There are people who say that CPF monies, under the Mnimum Sum Scheme, provides a secure source of funding for GIC and Temasek Holdings. But I am really with Tharman on this issue. It really is easy for Singapore to borrow to invest at a much cheaper rate. Let me run through the various ways.
There's the open solution mentioned by the Minister of Finance Tharman ( http://news.asiaone.com/news/singapore/cant-please-all-fund-members ):
"The Government doesn't need to borrow from the CPF. If we needed to borrow, we can borrow from the market at lower rates than from the CPF. Every finance professional knows that.
If we had issued one-year treasury bills, the rate we would have paid over the last 10 years would have been 1.7 per cent on average.
If we wanted to borrow through longer-term bonds, we could issue 10-year bonds and pay the market rate, without the plus one percentage point. So if the Government needed to borrow money, it can do so at lower cost.
CPF money is actually expensive money for the Government, not cheap money,"
Some might cite the well known Article 144 of the Constitution of the Republic of Singapore that says the Government can't borrow without permission. But of course...
http://www.sgs.gov.sg/SGS%20Home/The%20SGS%20Market.aspx
... MAS does ask permission. Each issue is authorised by a resolution of Parliament and with the President's concurrence. The monies raised goes into the Reserves (I assume the "Government Securities Fund" is part of the Reserves) and eventually (by various transformations) gets managed by GIC and Temasek Holdings. (Money borrowed can't fund operating expenditure.)
(BTW, it's amusing, a guy I know who worked on the launch of CPF LIFE in MOM has now gone to MOF and works in "Reserves". This flow sounds familiar.)
Of course there are more covert solutions. GIC and Temasek Holdings are "private companies" albeit with the office of the Minister of Finance and/or the office of the President of the Republic of Singapore as shareholders. (Check the Singapore Government directory http://www.sgdi.gov.sg/ to see that GIC/TH are not listed.) Now, if they cannot raise money by borrowing due to some special terms in their charter, it should be noted that most/all of their portfolio companies can. So GIC/TH can themselves, or use specially created and wholly owned subsidiaries (that will not be part of the Government and can raise money for investment) to borrow for investment. Capital can be (initially and openly) injected into the subsidiary to make it more credit worthy. Such mini-hedge funds can be legally set up to do borrowing on the quiet without an act of Parliament. (Of course, this is ugly and sneaky and there is no real point doing it when approval through Parliamentary resolution can be so readily gotten.)
Therefore, I say that those attacking the CPF system by claiming that CPF monies are held back so as to provide cheap funding for investment should accept that they are wrong on that count. There are certainly aspects of the system to be criticized, such as the paternalism of the Minimum Sum rule, but accusations like that of "implicit taxation" are wrong and possibly (for those who already know the claim is incorrect) dishonest.
Jeremy Chen
*Article first appeared on https://www.facebook.com/convexset/posts/10152470498201335