new firewall arrangements.  If the Euro Zone crisis worsens, and every indication is that it is far from over, Singapore’s loan commitment is likely to be called upon sooner rather than later. So just like the Germans we are lending to countries whose citizens are much better off than ours.


I cited here the 2009 survey by UBS which showed Singaporeans’ living standards roughly on a par with those of the inhabitants of KL and lagging behind Hong Kong, Tokyo, Seoul and Taipei. The 2011 report (Singapore was mysteriously dropped from the 2012 survey) showed Singaporeans’ real hourly net pay at 40.7 with New York at 100. Dublin was on 101.7, Madrid on 75.6, Milan on 75.3, Lisbon on 65.1, Barcelona on 71.6, Rome on 53.6, Athens on 59.9 and Nicosia (the capital of Cyprus to which the IMF recently lent Euros 1 billion as part of the banks’ rescue package) 93.7.


It is not even clear if net comparisons are appropriate. Though Singapore performs better on comparisons of net pay because of our lower taxes the inhabitants of these European countries receive an incomparably more generous package of welfare benefits from their governments in return for the higher taxes. Medical treatment is largely free in most of these countries and they also have old age pensions and income supports that Singaporeans can only dream of.


Of course the PAP government wants to play the role of generous benefactor internationally with our money.  All authoritarian regimes crave recognition and respectability. It helps to mute criticism from foreign governments. Libya, or Gadhafi’s son, was a generous benefactor to UK universities.  Our scholars are an important source of income for Cambridge University and other elite institutions. It additionally allows them to maintain the fiction of good economic governance.  The IMF is all too happy to oblige.

The PAP could be likened to Robin Hood but in reverse since the rule seems to be give to the rich and keep Singaporeans in austerity.  In fact when will Singaporeans wake up and realise that they live in conditions of austerity, self-imposed and completely unnecessary?

Grace Fu recently strengthened the reverse Robin Hood philosophy by condescendingly saying that the government will shoulder a greater proportion of healthcare bills but that the need for co-payment would remain in case Singaporeans were tempted into “overconsumption” of healthcare (see here).

While there should probably be some need for co-payment I believe this should be capped and reduced for those on low incomes. It is hypocritical of our government to be telling our citizens they won’t be allowed to  ‘over consume’ on healthcare while contributing to supporting countries with generous welfare states where health care is not limited.


In my next post I will be showing how our government plays Robin Hood in reverse domestically. In my rebuttal of Stiglitz, I already touched on the inequity of our tax system. I will add to this with details of our government’s policies on foreign labour and the effects of its monopoly over much of the domestic economy that keeps prices needlessly high.  Until then please try not to give too much money away to the already wealthy.



















Singapore: From Economic Powerhouse to The Sick Man of ASEAN?


sick man Asean

Singapore ‘s economy contracted by 0.6% in the first quarter of 2013 compared with the corresponding quarter of 2012.  On a quarter-on-quarter seasonally adjusted annualized basis the economy contracted by 1.4%.  Since year-on-year growth is now negative does that mean we are now officially in recession?

No. The accepted convention for defining a recession is two consecutive quarters of negative growth.  And thanks to some deft footwork by the Statistics Department the government has avoided that label being applied to the economy.   The result is that technically Singapore has so far been spared a double dip recession even though many Singaporeans might feel as though a thief has been double dipping from their pockets.

Singapore was in fact only saved from a technical recession by the downward revision of GDP growth in the first and third quarters of the year.  Initial estimates of GDP growth at a quarter-on-quarter seasonally adjusted annualized rate in Q1 2012 were 9.8% but this was revised down to 9.5% in the fourth quarter revisions. Similarly a decline of -1.5% on an equivalent basis in the third quarter was also revised down to a decline of -6.3% (see here for details). By taking growth from the previous three quarters and putting it into the fourth quarter, the end result was that fourth quarter growth came in at a positive 1.8% quarter-on-quarter annualized rate

That might have been an end of it but there were more revisions in the first quarter of 2013. Growth in the first and second quarters of 2012 was revised down again while growth in the third quarter was revised up. This resulted in a considerably stronger fourth quarter of 2012 while keeping year-on-year growth barely unchanged at 1.3% compared to the earlier estimated  1.2% (see here for details).

Many Singaporeans have been screaming foul or using the old cliché,  “lies, damned lies and statistics” to describe what goes on with our statistics. To be strictly fair there may have been good reasons for the revisions to earlier quarters. It is true that initial flash estimates of GDP growth are often revised substantially later on in other advanced countries. However in other countries an explanation is usually provided for the revisions. There has instead been a deafening silence on this point from the Statistics Department.

This is no different from our government’s silence  when asked for data about our surpluses and the true state of our reserves. Though in the government’s case it goes beyond silence and borders on active obfuscation. This would not be my blog if it were not to call for reform of our culture of secrecy and for greater transparency and accountability.

In the absence of an explanation from the Statistics Department for the revisions one is inevitably tempted to suspect that there may be some massaging of the figures to prevent Singapore being classified as in a technical recession.  Combined with the other dubious statistics produced by the Department to show rising real household incomes, which I have highlighted here and here, it makes a compelling case for the removal of the Statistics Department from government control so as to lessen the possibility of political interference in the calculation of its statistics. (Again, it wouldn’t be my blog if it wasn’t calling for independence from government control).

The UK Parliament in 2007 passed The Statistics and Registration Service Act 2007 which “established the UK Statistics Authority as an independent body at arm’s length from government with direct reporting to Parliament …rather than through Ministers, and with the statutory objective of promoting and safeguarding the production and publication of official statistics that “serve the public good”.

We need similar reform here coupled with a Freedom of Information Act. I have called repeatedly elsewhere for greater transparency in the general government accounts, which should include all the Fifth Schedule companies and statutory boards, in particular, Temasek and GIC.

However reform aimed at improving the transparency and independence of our economic statistics in the future does not alter the reality on the ground at present. Credit Suisse in a recent research note called Singapore “the sick man of ASEAN” and said that it “must rely on a meaningful improvement in the global trade cycle to register a reasonable recovery”.

While the services sector has held up reasonably well and the construction sector has been buoyed by government infrastructure spending, the industrial production index was by February this year some 18% below its peak in 2011 (see the Monthly Digest of Statistics for March 2013).  Of course 2011 was when the government had just triumphantly announced 14% growth for 2010 driven largely by the sectors (manufacturing and pharmaceutical manufacturing in particular) that are now declining. Labour productivity fell last year by 2.6% with manufacturing leading the way. The fall in productivity is if anything accelerating if the latest figures are added in.

The government is still sticking to its forecast of 1-3% growth for this year. It has been quite effective in the past in producing rabbits out of the hat, particularly when it was able to pull the wool over our eyes by confusing GDP growth (easily manipulable when US and EU demand was growing strongly by the addition of cheap foreign labour) with growth in GDP per hour worked. With the decline in our main export markets accelerating, Chinese growth slowing and several of our main trading partners such as Japan resorting to competitive devaluation to boost exports it is difficult to see where the rabbits will come from this time.  With inflation at current levels the government is not going to direct the MAS to lower its exchange rate targeting to boost the economy.

Paradoxically, just as Singaporeans have not seen the real income gains that one would expect from the high growth rates of the recent past – because most of the gains have accrued to the fixed factor of land as well as the profits and surpluses of the government and MNCs – a slowdown may not initially have too severe an effect on real median incomes. Even more so if it leads to a slowdown in inflation.

The government is fond of talking of a tight labour market and warning that business will face catastrophic cost increases if we tighten the tap on foreign labour but this is contradicted by the fact that real wages continue to lag behind inflation for the bulk of workers. This does not suggest a tight labour market.

Ultimately though rising living standards are dependent on raising productivity and here the PAP government is continuing to fail to perform. If we were moving upmarket into higher value added manufacturing one would expect average wages to be higher in the manufacturing sector than in services but in fact they are lower.

We are stuck in industries that are dependent on cheap labour and increasingly vulnerable to competition from countries with access to cheaper labour supplies while any move upmarket has to contend with similar moves by China and Korea, both with access to much greater R&D resources than us. If our economic recovery is dependent on a recovery in world trade one can legitimately question what “alpha”, or value the PAP are adding. The pejorative title  of “The Sick Man of ASEAN” may well prove to be the most accurate one.

An Open Letter to The Editor of TODAY

I sent this letter to the Editor of TODAY yesterday in response to their misleading report about the IMF loan appeal published on 10 April. However I still have yet to receive even an acknowledgement so I reproduce the text of  the letter below:

18A Smith Street
Singapore 054932

13th April 2013

The Editor

Dear Sir,

I refer to the report on my appeal against the judgement denying me leave to apply for a prohibiting order in the matter of the government’s $5 billion loan commitment to the IMF, published in your newspaper on 10 April 2013.

This is an important case, the outcome of which will determine whether our citizens can enjoy the protection of rule of law and an executive bound by the Constitution. Whatever the outcome I feel it is essential that your newspaper or indeed any State media, report on the case as accurately as possible.

Your reporter Ms. Lee did approach me after the appeal to ask for a written transcript of my oral arguments. Unfortunately I did not have a transcript as my arguments were oral and not read out from a script. However I did speak to Ms. Lee on the phone later and gave her the gist of my arguments. I also sent her links to the written authorities that I had relied upon in the Supreme Court. As my oral argument had taken over an hour and I also orally rebutted several of the AG’s claims I can fully appreciate that it may have been difficult to summarise them in the limited space available.

Unfortunately upon reading the article published in Today it seems that Ms. Lee’s presentation of my argument is based only on the earlier written submissions of 28 January 2013 and does not reflect the oral arguments I actually used in court.

Unfortunately whilst I am sure this was not the intention it has produced a report of the proceedings, which is fundamentally inaccurate and misleading. Worse, it puts arguments into my mouth which I did not actually present.
This was a complex case and even Deputy Public Prosecutor (DPP) Aurill Kam requested that my authorities be excluded on the grounds that they required specialized accounting knowledge. Maybe you will allow me to clarify.

Your report says, “Mr Jeyaretnam, who represented himself in the Court of Appeal yesterday,”

It is true that I represented myself. This becomes meaningful only when you know that I felt obliged to take this course of action because of the Law Society’s previous embroilment of my counsel Mr. M. Ravi. This affected the hearing of my first application in the High Court and I could not afford the possibility that this would happen again at the appeal in the Supreme Court. As my lawyer had settled matters with the Law society by April 8th, we did apply to have him re-instated at the hearing but this was rejected.

You say, “Yesterday, Mr Jeyaretnam maintained that the Government had given a guarantee, but Deputy Public Prosecutor(DPP) Aurill Kam argued that the guarantee contemplated in Section 38 of the MAS Act is a guarantee by the Government to cover “moneys due by” the MAS.”

My arguments were based on the fact that the MAS is a government company as defined in Schedule 5 of the Constitution and that the loan commitment had been given at the behest of the government. In any case, under the MAS Act, MAS is manager of the government’s reserves and not the owner of them. I pointed out that this is identical to the UK where HM Treasury made the loan commitment to the IMF, even though the Bank of England manages the country’s reserves.

You say, “But his application was dismissed last October by High Court judge Justice Tan Lee Meng, who ruled that this article only applied “when the Government raises a loan or gives a guarantee, and not when it gives a loan”.

I argued strongly that the natural and ordinary meaning of the words strongly supports the interpretation that loans as well as guarantees required both Parliamentary and Presidential approval. The Interpretation Act supports this.

However, even if one accepted that the giving of loans were not caught by Article 144 because loans were assets, I also argued and produced conclusive evidence from a variety of authoritative sources that as a loan commitment the IMF pledge should be treated as a contingent liability. Both loan commitments and guarantees are classed as lending-related commitments and contingent liabilities under US Generally Accepted Accounting Principles. The IMF loan commitment should thus be looked at as increasing the financial liability of the government.

I went on to point out that a loan commitment could be likened to writing an option to the IMF allowing them to borrow money from Singapore at a time that was advantageous to the IMF. This interpretation is supported by the accounting rules laid down by the US Financial Accounting Standards Board No. 133, Accounting for Derivative Instruments and Hedging Activities.

The practical effect of extending this commitment was that it was most likely to be drawn upon when the IMF had suffered losses and could not borrow elsewhere. I pointed out that the very term “firewall” used to describe the new commitment suggested that it was money that was to be “burnt” or sacrificed to prevent contagion spreading from, say, a banking collapse in the Euro Zone to the rest of the world’s financial system.

You say, “Mr Jeyaretnam also argued that he has standing as a Singapore citizen and taxpayer to bring forward the application

It is entirely misleading to report that I argued that my locus standi was based on being a taxpayer and CPF holder. I brought up taxpayer status in an, “ If… then” argument.. My point was that if Madam Vellama had standing as a resident of Hougang to bring an action for judicial review of the PM’s unfettered discretion then I had as much right to bring an action as a taxpayer and CPF holder. I pointed out the inconsistency in Justice Tan’s ruling in my case and the court’s concession of standing in Vellama’s case. The conflict between these two rulings was pointed out in an article written by Tham Lijing in the Singapore Law Gazette in February 2013. The Law Gazette is the official publication of the Law Society (See here).

I also pointed out the contradictory nature of the court’s using a distinction between public and private rights as a test of standing. It is an unjustifiable simplification of my argument to say that it was based solely on my having standing as a citizen and taxpayer.

I would be grateful if you would print my letter as soon as possible.

Yours sincerely,

Kenneth Jeyaretnam

A thought experiment. Imagine a situation where one MP from each constituency resigns, is removed or dies….

As you know, our IMF loan case appeal will be heard on Tuesday at 2.30pm in the Court of Appeal at the Supreme Court (See here for details) I hope to see you all there but if you are unable to make it let me explain what we stand to lose.

Originally this was about a $5 billion loan pledge to the IMF. I maintained that this breached our Constitution. I still maintain that.

The President pretended that it had nothing to do with him. The MOF tried to shift the responsibility on to MAS and claim it was nothing to do with them. The President  and the Government contorted themselves, hid behind semantics and arcane Latin phrases and did everything they could to evade responsibility for making this loan commitment without due process. However once it got to court it was the AG defending the government and not a private lawyer hired to defend MAS. And once in court the AG brought up something truly astounding.

As every effort so far to pull the wool over our eyes had failed and as they had been embarrassed by my discovery that the President’s office had already missed one breach of Article 144, they tried to get out of arguing the case by putting forward the argument that I had no standing. In other words, that there was no case to answer because I had no right to bring one.  If I were an individual and this were a private matter that would be my loss. But I was representing every Singaporean and when the judge ruled that I had no standing he ruled that every citizen had no standing, in matters that affect us all. As blogger Andy Wong said on (, this case is not about the IMF any more. That has become a side issue.

In fact, the High Court decided that I lacked standing because it said I could not show that I had suffered special damage and had a genuine private interest. This is what has become known as the locus standi issue. Yesterday someone pointed out to me a fascinating article in the Singapore Law Gazette by Tham Lijing (Locus Standi in Judicial Review: Two Roads Diverge in a Singapore Wood).

As the author points out this decision contradicts an earlier decision to allow standing to Madam Vellama in the case of Vellama d/o Marie Muthu v Attorney General. (It is noted that the AG did not even try to contest standing here ).  For those who have not read his article, I paraphrase his argument below.

Madam Vellama’s case involves Article 49(1) of the Constitution that states:

Whenever the seat of a Member, not being a non-constituency Member, has become vacant for any reason other than a dissolution of Parliament, the vacancy shall be filled by-election in the manner provided by or under any law relating to Parliamentary elections for the time being in force.

However, as Tham says,  the problem is that this also involves a public rather than private right.  It is difficult to see how Madam Vellama has suffered special damage by virtue of being deprived of representation in Parliament.  One might say that her situation is special by virtue of her being a constituent of Hougang. But this answer cannot resolve the inherent contradiction between Vellama and Jeyaretnam.

Tham gives us the hypothetical example where one MP from every constituency resigns or is removed. In this scenario, Madam Vellama would not be “personally affected” vis-à-vis other Singaporeans.  The rights of residents of all constituencies would have been equally affected. Therefore, a strict application of the “personal interest” criterion would deprive Madam Vellama of standing in this imaginary situation.  This exposes the contradiction between the two decisions since how can it be that enforceability of the right to representation in Parliament depends on an irrelevant factor such as the number of by-elections involved.

This piece of judicial logic suggests, as Tham goes on to say, that had MAS offered the IMF loan out of funds that were supposed to be spent on upgrading projects in Hougang, that a Hougang resident should have been able to bring an action as she would be “personally affected” compared to Singaporeans in other constituencies. So that Hougang resident would have had standing but not me (Never mind that I do have a personal interest as a taxpayer, CPF holder and presumably a stakeholder in Temasek and GIC in preventing the government from giving away our reserves). Yet we would both be seeking essentially the same thing, viz. to enforce Article 144 of the Constitution.

To illustrate this consider a situation where a future Prime Minister gets the President to dissolve Parliament and then decides not to call elections within three months as required under Article 66 of the Constitution. Instead he decides to rule by decree indefinitely citing reasons of national security for example.  This would affect all Singaporeans equally and thus no one would be able to bring an action to force the PM to hold an election and to enforce our Constitutional rights.

Recently, in relation to the Locus standi arguments,Tan Wah Piow reminded us all of Thomas Jefferson’s famous quote (see here):

“The two enemies of the people are criminals and government,
so let us tie the second down with the chains of the Constitution
so the second will not become the legalized version of the first.”

For those of you who have not heard of him, Tan Wah Piow is a famous Singapore dissident and  author of “Smokescreens and Mirrors: Tracing the Marxist Conspiracy”. He was a former student  and union activist who was forced to flee and seek asylum in Britain in the 1970s.  Ironically he also was a good friend of our current Finance Minister when the latter studied in the UK in the 1980s.

To return to Jefferson, he  is saying is that the only way to prevent a rogue government is through the Constitution or in more general terms, the rule of law. The PAP is fond of talking of rogue governments which has become synonymous in their vocabulary with another party being elected democratically. The real danger however is not one of a rogue government (Opposition)  being elected but of a future government going rogue. As Noam Chomsky always says  the test of democracy is not how you vote your leaders in but how you vote them out.  If we lack the ability to enforce the Constitution through the courts then we do not have a Constitution and if we do not have a Constitution then we do not have a democracy.

Extending Tham’s example earlier,  consider a situation where at the end of its five-year term a future Government decides to ignore the President’s attempts to dissolve Parliament and  call elections within three months as required under Article 66 of the Constitution. Instead it decides to extend its term and rule by decree indefinitely citing reasons of national security or the national interest.

Many of you if not most will probably think this could never happen in Singapore. However at the time when the Hougang seat fell vacant the PM said that “there are many other issues on the national agenda right now” and noted that Singapore just had a General Election less than a year ago (see here) as a justification for not holding a by-election indefinitely. In this case no one disputed Madam Vellama’s standing to bring an action calling for a by-election and asking for a declaration that the PM did not have unfettered discretion.

If a future PM was to decide to extend his government’s term unilaterally and impose a State of Emergency on spurious grounds (rather like what happened to India under Indira Gandhi in the 1970s) this would affect all Singaporeans equally. Thus given the precedent established by Justice Tan’s decision in the IMF case, no one would be able to bring an action to force the PM to hold an election.

It is thus vital in the interests of upholding our Constitution and the rule of law that this decision be overturned on Tuesday.

I welcome your comments.

The Problem with HDB or Deflating the Housing Bubble-Part 2

7560796-golden-house-and-broken-nest-eggs-reflect-the-dire-situation-of-real-estate-investments-on-the-rocksIn his Parliamentary speech Mr Khaw describes how the government’s asset appreciation policy had allowed some HDB owners to build up substantial nest eggs.

However, Singaporeans have actually been short-changed by their government/landlord because they have been forced to accept housing quality and densities at a cost that in a democracy would be unacceptable.

Kirsten Han a Singaporean blogger wrote about the appalling quality of the high-rise block, higher density estate and smaller albeit new unit that her mother was relocated to under SERS.

Still housing costs might be expected to rise substantially due to economic growth and limited supply. However it is vital that we understand that high cost is to a large extent a result of deliberate government policies. What the PAP refer to as their asset appreciation policy.

First and foremost is the government’s monopoly over land and its control over the supply of housing.

Second is the government’s deliberate decision to increase the population so enormously through immigration and the foreign worker policy as well as the various measures it has taken to make HDB property look more attractive than other investments.

These have helped to push up prices but have perverted the HDB’s original aim.

Mr. Khaw mentions allowing HDB owners to own private property in 1989 as well as the decision in 2003 to allow them to sublet their flats.  However he omits to mention some of the other measures that the government has taken. These include allowing us to use CPF contributions to pay for our housing loans.  This was effectively a big subsidy to housing investment compared to other forms because payments came out of pre-tax income and had the desired effect of pushing up prices. In addition each succeeding Budget has brought more generous grants, which were originally intended for lower-income groups but were subsequently extended, to encourage ever more over-investment in housing.

Ultimately these subsidies and grants are self-defeating because they have just had the effect of increasing prices by the present value of the subsidies (see my earlier blog, “A Bulge in the Pipeline”).  As the CPF subsidy is worth more to the wealthier (though only up to the Additional Wages limit for contributions) it has the effect of diminishing housing affordability for those in most need of public housing.  Indeed HDB has come so far from its original aim that it now serves an opposite function.


Supply and demand
However the biggest contributor to higher housing prices has been the government’s policies on both the supply and demand side. Despite more than a million people being added to the population between 2001 and 2010 the stock of HDB units only rose by some 11,000 units between 2004 and 2009.

USA today also wrote about this problem that the government is creating on both the supply and demand side.
To quote, “ From the end of 2007 through last year, Singapore’s public housing resale price index soared more than 40%.The median price for a four-room apartment rose at the same rate during that time, from $215,000 to nearly $304,000. The actual rise, however, is “more dramatic,” because public housing flats are smaller today than in the past, says Kenneth Jeyaretnam, secretary-general of the Reform Party, a liberal free-market party.

Critics blame the price increases partly on the government’s inability to keep up with demand for public flats as Singapore’s foreign population surges.


The government is the largest landowner in Singapore, meaning “it determine(s) the market value of the flats depending on how much land it releases and the amount of flats it builds,” says Jeyaretnam.” From 2007 to 2009, residential housing flats increased by less than 5,000, while the overall population climbed nearly 400,000, according to government data.


The government has ramped up construction of public housing. But the “root problems” haven’t been addressed, according to Jeyaretnam, namely that the country has too many people and not enough housing.”

Too many people not enough housing. All those extra workers had to be housed somewhere. While allowing PRs to buy flats in the resale market may have marginally contributed to higher prices the biggest contribution has undoubtedly come from allowing owners to sublet their entire flat to foreigners and to hold private property at the same time as owning an HDB (once the Minimum Occupation Period has expired). The labyrinthine and often contradictory HDB regulations present ample loopholes to be exploited and they have been with alacrity by PRs and Singaporeans alike.

Economically renting and buying are more or less perfect substitutes (meaning that price changes in one market will be reflected immediately in prices in the other) and increases in rental yields will push up HDB prices.


These policies have made a mockery of the original intention of HDB . Instead they have been a big bribe to upper middle-income groups who have had the financial wherewithal to exploit these deliberate loopholes and anomalies. This has only served to widen income inequalities.


This government’s policies should have been to remove subsidies which largely benefited those who had more capital to start with and who in a free housing market would have been able to look after themselves.


An illusion of prosperity
Naturally, the asset side of the government’s balance sheet has increased in value as land prices have risen due to inelastic supply and ever-increasing population pressure.  Because of this asset price rise HDB owners have been given the illusion of increasing prosperity.

However there has been a fundamental mispricing in the HDB market in which decreasing time to expiry of the lease has not been taken into account.  HDB properties can be taken back by a future government at the expiry of the lease for no compensation. Yet properties with sixty years or less to expiry trade at very similar prices to new flats with ninety-nine year leases in the resale market. This is completely different from how leaseholds on private property are valued in Singapore. This is also completely different to how leaseholds are valued in any other country in my experience.


The buyers have been sold the fiction that an asset that has to be handed back to the government in at most ninety-nine years, and in many cases much less, will somehow ignore the laws of economics and keep on appreciating forever. Let me repeat that there has been a fundamental mispricing in the HDB market.

Singaporeans have been told by PAP ministers and in particular LKY over and over again never to sell their HDB properties, as they can only go up in value. No government that I am aware of has made such an explicit promise and it can only be characterized as highly irresponsible.  If a financial investment had been promoted in this way by a broker or corporation without any mention of the risks and investors had subsequently lost money, the buyers would be entitled to compensation.

In fact the financial crisis of 2008 and subsequent recession were precipitated by exactly this kind of move to urge mortgages onto buyers who used the assets to fund consumption. For many in the US and the UK as well as the Eurozone this resulted in negative equity and ultimately foreclosure.


The problem is that there is a fundamental conflict of interest between the government’s roles as provider of supposedly low-cost housing for the masses and as monopoly owner of at least 80% of the land in Singapore. This is why the PAP government has had a vested interest in pumping air into the housing bubble.  Until now they have been happy to maintain the fiction that the length of the leasehold does not affect HDB valuations. This is because with the deliberate creation of huge excess demand for housing the HDB finds it profitable to acquire existing HDB blocks from their owners and pay them compensation which is close to the price of new BTO flats. That is because they can vastly increase the density of housing on that area by doubling or tripling the size of blocks and building them closer together.


To gain an exact understanding we need to know how much the state’s land holdings are worth and how this impacts the government’s finances through the manipulation of land prices. This is one reason I called for the value of these assets to be listed In the Statement of Assets and Liabilities that the Finance Minister presents to Parliament every year at Budget time. How To Make A Surplus Disappear Without Anyone Noticing”.

Mr. Khaw’s Speech and Subsequent clarification by Blog


Khaw made two main points:

  • HDB prices were likely to appreciate much more slowly than in the past
  • A commitment to make new BTO flats in non-mature estates more affordable by bringing down the ratio of prices to median incomes from five and a half times to no more than four times (by his calculations)


In the article on his blog he suggested several ways this could be done without affecting the values of existing HDB owners:

  • Shorter leases for the new HDB apartments.
  • A radically different form of lease in which leaseholders would be charged lower prices based on historic land values but then would only be allowed to sell their flats back to the government at prices related to what they had paid for them


The latter proposal is similar to the Hong Kong system for public housing in which purchasers, who have to be below a certain income level, have to sell back to the government at a lower price or else pay back the subsidy they had received between the market price and what they paid. However in Hong Kong public housing accounts for a much smaller proportion of the total housing stock than in Singapore.


It is also similar to proposals from some quarters for flats to be sold at a price reflecting only the cost of construction and not the land cost.  It is hard to see how this is distinguishable from providing rented housing for lower-income groups since the flats in question can only be sold back to the HDB. Except that this ill-thought out proposal would allow those on higher incomes to benefit from the scheme and also provide a put option for existing HDB owners in the event of a crash since they could always sell their HDB flat back to the HDB for the price they paid for them and take out the difference between that price and the scheme price in cash.


Despite Mr. Khaw’s assurances that this would not affect the prices paid for existing flats it is easy to see why this is incorrect. Both measures would have serious implications for the prices of existing HDB properties.


Shorter Leases?


It is hard to see how this could be done without undermining the current fiction that

HDB properties with shorter times to run on the original lease are worth as much as newer ones.  And then what would happen when the government wishes to acquire the flats with shorter leaseholds?  In equity they would have to be paid less than those with longer leases.  Any adjustment of HDB prices to reflect the length of leasehold is likely to have unpleasant consequences for those who have overpaid for HDB properties in the resale market based on the illusion that the government has given them an implicit promise to extend their lease for free by exchanging their existing property for one with a fresh ninety-nine year lease.


Lower Priced But Restricted Housing?


Despite the minister’s argument that this would be a separate class of housing which would not be fungible with existing HDB properties, it is likely that the creation of this option would undermine the current market prices as a large proportion of existing demand was diverted into this new option. In particular it would be likely to make the current mispricing between old and new HDB properties equally untenable.


It would also, in my view, be unattractive for all the reasons mentioned above.




It appears that the government has decided that it will get more support by lowering prices for new owners even if this has the effect of lowering HDB prices generally. Or else it has not thought through the implications carefully enough. There is a more sinister interpretation. This is that with slower economic growth and thus a declining need to expand the workforce through immigration the HDB will no longer find it profitable to increase housing densities by acquiring units from existing owners and paying them compensation that does not reflect the diminution in value caused by a shorter time to expiry of the lease.  Singaporeans who have relied on HDB to be a secure investment that will never lose value may be in for some unpleasant shocks in the future.


In Part 3 I will discuss some solutions to the current dilemma that would allow Singaporeans to own their own homes rather than being leaseholders and dependent on the government.

The Problem with HDB or Deflating the Housing Bubble-Part I

Pictures-how_the_bubble_burst_lg (1)Recent announcements by Mr Khaw Boon Wan in Parliament and on his blog indicate that he is rethinking the role of HDB in Singapore’s future. There seem to be hints that the PAP are abandoning their somewhat euphemistically entitled, “asset appreciation” policy which I call a policy of “deliberately creating a housing bubble “

I warned against the dangers of creating a housing bubble in my earlier blog, “A Bulge in the Pipeline”.   There I also explained how the various government schemes for subsidies and grants were not the solution to housing affordability. Ultimately subsidies and grants are self-defeating because they have just had the effect of increasing prices by the present value of the subsidies.

Latest figures put the number of Singaporeans living in HDB estates at 87%.  That’s nearly everyone.  We need to examine Mr. Khaw Boon Wan’s ideas very closely as they impact on the majority of our population and as immigration policy is so closely intertwined with HDB policy.

What is the purpose of HDB?

Surely the role of public housing should be to provide low cost housing to the people who most need it and not to provide some kind of asset appreciation vehicle? The original purpose of HDB was indeed to provide affordable housing of acceptable quality for the lower income groups.

HDB was born out of the Singapore Improvement Trust set up by the British Colonial government in 1927. The main aim was to resolve the overcrowding and slum conditions downtown in Chinatown and to move people out of their traditional Kampongs.

The PAP had made public housing a central tenet of its election campaign in 1959, promising to provide low-cost housing for the poor if it was elected. After the Barisan Socialis walked out in 1965 the PAP were left without any effective opposition to their policies. The PAP duly dissolved the SIT and set up the HDB.

In most advanced countries, social housing such as HDB is aimed at the bottom 20-30% of the income distribution. Mr. Khaw did acknowledge that housing for the poor was the original intention of the HDB building programme but he quickly glossed over that to state that over time it had come to serve a different function.

There are outside observers especially Americans, acutely aware of the US prime mortgage debt debacle that precipitated the financial meltdown of 2008, who see a whole population’s housing needs being taken care of by a government as the ideal socialist big-government state. Mostly these observers have never visited Singapore, let alone an HDB Estate, so what would they know?  Certainly they will not be aware of the manner in which ‘upgrading’ is used as a weapon to  threaten or  bribe residents into voting for the government which has, through being the sole provider of public housing, unusual power and control over nearly 90% of its population.

Other observers often pro –market liberal or small government advocates view a whole population living and being permanent lease holders in housing originally intended for the poor as being denied democratic rights to own property and even of the universal right to have freedom to live where they choose (the ethnic quota). It has been likened to a state of virtual serfdom like the Soviet Union or other Communist states.

Housing is a basic need whereas the ownership of property is a measure of the level of prosperity and democracy of a Nation.

Currently HDB housing is not fulfilling the role of public housing .  The high price makes it unattainable for too many, the wait list is too long and the restrictions such as typically needing to be married or over 35 or satisfy a racial quota are too onerous.  To quote Kathy Chu for USA today,

“Even so, the surging real estate market has put some pockets of public housing out of reach for Singapore residents like taxi driver Joshua Santhira, 51.

“I can find a flat, but at a price I can’t pay,” says Santhira, who wants to upgrade to a three-bedroom flat from his two-bedroom unit in Singapore’s Yishun area, 20 minutes outside the city.”

HDB is also not fulfilling the requirements of social housing. On my house to house visits I have met many amputees because with the lack of universal health care and inadequate health funding diabetes is a major problem in Singapore. I remember one man all too clearly who was isolated on a floor with no lift.   I say isolated but he was a virtual prisoner in his own home. A robust social housing programme would see him relocated to a disability- access friendly, purpose built unit. Not just a lift to his floor externally but wide access doorways internally, ramps and special bathroom.

Rebecca Lim for BBC news on February 17th  tells the story of a Ms Ng surely a candidate for social housing.

 “Ms Ng suffers from a hereditary skin condition and was only able to undergo surgery recently when a donor paid her medical bill. Her husband lost his previous job after he was hospitalised for an operation in October 2011.

In her one-room apartment she fished out unpaid bills, including one for more than S$400 owed in school fees.”

This story could illustrate many of the problems that those in need of social housing struggle with such as the cost of medical care and the lack of free school education and the reliance on charitable institutions and donations in order to survive. But what is striking here is that Ms Ng and her husband have two daughters and take care of his 12 yr old from a previous marriage yet live in a one room apartment.

Whatever purpose it now fulfills from the time of the PAP government’s expropriation of much of the land in Singapore in the 1960s to now, the original purpose has become perverted far from its original intention.

Government as Landlord

In fact HDB has been turned into a means of both bribing and controlling the majority of Singaporeans. The government through its ownership of most of the land has effectively monopolized the supply of housing to everyone but the top decile of the income distribution.  That elite landowning or freehold-sharing decile includes most of the government which is making the decisions affecting the other 90%. The ivory tower they inhabit is not just a metaphor. Such has always been the case with Landlords versus Tenants.

Never has there been a more clear demonstration of the gap between have and have nots in a population.  Singaporeans are left with very little chance of ever moving up the property ladder to freehold ownership, and an obstacle to the building of a prosperous middle class and a further squeezing of the sandwich classes across generations.   This is of course exactly what the PAP want which is to keep most of the population in a state akin to serfdom. It is impossible to have a democracy under these conditions.

With the PAP as both unfettered government and landlord the people are extremely vulnerable to deliberate government policies and conflicts of interest as well as from the usual mis- steps and U turns.  Beware then the housing bubble, uncapped immigration, insufficient supply of housing stock and now it seems interference in the market value of leases. 

In Part Two, I shall deal with:

Mr Khaw’s policy proposals which have made a mockery of the original intention of HDB and which have shortchanged Singaporeans

The government’s asset appreciation policy and the illusion of prosperity that HDB owners have been given.

Poor housing quality and high densities at a cost that in a democracy would be unacceptable

The supply and demand problem of too many people and not enough housing created by the PAP.

The dangers of Shorter Leases and Lower Priced but Restricted Housing?

And the fundamental mispricing in the HDB market

The danger of a government/ leader ( LKY) / landlord who urges you to never sell.

Now we have to make up our minds about the role that we want  HDB to fulfill. Do we want to continue in a situation where 87% of the population live in government-supplied housing and are virtual serfs because they can never really own their HDB? Or do we want HDB to revert to its role as a provider of social housing for those at the bottom?

How To Make A Surplus Disappear Without Anyone Noticing!

Magic Disappearing TrickIt will come as no surprise to those who regularly read my blog that I am going to start critiquing this year’s budget by drawing attention to the various subterfuges that Singapore’s PAP ruling Party uses to disguise the true state of its government’s finances.  As usual the budget is an exercise in opacity and smoke and mirrors type illusions.

Not Progressive

The PAP has also touted this year’s budget as a progressive Budget aimed at fostering a fairer and more inclusive society.  Sadly, I could not find any evidence of this progressive attitude. Progressive and efficient would mean taxing both employment and investment income equally and also capital gains. It would also mean abolishing special tax breaks and one-off tax holidays. With a broader tax base rates could be lower. Better still would be moving towards a progressive consumption tax in which savings would not be taxed.

There was a lot of noise about a slightly more progressive property tax structure but the net changes were relatively small. The Finance Minister claimed that Singapore’s property taxes are relatively efficient and preferable to other forms of tax. In economic theory this is because the supply of land is completely inelastic and thus economic growth which raises demand for land increases the wealth of landowners without them having to undertake any productive activity. However this would only be true of our property taxes if they taxed just the rise in the value of the land and not any improvements to the land in the form of buildings or other structures.

Of course the state owns 80% of the land so increases in land values directly affect its wealth. I have suggested before that this is the likely motivation behind the government’s obsession with economic growth from population growth rather than from working more productively (see “About Your Landlord”). However the value of its land holdings is not disclosed in the government’s balance sheet despite the fact that this wealth, expropriated with little or no compensation which would be unconstitutional in many countries, belongs to all Singaporeans.

Apart from that, Budget 2013 merely continued an established tradition of a limited number of ad-hoc handouts.

There is nothing progressive or long term or effective in the budget that I can see that would help the majority of Singaporeans.  Yes, no surprises here. The PAP continues to rigidly adhere to a disastrously flawed economic policy and by failing to provide the necessary transparency hopes to prevent discovery of the true state of the finances.

 No room for spending?

 The PAP continues to insist that it is running a balanced budget with no room for additional spending without going into deficit.
I would like to be able to contest that assertion irrefutably but unfortunately the data is not provided as this year’s Budget again fails the basic tests of transparency. (For a breakdown of how last year’s budget failed the basic tests of transparency I humbly refer you to a paper  I wrote then that you can find on the Reform Party website here.  I hasten to add that this is not a political blog and has no partisan political view but that paper remains the only authoritative break down of the budget for last year.)

There is an accepted format for the layout of budgets prescribed by the IMF. Last year I asked why the Budget could not be set out in the format prescribed by the IMF. In July 2012 I wrote an open letter to Christine Lagarde (see here) asking this question in more detail and that latter was published by the Huffington Post.  I said there that :

 The foreword to the IMF manual sets out an analytical framework for budgets and states that one of the aims of the framework is to provide an early warning system as to when things start to go wrong.

It is particularly relevant because Tharman was appointed Chairman of the International Financial and Monetary Committee of the IMF. One would expect that these positions would be given to the finance  ministers of nations which  demonstrated best ( IMF) practice. But maybe Lagarde gives these positions to those nations who will most be able to support her political agenda. Singapore’s lack of transparency must be especially comforting to her in that case.

Specifically lacking in  Budget 2013 are the figures for  net interest earned and investment gains or losses on financial assets and liabilities. It also does not include a value for the state’s land holdings or for receipts from land sales.

The only information available to us is the Statement of Assets and Liabilities that is more than a year out of date. This barely helps us gain some picture of the true state of the government’s financial position and the size of our net assets particularly as it comes without any explanatory footnotes or an explanation as to what accounting policy is followed.

As the stocks of financial assets and liabilities are more than twelve times the flows represented by revenues and expenditures any losses in the former can easily dwarf any surpluses in the latter.  We see no reason not to have full transparency, as secrecy can only be conducive to lack of accountability, even to mismanagement and potential corruption.

The Monthly Digest of Statistics shows a government surplus of $36 billion for 2012. This is not the general government surplus, a wider measurement of the surplus that is shown In the Yearbook of Statistics. In 2010 it was about $28 billion while the government surplus was “only” some $15 billion. This suggests that the general government surplus for 2012 is likely to be considerably bigger. Leaving aside the question of discrepancies in the accounts and possible doubts over the veracity of these surpluses, and also whether GIC’s performance has been extremely poor (which I have raised elsewhere), it is clear even under the most conservative assumptions that the Finance Minister has considerable room for additional spending.

Even on the basis of the limited and partisan information presented in the Budget, one can clearly see that the Finance Minister has been extremely tight-fisted. The PAP has taken back a chicken while giving out a drumstick. The Basic Surplus in 2012 was $3.6 billion. At a very minimum this should have been carried over for additional spending/transfers or tax cuts this year. And that is before the Net Investment Returns Contributions (NIRCs).
Smoke and Mirrors with the NIRCs?

Despite the fact that the 2012 NIRC, which at $7.65 billion is roughly 20% of the government surplus for that year, is supposed to be available to fund current spending, this contribution is again almost entirely offset by the Finance Minister’s top-ups to Endowments and Trust Funds. In 2012 the Finance Minister transferred $7.40 billion into Endowments and Trust Funds. Most of this money is not spent. For instance in 2012 the Minister transferred $2.95 billion into the GST Voucher Fund and proposes to transfer $3 billion this year. Yet the cost of the GST Voucher Scheme was funded out of Special Transfers, which come out of current spending. Indeed it just seems to be an accounting book entry to keep these funds reinvested in our SWFs without ever having to sell or realize any investments. Thus Singaporeans do not see much immediate benefit from the NIRCs. In 2013 the FM has again allocated $5.59 billion to top up these funds.

By moving so much money into these special purpose funds the objective of Parliamentary scrutiny and accountability over their use is defeated. The performance of these funds does not appear to be debated in Parliament even if the FM is required by law to put the accounts before Parliament and the President.  There is not even a line entry for the $2 billion National Productivity Fund in the Government Statement of Assets and Liabilities despite an Act of Parliament being required to set it up. Neither is it possible to find accounts for either the Productivity Fund or the National Research Fund even though they are required by law to submit their accounts to the Auditor-General and the Finance Minister is required to present them in Parliament as soon as practicable.

I had previously written about this topic here raising these points. Yet again, the Budget debate has come and gone without any MPs, whether PAP or Opposition, probing the lack of transparency in the government’s accounts and the true state of our reserves.

Lies, Damned Lies and Statistics

I am highly sceptical of the government’s claims that its measure of real incomes per household member accurately tracks the experience of most Singaporeans. If real wages have risen that would suggest the PAP have miraculously managed to repeal the laws of economics.  An elastic supply of labour, brought about by the PAP’s immigration and foreign worker policies, coupled with an inelastic supply of land is likely to lead to falling returns to labour, exacerbated by lack of competition and stagnant productivity growth.  Firstly, falling numbers of children and the high cost of housing is likely to have resulted in households with more working members and this would naturally boost incomes per household member perhaps quite significantly. Secondly the CPI undoubtedly understates the real rise in housing costs, which is a big component of the index.  This is because the Statistics Department uses an imputed rental for owner-occupied housing, which is not an accurate way of capturing the rise in housing costs. In line with the practice in other advanced countries the Statistics Department should use an index of mortgage costs plus depreciation and maintenance costs. However Singaporeans do not own their housing but hold it on a 99-year leasehold. Therefore any measure of housing cost would have to factor in lease amortization, which is likely to be much higher than depreciation. As HDB prices have risen over the last five years so will the amortization costs, which need to be factored in. Thirdly the large number of new citizens and PRs, who would likely be on higher real incomes than native Singaporeans and have fewer dependents, is also likely to have a positive bias on this measure.

Nor can I find any foundation for the government’s claims that over a lifetime a young low-income family with two children can expect to receive more than $600,000 in benefits. Firstly is this figure net of taxes paid? Secondly much of this benefit figure does not represent real costs for the government but are a consequence of its monopoly control over much of the economy. Land costs are inflated because the government owns most of the land and uses its monopoly power and immigration policies to keep prices much higher than they would otherwise be. So Singaporeans are forced to pay considerably more for housing than they otherwise would. It is like saying you can only shop at one store which charges prices 100% more than anywhere else but then offers you a 10% discount and calls that a subsidy. The same goes for many other costs that are inflated because of the scarcity of land but the returns to land go to the PAP government. Thirdly the figure of $600,000 fails to take account of the taxes and other contributions that their children will make over their lifetime.


 Without full transparency, the yearly Budget presentation is a meaningless exercise. If the government’s Statement of Assets and Liabilities and its surpluses buried in the Yearbook of Statistics have any connection with reality then it is hard to understand why it needs to save so much and cautions incessantly about the need for tax rises if we are to have more generous social safety nets. This is particularly the case if one considers the enormous value of the state’s land holdings which should be on the balance sheet. It is especially puzzling because the government’s plans to boost the working age population through continued mass immigration will be likely to swell the basic surplus in the future, especially as there is no burden on the current generation of workers of having to cover unfunded pension liabilities or health benefits for retirees.

Singaporeans would surely be better off curbing the growth of new citizens so as to prevent their shares in the state’s assets being diluted especially given the sacrifices they have made to build these up. However the PAP government is only interested in maximizing the size of the total assets not in maximizing the value of assets per citizen. If the bribe of citizenship makes individuals more likely to vote for them then the PAP have an additional incentive to do so. I have likened this in the past to a game between corporate management and shareholders. The management tries to dilute the shareholders by issuing more shares to their allies if the existing shareholders try to make the management pursue policies that maximize the value of their shares rather than policies that benefit management such as increasing the size of the company (because this means they get paid more).

Despite all the talk about a strong Singaporean core that must be precisely why the PAP is creating so many new citizens. There can be no other explanation otherwise the government’s policies do not add up. Meanwhile a policy of secrecy and obfuscation, as exemplified once again by Budget 2013, conceals the real size of the cake and the (poor) performance of the managers of the cake. Even money supposedly available for current spending is recycled back into the pool of assets and locked up again. We are constantly told that the only way to have greater spending or transfers is either through higher taxes or more immigration.

It is time to nail this lie once and for all. That is why I have consistently advocated the privatization of Temasek and GIC and the distribution of shares to Singaporeans with a certain number of years standing to create a shareholder democracy (see Chesapeake and Temasek: A Tale of Two CEOs and Shareholder Democracy

The PAP’s White Paper on Population reveals that the government has all the benefits of surround sound and a wide screen picture at the cost of losing the plot

For the last three years the Reform Party has been saying that the PAP has only one economic idea. That they have rigidly adhered to this idea for fifty years despite all the evidence that the idea itself is bankrupt. Far from producing an economic miracle the PAP government has no plan for making Singaporeans better off or providing our citizens with a brighter future. In fact they have subjected us to twenty years of austerity and denied us even the most basic financial safety measures as enjoyed by citizens of countries without our wealth. We the citizens of Singapore have built up that wealth through the sweat of our brow for our old age, our children’s and our grandchildren’s future and we have yet to see any return on our investment. We do not enjoy free health care.  We do not even have the right to free schooling and we have little chance of paying off the mortgages on the HDBs that we do not really own.

This one big idea that the PAP has is to produce high GDP growth.  This economic growth is generated purely by adding more inputs of labour and not using those inputs more productively. In other words population increase is not something that is planned to improve our lives but that is absolutely necessary to keep the PAP economic model from stalling and failing. It is an extensive model and as long as there is surplus labour somewhere in the world it can continue to run. However it is becoming clear that in their view there is no upper bound to Singapore’s population as long as they can feed the machine of GDP growth with inputs of cheap labour.

The ultimate irony is that the GDP figures themselves are not ones that any government would even boast of. When GDP per hour worked is used instead of GDP per capita that the PAP likes to extol.  Even the PAP themselves are beginning to admit what the Reform Party has been saying for three years: namely that our productivity is abysmally low.


In fact the proposed population increases will only serve to make our lives more miserable and offer no benefits whatsoever.

We are not surprised that the Population White Paper has set a new target for total population of 6.5 million to 7 million. The former figure is almost certainly an underestimate in any case since if we extrapolate from the population growth rates over the last two years we reach a figure of close to 9 million by 2030. It shows that the ruling party is completely incapable of any original economic thinking.

In the 1990s Paul Krugman pointed out that Singapore’s economic development was based largely on adding more inputs rather than using those inputs more productively and that growth would slow down. However by relaxing the labour constraint the PAP government has kept the profitability of capital from falling despite the dismal productivity record and kept economic growth rates relatively high. This has had little benefit for the median Singaporean worker (

In my rally speech in the by-election I drew attention to a survey from UBS in 2009 (UBS mysteriously dropped Singapore from subsequent surveys), which found the average Singaporean worker’s real income to be around the same as his counterpart in KL and substantially below those in four other Asian cities (Tokyo, HK, Seoul and Taipei).   Since 2009 the Reform Party has continually drawn attention to the fact that Singapore’s high rates of economic growth are no miracle, being based not on underlying productivity growth but merely fuelled by an enormous increase in imports of cheap foreign labour (

There is also a more sinister implication. With the big planned increase in population the people become more dependent than ever on the government to ensure that enough homes are built and infrastructure is improved. Certainly combined with the subsidies for housing that we have criticized, this will continue to push up property prices which is undoubtedly the government’s intention as the ultimate monopoly owner of land in Singapore.

The Government’s Justification


The real economic reasons for the government’s undiminished eagerness to allow in large population inflows have been briefly discussed above and will be the subject of another article to appear shortly.
However the justifications given are full of fallacious reasoning and non-sequiturs.

The White Paper begins by stating the obvious fact that productivity growth is the only way to generate real increases in incomes. The Reform Party has always said that. However the Paper sets a target of 3-5% GDP growth p.a. from now to 2020 without providing any explanation as to why this is necessary or desirable. It then works backward from that to say that with productivity growth of 2-3% p.a. (over ambitious given Singapore’s poor productivity record-GDP per hour worked rose by only 0.1% p.a. over the period 2007-2011 according to the US Bureau of Labor Statistics and the bulk of that appears to have been due to some highly suspicious revisions of prior year data that our Department of Statistics have yet to explain) to say that we will need workforce growth of 1-2% p.a. to reach that target. But why this target in particular? Presumably the likely shortfall in productivity growth will provide an excuse for an even bigger population increase. At our stage of development and given our limited resources of land there is little justification for economic growth to be much in excess of productivity growth plus the growth in the domestic workforce. We are not against allowing in more skilled immigrants and entrepreneurs who can create higher value-added jobs for Singaporeans or immigration to offset our fertility rate which is so far below replacement rate. However the PAP seem to have plucked this growth target out of thin air to justify their projected population levels.

The White Paper cites three pillars of the new plan:

  1. Maintaining a strong Singaporean core
  2. Creating Good Opportunities for Singaporeans
  3. High Quality Living Environment

Maintaining a Strong Singaporean Core


The government proposes to convert up to 25,000 PRs into citizens every year while admitting the same number of PRs so as to keep the number of PRs unchanged.  The ostensible purpose is to address the falling birth rate with our fertility rate  (TFR) now having fallen as low as 1.2 per woman. This will result in an enormous rise in the ratio of retired people to the working age population over the next twenty years. However the PAP were the engineer of this precipitous drop in the birthrate when they adopted the Stop at Two policy in the 1970s and the even earlier One is Enough slogan aimed at lower-income mothers with encouragement for sterilization and penalties for having more than two children.  Changing trends in fertility rates has been likened to turning a supertanker. It takes a lot of time and effort. This policy was abandoned in the 1990s and efforts were made to encourage women to have more children. However until very recently the whole thrust of government has been to encourage more immigration rather than invest significantly in encouraging mothers to have more children.

Our spending on education has been among the lowest as a proportion of GDP of advanced countries. Our education system has been neither universal nor free. Despite the recent increase in subsidies the cost of pre-school education continues to be a major concern for many middle-class parents along with the high cost of tuition fees that are seen as necessary if children are to stand a chance of competing in our test-driven system. The recent enhancements to the Marriage and Parenthood package do not begin to go far enough to address these disincentives. In addition the subsidies are oriented more towards those who are already well off through tax breaks like the Working Mothers Child Relief and the Parent Tax Rebate as well as the Child Development Account.

In any case, even if fertility rates do not rise, the reasoning behind the idea that we need a big increase in the total citizen population to reverse a projected drop in the working age population is faulty. We should always try to attract talented and highly skilled workers and those who are creating businesses that employ Singaporeans However it is difficult to see why we need to create many more new citizens than needed to maintain the pool at current levels or allow for modest growth.

Firstly we can to some extent draw on the pool of senior citizens who are currently under-employed to make up for the shortfall in the number of workers below 65. At the moment many of them would like to work for longer but face competition from younger foreign workers. Advances in medicine on the horizon are likely to continue to extend the numbers of years in which they enjoy good health, probably considerably.

Secondly productivity gains may more than offset any labour shortfall, particularly if simultaneously we make more use of the pool of older workers. Allowing business unlimited access to supplies of cheap foreign labour will act as a disincentive to productivity gains. In addition advances in robotics may mean that even unskilled assembly operations can be competitive in high-wage countries and replace low-skilled service workers in some areas while advances in intelligent software mean that even relatively skilled jobs can be automated.  For example there is a big hollowing out of the legal profession in the US because of software advances that replace the need for much repetitive work.

Thirdly at present we do not have a welfare system akin to that in the social democratic countries of Europe or Canada or even the US. Given the austerity that older generations of Singaporeans have endured to build up the assets of Temasek and GIC, it is arguably discriminatory to enfranchise a large number of new citizens who have not made the sacrifices but can expect to reap the rewards of the dividends from those assets.

The policy of admitting so many new citizens also discriminates against our male citizens who have endured the economic loss of two years of National Service for which they are paid slave labour rates. The new male citizens, unburdened by NS reservist obligations and younger than their Singapore counterparts, are also likely to be more attractive to local employers.

Thus the PAP government’s case for admitting so many additional citizens is tenuous at best. It is completely fallacious and betrays a poor understanding of economics to jump from the assumption that with a smaller Singaporean workforce employers may not be able to find enough workers to the conclusion that our young people will have to leave for jobs elsewhere. In fact with fewer workers wages are likely to rise and this may encourage people to have more children thus reversing the decline in fertility rates.

Creating Good Opportunities for Singaporeans?

Another non sequitur is the government’s claim that it is creating good opportunities for Singaporeans through this policy. The argument is that allowing in less skilled workers allows Singaporeans to move up into higher value-added occupations. While specialization and division of labour are obviously key determinants of productivity growth and higher living standards, foreign workers do not just take jobs Singaporeans do not want. Employers can also bring in an unlimited number of employment pass holders and the minimum salary for this starts at $3,000 for young graduates.  They thus compete directly with our graduates despite the men not having had to do NS. The MOM provides no breakdown of how many Employment Pass holders there are within the total number of foreign workers.

In any case, despite the growing number of Singaporeans with tertiary education and in the PMET category, tertiary education is increasingly becoming a minimum level qualification in the global labour market. On top of that there are still a large number of low-skilled Singapore workers and these compete directly with foreign workers. While it may be true theoretically that the gains from replacing them with cheaper foreign workers could compensate them for their job losses or lower incomes this is based on an assumption of full employment and that the government compensates them for their loss. The first assumption does not apply in the real world while the second is not borne out in practice.

The White Paper also cites Singapore’s poor productivity record and makes reference to government efforts to improve it. It is hard to see the connection between that and population policy. In fact they are inversely correlated since cheapening the cost of labour through making it much easier for businesses to bring in foreign workers is likely to dampen the need for productivity improvements.

High Quality Living Environment

It does not follow logically that in order to create a high quality living environment we need to add another 1.5 million people to our already crowded island. Most Singaporeans would agree that it is rather the reverse. The implication from reading the report is that we have to accept the increase in population or we do not get the investment. The PAP government is still playing catch-up in terms of infrastructure to cope with the current levels of population and many of the figures given imply that they will barely keep pace with the projected rise. For instance the White Paper says there will be a 30% rise in the number of acute hospital beds by 2020 but is silent on plans beyond that. This is just in line with the projected rise in population up to 2030 but which is likely to be a considerable underestimate.  In addition it says land has been set aside for 700,000 new homes without indicating that they will be built.

The White Paper is noticeably silent on how much green space will actually be left after the projected increase in population and how much new land area will be developed.

The RP’s Alternative Policies


A Rational Immigration Policy


While acknowledging the desirability of importing low-skilled workers to allow Singaporeans to be redeployed to higher value-added jobs the reality is that foreign workers compete with Singaporeans across the board and increasingly in PMET occupations. Therefore we would adopt a cap on the total number of foreign workers above a certain salary level that could be varied in line with economic conditions. Entitlements could be auctioned by the government ensuring that they go to the most productive sectors in a manner similar to the way COE is auctioned today.

Minimum Wage


The Reform Party would introduce a minimum wage and stricter regulation of working conditions to protect our low-skilled workers. This would also act as a spur to get employers to use labour more productively.



Child Benefit


We would alter the current Marriage and Parenthood package to reduce the tax breaks and incentives given to better off mothers. In particular we would abolish the Working Mothers Child Relief, which is a big tax break for the wealthy.

At the same time the RP would increase the help given to lower-income families with children through such measures as child benefit payments for lower-income families.  We would abolish fees for education from pre-school through to the end of secondary school and introduce universal health insurance, which would be a big improvement on the current patchwork.

If  necessary we  would raise taxes on single people and no-child families to fund the additional help given to families with children though this would await a review of the true state of the government’s finances.

Invest More in Education
The government currently spends only around 2.8% of GDP on education which is one of the lowest in the world. By comparison Sweden spent some 8% of Gross National Income in 2005 and the UK and the US both spent over 5% of GDP. The Reform Party would raise education spending, make education universal, free and compulsory up to secondary level. We would also look to broaden access to and improve the quality of tertiary education here so that more of the population can study here without having to go abroad which contributes to the brain drain.

The RP would also increase the resources devoted to retraining older workers  so as to make use of this underemployed pool



The paramount focus of any government should be making its citizens better off. The best way to do this is through accelerating the productivity growth of the existing workforce through encouraging automation and investment in education and training. Singaporean business should be encouraged to move into higher value-added activities paying higher wages.

This White Paper signally fails to make any case for why we need to increase our population so markedly to achieve the objective of making the people better off. In fact it is likely to lead to the reverse.   A series of non-sequiturs and glossy photos does not convince anyone. In fact the PAP government is being typically disingenuous in not disclosing the real agenda behind this White Paper.


Kenneth Jeyaretnam


Filing of Our Submission in the IMF Loan Case

At Violet Netto's office 25012013Today I was at Madame Netto’s office to file my appeal in the case of the IMF Loan Commitment  (Civil Appeal No. 154 of 2012). I expect the appeal to be heard sometime in April and hope for your support, both financial and moral. There are of course important constitutional issues involved, such as the sovereignty of Parliament and the function of Parliament and the Executive Presidency (EP) as a check on the Executive. There is the need to achieve greater transparency and accountability over how our government uses our reserves and particularly over its management of Temasek and GIC. There is also the moral question of why we should be prepared to commit $5 billion of our hard-pressed citizens’ precious money to support the profligate lifestyles of Eurozone members. While Singaporeans have had fifty years of never-ending austerity the citizens of these countries have long enjoyed a full-blown welfare state with free medical care, old age pensions and other benefits not available to us. $5 billion is more than our government spent on health in 2012.

Unfortunately our case failed at the first stage. The judge held that not only did the government not have to obtain Parliamentary and Presidential approval for a loan but that we did not have the locus standi to bring a case since it affected all Singaporeans. In so doing he removed an important constitutional right. He also opened the door to a possible future rogue government being able to give away all our reserves without any citizen being able to do anything about it.

Our appeal is on both these points. Not only do I think that the judge erred in agreeing with the AG that we had no locus standi to bring an action but I believe that even if you agreed with the government’s interpretation of Article 144, the IMF loan commitment is in the nature of a guarantee not a loan. Furthermore the IMF will pay close to zero interest should they draw on the loan. It involves almost certain loss for our taxpayers and CPF holders and thus the loan commitment should be viewed as a liability rather than an asset.

It will be interesting to see how the Court of Appeal views our arguments. I hope to be arguing the question of whether this is a liability or guarantee rather than an asset myself while M. Ravi should be arguing the locus standi issue. He has certainly done a lot of work on this.

2012 stats in review

The guys from stats prepared some stats for  me which I am sharing with you.  Sadly  November, December and January have been largely inactive due to IMF appeal work and  holidays. Happy New Year everyone!

Here’s an excerpt:

19,000 people fit into the new Barclays Center to see Jay-Z perform. This blog was viewed about 150,000 times in 2012. If it were a concert at the Barclays Center, it would take about 5 sold-out performances for that many people to see it.

Click here to see the complete report.

Why I will be appealing the IMF Loan Judgement

Issued by Kenneth Jeyaretnam on 22 November 2012


On 22 October 2012 Justice Tan Meng Lee decided to dismiss my application to have Singapore’s $5 billion loan commitment to the IMF quashed on the grounds that it violated Article 144 of the Constitution. The learned judge chose to rule that Article 144 did not apply to a loan commitment. On this I believe we have good grounds for an appeal. A loan commitment cannot be regarded as anything else other than a liability akin to a guarantee.

Locus Standi

Unfortunately in fighting to stop an action based on an ambiguous aspect of our Constitution a completely different aspect of our Constitution was thrown into peril.  The learned judge ruled that I had no Locus Standi to sue the government on an issue that affected all Singaporeans equally. In this a vital constitutional right  was removed from the citizens of Singapore almost as an aside, causing a well known legally qualified commentator to refer to the judgement as, “ The day our Constitution died” .

What we have achieved so far.

Even without an appeal this case has established on public record several important points:

  • We have proven that the Office of the Elected President is toothless and that his Excellency’s office can be completely unaware of constitutional breaches by MOF as in the case of the promissory note to the World Bank. That the Office of the President is without a clear frame of reference is demonstrated by the fact   that my letters to the President were erroneously referred to the MAS.
  • The MOF initially relied heavily on its assertion that MAS is an independent entity that can do as it wants with our money. We argued that MAS as a schedule 5 corporation was under the jurisdiction of the MOF and in this we were right. It is unlikely that the MOF will ever again try to claim that MAS is an independent entity.
  • We have shown that the Constitution is so ambiguous as to be open to different types of interpretation yet one of the fundamental elements of Rule of Law is that the Law must be unambiguous so the discretion of public officials is removed. The AG must surely now recommend that Article 144 be re worded so as to fulfil one of the fundamental conditions for rule of law.
  • We have forced a potentially embarrassing ruling demonstrating an ignorance of the accounting definition of liabilities and assets, to go on public record where it can be scrutinised globally.
  • We have shown that the AG on behalf of the MOF would rather fight a case through semantics and narrow technical definitions than do the right thing by the people and err on the side of democracy by taking the loan commitment back to Parliament and the President for approval.

Taking into account the enormous risks and costs involved and having achieved so much already I have considered whether there is any merit in launching an appeal. Conversely if the Court is correct it matters not how blatant, how transparent or how deliberate the breach of such a constitutional provision is; the simple and inescapable consequence is that no citizen may challenge it. The learned Justice Tan’s judgement on Locus standi must be of grave concern to all citizens of Singapore and of the common wealth.

Such a conclusion does not sit easily with a country that, at least in the eyes of the West, aspires to be thought of as a democracy and I believe that on this point at least there are good prospects that the Court of Appeal would not uphold the judgment of the single judge.

Seven days ago I announced via social media and my blog that the cost implications of losing an appeal were enormous and that the AG was asking for security of S$20,000. The public  immediately began pouring thousands of dollars into a fund for an appeal,  Ordinary citizens of Singapore, already squeezed by two decades of austerity, have given this money in sums as small as $2:00. There never could be a greater demonstration of public interest and concern about our constitutional rights.

After much thought and taking into consideration the advice of legal experts and considering the enormous amount of public interest and support I have reached the following decision. The ruling regarding locus standi is of such paramount public interest that it demands an appeal. Also, if the learned judge’s interpretation of Article 144 is allowed to stand, then any future government can take heart from knowing that they can give away our entire reserves without fear of being challenged and that the President has been shown to be unable to stop them.

Notwithstanding the huge risks and the struggle ahead I feel it now behoves to me not to let our citizens down. These good people of Singapore have ensured that we have enough money in the appeal fund to lodge security and file with the courts today.

Let us now hope that Mahatma Gandhi was right when he said,

“First they ignore you, then they ridicule you, then they fight you, and then you win.”

Kenneth Jeyaretnam


Presidential Candidate Tan Kin Lian speaks out on unconstitutional IMF loan, donates $1,000.

Mr. Tan Kin Lian , candidate for Elected President of the Republic of Singapore and economics and finance expert,  just put the following up on his blog. (This is after making a generous donation of $1000 towards the $20,000 needed by Tuesday in order to lodge a bond with the AG’s office so we can launch an appeal.)

IMF Pledge

I have made a donation to the fund for Kenneth Jeyaretnam to take up the issue of the IMF Pledge. He is doing it on behalf of all Singaporeans and deserve our support. Please donate generously.” See for details.

Mr Tan Kin Lian has previously written twice about the constitutionality of the loan that Singapore made to the IMF. He is kinder than me in his writing style but he comes to the same conclusions.   And this is a man whom the select panel deemed fit to run for President of our Republic!  He thinks the loan was unconstitutional and he wants to help me appeal it on behalf of all Singaporeans.

On July 07th 2012, Tan Kin Lian  had raised the issue of constitutionality of the loan here:

Of course he did. As an EP candidate how could he keep quiet? He said, “I am surprised that MAS would give the above type of explanation – as it seemed to defy logic and common sense.”

On July 12th 2012 he wrote an open letter to the Straits Times forum. Here is some of what he said:
” I am. therefore, amazed by the arguments put forward by the Monetary Authority of Singapore that the pledge given to the IMF, as it now stands, did not breach the Constitution. If the position of MAS is correct, it is better for the Constitution to be re-written to reflect the position taken by MAS.

The Constitution is perhaps the most important legal document in the land. The citizens should be assured that they can trust the Constitution to mean what it says, and that the wordings are not interpreted in a manner that defy logic or common sense.
I do not understand why the pledge of this large amount is not submitted for approval by required under the Constitution. Even if there is an urgency for the pledge to be given, it can be given on a provisional basis, and be subject to obtaining the required approvals. I believe that most countries would follow such a process on a matter of great importance. This would reflect a high standard of governance, which is what the Government aims to promote in the corporate world.
Rather than justify an action that is already done, I suggest that the MAS should submit the pledge to Parliament for rectification by Parliament and the President. It is all right to make a mistake and to learn from it.
Tan Kin Lian”
Clearly a man who knows his liabilities from his assets and a man who knows how to have the courage of his convictions. Thank you Mr Tan Kin Lian,  on behalf of all Singaporeans who want to keep their constitution alive.

Spelling Out the Implications of the Learned Judge’s Ruling for Our Rights and Why We Cannot Let It Go Unchallenged

For those of you who may have found the legal language of my statement on the IMF loan case judgement difficult to follow, I will spell it out in simpler language as far as possible. You have lost your right to challenge decisions of the government even where it has acted unconstitutionally as long as the violation of your constitutional rights applies to everyone.


A moment’s reflection should suffice to convince you that this cannot be the case. The learned judge has made a spurious distinction between public and private rights. He uses the example, taken from the Court of Appeal’s ruling in the case of Tan Eng Hong, of a law banning a particular race from using public transport and cites this as a case of a personal right applying to a particular section of the community.  In that situation the Court of Appeal said that only members of that race would have sufficient standing to sue the government because only their constitutional rights had been violated. However the learned judge is guilty of a logical fallacy.  It does not follow from the conclusion that, in cases where only one group’s rights have been violated that group are the only ones who can bring an action,  to the much more general rule that therefore where everyone’s rights are affected that no one has the right to sue.


This is quite apart from the fact that it is difficult to draw a line separating the violation of the rights of a particular group from the violation of the rights of the wider community. While in the case of Tan Eng Hong, it was the constitutional rights of the gay community which were violated, it could be argued that the violation of these rights affects all of us as it makes it possible for any group to be singled out in an arbitrary and capricious manner and destroys the basis for rule of law.


The learned judge also found that the government did not act unconstitutionally in not getting Presidential and Parliamentary approval for the IMF loan commitment. However this relied on a technicality that is debatable. One of the definitions of a liability in the accounting literature is a commitment to make a monetary payment to another party in the future which is to be made at a time that is potentially advantageous to the other party. The IMF loan commitment clearly falls under that definition. Thus this judgement has the capacity to render Singapore a laughing stock in the eyes of the financial community. Perhaps when our Minister of Finance chairs another IMF meeting, he might be quizzed on whether he understands the difference between an asset and a liability.


By shutting out any future challenge to the government even when it acts unconstitutionally, this judgement unfortunately plays into the hands of an elite who would do anything to avoid open debate on the issues on a level playing field. Through mechanisms like the GRC system and the other marks of an electoral system that is neither free nor fair, the PAP have marginalized the Opposition and ensured that Parliament is completely ineffective as a check on the Executive.  The learned judge quotes Diplock, “they [the departments of central government]are responsible to a court of justice for the lawfulness of what they do, and of that the court is the only judge” only to dismiss this later on.


A future government, whether PAP or Opposition, can take heart from knowing that they can give away our entire reserves without fear of being challenged and that the President has been shown to be unable or unwilling to stop them.


I have pledged an advance of $10,000 towards the security for costs that we need to put up if we are to mount an appeal. This is in addition to the $5,000 I have paid Violet Netto and Co for disbursements and the $3,000-$4,000 for independent non-pro bono legal advice from a London QC. While donations have been encouraging (including $1,000 from Mr. Tan Kin Lian) we are still about $3,500 short of our target. We only have two days left if we are to file notice of appeal! Come on, lets show that we will not allow any further erosion of our rights to go unchallenged!

“I find this argument highly insulting and hugely dangerous”

 A very good opinion piece  has just gone up on TR EMERITUS about how the learned Judge’s ruling in the IMF case effectively means that a member of  one race cannot speak up for a member of another race.

As the author Andy Wong says:

I find this argument highly insulting and hugely dangerous.

I have pasted the article here but it is well worth going over to TRE in order to read the comments attached.

Why I am donating to support Kenneth Jeyaretnam

 November 15th, 2012 |  Author: Contributions

“First they came for the communists,

and I didn’t speak out because I wasn’t a communist. Then they came for the socialists,

and I didn’t speak out because I wasn’t a socialist. Then they came for the trade unionists,

and I didn’t speak out because I wasn’t a trade unionist. Then they came for me,

and there was no one left to speak for me.”

- Martin Niemöller (A German pastor who talked about the inactivity of German intellectuals following the Nazi rise to power and the purging of their chosen targets, group after group.)

I read with interest the judgement in Kenneth Jeyaretnam’s IMF loan case [1].  Whilst there are many aspects of the ruling that trouble me, for now I would like to speak on just one point. The ruling brought to mind a famous poem by Martin Niemöller [2] titled “First they came … “, which speaks eloquently of the need not just to speak up for our own rights, but also for the rights of all members of our society.  You have just read it above. If we do not do something to protect others in our society, we will have no reason to expect ourselves to be protected in the future.

The relevant section of the judgement in Kenneth’s case is paragraph 47, it is about “locus standi” and who, if anyone, has the right to challenge the government if they pass an unconstitutional law. It quotes a previous case and includes the follow argument:

Every citizen has constitutional rights, but not every citizen’s constitutional rights will be affected by an unconstitutional law in the same way. For example, if there is a law which provides that it is an offence for any person of a particular race to take public buses, this law would clearly violate Art 12. [...]

However, the mere holding of a constitutional right is insufficient to found standing to challenge an unconstitutional law; there must also be a violation of the constitutional right. In this fictitious scenario, the only persons who will have standing to bring a constitutional challenge against the unconstitutional law for inconsistency with Art 12 will be citizens who belong to the race that has been singled out as only their Art 12 rights will have been violated. Persons of other races will not have suffered violations of their Art 12 rights and will thus have no standing to bring a constitutional challenge in this scenario.

I find this argument highly insulting and hugely dangerous. The reasoning is that I, as a member of one race, cannot speak up to protect the rights of my friends of another race. But are we not all Singaporeans? Do we not have national service to protect all Singaporeans, regardless of race? If a Chinese lady, married to an Indian gentlemen for example, cannot speak up to protect the rights of her husband, then what have we become? But the argument in this case is not really about race, it applies equally to any way to identify and categorise those people who may, versus those who may not suffer some loss in the face of an unconstitutional law. To paraphrase the poem that I begun with:

First they came for the newspaper men,

and I didn’t speak out because the high court of Singapore ruled that only newspaper men can speak out for other newspaper men, and I as an accountant do not have locus standi to speak out on this topic.

But my husband is a newspaper man, imprisoned without trial for seventeen years, and I fear I will never speak to him again.

I am not a lawyer, but from reading what has been published, I understand that this argument regarding locus standi is what Kenneth (at least in part) seeks to overturn in appeal.  I will donate to his cause not only because I think this is an extremely important legal principle, but also because I feel strongly in protecting the rights of all people in our society, not just any one particular group.


Andy Wong”

Andy Wong  has hit the nail on the head. What kind of society will we living in if this judgement goes unchallenged? And make no mistake that the implication is that even if the government has acted unconstitutionality_  yes, that’s right,  when the government HAS broken the constitution, you can’t challenge that if it is a constitutional breach that affects all Singaporeans or a race or group of which you are not a member. Because you need to prove personal damage to be considered to have Locus Standi.

Do you want a Singapore where the high income groups will not speak out against unjust laws that hit the worse off because they haven’t suffered any personal damage?Landed property owners not challenging though a legal suit an  HDB  illegal policy because it doesn’t affect them. It makes a mockery of our way of life , our society, our multi ethnic mix, the basic principles of our representational government if each individual  Singaporean is not also representative of all Singaporeans.

Statement on the IMF loan judgement and appeal for donations

On 28 June 2012 I wrote to Christine Lagarde, Managing Director of the IMF ( In the letter I warned her of the consequences for the future of democracy of trampling on the constitutional rights of Singaporeans for the sake of expediency in obtaining commitments to the IMF’s new global firewall.

I then challenged Singapore’s loan to the IMF in the courts as a last resort after a protracted period when the President and the Minister of Finance refused to respond to my perfectly reasonable letters.
On 22 October 2012 Justice Tan issued a judgement in my suit which must be of grave concern not only to all citizens of Singapore but to citizens fighting for democracy wherever they happen to live.
Let us not forget that the amount of money being loaned to the IMF by Singapore is at $5 billion dollars, more than the entire health budget allocated to all of our citizens for the year 2012 and is substantially more than three times the per capita contributions from Australia and the UK. There was no debate on the loan in our virtual one party parliament.

Prior to the judgement,  Eugene Tan,  a Nominated Member of Parliament, was quoted on 18 July 2012 in an Australian radio broadcast ( as saying about the action:

It would also ensure that Singaporeans who are concerned with certain decisions on policy of the government, you know, have an avenue by which they could challenge it, in a process that would be seen as democratic in way that would engender greater confidence and trust within the whole system of governance that we have in Singapore”

The learned judge has, in dismissing my application for judicial review, has effectively closed that avenue. It is a move which prompted a prominent local legal blogger to write that it was the “the day the constitution died”, (

 Legal Statement

This judgement should be of concern to all citizens of Singapore.

This is because the Court held that I had no right to bring a constitutional challenge in respect of an alleged breach by the Government and Monetary Authority of Singapore of Article 144 of the Constitution in giving a loan to the IMF without either the Parliamentary or Presidential approval specified in Article 144.

It is crucial to distinguish the two reasons why my challenge was dismissed. Most importantly, it was dismissed because I could not show any special damage flowing from a breach of Article 144. The Court therefore implicitly held that even if, in its view, I had made out an arguable case it would still have rejected it.

My case was also dismissed because the words in Article 144 ‘no guarantee or loan given or raised’ did not mean what they appear to say but, rather, meant ‘no guarantee given’ or ‘no loan raised’. On that reasoning, if a loan was given as opposed to being raised this fell outside Article 144 and so such loan – however precarious, however improvident – did not require the constitutional protections afforded by Parliamentary or Presidential oversight.

This short summary, which I will now expand upon, explains why I make this appeal for donations.

No right to challenge the constitutionality of a breach of Article 144

The learned judge did not refer to a clear authority from any court in Singapore to endorse the proposition that a constitutional change to a provision of the Constitution that has no relationship with private law rights can only be challenged if special damage is proved.

If the Court is correct, it means that although Singapore purports to be a democracy with a constitutional separation of powers, there is in truth no means by which a citizen can challenge a provision in reliance on a constitutional provision such as Article 144.

A moment’s reflection suggests that this is unlikely to be correct. Assuming it to be a requirement that special damage has to be established to bring some forms of constitutional challenges, it does not follow that special damage must be proved where breach of a constitutional provision affects all citizens equally and as a matter solely of public law illegality.

If the Court is correct it matters not how blatant, how transparent or how deliberate the breach of such a constitutional provision is; the simple and inescapable consequence is that no citizen may challenge it.

Such a conclusion does not sit easily with a country that, at least in the eyes of the West, aspires to be thought of as a democracy and I believe that on this point at least there are good prospects that the Court of Appeal would not uphold the judgement of the single judge.

Article 144 applies to the giving of a loan

My case was rejected because the court decided to give a purposive interpretation to the words of Article 144.

However, I believe that a purposive approach reinforces rather than weakens my argument.

Put shortly, the purpose of Article 144 is to safeguard the citizen against the creation of substantive liabilities by requiring Parliamentary and Presidential oversight before such liabilities may be created.

The court held that a loan was a benefit rather than a liability. But this does not grapple with the fact that many loans may, in substance (and sometimes in form) constitute a liability.

An IMF loan commitment is akin to a guarantee or a standby letter of credit that Singapore will lend money to the IMF when it has exhausted its borrowings from other sources. In this respect, there is no material difference between this and a bank providing a company with a standby letter of credit that in the event that it is no longer able to borrow in the short-term credit markets, the bank will step in and provide funding. This cannot sensibly be distinguished from a guarantee that is given or a loan that is raised which are undoubtedly within the scope of Article 144.


In my letter to Christine Lagarde, I said that in a robust democracy a government does not hide behind technicalities and dispense with the need to make itself accountable to the people. Unfortunately, by his ruling, the learned judge has enabled the government to do just that.

 A note on the Appeal and Costs

The learned judge also saw fit to dismiss my application with costs awarded to the AG.  As you all know I took this action as a private citizen, an ordinary Singaporean with CPF savings contributing to the central pool.  In this respect although acting on behalf of all of us in the public interest, I have shouldered the costs of this action so far entirely from my own pocket. This was only possible with M. Ravi and his team offering their services Pro Bono. I am now faced with the AG’s costs as well.

I have been asked whether I plan to appeal. The fact is that even with continued Pro Bono legal support, I will certainly be unable to fund the costs of an appeal on my own, however good the grounds.  Whether I appeal or not will depend on the public.

I also need help with the costs of the action so far.  I therefore ask all Singaporeans who are concerned about the erosion of their constitutional rights and who want to see the government held fully accountable for its actions, to make a donation.

As this is not a political campaign, non-Singaporeans can also donate money. No donation is too small, even the price of a Starbucks or a meal in a hawker centre.

We need to raise a minimum of  $ 20,000 to provide security for costs and to pay our lawyers if we are to launch an appeal.  Payment can be made to the PayPal account in my name, using my email address

Alternative you can send a cheque made out in the name of Kenneth Jeyaretnam – to the office of Violet Netto:

101 Upper Cross Street
#05-13 People’s Park Centre
Singapore 058357

Please do not send money directly to the lawyers due to strict regulations governing legal fees and income.

The account will be closed once the target is reached and should there be any excess this will be donated to charity.

MICA’s Response Fails to Reassure

A few days back there was a comment posted on my blog by @Lengyiren drawing my attention to a posting on saying that the government had rebutted my claims about the reserves.  The link to the so-called rebuttal is

This portal is maintained by the brave people at MICA who defamed me in the WSJ by claiming that I had misrepresented basic facts about my father’s bankruptcy and ensured through their control of the media that their version was printed while my right of reply was denied. One can see the MICA trademarks of sloppy editing and elementary grammatical mistakes such as saying “are flowed to” instead of “flow to”.

Actually they do not mention me directly referring instead to “some online postings.” And in fact since it was Christopher Balding  and not me who made the mistakes to which they refer, perhaps the post was solely directed at him.  Nevertheless I felt it important that I respond lest readers think that I am guilty of the same errors.
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Hard Truths or Plain Racism?The Government’s Hypocritical Outrage over Amy Cheong

While we can all condemn Amy Cheong for the unthinking racism of her remarks, we should wonder whether they just reflect the tone of institutional racism that is projected from the very top of the government. Her crime was perhaps that she took her cue from the frequent racist utterances from of our former Minister Mentor which instead of being condemned are labelled “hard truths to keep Singapore going.”  Recently even the Australian PM praised MM Lee for his “straight talk” from three decades ago and said “We never forgot his warning that without reform we would be the “White Trash of Asia”

She obviously did not realise that the latitude accorded to the gods do not apply to mere mortals such as her.  The PM was quick enough to jump on the bandwagon of condemnation from PAP ministers but has been noticeably silent about his father’s remarks. That surely ranks as hypocrisy or double standards to say the least.

She undoubtedly violated her corporate code of conduct. However she was dismissed without being given a chance to defend her actions by going through the company’s usual disciplinary procedure. Should not a reprimand or a written warning have been the first stage as she had already issued an apology? It was a salutary reminder of how few employment rights Singaporeans have. As Subra points out in his Article 14 blog ( it is particularly shocking, or would be to a naive observer, that a so-called government trade union should dispense with due process.

The question of whether she should be prosecuted is another matter. Most countries ban hate speech directed at an individual or group on the basis of their race, religion, gender, sexual orientation etc. The US is perhaps alone in protecting hate speech under the First Amendment to the Constitution dealing with the right to freedom of expression.

One must be careful not to curtail free speech rights just because they give offence to a particular group (for example fundamentalist Christians would no doubt wish to stop the teaching of evolution theory on the grounds that it is offensive to their beliefs). However against the belief in an absolutist right to free speech there is an important argument that hate speech undermines a public good which Waldron (“The Harm in Hate Speech”, reviewed in the NYT, “identifies as the “implicit assurance” extended to every citizen that while his beliefs and allegiance may be criticized and rejected by some of his fellow citizens, he will nevertheless be viewed, even by his polemical opponents, as someone who has an equal right to membership in the society. It is the assurance — not given explicitly at the beginning of each day but built into the community’s mode of self-presentation — that he belongs, that he is the undoubted bearer of a dignity he doesn’t have to struggle for.”

To quote Waldron again, “In its published, posted or pasted-up form, hate speech can become a world-defining activity, and those who promulgate it know very well — this is part of their intention — that the visible world they create is a much harder world for the targets of their hatred to live in.”

But postings like Amy Cheong’s do not occur in a vacuum. It is no accident that we get these numerous instances of hate speech in Singapore. There is not only Amy Cheong but also Shimun Lai, Sun Xu and Jason Neo.  A few years back there was the case of Chua Cheng Zhan, the PSC scholar, who made racist remarks about Indians dominating the Singapore association (perhaps he could not stand the competition!). Yet he was allowed to apologise and let off whereas Amy Cheong was sacked for saying something much milder!

Before that there was the case of MP Choo Wee Khiang who said in Parliament that “One evening, I drove to Little India and it was pitch dark but not because there was no light, but because there were too many Indians around.”   Surely, if they had not been protected by parliamentary privilege, his remarks could have been construed as inciting racial violence. They are qualitatively in a different league from Ms. Cheong’s. I myself have had to endure an onslaught of anonymous online postings calling me “ape-man” and “son of Ah Meng”.

It is because of a climate of institutional racism that is fostered from the very top and that is explicit in the racist attitudes and utterances of Lee Kuan Yew himself. If every citizen should have an implicit assurance, as Waldron puts it,  that he will be viewed as someone who has an equal right to membership in the society, then this is lacking in the case of minorities in Singapore, and in particular in the case of the Malay minority. The latter have always been viewed with suspicion as potential fifth columnists. Many Malays were excluded from national service or when they were enlisted assigned to low security classifications or part-time service. This served and continues to serve to stigmatize them in the eyes of employers.

Similarly the Ethnic Integration Act treats minorities as second-class citizens by denying them the right to live where they want. It also penalizes them economically because they are often unable to sell their property to the highest bidder if the quota has been filled.

The proportion of minorities who are selected as government scholars is also so much lower than their share of the population (and many of those classified as minorities are new immigrants or children of mixed-race parentage). From 2002-2010 the proportion was 5.8% ( but of these only 2.3% were Indians and 1.2% Malays. Surely in any country that wanted to portray itself as not institutionally racist there would be an inquiry and steps taken to either remove cultural bias in the selection process or remedy deficiencies in the education system.

It was only in 2009 that MM Lee gave an interview with National Geographic ( where he said about Malays that “The influence from the Middle East has made them have head-dresses for no rhyme or reason.”  Later in the same interview he said “Well, we make them say the national pledge and sing the national anthem but suppose we have a famine, will your Malay neighbour give you the last few grains of rice or will she share it with her family or fellow Muslim or vice versa?”

In January 2011 the Association of Muslim Professionals felt obliged to issue a statement in response to LKY’s book “Hard Truths to Keep Singapore Going”:

The Association of Muslim Professionals (AMP) deeply regrets certain comments made by Minister Mentor (MM) Mr Lee Kuan Yew in his book Hard Truths to Keep Singapore Going. These comments are in relation to the practice of Islam by the Malay-Muslim community (MMC) where MM Lee had urged the MMC to be less strict in their practice of Islam in order to facilitate integration, and in relation to the issue of gaps between the MMC and other communities in Singapore, where MM Lee opined that the MMC will never catch up with the other communities. We note that these views of MM Lee are not new. It is not clear why MM Lee has chosen to repeat them at this point.

Some of LKY’s other memorable quotes may be found at

His pseudo-scientific theories of racial superiority were acquired apparently from Toynbee, a British historian of the early twentieth century, who published “A Study of History”. While it is now universally discredited and hopelessly out-of-date, it still seems to command a certain support among members of the PAP elite, judging by quotes on George Yeo’s FB page when he was a minister. Toynbee naturally put the white races at the top. Lee Kuan Yew has modified this by putting East Asians at the top above the whites, South Asians in the middle and South-East Asians at the bottom. From his often-quoted comments on the IQ Bell curve, he clearly believes Africans are some way off being human which makes me wonder how he got on with President Obama when they met.

In this climate of officially condoned institutional racism, it is not surprising that Amy Cheong should have felt that her posting was acceptable.  PM Lee was quick to condemn a little person like Ms. Cheong:

“Fortunately the person has promptly apologised for her grievous mistake. But the damage has been done, and NTUC did the right thing in terminating her services.” 

However it is regrettable that he did not adopt the same moral tone in dealing with his father’s comments. Perhaps he should consider setting up a commission of inquiry into what has led to this climate in the first place and what steps can be taken to remedy it. It would seem difficult for the police to act against Ms. Cheong when they have turned a blind eye to some of MM Lee’s more outrageous comments.

How to Make A Small Fortune in Banking (A Further Note on Behind Chamber Doors)

Any day now we can expect the judgement in the IMF loan suit to be announced. I have already written about the absurdity of the AG’s arguments in a previous post, “Behind Chamber Doors” (

The AG has written that the IMF loan is an asset and that Article 144 of our Constitution is intended only to catch transactions that increase the government’s liabilities. I have argued that the natural and ordinary meaning of Article 144 is that both loans and guarantees require Parliamentary and Presidential approval.  This is irrespective of any semantic arguments over whether a loan is an asset and a guarantee a liability. However even if the judge accepts those arguments as valid, which flies in the face of all logic and any reasonable reading of the words, there is a further telling reason why the IMF loan commitment should not be considered an asset. This is that the government will certainly lose money on it even if the money is eventually repaid.

Consider a thought experiment

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A Case of the Pot Calling the Kettle Black?

Recently the Wall Street Journal  reported that Temasek Holdings, with no sense of irony,  was pressing Standard Chartered to appoint more independent directors (  The article went on to say that, despite earlier reports in the FT, Temasek did not have any immediate plans to sell its stake in the bank. I discussed a possible sale of Temasek’s stake in “Roach Motel or Investing for the Long Term: You Decide What Best Describes Temasek’ s Investment Strategy” (

The WSJ article quoted “a person close to Standard Chartered” who said “the dispute stems from Temasek’s desire for the bank to have a supervisory board consisting of just one Standard Chartered executive, with the rest of the board made up of independent directors.” The article went on to say that in its latest annual report Temasek had added a section about governance saying “To provide effective oversight of management on behalf of all shareholders, we advocate that boards be independent of management. We do not support excessive numbers of executive members on company boards.”

While these are admirable principles in practice the sentiments made me wonder how many of Temasek’s board could be said to be independent of the company or its 100% shareholder, the government. I decided to look at the background of the other members of the board, apart from the Chairman, Mr. Dhanabalan and the CEO, Madam Ho Ching, to see how many were truly independent.  I also compared Temasek’s governance framework with the Norwegian Sovereign Wealth Fund to see how far we were following what could legitimately be called best practice.

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