The first OBVIOUS NONSENSICAL CONTRADICTION put up by Tharman in his effort to disassociate CPF from Temasek is that prior to 1992 CPF was used for investment in Infrastructure and Temasek was set up by putting together a few companies set up by PAP government without injection of CPF money.
First of all, assets in these companies Didnt just pop up from nowhere. Secondly, most of these companies are companies with massive infrastructure built into them! Eg Singtel with communication infrastructure, Singapore Power, PSA with massive port infrastructure ...etc. Thus Tharman just contradicts himself in such spectacular way because he has just said CPF was used to invest in these infrastructure!
So make no mistake about it. The very existence of Temasek Holdings depended on our CPF monies invested in these infrastructure in the early days. Without our citizens CPF they can be no Temasek Holdings.
It is just counter-intuitive for Tharman to suggest that all our CPF was SPENT instead of INVESTED somewhere because it would mean PAP was very irresponsible because how would PAP government REPAY our CPF monies if it did not invest in something that generated return?
The second contradiction comes obvious on his explanation of "how CPF money is being invested". In this part, there are DOUBLE CONTRADICTIONS. In his first part, he tried to give the impression that CPF has nothing to do with Temasek because it was used by PAP government to use in infrastructure construction. The truth is, although the PAP government is allowed to use CPF for building up of infrastructure, it doesn't necessary mean that ALL CPF has been used for that purpose. This is especially so when there were budget surpluses over those years. It would mean that some of our CPF had to be managed and invested somewhere else via MAS!
Thus, Tharman said that prior to the formation of GIC (1981), MAS was the one which managed the CPF as part of the National Reserves. MAS was formed in 1971 while Temasek Holdings was incorporated in 1974. Prior to the formation of MAS, all those GLCs set up prior to the formation of Temasek Holdings, were directly managed by MAS! Thus we can only conclude that part, if not all, of the CPF were used to create these GLCs which subsequently transferred to Temasek Holdings.
Furthermore, it is not entirely accurate to say that Temasek Holdings only manages funds that were invested in these initial number of GLCs. Throughout the decades, Temasek Holdings have received additional injections of funds periodically, with the recent injection of $5 billions only a few years ago! Where do these monies come from? The National Reserves which includes our CPF monies transferred via the issuance of government bonds!
The Third nonsensical contradiction of Tharman lies in the explanation of GIC. Tharman claims that GIC was formed because they wanted to invest CPF into "longer term" assets. Pray tell, Temasek's investment isn't "long term" in any sense?
The formation of GIC is for solving a few STRATEGIC problems. Temasek back then mainly managed the GLCs which were basically local entities. It is deemed inadequate for our reserves to be invested only in Singapore companies and a "foreign investment" arm has to be catered for. Furthermore, in the event of any invasion like what happened to Kuwait which was invaded by Iraq, money invested in Singapore would be trapped and rendered "captured" by enemy forces while money invested overseas could be used to pay foreign powers like USA to help us to fight back and regain our land in Singapore. This was what happened Kuwait whereby it was said to pay USA over US$300 Billions for Desert Storm Operations.
The most absurd contradictory assertion made by Tharman is that GIC is formed so to invest CPF along with other Government reserves for longer terms but when explaining whether CPF is managed by GIC, he did a spectacular UP turn and say that GIC did not manage CPF but Government reserves or assets which just happened to include CPF!
Tharman is trying to obfuscate the issue here. We just want to know whether CPF is invested in Temasek, GIC or both. Why would PAP government refuse to acknowledge any of these? The reason, my fellow Singaporeans, is that they DO NOT WANT YOU TO THINK THAT YOUR MONEY HAS ANYTHING TO DO WITH GIC or Temasek so that YOU WILL NOT THINK ABOUT the OBSCENE amount of money they have earned by utilizing your money to invest in these two entities, while giving you pittance return of 2.5% or 4%!
They cannot continue to claim how superb their brains are in making good investment returns from Temasek and GIC without making you angry that you are not benefiting from all these even though your CPF are involved in these investment. That's the crux of the matter!
Tharman's reply on whether GIC knows they are managing CPF money has in fact CHANGED from GIC's initial stance that "it does not know" whether they are managing CPF money. This is after we have exposed the fact that Tharman himself, along with the Prime Minister, are sitting on the Board of GIC! If they don't know, who know? Now he has changed tune, just saying that GIC will "disregard" whether CPF was in fact within the government funds it is managing! This flipping of prata is really great!
He further claims that GIC should not view itself as investing CPF money only else it would have very different investment strategy which will not enable it to pay CPF members the current amount of return! For goodness sake, at current situation, CPF members DIDN'T benefit from higher return which GIC has achieved and thus, what difference does it make for us? It just means that by disregarding the fact that CPF is part of these government fund, GIC is taking MORE RISK than it should at the expense of CPF members? i.e. taking more risk, earning higher returns but not giving them to CPF members? What is Tharman trying to say here?
Furthermore, is Tharman trying to say that GIC is actually such a lousy investment vehicle as compared to other funds in the world that it could only garner an average of 5% return over the 10 or 20 years even when it is taking more risk than it should, assuming it is investing only CPF funds?
The truth is, GIC can and should invest in different portfolios of differential risks. It could take into account of CPF funds is within the assets entrusted to it and invested accordingly to the desire risk portfolio adhered to it. It could have allowed CPF members to invest directly into GIC with directed differential risk portfolios. And this is WHAT PROFESSIONAL fund managers would do! The more I listen to Tharman's nonsensical reply, the more I get worried!
As I have illustrated in my previous post on CPF, if you put coffee powder into the water along with the milk (budget surpluses) and sugar (land sales) to make coffee, you just cannot claim that there is no coffee powder in the coffee you made. Any coffee (or funds) given (or injected) into Temasek or GIC via this coffee mixer (Government Reserves) must contain a certain percentage of coffee powder in it! Thus Tharman's claim that Temasek doesn't have CPF money is absolutely nonsensical as we know money has been injected into Temasek throughout the decades using this common fund called Main Reserves. It is even more nonsensical to claim that GIC should disregard the fact that CPF is in the funds it is managing.
Whether it is Government Funds derived from Land Sales (Sugar), Budget Surplus (Milk) or simply CPF, THEY ARE ALL LONG TERM entities and that is precisely the reason why they are ALL invested in GIC. The risk profile of these entities should be more or less the same! The only problem is that GIC is UNDER-PERFORMING as compared to other pension funds or sovereign funds! People are getting 6% to 8% over the 20 years period while GIC is just getting merely 5%! And even with that, GIC is not giving FAIR RETURN to CPF and in fact, acting like a parasite, creaming off the rightful returns and gave back only 2.5% or 4% to CPF holders! That's the crux of the matter.
The truth is, for any sovereign fund or National Pension Fund, there will be a few important components. If you look at the Japanese National Pension Fund, most of it has been invested in LOCAL equities to reduce the foreign exchange risks. That may not be a good idea for a small market like Singapore with a huge amount of funds but at the very least, PAP should acknowledge the fact that Temasek has indeed utilized part of CPF money in its foundation years as well as the periodical inject of money into it. Temasek should be the "local investment" vehicle for CPF so to reduce the huge amount of foreign exchange risks, especially so when we are maintaining a strong Singapore Dollar as our international monetary policy.
Although it is strategic for us to invest in foreign land via GIC, but we must also be mindful of the great foreign exchange risks we face, as seen in the continuous weakening of US dollars against Singapore Dollars. Thus, it is TOTALLY UNPROFESSIONAL for Tharman and PAP to just focus ALL our CPF funds in GIC! Tharman, it is only PROFESSIONAL to diversify our CPF money into investment LOCAL and FOREIGN entities. Please stop your nonsensical statements here!
Goh Meng Seng
*The author is the former secretary-general of the NSP and he blogs actively at http://singaporealternatives.blogspot.sg