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Sent: Friday, June 1, 2012 8:44 PM
Subject: "This represents either the largest single example of financial mismanagement, fraud, government obfuscation, or graft in human history. Whether this money is not publicly reported, gone to money heaven, or is sitting in a Swiss bank account, the discrepancies are enormous and appalling." - Re: Why is the PAP govt not getting the BEST fund managers to manage out reserves? - Re: Why the double standard on productivity: so many ministers w/o portfolio in PMO?
To: Hsien Loong
Cc: Thia-Kiang Low
Sent: Friday, June 1, 2012 8:44 PM
Subject: "This represents either the largest single example of financial mismanagement, fraud, government obfuscation, or graft in human history. Whether this money is not publicly reported, gone to money heaven, or is sitting in a Swiss bank account, the discrepancies are enormous and appalling." - Re: Why is the PAP govt not getting the BEST fund managers to manage out reserves? - Re: Why the double standard on productivity: so many ministers w/o portfolio in PMO?
"This represents either the largest single example of financial
mismanagement, fraud, government obfuscation, or graft in human history.
Whether this money is not publicly reported, gone to money heaven, or
is sitting in a Swiss bank account, the discrepancies are enormous and
appalling." - HSBC Business School's Prof Christopher Balding,
"Singapore, Inc.: Just When You Thought it Couldn’t Get Any Worse"
(article attached below)
1 June 2012
To: PM Lee
cc: Lee Kuan Yew
These
are serious allegations by renowned Professor Christopher Balding of
Peking University Graduate School's HSBC Business School.
Whether
the claims are true or not, we, the citizens of Singapore, have a right
to know, and we demand to know, if indeed these claims are true.
Any silence on the government's part may be interpreted as agreement as to the article's factual
truth.
Rgds
===========================================================================
http://christopherbalding.com/2012/06/01/singapore-inc-just-when-you-thought-it-couldnt-get-any-worse/
Singapore, Inc.: Just When You Thought it Couldn’t Get Any Worse
This past weekend, I had the pleasure of meeting with Kenneth
Jeyaretnam, the Secretary General of the Reform Party, who wanted to
better understand exactly what I was claiming about Singaporean public
finances and the factual basis for such claims.
A former banker and hedge fund manager, he has spent his professional
life analyzing finances and numbers. Skeptical of my analysis about
the perilous nature of Singaporean public finances and the blatant
misrepresentation with regards to Temasek and GIC, he quizzed me about
the numbers and whether I had considered different scenarios that might
explain the discrepancy. Near the end of our time together having
exhausted the numbers and possibilities, he simply sits up in his chair
and says “well, this is a problem.”
However, since this meeting, I have come to realize that the problems
are significantly bigger than even I initially believed. One of the
main questions from people is whether the “surpluses” reported by
Singapore are actually surpluses. Thanks to my own additional searches
and data provided by Kenneth Jeyaretnam, the data looks even worse than
expected. Let me explain why.
We now have three sources that report Singaporean public surpluses.
First, we have IMF data from the International Financial Statistics
database on the operational revenue, expenditures, and surpluses. This
data goes back to 1963. Second, we have budget revenue, expenditure,
and surplus data from the Statistics Singapore dating back to 1980.
Third, we have the IMF general government revenue, expenditure, and
surpluses dating back to 1990. These numbers provide us a good basis
for comparison.
I need to make a brief detour to explain an important point about
these numbers. The first set of numbers from the IMF records
“operational” revenue, expenditure, and surpluses. The second set of
numbers from the IMF records “general” revenue, expenditure, and
surpluses. Think of the difference between these two numbers like this.
”Operational” revenue records how much money you make at your job
(revenue), how much you spend (rent, car, food as expenditure), and how
much you save from your job (surplus). ”General” revenue also records
income from your past savings.
So for instance, if you have $200,000 in an investment fund which
makes you 10% for the year or $20,000 and you made $50,000 at your job,
your “operational” revenue would be $50,000 and your “general” revenue
would be $70,000 ($50,000+$20,000). Understanding the difference will
help understand Singaporean public finances.
When we compare Singaporean budget numbers to IMF operational and
general budget numbers, the differences become very important.
According to Statistics Singapore, from 1980 to 2010, the government
ran a total surplus of $282 billion SGD. According to the IMF
operational budget numbers, Singapore ran a total surplus of $270
billion SGD. Those two numbers are pretty close and in line with the
previous data I have used. So far, so good.
However, according
to the IMF general government numbers which is given to the IMF by the
Singaporean Ministry of Finance, from 1990 to 2010, the Singaporean
accumulated surplus totaled $429 billion SGD. That general number which
includes revenues from historical reserves (Temasek and GIC) is more
than 50% larger than the operational budget surplus!!
There are a couple of points that need to be mentioned. First, from
2003 to 2010 the differences between the three different surplus numbers
is quite small. However, from 1990 to 2002, the differences between
the IMF general government surplus and the other budget numbers are
enormous. From 1990 to 2002, the Singaporean government claimed to have
an accumulated surplus of $151 billion SGD while the IMF general
surplus totaled $311 billion SGD!!
So what accounts for the enormous difference? A simple accounting
policy change. To avoid publicizing its revenue from historical
reserves (Temasek and GIC), the Singaporean government only published
domestically its operational surplus which explains why it so closely
matches the IMF operational surplus. However, it shifted to the IMF
standard for reporting government revenue in 2003 which covers all
government revenue including revenue from such factors as Temasek and
GIC. This means that the Singaporean government from 1990 to 2002 was
deliberately and systematically under reporting its revenue to its
citizens in its domestic accounts.
Second, this drastically, DRASTICALLY, changes the estimate for how much money Singapore, Inc. should have
sitting in the bank. If we only change our estimates to use the IMF
numbers which cover general revenue back to 1990, the Singapore budget
numbers from 1980 to 1989, and the increases in borrowing from 1980 to
2010, then use the GIC reported earnings of 7% over this time frame,
Singapore, Inc. should be sitting on $2.1 trillion SGD. Let me repeat
that in case you are not absolutely shocked.
Using Singaporean provided numbers on budget surpluses, borrowing,
and returns: Singapore, Inc. should have more than $2.1 trillion SGD in
the bank right now. TRILLION. RIGHT NOW!! It currently reports only about $700 billion SGD.
This represents either the largest single example of financial
mismanagement, fraud, government obfuscation, or graft in human history.
Whether this money is not publicly reported, gone to money heaven, or
is sitting in a Swiss bank account, the discrepancies are enormous and
appalling.
Hopefully, Kenneth Jeyaretnam and the people of Singapore will find
answers from their so-called democratic leaders. This level of
financial obfuscation cannot be allowed to continue in a supposed
democratic and transparent country.
Rather than continuing to ignore the discrepancies in their own data,
we can only hope that the Singaporean government will move to address
these concerns.
Update:
Here is a table of the hypothetical increase in Singaporean assets
under management. The first column comes directly from Statistics
Singapore. The second column comes from the IMF by way of the
Singaporean Ministry using a slightly different accounting method as
noted above. The assets under management are assumed to grow by 7%
every year since we do not know the year to year growth but only the
long term annualized average that GIC has reported. I chose the GIC
average because Temasek’s annualized average over the same period is
even higher.
To a degree it doesn’t matter whether you believe the IMF numbers or
the Statistics Singapore numbers, there is an enormous amount of money
missing.
Disclaimer: Kenneth Jeyaretnam requested a meeting to
better understand my research and supporting data. I do not speak for
or represent the Reform Party. I am not affiliated with any Singaporean
political party or stakeholder but will gladly assist any group, party,
or individual seeking to better understand the issues.
Biography
Christopher Balding is a professor of business and economics at the
HSBC Business School at the Peking University Graduate School. An
expert in sovereign wealth funds, he has published in such leading
journals as the Review of International Economics, the Journal of Public Economic Theory, and theInternational Finance Review on
such diverse topics as CDS pricing, the WTO, and the economics of
adoption and abortion. His work as been cited by a variety of media
outlets including the Wall Street Journal and the Financial Times. he
recently released a book entitled Sovereign Wealth Funds: The New Intersection of Money and Power published
by Oxford University Press. Prof. Balding received his Phd from the
University of California, Irvine and worked in private equity prior to
entering academia. He is married with two daughters and lives in
Shenzhen, China. His CV can be downloaded here.
36 thoughts on “Singapore, Inc.: Just When You Thought it Couldn’t Get Any Worse”
fpc on June 1, 2012 at 9:01 am said:
if what you write here is true, am i right to say that:
1. singapore has 2 trillion sitting in a bank or
2. singapore govt has not been producing positive returns from 2003 onwards since it is currently sitting on 700 billion or
3. the return rates from th/gic are exaggerated.
3. the return rates from th/gic are exaggerated.
is our cpf safe?
-
1. singapore has 2 trillion sitting in a bank or
Unlikely but possible.2. singapore govt has not been producing positive returns from 2003 onwards since it is currently sitting on 700 billion or
Not producing positive returns could go back much further than 2003. That was only an accounting change of how to calculate government revenue. If lack of returns probably goes much further back.3. the return rates from th/gic are exaggerated.
One of the most likely scenarios. -
Also, about the CPF, given the amount of problems we have already covered, I think your CPF is probably safe, but given the amount of documented problems, you can’t rule it out at all. In other words, I fear that there is a lot more that we don’t know that could change the results.
-
Our dear government has already protect themselves against insufficient payback of
cpf to lesser mortals by:“new law which allows the CPF Board to stop CPFLife payments unless the Lifelong Income Fund is solvent — then why have this provision in the first place?”“Even insurance companies’ annuity contracts are contractually backed by the full faith and credit, and assets of the insurance company, and are not subject to the solvency of the pooled annuity fund. So, why is CPFLife so different?”-
I just saw that they changed CPF pay outs again just recently. This is looking increasingly worrisome to me.
-
Hi Prof,“I just saw that they changed CPF pay outs again just recently. ”May I know which changes to the CPF payouts are you referring to? Is it the CPF Life (as in the below info/link) or the minimum sums? If not, can you furnish the links/info for me to refer to? Thanks.==================
http://mycpf.cpf.gov.sg/CPF/News/News-Release/COS_Speech-A-Simpler-CPFLIFE.htm
Ministry of Manpower, Central Provident Fund Board: New CPF Changes in 2012 (5 March 2012)
==================
Transfer to Retirement Account (RA) at Draw-Down Age (DDA):To help increase CPF LIFE payouts for all members as they work longer, members turning 55 from 2013 will see an automatic transfer of their accumulated post-55 contributions from the Ordinary and Special Accounts savings into their Retirement Account (RA)when they reach the draw-down age (DDA, or 65 years), if they have not met the Minimum Sum. This will increase the amount of savings used to join CPF LIFE, hence translating to higher monthly payouts for members. The amount of CPF savings a member can withdraw in cash remains the same, as under existing withdrawal conditions.
================== -
Here are two articles about the changes that were just announced. Hopefully they haven’t been reading my articles.
-
Chris,
may I suggest that you keep a local replica (html or pdf) of the content you find from online state media ( strait times, today, channel new asia) as they have the tendency to disappear online after some time. -
Thanks for the tip. Will do.
-
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http://christopherbalding.com/2012/06/01/singapore-inc-just-when-you-thought-it-couldnt-get-any-worse/
