High public debts mean the government borrows and owes
people’s money, in particular CPF members. The government says we do not have
net debt and our assets are well in excess of liabilities. #
Then, why should we worry? Investment risks and returns have to be
considered. This is the same things and
same warning that we receive for high private debts. MAS and ministers are
warning Singaporeans about the danger of property crash and the possible higher
interest rate.
The government says we should not worry about internal
debts as Singapore does not borrow money in the international markets, like
other countries. Is this true? Foreign
debts are more critical than internal (domestic) debts. This is like saying you
borrow money from your parents, brothers, sisters, uncles or aunties and you
have no worry. These relatives will not
chase you for money. This must be a
wonderfully world! Or perhaps, you have a sugar daddy!
So, according to MAS, we should not worry so much
about the internal debts as outsiders will not chase us for money like the loan
sharks. Is the government saying CPF
members will not chase and cannot chase them for money? CPF members are sugar
daddies too!
There is always a debate how big is our reserve and
its actual values. It is so complicated that it would need 50 man-years to
calculate. This was first known in the 1990s. By now, with Asian financial
crisis, world financial crisis and increasing complexity and sophistication of
world financial markets, it may now need 100 years to produce the reserve
figure.
Internal debts have no risk?
Just look at this classic case, the government issues S$
bonds and CPF Board buys the S$ bond. CPF Board needs to pay interest 2.5% or
4% per year to members. The government takes away the CPF money and asks
Temasek and GIC to invest. Of course, they have to invest all over the world to
make higher returns so that CPF board is able to pay back the principals and
interests to members.
The problem is there are risks involved be it
investment risks for bad decisions or foreign exchange risks. Another risk is putting more money into the
reserve and the investment may not necessary yield more positive returns.
The recent announced Temasek Review shows an
increasing shareholder equity but with a stagnant net profits to equity
holders. Who are the equity holders, the government and behind the government
the people of Singapore. In the past 10 years, we are putting more money as equity
in Temasek but we see stagnant return of profits.
 |
Temasek Holdings has increasing shareholder equity and stagnant net profits.
|
You can present the above (same) statistics in the
following way:
.png) |
Upward movement of shareholder equity and a straight line movement of profit
|
The blue line shows the shareholder equity and the red
line shows the profit for equity holder from 2004 to 2103. If this trend continues, whatever amount of
equity the government injects into Temasek Holdings, the profit will be a
straight line around S$11 billion plus and minus.
As a main source of internal debts and government
borrowings, CPF members will have to worry whether they can continue to play
the sugar daddies. Just like the private debts, the banks will check on you. Why are you borrowing more money and still
paying the same installment amount? Needless to say, all your relatives are getting
worry, worry about the internal and domestic debts.
Of course, banks will do the opposite – cut your
borrowings and ask for early payments. Banks are not sugar daddies. Then you tell the
banks my business portfolio is getting bigger and bigger, like what Temasek
said from S$ 354 million in 1974 to S$215 billion in 2013. Then the banks comments that you are using my
money to balloon your portfolio of which there are even bigger, higher and more
complicated risks. You may have a lot of
inventory, a lot of account receivables, and a lot of doubtful debts……..The
banks finally say they are unable to assess the assets values and the risks
involved.
Even professionals like banks have difficulties in
assessing the risks and the values, how about relatives who give private loans
to the family borrowers. This is the
situation of the CPF members. Many CPF members do not have financial knowledge,
not to mention the sophisticated modern and advanced international finance.
CPF members are forced to be sugar daddies by law. And
there is only one hope that the government is doing the right thing. Same thing for our reserve, Singaporeans have
to trust the government to do the right thing.
Right politics
Right thing means right politics.
The right politics unfortunately is to make people
trust the institutions handling CPF monies and the reserve. Right politics and right economics are how to
convince people and gain public confidence in the administration of public
money – CPF and reserve.
However, to the PAP, right politics is to continue
giving more equity to them to invest without questions, just like the sugar
daddies.
Unfortunately, majority of Singaporeans are not rich
enough to be sugar daddies. The reality
of right politics to them is to have an open, transparent, fair and equal
disclosure of public finance. This is
the basic principle of right politics.
If citizens do not trust you anymore, then the answer is simple – wrong politics.
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