Singapore
Pushed back by 10 years
And it’s only the beginning with the government losing more than
just money. Comment. By Seah Chiang Nee.
Nov 22, 2008
It
never rains, but pours; it wouldn’t have been too bad if I were
just talking about the weather.
I’m
referring to the growing pain that the global financial meltdown is
wreaking on this small affluent state.
It
has made us – the government and the people – a lot less rich, and
pushed the poorer class into deeper dire straits. It has eroded
national cohesiveness and widened the economic gap.
The
country has been pushed back by at least a decade, possibly more.
Leaders have warned that the pre-crisis living may not come back
for some years.
The
government, which had been sweeping general elections, is evidently
worried about an upsurge in discontent that could erode its power
base.
“The
crisis has dealt a blow to public trust in the younger leaders’
ability to help people manage the crisis,” said an
activist.
Take
weekends at the Speakers Corner.
Hundreds
of victims of the US financial woes have been gathering almost
every Saturday to vent their anger at what they see as government
failure to protect their interests.
This
by itself is a national phenomenon, considering that public
protests had been forbidden until a few months ago.
The
protesters are among 10,000 Singaporeans who have lost S$500mil
(RM1.2bil) of their life savings on “toxic” Lehman Brothers
products sold here by DBS, a government-controlled bank.
When
Lehman went bankrupt, these structured notes, which were extremely
complicated products offering a high 5% interest, became
worthless.
Many
claim the local banks had portrayed them as a safe product, instead
of telling them that if one of the six underwriting banks goes
bust, the principal amount would be loss.
DBS
has denied this, and the Monetary Authority of Singapore (MAS) is
investigating specific charges. Meanwhile, a small number of old
and ill-educated investors have been refunded.
The
irate protesters are not your usual breed of street protesters, but
hail from Singapore’s most conservative, pro-government
citizenry.
Some
are retirees and housewives, careful investors, who speak no
English. Women have openly wept while the men, with controlled
anger, lashed out at what they consider the government’s
unsympathetic response.
Before
tempers cool, another public outcry has erupted with serious
repercussions for the government, and undermined its standing in
Singapore’s heartland.
Eight
of the 14 PAP-managed town councils, which altogether have S$2bil
in “sinking funds” reserves, have invested and lost S$16mil in the
failed structured products.
The
money was collected from every household and meant for use in the
estate’s upkeep.
They
refer only to the toxic products and do not include investments in
other markets, which have declined significantly in value. There
has been no town council disclosure of total losses.
Questions
about the town councils’ total investments – let alone losses – are
unknown. So really, how much money has been lost?
Residents
are worried that the market decline will mean higher conservancy
charges.
“My
questions are: Why were these estate funds – with PAP members of
Parliament in charge – allowed to be used to buy risky papers?”
asked a web writer.
In
the first place, why were they collecting so much excess funds
instead of using it to develop the estates?
Criticism
has been widespread because it affects more than a million people –
although very marginally.
Some
Singaporeans fear that more skeletons will emerge within the
government machinery as the crisis deepens.
Many
statutory boards, educational institutions, trade unions and armed
forces may have saved up and invested billions.
Those
who did are continuing to see the flow of red ink.
The
conventional wisdom is that the current storm will blow over and
the lost value will be restored – but that is many years
away.
Amidst
the “sinking funds” losses, it was announced that four Statutory
Boards had incurred 14% market losses this year, none of which were
Lehman’s toxic products.
They
were the Civil Service College, Singapore Land Authority, Infocomm
Development Authority and the Professional Engineers’
Board.
However,
the losses represented only 0.05% of their total investment
portfolios.
The
market rewards were rich during the good times, but the punishment
is just as hefty when times are bad. So why does Singapore invest
so mightily?
The
reason lies in its small size and lack of natural resources, which
has forced it to rely on two things – human skill and
capital.
During
the past 20 years, its investments overseas have been
leaping.
Individually
they’re getting bigger. Previous totals of tens – or at most a few
hundred – millions of dollars, have been eclipsed by new
shareholdings today which are often measured in the
billions.
It
is not known whether – or to what extent – the post-crisis
government will review its investment policies. At the moment,
Temasek and GIC appear to be adopting a more cautious
approach.
Some
10 years ago – even before the current big investment push,
Singapore was seen as a prime global candidate for excess saving
and investment.
The
Federal Reserve Bank of San Francisco wrote in 1997: “Singapore’s
saving and investment rates are the highest in the world, and much
of this saving and investment is mandated by the
government.
“This
is in sharp contrast to Western industrialised countries ... we
cannot rule out the possibility that Singapore invests too
much.”
As
industries worldwide reduce their operations, Singapore, too, is
cutting back on its ambition.
But
it will likely continue to develop its external wings – by
significantly investing abroad – perhaps on a much more cautious
mode.
correct, how come the town councils never tell us their total
losses?