Friday, 19 September 2014

What's the Fuss over Singapore CPF and Roy Ngerng?

Nagging Questions abound on Roy Ngerng’s "Shocking Facts About CPF" .

Did PAP Take Our CPF to Pay for the GIC’s and Temasek’s Losses? Unfortunately, or fortunately, Roy and his co-writer DID NOT answer his own question in the undisputable affirmative.

I read many times Roy’s arguments over several posts regarding CPF, income inequality, Government Reserves, HDB Car Parks, Medisave and Medishield, poverty and a host of social issues he so passionately advocates. Most of these issues are unrelated to each other. It is however plainly painful to see Roy’s desperate attempts to persuade his readers to connect his missing dots so as to make some kind of connections between his interesting infographics in order to arrive at his “conclusions” regarding some kind of sinister motives in the PAP Government to conspire against Singaporeans and, particularly, to expropriate our hard-earned CPF funds.

It is known that GIC and Temasek Holdings lost $117 billion in 2008, mostly due to the US financial crisis.

The writers produce lots of “official” statistics in beautiful charts and infographics. But statistics are not arguments. Not a single shred of evidence - no smoking gun - is produced to trace the flow of funds from CPF to their supposed end eventually to cover GIC and Temasek’s losses.  It would have been better if the writers had “follow the money” and show the “missing funds” in the CPF, and trace their path, in some forms - whether as loans, equity, advances, gifts or bonds – into the books of GIC and Temasek.  They did not do so.  It would also be a better bonus revelation for them to reveal that these “losses” – an astonishing S$117 billion were never paid back into the CPF. 

The alleged big dark hole of $117 billion in the CPF’s books is surely difficult to miss since the CPF reported its Funds to have only about S$252.5 billion as at 31 December 2013.  And if no money were actually “missing” from the CPF – please check audited public accounts in CPF Annual Reports – how could the CPF have been used to cover up GIC/Temasek losses? 

In fact, the writers already refuted their own conclusion when they observed that since 2007, “CPF balance Grew by 90% … but GIC grew by only 69% and Temasek Holdings grew by only 21%.

The writers fail to grasp the significance of their own discovery. Their statement is by far the clearest evidence that GIC and Temasek DID NOT receive CPF Funds. The figures are true and only make sense if both GIC and Temasek were just “fund managers” and therefore the funds under their  “management” are not technically Temasek/GICs’ and therefore cannot be entered into their accounting books or balance sheets in accordance with standard accounting procedures and practices.

It was also concisely explained by Minister Tharman:
“… let me explain that GIC is managing Government assets. It is not GIC’s assets. GIC is a fund manager, so the assets are assets on the Government’s balance sheet, rather than on the GIC’s balance sheet.”

This should have been the end of the allegation that “the PAP took our CPF to pay for the GIC’s and Temasek’s losses”. 

Perhaps, “Shocking Facts About Singapore CPF” was NOT and was NEVER intended to argue that “CPF was used to pay for GIC/Temasek losses”.  That conclusion was seized upon only sometime at the end without leading logical arguments towards it. Therein lies the fundamental weakness and failure of of “Shocking Facts”.

The “Shocking Facts” posts began by pointing out and illustrating that the contribution rates to CPF was “unusually” high relatively when compared to other countries’ provident and pension contribution rates. Nothing “shocking” here. This is neither new nor revealing.  As an Economic Major student back in 1979, many fellow cohorts of Economic students already knew that the combined 40% CPF contribution rate then was indeed high. It went up to 50% at one time before settling at the current combined CPF rate of 36%; yes, still high but not in the least intolerable. There is nothing sinister; and the associated reasons for this to be used for national development, housing and medical are transparent, and are not unduly unreasonable. 

The high CPF rate also explains why Singapore has no external debts for its national infrastructural development during our formative decades, unlike the crippling external debts of many newly developing countries in the 1960’s and 1970’s. We have borrowed from ourselves, specifically from our own compulsory savings, and not from the future of our children.  

“Shocking Facts” then attempted to shock by pointing to the regressive nature of the CPF contribution rates, whereby lower-income Singaporeans pay a higher proportion of their incomes into CPF than the higher-income earners. Its “shocking” conclusion was that “nearly 80% of the lower- and middle-income Singaporeans pay more into their CPF, than the higher-income earners”.  This is indeed a shockingly WRONG conclusion! Paying a higher rate DOES NOT mean that one would pay MORE than those who pay a lower rate on a much higher income. 

Truth is, higher income earners (currently referring to those earning more than S$5,000 per month) faced an income ceiling for their CPF contributions and were therefore excluded from enjoying a higher level of tax-free CPF savings like the other 80% lower income earners. This is a uniquely Singaporean “income redistribution” innovation consistent with social equity and development principles of the World Bank.

There is however an observation that the Singapore Government earns a higher rate of return on CPF funds invested with its wholly-owned Fund Managers GIC and Temasek through the issue of Singapore Government Securities. The low CPF interest of 2.5% on the basic account is a valid social concern and involves all Singaporeans. Since GIC/Temasek (or their owner, Singapore Government) have already been paid handsomely for their fund management prowess, the remaining gains must necessarily and rightly belong and accrued to the ordinary Singaporean CPF fund owners.  The writers however did not offer any solution options for further public debate and consideration.  Alas, a missed opportunity indeed.

Ray asked Readers:Do you know that together with the assets that the Monetary Authority of Singapore and Temasek Holdings manage, our reserves would stand at at least S$900 billion – or close to S$1 trillion?”

No, I (we) did not.  Where are the facts and evidence?

Singapore’s Total Foreign Reserves (TFR), comprising Special Drawing Rights, Reserve Position in the IMF, and Gold & Foreign Exchange, stands at S$345 billion as end-2013.

GIC is one of two Singapore sovereign wealth funds, the other one being Temasek Holdings. Temasek Holdings Reserves stands at S$ 211.2 billions as at 31 March 2014. Temasek Holdings also issued $13.3 billions under its two Temasek Bond Programs which enjoyed top credit ranking by Standards and Poor as well as Moody.

The IMF/World Bank has put GIC assets at US$285 billion (about S$328 billion) as reported by the Sovereign Wealth Institute. It is usually reported that GIC manages well over US$100 billion.

Singapore Government debts as at March 2013 stood at S$396 billions as at March 2013. This comprised S$60 billions of T-Bills, S$87 billions of SGS bonds, and S$249 billions of SSGS (Singapore Government Securities).

The level of Government debt outstanding at S$396 billions (March 2013) or 114% of Gross Domestic Product (GDP) appears large on its own. However, it does not take into account the Government’s asset position, which exceeds its liabilities, and its ability to service debts through returns on its assets, as discussed below.

The net investment returns from GIC, the central bank, and Temasek account for about 15 percent of the total government budget in Singapore, more than sufficient to service all its immediate and long-term debts.  The CPF reported its Funds to be about S$252.5 billion as at 31 December 2013.   

Adding up the CPF, TFR, Temasek and GIC funds, and then minus the liabilities, the Government Singapore’s Net Reserve therefore stood at about S$727.4 billion, a far cry from the $S1 trillion so dramatically present by the writers.   

The writers then shot out even more questions, but without proffering any answers or explanation as to why these should be of critical interest:

“Why does the government continue to spend the lowest on education among the developed countries? Why does the government continue to spend the least public spending, such that Singapore now has the highest income inequality among the high income countries, and one of the highest in the world? Why is there still no minimum wage in Singapore to protect the low-income earners in Singapore and why do we have the highest poverty rate among the high income countries?”

Having failed to make persuasive arguments to support their allegations with their “facts” and “figures”, the writers become irreverently Socratic and strange.  Making no arguments, many questions were instead asked: “Do you know this or that?”

After reading Roy’s posts, many now knew the few assumed “facts”. For others, we already knew some the more credible statistics and alternative facts. Well, so what? Factual knowledge does not point to their problematic status or lack thereof. “Facts” or “assumed facts” are themselves not “problems’ until and unless their social impact made them so through human and social institutional interactions. 

A “Poverty Disempowerment Cycle” chart was further introduced without any explanation of its conceptual underpinnings or sources. It attempted to show, I think, how “Low CPF Rates” leads to “Smallest Retirement Funds” leading to “Lowest Wages” and then “Highest Price”. Taken prima facie, the concepts and their “arrows”, presumably to indicate causation or consequences, are even more problematic. The supposed connections between the concepts are spurious at best and the concepts themselves are also too problematic for understanding and too vague to be operationalised.   

It was followed by a “Poverty Rate” Chart showing Singapore at 28%, which is much, much higher than Vietnam (15%), China (13%), Indonesia (13%), Thailand (8%), Malaysia (4%). And by implication from their absence from the Chart, only the African countries had much higher levels of poverty than Singapore. For many of us who travel to the named Asian countries regularly, it is extremely difficult to accept the validity and truthfulness of the “Poverty Rate” Chart.

According to the reputable Global Finance magazine which uses the GDP per capita on a  Purchasing-Power-Parity (PPP) basis, a method favoured by the World Bank, trained Economists and Statisticians, Singapore emerged the 3rd richest country in 2013, and the African countries occupied 9 of the bottom 10 poorest countries.  

It is clear that the writers did not understand the concepts that they used to argue poverty and income inequality in Singapore. If they did intend to use “Poverty” defined and measured by the World Bank as daily earning of just US$1.25 (or S$1.50 per day), the writers have actually asserted that 28% of Singaporeans or 963,200 persons in 2013 earn just S$39 per month!  In 2013, the Singapore labour Force was 3.44 million as at June 2013.

If that’s their intention, than the writers’ arguments would go straight into the toilet. By arguing that at least 1 million Singapore workers do not contribute CPF at all, if indeed that being the case, they are then totally unaffected by CPF and the writers’ postings are therefore irrelevant and immaterial to these 28% of Singaporeans; since they had no CPF and therefore no HDB housing and no access to Medisave or Medishield assistance.  The writer did not tell readers where can we find these Singaporeans earning just $38 per month? And in what jobs?         

The Truth is, Singapore’s increasing income inequality as measured by the Gini Co-efficient has been widening even since the 1960’s and at an increasing pace.  This however has nothing to do with the Government or PAP CPF policies and GIC/Temasek Investment practices.

The Gini shows increasing higher income earned by many Singaporeans pulling away from an entrenched lower income group who are anchored by the influx of low income foreign workers. Gini attests to the fact that Singaporeans are in fact largely better off earning increasingly higher income except those who are unskilled or have low-skills who are forced to compete with low income foreign workers. On the whole, Singaporeans are indeed better off, contrary to the writers’ argument of increasing poverty in Singapore.

I wonder whether I have been reading and fed blatant falsehoods and lies. Or it is simply just sloppy research, ignorance and poor analysis. Ray and his writer will need to re-visit their numerous impressive infographics, and report them again attributing credible sources and deploy logical arguments linked directly to them. Better analysis, better research, credible statistics and direct relevant evidence cannot be substituted by loud and emotional political slogans to cover up for illogical and bad arguments.

I decided I had enough of their questions and rambling arguments. I wish and hope that their future ones are evidence-based, more focused, logical and contained more detailed arguments, not questions, so as to draw intelligent and mature readers into a lively and enlightened debate for the better future of our beloved Singapore.     

The attached references are useful for all seeking the Truths of everything mentioned in this article.

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1 comment:

  1. Roy and his co-writer already refuted their own conclusion when they observed that since 2007, “CPF balance Grew by 90% … but GIC grew by only 69% and Temasek Holdings grew by only 21%. The writers fail to grasp the significance of their own discovery. Their statement is by far the clearest evidence that GIC and Temasek DID NOT receive CPF Funds.
    Look again at CPF public accounts record easily available. Total CPF Fund balance grew steadily from $85.3 billion in 1998 to $166.8 billion in 2009. NOT POSSIBLE if $117 billion were withdrawn. The alleged withdrawal of $117 billion to finance FIC/Temasek losses would have left only about $50 billion in the CPF. At that time, from 2007-2010, CPF annual contributions were about $20 billion and withdrawals about $10 billion. So, about 50% of CPF was actually withdrawn as fast as they were contributed. There is just NOT ENOUGH money to pay for the $117 billion GIC/Temasek loss and hide it from the People of Singapore by covering up the hole in CPF books! Just follow the money, man!