Ministry of finance contradicts minister of finance?

[h=1]MINISTRY OF FINANCE CONTRADICTS MINISTER OF FINANCE?[/h]
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14 Jul 2014 - 2:48pm





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Ministry of Finance contradicts Minister of Finance?
The obfuscation just keeps pouring in. In a ST report on July 9th 2014, the Ministry of Finance revealed the $5b in capital injection into Temasek came from proceeds from the Singapore Government Securities (SGS), as well as government budget surplus and the proceeds from government land sales. The Ministry also told the ST that “the capital injection did not include proceeds from the Special Singapore Government Securities (SSGS)which are instruments that the CPF Board uses to invest Singaporean’s CPF savings. In other words, Temasek does not manage any CPF monies, an MOF spokesperson reiterated”
What Tharman said in Parliament.
On July 8th 2014, DPM Tharman, the Minister of Finance, in reply to a question from opposition leader Low Thia Khiang
“The GIC, because it has a large diversified portfolio, does aim to invest for the long term, and aims to do better than the SSGS obligations. But that is only because the GIC is not just managing SSGS obligations, it’s not just managing CPF liabilities.
GIC is fund manager for the Government, not owner of the assets and liabilities. It seeks to achieve the Government’s mandate of achieving good long-term returns, without regard to the sources of the funds that the Government places with it – for example, whether they are proceeds from SGS, SSGS or government surpluses”
He went on to say
“Our strength is that the Government has net assets, including unencumbered assets – proceeds from land sales over the many years, proceeds from the Government surpluses, especially in the earlier years, and the investment returns on those proceeds. Those give us unencumbered assets and by pooling the SSGS monies together with those unencumbered assets in one pool”
About those SGS
The SG government’s total debt to GDP ratio was 108% in 2013. This works out to be a total of $402b. Debt owed to CPF via Special SGS is $241b. That leaves $161b in SGS but all cannot be in Temasek as the capital injection statement seems to infer. Let us discount Temasek market value of $223b at a rate of 6% (allowing for extraction of returns by the government, loss provisions and operating costs from its 16% long term return), we arrive at a sum of just $30b 35 years ago. That means the total amount of capital injection should not exceed $30b. So the rest of the SGS proceeds must be in GIC as Mr. Tharman had inferred.
Capital Injection came from the same pool but no CPF monies?
All funds are mingled in one pool as Mr. Tharman said and this would have been in the SG Government Treasury, then allocated to GIC, and Temasek through MAS. This is similar to any pooling of funds in the treasuries of banks, large companies and asset managers. Imagine Ismail Rashid’s $10,000 fixed deposit at DBS – once the money is deposited at the bank, it is mingled with thousands of other deposits and monies in a funding pool which is then allocated for making loans etc. But DBS does not specifically give Rashid’s deposit directly to Tan Ah Huat’s car loan. The funds come from a common pool.
As such, how did the Ministry of Finance spokesperson know the $5b in capital injection contains SGS proceeds or conversely no Special SGS proceeds and hence no CPF monies? If SGS funds are in both GIC and Temasek, then how is it possible that Special SGS funds are not in both since they came from the same pool? Either the spokesperson has contradicted the DPM’s “one pool” or there are segregated accounts which the DPM does not wish to reveal. If the capital injection is from segregated monies, it begs the question why Special SGS funds and therefore CPF monies are not similarly segregated for the sake of transparency. Then consider what the Ministry of Finance website has to say about the Net Investment Return Contribution (NIRC);
“comprised up to 50% of the net investment returns on the net assets managed by MAS and GIC and up to 50% of the investment income from the remaining assets which includes Temasek”
Notice the same term “net assets” in Mr Tharman’s Parliamentary statement as in this description of the NIRC vis-a-vis MAS and GIC and the conspicuous absence of the term vis-a-vis Temasek. It strongly suggests that the entire burden of paying the interest on the $402b of SGS and Special SGS falls on MAS and GIC but not Temasek even if indeed it receives capital injection containing proceeds from SGS. It is little wonder that Temasek which the government insist has no CPF monies, has such a rosy long term rate of return since it is given every advantage, including the valuable GLC portfolio which provide significant protection against forex risk at the expense of GIC which, as the government kept admitting these days, manages CPF monies.


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.

The fact is that proceeds from SSGS are always invested, and so over the years proceeds from SSGS have been utilized by Temasek, GIC and MAS to build their portfolios.

All the talk about common pools and squabbling over whether or not a particular fund injection contained SSGS proceeds is irrelevant and simply distracting.

The first issue is simple - CPF low returns, whereas Temasek, GIC and MAS have enjoyed supposedly good returns over the years, and there is no transparency as to the flow of funds from one entity to another.

The second issue is also simple - govt keeps holding back the CPF money when it was agreed long ago that 55 is supposed to be the draw down age and not 60, 65 or 67. Plus, less and less money to retire on because healthcare and housing have shot up so much.

Common pools indeed. People have been harping these two issues for months now, and nobody from the PAP camp coming anywhere close to addressing them. It does no good to say CPF is risk free. People just want the money back. What is the use of risk free if you can't touch it? The issue goes far beyond convincing people that 2.5% is a good risk free interest rate and they should be grateful. People want to take charge of their own finances and not have it hijacked arbitrarily.

Tharman has been the most well regarded of PAP ministers, some cynically suggesting that its because he's the one dishing out goodies at budget time.

However, even he fumbles when trying to offer clarification on the CPF. It seems that no clarity can be offered. Not because govt thinks we are dumb and we should be spared details, but because the truth happens to be inconvenient and if we knew the full sordid story the house will tumble.

It is high time for Singaporeans to realize that Singapore's brand of state capitalism benefits no one except the Familee and their spineless and shameless lackeys.

Fancy borrowing money from the common man and then spiting them for their stupidity.

The truth is they have been complacent over the years, knowing that people are just too busy to study the fine print.
The combination of the internet and more discontented souls have certainly made life a little bit more uncomfortable for them.
They still tell lies with a straight face, but perhaps with less conviction.
And notice how the highly paid minsters etc dare not even to make a statement or comment on any issue, unless 120% necessary?
Look at Tan Chuan Jin - when he opens his mouth, he is illogical, mouthing things which are obvious and childish ("If you take money out early, you will have less to spend in your later years")
As a 7-year old, I discovered that home truth, when I spent the entire week's school allowance on Monday or Tuesday!
These guys are paid fcuking millions to mouth motherhood simpleton statements like this?

Confuseous said:

The truth is they have been complacent over the years, knowing that people are just too busy to study the fine print.
The combination of the internet and more discontented souls have certainly made life a little bit more uncomfortable for them.
They still tell lies with a straight face, but perhaps with less conviction.
And notice how the highly paid minsters etc dare not even to make a statement or comment on any issue, unless 120% necessary?
Look at Tan Chuan Jin - when he opens his mouth, he is illogical, mouthing things which are obvious and childish ("If you take money out early, you will have less to spend in your later years")
As a 7-year old, I discovered that home truth, when I spent the entire week's school allowance on Monday or Tuesday!
These guys are paid fcuking millions to mouth motherhood simpleton statements like this?

Click to expand...

Get off your high horse and do not belittle the least intelligent members of society. They are an important vote bank for the PAP.

mojito said:

It is high time for Singaporeans to realize that Singapore's brand of state capitalism benefits no one except the Familee and their spineless and shameless lackeys.

Fancy borrowing money from the common man and then spiting them for their stupidity.

Click to expand...

It's not really a secret, but the 60.1% are like pigs who like to wallow in their own excrement.

Consequently, the pappies get free license to do whatever they want. For the good of Singapore and Singaporeans, of course.