High cost of living – what the government can do

86 Responses to “High cost of living – what the government can do”

1) family man on April 30th, 2008 7.27 am

Thank you Mr Tan, for being so forthright on these financial products. I look to your inputs on TOC in future.

2) sevenleleven on April 30th, 2008 8.43 am

How true, the bank charge you $2 per month for account having less than $500 at any one time. Assuming if you have $500 in the accoun for a year at the return of 2%. This willing bring a return of about $10 only. but if the account is less than %500 per month at any one time, you will have to pay the $12 just to keep the money with them for a year.

It’s like having the cake and eating them as well. Did the govt or MAS did anything to stop this. No, the let the market force decides. What was worse was the trust the people had on POSB Bank and the govt. But it was sold to DBS. This is one instance of the betrayal of the people trust.

3) I spy with my eyes on April 30th, 2008 10.21 am

I always enjoy reading some of your life experiences articles.

On my way to work on Monday morning, I was approached by a young man (jobless) and his mother (most likely a retiree. His mother was sick and needed to go to a clinic but had not enough money so asked me for $10.00. Could I not give? No! I felt sad that these are the people the government really missed out.

Further on saw this old man picking up empty aluminium cans. What a pathetic sight!

At times I wonder whether all these happenings at ground zero are been monitored realistically up at the top.

4) Gary Teoh on April 30th, 2008 10.26 am

I bought the DBS swing fund,using my special acc from CPF.For 5 years, I lost heavily,the agent told me before I sent for it,she said I will get back the profit of 4% follow the SA acc rate if I don’t earn anything. But after 5 yr, I lost the up front fee and could not recover my loss.The agent is not honest.

5) The SS on April 30th, 2008 10.30 am

Banks : Agree that they are creaming off lots of customers who have no training to understand the intricacies of structured products. The claim of Principal Guaranteed is a misnomer. MAS can do more there.
Consumer Association: I find conflict of interest if it is funded by NTUC that runs a supermarket amongst other things! We need an independant Association that genuinely looks after the interest of the Consumer and allowed to organize boycotts and petitions etc against unscrupulous actions like oligopolies etc. CASE is not effective and does nothing for the Consumer except lame show of ‘demonstrating against children eating JUNK food?’.. what a laugh.
Transport: TPC should be reconstituted not to include people in Transport Companies to start with. Transport Companies should be made public and not be a pte company that serves the shareholders!! Only then can we have a Cost Plus Transport. In other 1st world countries, senior citizens travel FOC vs the pittance discounts here at off peak hours. We should not call it PUBLIC Transport here.. since its all owned PRIVATELY!!
ERP: is a ridiculous scheme that doesnt solve traffic woes but actually diverts the load to other arteriel roads. For e.g. CTE - they should build a double deck in the middle from Jln Bahagia through to Yio Chu Kang and make it dual-directional. Southbound in mornings and Northbound for evenings like the old Nicoll Highway. If the no. of people is growing (as intended) there is no choice but to BUILD infrastructure to cater for it and DONT BLAME US !

6) Gary Teoh on April 30th, 2008 10.35 am

To : I spy with my eyes,
I thought the government gave out $3 billion to 2.4 milliom of our citizens,newspaper reported, and they also sent flyers to us,advertise so clear, and MM lee said there are no beggers in spore?

7) Gary Teoh on April 30th, 2008 10.40 am

Mr Tan’s suggestions are good but is it workable ? Most of the time, the gavernment said, they let market forces to decide, they can’t control the price, I think it is not they can’t, they are reluctant.

8) Daily SG: 30 Apr 2008 « The Singapore Daily on April 30th, 2008 11.28 am

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9) Amused on April 30th, 2008 11.30 am

In USA, there are fund houses offering Index Funds with very low fees that performs close to their benchmark indexes most of the time. (E.g.: Vanguard European Index has an expense ratio of 0.22%, with average annual return of 10.53% for the past 30 odd years) If someone’s CPF had been in this fund, each $1 could have grown to $16!

Why can’t there be a similar fund for the Singapore market? (The Vanguard European fund is available through feeder fund [Lion Capital] in Singapore, but they have annual expense ration of 1.11%, which is like 5 times the fee charged by Vanguard.)

I feel that financial houses in Singapore charge too much fee for less performance.

10) finditsiongbyeachday on April 30th, 2008 1.50 pm

Thought anyway to help cutting transport cost is for the government to cut taxes on petrol to cushion the sky high petrol prices.

11) RAM on April 30th, 2008 2.29 pm

Hi Mr Tan ,

Appriciate ur article on the high cost, not sure am i rite to address this ,

About the people (newly married couples and young genenration) who wanted to get the HDB flat to sattle down , as current HDB valuvation price is very high price , with a little income how do they able to get place to sattle down , if the able to affort then they need to work longer years just to clear the housind debt, does this also need to address first as part of the high living cost . i can forsee the basic necessity for our young singaporean unable to get.

12) Tan Kin Lian on April 30th, 2008 4.23 pm

Here is my reply to RAM, who made an observation about the high cost of HDB flats for young couples.

Many, many years ago, it was quite common for young couples to stay with their parents for a few years, so that they can save enough money for the down-payment to buy their own house or HDB flat.

As HDB flats are now quite expensive, it may be necessary for young couples to consider this option, i.e to stay with the parents. Besides reducing the living expenses, this arrangement has the following advantages:

a) the grandparents can help to look after the grandchildren
b) better bonding between the three generations
c) the young couple learn to accept living with in-laws.

I hope that this “old arrangement” can still work in today’s context.

13) Eaststopper on April 30th, 2008 4.36 pm

Dear Mr Tan,

Allow me to share my thoughts on your piece.

With regard to investing, I think it will be a lesson learnt for all investors, that is, invest only in products one understand and that there is no free lunch - risk and return - there is always a trade off.

The fact that the SGD interest rate is so low is a result of MAS strong SGD policy, which is our only tool against imported inflation. To allow a gradual appreciation of the SGD, MAS will have to purchase more ‘SGD’ using foreign reserves. This essentially means that our SIBOR will remain low due to the huge pool of SGD available. So, to have a lower inflation rate, one will have to live with a lower rate of interest.
Anyways, the low rate of interest has other implications - this has effectively supported the housing market - the ability for people to finance their mortage at a low rate of interest acts effectively to stabilise the housing market.

Singapore is a victim of its success in attracting foreign talents from abroad. Unemployment is at an all time low and the Singapore population is increasing rapidly. As a consequence, the economy is operating at almost full capacity. Transportation, Housing, Cost of living will and continue to increase. An economic downturn or slowdown will ease transportation woes and I believe we should be seeing the effects very soon.

Regards,
Eaststopper

14) Tan Kin Lian on April 30th, 2008 5.08 pm

I agre with the views submitted by Amused (11.30 am) and Eaststopper (4.36 am).

I hope to get a new life insurance company to offer low cost investment funds within the next 6 to 12 months. Read my blog, http://www.tankinlian.blogspot.com

15) I spy with my eyes on April 30th, 2008 6.24 pm

To : Gary

<<<>>>>>>>>

Strange i keep seeing this old lady standing along overhead bridge of MRT station “selling tissues”. Sometimes i gave her couple of dollars only. I think I am breaking the tenet “there is NO free lunch”.

$3 billion spread over 2.4 million citizens over 6 months work out to about $200 plus a month. Plenty meh??????

16) Snova on April 30th, 2008 7.36 pm

Thank you very much Mr Tan; the suggested low cost investment fund will help many of us in the difficult years ahead . More importantly it will provide an alternative and can be the benchmark of conscience.
Your generousity of advice and planned follow up action is indeed rare top talent dishing out gratis in acts similar to that of the Servant King.

17) Tang on April 30th, 2008 8.30 pm

The Government often cites market forces, or leaving it to the market, as the reason why it does not intervene. As the elected Government, it must consider whether the players in the market are taking advantage of the consumers, particularly when they have little choices or alternatives. And if the market players, be they banks, telcos, transport bodies are not doing the right thing = but only concern about profits and more profits - then it is the duty of the Government to intervene. If the Government does not, then we might as well not have all the various regulatory bodies around. What are they for?

18) Fever Guy on April 30th, 2008 8.33 pm

Thank you Mr Tan for this article, but the tone used is too soft for my liking. We got to ask hard questions even if it is face dropping ones. This is a blog and i think Mr Tan has wealth of experience to showcase how bad this gahmen has been in recent years.

Why we call buses and mrt as public transport when it is privately owned by companies with shareholder interests? Shouldn’t Public transport as a basic need be kept under control by the gahmen? When they privatize it the costs would keep rising and the costs push to consumer who has no way to say no. Have services improved greatly? NO! People are condemning the transport services at all areas giving it a BIG thumbs down. Pay so much more every year and the level of service never moves a level up. My goodness, privatization leads to lower costs and higher productivity and in uniquely singapore is the BIG reverse.

What exactly is the gahmen ’s role? Why they collect all forms of taxes and GST but are seen to be shedding away so much responsibility as people elected gahmen. What are their business? Money or Citizens? TELL the people the truth. We should call gahmen as Singapore Business Corporation?

HDB also privatize without any consultation with the people and the promise of affordable housing evaporated into thin air and worse of all Expensive BTO flats, privately built flats and overpriced HDB flats that currently in short supply. People are waiting in a forever long queue. They have to pay $10 to get a queue number and is not refundable. Gosh, what agency can earn so much money printing queue number and the great honour goes to HDB! Thanks MR MAH…you are the man, one hell of a sucker.

Medical care(Means testing relaible in the long run?), Education(unfair to singaporeans?) and Manpower(What exactly are our Singaporean’s worker rights?) policies..with so much complexity and even MP and journalist cant understand it … how do we peasant able to understand? So much more we can discuss on the many failures implemented by million dollars minister which have not help but cause more pain to the people. Stop STOP STOP! STOP robbing us! We are BROKE!

FG

19) Fever Guy on April 30th, 2008 8.45 pm

You invest when you first have spare money. In Singapore context, many of us have money stuck in housing, education and daily expenses.

For those barely surviving, do you think they are in the mood to invest? Helping setup a investment fund for the people is not useful even if you can use CPF to do it but can you withdraw cpf monies to spend?

Not unless you are dead or emigrating or very very old. Come to think of it, only by increasing our wages and set a minimum wage is the way to go.

20) Fever Guy on April 30th, 2008 9.44 pm

Eaststopper,

Why did the Federal Reserve do to stop inflation? They did many things to spur the US economy from brink of a big recession and they are still keeping it up for now. At least they put in great effort to do it. They are quick to stop US falling into a recession sooner or may have evade one. They never procrastinate. I think our gahmen has to do something more than strengthening our dollar. It cant be artificially kept strong for long before our real economy gets hurt too much. What are their great solutions?

Why more actions are called for? More drastic actions to tackle inflation are needed before it gets ugly. We cant wait for recession to come or hope for one before actions are carry out especially when high inflation hasn’t dwindled away. We all will be double hit by a deep recession and a existing high inflation and to recall what GIC Mr Tony says is the worst case scenario for Singapore if world wide recession is deeply entrenched. One that no one hope for. Didn’t Tony already foretelling all of us of a impending doom? If it is a world recession, show us how million dollar minister can keep singapore afloat?

To make matter worse. Why is our MM telling whole world they are going to spend more on banks on cheap lelong buys that are face with deeper shit of their own? Saying UBS is a rare bank that cannot be replicate ever and investing in it is a right choice for next 30 years. In the first place, if UBS is good it wont be the world worst losing bank on sub prime related assets totalled US$30 billion. Where were their risk controls and management? Where are their foresight? Investment banks without top talent are nothing more than a branded shell. Talk about rare GEM, i am afraid GIC and Temasek are losing their mind and putting more of people’s hard earned savings into banks we do not need at all. Are the gahmen going to replicate de javu to us again? Please account the billion of dollars of losses before thinking of spending a dime from the reserve. I have the sinking feeling again in my heart, like when you lost thousands of your hard earned money in a stock you bought that is going down fast and you cant cut your losses by selling?

Our brilliant High Ministers should be seen doing much more and planning robust policy to tackle inflation rather than keeping SGD stronger by a few cents. Such a no brainer job dont need to pay millions of dollar.

FG

21) Tan Kin Lian on April 30th, 2008 10.47 pm

I agree with the views expressed by Tan (8.30 pm).

I also agree with several of the views expressed by Fever Guy, although I do not wish to adopt his style of presenting these views.

22) chet on April 30th, 2008 11.51 pm

Thank you for your article Mr Tan.

23) » Comment on High cost of living – what the government can do by … on May 1st, 2008 12.22 am

[...] Fever Guy sure knows how to captivate the audience. A recent post was published on Comment on High cost of living â [...]

24) Commoner on May 1st, 2008 12.41 am

Hi Fever Guy,

I agree with what you said, but I think we will still have to sit tight and wait for the recession to come. Then, all we have to do is to stay united to pull through it. It is the main reason for Singapore’s “success” and the PAP’s success over the years. Aren’t you used to it yet?

Regarding our national reserves, it’s in their hands so we can’t do much. Anyway, it won’t stay dwindle away with more plans for GST hikes (up to 13%) and other “must pay” charges, which are surely coming.

Inflation, recession or poverty is peanuts to them, just like the NKF issue. They are paid way too high to experience the plight of the people. I wonder how much do they donate out of their own pockets every month. I certainly don’t mind if they advertise such things about themselves, so that at least I know that they are doing something for us.

I still miss the old government that brought the real success to Singapore. Sadly, most passed on. I would prefer to pay them what the present govt is getting. Real value for money!

25) Commoner on May 1st, 2008 12.51 am

‘What to do? It’s happened.’

Personally, I think it is their job to ensure that it didn’t happen in the first place. How could someone so dangerous escape from the closely guarded prison with no one actually noticing it? Could it be an insider job? Any corruption involved?

26) tiredman on May 1st, 2008 12.55 am

Are Singaporean ready to prevent their backsides from catching fire? As I observed, few years back, the financial sector (perhaps govt) starts to pass on risks to all the savers by reducing bank interest and “forceing” people to invest. In another word we common people had to take risk.

One question: Are the people ready for the changes at that time? Is the information as efficient? Do we have a workforce to facilitate this change? I asked my mom does she know what is unit trust when she bought it. Apparently, it was only hearsay that it is good when I knew that she had made losses. One example is the CPF case, which happened years ago, when many Singaporeans used their hard earn saving to invest and end up everything gone down into the drain.

There is another case. Like a sudden surge in population which result the insufficient infrastructure (bus, housing, schools) to support this increase. I see both cases (the govt) as “too impatience to see an economic success”.

Talking about bus service, I believe that PTC is a useless council. I see them as friends of SBS and SMRT. It is astounding to see what PTC had said 5 mins per bus arrival had turned out to be a joke. Most of the time when I miss a bus, I have to wait 15 mins. Base on my experience, this would not shock me given that having three bus service providers is as good as one. Each service provider would monopolize a zone of their own and once one of them screamed for an increase in fare do the other two. Isn’t this another win-win-win situation for the providers? What are friends for right? Sometimes, I do wonder is our ministers as godly as being claimed?

Another point. It is good that everybody work and contribute to the economy. However, I am rather sad when I (ever read before) our PM praised a grandma for continuing to work at her age. This is showing a very bad sign, work till you drop. A good life example, my mother is unfit to work because of her health condition and was unable to claim the emm… I think it is called the workfare bonus (unsure about the actual term used). She used to collect such bonus half yearly. I see that as a help to my family. However, once she was unfit to work, she got none. I see that as a penalty for not working. So, is the bonus given out of economic reasons? Are there any moral values in it?

I want to send a strong signal that I do not believe in the current policy. I believe it is a duty of the government (of course not the annuities as I see economic component it.) to look after her elderly as they had contributed to the society for the past few decades. I do not wish my mom to pick up aluminum cans for living. Am I watching a movie of my future? It is such a disgrace for a PM to encourage his “mothers” and “fathers” to work at their age. To become a graceful society, the government must be equiped with graceful brain and policies. Do you agree with me?

PS. Due to time constraint (exam ahead) , the comment is a bit messy.

27) Fever Guy on May 1st, 2008 1.48 am

I too felt sad that elderly are commonly seen picking up cans and paperbacks for a living. SWISS standard of living for our elderly? Only PM can define it better than us?

28) Commoner on May 1st, 2008 2.08 am

Hi Tiredman,

I think the ‘workfare bonus’ is to encourage Singaporeans to stay employed so that unemployment rate will be curbed and it will look good for G at the end of the day. There are also other benefits. If employment rate goes up, CPF contributions and spending will go up, there will be cash flow for the “nation” and G.

By the way, does anyone knows where the money of our reserves comes from? It can’t be the 22 billion (can’t really remember the figure) that was saved by MM when he was PM, since some already spent as aids to neighbouring countries during SM as PM period, right? SM certainly introduced a lot of costly stuff to us (GST, ERP, salary adjustment for top G, foreign talents, esp from China, “pension” ministers) then.

Regarding “pension” minister, I don’t mind paying for the first guy, but I am quite worried how many more we have to pay for.

Regarding investment, one thing is for sure, if the present G said that it is good, then, be wary that it is not good afterall. Some of the many good examples are the anticipated sky-rocketing share prices of SingTel which never happen and the very “safe” Unit Trusts or Bonds (didn’t pay attn to it, so not too sure) that they advice us to invest with our CPF money. Perhaps it is a way to keep our Economy floating. As you can see, they are not really good investors, so if you have any money, just avoid everything that they mention and your money will be safe. I think for money matters, you can only trust the late Dr Goh Keng Swee or the late Mr Hon Sui Sen (the honest “hold-on man”).

Good luck for your exams!

29) Tang Li on May 1st, 2008 2.17 am

I like this piece because it points to a problem that many Singaporeans face - a competitive business environment for the small guy and an unrealistic “competition-free” environment for the big guys. It’s like when they tried to have media competition and then rushed back to the duopoly that we have because SPH and MediaCorp’s bigger shareholders (Now, now - don’t be cynical) could not face “Destructive Competition.” It’s like you want to laugh when Earnest Wong, former group CEO of MediaCorp becomes a hero for saving the company from a destructive phase - what exactly did he do - he went crawling to the government to take away competition. Nobody seemed to be bothered by what the Singapore media consumer wanted.

Likewise in the financial industry. You have banks placing on $2 monthly charges because it cost them money to keep your account if you have less than $500 in there. Erm, something is very wrong with the business model. As Mr Tan has pointed out, a bank pays you less than 1% - something pathetic like 0.25% a year (for savings accounts - they don’t pay interest on current accounts), yet the bank lends money out at least 8% per year. They borrow from you at virtually no cost and then lend it out at a whopping huge margin and they are losing money, which is the logic for charging you. Something is very wrong with that. But of course….who cares about your business model when you have somebody as your major shareholder.

30) Kay on May 1st, 2008 2.31 am

I do hope that people will avoid buying financial products that they do not understand. They are so prevalent these days with banks taking out full page advertisements on the ST. With regards to index fund, you can find the STI ETF on the SGX which is an index fund that tracks the STI and this is a good way to grow your investment for the general public. It has a very low annual expense of around 0.3% and pays dividend with a yield of around 2-3% annually. Moreover, the recent correction in the stock amrket makes it an attractive time to enter now. Don’t forget that the stock market average a return of 10% annually in the long run.

31) Politics quiz on May 1st, 2008 3.08 am

To cope up with the problem, petrol taxes should be minimised first.

32) The Kway Teow Man on May 1st, 2008 3.24 am

Mr Tan,

You said, “the regulator should disallow financial and insurance products that have excessive charges and offer unfair terms to consumers. The product issuers should not be allowed to design complex products that skim off the consumers”.

The KTM disagrees. The assumption you seem to be making is that the regulator is necessarily smart enough know what is excessive and unfair. Since you are retired, ever considered joining MAS to see if you can do better? Also, disallowing financial institutions to design “complex” products kills innovation. How would we even begin to define “complex”?

You said, “we need a stronger consumer association to play this role of educating the public and taking care of the public interest”. So you are accusing CASE of sleeping lah? Not disagreeing with you. Just wondering……

In many countries, the media and independent minded journalists help to educate the public and prevent the abuses of businesses in taking advantage of consumers. In Singapore, we have the unfortunate situation that many questionable products are advertised in full pages in the newspapers. .

The KTM disagrees again because you are working on the assumption that someone is in a position to decide what is “questionable” and what is not. Perhaps indulge us and cite a “questionable” product that you spotted in the media recently and explain to us why it’s “questionable”? The KTM is really keen to understand what you mean by “questionable”.

Finally, are you suggesting that MAS now employ some “expert” to squat at SPH vetting ads? Surely, the press cannot be expected to be an expert and/or authority on what it means for a product to be “questionable” right?

To conclude, the KTM agrees with you that the cost of public transport is a big issue, but he disagrees that the Government is doing enough to contain the cost. ERP is pretty irrelevant in the discussion on public transport. Those who earn enough to take taxis can take care of themselves. The KTM firmly believes that nothing’s going to change without nationalization.

Your views and comments would be much appreciated.
tiredman,

I believe it is a duty of the government to look after her elderly as they had contributed to the society for the past few decades.

Help me understand this thinking. While your mother was working, was she not paid a salary? Perhaps we can try to quantify this “contribution to society” thing you are suggesting.

Let’s do a simple thought experiment: suppose your mother didn’t work in Singapore but somewhere else, say Malaysia, how much worse off are we (the society, the other 2,999,999 citizens of Singapore)? If you can quantify this (let’s call this x), this is the amount of money that the Government should pay to your mother.

Another thought experiment: suppose your mother didn’t exist, what would have happened to you? How much worse off would you be? Let’s call this amount y. This is the amount that YOU should pay your mother for her bringing you up.

The KTM would hazard a guess that y >> x.

It is such a disgrace for a PM to encourage his “mothers” and “fathers” to work at their age. To become a graceful society, the government must be equiped with graceful brain and policies. Do you agree with me?

No.

1. Why is a disgrace to work at their age?

2. Shouldn’t YOU be taking care of your mother rather than the Government?

3. Do you have any idea who would be footing the bill? Do you pay taxes? Instead of having the Government tax you to pay for your mother, why don’t you just pay her directly?

33) Tan Kin Lian on May 1st, 2008 8.07 am

Here is my reply to Kway Teow Man.

If the regulator does not know what is a bad financial product, they should not be the regulator. Many complex financial products are designed to rip off the consumer. The ordinary consumer may not be aware, but it is obvious to a financially savvy person. If the regulator does not know, they can engage the services of independent financial experts.

People who read my blog will understand this point. I am able to point out many financial products that give poor value to consumers. They are covered in my blog and website:

http://www.tankinlian.blogspot.com
http://www.tankinlian.com

I encourage people to read my views. They are given free. If you do not agree with them, you are free to ignore my views and invest in the heavily advertised financial products. At least, you have an independent expert view.

In the medical field, the Health Science Authority have the responsibility of checking that drugs are safe for consumption by the public. They cannot take the stand that the public should judge for themselves on the safety of the product.

I hope that the MAS will take a similar approach towards financial products that are “unfair to consumers”.

34) Tan Kin Lian on May 1st, 2008 8.10 am

Fever Guy said that the tone of my article is too soft for his liking. I do not have the luxury of making strong statements and using strong language under the cloak of anonymity. I have to be careful with my words to avoid being sued in sue-happy Singapore.

It is a better approach to be positive in making our statements.

35) family man on May 1st, 2008 8.43 am

Kway Teow Man,

Please advise me. When I was a kid, I understand we need to store a big reserve to help Singaporeans in times of emergency. As it is now, inflation and the price of rice has increased tremendously.
However, our govt has indicated the subsidy of rice is the start of a slippery road. So our govt decides to buy more citibank and UBS shares, leaving our singaporeans without a cent of subsidy.

What is your take on this?

Should our govt spend some billions to subsidise the price of rice? When do you think the reserves will EVER be used to help Singaporeans? Or should only be kept in GIC to grow and grow and grow (hopefully)

When a meteor hits us?
When an earthquake hit us?
When the sea overflow the banks?

36) leong on May 1st, 2008 9.32 am

Tang of 0830.
Do you not realise most of these companies are more monopolistic and wholly or partly owned by the govt. If they could help, the would have! But, the govt smokescreens these are private instuitions and they have no say in them

37) Logicalman on May 1st, 2008 10.11 am

Fever guy,

I agree with your comments and analysis. On the point of combating inflation, you said “only by increasing our wages and set a minimum wage is the way to go”. I think there are better solutions to that. Like many of us have said, the Govt can afford not to collect GST on basic goods and services, and also to keep it at 5% instead of 7% for all other items. What about ERP when the public is faced with an equally costly “public” transport alternative?

On the point of privatization leading to lower costs and higher productivity, you are spot-on, and that I think in this respect, the private “public” transport and other services have fallen grossly short, yet no corrective measures were taken by the so-called regulatory bodies who do not seem to ask themselves what’s the basic objective of providing those services. As for banks charging $2 for balances below $500, as well as monthly account fee, and contrast that with the paltry interest paid, and the high interest they charge on loans, yes, we all see a huge problem. It’s highly exploitative, yet condoned. These are the days when it makes more sense to keep money in a tin can or under the pillow, instead of being bled in a savings account unless you have no choice because your employer credits your pay directly into one. Banks operate under strict regulations in any country, yet, it’s appalling that the regulatory body sees nothing wrong with such predatory practices. Perhaps this is why our banks stay afloat while those in US sink under the sub-prime losses in a highly competitive environment. To think that we are bailing them out. In a highly competitive environment, the fittest survive and the consumer benefits the most, but we are seeing the reverse here, to the extent that the Govt needs to compile a list of $2 meal outlets, telling us where to get better value for our money. Even if a price-wage spiral hasn’t started, a price-tax spiral already has.

Commoner,

You said “I still miss the old government that brought the real success to Singapore. Sadly, most passed on”. My sentiments exactly. The old guards were more grounded in their expectations and tackled the issues of those days diligently, directly and fruitfully. Today, various aspects of society have broken down.

Look at our education system. How many cousellors are appointed to look after students in schools today, and how many cases do they see? I know several counsellors personally and the cases they handled are really heart-wrenching. Students barely able to cope being pushed all the way to P6 and then being told to accept that they need to choose a different path henceforth. 12 years of age and a child has to decide what to do next. Sure, we have been churning out more record number of As, but how many are left struggling at the lower rungs until they are eliminated and their self-worth dented in the process, and how much of this is reported? Similarly, teachers are barely able to cope with teaching and non-teaching responsibilities. Many roster out their sick leave entitlement, and students have become accustomed to expect their teachers falling sick at intervals. Is raising pay for teachers a good solution, or should the KPIs be honestly reviewed and revised? The prison service has done well to recognise that their role is not just to reform but to transform inmates. It’s about time that MOE realise that their role is to educate, not to segregate.

Families aren’t doing too well either. Divorce rates have gone up. Many choose not to have children, or to get married at all. Is this a healthy trend? Will bringing in more foreigners to meet our target population number solve the underlying problems, or will it just meet the numbers and nothing else? We hear leaders exhorting work-life balance, but how many can afford that, in the light of the escalating costs of living on all fronts and increasing competition for regular jobs?

I can go on, but many have already voiced similar opinions about the real issues facing this nation, and suggested counter-measures. It will do the Govt well to take heed, listen, and act on these where merited.

38) accountable on May 1st, 2008 11.06 am

It is clear our govt of the day has decided not to take accountability for their role in our cost of living - rising inflation - starting with the much revolted GST increase from 5% to 7%. (compared to HK experience).

In the meantime, our MM LKY has indicated they will get their top dollar pay pegged to private sector pay, but regarding the GIC, they will dumb down to 5 year reporting regime regarding the GIC performances. You see, giving regular reports of GIC performances will make things difficult for the ministers to manage her citizens, so less transparency is better. So in the end, WHO DARES TO AUDIT GIC AND ACCOUNT FOR THEIR ACTIONS.

(PM Lee has indicated they will not be accountable to their losses - it was a throw of dice and one came up instead of six - sends shivers down my spine)

old hero of Singapore. LKY.

Modern hero of Singapore - Ong Teng Cheong and his valiant effort in accountability of Reserves role to ALL SINGAPOREANS.

PS - in GIC buying Citibank shares - was there a conflict of interest where a citibank paid advisor is also heading GIC?

39) Dingo on May 1st, 2008 11.56 am

So is the writer trying to suggest ways in which the ruling party can stay in power??

I’m in favour of helping the people but not in helping authoritarians maintain their stronghold.

40) Singaporean on May 1st, 2008 12.17 pm

“Tan Kin Lian Says:

May 1, 2008 at 8:10 am
Fever Guy said that the tone of my article is too soft for his liking. I do not have the luxury of making strong statements and using strong language under the cloak of anonymity. I have to be careful with my words to avoid being sued in sue-happy Singapore.”

Dear Mr. Tan,

I am of the view that Singaopore should not have this “sue-happy Singapore” culture as far as different or less than desirable tone of opinions are concerned. Having different opinions is not a crime. It is the onus (though not an obligation) on the party which possesses more accurate information to do the counter-argument - this can go on and on until the one with a stronger counter-argument prevails. If in the end, no clear outcome still exists, then a mutual respectable agreement to disagree should be on the table among all parties. That is how cross-learning and cross-education comes about.

Receiving parties have to decide on the quality of information from different sources and it is still not wrong to place reliance on a less-than-accurate information in their own decision making process as everyone has their own prioritised interests to take care.
People will learn fast as the real world will usually not be too kind to anyone for wrong decisions made unless there is a system deliberately calibrated to tweak this natural flow of result.

The danger lies in not having different viewpoints / opinions but the protection of viewpoints of some privileged groups. The former will benefit a society at large while the latter will benefit only those protected few.

41) Eaststopper on May 1st, 2008 2.17 pm

Dear Fever Guy @ 8.33pm

I appreciate your comments to my post. Allow me to share my thoughts.
The US Federal Reserve is aggressively cutting interest rates to jump-start a slowing US economy as well as to lower the cost of borrowing for the US investment banks. As a consequence, the US dollar has weakened further. These series of actions have accelerated the rising cost of raw materials quoted in US dollars (e.g petroleum). If you really look at it closely, it is not hard to see that this is exactly what is happening in Singapore - our interest rates are keep low so we do not stifle domestic demand and in addition, allow our local business to continue running at a lower cost of debt. Our currency is kept strong because we are importing raw materials from our neighbouring countries, example rice, chicken, vegetables, steel for our IRs, etc. The currencies of our neighouring countries are strengthening as well. So if our currency do not appreciate against these currencies, the rate of inflation would have been much higher.
I agree with you that the GST, on hindsight, should have been delayed. But then, there is never a good time for this tax for the consumer. I do understand that the government sends out rebates for the GST so in a way, this is identical to the US as well (the Bush administration recently sends out billions of US dollars worth of tax rebates)
With regard to GIC’s investment in foreign banks: yes, I agree that the banks have messed up big time and they are paying a huge price for it. GIC’s investment strategy has always been for the long term and not reactive to the volatility of the share movement. We should look at the other strategic issues here at play rather than simply the stock price. And to add on to it, GIC’s investment in UBS is in the form of a convertible bond, maturing in 2 years (2009). In the meantime, GIC is collecting a cool 9% return on its outlay. We shall see if UBS share price is still languishing at its current level in 2009.

Cheers,
Eaststopper

42) Seeking Salvation on May 1st, 2008 4.33 pm

In this present world class government that do not do much to look after the people who have at a time contribute significantly also to nation building

1) see old people pick up cardboards and tins cans to erk a living as graceful retirement is beyond their means

2) seing people who consult the polyclinic but have not money to pay for their prescription and asking only for a few days medicine

3) seing down and out friends who lost their jobs because they are considered more expensive in the cost structure of the company expenditure when the company prefers hiring cheaper foreign talent to replace them

4) seeing middle aged people who were gainfully employed who lost their jobs in property management because of the government’s enbloc property ruling which prop the property market to new highs Developers prefer to hire new young management staff who are cheaper

5) there are many other factors which would take days to list

Are we then considered as a decimal point which can be chuck aside when we outlive our usefulness. This is a government that has lost its soul and would not take care of its citizens. We are not asking for handouts but their present form of taxation or GST has caused considerable hardship to down and out and the low income. Even Australia has not taxation or gst on food.
The elite would still support this structure as they have lost touch with the ground. The day of judgement would arrive remember the enslavement of the people during the egyptian empire and what happen afterwards.

43) The Kway Teow Man on May 1st, 2008 5.07 pm

Mr Tan,

Thank you for your response. The KTM agrees with you that “if the regulator does not know what is a bad financial product, they should not be the regulator”.
However, the KTM might not have articulated his question very well and so perhaps he can try again. Imagine. Just imagine that the Government agrees with you that we should regulate more and you are appointed the Director at MAS in charge of the regulation. In addition, you have a small army of analysts at your disposal to help you with your work. My question: what is your directive to your army of analysts w.r.t. what should be considered “questionable” products?

Obviously there are many factors, e.g. liquidity, maturity, etc. etc., but at the end of the day, it’s all about the tradeoff between rate of return versus risk. So what are you going to do? Are you going to say that only products with a minimal “effective” (nett of fees) rate of returns of say 5% can be sold? How would you even begin to quantify the risks and are you going to make decisions on behalf of the people w.r.t. their risk appetites?

Since you were from the insurance line, so perhaps we can do a simple case study for insurance products that typically have two components - guaranteed and non-guaranteed. What sorts of conditions would you impose on them? People surely haven’t forgotten the recent episode where AIA zeroed the bonuses (because investments didn’t do so well)? When insurance companies sell their products they always have this dunno what projected returns. If they cannot meet how? Should MAS keep track and fine them?? If MAS passes such a law, the KTM is sure you know the reaction of the insurance companies.

And one last point - and the KTM would like to highlight that this last point is not made as a personal attack in any way, but raised as a matter of public interest.

As we know, NTUC Income is a major player in the financial sector in Singapore and since NTUC is a co-operative, which means that it is supposedly owned “by the people for the people”, how is it possible that NTUC will come up with “questionable” products, which seems to be what you are insinuating as you sweep the financial landscape with your broad strokes?

Now suppose the KTM has misunderstood, and NTUC Income is flush with lots and lots of “good products”, then isn’t the solution simple? Government can just tell the people, “Let’s buy NTUC. NTUC will take care of all your retirement needs!”. In any case, if NTUC Income is “doing the right thing”, wouldn’t it already be exerting competitive pressures on the other financial institutions to fall in line?

family man,

Truly excellent questions. So excellent in fact that the KTM has written a whole blog entry in response: http://kwayteowman.blogspot.com/2008/05/questions-about-reserves.html.
The KTM’s answers are unlikely to be satisfactory by a long shot, but that’s the best this Internet kay poh can do. Someone should really raise your questions in Parliament so that we can all have some clarity on this issue of reserves. Good day.

44) Fever Guy on May 1st, 2008 6.34 pm

Eaststopper,

I believe the GIC investments in UBS and citibank are bad and comes at a terrible time. We have to see how both CITI and UBS start to raise capital and dilute the investment GIC have made. Is not millions they are raising but billions of dollars and not once but more often and definitely enough to par down the value of GIC investment significantly. The share price of the 2 companies are trading at record lows and GIC bought them at a price so much higher. If Buffet stays away why is GIC stupidly buying them at high price? Who has the logic? Talk about 9% return for 2 years is not even enough to cover the already battered stock price with paper losses in billions. Anyway UBS is negotiating a new deal with GIC that might just evaporate our investment further and bye bye to the 9%. UBS shareholders are not happy with the 9% thingy to GIC. More drama coming? GIC pumping more money to save the mess it got into?

FG

45) Fever Guy on May 1st, 2008 6.46 pm

Dear Mr Tan Kin Lian,

I do admire Mr Tan for coming out with a nice article that raised some pointers about present day living costs. I thank him for his courage and wisdom. As for myself, i am a peasant and my role is to be a peasant. We need warrior like Mr Tan to fight using his pen so that peasant like me can hope for a better life. In TOC, there are many warriors and heroes to whom i have great respect for. Their writings are really spot on and most of the time leave no stones unturned. I believe that Mr Tan will soon get a hang of how current TOC writers wrote and how our peasant voices are better reflected on a blog through them. Thank you once again, Mr Tan. Hope to see more cutting edge articles.

Fever Guy the anonymous

46) Tan Kin Lian on May 1st, 2008 6.48 pm

Dear Kway Teow Man,

If I were the MAS director of regulation, I will require the product issuers to answer a few key questions:

a) what are the charges levied on the consumer
b) what benefits is being provided by the product issuer
c) what is the best estimate cost of the benefits

This will prevent products being designed to skim off consumers.

Here is an example. A structured product is being introduced to give a capital guarantee at the end of 5 years. If the yield on government bonds is 4% per annum, the product can earn 20% from this investment. If the charges taken away for the marketing, issue expenses and the profit to the issuer is 15%, the product is likely to return 5% for 5 years or 1% per year. To hide this miserable yield, the issuer invest the remaining 5% in an option. Many of these options expire without value. The investor is likely to get back the original principal - nothing more.

It is not likely for a financially naive investor to see through this type of structure. We need stronger regulation to ensure that the interests of ordinary consumers are protected.

It is all right for investors to decide on taking higher risks to get higher returns. But it is not right that the major portion of the return is taken away by the product issuers and intermediaries.

47) The Kway Teow Man on May 1st, 2008 11.21 pm

Mr Tan,

I will require the product issuers to answer a few key questions:

a) what are the charges levied on the consumer
b) what benefits is being provided by the product issuer
c) what is the best estimate cost of the benefits

Item (a) is quite clear. The KTM however doesn’t completely understand what you mean by items (b) and (c). He would be most grateful if you can elaborate on “benefits” and “estimate cost of benefits”. Benefits = ROI? What’s estimate cost? Please pardon the KTM for his ignorance.

Your cited example is interesting - but it is still not clear that regulation (in the sense of banning such products) is necessarily the only way. You seem to have described a problem of misrepresentation. My question on your 5%-gamble-on-option product is the following: how does/can a financial institution get away with it?

Even a naive investor will ask the question: how much can he expect to get after 5 years, above and beyond the capital guarantee? Surely the bank rep must cough up a number and the expected returns must be more than you regular bank savings rates for him to invest in the structured product. Are you suggesting that there a problem in that number? In your example, the bank rep should have said 1% p.a. right? If not, then shouldn’t MAS simply take action against misrepresentation?

Frankly, the KTM has no issues with MAS requiring financial institutions to make full (or what’s deemed “sufficient”) disclosure of financial products (but he thought this has already been done what no?). Where the KTM disagrees quite strongly with you is the statement that “(MAS should) disallow financial and insurance products that have excessive charges and offer unfair terms to consumers”, because the terms “excessive” and “unfair” are highly contentious (and he was basically seeking to understand where in your opinion is that threshold separating “reasonable” from “excessive” and separating “fair” and “unfair”).

If there’s is no misrepresentation and it’s a case of willing buyer/willing seller, why should we stop people from buying/selling? You seem to be implying that your invest-5%-on-option instrument is bad. Perhaps you are right, but there is this organization called Singapore Pools and they sell this thing called 4-D. Is buying 4-D necessarily better or worse than investing 5% on options?
To conclude (and the KTM doesn’t want to sound too pushy), but you have not addressed the question of what NTUC Income is doing in our financial landscape as a subsidiary of the national cooperative (which is now supposedly all about U (us?)). Rumours are (and the KTM must admit that it’s all hearsay since he’s not a client of Income) that there’s also been some cutting of bonuses. Your comments?

Thanks for your patience and kind indulgence.

48) tiredman on May 2nd, 2008 12.45 am

The Kway Teow Man,

First thing, please do not put those words in my mouth. You are trying to say that I refused to take up the responsibility of a son and it is not true.

Tell the people in TOC that the gahman had no obligation to take care of her people! Mr KTM. Tell the people in TOC that the gahman had paid the people salaries and will have no obligation to take care of the people when they are old, Mr KTM. Please, I respect, Health Minister Khaw Boon Wan alot. He is not YOU!

I as a citizen would assume that my children will experience the same problem and hence I will be as selfish as you were and plan for myself and my children. I will be an opportunist. When I see a better place, I will leave with my family. However, I hardly want to do that, I want to see changes.

Think again, why most of the Singaporeans choose to leave if they have a chance? This is the same when we talk about Singaporean’s welfare. When most of the people react the same way, you are not being very rational. You have to think hard Mr Kway Teow. People who are not rational are people who think highly about themselves and would very likely not to spare a thought for others.

Perhaps you can ask your elderly mother to work till she drops. Tell your friends, “Look my mother is still working (shame on you) and she does not need me!” Next time when you have problem to pay your parent’s bill, please do not complain. Continue with this please. In future when you become an old man and having trouble in footing any medical bill, please come and find me.

I have notice your presence since few years and I already know that we do not share the same views in many areas and I see that you are worse than our gahman.

Writers like Mr Tan Kin Lian and Mr Leong Sze Hian are gaining my fullest respect as they write with a hope to help and educate many Singaporeans like me.

With people like you around, life would be very hard.

49) Tan Kin Lian on May 2nd, 2008 8.44 am

Dear Dingo (11.56 am)

The writer (i.e. me) is suggesting ways for the ordinary people to get a better yield on their savings, and to reduce the cost of transport.

At present, it seems that the current government has the power to make this happen. I hope that they will do so.

I am not suggesting ways for them to remain in power. They know how to take care of themselves. This is a separate matter for the people to decide in 2011.

50) Tan Kin Lian on May 2nd, 2008 8.51 am

Dear Kway Teow Man,

I do not wish to engage in a lengthy discussion on how to regulate the financial services industry in TOC. If the MAS is interested, they can contact me directly on this matter. If you tell me about the nature of your interest (e.g. if you are representing the political powers), you can also contact me. We can discuss it separately.

If you wish to know about the rumoured cut in bonus by NTUC Income, you can read more details in my blog, http://www.tankinlian.blogspot.com.

I do not wish to comment in TOC about the practices of NTUC Income at present or in the future. It can create misunderstanding.

During my time as CEO of NTUC Income, I made sure that all the products sold by NTUC Income are fair and give good value to consumers. These are the products that I would buy for myself and my family on the same terms as customers. I consider that this is ethics and integrity.

51) Tan Kin Lian on May 2nd, 2008 8.58 am

Gary Teoh (10:40 am) said:

Mr Tan’s suggestions are good but is it workable ? Most of the time, the government said, they let market forces to decide, they can’t control the price, I think it is not they can’t, they are reluctant.

Dear Gary,

I agree with you. The government can let market forces work, but they can play the following roles:

> ensure that the market players do not skim off the consumers
> do not add to the cost through ERP, taxes, levies
> promote an efficient, competitive market

In many countries, a pro-market government recognises that they have to play an active role in these areas. Look at USA. They have to regulate the market, when the market fails (e.g. subprime mortgages). They have anti-trust laws. They are considering a waiver of petrol tax to reduce the cost.

52) Tan Ah Kow on May 2nd, 2008 5.48 pm

I came across some very pertinent questions asked by family man May 1, 2008 at 8:43 am. In a nutshell the gist of question posed was this: What is the reserved for? Is it a play thing for GIC?

The question was posed to KTM and, as ever, one can expect the “nut case” to dissect the question to the point of being deviod of context and meaningless analysis. But that’s KTM take.

As for my take, it is quite clear from the various PAP pronouncement of that even people in the inner circle is unclear of what the role of the reserve is for?

Take the latest pronouncement by LKY about investing in international banks:

“We are buying something that we intend to keep for the next two to three decades and grow with them.”

So from the horse’s mouth it seemed the role of GIC is to use the state asset held under it’s charge to “grow” — i.e. code word for building a company, a foreign one — company. To the old man it seemed to be that the goal is not really to maximise returns on investment.

If you refer to the GIC mission statement:

To achieve good long-term returns on state assets placed under our charge by investing internationally, with due regard to risk and the nature of associated liabilities.

Now here the mission statement is missing some key details. How long is long-term? five years? ten years? one hundred years?

Well at least according to the Old Man, it seemed long-term means twenty or thirty years.

Quite clearly, it seemed that the so-called reserved is NOT meant as family man puts it “to help Singaporeans in times of emergency”.

If it was meant to be:

(a) An emergency fund, no one in the right mind would have plan for returns over such a long period, going by the OLD man thinking, thirty-years. Who can predict an big emergency wouldn’t happen within the thirty-years? Five-years is already long enough. Imagine if suddenly in the tomorrow a terrorist exploded a bomb a Singapore and tomorrow there is a run on Singapore banks by foreign investor and MAS needs to draw down to reserve to protect Singapore dollar, and hey presto, we have to sell UBS to raise money. The the paper loss is no paper loss no more. Oh I forgot LKY is the next best thing to a God so I suppose he can. I am sure LKY suck up kind like KTM probably believe LKY is GOD!

(b) Ok it could be argued that GIC investment is to help out the Government in handling the bumps presented by, say demographic changes and the liability of high CPF draw down by larger than expected pool of retirees, well then the question for GIC is should it be in the business of “growing” a faltering business by GIC? Should GIC investment cycle not be more in synch with say the demographic trend in the case it was indeed used to protect CPF investment? After all there is opportunity cost for helping faltering business. What if the CPF draw down come on stream whilst the business cycle of the company GIC invested is still on the downward trend? So money that could have been used to ride out the bump in CPF draw down becomes unavailable. Oh I guess no need to worry here because under LKY mode of thinking, this is not a problem:

(i) LKY can easily disclaim that it is not a GIC problem and the finance ministry one, which I am sure KTM will say. Logic is a bit strange considering that GIC is 100% owned by Finance Ministry. Alternatively Finance Ministry wants to be hands off, hey why should the Ministry then buy products from GIC? Hey, when I am investing my money, I don’t just go to one provider, I go to several and find a product to fit my needs. I don’t go buy a product to feed the needs of the provider right?

(ii) The PAP can easily withhold payment and say to the depositor, tough. It’s for your “long term” good.

(c) Ok the government could say that investing in entities are for the “strategic” good of Singapore. Because by investing in these entities, say investment bank, we can control these entities and get them to help develop our own finance services sector. Oops a problem here. If this was an open intention, it is definitely going to cause other Governments to suspect that GIC has a strategic rather than simply financial motives. I am guessing that “strategic” thinking is probably behind such investment. Here is what LKY said of investment in UBS:

“The franchise of the banks, the expertise that they have, under proper leadership, they will be able to recover and rise again … Will there be another Swiss bank like UBS for wealth management? I doubt it, we doubt it, that is why we invested in it.”

As for Citigroup, his comment was:

“an enormous spread worldwide as a retail bank”

Now he wasn’t saying that the banks’ shares or our investment value are likely to be so-and-so many points higher, when they recover, given the good leadership and extensive. He was point-blank in pin-pointing the functional value of the company — i.e. wealth management, retail bank spread. Is that really thinking in terms of financial gain? If not wouldn’t other countries suspect GIC investment intention. Oh to LKY it’s no problem: don’t use the word “strategic” just used word like “long-term” and all will be ok.

So all-in-all, if you hear the government say the investment is for the “long term” — whatever that means — good, it basically means it is a play thing for GIC. Emergency fund, forget it!

53) Daniel on May 2nd, 2008 6.16 pm

Tan Ah Kow,
thank for your analysis, you really say it all.
Your comment is a must read.

54) The Kway Teow Man on May 3rd, 2008 12.19 am

Mr Tan,

I do not wish to engage in a lengthy discussion on how to regulate the financial services industry in TOC.

Fair enough. This topic will probably bore many TOC readers to tears.
If you tell me about the nature of your interest (e.g. if you are representing the political powers), you can also contact me. We can discuss it separately.

If indeed the KTM was a representative of the political powers, he would have asked his secretary to invite you for tea instead of engaging you here at TOC. Sorry to disappoint you, but the KTM is just a big internet kay poh who is interested in the topic at hand and has been looking for an expert with whom to exchange views. You just happened to be a convenient choice. Hope you don’t mind.
In any case, this is the blogosphere and the keyword is transparency. Would it be possible for the KTM to invite you to his KT stall to continue our discussion? The topic at hand is a matter of public interest and is unlikely to be defamatory or seditious and so it’s perhaps unnecessary for us to resort to private communication.

I do not wish to comment in TOC about the practices of NTUC Income at present or in the future. It can create misunderstanding.

The KTM understands and respects your decision. It is certainly quite inconvenient that you should happen to be the former NTUC Income CEO.

During my time as CEO of NTUC Income, I made sure that all the products sold by NTUC Income are fair and give good value to consumers. These are the products that I would buy for myself and my family on the same terms as customers.

Great. The KTM is delighted to hear this.

For some closure, permit the KTM to summarize our discussion and for the KTM to share his views.

You had said in your article that “(MAS presumably) should disallow financial and insurance products that have excessive charges and offer unfair terms to consumers”.

The KTM disagreed with this statement because he is of opinion that if the Govt tried to regulate, it’s probably going to screw it up - because MAS won’t be able to do it right. However, the KTM could most certainly be wrong if there’s indeed some way of regulating the industry, which is why your views on “how” the regulation should be done was sought.

Now the question about NTUC Income was not random (and neither was it a personal attack). The point very simply is the following: NTUC Income is a subsidiary of the NTUC, a national co-operative under the control of the Government. And hor, co-operatives aren’t usually supposed to be making tons of money since they are supposedly “by the people for the people”.

The answer to “questionable” financial products thus seems pretty obvious (or perhaps not): if NTUC Income is doing its job and coming up with quality products, it should be hard for other financial institutions to sell their “questionable” products. All NTUC Income has to do is to take up ad’s side-by-side with these “questionable” products with accurate information and let these products sell themselves. Of course, this might not eliminate “questionable” products completely, but it should make these products relatively unpopular if the uptake isn’t high enough. So ends the KTM’s logic.
This argument could however be flawed since the KTM is not sufficiently familiar with the financial landscape to see where the underlying assumptions might fail. Your comments would be much appreciated.

tiredman,

Clarification: the KTM never sought to put words in your mouth. If you will read carefully, the KTM merely provided you with two thought experiments and three questions - and said he didn’t agree with you. How could that possibly constitute “putting words in your mouth”?

In any case, it is nice to know that you are running a charity. If you will leave your contact number, the KTM will most certainly come and look for you when he becomes an old man and has trouble footing his medical bills. You are too kind.
Perhaps we can talk again when you’ve figured out what’s x and y.

55) ronin on May 3rd, 2008 12.22 am

Mr Tan,

The govt put up ERP so that the rich will not be stuck in traffic jams….because their time is too precious. With ERP charges so high, our roads will soon be just for Ferraris!!!

56) The Kway Teow Man on May 3rd, 2008 12.52 am

Tan Ah Kow,

Seems like you cannot understand the concept of separation of functions between Finance Ministry and GIC. Perhaps the KTM can give you a simpler analogy: suppose you own a guard dog (to guard your house lah, what else?), are you going to leave the dog to guard your house when you sleep, or are you going to stay up with the dog watching the gates so that you can tell the dog to bark when the thieves break in?
Interesting theories on the function of the reserves - but perhaps permit the “nut case” to explain why you are not making any sense:

(a) An emergency fund, no one in the right mind would have plan for returns over such a long period, going by the OLD man thinking, thirty-years. Who can predict an big emergency wouldn’t happen within the thirty-years? Five-years is already long enough.

Finance 101 for you. GIC holds hundreds of billions worth of assets. What this means is that GIC is definitely doing some big time portfolio optimization crap and it will be holding a whole range of assets from long-term instruments to liquid assets. If the folks at GIC are earning their pay, they will be doing all kinds of stuff to hedge against the risk inherent in the assets they are holding. What makes you say that five years is enough? Do you know there are instruments known as 30-year Treasury bonds? Also, long-term doesn’t mean cannot sell early if the price is good.

Suppose you have some fixed deposits, but suay suay your house burn down, you sell or not? Or do you kiasu put all your money in the savings account ‘cos scully your house burn down tomorrow? If the probability of shit happening is relatively low, it is possibly optimal to hold higher-return, longer-maturity assets, or is this principle lost on you?

Next, when it comes to an emergency fund, how much of spare cash you think we’d need at one go? If the emergency is so big that GIC has to liquidate ALL its assets, we’re COMPLETELY screwed I tell you, emergency fund or no.
(b) Ok it could be argued that GIC investment is to help out the Government in handling the bumps presented by, say demographic changes and the liability of high CPF draw down by larger than expected pool of retirees, well then the question for GIC is should it be in the business of “growing” a faltering business by GIC?

You think people grow old overnight huh? Let me tell you this: the Govt can compute its liabilities arising from expected CPF draw down EXACTLY - isn’t this obvious actually? An emergency fund will not be needed for this purpose if someone is doing his/her job and planning for it. If there’s some “complacency” somewhere then anything is possible lah.

(c) Ok the government could say that investing in entities are for the “strategic” good of Singapore. Because by investing in these entities, say investment bank, we can control these entities and get them to help develop our own finance services sector.

******* Who in his right mind will sell us a controlling stake in their bank? On the point about “controlling”, do you know what Temasek is currently going through in Indonesia? Big stakes will expose GIC to unnecessary political risks.

********* ******* ****** *******

TOC Moderator’s note: KTM, your comments have been edited - denoted in the bold asterisks. Please refrain from making personal, disparaging remarks. There is no need to do so. Thanks.

57) Daniel on May 3rd, 2008 3.09 am

KTM, do enlighten me.

“Seems like you cannot understand the concept of separation of functions between Finance Ministry and GIC. Perhaps the KTM can give you a simpler analogy: suppose you own a guard dog (to guard your house lah, what else?), are you going to leave the dog to guard your house when you sleep, or are you going to stay up with the dog watching the gates so that you can tell the dog to bark when the thieves break in?”

Not that we do not understand but we no longer trust the government to think that they invest wisely. What is the connection between Finance ministry and GIC then ? Anyone bother to tell us ? Still, you probably ask how wise is wise ?

If I have a guard dog that I could not trust, I will replace it. Why do I even bother to stay together with the dog to enjoy the moon ? How about Temasek and GIC ? Could we replace the coffers if they create blunders and coverup ? How much is enough is enough ?

“What makes you say that five years is enough? Do you know there are instruments known as 30-year Treasury bonds? Also, long-term doesn’t mean cannot sell early if the price is good.”

Now the most important question to ask if who is THE ONE RESPONSIBLE ? The government, Hojin or some pathetic trader ? Putting the matter of 30 years old investment or whatever. Who is responsible ? That is what we want to know. Not some Tom, Dick and Harry who physically execute the transaction and thus be responsible, but who are the one passing down the order. Selamat’s saga has certainly been a lesson of complacency, not of government but of own nation. So will bad investment been the case of complacency again ? Now, did LKY anticipate that Thaksin get overthrow when the latter sell the telecom company ? Think nothing serious going to happen for investment in next 30 years ? Indeed base solely on commerical interest and benefit, the government is right to invest, but it never thought that Thaksin get overthrow, isn’t it ? Of course, we should continue to invest but we should have somebody to be responsible. Even in army, we have official responsible. The strange thing in government office is that no one is responsible. Don’t you find strange or do you find it normal ?

” If the emergency is so big that GIC has to liquidate ALL its assets, we’re COMPLETELY screwed I tell you, emergency fund or no.”

Taking the worse case again, the question is what is the probability of GIC liquidate ALL its assets for the emergency ? Is there any past history to indicate that GIC and government will sacrifice everything ? Given characteristic of our government, will anyone confident that government will sacrifice it all ? Nobody ask GIC to liquidate ALL its assets, how about some of the assets ?

“On the point about “controlling”, do you know what Temasek is currently going through in Indonesia? Big stakes will expose GIC to unnecessary political risks.”

So does that deviate the government any responsbility and accountability to the citizen because lack of disclosure is necessary to migitate political risks ? Can you suggest how then we can ensure that Temasek is accountable to the nation given the past blunders ? Yes, you will ask again what blunder and ask me how to do it ?

Do you yourself trust the Temasek and GIC for their investment aside from your pragmatic view and response ?

…. cheers, thank

58) Just To Say on May 3rd, 2008 7.10 am

This is what I got to say..
After reading so many comments on this article, the bottom line is that the goverment keep on stressing on the achieved STANDARDS in Singapore. But have those ministers up there saw the ground situation?? Before they got to see the other pathetic side of Singaporeans, their sniff dogs already keep the ugly scene out of their sight. Have they really gone through the situations now Singaporeans were facing now??
1)Jobs Security.
2)Cost Of Living.
3)Daily Expenses.
4)Transportations.
5)Foreign Talents.
For the above mention and maybe more are the woes of average Singaporeans were facing now.
Will anyone think that the miserable 3 billions payout in installments given have improve or lessen the problems?? That was really peanuts to a better solution?
Have people earning big bucks up there really mind on the decisions they made affected lives of others. Did they really gone through REAL LIFE SITUATION then relying on paper reports or surveys.
##Conclusion##
Every single things has gone up in $$$, but pay package still the same or worst retrench on present job and got a lower pay package. Will these contribute to the zero morale of an individual in Singapore? As for myself, I do not know and don’t even think can live up to 82 years old working on two jobs just to par up end meet feeding a family of 4.
##Proposed Solution##
Pay out percentage of our CPF.
##My point of view##
I don’t really believe to live up to the retirement age. Why can’t handle the CPF $$ if oneself is mature enough to plan on their financal needs. That’s why Singaporens are asset rich but pocket empty. If one can’t slove the situation facing now, why think of retirement? Why goverment need to control on CPF which was monies doesn’t belong to them?? Why can’t be transparent and what is the purpose behind holding CPF? To prevent poor Singaporens having nothing to spend in old age whereby is a dream far far later. I must agree that the Goverment has done good on certain part and grateful when CPF really helps on buying HDB asset. But can also introduce CONTROL SYSTEMS for those who have brought their asset, withdraw certain percentage of CPF for situation like now. This will be applause by every single Singaporean and goverment still hold certain percentage for retirement planning. WIN WIN Situation.
Everybody then can pay off their monthly due.
ONLY A PERSON WITHOUT DEBT CAN REALLY PROVIDE BETTER OUTPUTS.
SAID WITHOUT ACTION OR THROWING SWEETS AROUND SERVE NO RESULTS.

59) Singaporean on May 3rd, 2008 9.15 am

I have this question.

About the “better-than-average” past performance of GIC, Temasek , our reserves. Has “the better-than-average” performance been due to overall net positive performance on portfolio done within Singapore as against those outside Singapore ? I definitely can sleep better if their foreign portfolio has performanced “better-than-average” on a net-basis since the day they ventured overseas and again how much better.

To me, I am of the opinion that GIC, Temasek, our reserves are all of the same thing (e.g it belongs to the nation) as I do not really know the mechanics of funds transfer among the entities if the need arises.

Could someone enlighten me a little bit.

60) Logicalman on May 3rd, 2008 9.18 am

Just to say,
I think having more flexibility with CPF monies does not solve the problems at hand. Our current situation of high cost of living is due in large part to prices escalated by taxes and external factors that may be regional or global in nature, and reduced Govt spending. If the Govt were to do more in terms of spending on public goods and services, such as transport, utilities, education, healthcare, public housing, etc, and taxing less (no GST on basic goods and services, 5% on others, more equitable ERP, for example), leaving the monies in CPF will serve us well, as it did for the generation before us. CPF itself is a good system to have, but I must say I have yet to be convinced of the fairness and benefits of the CPF Life annuity scheme, the upping of minimum sum, and the delaying of CPF withdrawal age, based on the justification that people appear to be living longer.

Coming back, as more public good and services are privatised, yet do not translate into lower costs for the public, our purchasing power drops. At the same time, because many public goods and services have been privatised, the Govt no longer spends as much on them; on the contrary, she now collects taxes levied on these goods and services, on top of the “market” rates that we are paying, as well as the from the businesses that provide such former public goods and services.

The lower interest rates everywhere also do not help our savings unless we have enough to invest in higher-return instruments. Many people, by leaving their money in savings accounts, have actually been bleeding. Whatever little interest earned is wiped out, along with part of our savings, by bank charges every month. Interestingly, though interest rates have fallen, long-term borrowing costs for housing did not. At the same time, the value of our public houses have seen several upward revisions, resulting in higher property taxes, while we benefit nothing from it, unless we are in the business of buying and selling properties, or apartment rental.

If we own a car, we are stuck with high COE pri