Category Archives: Budget

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


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.

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.

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.

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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Talking about conversation diverts attention from bombshell!

I have highlighted articles from blog spot Article 14 previously on Rethinking the Rice Bowl.  “Subra” states on his blog to be a Singaporean  lecturer in law here and he clearly has the talented teacher’s skill of setting out complex subject matter in a simple, easy to understand manner.  Several very good reasons why everyone should read his latest article:    But he has added a twist that I didn’t notice.

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National CONversation

National Conversation? LOL, as the youngsters would say.  It is just propaganda. The outcomes are pre-decided, the PAP model is rigidly entrenched, it has no parliamentary mandate,  it is an exercise in deflecting us away from  building a functioning democracy. How much tax payer money will be spent on this PAP propaganda machine? It’s not even an election campaign period so doesn’t come out of their own party coffers.

Personally for me the National Conversation is a continuation of the National Silence that I am so used to. Well, until Jim Sleeper of Yale started to make a bit of noise that is. No sooner had he posted an article detailing how I was excluded from National University forums, the National televised debates for GE 2011, National Media and so on than an invite arrived to appear at a forum from the earnestly co-opted NUSSPA.  Thanks Jim! I am sure Jim causing embarrassment from Yale is also behind the sudden magnanimous decision by the PAP to accept Soon Juan’s offer of a $30,000 payment of his fine. Or the PAP have finally realised that they risk not only embarrassment but the creation of another National Martyr under virtual house arrest  in the manner of Aung San Suu Kyi, if Soon Juan is not able to join us in a proposed visit to Yale later this year.

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Where have our reserves gone?

“Let me tell you the  truth, as spending increases significantly sooner or later taxes must go up too.”   Thus spake the PM in his National Day Rally Speech. Apart from that so-called truism, the NDR speech was totally without interest being the usual PAP message of austerity for Singaporeans ( what the PM calls being tough as individuals) but largesse for everyone else.

Let me tell you, the PM’s truth  is actually just one opinion and I believe it is far from the truth. Firstly, we should have enough money in savings to pay for all conceivable heath care needs even with an ageing population. After all in Singapore all health care and the cost of an ageing population is on a pay as you go basis where costs are almost entirely borne by the individual. In fact our population is not increasing, native-born Singaporeans are declining and the New Immigrants are all young.  So spending should not be increasing on a scale to make a tax hike necessary.

Secondly we should have enough savings.

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Auditor General: MOF breached Constitution Article 144 in January 2012.

The Auditor General’s Report for the financial year 2011/12. arrived in the President’s in- tray in July of this year and is now publicly available.   The  objective of the report is stated clearly in the mission statement that precedes it.


To audit and report to the President and Parliament, in accordance with the law, on the proper accounting of public moneys (sic) and use of public resources so as to enhance public accountability.”

It’s a long report almost all of it vital and essential but my attention was drawn  in particular to Part 1B which is an audit of Government Ministries, Organs of State and Government Funds.  Astonishingly the AGO observes that the MOF breached Article 144 of the Constitution.

Under  the heading, ” Ministry of Finance,  you will find the report headed: President’s Concurrence Not Obtained for Promissory Note issued….. 

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Update: In the Supreme Court of the Republic of Singapore. Pre-Trial Conference.

TUESDAY, 21 AUG 2012, AT 9:00 AM, CHAMBER 2-6


So, the pre-trial conference for my case to request a quashing order on the IMF loan  listed for Tuesday morning,  is now in the public arena.   The AG has taken what I am told is  an   unusual step in ‘choping’ the  9:00 am slot.  Apparently the more usual  form or procedure is to turn up and get in line for a time slot.  My guess is that they don’t want any Press hanging around and want to get in and out as quickly as possible. Then  again they may just  be hoping that the early bird avoids the  Wong.   That is the Law Society’s Mr.  Wong who has a habit of turning up whenever M. Ravi is due in Court or even Chambers.  Actually, to be fair to the poor misguided soul,  he has given a verbal assurance that he will stop stalking us in future.

With National Day fresh in our minds it is timely to have a quick recap.  The PAP may be able to recite the  National Pledge but they are oblivious to the meaning of the words and clearly not a one of them understands what ” Democracy”  means.

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