Part 2
In the first part of the article, I discussed how the government has finally admitted that the GIC does use Singaporeans’ CPF to invest, after years of not admitting to this information. The GIC also admitted to the information, after years of denying knowledge of this. Similarly, the Temasek Holdings also claimed not to invest our CPF when it is known that they had previously use our CPF to invest. It was also found that the government, GIC and Temasek Holdings all changed or revealed this information only early last month, in June. Previously, this information of how our CPF is used by the GIC and Temasek Holdings is unknown to Singaporeans.
Part 1 of the article can be found here.
In this article, we further look into some of the things that the government doesn’t tell Singaporeans about what they do with our CPF and the discrepancies, and the areas in which the government needs to be be transparent to Singaporeans.
(6) Where Are the Full Reports of the MAS, GIC and Temasek Holdings
In the first part of this article, I ended off by saying that the government needs to release the full reports of the GIC and Temasek Holdings, so that Singaporeans can be fully aware of how the government is using our CPF to invest in the GIC and Temasek Holdings.
However, according to the government, they say that “the size of the Government’s funds managed by GIC” cannot be published because “Revealing the exact size of assets that GIC manages will, taken together with the published assets of MAS and Temasek, amount to publishing the full size of Singapore’s financial reserves (and) It is not in our national interest to publish the full size of our reserves.” The government also claims that, “If we do so, it will make it easier for markets to mount speculative attacks on the Singapore dollar during periods of vulnerability… and it will be unwise to reveal the full and exact resources at our disposal.”
Chart 1: The Minister of Finance Singapore - Section I: What comprises the reserves and who manages them?
Temasek Holdings also claims that, “As an exempt private company, Temasek is not required to disclose financial information.”
Chart 2: Temasek Holdings FAQ
As such, the government is unwilling to provide the full reports of the GIC and Temasek Holdings for the scrutiny of Singaporeans.
Today, the GIC and Temasek Holdings are the 8th and 10th largest sovereign wealth fund in the world, respectively.
Now, compare this to the largest sovereign wealth fund in the world, the Norwegian Government Pension Fund – Global, and let’s take a look at how they do their reporting and the standards that are set by the top sovereign wealth fund in the world.
You can see that they would provide their reports in full.
Chart 3: Norway’s Government Pension Fund Global Annual Report 2013
The question then is, why is the government, GIC and Temasek Holdings not willing to do so?
Also, as discussed in the first part of the article, the Singapore prime minister, two deputy prime ministers and two other ministers are also the Chairman (prime minister) and Board of Directors of the GIC. Lee Kuan Yew is the Senior Advisor. If the government is the GIC and the information is not transparent, is it safe for Singaporeans to leave our CPF in the hands of the government and the GIC? Who can we hold accountable for the use and management of our CPF? If the GIC mismanages our CPF, can we hold the government accountable if the government (and the Singapore prime minister, no less) is on the Board of Directors on the GIC?
This is a very uncomfortable position that Singaporeans are in when the government is the GIC and the GIC does not publish full reports, and we are not able to know what the government/GIC are doing with our CPF.
Also, the government says that, “The main companies in the GIC group and the Government’s portfolio managed by GIC are also audited by the Auditor-General.”
Chart 4: The Minister of Finance Singapore - Section I: What comprises the reserves and who manages them?
If so, can the Auditor-General release full audit reports of the GIC?
Right now, Singaporeans are not able to access full reports from the MAS, GIC and Temasek Holdings. Singaporeans also do not have access to the Auditor-General’s audit report of the GIC. Basically, Singaporeans do not know what the government is doing with our CPF. Is it safe to leave our CPF in the hands of the government, MAS, GIC and the Temasek Holdings when Singaporeans have no idea what they are doing with our CPF?
More importantly, if the Auditor-General is the government and the government is the GIC, then when the Auditor-General audits the GIC, is there a conflict of interest since they are both the government?
DEMAND FOR TRANSPARENCY: SINGAPOREANS DEMAND THAT FULL REPORTS FROM THE MONETARY AUTHORITY OF SINGAPORE (WHICH ALSO MANAGES OUR RESERVES), GIC AND TEMASEK HOLDINGS BE RELEASED.
(7) Can the President Know or Not Know the Size of the Reserves?
According to the government, “the President safeguards the Past Reserves of the Government and Fifth Schedule entities”, which include our CPF.
The government also says:
The President is entitled to all information that the Cabinet and the boards of the Fifth Schedule entities (which includes our CPF) are entitled to… The President has full information about the size of the reserves (including a listing of physical assets like land) and the performance of the investment entities. Each year, the Accountant-General prepares and submits the Government’s financial statements to the President. These statements are independently audited by the Auditor-General.
If the President is entitled to the “full information about the size of the reserves”, then why was it that the government told President Ong Teng Cheong in 1996 that, “it would take 56-man years to produce a dollar-and-cents value of the immovable assets“?
It is now known that the reserves are managed by the Monetary Authority of Singapore (MAS), GIC and the Temasek Holdings. If so, they would have kept full reports of the reserves. It wouldn’t need to take 56-man years to let President Ong Teng Cheong know the “full information about the size of the reserves”.
Why then did they not want to let him know?
If Singaporeans are not able to know the full information about the reserves and the President is also not able to know, then who exactly is safeguarding our reserves and our CPF? If Singaporeans and the President doesn’t know what is happening to our reserves and the CPF, then what exactly is the government doing with our CPF?
The only way that Singaporeans can truly and safely know what the government is doing with our CPF is when full reports are revealed from the MAS, GIC and Temasek Holdings are released to be scrutinised by Singaporeans.
SINGAPOREANS DEMAND THAT FULL REPORTS FROM THE MAS, GIC AND TEMASEK HOLDINGS BE RELEASED.
(8) Is the CPF A Cheap and Significant Source of Funding for the Government?
Earlier last month, it was reported by The Straits Times that then Second Finance Minister Tharman Shanmugaratnam had said that, “the charge of the Government using CPF as a cheap source of funds was “wrong and plainly misleading”“.
However, in a Straits Times article in 1983 that was dug up by the Worker’s Party Pritam Singh, it was said that, “The CPF … provided a cheap source of finance for the government”.
The Straits Times article in 1983 goes on to say that, “The CPF purchases government stocks, and the government loans the money cheaply to the HDB. The CPF purchases government stocks, and the government loans the money cheaply to the HDB.” The HDB then “lends part of this money to purchasers of HDB flats”. (So, the government borrows our Singaporeans’ CPF cheaply, then lends it back to us – does this make sense?)
Chart 6: The Straits Times – The dollars and sense of CPF
Finally, the article ended off by affirming that, “CPF savings provide a significant source of domestic funds available for government borrowing”.
Chart 7: The Straits Times – The dollars and sense of CPF
So, who is telling the truth here?
- If the government claims that the CPF is not “a cheap source of finance for the government”, how does the government counterclaim what was said in 1983, when it is revealed that the government has indeed borrowed from our CPF cheaply?
- If the CPF is not a “cheap source of finance for the government”, then how much is the government paying Singaporeans to borrow our CPF? Or, are Singaporeans paying the government instead? If so, is our CPF an expensive source of finance for Singaporeans who have to lose our CPF to fund the government’s finances?
- Also, if the current government claims that the CPF is not “a cheap source of finance for the government”, then what are the other sources of finance for the government? How much are these other sources of finance and what is the breakdown of these sources?
The nail in the coffin could perhaps be what the GIC says when they admitted that, “Sustained balance of payments surpluses and accumulated national savings are the fundamental sources of the Singapore Government’s funds.”
Chart 8: GIC FAQ Popular
You would remember that the GIC is also made up of the Singapore prime minister, two deputy prime ministers and two ministers, or literally the government.
What are “accumulated national savings”? Is this our CPF? It thus seems clear that the “fundamental sources of the Singapore’s Government’s funds” come direct from government surpluses and our CPF.
Which is why it is perplexing why the Temasek Holdings would say that it “does not manage CPF savings (and) Government surpluses”. If the “fundamental sources of the Singapore Government’s funds” are the “sustained balance of payments surpluses and accumulated national savings” and yet the Temasek Holdings does not manage them, then did the Temasek Holdings got their funding from thin air? Also, was the Temasek Holdings invested our government surpluses and CPF at some point prior?
Chart 9: Temasek Holdings FAQ
Thus how much of our CPF is invested in the GIC (and Temasek Holdings)? How much government surpluses have been invested in the GIC and Temasek Holdings since their inception? What is the full breakdown of the funds that have been invested in the MAS, GIC and Temasek Holdings since their inception?
There seems to many very different things that the government is saying about our CPF and how they are managing our CPF. If so, does the government even know what is going on? And if they do, will they tell Singaporeans the truth instead of go in a roundabout fashion to prevent Singaporeans from knowing the truth?
DEMAND FOR TRANSPARENCY: WHAT ARE THE SOURCES OF FUNDING FOR THE MAS, GIC AND TEMASEK HOLDINGS? WHAT IS THE FULL BREAKDOWN OF THESE SOURCES OF FUNDING INVESTED IN THE MAS, GIC AND TEMASEK HOLDINGS SINCE THEIR INCEPTION? HOW MUCH DID THE FUNDS EARN IN THE GIC AND TEMASEK HOLDINGS, FOR EACH OF THESE SOURCES OF FUNDING?
(9) How Much of the Interest Earned On Our CPF is Not Returned Back to Singaporeans?
Finally, now that we know with certainty that Singaporeans’ CPF is invested in the GIC and was invested in the Temasek Holdings, then the question is why is the GIC and Temasek Holdings earning 6.5% (annualised 20-year return in USD terms) and 16% (in SGD terms) respectively, but our CPF is only earning 2.5% to 4%? According to Mr Leong Sze Hian, the interest and real interest that Singaporeans are earning on our CPF is the lowest in the world.
Thus, why is it that Singaporeans today have one of the least adequate retirement funds in the world?
Chart 10: Pensions at a Glance Asia/Pacific 2011
But GIC and Temasek Holdings are ranked the 8th and 10th largest sovereign wealth funds in the world respectively?
Chart 11: Sovereign Wealth Fund Rankings
In short, why did Singaporeans become so poor, while the GIC and Temasek Holdings, and the government which owns them, become so rich?
According the the Asian Development Bank Institute:
To the extent the Government earns a higher rate of return on the CPF funds than what it pays to members; there is an implicit tax on CPF wealth. This tax is likely to be fairly large and regressive, as low-income members are likely to have most of their non-housing wealth in the form of CPF balances. This vividly illustrates how political risks (i.e protection of political power) and non-transparency can arise in an individual account system.
So clearly, not only are the real interest rates on Singaporeans’ CPF the lowest in the world, the interest earned by the GIC and Temasek Holdings that are not returned to Singaporeans is an “implicit tax” that Singaporeans are paying to the government. If so, isn’t the CPF clearly “a cheap source of finance for the government”? If so, isn’t the CPF an expensive source of finance for Singaporeans who are paying our CPF to the government?
You have to understand this – without our CPF, the GIC and Temasek Holdings would have no funds to invest in. No matter how much the government wants to phrase that the CPF is not “directly” invested in the GIC and Temasek Holdings and thus the returns earned by them does not need to be returned to Singaporeans, such logic does not hold water because if not for our CPF, the GIC and Temasek Holdings would not have been able to earn in the first place.
DEMAND FOR TRANSPARENCY: HOW MUCH CPF IS (AND WAS) INVESTED IN THE GIC AND TEMASEK HOLDINGS ON AN ANNUAL BASIS SINCE THE GIC AND TEMASEK HOLDINGS’ INCEPTION? HOW MUCH DID THE CPF EARN IN THE GIC AND TEMASEK HOLDINGS ON AN ANNUAL BASIS SINCE INCEPTION? HOW MUCH WAS THE INTEREST AND MONEY EARNED BY THE GIC AND TEMASEK HOLDINGS, USING SINGAPOREANS’ CPF, WHICH WAS NOT RETURNED, ON ANNUAL BASIS, SINCE INCEPTION?
(10) Why Did the Government Erase Information that Singaporeans’ CPF is Invested in the GIC and Temasek Holdings?
Finally, and this is perhaps the most damning – last year, I traced the information on several government websites that Singaporeans’ CPF is invested in the GIC and Temasek Holdings.
I was able to find that our “CPF monies are invested in bonds (SSGS)” which are “borrowed” by the government and “invested in reserves”. “Our reserves are managed by three agencies – the Government of Singapore Investment Corporation (GIC), Temasek Holdings (Temasek) and the Monetary Authority of Singapore (MAS).”
Chart 12: Information obtained from several government websites
However, when I last checked in May, the government has edited, changed and removed some of the information on their websites.
Two of the key information that are changed is this:
(1) First, the government removed the information that our CPF is invested “in reserves”.
Chart 13
(2) Second, the government removed the information that our reserves are managed by GIC, Temasek and MAS. In the new edited version, you are now unable to directly tell that our reserves (and our CPF) are managed by the GIC and Temasek Holdings.
Chart 14
Thus with this two pieces of information removed, Singaporeans are now not able to know that our CPF is invested in the reserves, and that the reserves are managed by the MAS, GIC and Temasek.
However, you would remember in the previous article that it was only early last month, in June, that the government finally admitted that Singaporeans’ CPF is invested in the GIC. It was also in early June that the GIC admitted that they know that they use our CPF to invest. It was also in early June that Temasek claims that they do not invest our CPF.
All these happened in early June. I lost my job in early June.
So, here’s the chronology:
- After I traced the information that our CPF is invested in the GIC and Temasek last year, the government changed the information on their website to remove this evidence so that Singaporeans were unable to know that our CPF is invested in the GIC and Temasek.
- However, in early June this year, the government suddenly did an about turn and admitted that our CPF is invested in the GIC.
- They also claimed that the Temasek Holdings does not invest our CPF but the evidence is that Temasek Holdings had used to.
These are the questions:
- Why did the government first want to erase the evidence that our CPF is invested in the GIC and Temasek Holdings, so that Singaporeans were unable to know?
- Then, what forced the government to change their stance to admit that the CPF is invested in the GIC?
- What made the Temasek Holdings say that they do not invest our CPF but more importantly, why don’t they admit that they used to invest our CPF before?
DEMAND FOR TRANSPARENCY:
SINGAPOREANS DEMAND THE FULL REPORTS OF HOW OUR CPF IS INVESTED IN THE MAS, GIC AND TEMASEK SINCE THIS ARRANGEMENT OF INVESTING OUR CPF IN MAS, GIC AND TEMASEK FIRST BEGAN.
SINGAPOREANS DEMAND THAT FULL REPORTS FROM THE MAS, GIC AND TEMASEK BE RELEASED, INCLUDING HOW MUCH OUR CPF HAD EARNED IN EACH OF THESE ENTITIES, SINCE THEIR INCEPTION AND HOW MUCH INTEREST WAS NOT RETURNED TO SINGAPOREANS.
Very clearly, there are many discrepancies that the Singapore government needs to answer to on the management of Singaporeans’ CPF.
I have illustrated the 10 loopholes that has been revealed. Why does the government not want to provide the full information to Singaporeans? Why doesn’t the Singapore government want to be transparent to Singaporeans?
More importantly, what exactly is happening to our CPF? Until now, we are no wiser on how our CPF is truly being managed, and why we are not able to take our CPF back.
Something is not quite right with how our CPF is being used, or rather, something is very wrong. The government has a duty and responsibility to be transparent in letting Singaporeans know what they are doing with our CPF, to give us the full information and be accountable to Singaporeans.
Singaporeans are fair people. If we know the truth about what is happening to our CPF, we would be able to collectively come out with solutions to better our CPF. But this is only possible if the government is honest and transparent to Singaporeans by providing Singaporeans with the full reports from CPF, MAS, GIC and Temasek Holdings.
The government also needs to reform the CPF and the management of the CPF by the MAS, GIC and Temasek Holdings. The management of these entities cannot be duplicated and have to be trained experts in their fields of expertise.
Finally:
- When did the government first start using our CPF to invest in the MAS, GIC and Temasek Holdings?
- How much did the government take from our CPF to invest the MAS, GIC and Temasek Holdings?
- How much interest did the government earn on our CPF which has been invested in the MAS, GIC and Temasek Holdings?
- How much of the interest earned on our CPF was not returned to Singaporeans?
The ball is now in the government’s court. Will the government be honest and transparent to Singaporeans? Will the government respond to Singaporeans?
Singaporeans will be waiting.
You can read Part 1 of the article here.
*****
It is clear that something is amiss in the management of our CPF by the government, the GIC and Temasek Holdings. There are still loopholes and discrepancies which the government has not addressed. This are important loopholes that the government has to acknowledge and speak up on, especially so since this concerns the retirement funds of Singaporeans.
What exactly is going on with Singaporeans’ CPF!
On 12 July 2014, an event will be held to discuss the CPF issues and the lack of transparency and accountability from the government and for Singaporeans to demand to the government to #ReturnOurCPF.
Roy Ngerng
*The author blogs at www.TheHeartTruths.com