By Leong Sze Hian
I refer to the article “Sovereign funds seen twice shy” (My Paper, Mar 3).
This is what the article states:
“It took the Government of Singapore Investment Corp three days in 2007 to agree to prop up UBS AG, ailing from subprime losses. It may take a decade to recoup that investment of 11 billion Swiss francs (S$14.3 billion). GIC, manager of more than US$100 billion of the country’s foreign reserves, faces a paper loss of about 5.6 billion francs when it becomes the biggest shareholder of UBS on Friday, as shares of Switzerland’s largest bank trade at a third of the conversion price on notes it holds.”
Click image to read article
With this being yet another multi-billion dollars loss for GIC / Temasek, the following questions become pertinent:
- Why is it that the total amount of our foreign reserves in GIC is not public information?
- How much in total did GIC and Temasek lose during the financial crisis?
- How were the investment decisions made? Who made the decisions? What evaluative and decision-making processes were followed?
The article also stated that:
“European and US bank chiefs made personal pitches to the funds during the height of the mortgage-market meltdown. Marcel Ospel, then chairman of Zurich-based UBS, called GIC Chief Investment Officer Ng Kok Song, according to comments they made at the time. Talks began on Dec 6 2007 and by the evening of Dec 9, GIC had committed to make its biggest single purchase at the time.”
So, what actually happened in GIC during those three days?
The article goes on to say:
“Acknowledging that recouping the money might take longer than initially expected, Mr Ng said in GIC’s annual report, published in September, that he still has ‘confidence’ in the ‘long-term prospects’ of the investment.”
Well, the “confidence” and “long-term prospects” of the investment has now devolved into a glaring announcement by the abovementioned article that “It may take a decade to recoup that investment of 11 billion Swiss francs (S$14.3 billion)”.
One statement the article makes stands out:
“One lesson that all investors, including the sovereign wealth funds, learnt from this crisis is that you have to do the due diligence before investing.”
This statement underscores the need to have the answers to the above questions. Otherwise, how do we learn from our mistakes to avoid making them again?
What “due diligence before investing” did GIC do during the three days?
According to the article “Singapore, Abu Dhabi Face Losses on UBS, Citigroup” (Bloomberg, Mar 2), GIC declined to comment on the nature of due diligence carried out.
So, will GIC now give a comment to Singaporeans?
From the various media reports on sovereign wealth funds, it would appear that GIC and Temasek had one of the worst performances amongst such funds during the financial crisis.
GIC-Medisave Link
Well, what has GIC losing billions got to do with allowing Medisave to be used overseas?
According to media reports, from March, Medisave can be used for overseas hospitalisation through two approved healthcare providers.
What was perhaps conspicuously absent in all the media reports was that there was no mention of whether Medishield would cover such overseas hospitalisation.
Medishield currently does not cover hospitalisation overseas, and all the private insurers’ CPF Shield medical insurance plans also do not cover overseas hospitalisation, except in the case of medical emergencies.
Singaporeans and permanent residents who are considering overseas hospitalisation using their Medisave should be alerted to this issue.
Since the proposal to use Medisave for overseas hospitalisation was first mooted about a year ago, why is it that with almost a year to design this new scheme, no consideration has been given to the vital link between insurance coverage and overseas hospitalisation?
As more healthcare providers are approved, and more people may utilise this scheme, because the cost savings can be more than 50 per cent, will it result in less claims and higher surpluses for the Medishield scheme?
Why not disclose the claims experience and surplus of the Medishield scheme now, so that if there is an improvement in the future due to lesser claims in Singapore, the Medishield premiums may be reduced gradually, or cover periodic health screening to benefit from early detection which may lower overall costs in the long run?
As there are additional risks and inconvenience in using overseas hospitalisation, we could also review the current limits for the use of Medisave in Singapore.
In this regard, often patients pay out-of-pocket because the current Medisave limits may not be enough to cover the increasing medical costs in Singapore.
From the perspective of the standard, quality and risks of treatment from the patient’s viewpoint, patients should not have to balance the subjective dilemma of deciding between overseas hospitalisation that are within the Medisave limits against hospitalisation in Singapore which exceed the Medisave limits.
Allowing Medisave to be used overseas may just be a short-term partial solution to the problem of rising healthcare costs in Singapore. Ultimately, we have to consider spending more on healthcare than the current four percent of GDP, of which I understand only about two per cent is public spending.
So, if GIC and Temasek has not lost billions, perhaps we could have spent more on healthcare?
By the way, medical costs have gone up again.
Between 2008 and 2009, the increase in the average bill sizes ranged from three per cent for Class B1 to 10 per cent for Class B2, according to the report “Hospitals bills higher but most did not have to fork out cash” (Channel News Asia, Mar 3).
This means that the percentage increase in the hospitalisation bills incurred by poorer Singaporeans who go to Class B2 wards (10 per cent) is more than three times that of the increase in costs experienced richer patients in Class B1 wards (3 percent).
Surely some of the billions lost may have helped to limit rising medical costs if we had spent more on healthcare.
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//ludwig
I’m very sure Mr Leong has never lost $7.3 billions in his investment. Anyway, I read an article from Reuter recently stated that our GIC made world record of lost a huge $$ in the shortest period.
How come the can lose all this money without an inquiry set up?
Now they are trying to recover it by squeezing the sick. It is getting disgusting.
It’s not just GIC and Temasek.
Several GLCs are also saidto make hundreds of millions of investments overseas based on their business/social sessions with the other parties and a couple of weeks (or days) of due dilligence into the investees’ financial accounts (naturally the “official” edition). No surprise – investments go awary and frauds strike… But rather than learning from their lessons, things are swept beneath the carpet and forgotten… Don’t know, don’t care.
Talking about productivity, the PAP govt is the most unproductive, having lost billions and billions of dollars of our hard earned money. Who the shit they think they are, gambling away our money as if they are in a casino. They are not credible to talk about productivity. MM, SM and PM should resign immediately with ignominy for their dismal performance. They are sucking our blood dry and making us zombies while they continue with their lust to whittle away our hard earned reserves in money- losing ” investments” through plain incompetency. Please get lost. You are no longer useful to our country.
11 billion had it been invested in CPF at 2.5% would have given us 14.8 billion in 10 years.
For the now depreciated with value of 5.6 billion investment to become 14.8 billion in 10 years, the return rate needs to be 10% per annum over 10 years.
Is it likely to happen?
Good Morning,
IMHO losing money is not the real point here. There is no point in crying over spilled milk. What done cannot be undone. The die is set.
The pressing question is how can this be avoided in future and what are the learning outcomes from this fiasco?
As Rahm Emanuel’s iconic motto goes, ” a good crisis should never go to waste.” This underscores the need for government to take this as an opportunity to learn and improve their decision making process, not only in GIC and Temasek, but it could just as well apply on a general basis to everything that we call Government.
But that is only possible if the decision makers first admit there is a problem – the real problem as I see it; is there is no problem and so the general sentiment is it’s business as usual – that is the real problem. And a very dangerous problem at that.
The mood or sentiment can be summed up in this essay.
http://dotseng.wordpress.com/2010/03/05/whats-even-worse-than-too-big-to-fail-the-perils-of-mythmaking/
SD
//ludwig
//As a finance expert, u should know that investment can lose money. Can u swear that u never lose substantial money in your investments?//
Use your own funds and no one is likely to raise any noise except maybe your affected family members.
A bunch of ex-civil servants throwing darts at a dart board.
The board pasted with ‘buy’, ‘sell’, ‘hold’ etc.
The place where the most darts hit is the decision.
The loss on UBS will take a long time to recover. Reason, very simple. The business model of UBS has changed. Bank secrecy, the corner stone of the swiss banking has modified. Previously, people put money into Swiss banks due to the bank secrecy to evade taxes, etc, but now the Amercian Government has forced swiss banks to reveal the names of those big time customers who deposit a lot of money there. Bank secrecy becomes a liability to those rich Amercians instead of an asset as in the past. So less rich people will bank with swiss banks.
Therefore less profits.
Other than medisave, I see the INCREASE in
i. HDB prices (12,000 new units to be sold this year at record high prices)
ii GST (impending increase to 10%)
iii Foreign Workers Levies (masqueraded as disincentive)
iv PR educational fees (disguised as differention tool)
v Land prices (tendered at record prices since last boom)
all above POINT TO ONE SINGULAR PURPOSE, i.e. to recoup MASSIVE BILLIONS LOSSES by daughter-in-law
Singaporedaddy
Mar 6, 2010 11:00 – “iconic motto goes, ” a good crisis should never go to waste.” This underscores the need for government to take this as an opportunity to learn and improve their decision making process, not only in GIC and Temasek, but it could just as well apply on a general basis to everything that we call Government. ”
I beg to differ. I have no qualms about investing in pte funds. But Using CITIZENS/STATE FUND as a tool to gamble (masqueraded as learning) is extremely DANGEROUS (to quote Josephine).
Government should never temper with money & resources garnered from YEARS OF FRUITFUL HONEST HARD WORK.
Just to elaborate, our SWF is different from those of Abu Dhabi. Abu Dhabi’s SWF has and is still being amassed from its controlling stake of 90% of oil reserves from the Emirates, without any of the locals having to slog it hard at the accruement. For them to recoup, simply widen the gates of the oil reserve. For us, it is totally built up from scratch with YEARS OF FRUITFUL HONEST HARD WORK and no one has any idea how to recoup the massive billions lost (paper or whatever loss, it is STILL LOSS).
The shocking thing is that the leaders of the GIC, Temasek and, top level executives and admin staff are still with the company and the heavy losses.
I believe that Lee KY, Tony Tan, Dhanabala, Ho Ching are still with these companies. They should make public how much we have and the losses, then resign from these companies and get real experts to run them.
Pitiful for Ng, chief investment officer, to say that the investment is for “long term”, what else can he say ? The money would have lost a substantial amount to inflation when recouped over the long period.
Looks like a bunch of clowns in a circus show, only that no one is laughing.
The issue is not GIC or TH”s loss in any particular investment, the issue is their continuous trend in making a string of losses from their investments. I do not know how many are associated with Ho Ching, what I know is that she had already made substantial losses during her days in Singapore Technologies Group, losing more than $300m in a ill-defined investment in hardware manufacturer Acropolis when the world was moving towards outsourcing with manufacturers in the far east enjoying vast economies of scale in production.
Then came the spate of losses from TH : ABC Learning tuition group of Australia ($200m?). Why would a sovereign fund be interested in dot and line retail business? Then that flabbergasted investment in Shincorp where no due diligence was ever conducted. And then Merrill Lynch (BOA), and Barclays (not announced) and recently there was this damned investment in botched Stuyvesant Town, and many more, some of which have yet to be announced by third parties. All these came about ABOUT the entry of Ho Ching, so undeniably she must have had a hand in TH”s ill move into these entities.
What would it take to remove the present incompetent management from the board, I wonder. Would it reach a point after TH have lost all its 100 % investment capital for the PAP leadership to then realise that they have some laggards at the top of their pyramid corporate power structure?
Furthermore, if they could appoint ex-SGX CEO, Hsieh Fu Hua, as adviser (to Ho Ching) doen’t it make her redundant and obsolete? Where is the productivity and her value added if any decision so made is based on Mr Hsieh’s handiwork and business acumen? Wouldn’t it be better that Mr Hsieh be made to replace Ho Ching as CEO instead (this would have made better sense).
I am not an expert in investments. Logically when so many people are faulting the authorities, how can one say that this is just silly opposition when it is happening throughout the World. But we have heard of confessions by TOP Investment Executives
in other parts of the leading Economies on the mistakes made.
If our leading Investors whether Private or Government, know that they have not made any mistake, then the only way to quell suspicion is to come out in the OPEN and defend themselves by providing accurate information on our catastrophic failure. There must certainly be people with wisdom who can do this. Majullah Singapura.
To : Ho Bai Bai and Use your own funds
I know the difference between investing my own money and other people money (OPM). personally, i invest my own money.
As the Singapore govt. has saved some extra money and wish to earn a higher return than low interest fixed deposits, it will need to employ some people (Ho Ching or Tony Tan) to invest the OPM. Whosever money is invested, there will some gains on some investmensts and losses on other investments. Whether e investment manager is good need to be evaluated on a portfolio basis. It means to check whether the gain exceeds the losses.
I will admit that i do not know all or most of GIC or temasek losses. But does anybody know most of their gains? Maybe it is time for Temasek or GIC to defend itself.
Ho Ching got her job because of political reasons. Keeping it all in the famiLEE. Her competency(or lack thereof) is a non-issue. This should have been clear from day one, back during the Micropolis fiasco.
ludwig
Mar 8, 2010 15:40
To : Ho Bai Bai and Use your own funds
I know the difference between investing my own money and other people money (OPM). personally, i invest my own money
than why is hoching allowed to use our cpf savin$ as monopoLEE money?
is it
a) hoching is the wife of our prime minister
or
b) she is the daughtetinlaw of our mental minister who happenned to be promoted by our prime minister?
c) opps sorry wrong questions.. they are ALL related to 1 another
even leekuanyew know the differences of usin his overpaid monthLEE salary to invest…
if he had done what you asked him to do with his owned money..today he is more poorer than you or me…
next siLLEE question please?
Oii!! Who is the Chief Investment Officer of Singapore? It’s HO CHING. Remember this, HO CHING. And who is HO CHING? Oii, HO CHING is the wife of the PM of Singapore and DIL of Lee Kuan Yew. Yes, this woman is responsible for all the losses of taxpayers’ money.
Isn’t it goooooood to be a member of Lee family and PAP?
alamak,
there goes sg people’s dream to better retirement..
there goes sg people’s $ down the drain..
there does sg people need to work more years..
still puzzle – why own $ must be invest by other people, then $ lost liao, then the people has to work harder?
if at 1st no buy/invest, then all problems solved or at least no need to lose ma, correct?
alamak