Yesterday’s attack on the French satirical magazine Charlie Hebdo has been seen quite rightly as an assault on the fundamental values of liberal democracy and freedom of expression. The attackers claimed to be avenging the Prophet Mohammed but this attack was not about Islam. Instead it was all about intimidating us from expressing our views and our beliefs where they are something that the attackers do not like.
Watching commentators across the globe condemn the brutal murder of these eight cartoonists and seeing the huge crowds that rushed out to stand vigil not just in Paris but in London and elsewhere, I couldn’t help but think of our political cartoonist Leslie Chew banned films from local filmmakers such as Martyn See, Mirabelle Ang, and Tan Pin Pin, as well as imprisoned septuagenarian author Alan Shadrake and embattled human rights lawyer M Ravi.
No bullet was ever fired in this war on freedom, no one was disappeared in the night (although thousands have fled the scene) but the Lee family and their government have just as surely slaughtered freedom of expression in Singapore as any terrorist with an AK 47. In fact they have the whole nation cowed in fear, living on land the government owns, forcibly contributing tax dollars to secretive funds the Lee family manages and the Western Press is dead, bowed or complicit.
Anyone who thinks it is a faceless bureaucracy or a board of censors making these decisions should read here:http://theindependent.sg/blog/2013/10/07/how-lky-changed-my-life/
While murder is an extreme way of achieving these goals the terrorists differ only in degree and the power at their disposal from the world’s authoritarian governments that give themselves the right to control what we can read or say. Authoritarian governments globally have not shied away from murdering journalists and those who ask inconvenient questions, whether it is Sri Lanka, Thailand, the Philippines, Indonesia, Mexico, Russia, Egypt or countless other countries throughout the world. In other countries journalists, cartoonists, bloggers and ordinary people are imprisoned or sued by regimes that dislike what they say or in the name of religious dogma. Examples include the use of lese-majeste laws in Thailand, blasphemy laws in Pakistan or criminal defamation and sedition laws in South Korea or Malaysia.
We can expect the PAP ministers to condemn the attacks today as barbaric and an assault on civilized values. But the PAP Government and the Lee family have achieved a degree of control over what can be said in Singapore that would be the envy of many authoritarian regimes and of the terrorists who committed the atrocities today.
Since they came into power the PAP and the Lee family have sought by all the means at their disposal (and they control all the means) to control the press and ensure that people are intimidated or prevented from criticising them.
I remember a cartoon from the 1970s published in the Singapore Herald, a short-lived and solitary experiment in independent media that soon incurred the wrath of Lee Kuan Yew and was shut down. The cartoon showed Lee Kuan Yew in a tank crushing a baby. The baby was labelled something like “A Free Press”. After that the PAP made sure that no one could read any views other than those they allowed in their State-owned or –controlled media. The Newspaper and Printing Presses Act followed soon afterwards ensuring that the Government has a veto over the ownership and appointment of the editorial staff of every newspaper. Though this was not even necessary in the case of broadcast media and many print titles, which were all controlled by Temasek.
Seriously who needs to send their zealots to Syria to train with ISIS when they can learn everything they need to know here.
The foreign press has been intimidated into silence by defamation suits and threats to restrict their circulation in Singapore. The Wall Street Journal, the Far Eastern Economic Review and the Economist are just a few of the publications that were sued for saying things that are said every day about politicians and institutions in the West.
When Western governments speak out now about the need to send a strong signal to Islamic extremists that the West will not be intimidated into silence I can only recall the spineless way they failed to support their media in their battles with the authoritarian regime in Singapore and have these restrictions declared a breach of Singapore’s obligations under bilateral and multilateral trade agreements. With the lack of support pretty soon most publications found it expedient to regurgitate the PAP’s version of history. These include the myth that Singapore was a mangrove swamp before Lee Kuan Yew transformed it or that Singaporeans have willingly sacrificed their freedom for the promise of prosperity.
The use of defamation laws, detention without trial and politically motivated prosecutions on bogus charges have been successfully used in parallel to create a climate of fear and stop Singaporeans from speaking up. A trumped-up charge was used to remove my father from Parliament because Lee Kuan Yew was unable to answer his questions. Subsequently he was sued into bankruptcy to prevent him from standing again or even speaking at election rallies. He became a virtual non-person just like dissidents under the Soviet regime which was condemned so forcefully by the West.
The climate of fear and self-censorship is still as strong as ever despite the PAP pretence that there has been liberalization.
Dr Chee was silenced. The ReformParty suffered a media black out during GE 2011 ( but still they won a greater share of the national vote than SPP for example). I am banned from attending debates and talks at our national universities and one university even attempted to prevent me from being in the audience. Of course Hri Kumar tried to keep me out of a consultation on CPF, dodged my questions and then resorted to lying and smearing me. Mr Chiam was himself the victim of vicious smears as all opponents of the Lees have been. Leslie Chew, the cartoonist, was arrested and held in jail without bail for an extended period. Academic Cherian George is this week finding out for himself that there is no such thing as being a mild opponent of the regime as he experiences the same backlash we have all suffered.
My own family (and I) were subjected to maybe some of the most extreme versions of this- threats of rape, violence and even death in an attempt to silence me and crush plurality of thought. This off the scale attack on a politician’s family members was aided and abetted by both Government and alternative media and the silent complicity of the other political parties.
What is most depressing is that, in contrast to the spontaneous rallies that have erupted in France and elsewhere in response to the murders of the journalists, Singaporeans have been mostly silent just as they were over what happened to JBJ or the alleged Marxist conspirators.
It is a blot on Western values that authoritarian regimes like Singapore are not only tolerated but held up as shining examples for democracies to emulate. Only Jim Sleeper got this right when he so vehemently and intelligently objected to the liberal values of Yale being compromised through setting up an offshoot in authoritarian Singapore.
It is pure hypocrisy if the reaction to this barbaric attack is just about combatting the threat from Islamic extremism and does not grasp the wider lesson about standing up everywhere for universal values like democracy and freedom of expression.
Just now on CNN Bruce Shapiro editor of the Dart Center for Journalism and Trauma at Columbia University in New York spoke about the attack which he categorised as an attack on journalism:
” People are united in saying this is an attack on journalism. We as journalists now are saying ‘we are all Charlie Hebdo’. This is part of a global pattern of using journalists as a capillary system for fear and terror. Whether it is terrorists in Paris, whether it is ISIS in Syria, whether it is Narco gangs or politicians who have assassinated journalists in Mexico, in every case it is about seeing the only value of journalism as a corpse to spread fear… and that I think is at the heart of this. Are we going to stand up in general in the memory of great cartoonists but not stand up for the value of independent journalism and value of satire in democracy. That’s what’s at stake here, democracy.”
As Martin Luther King said, ” In the end we will remember not the words of our enemies but the silence of our friends. There is little doubt that democracy, plurality of thought and freedom of expression would have great difficulty finding a friend in Singapore.
#RETURNOURCPF – MEDISHIELD LIFE PROTEST 12
JULY, HONGLIM PARK
In June 2014, the enhanced benefits for MediShield Life were announced.
It was stated that there will be substantial increases in benefits for MediShield Life that will cover all Singaporeans for large hospital bills.
At a time when Singapore is ranked as the most expensive place to live in the world, where Singaporeans yet continue to receive the lowest wages among the high-income countries, CPF is akin to an additional tax on our income.
On 7 June 2014, Singapore had its first CPF protest against the increase of the minimum sum as an estimated only 1 in 8 Singaporeans who reach age 55 were able to meet the CPF Minimum Sum and MediSave Minimum Sum entirely in cash from their CPF accounts.
There is no transparency and accountability towards how the government is using our CPF monies or the returns derived from CPF funds, all these despite MPs calling for higher rates, improvements to our CPF system practically every year.
From a cash flow perspective, the Government is still not spending a single cent on healthcare because MediSave contributions in a year continue to exceed all withdrawals including government healthcare spending.
Being a Singaporean, I’m concerned about my future and have decided to invite all political parties that took part in GE2011 to hear their views regarding my concerns.
As such, this event aims to highlight the inadequate measures in place to protect the healthcare needs of Singaporeans.
Date: Saturday 12 July 2014
Time: 4.00pm – 6.00pm
Venue: Hong Lim Park – Speaker’s Corner
4.00pm – 4.15pm Mr. Tan Kin Lian, former presidential candidate
4.15pm – 4.30pm A political party
4.30pm – 4.45pm RP Secretary-General Kenneth Jeyaretnam
4.45pm – 5.00pm SDP Treasurer Chong Wai Fung
5.00pm – 5.15pm Mr. Vincent Wijeysingha
5.15pm – 5.30pm Mr. Leong Sze Hian
5.30pm – 5.45pm Ms. Han Hui Hui
5.45pm – 6.00pm Mr. Roy Ngerng
6.00pm – 6.30pm Questions & Answers
To find out more about the event, you can go to the Facebook event page at https://www.facebook.com/events/251518938371663
Han Hui Hui
(Warning the following article contains satire. If you have experienced difficulty in the past digesting satire and parody then please consult a doctor before proceeding)
The debate seems to be getting a tad emotional, so I have responded with this light-hearted and comical piece which I hope will cool things down a little. Please enjoy. It is a parody of Hri Kumar’s Facebook post where he got a bit excited about my report on the CPF forum. Let’s chill people and stick to the substantive issues.
“Mr Kenneth Jeyaretnam leader of The Reform Party who attended my forum that somebody else invited him to, has reported the following in The Online Citizen.
Quote: “When I sat down in that room I looked at the enormous glass coffee table and thought, “Finally some transparency from the PAP.”
Mr Jeyaretnam is a liar. That did not happen in the forum. No coffee table or anyone or anything present provided Mr Jeyaretnam or any other attendee with any required transparency at any time. Opacity was the whole point of the forum and Mr Jeyaretnam lacks all credibility in suggesting otherwise.
The coffee table was not there to provide any transparency from the PAP, by the PAP or with the PAP. Any transparency it provided was purely coincidental and entirely unconnected to our policy of obfuscating the facts and replacing them with our belief system.
Mr Jeyaretnam is trying to destroy our nation by perverting our firmly held beliefs in quadruped furniture as supports for empty coffee cups, disposable chop sticks and old tissues.
To suggest that the coffee table could provide the answer to how much is in the reserves or provide answers to gaps in the budget presentation or information on the returns of Temasek and GIC is not a constructive method for conducting an accessorial-furniture-interface dialogue.
If we wanted to have an accessorial-furniture-interface dialogue I would go about it like this. I would start an Event page on Facebook, open to all so that Mr Jeyaretnam could be invited to the Event by someone else and I would comment on that public page that non-residents were welcome to accept the invitation. Then for the avoidance of doubt, as the host, I would post on my own page that I was happy non-residents were also signing up.
If it were later discovered that Mr Jeyaretnam, who is a well-known glass coffee table provocateur, had followed these steps, I would then publicly denounce Mr Jeyaretnam for “Inviting Himself”. I would smear him with the suggestion that his only intention in attending was to destroy the unique position that glass furniture holds in our robust democracy. But we are not having that dialogue so of course I won’t do anything like that.
Mr Jeyaretnam’s allegation that the coffee table provided transparency is very serious indeed
Mr Jeyaretnam’s allegation that the coffee table provided transparency is very serious indeed. It is as destructive as those people in other countries who take old furniture and up-cycle it into something useful and attractive. In fact as my video recording will demonstrate two people in that group roundly shouted at Mr Jeyaretnam in turns, entirely demolishing his arguments with their unsubstantiated stories of how much tax they had to pay to overseas for similar furniture products.
Nor did the PAP stuff that forum with PAP supporting furniture, whether a table of glass, plastic or that stuff that Ikea uses, as Mr Jeyaretnam has so evilly insinuated. Mr Jeyaretnam lacks all integrity and credibility. That coffee table was a bona- fide resident of Thompson-Toa Payoh. As such it was there of its own accord in its personal capacity. It was a non-partisan coffee table, not even an activist coffee table or a civil society coffee table. It had NOT been put there in advance or polished up by any member of Thompson-Toa Payoh CC.
It wasn’t me, it was Mr Jeyaretnam who stuffed that forum with supporting furniture. In fact everyone there who questioned my presentation or disagreed with me or smiled at Mr Jeyaretnam instead of me or wanted to shake his hand not mine, was a personal friend of Mr Jeyaretnam and just pretending to be a resident. It was ‘fixed’. There is no other reason they would have demanded the return of their CPF.
As it is my experience that many of you are childlike or otherwise “daft”, I will summarise.-“Mr Jeyaretnam was the only person at the forum seeking transparency not the coffee table.”
In an extraordinary turn of events the State Times published a letter in its Forum page yesterday from Temasek Holdings. It seems that last Saturday ST published an article (“Ways to improve CPF”) which quoted an unnamed person as saying he suspected the Central Provident Fund Minimum Sum was raised “because Temasek or GIC lost money overseas”. ( See more at: http://www.straitstimes.com/premium/forum-letters/story/temasek-doesnt-invest-or-manage-cpf-savings-20140604#sthash.jRLqDrka.dpuf)
Temasek wrote their letter in response to that comment and presumably to deny that rumour. I say it is extraordinary because not only does it fail to prove that CPF monies do not help to finance, even indirectly, the government’s injections of capital into Temasek, but a large part of the letter is simply a setting out of current government CPF policy and an explanation of the PAP’s stated reasons for increasing the minimum sum. You know, the one about increased life expectancy blah blah.
The letter was written for Temasek by
Managing Director Strategic & Public Affairs
If you want to know more about Mr Forshaw here is the blurb from an interview he gave to mumbrella.asia – a site about Asian media and marketing.
Stephen Forshaw is the managing director of corporate affairs at one of Asia’s most powerful investment firms, Temasek Holdings. He is also managing director of Temasek’s operations in Australia and New Zealand, and president of the Institute of Public Relations of Singapore.
In this interview with Mumbrella Asia’s editor Robin Hicks, Forshaw – who was comms chief for Singapore Airlines and Microsoft before joining Temasek – talks about how corporate communications is changing, how brands should respond to disaster, and why he’s a big admirer of Shell.
So now we have an Expat explaining our own government’s CPF policy to us. Who made him spokesperson for CPF and for the PAP? As he works for Temasek but is being paid to spell out the PAP’s justification for raising the minimum sum in CPF he only adds weight to the argument that the two (CPF and Temasek) are co-mingled. What will we have next? The Head of Standard Chartered ( in which Temask has a 20% stake) writing to ST to explain to us Singaporeans why women will have to start doing National Service? Or the head of Sheng Shiong writing to tell us why GST is being raised?
So does Forshaw actually dispel the fear that the minimum sum has been raised because Temasek has lost money and the government needs to get the money from somewhere else? No. This is what he does say.
“As for Temasek’s performance, we have more than doubled our portfolio value since 2002, excluding any net new capital.
As of our last reporting date of March 31 last year, returns to Temasek for newer investments made since 2002, when we started investing directly in a growing Asia, have exceeded returns since 2002 for older investments made prior to 2002.”
So, that’s as clear as mud. It seems Temasek are saying that positions put on since 2002 have done better in the 11 or so years up to 31 March 2013 than those before 2002 but again doesn’t say whether this is from 1974 up to 2002 or for example, 1992- 2002.
Is the date 2002 significant? Well it could be that 2002 has been chosen for this division of performance into pre and post 2002 because it is the year Mrs PM took over as head of Temasek. (I’ve said before that it is hugely embarrassing and a conflict of interest to have the PM’s wife head up our sovereign wealth fund.)
But I believe 2002 was chosen because that date was during the post-9/11 recession and at the lowest point for the markets before the Great Recession of 2008) so of course anything after that is likely to look good, by comparison
Temasek doesn’t provide a link to the balance sheets or any other data. Critically for me or anyone wanting to study their performance, Forshaw doesn’t provide information on the valuation criteria that Temasek uses. I am particularly interested in their unlisted positions. Again it comes down to transparency and public listing would achieve that.
Still this divide into older badly performing stock and the better performance post 2002 is worrying. If I ran a fund in which all the longer term positions were performing worse than the newer ones, I would expect my investors to be concerned. Consistency is everything.
Of course it begs the question of why aren’t the poorer, older performers culled? Or is there another explanation for recent out performance such as recession recovery or another more sinister explanation or even a bubble waiting to burst.
Actually I have already provided an answer for part of this previously when I highlighted the Olam takeover scandal. That kind of manoeuver allowed Temasek to put the complete purchase on the books as a profit because they had owned shares before what is widely believed to have been a leak in the takeover process, that pushed the share price up enormously. Other Assets such as Changi Airport were transferred to Temasek for a 10th of their true market value. Instant profit.
Go back to the quote again and see that Forshaw tells us “As for Temasek’s performance, we have more than doubled our portfolio value since 2002, excluding any net new capital. –
Let’s look at that “new capital“. That is money that the government injects into Temasek from time to time. The government is able to inject money or assets into Temasek because of the constant stream of new investment it receives from CPF. So Temasek is getting CPF money indirectly. Temasek’s answer to the public via the ST forum is economical with the truth to say the least. CPF may be invested elsewhere and not directly into Temasek or vice -versa but it all comes from the same pot which is government capital or surpluses. As the CPF monies are available for the government to invest elsewhere, it frees up capital to inject into Temasek.
Let’s look at that doubling of the portfolio value since 2002. The S&P 500, the Hang Seng and most global stick indices have doubled over the same period since the low of 2002. So in other words if you had been investing in an index Fund and gone on holiday since 2002 you would have done as well as Temasek. Had Temasek done nothing in that time, the simple fact of the market rising would have created the same doubling over that period. Bravo!
Temasek Holdings writes that it is not investing or managing CPF money. This is simply sophistry. It is half a lie and wholly economical with the truth. Money that the government receives from CPF savings goes to GIC and the profits that GIC earns investing those funds swells government surpluses enabling the government to inject more capital into Temasek. Furthermore Temasek’s own internal rates of return that it is supposed to earn on new investment will no doubt be related to CPF interest rates. Like everything else we have no disclosure on this but trust me, this is how it is done.
The question is unanswered. Why is the Central Provident Fund Minimum Sum being raised ?
An Open Letter to the Minister for Finance
Mr. Tharman Shanmuguratnam
Ministry of Finance
100 High Street
#10-01 The Treasury
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.
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.
K Z Arifa
Dr Charan Bal
Sharmeen Nina Chabra
Xin Hui Supanee Chan
Kenneth Chee Mun Leon
Chew Kheng Chuan
Chong Kai Xiong
Chong Wai Fung
Fong Hoe Fang
Foo Hui Shien, Catherine
Assoc Professor Cherian George
Han Hui Hui
Dr Russell Heng
Isrizal Mohamed Isa
Dr Khoo Hoon Eng
Koh Boon Luang
Lee Gwo Yinn
Lee Shiuh Meng Kevin
Philip Selwyn Lemos
Leow Zi Xiang
Dr Liew Kai Khiun
Gary Lim Meng Suang
Lim Kay Siu
Nicholas Lim Yew
Loh Chee Leong
Dr Loh Kah Seng
Low Yit Len
Neo Swee Lim
Ng Mei Fay
Dr Noor Rahman
Ong En Hui
Pak Geok Choo
Gene Sha Rudyn
Seet Cheng Yew Michael
Rev Miak Siew
Siew Kum Hong
Assoc Prof Paul Ananth Tambyah
Alvin Tan Cheong Kheng
Caryn Tan Sun
Eugene Tan Siah Yew
Joel Bertrand Tan
John L Tan
Tan Joo Hymn
Dr Roy Tan
Teo Soh Lung
Professor Tey Tsun Hang
Dr Pingtjin Thum
Toh Boon Hwee
Dr Vincent Wijeysingha
Wong Chee Meng
Melissa W S Wong
Wong Tong Kwong
Dr Woon Tien Wei
Rev Dr Yap Kim Hao
Yeo Yeu Yong
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:
- 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
- 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.
- 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.
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.
The 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 www.sonofadud.com 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.
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.