http://sonofadud.com/2015/03/08/exposing-the-problems-with-cpf/
Does Singapore even need a Sovereign Wealth Fund?
Singaporeans need to ask, particularly in the light of the recent investment losses, why Singapore even has a SWF let alone two.
Look at my definition for the first type and you will see that Singapore does not meet the criteria since we do not need to manage a windfall from any natural resources. If Singapore had expanded its domestic investment and consumption over the last 30 years it would have had smaller current account surpluses and thus smaller foreign exchange reserves needing management. MAS already has sufficient foreign exchange reserves necessary to manage the Singapore dollar. No second SWF was needed to fulfil this function.
Again without transparency we have no breakdown of how much government saving in the form of surpluses has contributed to both Temasek and GIC’s growth over the years. But we do know that the cumulative budget surplus over the last thirty years has been considerable.
Budget surpluses
Where have these budget surpluses come from in the first place. Well we all know how to save money. We cut back on expenditures. When a country cuts back on the absolute basics such as free education for its children then it creates a budget surplus. Let’s make no mistake here. No other First World Nation only has compulsory education up to the end of Primary school and even that only for a very short day. Even our very minimal compulsory education is not even free (although heavily subsidised). I am not advocating a full welfare state but to put it bluntly, Singaporeans have helped to pay for our enormous overseas investments by going without the brights and benefits that citizens in a democracy demand. So Singaporeans go without free universal education to secondary level, a national health insurance system and other elements of a social safety net which are characteristic of most countries at Singapore’s level of development. By making you go without the PAP builds up a huge surplus for investment overseas.
How the budget surplus should be invested: In Singaporeans
SO, the budget surplus, has been taken from the pockets of Singaporeans and represents money that you not only could have but should have. It could and should, be returned to the citizens of Singapore in the form of lower taxes, fees and charges. It could have also been used to finance much higher domestic investment in education or in health and welfare.
Their website states that Temasek has achieved an annualized return of 18% since inception though that is based on the March 2008 asset figure of S$185 billion rather than on the current valuation of S$145 billion announced by CEO Ho Ching yesterday. Investment in our only natural resource, our people, could potentially have had a much higher internal rate of return, in the form of a more highly educated workforce, than that achieved by Temasek or GIC on their overseas investments.
Instead of the Government investing our money to pick winners through an industrial strategy there could have been greater incentives for investment and R&D in the private sector which might have led to faster productivity growth and higher levels of real incomes. And even if GIC has not been funded directly by the MOF, the growth of our foreign exchange reserves has come about through chronic external surpluses which represent domestic under-consumption and under-investment.
Co-investment
As a final insult, CEO Ho Ching announced on July 29th 2009 at the Institute of Policy Studies that Temasek was thinking of allowing Singaporeans to co-invest alongside Temasek sometime in the next ten years. How kind of her. I thought we had already invested as outlined above. The only positive side of this news is that it would presumably force Temasek to be much more transparent about its investment process and corporate governance. In any case any personal financial adviser would not advise an investment in a company without sufficient transparency that required due diligence.
Does Singapore even need a Sovereign Wealth Fund?
Singaporeans need to ask, particularly in the light of the recent investment losses, why Singapore even has a SWF let alone two.
Look at my definition for the first type and you will see that Singapore does not meet the criteria since we do not need to manage a windfall from any natural resources. If Singapore had expanded its domestic investment and consumption over the last 30 years it would have had smaller current account surpluses and thus smaller foreign exchange reserves needing management. MAS already has sufficient foreign exchange reserves necessary to manage the Singapore dollar. No second SWF was needed to fulfil this function.
Again without transparency we have no breakdown of how much government saving in the form of surpluses has contributed to both Temasek and GIC’s growth over the years. But we do know that the cumulative budget surplus over the last thirty years has been considerable.
Budget surpluses
Where have these budget surpluses come from in the first place. Well we all know how to save money. We cut back on expenditures. When a country cuts back on the absolute basics such as free education for its children then it creates a budget surplus. Let’s make no mistake here. No other First World Nation only has compulsory education up to the end of Primary school and even that only for a very short day. Even our very minimal compulsory education is not even free (although heavily subsidised). I am not advocating a full welfare state but to put it bluntly, Singaporeans have helped to pay for our enormous overseas investments by going without the brights and benefits that citizens in a democracy demand. So Singaporeans go without free universal education to secondary level, a national health insurance system and other elements of a social safety net which are characteristic of most countries at Singapore’s level of development. By making you go without the PAP builds up a huge surplus for investment overseas.
How the budget surplus should be invested: In Singaporeans
SO, the budget surplus, has been taken from the pockets of Singaporeans and represents money that you not only could have but should have. It could and should, be returned to the citizens of Singapore in the form of lower taxes, fees and charges. It could have also been used to finance much higher domestic investment in education or in health and welfare.
Their website states that Temasek has achieved an annualized return of 18% since inception though that is based on the March 2008 asset figure of S$185 billion rather than on the current valuation of S$145 billion announced by CEO Ho Ching yesterday. Investment in our only natural resource, our people, could potentially have had a much higher internal rate of return, in the form of a more highly educated workforce, than that achieved by Temasek or GIC on their overseas investments.
Instead of the Government investing our money to pick winners through an industrial strategy there could have been greater incentives for investment and R&D in the private sector which might have led to faster productivity growth and higher levels of real incomes. And even if GIC has not been funded directly by the MOF, the growth of our foreign exchange reserves has come about through chronic external surpluses which represent domestic under-consumption and under-investment.
Co-investment
As a final insult, CEO Ho Ching announced on July 29th 2009 at the Institute of Policy Studies that Temasek was thinking of allowing Singaporeans to co-invest alongside Temasek sometime in the next ten years. How kind of her. I thought we had already invested as outlined above. The only positive side of this news is that it would presumably force Temasek to be much more transparent about its investment process and corporate governance. In any case any personal financial adviser would not advise an investment in a company without sufficient transparency that required due diligence.
