TR EMERITUS

Temasek fails to persuade over connection with rise in CPF Minimum Sum In an extraordinary turn of events the State Times published a letter in its Forum page yesterday from Temasek Holdings. It seems that last Saturday ST published an article (“Ways to improve CPF”) which quoted an unnamed person as saying he suspected the Central Provident Fund Minimum Sum was raised “because Temasek or GIC lost money overseas”. [Read more] Temasek wrote their letter in response to that comment and presumably to deny that rumour. I say it is extraordinary because not only does it fail to prove that CPF monies do not help to finance, even indirectly, the government’s injections of capital into Temasek, but a large part of the letter is simply a setting out of current government CPF policy and an explanation of the PAP’s stated reasons for increasing the Minimum Sum. You know, the one about increased life expectancy blah blah. Stephen Forshaw The letter was written for Temasek by Stephen Forshaw Managing Director Strategic & Public Affairs Temasek If you want to know more about Mr Forshaw here is the blurb from an interview he gave to Mumbrella Asia – a site about Asian media and marketing. Stephen Forshaw is the managing director of corporate affairs at one of Asia’s most powerful investment firms, Temasek Holdings. He is also managing director of Temasek’s operations in Australia and New Zealand, and president of the Institute of Public Relations of Singapore. In this interview with Mumbrella Asia’s editor Robin Hicks, Forshaw – who was comms chief for Singapore Airlines and Microsoft before joining Temasek – talks about how corporate communications is changing, how brands should respond to disaster, and why he’s a big admirer of Shell. “A big admirer of Shell?” You should be panicking by now. So now we have an expat explaining our own government’s CPF policy to us. Who made him spokesperson for CPF and for the PAP? As he works for Temasek but is being paid to spell out the PAP’s justification for raising the Minimum Sum in CPF, he only adds weight to the argument that the two (CPF and Temasek) are co-mingled. What will we have next? The head of Standard Chartered (in which Temask has a 20% stake) writing to ST to explain to us Singaporeans why women will have to start doing National Service? Or the head of Sheng Shiong writing  to tell us why GST is being raised? So does Forshaw actually dispel the fear that the Minimum Sum has been raised because Temasek has lost money and the government needs to get the money from somewhere else? No. This is what he does say. As for Temasek’s performance, we have more than doubled our portfolio value since 2002, excluding any net new capital. As of our last reporting date of March 31 last year, returns to Temasek for newer investments made since 2002, when we started investing directly in a growing Asia, have exceeded returns since 2002 for older investments made prior to 2002.” So, that’s as clear as mud. It seems Temasek are saying that positions put on since 2002 have done better in the 11 or so years up to 31 March 2013 than those before 2002 but again doesn’t say whether this is from 1974 up to 2002 or  for example, 1992- 2002. (Mrs LHL) Ho Ching Is the date 2002 significant?  Well it could be that 2002 has been chosen for this division of performance into pre and post 2002 because it is the year Mrs PM took over as head of Temasek. (I’ve said before that it is hugely embarrassing and a conflict of interest to have the PM’s wife head up our sovereign wealth fund.) But I believe 2002 was chosen because that date was during the post-9/11 recession and at the lowest point for the markets before the Great Recession of 2008 so of course anything after that is likely to look good, by comparison. Temasek doesn’t provide a link to the balance sheets or any other data. Critically for me or anyone wanting to study their performance, Forshaw doesn’t provide information on the valuation criteria that Temasek uses. I am particularly interested  in their unlisted positions. Again it comes down to transparency and public listing would achieve that. Still this divide into older badly performing stock and the better performance post 2002 is worrying. If I ran a fund in which all the longer term positions were performing worse than the newer ones, I would expect my investors to be concerned. Consistency is everything. Of course it begs the question of why aren’t the poorer, older performers culled? Or is there another explanation for recent out performance such as recession recovery or another more sinister explanation or even a bubble waiting to burst. Actually I have already provided an answer for part of this previously when I highlighted the Olam takeover scandal. That kind of manoeuver allowed Temasek to put the complete purchase on the books as a profit because they had owned shares before what is widely believed to have been a leak in the takeover process, that pushed the share price up enormously. Other assets such as Changi Airport were transferred to Temasek for a 10th of their true market value. Instant profit. Go back to the quote again and see that Forshaw tells us “As for Temasek’s performance, we have more than doubled our portfolio value since 2002, excluding any net new capital.” Let’s look at that “new capital”. That is money that the government injects into Temasek from time to time. The government is able to inject money or assets into Temasek because of the constant stream of new investment it receives from CPF. So Temasek is getting CPF money indirectly. Temasek’s answer to the public via the ST forum is economical with the truth to say the least. CPF may be invested elsewhere and not directly into Temasek or vice-versa but it all comes from the same pot which is government capital or surpluses. As the CPF monies are available for the government to invest elsewhere, it frees up capital to inject into Temasek. Let’s look at that doubling of the portfolio value since 2002. The S&P 500, the Hang Seng and most global stick indices have doubled over the same period since the low of 2002. So in other words if you had been investing in an index Fund and gone on holiday since 2002 you would have done as well as Temasek. Had Temasek done nothing in that time, the simple fact of the market rising would have created the same doubling over that period. Bravo! Temasek Holdings writes that it is not investing or managing CPF money. This is simply sophistry. It is half a lie and wholly economical with the truth. Money that the government receives from CPF savings goes to GIC and the profits that GIC earns investing those funds swell government surpluses enabling the government to  inject more capital into Temasek. Furthermore Temasek’s own internal rates of return that it is supposed to earn on new investment will no doubt be related to CPF interest rates. Like everything else we have no disclosure on this but trust me, this is how it is done. The question is unanswered. Why is the Central Provident Fund Minimum Sum being raised? Kenneth Jeyaretnam * As a blogger, KJ hopes to help imagine a model for a New Asian Nation to bring about a free and fair future for Singapore. KJ is a Cambridge trained economist who could be broadly described as from the Keynesian school. He is also a successful ex-hedge fund manager and a liberal opposition politician who contested in the 2011 General Election with his party. He is currently the Secretary-General of The Reform Party. He blogs at Rethinking The Rice Bowl.  Read More →

Health Minister Gan Kim Yong Speaking to reporters on the sidelines of an event to celebrate World Blood Donor Day at Sentosa yesterday (7 Jun), Health Minister Gan Kim Yong assured everyone that MediShield Life premiums will be kept affordable for all segments of the population. In particular, he stressed that the 1% increase in the employer's Medisave contribution next year will be sufficient to cover the rise in premiums for the majority of the upper middle-income families when MediShield Life starts. He said that for those earning at least $5,000 - the income cap for calculating CPF contributions - the additional 1% Medisave contribution will provide $600 a year. This will be enough to cover the increase in premiums for most families in that income bracket, he said. With more benefits and a higher payout from MediShield Life, premiums will rise but he assured everyone that premiums would be kept affordable for all. He said: For the older Singaporeans, the pioneer generation, the Pioneer Generation Package announced recently will ensure that our pioneers don't need to worry about MediShield Life premiums. Secondly, the middle- to lower-income Singaporean families, there will be a permanent subsidy structure to ensure that they too will be able to afford the premium for the family. And for the middle and higher-income Singaporeans, the additional 1% Medisave contribution will go a long way to help them cope with MediShield Life premiums. For anyone else who may "fall through the cracks", the government will work out a special scheme to help them, he promised. He also added that the transitional subsidies, offered over 4 years by the government, will help Singaporeans ease into MediShield Life. "Because this is a very major shift in the health-care financing framework, the Government is committed to providing sufficient help and support," said Mr Gan. "The idea is to help as many people as we can." Details of MediShield Life's enhanced benefits and wider coverage were announced by MLRC on Thursday (5 Jun), but there has been no news yet on how much the premiums will cost exactly. The final report from the committee will be submitted to the government at the end of this month and be debated in Parliament next month. Government committed to providing sufficient help and support in healthcare Speaking of the government's commitment to provide "help and support" to Singaporeans in healthcare, during a parliamentary debate on 12 November 2013, Mr Gan said that the government will do more to enlarge its share of healthcare cost from the current less than one-third to more than 40% (he did not give a time-frame to implement such an increase to 40%). However, comparing with the data from OECD countries using Gan’s promised 40% figure, the Singapore government is still very much less generous than the governments of OECD countries, preferring Singaporeans to bear more in healthcare cost either through out-of-pocket payments or buying more health insurance themselves: Expenditure on health by type of financing, 2011 (or nearest year)   Public Spending Private out-of-pocket Private insurance Other Private Total Netherlands 85.6 6.0 5.6 2.9 14.4 Norway 84.9 15.1 0.0 0.0 15.1 Denmark 84.7 13.3 1.9 0.1 15.3 Czech Rep 83.9 15.0 0.1 1.0 16.1 Luxembourg 83.0 12.3 3.8 0.9 17.0 UK 82.8 9.9 3.0 4.2 17.2 NZ 82.7 10.9 4.8 1.6 17.3 Japan 81.9 14.6 2.4 1.1 18.1 Sweden 81.6 17.2 0.3 1.0 18.4 Iceland 80.4 18.2 0.0 1.4 19.6 Estonia 80.2 17.8 0.3 1.8 19.8 Italy 77.8 18.0 1.0 3.2 22.2 Austria 77.2 17.0 4.5 1.2 22.8 France 77.2 7.7 14.4 0.7 22.8 Germany 77.0 12.4 9.7 0.9 23.0 Belgium 75.9 19.7 4.2 0.2 24.1 Finland 75.3 19.5 2.2 3.0 24.7 Slovak Rep 73.8 23.6 0.0 2.6 26.2 Slovenia 73.1 12.2 13.6 1.1 26.9 Spain 72.9 21.1 5.7 0.3 27.1 Turkey 72.7 19.2 0.0 8.1 27.3 Poland 70.9 24.0 0.7 4.4 29.1 Canada 69.9 15.5 12.9 1.6 30.1 Australia 68.0 20.4 8.3 3.4 32.0 Ireland 67.0 18.1 11.9 3.0 33.0 Greece 65.9 30.9 2.8 0.3 34.1 Portugal 65.5 28.9 4.9 0.6 34.5 Switzerland 64.9 25.8 8.6 0.8 35.1 Hungary 64.5 26.8 2.7 6.0 35.5 Israel 62.3 24.8 10.1 2.7 37.7 Korea 56.6 36.8 5.8 0.7 43.4 US 48.8 12.1 35.2 4.0 51.2 Mexico 47.3 49.0 3.7 0.0 52.7 Chile 44.9 38.3 16.9 0.0 55.1 OECD34 72.4 19.8 5.9 1.9 27.6 [Source]: OECD Health Report * Private financing of healthcare consists mainly of payments by households (either as standalone payments or as part of co-payment arrangements) as well as various forms of private health insurance. On average, the share of public spending in healthcare for OECD countries was 72.4% in 2011. Most of the OECD countries spent more than 50% in terms of share of public spending on healthcare in 2011. The exceptions were: Chile (45%), Mexico (47%) and the United States (49%). Still, their spending was very close to 50%. As can be seen, the governments of all the OECD countries are still spending more on healthcare as a percentage of public share in health spending compared to the Singapore government, even after factoring in Gan's new target of 40%. With the Singapore government being so miserly towards its citizens in terms of healthcare, it is no wonder that regular blood donor and volunteer, Bernard Tan, preferred to help out at the CPF protest in Hong Lim Park than attend the World Blood Donor Day event in Sentosa. Bernard said ('A volunteer’s thoughts on 7 June 2014 CPF protest'): Elsewhere, there was also a Red Cross World Donor Day 2014. Being a regular blood donor and volunteer, I was invited with discounts and coupons to go to the venue, Sentosa. I sacrificed going to Sentosa and opted for going to Hong Lim Park instead. I felt much better after I found out that the Guest-of-honors were PAP’s Ms Tin Pei Ling and Mr Gan Kim Yong!  Read More →

Interesting that this never ever got reported by our constructive, nation-building media or mentioned by Yaacob, the propaganda ministry, MDA and IDA The solution to improving our score is ensuring speedy and cheap online access should top the list. So come on Yaacob, MDA and IDA: stop trying to fix netizens and get us cheaper online access. Example the 4G charges were added on. More on the index: A new study by the Boston Consulting Group, to be presented at the World Economic Forum in Davos this week … “Greasing the Wheels of the Internet Economy”, its purpose is to make it easier to identify points of friction that hold back the digital economy. At the heart of the report is an “e-friction” index. The authors took no fewer than 55 indicators (from “internet bandwidth per capita” and “average mobile connection speed” to “strength of intellectual property protection” and “press freedom”) and calculated a score for each of the 65 countries covered, which rises the higher the friction (see chart on this page. The full country ranking can be found here). … The usual suspects from northern Europe (Sweden, Finland, Denmark) end up on top, with HK 5th, Oz 14th and S’pore 15th. … Such rankings often depend on how the indicators are weighed. BCG argues that infrastructure factors, such as the quality and cost of internet access, are the most important sources of friction, and bases half of its index on these. Other types of indicators, such as those that measure barriers that deter companies and consumers from adopting the internet, count much less. But even with a more even weighting, the authors say, the results would not be much different. A more interesting finding is a clear correlation between a country’s rank in BCG’s index and the size of its internet economy: the lower the friction, the larger the share of online-related activities as a percentage of GDP … What can countries do to move up the curve? Each country is different, the authors of the study argue. But ensuring speedy and cheap online access should top the list. http://www.economist.com/blogs/schumpeter/2014/01/digital-trade Cynical Investor Source: Thoughts of a Cynical Investor  Read More →