(function() { var ga = document.createElement('script'); ga.type = 'text/javascript'; ga.async = true; ga.src = ('https:' == document.location.protocol ? 'https://ssl' : 'http://www') + '.google-analytics.com/ga.js'; var s = document.getElementsByTagName('script')[0]; s.parentNode.insertBefore(ga, s); })();


Alternative proposals for a better Singapore

Size of MediShield reserves

Parliamentary Question on 4 August 2014

Mr Gerald Giam Yean Song asked the Minister for Health (a) what is the size of the MediShield Fund’s reserves as at 31 December 2013; and (b) what is the percentage of the reserves that support (i) claims incurred but not yet submitted or paid; (ii) claims not yet incurred but expected to be paid in the future; (iii) continuing claims which have a long tail; and (iv) future premium rebates.

Mr Gan Kim Yong (Minister for Health): The MediShield Fund’s reserves were at $1.7 billion as at 31 December 2013. The reserves support scheme liabilities that include policyholders’ claims as well as premium rebates to help policyholders with their premiums in their older ages.

Of the total reserves set aside, currently about two-thirds support ongoing and future claims while the rest support future premium rebates. The portion of the reserves that support premium rebates is expected to rise in future with the move to distribute premiums more evenly over policyholders’ lifetimes under MediShield Life, so that net premiums after the premium rebates rise less steeply in old age.

MediShield liabilities and reserves are reviewed annually in line with established actuarial principles. The MediShield Fund accounts are audited annually by an independent auditor.

Get my latest updates. ‘Like’ my Facebook Page.

Leave a comment

Impact on Govt’s new bus contracting model on SMRT and SBST

Parliamentary Question on 4 August 2014

Mr Gerald Giam Yean Song asked the Minister for Transport (a) what are the reasons for having SMRT and SBS Transit continue running nine out of 12 bus contract packages without a competitive tender in the initial period of the new bus contracting model even after their Bus Service Operating Licences (BSOL) expire on 31 December 2016; (b) whether during this initial period SMRT and SBS Transit will benefit from being paid the service fee with no fare revenue risk while not being subject to competition for their nine negotiated packages; and (c) when does LTA expect to put out a competitive tender for all 12 bus packages.

Mr Lui Tuck Yew (Minister for Transport): The move to the Government contracting model is a major shift, involving more than 270 bus services across the country. The LTA is therefore adopting a gradual approach by tendering three packages initially while retaining the current operators in the remaining nine packages. This is to ensure a smooth transition and minimise the risk of disruption to bus services and inconvenience to commuters. A gradual transition provides time for new operators to become familiar with our market, and for LTA to refine and improve on the tendering and handover processes for each successive tender.

The Bus Service Operating Licences (BSOL) of SMRT and SBST will expire on 31 August 2016. At that time, the nine packages that they will continue to run will also move to a Government contracting model. Since the service standards for these nine packages will be similar to that of the three tendered packages, we can use returns from the competitive tenders as a reference for our negotiations with the operators on the nine packages. Contracts for the nine packages will vary in duration and we will continue to gradually move more of them in phases towards competitive tendering when the contracts expire. We expect more than half of bus packages to be competitively tendered by the early 2020s, and the rest thereafter.


Source: Singapore Parliament Reports (Hansard)

Get my latest updates. ‘Like’ my Facebook Page.

Leave a comment

Delay of Ng Teng Fong General Hospital and increased patient load

Parliamentary Question on 8 September 2014

Mr Gerald Giam Yean Song asked the Minister for Health with regard to the delayed opening of the Ng Teng Fong General Hospital and the addition of 150 beds to existing hospitals to cope with the increased patient load (a) whether NUH, SGH and CGH have the infrastructural capacity to cope with the additional 150 beds that are unplanned for; (b) whether the bed additions to these hospitals will be permanent or temporary, (c) what proportion of these beds will be housed in corridors or temporary structures such as tents; and (d) whether the hospitals have the ready manpower to absorb the additional strain to ensure that patients will still be able to receive high standards of care.

Mr Gan Kim Yong (Minister for Health): CGH’s additional beds have been planned as part of the CGH-SACH Integrated Building for which works started in 2012. The new Integrated Building will progressively open from end 2014 and will have over 280 beds when fully open in 2015. CGH has been ramping up its manpower in preparation for this planned expansion.

In addition, about 150 beds will be added in NUH and SGH to cope with any surge in acute care demand. As new facilities such as the NUH Medical Centre, the Academia and the National Heart Centre have been completed, the space in existing buildings has become available for new uses. These additional beds will be housed in renovated spaces within the existing hospitals as part of their plans to remodel and refresh their facilities. None of these additional beds will be housed in temporary structures. As JurongHealth and Sengkang Health had recruited staff in preparation for the opening of NTFGH and running of Alexandra Hospital (AH), there is also sufficient manpower in the system to operate these additional beds safely.

Get my latest updates. ‘Like’ my Facebook Page.

Leave a comment

Care programme for rape victims

Parliamentary Question on 8 September 2014

Mr Gerald Giam Yean Song asked the Deputy Prime Minister and Minister for Home Affairs regarding the Victim Care Cadre (VCC) programme which trains members of the public as victim care officers to provide direct moral support to victims of rape (a) when did the programme start; (b) what are the selection criteria for VCCs and whether these include personnel from groups that are already providing victim care support; (c) what kind of training have the VCCs undergone; (d) to date, how many VCCs have been trained and certified; (e) how many victims have received support from VCCs; (f) whether all victims of serious sexual crimes who make police reports are assigned VCCs; and (g) whether VCCs are allowed to accompany victims through all medical examinations , police interviews and court processes and, if not, whether they can be so allowed.

Mr Teo Chee Hean (Deputy Prime Minister and Minister for Home Affairs): The Police have implemented the Victim Care Cadre (VCC) pilot project in June 2014 to provide care services to victims of serious sexual crimes. It offers an additional avenue of help to victims, and complements the Child Protection Service programme offered by the Ministry of Social and Family Development. The Police also work closely with the Ministry of Education, the National Crime Prevention Council, crisis support groups and medical social workers to provide additional victim care.

VCC volunteers must be at least 21 years of age, possess relevant qualifications and experience in counselling, psychology and/or social work. Suitable candidates are required to undergo a training programme conducted by trained psychologists. To date, 15 volunteers have been appointed under the VCC programme.

Upon activation by the Police, the appointed volunteer will respond to the assigned victim, providing emotional and other support according to the needs of the victim. The consent of the victim is required before a volunteer is assigned. Appointed volunteers are not allowed to sit in during Police interviews to ensure proper conduct of the interviews and for confidentiality reason.

Police will be evaluating the VCC pilot project in June 2015 upon completion of the 1-year trial.

Get my latest updates. ‘Like’ my Facebook Page.

Leave a comment

Impact of removal of medical fee guidelines on healthcare costs

Parliamentary Question on 8 September 2014

Mr Gerald Giam Yean Song asked the Minister for Health:

(a) whether the removal of the Singapore Medical Association’s (SMA) Guidelines on Fees (GOF) in 2007 has resulted in more competitive medical consultation and procedure fees in the primary and specialist healthcare sectors;

(b) if so, what is the evidence of such price competitiveness and, if not, whether the removal of the GOF has directly or indirectly contributed to healthcare inflation; and

(c) whether the Ministry plans to introduce legislative amendments to override the Competition Commission of Singapore’s concerns about fee guidelines and allow the guidelines to be re-introduced to help contain healthcare inflation.

Mr Gan Kim Yong (Minister for Health): The Ministry of Health (MOH) has been monitoring healthcare charges in the private sector. Between 2007 and 2013, based on a sample of 10 common procedures, the increases in the median Surgeon Fees at the major private hospitals ranged from 3.2% per annum (for Hip Replacement Surgery) to 9.7% per annum (for Heart Bypass Surgery). Similar increases were seen at the 75th percentile level. The overall healthcare inflation rate was 3.4% per annum over the same period.

Our samples do however show more variation in the rates of increase for charges above the 75th percentile level. This wider variation may reflect underlying differences in case complexity, individual patient conditions, or different charging practices among doctors. It is therefore difficult to determine the direct impact of the GOF on fees.

Nevertheless, MOH has been working towards facilitating greater price transparency to help both patients and doctors make informed decisions. Since 2003, MOH has been publishing Total Hospital Bills for common conditions at both public and private hospitals. On 1 September 2014, MOH published information on the Total Operation Fees for 65 common procedures at public hospitals. We will continue to explore more avenues to provide useful information and guidance to doctors, patients and their families.

Healthcare costs also rise as a result of the ageing population. As we grow older, we tend to consume more healthcare services which in turn drive up demand and costs. The increasing use of more expensive new technologies in diagnostics and treatment may also drive up healthcare costs. MOH has recently introduced Health Technology Assessment for medical devices to ensure they are both clinically- and cost-effective. We are also working with the public hospitals to set up Medical Device Committees to ensure rational selection and utilisation of these devices.

Get my latest updates. ‘Like’ my Facebook Page.

Leave a comment

Vacancies in Jobs Bank taken up by Singaporeans

Parliamentary Question on 8 September 2014

Mr Gerald Giam Yean Song asked the Minister for Manpower (a) whether the Ministry tracks what proportion of the Jobs Bank posts are eventually secured by Singaporeans; (b) if not, whether there are plans to measure and publish such data by requiring employers to disclose the outcome of their job postings; and (c) whether such data can be cross-referenced with data from Employment Pass and S-Pass application processes to yield patterns and causes for PMET jobs not going to Singaporeans.

Mr Tan Chuan-Jin (Minister for Manpower): To date, more than 31,000 Singaporeans have signed up with the Jobs Bank and more than 10,000 employers have come on board and are actively posting job vacancies. There are over 65,000 jobs available on the Jobs Bank today. The feedback from both employers and job seekers has also been positive. It is an encouraging start, and we hope more employers and Singaporean job seekers would use it over time.

The Jobs Bank was intended to facilitate a fair hiring process and greater awareness of job vacancies available for Singaporean job seekers. Singaporean job seekers are now able to make job applications directly through the Jobs Bank for a comprehensive list of job openings.
The Jobs Bank and the Fair Consideration Framework (FCF) was not, however, set up to guarantee local job seekers that they will always get the job. This will continue to be determined on the basis of merit, and to the best applicant for the job. There can be various reasons why an employer may not end up hiring the Singaporean candidate after considering applications fairly.

For example, in the IT sector, there could be jobs that require technical skills or domain knowledge of legacy programming languages, which IT firms use in supporting legacy IT systems of many companies that our local workforce may not possess in sufficient numbers. Likewise, Singaporean job seekers have their reasons for not accepting job offers, for example, if employers are unable to meet their expectations in terms of job scope and other personal considerations.

Singaporeans may also get placed in jobs through means other than the Jobs Bank. For example, Singaporeans may be hired directly by the firm or through head-hunters or private job portals and other job advertisements. Even when Singaporeans apply for a job that they see on the Jobs Bank, we cannot directly track this. For example, job seekers may apply through firms’ in-house HR portals. Therefore, data on the number of Singaporeans who were placed in a job vacancy which was advertised on the Jobs Bank would not be a representative or accurate indicator of how well Singaporeans are doing in the labour market in general.

Rather, what is important to us is whether the overall labour market ecosystem benefits Singaporean job seekers. This goes beyond the Jobs Bank and involves broader factors, such as the number and types of jobs being created, and whether our people have the skills and passion for the job. We track and report indicators of citizen employment outcomes regularly, and the situation is healthy. The seasonally adjusted citizen unemployment rate is 3.0% [1] and remains much lower than those of many other countries, while Singaporean workers have enjoyed positive real wage growth over the last five years [2].

We are, at the same time, keeping a close watch on firms’ hiring patterns. If a firm has a disproportionately low percentage of PMEs who are Singaporeans compared to their industry peers, we will initiate closer scrutiny of the firm to find out more details about the hiring practices and plans to develop Singaporeans for more senior positions. MOM will assess if HR practices are fair in these firms. If they are not, we will ask the firm to work out a plan to make improvements. Should a firm remain uncooperative, or not adhere to the plan, it may have its work pass privileges curtailed.

[1] Preliminary estimate in June 2014.
[2] The real median gross monthly income from work (including employer CPF contributions) of full-time employed Singapore Citizens grew by 1.7% per annum from 2008 to 2013.

Get my latest updates. ‘Like’ my Facebook Page.

Leave a comment

Audible pedestrian signals for the visually-impaired

I asked the Minister for Transport this Parliamentary question on 8 September 2014 after speaking at length with a friend who is blind, who told me about the challenges visually-impaired Singaporeans face when navigating around our roads and public transport system. I think there is much more that we can do to make Singapore more accessible for people with disabilities.



Mr Gerald Giam Yean Song asked the Minister for Transport (a) how many signalised pedestrian crossings are equipped with audible pedestrian signals (APS) for visually-impaired (VI) pedestrians and how many are not; (b) of those that are equipped with APS, how many operate on restricted hours at night and what are those hours; and (c) whether LTA can consider equipping all signalised pedestrian crossings with APS which operate 24 hours a day, if necessary with “on-demand” activation at night, so that all VI pedestrians can cross roads safely especially at night when there are fewer other pedestrians to assist them.

Mr Lui Tuck Yew (Minister for Transport): The Land Transport Authority (LTA) has installed audible pedestrian signals (APS) at 860 of about 6,000 signalised pedestrian crossings (see footnote below), based on requests from the Singapore Association of the Visually Handicapped (SAVH) and from visually-impaired individuals.

LTA takes into consideration the needs of visually-impaired pedestrians as well as the impact on other stakeholders when setting the operational hours of the APS. Generally, the APS is activated from 7.00 am to 9.00 pm daily so that the audio signals do not adversely affect residents living nearby. In some cases, for example, at junctions near the SAVH premises, LTA has acceded to their request for the APS to commence earlier at 6.00 am and end later at 11.00 pm.

“On-demand” APS devices can potentially allow more APS to have longer operating hours. LTA is happy to explore this and other measures that can assist visually-impaired pedestrians to cross the road safely.

Get my latest updates. ‘Like’ my Facebook Page.

Leave a comment

Enhancing safety on our roads

This was my speech in Parliament on 8 September 2014 during the debate on the bill amending the Road Traffic Act.

To all my fellow drivers: Please don’t use your phone when driving. You are four times more likely to get into an accident if you do. Think about your family and other road users.


Madam Speaker,

There were 6,426 fatal and injury accidents on our roads last year.[1] While this is down from a high of 8,625 in 2010, every serious accident is one too many, because they each impact the lives of not just the victims but their families as well. Statistically speaking, our daily commute on the roads is often our most dangerous activity each day.

Because of this, road safety is a matter which warrants serious attention by both policymakers and citizens, drivers and pedestrians. I therefore support any measures to enhance safety on our roads.

This Bill enhances regulations on several road safety and licensing issues, but there are some which could be further tightened. I will focus on two aspects of this Bill today: the use of mobile communication devices while driving, and the recognition of foreign driving licences and driving permits.

Mobile communication devices

First, on mobile communication devices.

I was recently rear-ended by another car while I was stuck in traffic. While the driver claimed that she was not texting while driving, there must have been something that distracted her to cause her to crash into my stationary vehicle.

According to a study published in the British Medical Journal (BMJ), a driver is about 4.9 times more likely to get into an accident when holding and using a mobile phone while driving. Even using a hands-free accessory is not much safer – it has been found to increase the risk by about 3.8 times.[2] The UK’s Department of Transport said reaction times for drivers using a phone are around 50% slower. Even careful drivers can be distracted by a call or text, and a split-second lapse in concentration could result in a crash. [3]

While there are many studies with varying conclusions, one thing is clear: Driving a car safely requires high levels of attention and concentration, and the use of mobile devices is a distraction which could result in serious accidents and even deaths.

Ideally, no one should be allowed to use their mobile devices while driving. However, we don’t all live in Road Safety Community Park. Our people lead busy lives and multi-tasking is the order of the day, sometimes even when driving.

At a minimum, we should have a regulatory regime where the most risky and distracting activities are clearly banned, while at the same time the authorities constantly remind drivers through public education of the dangers of using their mobile devices while on the roads.

Our message to drivers should be clear: Realise that all use of your mobile devices will distract you from driving safely. If you choose to use your mobile device while driving, be aware that certain particularly risky activities will attract heavy penalties.

Clause 14 of the Bill replaces Section 65B and attempts to clarify the law by changing “mobile telephone” to “mobile communication device”, so as to encompass not just phones, but also tablet computers. It prohibits using any of the device’s functions while the vehicle is in motion.
However, there are some situations in which it appears this Bill does not cover. For example, if the device is mounted on a holder, the driver could be checking email, watching videos or playing games, while the vehicle is in motion.

Introducing a definition of “communicative function” in the Bill could unintentionally limit the scope of prohibited devices. With a very fast-changing technology landscape, the scope of “communicative functions” of mobile devices could render this definition obsolete soon.
There is a new breed of emerging technologies called “wearables”, like smartwatches, which essentially function like portable computers, but do not need to be held in the hand. Were these considered when drafting this legislation?

Members may know about Google Glass, which is a wearable computer with an optical head-mounted display developed by the Internet giant, Google. It is worn like a pair of spectacles with a small LCD screen attached, which can display maps, text or videos within the user’s field of vision. It can also snap pictures and record videos. The device is voice activated, so there is no need to “hold” the device to operate it.

Some regulators and lawmakers around the world have raised safety concerns about Google Glass, which was introduced last year. The UK’s Department of Transport has indicated that it is “not acceptable” under existing regulations for motorists in the UK to wear it.[4] In West Virginia in the U.S., a state legislator introduced an amendment to ban the use of Google Glass while driving.[5]

I would like to ask the Senior Minister of State (SMS) two questions:

What is the Government’s position on the use of the communicative functions of a mobile device while the vehicle is in motion, if the device is mounted and not held in the hand? This includes using the normal phone functions or GPS navigation software, whether installed on the phone or on a third party device.

Could the SMS clarify whether using “wearables”, including Google Glass or smartwatches, are prohibited while the vehicle is in motion?

Recognition of foreign driving licences

I would now like to raise some concerns about the recognition of foreign driving licences and driving permits. Clause 8 seeks to tighten Section 38 to require that work pass holders, who need to drive as part of their job, must now obtain a local driving licence within a “prescribed period” from the date of issuance of their work passes. From MHA’s press release on 4 August 2014, I understand this prescribed period is 6 months.

This is shorter than the 12 months that is currently allowed for all holders of valid foreign driving licences who are not citizens or permanent residents of Singapore. However, I believe that the regulations may not be tight enough.

Six months is a long time for someone who does not have a valid Singapore driving licence to be driving around on our streets. In fact, it only takes a few minutes for a serious accident to happen – and indeed such accidents are more likely to happen within the first few days for a driver who is new to our roads, than several months later when he is more familiar with driving in Singapore.

A foreign driver who is new to Singapore will tend to be unfamiliar with our roads – our street signs, our road markings and our driving culture. In many cases, they may be used to driving on the opposite side of the road that we drive on.

In addition, there is a risk that even a “valid” foreign driving licence may not mean that the person is sufficiently trained and competent to drive. In some countries, corruption plays a big part in the issuance of driving licences.

A research study which appeared in The Quarterly Journal of Economics, which is published by Harvard and MIT, found that 71% of people who obtained a driving licence in New Delhi did not even take the licensing exam. [6] Equally worrying is that 62% were deemed not competent enough to drive after taking an independent test organised by the researchers just after they obtained their licences.

The study found that the average licence applicant paid about 2.5 times the official fee to obtain a licence. Most of these extra-legal payments are not outright bribes to officials but fees to “agents”, who “assist” individuals in the process of obtaining their driver’s licences without taking a test. This is corroborated by a report in Bloomberg Businessweek, which gave an account of how dozens of men stand outside the front gate of the Road Transport Office of a certain Indian city, swarming around prospective licence applicants, offering “shortcuts through the red tape for just 3,000 rupees”, or 65 US dollars.[7]

Madam, it is not my intention to single out any country, as many other countries have similar corruption problems in their bureaucracies. But I am very concerned that many of these unqualified drivers may be on our roads right now as we debate this Bill. They could be driving through our school zones and housing estates, posing a danger to pedestrians, other drivers, their passengers and even themselves.

Can I ask the SMS:

How does the Police satisfy itself that a foreign driving licence is legitimately obtained when allowing a foreigner to use it to drive in Singapore without a valid Singapore driving licence?

Why is there a need to give a 6 to 12 month window for foreigners to drive in Singapore without a valid Singapore driving licence? I note the SMS said in his speech that this is based on the practices of other jurisdictions and the views of industry stakeholders. Can I ask who these stakeholders are and do they include drivers and pedestrians who do not employ foreign drivers?

Would it not be more prudent, and in the interest of public safety, for all foreigners to take and pass the theory and practical driving tests in Singapore before being allowed to drive?
I understand there are other categories of foreigners besides work pass holders who may need to drive. These include visiting forces or tourists. Can we be more selective about the countries from which we recognise foreign driving licences, just like we do for foreign university degrees in certain professions? Many countries do operate clean bureaucracies that ensure that only drivers who have legitimately passed a driving test are issued licences.


Madam Speaker, with thousands of fatal and injury accidents on our roads each year, closing every gap in our legislation that lets less-than-competent drivers ply our roads could save many lives and limbs. I urge the Government to consider these suggestions to further enhance road safety and I look forward to the SMS’s responses to my questions.


[1] http://www.police.gov.sg/mic/2014/02/20140210_others_TP_stats.html
[2] http://www.bmj.com/content/331/7514/428. Driver’s use of a mobile phone up to 10 minutes before a crash was associated with a fourfold increased likelihood of crashing (odds ratio 4.1, 95% confidence interval 2.2 to 7.7, P < 0.001). Risk was raised irrespective of whether or not a hands-free device was used (hands-free: 3.8, 1.8 to 8.0, P < 0.001; hand held: 4.9, 1.6 to 15.5, P = 0.003).
[3] http://think.direct.gov.uk/mobile-phones.html
[4] http://www.telegraph.co.uk/technology/news/10214822/Drivers-to-be-banned-from-wearing-Google-Glass.html
[5] http://edition.cnn.com/2013/03/25/tech/innovation/google-glass-driving/index.html?hpt=hp_c3
[6] http://scholar.harvard.edu/files/remahanna/files/driving_qje_nov_2007.pdf
[7] http://www.businessweek.com/magazine/content/10_51/b4208012561750.htm

Get my latest updates. ‘Like’ my Facebook Page.

Leave a comment

Concerns about the TPP’s Investor-State Dispute Settlement provision


I asked the Minister for Trade and Industry this parliamentary question on 4 August 2014. There are concerns about the Investor-State Dispute Settlement (ISDS) provision in the Trans-Pacific Partnership (TPP) free trade agreement (FTA), which could grant foreign investors (usually MNCs) the right to sue national governments in an international tribunal if they believe TPP commitments have been breached.

Australia is currently engaged in legal battle with tobacco giant Philip Morris over the country’s plain packaging requirements on cigarette packs to reduce smoking rates. Philip Morris challenged this in Australian courts and lost. So they took the legal challenge to Hong Kong under the Hong Kong-Australia Bilateral Investment Treaty. While not part of the TPP, this is an example of how some multinationals may attempt to use international courts to overcome adverse rulings against themselves in domestic courts.

I would not want to see similar legal challenges against Singapore, especially against regulations that are meant to protect the public health of Singaporeans and our environment. Any FTAs that we sign should also not constrain us from enacting such regulations for fear of attracting legal challenges by MNCs at international tribunals.

The TPP is a proposed regional free trade agreement that is currently being negotiated by twelve countries throughout the Asia-Pacific region, including Singapore, Australia, Japan, the United States and Canada. While it is important that Singapore is included in the TPP, it is equally important that our trade negotiators ensure that the interests of SMEs and ordinary Singaporeans — and not just large MNCs — are promoted under the TPP.


Mr Gerald Giam Yean Song asked the Minister for Trade and Industry (a) what mechanisms and processes are in place to allow Singapore to implement legislation in areas such as public health and the environment given the Investor-State Dispute Settlement (ISDS) provision in the Trans-Pacific Partnership (TPP) which grants foreign investors the right to sue the Singapore Government in an international tribunal if they believe TPP commitments have been breached; and (b) how many ISDS challenges by multinational companies have been brought or have been threatened to be brought against Singapore in the past.

Mr Lim Hng Kiang (Minister for Trade and Industry): The TPP commits Singapore to ensuring a stable and fair regime for foreign investors. In return, Singaporean investors in TPP countries are also ensured the same stability and fairness. The ISDS mechanism gives foreign investors the right to initiate dispute settlement proceedings against host countries to enforce this commitment. At the same time, to prevent misuse of ISDS, there are also provisions within the TPP which discourage and allow the dismissal of frivolous suits, and allow TPP governments to direct the arbitral tribunals in certain situations.

Our FTAs, including the TPP, do not restrict Singapore from adopting measures for legitimate public policy reasons, including the protection of public health and the environment.

To date, no multinational company has challenged or threatened to challenge Singapore.


Source: Singapore Parliament Reports (Hansard)
Image: Canada Department of Foreign Affairs, Trade and Development

Get my latest updates. ‘Like’ my Facebook Page.

Leave a comment

Q&A on Govt’s net assets, GIC and CPF obligations

These were the questions I asked DPM Tharman Shanmugaratnam on 4 August 2014 in Parliament regarding the Government’s “net assets” and how the returns from the reserves managed by GIC make their way back to CPF members. The DPM’s answers and my supplementary questions are below.


Mr Gerald Giam Yean Song asked the Deputy Prime Minister and Minister for Finance (a) whether the buffer of “net assets” that are used by the Government to ensure that Special Singapore Government Securities (SSGS) interest rates are paid to the CPF Board even in years when GIC’s returns are weak refers to (i) past Government reserves requiring Presidential assent for drawdown (ii) current Government reserves or (iii) current or past reserves accumulated by GIC or MAS; and (b) what limitations apply to the use of these net assets.

The Deputy Prime Minister and Minister for Finance (Mr Tharman Shanmugaratnam): Mdm Speaker, I thank Mr Gerald Giam for his question.

Let me first reiterate the basic framework that enables the Government to ensure that SSGS obligations are met. The CPF Board invests CPF members’ savings in Special Singapore Government Securities (SSGS), which are guaranteed by the Government. This assures that CPF savings are safe, regardless of financial market conditions. The interest rates on SSGS also match those on CPF savings, so that CPF members will receive the annual interest rates that they are promised, including the minimum 4% to 5% interest on SMRA balances (Special Account, Medisave Account, Retirement Account balances) and the 2.5 % to 3.5% interest on the Ordinary Account balances, that they receive this even when market interest rates fall to low levels. So, the interest rates on SSGS match these interest rates on CPF savings regardless of financial market circumstances.

The Government pools the SSGS monies with the rest of its funds, such as proceeds from issuing Singapore Government Securities or SGS in the markets, i.e. the tradable securities in the markets, as well as unencumbered assets that reflect past Government surpluses and receipts from land sales. These co-mingled Government funds are first deposited with MAS as Government deposits. A major part of these funds, being of a longer-term nature, are then periodically transferred to the GIC to be managed over a long investment horizon.

Before GIC was formed in 1981, the Government’s monies including those derived from SSGS were managed by MAS. MAS continued to manage a good part of the monies especially during the first decade after GIC was formed, while GIC built up its capabilities for long-term global investment in diverse asset classes. Currently, GIC manages a major part of the Government’s funds, including those derived from long-term liabilities such as SSGS.

Importantly, GIC is not managing SSGS or CPF monies on their own, but a combined pool of Government funds including a significant sum of unencumbered assets. This is why the GIC’s mandate is to take calculated investment risks aimed at achieving good, long-term returns on the Government’s funds, without regard to the Government’s liabilities. It is precisely because the GIC is managing a combined pool, which includes a significant amount of unencumbered assets, that it is able to invest for the long term, take risk in expectation of long term returns, without regard to the government specific liabilities.

GIC has achieved good long-term returns to date. However, as investment markets are uncertain and volatile, GIC’s returns over shorter periods could be low or even negative. The Government is able to absorb these short-term market risks, because it has a strong balance sheet. It has a substantial buffer of net assets that enables it to meet the obligations on its liabilities, including its SSGS commitments.

The Government’s net assets, or its assets in excess of its liabilities, are the Government’s reserves as defined under the Constitution. The bulk of the Government’s reserves are those accumulated during previous terms of Government, also known as its Past Reserves. It is the Past Reserves that the Constitution seeks to safeguard, especially through the powers vested in the President.

In particular, the Constitution guards against profligate spending, which can draw down Past Reserves. The President can withhold his assent for the Supply Bill if the Government intends on its annual Budget to spend more than its Current Reserves, in other words, reserves accumulated during the current term of Government.

The Constitution also enables the President to state and gazette his opinion if he considers that the Government has entered into liabilities that will likely draw down Past Reserves. This scenario could for example arise if the Government were to set interest rates on SSGS at artificially high levels, without reference to market interest rates, and above what can reasonably be expected to be earned in investment returns on the Government’s funds over the long-term. This would run down the reserves systematically and deliberately. The President has not been put in a position where he has had to state such an opinion. CPF and SSGS interest rates are set with reference to returns on similar market instruments, and are both fair and sustainable.

The scenario of entering into liabilities that will lead to a systematic and deliberate drawdown of reserves should not be confused with the fluctuations in the value of the reserves due to market volatility and cycles that happen all the time. Volatility and cycles are part and parcel of the investment world. Indeed, the GIC’s mandate is to take risks aimed at achieving long term returns, in full knowledge that the Government’s portfolio will be exposed to market risks that could mean weak returns or even declines in value on a mark-to-market basis for a time, before cycles reverse and values rebound.

Hence, although GIC’s returns over the last 20 years – ending March 2014 – have averaged 6.5% in USD terms, or 5.3% in SGD terms, it has experienced several years where its returns were low or negative – several years during that 20 year period. To take the most recent episode, the Global Financial Crisis led to a significant reduction in GIC’s annualised five-year return ending March 2013 – i.e. as of a year ago – to just 0.5% in nominal SGD terms. But moving just a year forward to March 2014, its five-year annualised return rebounded strongly. This volatility is part of the market. It was also seen in comparable market portfolios.

The President and the Council of Presidential Advisers (CPA) have full information about the size of the reserves and all of the Government’s financial assets and liabilities. What matters in determining if there will be a likely draw on Past Reserves is whether Government has entered into liabilities that are sustainable and will not result in a systematic erosion in the reserves. It is not the short-term fluctuations in investment returns due to market risks that matter here – even if these ups and downs in investment returns, taken together with the Government’s SSGS and SGS obligations, imply fluctuations in the value of net assets.

A decline in investment returns or a drop in the market value of assets in the course of market cycles is not considered a draw on Past Reserves that the Constitution seeks to guard against, because any strategy of investing the reserves for long-term returns must mean taking investment risk and will involve ups and downs in market value of the portfolio, not just from one year to another but very frequently within the year.

The only way to avoid fluctuations in the value of our reserves is to avoid taking investment risk, for example by investing all of our assets in cash-like instruments. However, this will mean accepting low returns over the long term, and indeed returns that would likely fall below the interest rates on SSGS and even SGS over the long term.
To summarise the point, what the Constitution guards against are actions that lead to a systematic erosion of reserves, not the investment of reserves in order to gain long-term returns, which must involve investment risk and fluctuations in market value.

Let me return to the basic features of the system. The Government’s strong balance sheet enables it to take investment risks and ride out the market cycles that are inherent in investing for the long-term. It has a significant buffer of net assets, with important benefits for Singapore. These net assets enable the Government to guarantee CPF savings, and pay fair interest rates on CPF savings despite financial market cycles. The Government’s significant net assets, on which we expect to earn long-term returns, are also why we have a significant stream of investment income in the form of NIRC (Net Investment Returns Contribution) on our Budget each year, which can be used to meet important spending priorities.

Mr Gerald Giam Yean Song (Non-Constituency Member): Thank you, Madam. I thank the Deputy Prime Minister for the answers. I have three supplementary questions. GIC has reported that over the 20-year period ended 31 March 2014, the GIC portfolio has generated an average annual real return of 4.1%. Does this figure take into account the interest payable to CPF for the SSGS?

Second question: can the Deputy Prime Minister explain what is the mechanism by which the investment returns from GIC are transferred back to the Government and then to CPF? Does the GIC only return the NIRC to the budget and then leave it to the Government to disperse the SSGS principle plus interest to CPF using net assets?

And third question: specifically on the eight years in the past 20 years where GIC’s investment returns were below what the Government pays on SSGS, were these shortfalls funded from the Government’s net assets or from the GIC’s assets?

Mr Tharman Shanmugaratnam: First, let me explain that GIC is managing Government assets. It is not GIC’s assets. GIC is a fund manager, so the assets are assets on the Government’s balance sheet, rather than on the GIC’s balance sheet. When the GIC reported that it has earned a real return over 20 years of 4.1% on an annualised basis, it is referring to the return on the total assets that it is managing for the Government.

The NIRC which enters the Government’s budget is computed after netting off what is payable on the Government’s liabilities, SSGS and SGS. That is already netted off. So, what enters the Government’s budget, which is up to 50% of the expected investment returns, is after Government has paid what is necessary on the liabilities.

And as for the eight years within the last 20 years, which was what I had stated in response to Mr Gerald Giam’s question at the previous Sitting – just to reiterate, that is eight years in the previous 20 years ending 2013 – that is when in fact the GIC’s returns on the total assets that it is managing fell below the SSGS rates. That by definition would have meant that net assets would have been lower than otherwise because the Government has fixed obligations on its liabilities, and because of the fluctuations in returns on its assets.


Source: Singapore Parliament Reports (Hansard)

Get my latest updates. ‘Like’ my Facebook Page.

Leave a comment