TR EMERITUS

I fully support the National Solidarity Party's proposal to scrap the Group Representation Constituency system ("Roll back the GRC system"; last Sunday). The basis for its creation was to ensure better minority representation in Parliament. Initially, each GRC was made up of three members with at least one member of a minority race. Over the years, however, the size of GRCs has grown with a majority of them made up of five or six members, but the minimum number of MPs from minority groups required under the law has actually fallen. Winning an election by playing the race card is no longer an effective strategy in modern Singapore. Former MPs such as Mr J.B. Jeyaretnam, Mr Abdullah Tarmugi and Mr Michael Palmer have won against opposing candidates of the majority race, proving that race, culture or language is not the determining factor in winning an election. The GRC scheme also assumes that Singaporeans are unable to look beyond race when choosing an MP to represent them in Parliament, and that minority candidates cannot be elected on their own merit. Other flaws include giving untested candidates a "free ride" into Parliament on the coat-tails of stronger candidates, and making it harder to vote out unpopular MPs. Next year will be 50 years since our independence. We have come a long way since the racial turmoil of the 1960s. It is perhaps timely to review our electoral system and consider reforms that will strengthen it.   Jag Kuo Soon Yong * Letter appeared in ST Forum (13 Jul)    Read More →

CPF: Most members earned 5% in SMRA and in 3.5% OA So said Minister of State for Manpower, Tan Chuan Jin in Parliament on July 8 2014. This is in reference to the extra 1% on the first $60,000 of combined balances, one of the so-called key improvements to the CPF system. He also said that “This is superior to what is earned on bank deposits and comparable financial instruments”. The writer does not care to rebut the latter statement because it is really getting silly when ministers keep comparing CPF to bank deposits and comparable instruments when there is really no comparison for the way CPF locks up monies indefinitely and its rate of return subjected to the decision of politicians. Instead, he will focus on the perverse nature of this so-called improvement of paying extra 1%. What is the aggregate rate paid to all balances? For this question, the writer refers to CPF’s 2013 Annual Report’s financial statement. Page 22, under item 7 “Investment”, line item “Held-to maturity financial assets” shows total investments in Special SGS and advanced deposits at $251b. This relates to the investments of CPF members’ funds. Page 23, under item 13 “Income from investments”, line item “Interest income from held-to-maturity investments” shows interest earned of $9.3b. That works out to an aggregate rate of 3.7% the government paid to CPF. Someone got short-changed Since, CPF receives only 3.7% from the government, a large segment of CPF members will get short-changed if two-thirds received 5% SMRA and more than half 3.5% OA. Who are these?  Obviously, those with balances exceeding $60,000, the larger the balances the more the member get short changed as their average rate of return on combined balances falls. For many it will be lower than the inflation rate. This does not affect just the high wage earners but also those who prefer to be prudent in their housing purchase in order to have more protection in retirement and those who lived with their parents or take care of them. It will affect older CPF members who by virtue of working longer have larger CPF balances. If one thinks about it, it is really perverse when the old had to pay for the young since the young, having worked less, had smaller balances. This is a complete reversal from a state pension system where the working young paid for the retired old through the tax system. Wrong Incentives for Savings Indeed, the nature of the extra 1% on the first $60,000 provides the wrong incentives to save. It is certainly a strong temptation for CPF members to over-reach in their housing purchase; that condo in a nicer address, that extra bedroom, that shorter commute to the office seems so much more tempting in light of the fall in the average rate of return if one is prudent to keep a larger balance for retirement. Conversely, it is an excellent incentive to drive the government’s asset enhancement strategy. Only, it drives up real estate prices to such stratospheric levels that so much monies are committed to housing insufficient retirement funding becomes an acute issue. Never mind the risk to the economy. Clever scheme to win votes? If the majority receives 5% on SMRA and 3.5% on OA, maybe they are grateful enough to vote for the PAP.  But the government only pays 3.7% in aggregate; those 5% and 3.5% came from other CPF members. If this is a scheme to win votes, then the government paid for it not from its own pocket but from members with larger balances. Neat. CPF is not a national state pension system as the government likes to repeat ad nauseam. Each citizen compulsorily funded their own retirement which is channelled into a single asset. It must be strange that having invested in the same asset, some citizens get more than others. Chris K *  Chris K holds a senior position in a global financial centre bigger than Singapore. He writes mostly on economic and financial matters to highlight misconceptions of economic policy in Singapore.  Read More →

“He also failed to mention that Singapore’s AAA rating is due to the government’s intransigent on welfare spending thus generating persistent budget surplus. That AAA-rating is bought at the expense of adequate social provisions and has no benefit to citizens as the government does not use the low borrowing costs implied by the rating to fund citizen’s well being. He knows very well that many countries, such as Canada, Germany and Switzerland just to name 3, are also AAA rated despite budget deficits of 2 -2.5% of GDP.” Very well said, Chris. The main problem is PAP has veered too far right in its policy and there is no other party in the parliament balancing them. That’s why our rich and poor divide is the greatest among first world nations. Some people argued that PAP can self-correct itself and has now started implementing more social policies. Ask yourselves, are you happy with the current MediShield life announcements? It’s like asking a millionaire who never believes in donating to the poor in his life but was suddenly forced to do so by circumstances. He then decides to give only $10. As pointed out by Chris, people like Tharman who is inside PAP for so long, is already biased towards a prescribed ideology. It’s hard for these people to change their thinking like the millionaire example. So, I am not holding much hope that PAP can change itself from within. If you want drastic change in the ideological thinking in this country, it will have to come from the outside, from another political party altogether. What is lacking now in Singapore is a another party with left leaning to balance the far right PAP, much like what you see in the other first world nations where their parliaments are balanced by political parties from both left and right.   John * Comment appeared in: Understanding what Tharman did not say      Read More →