TR EMERITUS

What Now, Roy - A Contrarian Approach I’m happy for the $70k contributions achieved to pay for the legal fees, not the libel damages. But damages there will be since Roy has already admitted and apologised. What’s Unchanged From those who appear to be in the know of legal matters, at least 2 relevant points to bear in mind; One, there won’t be any discussions on the CPF issues. The defendant has already admitted guilt by way of his apology. Of course, Roy can still withdraw the apology and go the whole nine yards. But, what’s the point? Two, there is the possibility of the PM applying for a Mareva Injunction the way LKY did agst Tan Liang Hong. If so, Ravi his counsel may not get paid. Good chance Roy may still be made a bankrupt. Or his supporters poorer from another donation appeal – supporters who Roy wants to help get a better CPF deal. If so, what’s the point? I think Roy has proven his point. Or Singaporeans have proven OUR point. There isn’t just a lunatic fringe not entirely happy with the CPF issue (related and other issues) – enough to put our money where our mouths are (me included). The speed and amount with which the $70k target is realised can only be seen as astounding in SGP’s context, a polity apparently apathetic or compliant, beaten or brainwashed into a submissive pulp. But, not anymore; we have stood up. Now, PAP – Listen Up. Why not for the good of the country and not the sake of either ego in this silly saga, settle out of court? If S$5,000 is not enough, Roy hasn’t asked, ‘So, how much do you want from me?’ Why he has not asked for that counter-offer, that amount that is enough to PM Lee? Don’t you get it – PM Lee can’t be asking for too much not to appear to be ‘greedy’? So, settle. And let’s get back to the REAL ISSUE which is the CPF and its many policies tt have cut so many of us asunder. EGOs are not the issue. I had observed that PM Lee, through his Davinder weaponry, held the initiative, was dictating the direction and pace of the situation. Anyone with any basic knowledge of strategy will know that you are on the losing side if the other side calls the shots. That PM Lee has more and better resources is not the issue and cannot be the excuse for not trying to figure out how to turn the disadvantage around. Where in his strengths is he most vulnerable? Be that as it may, Roy (or the collective ‘we’ standing on the side of Roy) should and indeed must play the cards that are now in his hands. Roy, do not get caught up with the adrenaline rush of the moment, please DO NOT forget what you are fighting for. What you claim to be your aim. Revisit that aim now to stay true to yourself – and keep the faith of those who support you in yr time of need. Ask yourself honestly, are you NOW fighting to humiliate the PM? Or do you stay true to want to achieve a better transparency and return in what your fellow citizens rightly deserve from their CPF savings from this govt? If it is the former, then what of your aim? Is there a better way other than going the whole 9 yards to the courts? How? How’s that going to help yr cause, yr aim? As noted, you have already apologised. The courts will be to determine the damages. No discussions on what you have alleged about the CPF. If you then decide to retract that apology, then you would lose at least one supporter – me. It means your aim in yr blogging is no longer what you claim. I am inclined to believe it’s no longer about the CPF but something else. What’s changed - a position of strength… If nothing else, the S$70k raised in 96 hours is a clear statement of the anger of the electorate on the CPF issue. Now, Roy has the ballast of a critical mass of supporters behind you. Now, use that to regain the initiative. Now, you can go to Davinder and say, look, why not settle? Roy, I say again, the PM cannot ask for too much without looking like shit. That said, can you just imagine all the invaluable gains accruing from taking that initiative? Yes! You would have gotten him pretty damaged either way. To accept, you come up tops as the matured party. To say, no way, Jose, he’d sealed for himself the image of a small-minded, vindictive person. So, he’s caught between his rock & his own hard place for taking action without thinking thro’ the end game, his exit strategy. I leave those who disagree with my view to imagine the many, many other gains to be had taking this route. To cede a battle is not defeat in a war. Roy, if nothing else, for yr own integrity, settle and let him then show us the CPF money. That’s aligned to yr stated aim. He can’t get away from that now without losing more votes, credibility. Let me end with not a quote from Sun Tze but Miyamoto Musashi 1584-1645, legendary Japanese swordsman: Perception is strong and sight weak. In strategy it is important to see distant things as if they were close and to take a distanced view of close things.” There is little doubt that those you surround yourself with for support and counsel will give you a perspective different from mine. Well, you can’t now claim that you were not given some 2cents worth approach, with the best of intention. 2cents * The author blogs at 2econdsight.  Read More →

Pedestrians emerge from the basement levels of Ion Orchard mall, jointly owned by CapitaLand Ltd. and Sun Hung Kai Properties Ltd., on Orchard Road in Singapore on Friday, April 11, 2014. (Photo: Charles Pertwee/Bloomberg) (4 Jun) - Singapore companies’ indebtedness has swelled to the most in Asia after China and India as the city-state’s economic growth slows, according to GMT Research Ltd. Leverage among the Southeast Asian nation’s corporates is following counterparts in the two larger economies to a level considered a “danger threshold,” Gillem Tulloch, founder of the Hong Kong-based researcher, said in an interview yesterday. Debt rose to six times the amount of operating cash flow in 2013 for non-financial Singaporean companies, from 5.1 times in 2012, a report by GMT Research shows. “It’s a bit surprising that Singaporean companies seem to have leveraged up significantly over the past few years,” said Tulloch, 43, a former analyst at CLSA Asia-Pacific Markets. “There’s been a slight loss of discipline, or it could be that the growth has not come in as expected.” Read more: www.bloomberg.com/news/2014-06-04/singapore-joins-china-with-dangerous-debt-level-gmt-says.html  Read More →

[Editor's Note: The following article was submitted to TRE for publication on Thursday, 29 May i.e. before ST came up with their own 3-point wish list under Politics 360 on 31 May.] This article, the first of 2, outlines proposals to revamp CPF with the objective of improving returns. The second, shorter article, deals with Withdrawals and Medisave. Some aspects of what is proposed may come across as controversial to Singaporeans but the objective is to stimulate discussion and debate of that which rightly belongs to the citizens must yield a fair return for retirement and healthcare funding. Low Returns on CPF and savings (Photo: smallbiztrends) As a preamble, it is useful to understand that the monetary policy framework and the fiscal strategy of persistent budget surplus conspire to generate low rate of returns on not only CPF but also personal savings. These arrangements had the result of favouring the corporate sector with low cost of capital at the expense of citizens’ savings. Moreover, the government controls CPF rates by administrative fiat but like to make reference to market yields as if the dynamics of the market have not been affected by those policies to produce the desired outcome for the government. This provides a powerful tool to set CPF rates against prevailing inflation to deliver additional surpluses. Through the Net Investment Return Contribution (NIRC) framework, the government has an inherent bias towards low CPF rates as the resulting low government debt servicing means higher sums for discretionary spending. Proposed changes to CPF Returns To improve returns on CPF, the authors seek to modify the setting of CPF rates from administrative fiat to one decided by inflation or actual market based returns. Here is a choice of 3 proposals with the simplification of 1 rate for all accounts (no distinction between OA, SA, MS, RA for transparency). Option A: Inflation indexation of CPF rates All CPF accounts to be indexed to the inflation rate by having the interest rate priced at a spread over the inflation rate. The authors propose using the long run 2% average inflation premium of the 30 year inflation-indexed bonds of the major issuers such as Australia, Canada, Germany and the US. The following table gives an overview of what inflation-indexed CPF rates would have been in the past 7 years against what CPF members actually received by government decree. 2007 2008 2009 2010 2011 2012 2013 Ave Inflation 2.1 6.5 0.6 2.8 5.3 4.5 2.4 3.5 Ave CPF Rates 3.3 3.4 3.4 3.4 3.4 3.4 3.4 3.4 Indexed Rates 4.1 8.5 4.6 6.8 7.3 6.5 4.4 5.4 In 2013, inflation indexation would mean that an extra $5.2b interest will be taken from the investment returns of reserves. Each CPF account would have gained an average of $1,480. Advantage: This counters the effect of inflation, is transparent and does not require CPF members to make investment decisions. It is simplest to enact since it is a matter of changing the current interest rates of the Special Singapore Government Securities (SSGS) to the above inflation-index method. The government continues to guarantee principal and interest because CPF continues to invest in SSGS. Disadvantage: In times of low inflation, the interest rates will be low but remain above inflation. Option B: Rates linked to GIC or Temasek This proposal converts CPF into an actively managed fund whose rate of return is generated either by GIC or Temasek. This will necessitate CPF to invest directly in the selected entity to ensure legal claims to its returns. This makes redundant the present investment in SSGS which is the legal barrier preventing CPF from receiving the full returns. The selection should be based on accepted risk tolerance: lower risk / lower return GIC or higher risk / higher return Temasek. Historical returns below. GIC Temasek Reported 10 year returns 5.3% 13% (Temasek delivers net income, est. 7.5%) *Temasek has the advantage of owning GLC assets, the most stable and valuable assets in its portfolio which gave CPF an exposure to Singapore which GIC does not. Having made the selection, a necessary step will be to adjust the total amount of assets in the selected entity to the total amount of CPF liabilities plus a government-injected general reserve which includes CPF’s own operating surplus. The creation of the general reserves mitigates the end of the government guarantee due to the redundancy of SSGS. This arrangement ensures CPF ownership of the assets in the selected entity and have full claim on the returns while enjoying risk mitigation from the general reserves. The selected entity manages the CPF funds and the general reserves as a single pool. The other entity remains a Sovereign Wealth Fund providing a clear separation of CPF assets and sovereign assets for full transparency, a complete and necessary departure from the present obfuscation. The selected entity should be subject to quarterly review by the Ministry of Finance and CPF, semi-annual testimony to a Parliamentary select committee and annual public audit. Advantage: Similar to the Option A, CPF members are not required to make investment decision. Returns can be higher than Option A. Disadvantage: In times of poor investment performance, returns can be less than Option A or may even suffer losses but this is mitigated to a large extent by the general reserves, Option C: CPF Member Self Investment The final proposal is to allow CPF members to self-invest up to 50% of their CPF accounts. The self-invest portion will be subject to much wider criteria than the present CPFIS, such as a wider range of investment choices including foreign investments under a specified maximum limit of exposure. The remainder of funds in CPF will be subject to Proposal A or Proposal B. This proposal requires CPF members to make investment decisions on their self-invested portion and should do so under advice from professional pension advisors. CPF members may choose not to self-invest at all. Advantage: Combined returns can be higher than Option A or B. Disadvantage: Poor investment choices and market down turns can cause returns to be lower than Option A and B due to the lack of general reserves against losses in the self-invested portion. No chance of Happening The proposed options are radical requiring wholesale changes to the debt management dynamics of the government. Aside from showing the government has been less than forthright with citizens in regards to the effectiveness of the present CPF format if the suggested options are effected, there are also 4 significant if indirect impact; 1. CPF will no longer be captive to the government’s persistent arrangement of the SSGS/ bond market within the monetary policy framework to deliver low financing costs to the corporate sector at the expense of citizen’s savings. 2.  The government can no longer use a high inflation – low CPF interest servicing equation to deliver benefits to its budget at the expense of CPF savings’ future purchasing value being eroded by recent low, at times negative real CPF rates of return. 3.  The government will also not be able to use low CPF rates to generate high NIRC for discretionary spending as they have done for the PG Package if and when they regard such spending serves a political purpose. 4.  CPF’s rate of return will be transparent. The present difference between CPF rates and returns generated from the reserves which include CPF funds will be eliminated or drastically reduced. Hence the chance of any of the above happening under the present government will be zero. Is this fine with citizens? Or is it time that we deserve better returns to meet our retirement and healthcare needs? Chris K / 2cents * 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. * 2cents blogs at 2econdsight.  Read More →