I'm not implying that I do not trust those who are looking after
Singapore's assets, but the question does beg whether its advisable
for Singaporeans to place so much trust in such a non-transparent
system? Espcecially when the assets have grown so large.
--------------------------------------------
http://www.littlespeck.com/content/economy/CTrendsEconomy-031207.htm
Rising surplus -
Who should control?
US$100b asset topped by another
US$23b this year, an unmatched gain which raises tough questions.
Richard Hubbard. Reuters
Dec 7, 2003
The tiny island nation of Singapore is set to end 2003 with a weak
economy and high unemployment but a very fat bank balance.
Singapore's reserves, already estimated to exceed US$100 billion in
a nation of just over 3.3 million citizens, are set for a top up
from a record current account surplus the country has in its
balance of payments with the rest of the world.
But as the reserves mountain grows analysts are questioning whether
the current system of control by a large and secretive institution,
the Government of Singapore Investment Corp (GIC), is in the best
interests of the country.
"It is highly risky for Singapore to place virtually its entire
reserves under the management of a single entity, particularly one
marked by low transparency," said Manu Bhaskaran, a partner in
Centennial Group Inc.
Owing to the government's dominance in the city-state's economy, a
large slice of the current account surplus - the gain from
exporting more goods and services than are imported plus net
investment income - is likely to end up in the coffers of either
the central bank or the GIC.
The surplus for the first three quarters of 2003 stood at S$35.1
billion (US$20.36 billion) - the highest ever recorded, according
to the Department of Statistics.
A strong final quarter will easily push it above S$40 billion for
the whole year, a level never seen before.
"It's a crisis of plenty," according to P.K. Basu, managing
director of Robust Economic Analysis in Singapore.
Basu said the surplus, running at around 30 percent of gross
domestic product, was a result of a reluctance by the government to
increase spending as the economy slowed down.
When a government increases spending, people generally have more
money to buy imported goods and the current account surplus would
normally shrink.
Analysts said the surplus also partly reflected Singapore's weaker
currency after the central bank eased monetary policy mid-year,
which would have made imports more expensive.
With the manufacturing and service sectors hit by the Iraq War and
the deadly SARS outbreak, Singapore's GDP is expected to be only
one percent higher this year than in 2002, when it showed 2.2
percent growth.
Investments
abroad
A current account surplus must be invested in foreign assets, such
as foreign exchange, stocks, bonds, and real estate overseas.
In Singapore some of this will be done by private sector firms, but
the bulk would be handled by the GIC or the central bank.
The GIC manages funds that come from the government's accumulated
budget surpluses, including the profit of investment agency Temasek
Holdings, and some of the assets of the central bank, the Monetary
Authority of Singapore.
Chaired by modern Singapore's founder and current senior minister,
Lee Kuan Yew, the GIC said last year it had around US$100 billion
in assets, but does not make public its accounts.
The central bank, chaired by Lee Kuan Yew's son Lee Hsien Loong,
currently has official foreign reserves of over $90 billion, mainly
held in foreign exchange and gold.
Temasek, whose executive director is married to Lee Hsien Loong,
earns income from stakes worth more than $45 billion in about 40
major Singapore companies.
The agency's stable of companies includes well known names such as
Singapore Telecom, Singapore Airlines and DBS Bank, and the port
operator PSA Corp.
The GIC invests its funds in everything from outright purchases of
hotels and hospitals in Australia to heavy investments in US
equities and bonds.
Temasek uses its money principally to build local companies, but
recently has begun making direct investment abroad as well,
including buying stakes in two large Indonesian banks.
Some analysts argue that, after years in which this government-led
investment has turned Singapore into a highly developed country, it
may be time for the state to step back.
"What needs to be done is that the government has to decide whether
to pass the investment decision back to the people," said Joseph
Tan, an economist at Standard Chartered Bank.
"The wealth in a sense doesn't belong to the government."
Basu of Robust Economics believes the concentration of the
management of the country's wealth has also contributed to the
country's lack of entrepreneurship.
Centennial Group's Bhaskaran said the GIC was most in need of
reform and suggested a statutory board be set up to oversee its
management, and that the group's various fund management divisions
be broken up and sold off.
"For a small country, do we want to put all our savings in one fund
management house?" he said. ($1=1.724 Singapore Dollar)
Reuters