20140613 PAP government must be upfront with the public on CPF and GIC

The Business Times published an infographics on “CPF: How it works” (9 June). This is a small step forward in educating the public but the government has yet to address the issue on transparency.

In “CPF: How it ‘really’ works?”, Leong Sze Hian raised the following pertinent questions:

– Why did the government take so many decades to disclose this, despite questions over the years, including in Parliament?
– What was the GIC’s annualised returns in S$ term since its inception?
– Is the number of Singaporeans aged 55 who are able to meet the combined Minimum Sum (OA and Medisave) of $198,500 only about 1 in 8?
etc.

A positive response from the government’s will address CPF members’ concerns and prevent speculation.

BT’s infographics is not much different from Roy Ngerng’s and there’s actually no new relevant information revealed except that BT’s is the official version.

BT’s

Roy’s

In an earlier blog one week ago, I highlighted the unnecessary confusion of CPF members caused by GIC in answering the simple question “Does GIC invest CPF monies?” with a 171-word answer. From BT’s infographics, the answer is a one-worded ‘yes’. GIC should revamp its FAQ section (including other answers) and simplify its answers for the public.

There are also errors which need to be corrected eg

“What is the relationship between GIC and the Government?”.

GIC says ..”our relationship with the government is that of a fund manager to a client” and “The Government..neither directs nor interferes in the company’s investment decisions.” This is totally misleading because the government is represented on the board of directors by PM Lee, DPM Teo, DPM Tharman, Minister Heng and Minsiter Hng.
The board of directors has defined roles and responsibilities. GIC board of directors assesses the overall direction and strategy of GIC. Any responsible board of directors cannot be unaware of the company’s multi-billion investment decisions. It is also its responsibility to interfere to prevent a bad investment decision.
GIC board of directors are given regular updates and if it really has never set any direction for the company’s investment decisions, then the board of directors serves no purpose.
An example of a fund manager/client relationship – individual A invests in B fund management company. But if the board of directors comprises his parents, Ah Kong, Ah Ma and relatives, this is no longer a fund manager/client relationship.
In January 2008, CNA reported that GIC pumped $9.8 billion of CPF monies into Citigroup within 8 days. Is the public expected to believe there was total silence from ministers on a transaction amounting to almost $10,000,000,000?

“What are the returns of the GIC Portfolio?”.
GIC says “it reports its 5-year, 10-year and 20-year annualised nominal rates of return and its rolling 20-year rate of return in its annual report.” GIC handles CPF monies and the information it provides is of no interest to CPF members who are its stakeholders. CPF members are only interested in CPF returns, not GIC’s overall returns.

GIC’s FAQs appear to be an attempt to pull wool over CPF members’ eyes because the answers are tailored to GIC’s questions, not CPF members’. If GIC is still in the dark as to what its stakeholders need to know, here are some questions:
– Where are CPF monies invested in?
– What are the annual profit/loss figures of CPF funds since inception?
– What is the market value of investments?
– What is the remuneration of its board of directors?
– What is the latest return on CPF funds?
etc

Since the government has finally confirmed that GIC handles CPF monies, there must be a proper set of accounts for CPF investments. GIC must publish an annual report showing all the relevant figures. Good corporate governance demands transparency from GIC.

In any financial crisis, our central bank, the MAS, has the responsibility to ensure financial stability. This may require the use of our reserves to defend our currency which may come under attack. The MAS uses the funds under its management for such a purpose.
The objective of transferring CPF monies to GIC is only for investment to seek a return for CPF members’ retirement adequacy. Using CPF monies to defend our currency in no way contributes to achieving CPF members’ objective.

Revealing the individual investments will not take 56 man years

GIC is one of the biggest fund manager in the world. It usually invests in the billions eg UBS more than $10 billion, Citigroup or hundreds of millions in smaller companies. “GIC bets big on Chinese debt” is the most recent billion-dollar investment. Other GIC’s multi-million investments are also listed on its website.

With CPF monies of $260 billion and judging from the average size of GIC’s investments, the individual investments are likely to be between 100 and 300. This does not take 56 man years to compile. Since GIC is a long term investor, the number of investments it makes in a year could be slightly more than a handful.

GIC has all the information on investments using CPF monies. CPF members have the right to know how and where they are invested.

MOF statement distracts public from CPF issue

MOF says “It is not in our national interest to publish the full size of our reserves. If we do so, it will make it easier for markets to mount speculative attacks on the Singapore dollar during periods of vulnerability”. MOF But our CPF monies invested by (not in) GIC has nothing to do with the defense of our currency. CPF members are not interested in other monies managed by GIC but only CPF retirement savings. CPF returns is unrelated to the defense of Singapore currency.

Conclusion

GIC has all the facts and figures of individual investments using CPF monies. There are unrealised huge losses of individual investments such as UBS and this appears to be the reason for GIC not to avail the necessary information to the public.

There are too many unanswered questions on CPF and GIC. The government has to lift the veil on transparency if it’s to maintain the public’s trust.

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