Heartless PAP creating liquidity risk at AHPETC

2015 PAP Strategy 战略 11

Strategy of Bankruptcy

[Can PAP bankruptcy strategy win your hearts and minds?]

All town councils in Singapore need government grants to escape the cash flow problem and liquidity crisis. The continuation of withholding government grants will certainly increase the liquidity risk of Aljunied-Hougang-Punggol East Town Council.

This old PAP bankruptcy strategy is not new. It has happened to JBJ, Chee Soon Juan, Tang Liang Hong and now it moves to a town council. Why a town council? It is because it is a big opposition town council.  It is no more a single-member constituency town council which poses little challenges and needs only small grants.  The grants can go up to multi-million dollars.

And in fact, the fastest killing bullet is increasing the liquidity risk. It can kill a business instantly and makes the business filing for bankruptcy.  This is why insolvency or bankruptcy are highlighted in the Courts and the media. Now there is a new description of ‘a house of in danger of collapsing’. The PAP wants to win your hearts and minds by capitalizing on the collapsing house.

It is not surprise the PAP’s Charles Chong is promoting his ‘Restoring MND grants to Punggol East is PAP’s goal.’#1 He is trying to use this carrot to attract attention and wins votes.  

Let’s first understand two concepts: liquidity and solvency.

What is the difference between a liquidity issue and solvency issue? A liquidity issue (crisis) occurs when a firm (or country) has a temporary cash flow problem. Its assets are greater than its debts, but some assets are illiquid (e.g. it takes a long time to sell a house. A bank can’t suddenly demand a mortgage loan back) Therefore although in theory assets are greater than debts, it can’t meet its current payment requirements. A Solvency crisis occurs when a country has debts that it can’t meet through its assets. i.e. even if it could sell all its assets, it would still be unable to repay its debts. To be insolvent is much more serious because even if you have access to temporary funds it can’t solve the underlying problem of excess debts. Definition of liquidity: capable of covering current liabilities quickly with current assets Definition of solvency: Ability of a business to have enough assets to cover its liabilities http://www.economicshelp.org/blog/5043/economics/difference-between-liquidity-crisis-and-solvency-crisis/

AHPETC’s balance sheet shows there is a low solvency risk as the assets are greater than liability. Most of the time, solvency is related to long-term and sustainability issues.

However, liquidity risk is current and operating issue. AHPETC needs to pay salaries, CPF, water and electricity bills, taxes, and sinking funds as required by law.  In 2013/2014 Annual Report, AHPETC explains:

The liquidity risk of AHPETC is tied to government grants. The longer withholding period of the grants, the higher liquidity risk it will be. The PAP is trying to mislead the public by giving frightening warning signs. It tries to project AHPETC has no money for sinking funds payment. Sinking Funds is the statutory requirement and AHPETC as indicated in their Annual Report 2013/2014 stated that ‘Operating transfer to Sinking Funds (minimum required by law)’. AHPETC does not want to break the law but transfer the minimum required funds while they are waiting for government grants.

If you are in business, especially small business, you will

understand how importance is the cash flow and liquidity. This is why the lender of last resort for some businesses is to get loans from ‘Ah Long’. It is totally different from government linked companies. They can get cheap and reliable funds with non-stop supply from the government. When DBS needs cash, it just merges with POSB as POSB is a cash cow that cannot say no.  

How heartless and cruel the PAP government can be

The Ministry of National Development is using the technical issue to withhold the grants in the good name of public money.

Now you can imagine how heartless the PAP government can be. This mindset is same as their social policy. The government spends so little on social welfare and fails to increase the wages of lower income workers. They make high return on our CPF monies but return low interest to our CPF savings. They even give grants to listed SMRT and SBS to improve their earnings.  These are some examples. You can look around to find more examples.

However, there is difference between TC grants and the above examples. All other town councils receive grants except AHPETC. TC grants have a higher moral authority than all other grants which are the mandate of the voters. The PAP government fully understands AHPE voters voted for Workers’ Party in 2011. By holding the grants without good reasons, especially with the ill intention and cruel act, the PAP pretends voters are blind and they cannot see the true color of the PAP.

It is like in ancient China when there was a disaster, the central government would deliver food assistance and grants to the affected areas.  Unfortunately, the assistance did not arrive.  Once the residents found out the real reasons, unrest, riot broke out.  Many dynasties were overthrown because of this ill act.

Perhaps, the PAP has not learnt the lesson from ancient China.  It has also failed to understand the wishes of voters in AHPE.

Withholding grants can cause a liquidity risk and crisis for AHPETC. It means an organisation has cash outflow greater than cash inflow. This is what happens to Lehman Brothers, AIG, Fannie Mae and Freddie Mac etc during financial crisis in 2008. Even a AAA company can be killed quick and fast if short-term obligations cannot be met.

The continuation of withholding the grants is morally wrong. It is like because there are drug dealers, illegal parking, or ‘Ah Long’, MND cannot transfer the grants to AHPETC. This is why the Courts finds it reluctant to handle the case and asks both parties to settle out of court.  

AHPETC is not in business and the situation is different.

AHPETC cannot seek investors or get bank loans even it is a promising stock and WP brand name has a market value. However, a prolonged period of cash flow problem of not receiving grants will lead to liquidity crisis.  

GE2015 is coming.  Voters in AHPE must understand the real reason behind the withholding of grants and sinking funds issue. Voters in Singapore must send a clear signal to the PAP.  By playing dirty, by denying mandate of voters, and by continuing practicing bankruptcy strategy, it will cause the PAP dearly.

It is not a surprise the PAP is engaging in this dirty path. They have used to bankrupt opposition leaders before. Now they try to bankrupt a town council. They have tried to withhold upgrading projects but failed. Upgrading will not affect the TC cash flow as payment to sinking funds is not involved. But grants are real money, without it, it will cause liquidity problem for any town councils, not only AHPETC.

This is a double standard based bankruptcy strategy of the PAP. Voters all over Singapore must reject it.

The PAP wants to kill AHPETC by creating liquidity crisis. However, time is running out for the PAP as they can’t even assign a minister to stand in Aljunied GRC. They cannot even find another Charles Chong standing in Aljunied telling voters he can help to restore MND grants to Aljuined and Hougang.

Voters in Aljunied will return WP to take care of them.  With a decisive win and stronger mandate, can MND continue to withhold the grants? Or if bad luck strikes the PAP, they will become the largest opposition party in Singapore. No more in government, how can the PAP withhold the money?

Where is the PAP’s socialist heart? What kind of heart does PAP have? Their hearts are not with the people as they think they can hold the grants forever.  How can they treat AHPE residents as second class citizens?  A price they will have to pay in coming election.   

#1

http://www.todayonline.com/singapore/restoring-mnd-grants-punggol-east-paps-goal-says-charles-chong

# more on solvency risk and liquidity risk

Solvency risk is the risk that an institution cannot meet maturing obligations as they come due for full value (even if it may be able to settle at some unspecified time in the future) even after disposal of its assets.

Liquidity risk refers to the risk that involves the disposal of assets or selling of assets. An asset may be sold quickly thus stating that the asset is highly liquid. Indeed, liquidity risk includes the management of funding sources and the overall monitoring of the market conditions. This is therefore bound to affect the ability to liquidate the assets of the firm with very little loss in the value of the assets.

http://www.uniassignment.com/essay-samples/finance/difference-between-solvency-risk-and-liquidity-risk-finance-essay.php