SINGAPORE: Parliament has authorised the Ministry of Finance to borrow a further S$170 billion, through the issuance of government securities.
The increase raises the ceiling for issuing government securities to S$490 billion.
Minister of State for Finance Josephine Teo said 80 per cent of the increase will be issued to the Central Provident Fund to meet its investment needs.
The remaining 20 per cent will go to the Monetary Authority of Singapore, for the issuance of Singapore government securities in line with the growth of financial markets, and to enhance the efficiency and liquidity of Singapore debt markets.
Ms Teo reiterated that all proceeds from the issuance of securities are invested, not spent.
The last increase was approved by Parliament in 2009, when the limit was raised from S$250 billion to S$320 billion.
Mrs Teo said" "What has happened in that time was the increase in special government securities was faster than expected as the economy recovered very rapidly, and exceeding the expectations. As a result this initial borrowing limit, or issuance limit that we sought in 2009 is going to be reached much earlier than we expected. This is why we're coming to Parliament again to ask for the issuance limit to be raised."
An outsider’s view on what’s happening in Singapore
February 2nd, 2013
I am an “ex-Singaporean” living in Europe for the past 27 years. “Ex-Singaporean” meaning, I still hold a SG passport and come back every 5 years passing through (to other countries for holidays) to get my passport stamped or I’ll lose my citizenship.
I only found out about TRE in early 2012 while passing through SG (stayed 5 days before spending a month in Indonesia) and have since been following actively what’s going on.
I admit, I will probably never come back to SG as my life and work is in Europe. I have only $10,000 in my CPF and can never afford to buy anything in Singapore. Nonetheless, I still have my SG passport and may one day return home. Who knows… But please don’t “tekan” me because of that. I left after fulfilling my NS 2.5 years with no deferments. And I am proud to say that it was not doing some “scientific research” but in an active combat unit.
I would like to share my opinions of what’s happening in the country where I grew up till 1988 when I moved.
CPF? I think it is a big huge ponzi scheme. The monies there have been lost in bad investments through Temasek and GlCs. Which explains the reasons that you cannot practically take your money out when you retire.
6.9m population? Another ponzi scheme. Let’s face “human tendencies”. If I was a minister earning million dollar salary, I will propose what I think is right and good for the country (eg 6.9m population). People don’t like it? Fine. I take it the idea off, as my salary is not affected anyway till 2030… and let the people suffer for not taking my “advice”.
So why is the govt forcing down the throats of the poor sinkies that 6.9m is the way to go and risk losing a GE in 2016? The only reason I can come up with is this.
There is no more money in CPF due to bad investments. Assets in Temasek are only paper assets worth “billions”. No transparency in Temasek because the “billions” are not there as convertible into immediate cash if needed. The values of the investments are values they hope to get if they sell.
The way to cover up for the losses? Increase population size (or demographics ponzi) so the increased (FT) population can pay for the losses. I really do not see any other reasons why a govt in power would go against the wishes of the people. The secret of the investment losses is a secret to an inner circle who use the party whip to get PAP MPs to toe the line to vote YES.
And those elite PAP members, MPs, RC leaders and those riding on PAP backs members? They get perks and good salaries. Too crowded? They can afford holidays to less crowded places or invest in properties outside of SG where they can retire.
I have 3 conclusions as possibilities :
PAP is totally disconnected with the people.
They are truly servants of the people and believe 6.9m is the way to go and would risk losing an election based on this belief.
6.9m is self interest to cover investment losses and taking a bet that people will not vote opposition.
Does SG need 6.9m? No. SG was doing ok but with crisis when I left in 1988 with 2.5m. Things got better in the 90s with some FTs. I regretted leaving back then. Now I don’t. 5.5m on an island? So expensive. CPF locked up. No way! Govt got greedy and wrongly invested which resulted in needing more FTs to cover for losses and million dollar salaries.
True, as many have pointed out in TRE. SG got addicted to the cheap labour. Low costs with no increase in productivity – which a developed nation should NOT be doing. There is a 1st world salary for the lucky few, 1st world infrastructure for the people (what used to be… until the MRT started breaking down and high property prices) but no 1st world salary for the majority of the people. Basically it is a 3rd world salary scale (for the majority) with a 1st world infrastructure. So to continue this growth, SG “needs” cheap 3rd world salaried workers like the FTs coming in.
SG highest number of millionaires per capita? I used to boast about this to my European friends until I started reading TRE. I brought my girlfriend to SG and she was amazed at the number of Ferraris! She said it is like Monaco! She had never seen so may Ferarris in Paris – about 10 million population (she is French).
The gap between the “have it” and “have nots” are too wide and does not represent a 1st world country or economy. Look at India, China, Brazil, Argentina, etc. There are billionaires! And the “have nots’? 99%! Now I tell my friends – SG is 3rd world.
Vote PAP out and Opposition have majority and form new (coalition???) govt?
Likely not happen. Hate to say it, if in GE 2016 PAP is voted out…. will be a disaster for SG. Opposition too splintered. Talented opposition leaders too spread out.
I think WP is doing it right. They know they cannot replace PAP – Yet. Better to be a co-driver to check on PAP than to fight them by marketing themselves as the “next govt” as they do not have a full team that can replace all the PAP ministers.
Ideally it would be great to have 1 single strong opposition that can form a shadow govt with a shadow PM, shadow Minister of defence, etc. But there is no shadow govt. So far, SDP has got a great shadow MND (Dr Chee). RP has a good shadow Finance Minister – KJ. NSP has got a potential Minster in Youth and community – Nicole Seah, WP has got a potential law minister Sylvia Lim, Muhamad Faisal – Minister for Muslim Affairs, Chen Show Mao for Trade and industries, LTK as DPM (let’s be honest… take on LHL… will be tough) and so on.
But they are all scattered opposition parties. If everyone could get together to form 1 single opposition party. Of course, that is wishful thinking as SG embarks on its democratic course. However… if…
All the opposition parties were to form a coalition opposition/shadow govt naming all the shadow ministers with their policies… that would be something! Then we will be offering the people an alternate choice of a govt if the coalition was voted in. Is this a dream? Maybe…
If GE is now. Who would you vote? A party with people already in place as ministers and a cabinet or a splintered opposition with no alternatives?
I believe that as long as an opposition shadow cabinet is not in place, people cannot choose. With a shadow cabinet in set up, when GE2016 happens, people will be vetting opposition candidates on ministerial possibilities rather than voting opposition for the sake of opposing. Let’s be honest, MPs do not make policies. They are Yes man (PAP) or avoid fights they cannot win (WP). Ministers make policies that shape a county.
Face facts. In a freak election that people voted opposition parties in protest of PAP and a coalition of opposition parties forms the next govt in 2016. Can you find 11 minister calibre people in the opposition – assuming they all agree to form a new govt? I think it is most likely WP will be the main opposition party that will prefer to form a coalition govt with 1 single PAP than with 5 opposition parties.
Unless the opposition can sit down together and create a shadow govt and a shadow cabinet, 1 of 3 things will happen in 2016 :
Live with the devil you know = PAP
Freak election, PAP voted out and splinter oppositon form coalition with unknown and untested candidates as minsisters to fill the space.
WP forms coalition with PAP and shares power (closer to democracy).
6.9 million figure is the worst case scenario?
Khaw: 6.9 million figure is the worst case scenario.
“We hope we do not reach that figure; we may never reach that figure. But as planners, we have to ensure that the infrastructure could accommodate such a figure, if need be. Our hope is that the actual figure would turn out to be much lower.”
My take? Bullshit! They (the govt) are going to build for 6.9m anyway. When the time comes… they say we have everything in place for 6.9m anyway, so why not use it?
And the magic 6.9m figure? Sounds very marketing to me. $1.90 sounds better than $2.00 when I am trying to sell something to someone. 6.9m sounds better than 7m.
Whenever I see the $1.90 or $9.99 item on sale… I get wary. It means it is not worth that. So, 6.9m looks more like above 7m to me.
But hey, I am not living in SG now. I can only feel the pain of my fellow Singaporeans dealing with this. I still remember my kampong and the first MRT ride I took before I left. How proud I was when I showed my friends with me while they were visiting SG.
Now, my foreign friends see Ferraris and old people collecting bottles, cardboards, selling tissue paper at hawker centres. They associate rude bus drivers and people not speaking English (or Singlish) to Singapore.
Good luck in finding your balance. As Vivian Balakrishnan say – ‘we are facing the crisis of our lifetime’. No punt or offence intended. He is talking about a different crisis. You, my fellow SGs, are facing the real crisis. This shows the disconnect of PAP and the people.
Singapore ranks 2nd overall for the third consecutive year, owing to an outstanding performance across all the dimensions of the GCI. Again this year, it is the only economy to feature in the top 3 of seven out of the 12 pillars of the GCI; it also appears in the top 10 of two others. It dominates the goods market efficiency pillar and the labor market efficiency pillar, and places 2nd in the financial market development pillar. Furthermore, the city-state boasts one of the world’s best institutional frameworks (3rd), even though it loses the top spot to Finland in the related pillar. Singapore also possesses world-class infrastructure (2nd), with excellent roads, ports, and air transport facilities. Its economy can also rely on a sound macroeconomic environment and fiscal management (18th) — the budget surplus amounted to 5.7 percent of GDP in 2012. Singapore’s competitiveness is further enhanced by its strong focus on education, which has translated into a steady improvement of its ranking in the higher education; and training pillar, where it comes in 2nd, behind Finland. Singapore’s private sector is also becoming increasingly sophisticated (17th) and more innovative (9th), although room for improvement exists in both areas, which are the keys to Singapore’s future prosperity.
Economic Indicators: Money Supply ~ The money supply is just that: the amount of money floating around the economy and available for spending. Different numerical aggregates show different subsets of money based on their liquidity, starting with M0 (the most liquid), which is just the dollar value of physical cash and coin, and M1, which includes all of M0 as well as checking accounts, traveler's checks and demand deposits. The M2 aggregate includes the dollar value of all of M1 in addition to savings accounts, time deposits of less than $100,000 (such as certificates of deposit), and money market funds held by investors.
“Maginot Mentality” a term that is a byword for leadership who takes comfort in the past, unable to recognize fundamental changes had taken place. On Feb 14th after its monetary policy review, the MAS announced the gradual appreciation of the S$ remained the “appropriate policy stance”. The writer wonders if policy-makers are afflicted by their own “Maginot Mentality” – overly comfortable with ultra low interest rates, unable to recognize that the ground had shifted. Given the S$ correlation to US interest rates, the MAS may well be fighting yesterday’s battles when the Federal Reserve eventually raise rates, thereby rendering MAS’s policy ineffective or even counter-productive.
MAS policy targets a gradual appreciation of the S$ Nominal Effective Exchange Rate (NEER) which represents the undisclosed trade weighted value of S$ in relation to Singapore’s main trading partners. It is meant that the NEER should be strong enough to control imported inflation, thus supporting economic growth. Until 10 years ago, targeting an appreciation of the NEER kept inflation in check. But things began to go awry from 2005 onwards.
The above chart shows the cumulative year by year increase in inflation (blue) and the cumulative appreciation of the S$ against trade weighted index as a proxy to NEER (red). You can see that inflation start to accelerate in 2007 but throughout the 10 year period, the NEER has appreciated almost in lock step with inflation. However, this should not be the case since the appreciation of the NEER is meant to curb inflation. In addition, since 2008 the 1 year deposit rate (green) flat lined close to 0.5% and the 10 year bond yield (grey) averaged 2.5%. By relying solely on NEER appreciation, MAS had produced negative real interest rates by mimicking the monetary conditions from the West despite the absence of their problems of low growth, high unemployment and potential deflation.
Why did the NEER appreciation failed to curb inflation? The answer is the FT policy which flooded the economy with foreign workers and the Profit Maximization Strategy which work hand in glove with the latter. Transport costs (Goods Vehicle and Bus COE +500%), real estate (Residential +89%, Industrial +138%) and rents (+52% last 4 years), among others, have driven inflation to an extent that any disinflationary benefit from the appreciation of the NEER has been overtaken. Negative real interest rates caused homebuyers to over-estimate affordability, developers to bid up land prices, businesses to over-expand, unproductive ones to thrive, banks lending too much and large companies to overpay for acquisitions. This created far greater demand for resources than the economy can cope. The present policies caused the Singapore economy to grow well above the rate it could naturally sustain, are inflationary and the root cause of unaffordable housing, high cost of living and poor returns on savings.
The NEER policy alone cannot curb these excesses as the link between the NEER and inflation may be irretrievably broken by present government policies. The writer suggests the MAS apply interest rate targeting to guide the economy along a sustainable growth path. In any case, the S$ will be weakened by higher US rates which would worsen inflation. This will force the MAS to raise interest rates belatedly when it should act preemptively to forestall risks.
The role of central banking had been famously described as “taking away the punch bowl just as the party gets going”, i.e. raise interest rates when growth is too strong in order to balance the risks and trade-offs in the economy. When interest rates overtake inflation, the unnatural speed of the economy will slow. Uncompetitive industries such as those on low productivity and addicted to labour inputs tend not to survive in such monetary conditions. The creative destruction improves the economy’s productivity by ridding it of excessive labor reliance and resource usage. Higher rates enforce discipline on pricing since cost of financing is no longer cheap. Citizens’ savings and CPF earn a real return and will not be sacrificed for low financing costs to the business and corporate sector.
Unfortunately, the MAS’ role is to support government policies, not to lean against economic risks and excesses by acting according to its own judgment on growth and inflation. However, monetary policy is too important to be left to politicians who by nature tend to favour one part of the electorate over another according to ideology.
It is for this reason that central banks, an indispensable check and balance in advanced countries, are free from political control. Singapore lacks such diligent niceties which stand in the way of the growth at all costs strategy. But the institutional lack of check and balance has heightened risks to economic stability due to inflation, elevated property prices, excessive bank lending, among others. An early rise in interest rates back in 2011-2012 would have lessened these risks. This is all the more ironic given the government’s “foresight” in “long term planning”.
* The writer has spend his entire career in managing balance sheet currency, interest rates and liquidity risks. As such, determining the direction of central bank monetary policy is a crucial element of his job.