Are we rich or are we bankrupt?

[metalslug]

http://yoursdp.org/index.php/perspective/special-feature/4891-are-we-rich-or-are-we-bankrupt-part-1

Are we rich or are we bankrupt? Part 1
Monday, 11 July 2011
Singapore Democrats

With the Presidential Elections just weeks away and the fact that the president is supposed to act as a custodian of our financial reserves, it is amazing that the state of our reserves and hence our nation's fiscal health is not more a subject of national debate.

How these reserves are deployed has a bearing on our financial well-being – a bearing much more direct and serious than people think.

The SDP has in the past raised concerns about the high level of public debt incurred by the Government. At 102.4 percent of GDP, this amount is the ninth highest in the world. In fact, Greece which is facing severe economic troubles is placed only slightly higher at fifth spot with 144 percent of GDP.

The public debt-to-GDP ratio is a measure of what a country owes as a proportion to what it produces. A high ratio means that it is harder for a country to pay off what it owes and that it is more likely that the country will default on its payments. This is the financial predicament that Greece currently finds itself.

CIA World Factbook

What about Singapore? Is Singapore's situation as bad as it looks? Despite our high public debt, analysts say that Singapore is in a different category. This is because our economy generates budget surpluses most years and this surplus counter-balances the debt incurred. Therefore, on balance, our books show a surplus and not debt.

Borrower calling the shots

But why, if we are generating budget surpluses, would the Government need to borrow money and go into debt? At last count the amount of debt is upwards of $200 billion. And, equally important, who are we borrowing from?

Let's tackle the second question first. From whom is the PAP Government borrowing these large amounts of money?

The answer is us, the people. The Government issues debt instruments in the form of bonds, securities, Treasury bills, and deposits with the Monetary Authority of Singapore (MAS) which financial institutions buy.

One of these financial institutions is, of course, the CPF which uses almost all of our savings to buy these instruments making it the single biggest holder of Government debt.

So we have a situation where the Government is the debtor and we the people are, collectively, the creditor. With a twist, of course. A big one. In our case, instead of the lender setting the terms on when and how the debt will be repaid, in this case it is the borrower who decides the terms. And to add insult, the debtor keeps changing the terms of repayment.

Years ago when the CPF scheme started, we were able to withdraw our CPF funds at age 55. But the Government changed the law in the late 1990s, introducing the Minimum Sum Scheme which gave it the power to retain a portion - a huge portion - of our savings even beyond the age-55 limit. The amount started off at $80,000 and has been increasing every year. As of July 2011, the Minimum Sum is set at $131,000.

Singaporeans reaching 55 will only be able to withdraw any savings in excess of $131,000 (which the overwhelming majority of Singaporeans do not have).

It is only when one reaches 62 will one be able to start withdrawing one's savings – in monthly instalments of a couple of hundred dollars depending on how much one has in one's account. Of course, this is after the Government deducts another $27,500 more (as of January 2011) for Medisave.

After "borrowing" our savings, issuing debt as a collateral, the Government is now free to use the funds for whatever it deems fit. It invests this money mainly through the Government of Singapore Investment Corporation (GIC) and Temasek Holdings.

Through the years, these two conglomerates have invested in industries ranging from telecommunications to banks to hotels and everything in between. Domestically, it uses the funds to set up companies that deal with all kinds of businesses. To what extent and where these funds are parked no one quite knows because they are hidden from public view, especially those of the GIC.

The perfect arrangement

There is still the question of why the Government needs to borrow our CPF funds when it generates a healthy budget surplus annually. The simple answer is that the money is there. By issuing securities and bonds at low interest rates, the Government avails itself to more than a hundred billion dollars of CPF funds.

With such a vast amount of money at its disposal for investments, Government officials can strut the world's stage and command fawning attention from the international business community that few politicians can.

Domestically, it places itself as employer, CEO and landlord to all that Singaporeans do. The next time you buy a house, watch cable TV, or buy your groceries chances are that you are giving your business to the Government. Not that you have much of a choice as a customer because most big local businesses are run, directly or indirectly, by the Government through GLCs.

The political control that the PAP derives from such economic dominance is what has kept it in unchecked power all these decades. For the PAP it is the perfect arrangement. It borrows money at low interest rates from the CPF at little or no risk. If it incurs losses, it doesn't have to tell the people. It simply changes the rules governing the return of the savings to CPF members. If it turns over a profit, it pays to the CPF a paltry 2 percent and pockets the remainder.

Heads the Government wins, tails the people lose.

How all this affects the average citizen will be the subject of Part 2.

 

[GOD IS MY DOG]

S'pore is like the Titanic.....................but got 2 icebergs.................

they are our national debt...............over 100% of GDP = bankrupt technically............and the blackhole called CPF............



### also, the local peoples' housing, car, etc debt to income ratio is the highest in the world.................

 

[metalslug]

http://yoursdp.org/index.php/perspective/special-feature/4896-are-we-rich-or-are-we-bankrupt-part-2

Are we rich or are we bankrupt? Part 2
Wednesday, 13 July 2011
Singapore Democrats

In Part 1 of this series, we explained how the PAP Government borrowed against our CPF savings to conduct commercial activities both in and outside Singapore. In the process, it has ratcheted up our public debt which has become larger than our Gross National Income.

This puts us in a rather discomfiting fiscal position. According to some analysts, a redeeming feature – if one can call it that – in this arrangement is the fact that we have a structural budget surplus. This guarantees our ability to pay off the debt that the Government has incurred on our behalf.

In order to maintain the surplus at a viable level for it to counter-balance the debt, the Government would have to collect revenue from us at the present high rate. That is, the more the Government borrows, the more it has to tax us.

In other words, we are dependent on maintaining a budget surplus on a consistent basis to ward off a situation similar to the one now taking place in Greece.

Revenue, glorious revenue

To this end, the PAP has devised a myriad of ways to collect revenue from us. The Singapore Democrats have repeatedly pointed out the more evident ones such as the GST, COE, and ERP. Other means include PUB tariffs (electricity rates increased 6.5 percent in April this year), bus and MRT fares (which are going to increase later this year), the road tax and so on.

A less obvious, but nevertheless huge, cash cow for the PAP is land. By jacking up the cost of land in Singapore, the PAP raises HDB prices. With the vast majority of Singaporeans living in such public housing, the revenue is vast. Mr Wong Pak Shong, a former top official of the Monetary Authority of Singapore, remarked that when it comes to the compulsory acquisition of land, the Government "is a terrific moneymaking machine."

Huge amounts of money can also be made by allowing cash-rich foreigners and permanent residents to purchase property in Singapore.

Raising land prices also increases rental prices. Ask entrepreneurs and they will tell you that most businesses operate just to help their landlords collect rent. After paying off the rent, little is left. And who is the biggest and ultimate landlord in Singapore?

Padding up the budget surplus is done not only through the imposition of taxes and fees. It is also carried out by reducing Government expenditure. Take healthcare, for example. Through the years the PAP has been scaling back the Government's share of paying for the nation's healthcare. In the 1960s, the Government's share of the national healthcare expenditure was 50 percent. Today it has been reduced to around 25 percent.

In fact, from the figure below one can see that compared to other countries such as Canada, Germany, Japan, the Netherlands, Switzerland, and Taiwan, the Singapore Government spends the least when it comes to taking care of the country's healthcare expenses.

Sources: WHO and Department of Health, Taiwan (2009)

When the Government spends less, the people have to spend more. And when the people spend more, the Government collects more through the GST. It is a diabolical double whammy.

(The SDP Healthcare Advisory Panel is presently studying ways on how we can reform our healthcare system and its financing to make it affordable for Singaporeans.)

One more way that the PAP keeps the revenue vacuum operating with maximum efficiency is by changing our immigration policy. By flooding the country with foreign workers, it enlarges its tax base. How such a policy affects the average Singapore worker is another matter.

Even PAP Town Councils are running their estates like mini-Governments. Readers will recall that the Pasir Ris-Punggol and the Holland-Bukit Panjang Town Councils collected so much in conservancy charges that they had in excess of $12 million in 2008. The money was invested in Lehman Brothers, DBS, and Merrill Lynch financial products which turned toxic. As a result all the residents' money was lost.

It is of course superfluous to say that taxes are necessary for a government to run the country. In Singapore, however, the PAP does not collect taxes from the people just to perform its duties as Government. It doesn't need that much money to run the country efficiently. Rather it collects revenue to further amass financial, and therefore political, power for itself.

And it is doing this because it can. The PAP has ensured that the opposition has been domesticated, civil society neutered, and the media house-broken. With all institutions that can keep it in check destroyed, the PAP does as it pleases.

What can we do to you...I mean for you?

Such an approach, needless to say, makes Singaporeans' lives highly stressful. The pumping up of taxes and fares makes this island a very expensive place to live in. A UBS study released last year showed that Singapore is the 11th most expensive city in the world (out of 73).

On the other hand, keeping our wages low through the mass importation of cheap foreign labour reduces our purchasing power. The same UBS study revealed that our domestic purchasing power (DPP) is ranked a lowly 49th position. The DPP is a measure of how much we can buy in exchange for the salary that we earn in a given period of time. At 49th position the average Singaporean's purchasing power (38.8) trails behind other Asian Tigers (Taipei 60, Hong Kong 55, and Seoul 52.9).

Caught living in an expensive city with low domestic purchasing power – that's the price that Singaporeans have to pay for a Government knee-deep in public debt.

Analyst Dan Fineman underscores this point in an essay Fiscal Predator published in 2004:

The high-surplus strategy lowers Singapore's standard of living. Deprived of disposable income by numerous taxes, Singaporeans consistently consume a share of GDP 10-20 percentage points below Hong Kong levels, while Hong Kong maintains a higher per capita income. Their high-revenue, low-expenditure government leaves Singaporeans a smaller slice of a more modest pie.

The SDP continues to urge Singaporeans to pay attention the nexus between the public debt, our reserves and our CPF savings because the large debt-to-GDP ratio has a tremendous and direct impact on our daily financial concerns.

We need to change course and the first step to doing this is to understand the how the current PAP-administered system not only hurts our livelihoods but that it also endangers the economic future of this country.

Are our reserves still intact? Part 3 will explore this question.

 

[depeche]

So strange that they can still get the mandate to govern? Why?

 

[metalslug]

http://yoursdp.org/index.php/perspective/special-feature/4900-are-we-rich-or-are-we-bankrupt-part-3

Are we rich or are we bankrupt? Part 3
Tuesday, 19 July 2011
Singapore Democrats

Are they still there? This is the question that Singaporeans keep asking about our financial reserves but to which answers don't seem to be coming.

If they are still there, how are they invested? Are the investments carried out in socially responsible ways? What are the returns? Are they benefiting the people or just the ones managing the reserves? Who makes the decisions on these investments and do Singaporeans have a say?

The concern of the performance of our investments is justified especially when we hear about mega flops in the projects that the GIC and Temasek Holdings are involved in. Below is a compilation of business ventures and investments carried out by the two funds that have gone awry and the amounts of money that were involved. Needless to say the list is not exhaustive.

According to the GIC and Temasek Holdings, a total of $140 billion was wiped out from their accounts when their investments in American and European banks like Merrill Lynch, UBS, and Barclays were wiped out following the sub-prime crisis that engulfed the banking system in US. The amount could very well have destroyed all our savings in the CPF.

Is the PAP finding it difficult to return us our CPF savings because of insufficient funds in the reserves? Is this why the Government is delaying the withdrawal age of CPF account holders, making workers delay their retirement, and even withholding our money outright?

With our population ageing rapidly more and more Singaporeans will be looking to withdraw their CPF savings for retirement. Presently 7 percent of the population is 65 and older. By 2030 every one in five persons in Singapore will be in this age group. Is there not enough in the reserves to make good these withdrawals?

Why the secrecy?

If our reserves are still in tact, and in as healthy a state that the Government claims them to be, why not invite all and sundry to verify the accounts rather than hide the records away from scrutiny. Indeed why does the GIC and the Ministry of Finance not open up their books for public verification?

The ones who put themselves in charge of the money tell us that revealing the information about our reserves would give the competition a leg-up over us as far as investment strategy is concerned. The secrecy, it says, is a necessary part of the business.

If that is the case, the (GPFG) should have folded a long time ago. Described universally as the model sovereign wealth fund which runs its operations transparently and efficiently, GPFG has posted solid gains in its investments over the years with a 26 percent surge in returns in 2009 and another 10 percent in 2010.

The fund is Norway's equivalent to the GIC. It was established to manage the country's petroleum dollars – US$570 billion in all – after oil was discovered off its coast in 1969. Quite the opposite of the GIC, the GPFG keeps to strict reporting guidelines stipulated by the Ministry of Finance:

Public reports on the management of the Fund

1. The Bank shall publish quarterly and annual reports on the management of the Fund. The reports shall be based on the greatest possible degree of transparency within the limits defined by a sound execution of the management assignment.

2. The reports shall consist of a descriptive part and extracts from the Bank’s accounts concerning the management of the Fund in accordance with the current accounting regulations for Norges Bank.

3. The descriptive part shall include a true and fair summary of the performance of the Fund, management costs, investment management strategies, creation of value in the investment management and relevant risk in the investment management, including utilisation of the limits defined in this mandate. In addition, an account shall be given of the organisation of the investment management in the Bank.

4. The descriptive part of the annual report shall include a separate account of the management of the real estate portfolio.

5. The descriptive part of the annual report shall also contain a separate account of the Bank’s work related to active ownership and integration of good corporate governance and environmental and social issues, including an account of separate environment-related investments. The account of the environment-related investments shall include, for example, the scope, strategy, asset type, description and evaluation of how they fulfil the intention of the environmental programme.

6. If the calculation methods on which the reporting of performance and risk have changed since the last published report, then an account shall be given of why the methods have changed and information shall be provided on any effects of the changes. In addition, pro-forma figures shall be provided in accordance with the previous calculation methods in four subsequent reports.

7. The annual report shall be published no later than three months after the end of the financial year. The main points in the reports shall be made available in print. Other data may be reported electronically.

Not only is the GPFG transparent in its operations, it also invests in ethically acceptable businesses. The rules forbid it to in “tobacco producers, companies involved in human rights abuses, environmental damage or production of weapons that through their normal use may violate fundamental humanitarian principles (nuclear arms, cluster munitions, land mines etc.)”

An insanely dangerous position

Compare: The Norwegians elect a government in freely and fairly held elections where ministers are held accountable for all that they do. The government then appoints managers who run the GPFG in a transparent manner and in their interest of the people.

Singaporeans, on the other hand, take part in an election system that the PAP controls and all but guarantees it victory. Its leaders then appoint themselves as heads of the GIC and then refuse to tell us how they operate and how much of our reserves they hold.

Unlike our Norwegian counterparts who are firmly in control of their reserves, not only have we put all our reserves in the hands of a few individuals (Mr Lee Hsien Loong chairs the GIC and his wife heads Temasek) we have ceded all our rights to know and question what is being done with our money.

Singaporeans are living dangerously, playing Russian roulette with our reserves. The global financial and economic system is far from the stability that it portrays. The US is grappling with its budget deficit with President Barack Obama dueling with the Republicans over America's debt ceiling. Europe is engulfed in a potentially explosive economic situation with Greece, and more worryingly Italy, as its epicentre. There are signs amid all the bullishness about China's economic development that the country's expansion is a bubble waiting to pop.

Given such worrying indications, it is bizarre that Singaporeans continue to display such nonchalance towards our lack of control over our reserves. This is an insanely dangerous position for the nation to be in. If and when the financial troubles visit this island, we will find ourselves completely out of our depths.

Through the years, the SDP has been calling for Singaporeans to stand up for their political rights which will enable us to protect of our reserves. Skeptics argue that rights won't make us rich. Maybe so. But without them we may wake up one day and finding ourselves bankrupt.


Are we rich or are we bankrupt?
Part 1: How the PAP Govt borrowed against our CPF savings to conduct commercial activities both in and outside S'pore.
Part 2: How all this affects the average citizen