TOC is happy to welcome Mr Tan Kin Lian on board as the latest addition to our writing team. He is the former chief executive of NTUC Income, an insurance cooperative in Singapore.
Lessons from the general election in Malaysia
The Malaysian general election held in March 2008 produced results that surprised not only the politicians but ordinary voters as well. A Malaysian friend told me that the ordinary people wanted to send a message to the ruling Barisan National, which had governed the country for over 50 years, about their unhappiness with the current situation. They did not expect to see a change in five state governments to the Pakatan Rakyat.
One key issue that contributed to this unexpected election results appears to be the high cost of living. It is not sufficient for the Government to explain that the higher prices are due to external factors. The people expect the Government to find effective ways to deal with this problem. This is what they elected the Government to do.
This election result has lessons for Singapore. What can the Government do about the high cost of living in Singapore?
Contributors
Here are two key factors that make it difficult for many people to cope with the cost of living in Singapore:
Financial Products.
Many people earn a low rate of interest on bank deposits. The bank interest rate, which has been less than 2% for several years and now less than 1%, is insufficient to cover the rate of inflation, which has now increased to more than 5%. If they invest in other financial products, they have to pay high charges and get a poor yield.
Many people invested several billions of dollars in structured financial products in the hope of getting a better yield than bank deposits. They were taken to the cleaners. Many housewives and retirees told me about their investments in the capital guaranteed products that were heavily advertised and sold by our trusted banks. After locking up their principal for five years, they get a total return of less than 1% per year, worse than bank deposits. They missed the chance of earning more than 10% per annum on the booming stockmarket.
For most people who invested in unit trusts and investment funds offered by life insurance companies, the outcome was not much better. They have to suffer an upfront charge of 3% to 7% on their investment and an annual charge of 1% to 3%. After deducting these high charges, the net yield on their investment is mediocre and is not commensurate with the risk. The fund managers and other financial intermediaries have taken away most of the gains.
The worst cases are the hundreds of thousands of people who invested their regular savings in an investment-linked product sold by the life insurance companies. In addition to the high charges mentioned above, they have to suffer “allocation rates” that takes away two years of their savings to pay commissions to the insurance agents. Many were not aware of the financial impact of these predatory “allocation rates”.
Transport
Many people have to pay high cost for their daily commute to and from work.
If they live in a place that is not conveniently served by public transport, they would have to use a private car. The cost of driving has gone through the roof due to high petrol prices, a wider network of gantry points and higher ERP charges implemented over more hours in the day and night.
Those who use taxis for their transport have seen the cost increased by 30 percent.
A friend of mine once decided to take a taxi from Pasir Ris for a meeting in town, instead of driving. She was shocked that it cost $27. This was the highest taxi fare that she has paid in her life in Singapore. It will be the last time that she takes a taxi. Not all the $27 goes to the taxi driver. ERP charges takes up a few dollars.
If you have to take public transport, it could mean a bus to the MRT station, a ride in a train, and another bus ride to the destination. The total cost of three legs of the journey is not cheap. And the rides are not comfortable, due to crowded buses and trains and long unreliable waiting times.
Apart from the high cost, the commuters have to bear with long travelling time of more than one hour at times.
The regular increase in bus and train fares, needed to keep pace with higher petrol and other operating costs, is never welcomed. The commuters read that the large publicly listed transport operators continue to make hefty and increasing profits for their shareholders.
In a recent survey carried out in my blog, www.tankinlian.com, I was surprised that the cost of transport was rated to be the highest concern among my readers.
Suggestions
Here are my suggestions on how to help people to cope with the cost of living in Singapore.
Financial Products
We have to give people a fair return on their investments.
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 financial institutions can compete to provide products to consumers on the basis of their efficiency and quality of service.
We need a stronger consumer association to play this role of educating the public and taking care of the public interest. The consumer association needs to be adequately funded by the Government and to be provided with adequate resources to play this role, which is normally expected of the Government.
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. They are an important source of revenue to the newspapers which, in turn, reward the advertisers with friendly coverage.
Transport
The Government can take a pro-active approach to reduce the cost of public transport. It is a necessity for daily living, just like fresh air. People do not consume public transport for enjoyment.
The cost of public transport cost can be reduced by waiving ERP charges, road tax and other levies. It can be brought down to the marginal operating cost to cover energy, wages and depreciation.
We have to find ways to reduce the need for commuting. People should be encouraged to find work near their homes or to move their homes closer to their place of work. Students should be encouraged to study in a school near their home.
We should reduce the transaction cost for a person to sell a house and buy a new house that is close to the place of work. Stamp duty should be waived. Lawyers and broker fees can be reduced by simplifying the work and creating a more efficient system.
Apart from reducing the transport cost, this will save travelling time and improve the quality of life.
Conclusion
The Government has already announced several measures to address these two issues. A new transport blueprint has been published. The Monetary Authority of Singapore has invited public views on a consultation paper dealing with the conduct of financial institutions.
I hope that the Government will consider the additional measures that are suggested in this article.
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About the author:
Mr Tan Kin Lian started his insurance career in 1966 in a local life insurance company. He qualified as a Fellow of the Institute of Actuaries in 1975.
He joined NTUC Income in 1977 as the chief executive officer. From a base of $28 million, the total assets increased to over $18 billion when he retired in April 2007. NTUC Income is a leading life and general insurance co-operative in Singapore.
From 1992 to 1997, he was Chairman of the International Co-operative and Mutual Insurance Federation (ICMIF), an international organisation representing 123 insurance groups in 65 countries.
He now works as a consultant to insurance companies and maintains a website here: www.tankinlian.com
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Tan Ah Kow,
thank for your analysis, you really say it all.
Your comment is a must read.
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. :-P
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. :-P 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. :-P
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!!!
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? :-P
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. :-P
(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? :-P 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.
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
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.
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.
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 prices, high petrol prices as well as higher ERP charges levied at more places. If we choose alternative transport modes (there’s no public transport to speak of in Singapore), we are faced with increased MRT and bus fares, higher school bus fees, as well as higher taxi charges, most of which have gone up by 20% or more last year.
If our household comprises of 2 working parents, a couple of kids, and an aged parent, we incur higher charges from before/after school care, as well as domestic helper (foreign worker levy has dropped slightly for the domestic helper, but salaries have increased overall).
As you rightly pointed out, wages have not risen as fast or as much as the cost of living. In many cases, workplace restructuring has led to people, mainly older workers, moving onto lower-paying jobs. I do not think that the fact that we have more curry-puff and tissue paper sellers, as well as beggars at bus interchanges, is a pure coincidence. As you have also pointed out, many Singaporeans are asset-rich but pocket-empty. May I add that asset, for most, is a HDB flat unit that won’t generate any financial benefits to the owner, unless it’s rented out or downgraded. If the flat is a home, most people won’t think of renting out, much less selling it for profit.
Most of the points have been well covered in relation to GIC and Temasek’s investments.
Without a good estimate of the amount of S’pore’s reserves, how are we going to quantify and qualify their returns? Base on $100/200/300 billion? 1% of either of these sums is a monstrous difference.
Is there transparency in the remuneration of the executives and management at Temasek and GIC? Do we need to wait till a sub-prime type of management crisis there to realise the magnitute of their losses?
As far as I’m concerned, there are only two distinct reasons for being evasive about GIC, Temasek and the reserves. One, we have so much more than perceived. Two, we use to have so much but depleted significantly over the last 2 years, especially since 2007 with the onset of the crisis.
There is also a possibility that GIC has invested heavily in UBS prior to the crisis and finds it necessary to give it a lifeline.
Whatever the reason, any further injection of funds into UBS will only serve to cover their write-offs for the foreseeable future.
To protect himself, LKY hints that this investment may take up to 30 years to bear fruits. Unfortunately, it is unlikely Singaporeans can hold him or PAP accountable.
Any expectation of Singaporeans to continue to have blind faith in LKY or PAP is plain foolish and naive, not only complacent.
Singapore is here today only through the collective efforts of its citizens’ sacrifices, not PAP’s policies alone. Therefore, it’s time to stand up for our citizens’ rights to put things back on the right path.
Good political leaders had passed on or retired. What we are having now are as good as corporate raiders, where profits is the end objective.
Daniel et al.,
Those who wish to engage the KTM are welcome to come to the KTM’s KT stall to continue this conversation.
The KTM is extremely displeased with the double standards w.r.t. to censorship that the TOC moderator has adopted. The KTM expects his earlier comments to be posted in full and an apology before he will continue with further conversations on this thread.
The KTM nevers uses obscenities, profanities or seditious and racist remarks in his postings and sees no reason TOC has to resort to censorship. What transparency are we talking about? Pathetic.
KTM says:
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?
He must be sleeping that he did not know the level of CASE’s incompetence. Did he not know that it took a MP and a lot of disgruntled customers a long time and get CASE to finally sanction that the TimeShare scheme is a sham with how the salesman tries to force the customers to get the products?
Muahahhahahaha, my friends in TOC, even you have to moderate KTM, a blogger belonging to a group that is supposed to champion rational and fair discourse. I really want to know what he says that constitutes personal and disparaging remarks. Finally it took that long to have this chap being moderated.
I suppose one need not be surprised by KTM responses. Here he goes again spinning with his “nit-picking analysis” what was actually said to the point of being out-of-context.
Let’s start with:
KTM says:
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?
Daniel says May 3, 2008 at 3:09 am hit the nail on the head. Let me try to analyse KTM’s “superior” logic by extending his guard dog analogy:
What happens if my guard dog keeps letting thieves in?
Of course since I cannot understand the concept of separation of function, so I must go by KTM’s “superior” logic and keep the guard dog despite it not being a good one in the interest of “separation of function”.
Coming back to my original point: I didn’t say that the Ministry of Finance, to use KTM’s word, must keep watch over GIC’s day-to-day operations. My point is that the ministry has two options:
(a) Since it has 100% ownership of GIC, it could clearly influence the “guard dog” mission. Making make the “guard dog” a “pet instead” — i.e. making GIC technical advisers rather than executor!
(b) If GIC was not delivering as expected of it, than go find another “guard dog”, UBS perhaps?
KTM says:
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.
As usual KTM loves to put words in people’s mouth.
The point I was making was that on the one hand GIC’s stated goal was to “maximise return over the long term” and LKY, the chairman of GIC, than say that they bought into UBS and the likes because and I quote:
“We are buying something that we intend to keep for the next two to three decades and grow with them.”
Now how do you reconcile the two intentions? If what LKY is saying of how GIC invest, then one wonders if the people in GIC are really doing optimization at all.
That’s what LKY says, so is KTM wanting to put words in LKY’s mouth?
On the point about the five year, whether it is long enough? My point is that to all about ability to predict so far. Not about choice or availability of investment instruments. Now again my point is that IF, and I stress again IF, the reserved was indeed intended to be an emergency fund, putting that kind of fund into something that long range, especially, stocks-based instruments is somewhat difficult to reconcile. As it is now, GIC is sitting on a paper loss because of investment in Banks, can anyone say that we won’t need to liquidate that investment with five years let alone thirty? As KTM clearly point out there are 30-year bond, so if it was an emergency fund won’t anyone with their right mind put it into that than stocks?
Well maybe KTM with superior logic can make thirty year prediction.
Oh here is Finance 101 when you sell stocks at a loss, you not just lose the difference between what you paid and what you finally get. Your loss is compounded because of opportunity cost — i.e. the money that you have lost if placed on a saving account would also be earning interest so you not only lose the paper lost but also you opportunity interest gain!
KTM:
Who in his right mind will sell us a controlling stake in their bank? :-P 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.
Here is another one those KTM classic put words in my mouth thing.
My point is that based on what LKY is saying, it seemed that all these investment seemed to reflect strategic considerations rather than purely financial. So the question in my mind is this a wise?
Oh to answer KTM’s question, note that Barclays and UBS offered board membership. Keppel gain full control of a power generation company in the UK. So yes, there are companies willing to offer controlling stake. Whether their host Government is happy about such arrangement is another matter altogether.
For all I read, KTM means well. I just find hard to understand him like most of people here. To me, it is not business decision and business acumen that I questioning but the leadership and morality of the ‘secretive’ groups that run Temasek and GIC. If they learn from mistake, I say fine and move on but instead those mistakes are downplayed as honest mistakes and coverup, and repeat again which eventally give doubt about their competency and their integrity.
If by all means that there is real check and balance from independent group that the citizen could trust, by all means, says that Daniel is too paranoid and oversuspicious. However, now there anything to go by, Selamat is a wake-up call to many that no one is responsible and accountable for major blunder. Business as usual. WKS , PM still get their increasing millon dollars job, still sing song together while millions of taxmoney goes into capturing Selamat, bad reputation abound. Importantly, citizen end up paying more taxes because PM say that there is no free lunch so money will need to be recouped from somewhere. From who, do I need to say more ?
Business rationality and strategy do made concrete sense but do take into consideration the importance of ‘good’ characters and traits of the leaders that run those business, especially with total lack of transparency and accountability. Leader with greed and lack of moral authority, and running with nepotism, doing as they please and like like nobody business using someone else money like his own, so isn’t that frightening to see that happening in our Uniquely Singapore?
Worldcom, Enron, etc shows examples of leaders with lack of transpency, using Creative accounting, justifying their million dollars salary. Yes, these people can be brought down and stand trial because evidence can be found against them.
Question is could our coffers withstand scrutiny or just simply acquitted and move on because of the repercussion should that happen ? Isn’t there a law to protect ministers/high officials from investigation ?
We are not going anywhere if we simply focus upon business decision or policy, the focus lies in the leaders and their integrity who run the show. Needless to say, majority of educated Singaporeans no longer trust the government. (Will KTM ask again who are the majority just like LKY ?)
Hope that KTM understand what are we really concern about.
KTM,
I will like to visit your ‘stall’ and eat more of your ‘Kway Teow’. However, after ‘tasting’ some of your ‘Kway Teow’ here, I better stick to MeeSiamMaiHUM.
cheers…. my friend …
I am so impressed that KTM talks about being moderated. The establishment can choose to censor what he or she wants, but TOC cannot. Talk about double standards. KTM, stop faking as a kway teow stall seller when u are a lackey of the establishment.
I love Kway Teow Man’s persistence in saying if the current party is no good we should vote them out in the next election.
Bro, with the crazy gerrymandeering and suka suka change electoral boundaries, so easy meh? Oh, I’m sure inflation will affect election deposit in 2011 too!
Is Kway Teow Man working for the Hen man?
To Mr Tan Kin Lian, may I ask this: Was it ethical for CPF to transfer public Medisave policies/accounts to NTUC Income and Great Eastern Life (or was it AIA?) many years ago without the consent of the policy holders. Through the transfer, the 2 insurers had access to the personal particulars of hundreds of thousands which I think was worth much as it would lead to new business. No, I do not blame the insurance companies involved. I’m just sad that the CPF Board can just walk all over us without any respect for our privacy!
Meanwhile, I feel that the reserve in GIC & Temasek is just a mirage where the general population is concerned! They may be real to the Lee family and selected Eleetists. Surprisingly, some MPs don’t even know squat about it! Then again, if our late President, Mr Ong Teng Cheong, had to go through the cesspool and still not find what he needed to know, who are we to know?
Pardon my cynicism, but I feel very strongly that our reserve is similar to Mas Selamat Kasturi.
What is our reserve? (Who is Mas Selamat?)
Where is our reserve? (Where is Mas Selamat?)
How big is our reserve? (How do we describe Mas Selamat?)
It’s for them to know and for us to find out?
Who are we to know? Does it matter if we know?
We just want them to ‘stay together and move ahead’ with us with our reserve! Not tell us that “u cant touch this” until 5, 20 or 30 years later!
Meanwhile, they touch, they play!
We wonder.
Who’s money is it anyway?
feedmetothefish
Oops, I mean Medishield, not Medisave.
Sorry.
feedmetothefish
I love the substances in the many posts here, especially Posts 65 to 67 by Daniel and Feedmeto the fish.
And I just like to add that MM Lee Kuan Yew can say anything he wants now because thirty years(or maybe tommorrow) down the road, even gods will not be able to make him answerable to anything he has ever said. I am 101 percent sure!
patriot.
Keow Teow Man said:
Mr. Tan said:
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.
Dear Keow Teow Man,
The product issuer tells the financially naive investors that their money is invested in certain combination of shares or bonds that will give certain yield under certain circumstances in the future.
The ordinary folks have no way of calculating the probability of the “happy events” occuring. As a financial expert, I will not be able to calculate this probability as well, but I guess that the chance is very, very small.
What happened? Most of these “happy events” did not occur. The investor is likely to get his principal back. In some cases, they lose part of their principal – as they were not aware about the risks.
I understand that some of the structured products are invested in CDOs. They have not matured yet. Let us see if the investors can get back their principal.
As the so-called MAS director of regulation (if I ever get appointed), I will never allow this type of “rip-off” to happen. It will not be possible for the product issuer to answer my (b) and (c) questions, so the product will never get approved by me.
Why did the government regulate gambling? It is to ensure that the consumers are not “rip off”. They should be given a fair game of chance, and may pay some loading to cover expenses.
Sadly, this kind of protection does not occur, when financial products are concerned and reputable, trusted banks are involved.
To Mr Tan Kin Lian, may I ask this: Was it ethical for CPF to transfer public Medisave policies/accounts to NTUC Income and Great Eastern Life (or was it AIA?) many years ago without the consent of the policy holders. Through the transfer, the 2 insurers had access to the personal particulars of hundreds of thousands which I think was worth much as it would lead to new business. No, I do not blame the insurance companies involved. I’m just sad that the CPF Board can just walk all over us without any respect for our privacy!
Dear Feedmetothefish
I prefer these schemes to be managed by the CPF, rather than passed to the private sector. There is no advantage in having the private sector to manage these schemes. They are not able to improve efficiency, reduct cost, or give better service compared to CPF.
Sadly, there is a mistaken belief that the private sector is efficient. This is not the case.
You have raised a privacy issue as well. I think that the insurance companies are required to sign an agreement to respect the privacy and are not allowed to use the data for their own marketing. I think that this should be all right, and that it is not being abused.
I prefer national schemes to be managed nationally. Do not give it to the private sector, which are profit drivern.
Quote; “I prefer national schemes to be managed nationally. Do not give it to the private sector, which are profit driven.” Unquote.
Kin Lian; may I ask, with reference to the Quote, are You saying the National Schemes are not run for profits and gains? Personally, I do not find any of the Schemes benefitting the people much except for those families that get some helps from the schemes(insurance related) for some reimbursements and claims for medical bills and when death occurs to an insured person. Do You consider NTUC Products under the so-called National Schemes?
Are there National Schemes that allow citizens to make money without much risks? I thank You!
patriot.
Dear Patriot
Some national schemes in other countries are runned on a subsidy basis, i.e. the deficit in the scheme is covered by taxpayer’s money.
In Singapore, the national schemes, such as CPF and Medisave, are runned on a non-profit basis. If the scheme shows a surplus, it should be returned back to the participants.
However, there is a tendency for the scheme to keep the surplus as a reserve, in case they are needed to cover losses in the future. The problem is that the reserves can grow to be too big.
We need good managers to manage the scheme, so that there is a proper balance between keeping the cost low (as a non-profit scheme) and keep them solvent (by accumulating some reserves in good years). This requires someone to take the responsibility. The trouble is: in Singapore, most people do not want to decide.
During the time that I was CEO, you can consider the schemes of NTUC Income to be almost non-profit, as it is a cooperative. I am not sure whether this still concept applies today, as it is now under a new management.
Hi Kin Lian;
thanks for your response. The ‘ifs’ and ‘shoulds’ in your response are ‘doubts’ in my understandings of National Schemes all these years. I now feel consoled that the understandings are quite fitting to the ‘ifs and shoulds’.
And may I add that ‘if’ our essential goods and services providers did not ‘push’ for better bottomlines(profit/revenue), most of us ‘should’ be living much more comfortable now. Do You agree?
I am much obliged, from: Yours truly; patriot.
Dear Patriot
I strongly believe that there is a place in the free market economy for non-profits, cooperatives and state schemes to serve the public. They play an important role to moderate the profit-drive sector.
Our government leaders have the belief that the free market and profit-driven enterprises can produce the best results through competition. This is partly true, in the areas where competition can work best.
But, there are many areas where competition does not work well, such as in financial services and health care. The economists call it “market failure”. I call it “exploiting the ordinary people”.
Regulators have the duty to protect the interest of the ordinary people. In recent years, they have neglected their duty. They have the mistaken belief that the competition and disclosure can solve the problem.
Look at disclosures in the financial services sector. It has been ridiculous. The product issuers can disclose a lot of details that are incomprehensible to ordinary people.
For example, there is a disclousre in the life insurance policy that the “effect of deduction” is $100,000. What does this mean? It means that the product issuer and the intermediary takes away $100,000 from you during the lifetime of the contract. It is daylight robbery, but the general public does not understand it. This information is hidden within 30 pages of printed output.
Back to your question. Yes, if there are more ethically runned businesses in our economy, most ordinary people will be more comforable in Singapore.
These businesses can be runned efficiently and are entitled to make a fair profit. But they cannot be allowed to make excessive profit by cheating or short-changing the consumers.
My entire paper is actually aimed at driving this point home – and at the role of regulators!
Mr Tan,
Thank you for your response. It seem that you have decided to continue this discussion here and it would be impolite for the KTM not to at least leave one reply for you. Note however that the KTM would rather continue our discussions at his KT stall because he is aggrieved by what he perceives to be irresponsible moderation by the TOC moderator.
If you do not wish to continue this discussion it is fine too and you are welcome to have the final word here at TOC. Thank you for your patience.
It will not be possible for the product issuer to answer my (b) and (c) questions, so the product will never get approved by me.
Wah, isn’t it somewhat extreme to issue disclosure requirements that are not satisfiable?
While the KTM still doesn’t understand completely what you mean by (b) and (c), he does not believe that your requirements are impossible to satisfy. It is just not plausible for MAS do something like that. In fact, let’s imagine that you are the MAS Director and KTM is CEO of the imaginary KT Income, and you issue this new directive. This is what the KTM will do:
KT Income will kwai kwai follow your instructions and submit the data to you as required. Whatever PhDs you have, the KTM will also similarly employ to spit out the numbers you ask for. Throw in the partial differential equations, Black-Scholes, kitchen sink and all. Somehow, there will be these magic numbers all backed up nicely with data and charts. :-P
That’s not it. The KT Income will not be submitting just one product for approval, but a whole range of products (10?) ranging from almost riskless bond-like products to the high-risk products. Why? The KTM is merely probing your system. You cannot possibly be blocking the bond-like products. The question will be: where is your threshold and how do you actually do the regulation?
If your threshold is too low, the KTM will complain to the Finance Minister that you are killing the financial sector and Singapore can kiss it’s pipe dream of becoming a financial services hub goodbye. :-P And it’s not just a complaint letter. The complaint will be a big stack of documents demonstrating to the Minister in no uncertain terms that MAS has disallowed a product that is comparable to products available in other major financial centres like New York or London – and you can go figure how to explain to Minister. The KTM’s numbers will be correct (‘cos they will be generated by this army of PhDs in the back room). :-)
Ding-dong enough and something will eventually get through ‘cos KT Income has the resources to play this little game with the MAS bureaucrats. And what happens after that? Two things:
(i) What is submitted to MAS for approval and what is printed in the marketing brochures are not exactly the same. There no lies of course! By why the omissions? “Aiyah, not our fault. We did try to print (b) and (c) in our earlier versions, but we found out that the customers couldn’t understand and didn’t find it useful. We want to help the customers understand and so we only print useful information in the product description.” Actually hor, you want us to print also never mind, since like you say, nobody understands anyhow.
(ii) There will always be risks – and if the product tanks, whose fault? Well, MAS has already checked and approved, so KT Income cannot accept responsibility. MAS’s approval means that we had already done our due diligence. Any losses arising are an act of God (or MAS’s failure in its checks. Complacency?)!
Be aware that an approval process will have the unintended side effect of implicit endorsement. There is no reason why MAS would in its right mind want to accept responsibility for the downside of a financial product. It might not be MAS’s fault, but will the people understand? :-) Damned if you do; damned if you don’t.
Frankly, the KTM does not disagree with the spirit of your proposal. Surely, protecting the people cannot be wrong. He just doesn’t believe that there is a practical implementation of what you’re proposing. We can continue our discussions here, or if not, we can end this discussion here.
I strongly believe that there is a place in the free market economy for non-profits, cooperatives and state schemes to serve the public. They play an important role to moderate the profit-drive sector.
The KTM agrees strongly with this statement and thanks you on behalf of his fellow Singaporeans for your services rendered as CEO of NTUC Income. Thanks again for sharing your views with the KTM. :-)
Dear Kin Lian;
I must thank You for the interactions and I must say I am very comforted that You will be enlightening us lay people with your many years of experiences and expertise in the Insurance and other Financial products.
The people have been and being exploited for many years and exploitative aspects of our market realities and practices sadly are also practice by our so-called National Schemes Planners. You have informed us here of a 30 Page Print and almost everyone who owns a HDB Unit can understand What You have said. Almost all of us who bought HDB Flat, Insurance and Financial Products do not read all the Rules and Regulations in all these products. Even if we do, we are unlikely to understand much of the legal jargons used in them and there is always the danger of missing the super fine prints in advertisements, annual reports and announcements.
All in all, I will say the market place is full of frauds and hidden dangers and regulators have failed very miserably in the face of all these malpractices. It is indeed sad that Netizens have realized that our regulators have been very much ineffective and inclined to side with the businesses instead of protecting consumers.
Well, not to bother You too much, I will just say it is good to have You here in TOC and I wish You will enjoy our companies(interactions). And You and your family have happy and healthy livings.
Yours sincerely: patriot.
Dear Keow Teow Man,
KT Income can submit many applicationsas you wish, provided that you pay a processing fee of $500 for each application.
I do not hesitate to reject applications that are frivolous. This will be accompanied by a reprimand to KT Income.
If KT Income complain to the Finance Minister, so be it. I will tell the Finance Minister that I have approved a lot of suitable financial products, and they are submitted by financial institutions who decide that it is better to be ethical and give good products to the consumers.
At the present time, the system encourages product issuers to “rip off” the consumers, as it is more profitable for them, and legal as well.
If Keow Teow Man is the Finance Minister, I hope that I can get this imaginary job as “MAS director of regulations”.
Dear Mr Tan,
Thank you for your kind response.
With your contribution to TOC (which I read often), I hope, in time, this platform will be as popular if not more than the sycophantic msm.
Being your previous customer, I benefited from the major illnesses policy when I suffered a heart attack many years ago. The claim helped me feed and educate my kids when employers and the government gave up on me. As far as they are concerned, I was as good as dead. When you are over 40, you are over the hill. When you are hit with a dreaded disease, you are as good as 6 feet under! This is Singapore Inc! We are as good as what we can contribute to the economy. If we can’t, we become a burden and our past contributions doesn’t mean squat!
Though the heart attack did not kill me, I’m sure the indignity of begging for public assistance from the MIW would have triggered another heart attack and finished me off! Thank you Insurance!
The decision made years ago to protect my wife & kids paid off and I am grateful. If not, I would be dead now instead of having the opportunity of writing to you.
I salute your courage to tell it like it is. I hope, I sincerely hope, to see more people with talent, experience and expertise like you, Ms Catherine Lim, Mr Aw and Mr Leong Sze Hian extract the wool pulled over our eyes by the arrogant eleetists and their media dogs!
We need rational insights, responses and actions to truly build a democratic society based on justice and equality so as to achieve happiness, peace, prosperity and “golden age” for ALL!
Thanks again for your precious time.
Sincerely,
feedmetothefish
Dear Keow Teow Man
Here is a further reply to your point in (76). As the imaginary MAS director of regulation, I will issue certain guidelines on suitable products that does not require my approval.
The traditional products, such as savings account and unit trusts do not require approval, so long as the charges are below a certain cap, and there is no game of chance involved (apart from the market risks).
However, if you wish to introduce products with an element of chance (such as a gambling product or options that are not traded on the market), you will require certification by independent financial experts. I will refer it to the experts, so that there is no conflict of interest.
Most of the products that “rip off” the customers fall in this category. They have high upfront charges and give doubtful value to the consumers. After buying the products, the consumers are locked into it for many years. Anyway, I will set caps on the upfront charges to be at a reasonable level.
Insurance products that take away two years of savings will not be approved. If the customer wants to pay this kind of fee to the insurance agent, they customer can pay it separately and directly. It will not be part of an approved product.
Do I still get the job as imaginary MAS director of regulation from the imaginary Finance Minister, aka Keow Teow Man?
Singaporean Says:
Dear Mr. Tan,
I am of the view that Singapore 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.
Dear Singaporean,
I agree with you. I hope that the powerful people are more tolerant about opinions, and may even forgive the occasional oversight.
At present, most people only dare to speak up in the internet, because their are anonymous. I hope that more people are willing to speak up with their name, so that other people can judge them in a more credible way.
I make it a point to be non-judgemental in giving my views. I express my opinion and state the reason to back the opinion. I do not try to pass judgement on other people’s opinion. I just “happen” to have a different opinon or different point of view.
This is not just being safe. It is being fair to other people.
Fortune 500 has clearly stated past history of errors on CITIBANK. It didn’t happen overnight there are many series of costly errors that befall Citibank and their past CEOs. No one is GOD and no banks are Heaven. Banks reputation is as good as their last balance sheet.
Why did our GIC bought a stake in citibank? In Dec 2006, CITI has a market value of $280 billion dollars and now a mere $120 Billion. A lost of $160 billion roughly 6 times of bear stern. With great write offs in CDO in billions of dollars, i just cant imagined GIC will even think of investing more money in it.
CITIBANK is too big to managed and might have to be broken up into two eventually. That will make our GIC investment ever more trickier. Of course, we have UBS too. Lets wonder what will happen to world no 1 weatlh management UBS ( CITIBANK was world no 2 in wealth management) more job cuts ard 8000, closed more branches and reduced operating costs? Finally i think the only solution is to raise more capital and thats bad for GIC. Really bad. The long term solution is to keep away from banks until more visible signs appeared for GIC to spend our reserves again. Bearing in mind, Singaporean’s life savings are at stake we dont want to be 100 years old to see our cpf money, thats not long term.
Tan Kin Lian ,
kudo to you for your honest view. Hope that there is more people from the government office like you that willing to explain thing in objective manner. Your expertise and knowledge really help many to understand the financial service in Singapore. Moreover, been ex-CEO of NTUC, you have shown very impressive understanding of the ground and operation.
The sad thing is there is lacking of such substances from our expensive gahmen and ministers. After listening to these gahmen in speech and questioning from time to time, I realize that their answer is simplistic, ‘naive’, insulting, lack substantial understanding and knowledge, and therefore their only argument is defensive and taking the worse case to backup their claim. I wonder is it something to do with their tour of duty or their ego or their ineptness ? Capable Ministers who do well in certain ministry suddenly been switch to other ministry, and military personal been post as chairman or executive. And ministers and others who have script written by scholars to ensure right thing and rhetoric are been said. I wonder how these ministers and many officials can make such important decisions without themselves understand what happening on the ground. There is fallacy to think that academically-capable gahmen can perform any task excellently. I really doubt so even if they have capable people around helping him because it takes time to earn respect and examine thing.
Wish you become a model for the generation of leaders serving the country.
One of my favourite subject is to reduce the need for commuting by encouraging people to work near their home or to move their home to be near their place of work.
This requires the government to waive the stamp duty for purchasing a owner-occupied property, and other impediments imposed by government HDB loan financing.
If commuting can be reduced, say, by 30%, it will produce the wonderful effect of reducing road congestion, reducing the demand for buses and trains and lead to a more comfortable journey.
I am somewhat sad, that nobody take up this point. Maybe, I am too idealistic and impractical? Am I expected too much?
I have created a blog on Public Transport, to gather views of Singaporeans on how to improve this system.
http://www.singaporepublictransport.blogspot.com
Why all of a sudden we are getting reminders about what the role of a President is and what he can or cannot do ? What is the “real” message coming out from these learned ministers to us ?