How is Our CPF & Income Being Used? Is it Fair & Equitable?

I decided to do some research to look at how some of the larger Singapore-owned companies in Singapore are performing. I selected mainly companies which were involved somewhat in managing public goods, such as telecommunications and media agencies, transportation and unions, as can be seen in the chart above.

Interestingly, as many observers have noted, the management at these companies share similar characteristics – some of them had managed government agencies, are members of Singapore’s predominant political party, and were rotated among these government agencies and companies. Some of these companies were previously government-linked but privatized under a “privatization program formally announced in 1985” [1]. The reasons given for privatization was to “withdraw from commercial activities which no longer need(ed) to be undertaken by the public sector” and to “add breadth and depth to the Singapore stock market by the flotation of government-linked companies and statutory boards and through secondary distribution of Government-owned shares.”

Together, these companies currently make about $30 billion in profits. (Note that the operating revenues will be several times larger.) In comparison, the government has an operating revenue of $50 billion [2]. I had compared the corporate profits with the government’s revenue because, broadly understood, the government’s revenue will generally be used for Singaporeans’ needs, and corporate profits are additional sources of available monies which companies can choose to re-divert, aside from operational uses.

I wondered about how the dynamics of these companies interplay with the government because of their shared management and previous history of these companies being government-linked. If the management are made up of representatives from the political party and rotated around, how does the fund transfer occur?

What is also interesting to note is that of the 17 Singapore companies which are in Forbe’s 2000 list of the biggest and most powerful companies in the world [3], a huge proportion of these were previously government-linked and then privatized.

I also did a comparison of the government revenues and corporate profits to the Singapore Official Foreign Reserves – which stands at $308 billion, as can be seen in the chart below. Again, I wondered about how these sources of funding interact.

I decided to do a further investigation to understand how the sources of funding for the reserves are derived. Based on the table below, the government’s expenditure is almost on par to the government’s operating revenue annually, and on some years, exceeded it – which means the reserves can’t be made up of government revenue, collected through taxes etc, or at least it cannot make up the huge proportion of the reserves.

I then looked at Temasek Holdings’ portfolio, but still, their portfolio doesn’t make up the reserves fully. Of course, there is still GIC, though the government has decided not to publish the funds managed by GIC because of “security reasons” though GIC is revealed to manage well over US$100 billion, which suggests that the rest of the reserves could be made up of GIC’s portfolio.

During my course of research, a friend informed me about Singapore’s public debt, which stands at $283,192. This got me curious. The public debt seems to follow very closely the reserves over the years.

I then looked at a comparison of Singapore’s public debt with other countries that have huge reserves (Singapore ranks at 11), in the table below. If you look at the public debt per person and public debt per GDP, Singapore ranks the highest, after Japan. It is understandable why Japan’s public debt is very high because of their economic situation. However, what perplexes me is why Singapore would rank so high as well in public debt, especially since our economy is doing relatively well, compared to other economies. If you compare Singapore’s economy with the other Asian tigers (Hong Kong, Taiwan and South Korea), their public debt per person and public debt per GDP is significantly much lower.

Then, I remembered an article that I had read by Kenneth Jeyaretnam [4]. Are “our reserves not as buoyant as we might have been led to expect by past surpluses and the supposedly class-leading returns achieved by sovereign wealth funds”? Was Prof Christopher Balding’s questions about our reserves also valid [5]?

Though this still doesn’t answer why we have such a massive public debt, which seems to follow closely with our reserves. If Singapore is so rich with huge reserves and the largest reserves per person, why do we need to borrow? So I read up a few definitions on what public debt means. In short, my understanding is that public debts are funds that the government borrows from its people to use. In such situations, the funds borrowed from the people are lower in interest, so it makes more financial sense to borrow from the people, than from banks, which will charge higher interest rates.

Then it hit me – the public debt accumulated is from our Central Provident Fund (CPF)! I have read this casual association that someone had commented before on an article. Is this true – that the government borrows from our CPF to invest via Temasek Holdings and GIC, to accumulate the reserves? I looked at the net increase in CPF and compared it with the public debt, in the table below. It does indeed look like the net increase in CPF follows very closely with the public debt, and thus the reserves.

So I asked myself another question, if the government chooses to borrow from us because of the low interest rates, are we getting back what we deserve, again reminded by the comment about how in spite of the high returns Temasek Holdings and GIC have, Singaporeans are not being sufficiently reimbursed for the investments of our wages, what more without our knowledge?

So, I looked at the interest rates. Our CPF gives us an interest rate of a maximum of 4%. Temasek Holdings has been earning an interest rate of 17% since 1974 and GIC, 7.2%, over a 20-year period. And then I thought, what about the inflation rate? Are our returns over and above the inflation rate – which stands at 5.2% last year. This is higher than our CPF interest rate. On top of that, the government has announced that the CPF Minimum Sum has been raised by $8,000 [6]. Of course from the table, there were also years when the inflation rate was below the CPF interest rate, but noting too that Temasek Holdings and GIC were also earning from our CPF over the same period.

Finally, the questions then would be to ask:

  1. Firstly, if our incomes and CPF are managed by people at the top, who are rotated around in the top companies in Singapore, and one of the richest in the world, is it reason to suspect that they would have interests in suppressing wages to earn further profits for their companies and for the management? Does revenue generated gets contained at the top? Does this institutionalized structure explain how the income inequality is rising in Singapore?
  2. Secondly, are we sufficiently reimbursed for lending our money to the government for investments? Do we deserve higher rates of return for our share of the investments?

I do not have an answer for this. I am not an economist. But what I would venture to say is – if our income inequality could be attributed to how companies in Singapore are controlled by a self-selected group of individuals, with clear linkages to the predominant political party, how can this conflict of interest between profit making by the corporate companies and ensuring that citizens’ needs are met be balanced? What is the government’s role in ensuring an equitable redistribution of wealth, or are they satisfied with just being able to increase their coffers? If so, should this structure be dismantled? Or should we vote for more opposition to speak up for our interests, and perhaps for once, we should take this seriously.

Of course, we know that most, if not all, governments are corrupt, or put in place structures or systems which benefits them. Question then is, can we change it? How can we change it? The immediate solution would be to vote for the opposition to keep the predominant party in check. However, a larger question is the question of governance and whether power contained by a selected group of individuals is wise. But this is a philosophical and evolutionary question of governance.

The other question is, are we being reimbursed for our submission of CPF for the government’s investment? For this, I refer you to an article that I came upon online by Furry Brown Dog [7], which provides an in-depth comparative analysis of our CPF. Perhaps many Singaporeans know that they are not getting their returns from the government with their CPF monies, and which is no wonder why many, like most Singaporeans are saying, choose to take use their CPF to invest or purchase property, to earn a higher rate of return on their own monies.

Finally, the government does not let us know how our CPF monies are being invested, as the GIC and Temasek Holdings do not disclose full outcomes of their investments. However, we do not know how much taxes are being collected and how the revenue from taxes is being used, which means we have a better idea how our money is being used from taxes, rather than from the CPF monies. If that were the case, would there be a better case for us to increase the taxes and reduce our contributions to CPF? However, in this scenario, the same problem of transparency will arise – will our taxes be equitably distributed? How will we know? What this means is, it’s not a matter of which framework we should use – higher taxes or continued contributions to CPF. What is essentially the issue here is that there is a lack of transparency in how our wages and monies are being taken from us and used. Whether it is higher taxes or higher CPF contributions, if a government conjures reasons not to explain to their people how their monies are being used, then we will be always be at their mercy, when it should be the other way round.

Last but not least, regardless of whether we increase taxes or CPF contributions, other than transparency, another compounding factor could be how the systems are unnecessarily complicated to reduce ease of access to services, and thus higher savings and revenue for the government. And my beef here is this – has the government chosen to show itself to be willing to dispense financial benefits, but makes the systems for subscribing to these benefits so complicated that the access to these services is reduced? The government would have information of citizens of lower incomes etc, yet it requires that individuals to go through complicated processes to apply for healthcare financing or social assistance. Is the government then, putting barriers in an otherwise perceived generous government, so as to look magnanimous but continue to hold the purse strings behind closed doors?


Please see below two further argument points that I would like to add on:

1. So what if our tax rates are low when our contribution to CPF is 4 times higher than the national revenue, collected from taxes? To put it broadly, even if the government claims that tax rates are low in Singapore, doesn’t it make more sense that we are actually paying 4 times higher the tax we are told we are paying?

Are we being taken for a ride then?

2. Isn’t it ironic that if we choose to invest our CPF with private investment firms, the returns that we have on our interest is actually much higher than what the government can provide? Isn’t the government supposed to provide a public good and ensure our needs are met, over and above what a private entity can provide? Isn’t this the very reason why the government privatized the government-linked companies in the first place? To increase competitiveness?

Why do we feel like prisoners trapped within a system that has been forced fed to us, with the government thinking that we are unthinking individuals who will allow ourselves to be scammed?

Is the government the perfect con artist then?

I had originally posted this article on my Facebook page:


[1] Privatisation: The Singapore Perspective

[2] Government Tax Revenue

[3] 17 Singapore companies among the top 2000 global firms: Report

[4] Kenneth Jeyaretnam: Alarming Implications on PM Lee’s Speech to ESS

[5] Issues raised by Christopher Balding on our reserves…

[6] Changes in CPF Minimum Sum, Medisave Minimum Sum and Medisave Contribution Ceiling from 1 July 2012


References for Profits of Selected Singapore Companies:

GIC (Note: The size of the Government’s funds managed by GIC that are not published. What has been revealed is that GIC manages well over US$100 billion.)

Temasek Holdings




Singapore Press Holdings



SMRT (Note: Link to SMRT’s annual report doesn’t work)


City Developments

Fraser and Neave

Frasers Centrepoint Trust

Keppel Land

NTUC Income

NTUC Fairprice

NTUC First Campus

Singapore Official Foreign Reserves


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  6. Jin Ai Lui

    Hey Roy, good work ! Wish there are many more Singaporeans like you…..and like I have been saying, CPF is actually DBS2 aka “Country Property fund”. When Sg wanted to grow her external wing or second economy (remember the rhetorics of the late 80s), some sort of finance were needed. DBS, development bank of Singapore was already commercialized. So another DBS has to be found. Originally the CPF monies were used to finance the development of HDB, which were then sold to Singaporeans so that they will be committed and rooted to the infant national that time. If you take a look at CPF annual report you will see under Investment $227B, look at the notes, it says, invested in SG Govt Bond. So u r right, the Govt is borrowing from the people’s retirement fund to put it crudely. Where the monies flow after that there is a black hole. However the government has maintain vehemently that it’s not used to finance the operation national budget which is financed through taxes and ERPs hahaha, so where the monies flow next is a big question mark. I suspect it’s being used to finance very long term investment and some have made a loss and some is sitting in paper loss with no near term prospect of breaking even. Think overseas. Think Vietnam, Mongolia, India, Sri Lanka, brazil, suzhou, tianjin,etc…. You get the picture….anyway monies not coming back our way anytime soon……and borrowing from CPF monies is better than other sources, foreign lenders for example, or commercial banks, one has foreign exchange risk and the other is market rate….with CPF, you can always control the percentage of contribution and withdrawal age….make it harder to withdraw like raising the minimum withdrawal age, etc….in conclusion, Government has borrowed to I suspect invest, with good intention I must add….however it has borrowed or invest more than the total output of the country’s good and services. Meanung to say, all of our hard work is fully invested and more in projects in Vietnam, India, Sri Lanka, Mongolia, Suzhou, Tianjin….to name but a few…..question is not will you see the returns, but will your children’s children reap the benefit…..good luck to us all Roy!

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