Earlier this month, the government finally acknowledged that Singaporeans’ CPF is invested in the GIC. Manpower Minister Tan Chuan-Jin shared on his Facebook where the CPF is invested in.
However, this information wasn’t previously available – the government had previously not acknowledged this information. Also, there are discrepancies in what the government had told us about our they have been using our CPF. In this two-part article, we highlight what these discrepancies are, and discuss the areas where the government needs to be transparent to Singaporeans on how they use our CPF.
(1) Does the GIC Know that They Invest Our CPF or Not?
Now that we know that our CPF is invested in the GIC, let’s take a look at what the GIC says about this. Do you know that as late as last month, the GIC had previously said that, “GIC manages the Government’s reserves, but as to how the funds from CPF monies flow into reserves which could then be managed by either MAS, GIC or Temasek, this is not made explicit to us.”
Chart 2: GIC FAQ Popular
Thus up until last month, the GIC had stated that they do not know if they manage our CPF because this is not “made explicit” to them.
However, this month, the GIC changed this information on their website. Below is what they have replaced the information with:
GIC, along with MAS, manages the proceeds from the Special Singapore Government Securities (SSGS) that are issued and guaranteed by the government which CPF board has invested in with the CPF monies. So while the CPF monies are not directly transferred to GIC for management, one of the sources of funds that goes into the Government’s assets managed by GIC is the proceeds from SSGS.
Chart 3: GIC FAQ Popular
Thus coupled with the what the government had finally acknowledged this month (in Chart 1), the GIC has now also finally acknowledged that they do use our CPF for their investment. Then the question is, why is it that up until May this year, the government had refused to acknowledge that our CPF is invested in the GIC but they then suddenly did an about turn a few weeks ago? Also, why has the GIC previously refused to admit that they are using our CPF to invest and only finally admitted a few weeks ago that they do? Why did the GIC suddenly change its stance?
Demand for Transparency: Why did the government and the GIC previously refuse to admit that they use our CPF to invest in the GIC but suddenly did an about turn and finally admitted this month that they do use our CPF to invest in the GIC?
(2) Should the Singapore Prime Minister and Ministers Also Be on the Board of Directors of the GIC When There is A Conflict of Interest?
But this admission is further compounded when you realise the next piece of information. Do you know who is on the Board of Directors of the GIC? The Chairman of the GIC is actually the Prime Minister Lee Hsien Loong and the other members are the two deputy prime ministers Tharman Shanmugaratnam and Teo Chee Hean, the Minister for Education Heng Swee Keat and the Minister for Trade & Industry Lim Hng Kiang. Lee Kuan Yew is also the Senior Advisor.
Chart 4: GIC Board of Directors
With this as a backdrop, the above information thus becomes even more interesting.
- First, if the government, and the Singapore prime minister no less, is on the Board of Directors of the GIC, then can the GIC not know that they are using our CPF to invest?
- And if the GIC would know that they are using our CPF to invest, then why did they tell us previously that they do not know?
- If the government knows that they are using our CPF to invest in the GIC, why did the government not admit to this information previously?
- Why did the government/GIC only admit to this information a few weeks ago that they are using our CPF to invest in the GIC?
Also, do you know that the GIC claims that, “The Government, which is represented by the Ministry of Finance in its dealings with GIC, neither directs nor interferes in the company’s investment decisions. It holds the board accountable for the overall portfolio performance.”
Chart 5: GIC FAQ Popular
In fact, this is also reiterated by the government, which says that, “The Government plays no role in decisions on individual investments that are made by GIC, MAS and Temasek. At the GIC and MAS, whose boards include Ministers, these investment decisions are entirely the responsibility of their respective management teams.”
Again, can it be possible that the government does not direct or interfere in the GIC when the government, again the Singapore prime minister no less, is on the Board of Directors of the GIC? According to Phillip Ang, “GIC’s performance is not as stellar as made out to be by the government. In fact, it appears to be punting with CPF monies and has been simplistic and even reckless! … In 2007, total CPF members’ balance was $137 billion. A prudent fund manager would not have sunk 10% of total funds into a single investment. GIC was totally reckless. The board of directors should have been held accountable.” Phillip Ang also discussed GIC’s investment failures in his article and said that, “CPF members are now paying the price for GIC’s failure.”
- If the government is also the GIC, then is the government’s priorities taking care of Singaporeans’ CPF, or earning via the GIC?
- Also, if the government is also the GIC and when the GIC makes investment failures with Singaporeans’ CPF, who will hold the GIC accountable? Can the government hold the GIC accountable when the government is the GIC, and especially when the Singapore prime minister is the GIC Chairman? Can the Singapore Prime Minister hold himself accountable?
- If the government is the GIC, then isn’t there a conflict of interest?
Perhaps the most important question of all is this – other than earning millions in salaries as the government from Singaporeans’ taxpayers’ money, how much are the ministers who are also on the GIC’s Board of Directors also earning in salaries from Singaporeans’ CPF? Have Singaporeans ever been told how much of our CPF is used to pay them?
Also, the government might claim that it “ensures that each of these entities has a competent board to oversee the management and seek to ensure that their respective mandates are met“. But how is the competency decided? Are these ministers trained in their competencies?
Demand for Transparency: Why did the government make themselves the Board of Directors on the GIC? Are the ministers on the Board of Directors qualified fund managers? When losses are made by the GIC, who holds the GIC accountable and puts in measures to prevent future investment failures? How much are the ministers on the Board of Directors paid? Since there is a clear conflict of interest and this arrangement between the government and GIC has existed for decades, has this conflict of interest shown a lack of responsibility on the government, as well as the GIC’s part, to manage Singaporeans’ CPF responsibly?
(3) How Long Was the Temasek Holdings Using Our CPF to Invest and When Did the Temasek Holdings Stop Using Our CPF to Invest?
Last week, Temasek Holdings also wrote to The Straits Times to say that, “Temasek does not invest or manage the savings of CPF members.”
However, the book, Development States: Relevancy, Redundancy Or Reconfiguration, it was written that “since the late 1970s, CPF’s reserves as part of public sector surplus have been co-mingled with other investments either domestically by Temasek Holding Ltd or abroad by the GIC”.
This means that Singaporeans’ CPF was at one time invested in the Temasek Holdings.
- How long was the Temasek Holdings using Singaporeans’ CPF to invest?
- When did the Temasek Holdings stop using our CPF to invest?
- Temasek Holdings only revealed the information that they do not use our CPF to invest a few weeks ago (early June). Does this mean that as late as May, the Temasek Holdings was still using our CPF to invest?
In fact, the government has also said this:
The Government systematically reviews the overall risks of its whole portfolio of assets invested by the three entities… Based on the overall risk profile of the Government’s portfolio, it decides how government capital should be allocated among the three entities. This takes into account the different investment orientations of MAS, GIC and Temasek, which place them at different parts of the spectrum of investment risk.
Thus when did the government decide to remove our CPF from being invested in the higher-earning Temasek Holdings to the lower-earning GIC? Also, how was this decision taken? Has any reports been revealed?
Demand for Transparency: When did the government stop using Singaporeans’ CPF to invest in the Temasek Holdings? For how long did the government use our CPF to invest in the Temasek Holdings? Why did the government decide to stop using our CPF to invest in the Temasek Holdings? How was this decision made? Why did the government and Temasek Holdings not tell Singaporeans that at one point, our CPF was used to invest in the Temasek Holdings? Why is this information omitted?
(4) How Much Did the Temasek Holdings Pay For the Pioneer Generation Package?
The Temasek Holdings also said the following:
Temasek pays taxes on its profits and also distributes annual dividends to its shareholders. These dividends supplement the taxes collected by the Government to fund various programmes, including lifelong medical support for the pioneer generation.
If so, how much exactly did the Temasek Holdings provide for the Pioneer Generation Package. The government has “set aside S$8 billion in a fund to pay for the Pioneer Generation Package”, of which, “about half will be drawn down in the first ten years”. This means that $4 billion will be drawn down in the first ten years and if the fund is distributed equally, only $400 million will be used this year.
As of March last year, Temasek Holdings has a portfolio value of $215 billion. $400 million is only 0.002% of the total portfolio value. Of this $400 million, how much did the Temasek Holdings contribute to? Say if the Temasek Holdings contribute only a quarter of the Pioneer Generation Package or $100 million, this would be only 0.0005% of their total portfolio. Even when seen as a percentage to the Temasek Holdings’ net profit of $11 billion, this would only be 0.009%.
So, how much exactly did the Temasek Holdings contribute to the Pioneer Generation Package. But more importantly, how much did the Temasek Holdings earn from Singaporeans’ CPF and what is this amount that is not returned? Is the contribution to the Pioneer Generation Package piecemeal then, in comparison to the earnings from Singaporeans’ CPF which are not returned?
Demand for Transparency: If so, how much exactly did the Temasek Holdings provide for the Pioneer Generation Package and for what purpose?
(5) Where Does the Additional “Injection of Capital” to the GIC and Temasek Holdings Come From?
Finally, the government says that, “the Government has not and does not transfer funds to Temasek or GIC to improve their performance figures”.
However, the government says that what it does is to “inject capital into Temasek from time-to-time as part of the Government’s allocation of fresh flows of funds”.
According to the government, these “Capital injections can increase the size of the portfolio but do not improve the investment returns”.
Finally, the government also says that, the “transfer of funds cannot be used to hide investment losses”.
For this last part, I leave you to discern for yourself if there is a difference between the “transferring of funds” and the “injection of capital”. Also, is there a difference between “hiding investment losses” and “increasing the size of the portfolio”?
To the layman, these terms are only big words which hide the true picture. The only way we can truly know is if full reports are revealed by the GIC and Temasek Holdings on how they use are CPF to invest, what losses had occurred, how these losses were managed, how funds were moved around and where these funds come from.
In fact, the government might claim that they “inject capital” into the Temasek Holdings. However, where does this “capital” come from? The reserves are already managed by the Monetary Authority of Singapore, GIC and Temasek Holdings. If the reserves are already fully managed by them, then where does the additional “capital” come from?
Moreover, the government says that they do not “transfer funds” so the additional “capital” should not have come from existing funds. If so, where does the additional “capital” and these “fresh flow of funds” come from? What is the breakdown of sources for this additional “capital”
Does this additional “capital” come from raising additional CPF from Singaporeans? Also, how does this additional “capital” change year on year?
Demand for Transparency: What are the losses that GIC and Temasek Holdings have made since their inception? What have they done to manage the losses? How much “capital” has the government injected into the GIC and Temasek Holdings since their inception? Where does this additional “capital” come from? The government has to reveal the full reports of the GIC and Temasek Holdings since their inception for Singaporeans to analyse for ourselves how our CPF is being used by the government, GIC and Temasek Holdings.
Finally, do you also notice the following?
- The government only admitted that they use Singaporeans’ CPF to invest in the GIC in early June this year (a few weeks ago).
- The GIC only changed the information on their FAQ to admit that they use Singaporeans’ CPF to invest in early June this year.
- The Temasek Holdings only revealed that they do not use Singaporeans’ CPF to invest in early June this year.
Everything happened in early June this year. Last month, I was still employed. Why early June? Did the government do anything prior to June to review their “overall portfolio of assets” and re-allocate them? Did the GIC do anything prior to June before admitting to knowing that they use our CPF to invest? Did the Temasek Holdings do anything prior to June to stop using our CPF funds to invest? Why did all these happen suddenly, together? What happened back-end? I leave you to think about it.
In the second part of this article, I will discuss further on the discrepancies and how it is time that the government is transparent to Singaporeans on how they are using our CPF to invest.
You can read Part 2 of the article here.
It is clear that something is amiss in the management of our CPF by the government, the GIC and Temasek Holdings. There are still loopholes and discrepancies which the government has not addressed. This are important loopholes that the government has to acknowledge and speak up on, especially so since this concerns the retirement funds of Singaporeans.
What exactly is going on with Singaporeans’ CPF!
On 12 July 2014, an event will be held to discuss the CPF issues and the lack of transparency and accountability from the government and for Singaporeans to demand to the government to #ReturnOurCPF.
You can join the Facebook event page here.