Siew Kum Hong
Singapore
“Sir, I have one supplementary question for the Senior Minister of State. Sir, Thailand, as the ASEAN chair, issued a statement criticising Myanmar for its trial of Daw Aung San Suu Kyi and Myanmar's response was that Thailand was meddling in Myanmar's internal affairs.”
“Mr Speaker, Sir, I have two supplementary questions. My first question is to ask the Minister what is the expected date of announcement of the final decision by MAS in its investigations given that now the preliminary findings have been made and there is a due process going on.”
“My belief is that it will also be the case with these present amendments, in which case, why bother? The Senior Minister of State has pointed out that the prohibition on party political films has an offline aspect as well, and that is true.”
“Sir, I have a similar supplementary question with regard to work permit holders. I would like to ask the Acting Minister how many new work permits have been issued in the past few months, given that there are so many stories of foreign workers already here on work permit not having work or not having enough work.”
“Secondly, there should be increased transparency in how the Act has been used. Instead of waiting until the Act is up for extension to give figures on the use of the Act, it would be better if the Ministry could proactively disclose figures on the Act’s operation on an annual basis.”
“A poll by the Sunday Times last July found that 81% of 230 respondents thought that maids should get a mandatory day-off. That being the case, I hope that the Acting Minister would reconsider the existing position and introduce a mandatory day-off, at least once a month, which I feel should not be contentious for foreign domestic workers.…”
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“Mr Deputy Speaker, Sir, I think Mr Singh may have misheard me. I do not believe that I said anywhere in my speech that the money will be wasted in the Jobs Credit Scheme. I do not think I used those words "the money will be wasted". What I did was to set out the stated objective of the Scheme, which is to save jobs and to reduce retrenchments. What I argued was that I do believe that the Scheme will achieve that stated objective. I do not think the money will be wasted in so far as we understand the term "waste". I do think that the money will reduce business costs. I just have doubts as to whether it will save jobs.”
“And even if they require some more resources on the part of the Government for implementation purposes, that should not, in and of itself, automatically rule out policies that could benefit Singaporeans. Maintaining a lean government is a means to an end and cannot be the end in itself. I know that there is ComCare and it plays an important role in helping needy Singaporeans. Today’s edition of the TODAY newspaper carried a useful reminder of that scheme. But it is an ad hoc scheme that is highly discretionary, and only intended for three to six months of assistance. That time frame may be too short for retrenched workers in this recession. The discretionary element in the scheme does not give workers the all-important assurance and security that a formal scheme provides. These times are already so uncertain, why add to the stress of retrenched workers by making assistance uncertain as well? I think we can, and we must, do more and do better for Singaporeans who lose their jobs. When Franklin D Roosevelt was inaugurated for his second term as the US President in 1937, he said in his inaugural address, "The test of our progress is not whether we add more to the abundance of those who have much; it is whether we provide enough for those who have too little." This year, there will be many amongst us who will have too little. Economists have forecast anything between 30,000 and 300,000 jobs lost over the next one to two years. But this Budget does little to provide for them. What then is the extent of our progress? Singaporeans will have to judge for themselves.”
“Examples of approved purposes could include medical expenses that are not covered by insurance, MediShield or Medifund – for whatever reason – or expenses not covered by ComCare for whatever reason. To avoid abuse or misuse, the loan amounts could be disbursed directly to the persons charging for these bills and expenses. The loans should be interest-free and payable in small instalments once the borrower starts working again, perhaps by deductions from salaries through the CPF framework. Such a scheme would reduce the incidence of folks in desperate need for cash going to loan sharks or maxing out their credit cards, which would result in a downward spiral of crippling interest at a time when they could least afford it. I also ask the Government to introduce more special transfers to the low-income. The doubling of GST Credits and the additional S&CC and rental rebates are helpful, but they are very small in size. Inflation hit 6.5% last year, and even in this recessionary environment, there will be a time lag before prices go down. As it is, there have been some reports in recent weeks suggesting that some food prices could still be going up. More special transfers in the first half of this year will help the low-income cope, until such time as disinflation kicks in. This will also provide a helpful fiscal boost, given that the MAS' own Monetary Model of Singapore shows that direct transfers to the low-income has a high fiscal multiplier for the Singapore economy. Sir, I do not see these suggestions as reckless or dangerous. I do not think they will necessarily result in a bloated bureaucracy.”
“In 2007, we introduced social risk-pooling for longevity risk, which is the risk of living longer than we expect or can afford to. Why not social risk-pooling for retrenchment? Not unemployment as such, but targeted for retrenchment with low benefits. This can be restricted so that only workers who are retrenched with payouts below a certain stipulated amount, say the lower of three months of the last-drawn salary or a stipulated quantum, get a few hundred dollars for so long as they remain unemployed, up to a maximum of six months or longer, provided they seek re-employment during this period. This is targeted and limited. This will not sustain long-term unemployment, but is intended to tide over those who have been retrenched while they find another job. The payout will be small, but the assurance to those retrenched could mean so much. And if the Government will not introduce unemployment insurance on a permanent basis, then I ask it to consider unemployment benefits for the retrenched, just for this year. It can be limited to workers who were retrenched since last November or who are retrenched this year. The amount can be limited to the lower of half of the last drawn salary or $1,000 per month, capped at a maximum of six months of payments. Just like the Jobs Credit Scheme, it is a one-off scheme in light of the worst recession in 60 years. But I know that realistically, both of these options will not be acceptable to this Government. And so I ask the Government to introduce a temporary assistance loan scheme, loosely modelled after the UK’s social fund. It should be made available to unemployed Singaporeans including the recently retrenched, to provide small loans for certain approved purposes. We can call this the No Jobs Credit Scheme.”
“And in most cases, that is the rational choice, if only because retraining for a new profession means starting all over again at entry-level pay, wasting their accumulated experience in their existing profession. For these retrenched PMETs, SPUR does not provide meaningful assistance. For these retrenched PMETs, the Budget has little else. For these retrenched PMETs, there is little help forthcoming. I spoke about the Government’s approach to helping Singaporeans in my Budget speech last year. I spoke about my disappointment at how we put so much more emphasis on GDP growth than on helping less fortunate Singaporeans. I criticised this Government’s approach to social assistance of being willing to let Singaporeans suffer rather than risk any wastage of public funds to help them. This year’s Budget again does not risk any wastage of public funds in helping Singaporeans. But it does risk wasting public funds in helping businesses. Even in these tough times, we do not give away money with no strings attached to individual Singaporeans. But it seems that these tough times justify giving away money with no strings attached to businesses regardless of whether they are prospering or despairing. Last year, I was criticised for being reckless and dangerous. At the risk of being called the same or worse this year, I will have to press on. I continue to believe that it is possible to craft targeted social assistance schemes to help the unemployed, that minimise the risk of eroding the work ethic. I have a few suggestions and I hope that I can articulate them clearly enough. I ask the Government to introduce some form of unemployment insurance.”
“This Budget seems to have produced the singular oddity of a one-sided coin, where we concentrate so much of our efforts on saving jobs, but do so little to help those who do lose their jobs. It is almost as if the retrenched are being dealt a double-whammy: the first hit is the loss of their jobs, and the second hit is the lack of assistance for them. To be fair, SPUR does have something for the unemployed. An unemployed low-skilled Singaporean who attends training courses to learn new skills can get an allowance of $4 per hour. A PMET who undergoes a professional conversion programme (PCP) can get an allowance of up to $1,000 per month. But SPUR is not without problems in implementation. It adopts the co-payment requirement of so many government measures. This strict insistence on a 10% co-payment of course fees means that trainees must still fork up an upfront fee. This can be difficult for many, since they by definition have no source of income. We should provide trainees with interest-free loans for the co-paid amount, with repayments in instalments and possibly interest-bearing after the trainee finds a job, which can be monitored through the CPF system. Also, the PCPs will be unattractive to most retrenched PMETs. Some retrenched PMETs will have skills that are obsolete, and PCPs will be appropriate for them. But the majority of retrenched PMETs will have skills that are not obsolete. They were retrenched not because they are in sunset industries, but because their companies needed to cut costs. Their skills will be in demand when the economy picks up again and the economy will pick up again. They do not need and they do not want retraining for a new profession, because they will in all likelihood continue doing the same thing once the economy recovers.”
“But we have always opposed handouts for Singaporeans. Why are businesses different? In giving all this money away to businesses, are we somehow being psychologically held hostage to the ideological dogma that the best way to help Singaporeans is to help businesses, instead of helping Singaporeans directly? This Budget does little for the retrenched and the unemployed. The various elements that made up the GST Offset Package first announced in 2007 have been enhanced. The amount of GST Credits for each household has been doubled, and there are additional S&CC and rental rebates. But let us be honest with ourselves. These are mostly enhancements of measures previously announced to alleviate the pain from the GST hike in 2007. But the coming storm will inflict much more pain and much more suffering than the GST hike of 2 percentage points did. To equate the two is to severely understate the impact on Singaporeans in the coming year. They are simply incomparable. It is inconceivable to me that the exact same tools used to soften the impact of the GST hike could be enough to address the worst recession we have seen in the past 60 years. In the past few weeks, various Ministers have spoken about the need to save jobs. Rightly so. Saving jobs has to be the No. 1 priority. I may disagree on the effectiveness of the Jobs Credit Scheme in achieving this goal, but I do not argue with the goal itself. But I would go on and argue that helping those who have lost their jobs deserves to be the No. 2 priority. Prevention is better than cure, so the saying goes. "Better than", not "instead of". When prevention fails, we still need a cure. Saving jobs is only one side of the coin; the other side of the coin must surely be to help those whose jobs are not saved.”
“And I think Mr Poon sets a surprisingly modest target. At $4.5 billion, I would expect more. The Jobs Credit Scheme will end up benefiting capital owners disproportionately. It will reduce business costs, but I do not expect it to save very many jobs, and even then not for very long. It is essentially a special transfer to capital owners, such as business-owners and entrepreneurs. And considering that around 50% of the Singapore corporate sector is foreign-owned, a big chunk of this transfer will leak out of Singapore. Today’s Straits Times Forum carried a letter from someone who works in an SME, praising the scheme. But if you drill into the details, it is clear that the business was not considering retrenchments in the first place. Instead, it is considering using the Jobs Credit funding to invest further in its business. In these times, that is not a bad thing. But it clearly shows up the limitations in the Scheme’s ability to achieve its stated goal of saving jobs. The Jobs Credit Scheme will have, at best, a marginal impact on businesses’ decisions on whether to retrench. Businesses facing collapsed demand will still retrench. Businesses doing well will reap a windfall benefit. MNCs will still, by and large, follow their corporate headquarters’ directions on retrenchments. True, the Jobs Credit Scheme is not meant to be the complete answer. It is not a panacea. It is one piece of the puzzle, albeit a big centrepiece, and there are many other measures to reduce business costs and help businesses through this difficult period. But the question must be whether spending $4.5 billion on the Jobs Credit Scheme produces the most bang for the buck for Singaporeans. This is a handout for businesses.”
“But it will still only be a band-aid at best, in stopping job losses. And what a very expensive band-aid it will be. Citigroup’s head of Singapore research, Dr Chua Hak Bin, has pointed out that if the Jobs Credit Scheme helps to save 50,000 jobs, then the cost of saving each job is $90,000 – three times the median annual salary of each job in Singapore. Even if it helps to save 100,000 jobs, the cost of saving each job is $45,000 – still 50% more than the median annual salary. And contract workers, who are probably most at risk when a business cuts staffing costs, may not benefit from the Jobs Credit Scheme. Contractors are usually hired by employment agencies and farmed out to companies. The agencies will be the ones receiving the subsidies. They have no incentive to pass it on to the companies. Unlike with property tax rebates, the Government has not asked these agencies to pass the savings on to their customers. And so, the scheme could make contractors, who form a growing proportion of the workforce, even more vulnerable than they otherwise would be. I agree with people like NUS Prof. Shandre Thangavelu, who has said that the Jobs Credit Scheme will only have a short-run impact on the retrenchment behaviour of employers. Even the MOF team who designed the Scheme is unable to predict just how many jobs it will help to save, and for how long. Mr Poon Hong Yuen, who led the team that put the Scheme together, said "If just because of this, they rethink retrenchments, then I think it is already quite an achievement." I would praise the Ministry for its willingness to take a chance on the Jobs Credit Scheme. I think this sort of policy risk-taking is important and helpful. But I do not think the risk will pan out in this instance.”
“5 billion, and will be funded by our reserves. The objective of this scheme is to save jobs. But how effective will it be? Clearly, the effectiveness of the scheme for each employer will depend on the proportion of its costs attributable to wages. If wages form just 10% of an employer's overall costs, then the Jobs Credit Scheme will reduce its total costs by up to 0.8%. On the other hand, if 70% of costs are wages, then the scheme will reduce total costs by a maximum of 5.5%. These are theoretical maximums, based on improbable assumptions of 100% local employees, all earning $2,500 per month, or less. The Minister has explained that the global economic crisis is caused by a worldwide collapse in demand. Simply put, there is massively reduced demand for the goods and services produced by our economy. Last week, the Economic Development Board (EDB) released a report on the manufacturing sector's business expectations for the next six months. This report paints a shocking picture of just how dire things are expected to get. An across-the-board negative outlook for the first half of 2009 for manufacturing, with similarly negative forecasts for output and employment for Q1. For instance, 92% of data storage firms and 81% of precision engineering firms predict a drop in output. When demand falls off a cliff like this, many businesses will face a drop in revenue far exceeding 8%. Businesses will have no choice but to cut costs to stay afloat. In this context, I suspect that the Jobs Credit Scheme will turn out to just a band-aid. Yes, it will provide a temporary cushion for businesses, especially SMEs. Yes, it will make employers a little bit more reluctant to lay off locals. Yes, whatever protection it creates will probably benefit the low-income more than the high-income.”
“The Elected Presidency is all about the process for using the reserves – so it is important to ensure that the process in this instance is transparent and clearly articulated. The Government has stated some principles for using the reserves, but principles articulated by the Government do not – and more importantly, should not – bind the President. After all, the President is supposed to be the independent check on the Government in its use of the reserves. The President is the guardian of the so-called second key to the reserves. It would therefore be helpful for the President and the Council of Presidential Advisers to publicly explain to Singaporeans, why they approved the use of the reserves, and what principles they intend to adopt moving forward. Doing so would buttress the institution of the Elected Presidency. These principles and guidelines do not have to be legally binding or even binding on subsequent requests to use the reserves. But they would certainly provide helpful guidance if we ever want to use the reserves again. Now is the time to set a sound foundation for the future. This is all the more important, given that this Government has actually accumulated sufficient reserves during its term to fund the Jobs Credit and SRI Schemes. The Government should therefore ask the President to explain whether and why he is satisfied with the Government's reasons for not using its accumulated reserves. I now turn to the Jobs Credit Scheme. It is one of the lynchpins of the Budget, and it seems to have caught the imagination of Singaporeans. Call it what you will, but it is fundamentally a wage subsidy for employers. It equates to a 9-percentage-point cut in the employers' CPF contribution rate. It will cost taxpayers $4.”
“Mr Deputy Speaker, Sir, thank you for allowing me to join the debate on the Budget Statement. I will touch on three aspects of this Budget: the use of the reserves, the Jobs Credit Scheme, and the amount of help for the retrenched and unemployed. First, the unprecedented use of our reserves, to fund the Jobs Credit Scheme and the Special Risk-Sharing Initiative. I applaud the Government for taking this step. Our reserves have always almost bordered on the mythical: Singaporeans speak of them proudly and reverently, but we know so little about these fabled reserves. Using them now sends the right signal about just how dire the situation is. It assures Singaporeans that the reserves are not sacrosanct, that they are not being accumulated for the sake of accumulating them, and that they will be used when it is necessary to do so. If the worst economic crisis the world has seen in six decades, does not merit the use of the reserves, then nothing ever will. But I have some concerns about the process in which the use of the reserves is being approved. We have always been told that the reserves are a hard-earned strategic asset of Singapore, and that the Elected Presidency is necessary to safeguard them. And yet, there has been precious little information about the deliberations of the President or the Council of Presidential Advisers, in giving in-principle approval to use the reserves. The Government should ask the President and the Council to publish detailed reasons for their decisions. This is the first time we are using the reserves. It is, therefore, a golden opportunity to define the principles for doing so.”
“If MAS provides all the necessary information and facts and figures, we can calculate the financial cost to investors of this whole debacle. But what about the human cost? How do we quantify that? If we do not adopt more principle-based regulations, if MAS does not take vigorous enforcement action against those who have breached the law, such egregious mis-selling will occur again. The precise form of mis-selling will change, and the investment products involved will differ. But it will happen. And by not learning our lesson from this episode, we will be guilty of having allowed it to happen. This Amendment Bill, currently before this House, does not address these issues. I hope that when the findings and recommendations of the MAS come to be debated in this House, those recommendations will include the introduction of principle-based regulation. Sir, with that, I support the Bill.”
“Of course, it does. We had a rule-based approach then, and we have a rule-based approach now. And if we keep our rule-based approach without augmenting it with principle-based regulations, we will hear the same story 10, 20 years in the future. I assure Members that so long as we rely exclusively on a form-filling, tick-the-boxes, rule-based approach to regulating the sale process, this will happen again, and again, and again. We will have more cases like that of Mr Ling Jun Zhi and his wife, retirees who put their life savings of $100,000 into Minibonds. Or Mr Ang, a 68-year old retiree who put $600,000 of life savings in DBS High Notes 5, when he had merely wanted to renew his fixed deposit. Or Mrs Chong, who invested a total of $100,000 in Minibonds, being her life savings and half of her husband's CPF savings. She subsequently suffered a nervous breakdown upon finding out what the collapse of Lehman Brothers meant for her. Worse, her relationship with her husband was adversely affected. When asked what her plans for the future were, she said, "What is there left to plan? There's nothing left for me to plan anymore? Or Ruth, a 38-year-old lady diagnosed with stage 2 breast cancer, who had invested the $20,000 meant for her parents in Minibonds. The FI knew about her medical condition, and still went ahead to sell the Minibonds to her. Because of the loss of this sum, she had to go back to work early against her doctor's wishes, instead of recuperating and recovering from her chemotherapy. I hope all of these victims have been offered full compensation. These are the most clearly heart wrenching cases. But there are many other victims, whose situations may not be quite as dramatic, but whose lives have similarly been adversely affected beyond their worst nightmares.”
“I now turn to my second broad point, which is much shorter. Quite apart from having the correct regulations in place, the regulator must also be willing and able to vigorously enforce these regulations. Businesses being what they are, the language that they understand best is the language of money, and surely the MAS has to speak the same language to make sure that the regulations are complied with. Given that the investigations by MAS are still ongoing, I will leave it at that. I will only add that this episode has resulted in widespread cynicism amongst the investing public about the MAS' willingness to enforce the law vigorously, to stand up to the FIs and to protect investors. Rightly or wrongly, the fact remains that this is a widely held view. This cannot be a healthy state of affairs. I think it is by now very clear that there has been at least some mis-selling by FIs. I therefore urge the MAS to take strong enforcement action in this regard, to demonstrate that breaches of the law will be punished in accordance with the law. This is the only way to restore public confidence in the regulator. This is not the first time that investors who only wanted to renew their fixed deposits were misled into purchasing investment products that were unsuitable for them. Almost a decade ago, unit trusts were the investment product du jour. Stories abounded of uncles and aunties who wanted to renew their fixed deposits being pressured into buying unit trusts, including narrowly focused, high risk technology funds. With the stock markets then in the frenzied throes of the dot-com craze, technology funds looked like the best things since sliced bread. Well, when the dot-com bombed, these uncles and aunties lost huge chunks of their investments. Does that sound familiar?”
“When the rules focus only on the different steps to take, the forms to be completed, the boxes to be ticked, then the smart sales person will simply take those steps, complete the forms and tick the boxes in the way that requires the least effort. The question of proper advice for the investor becomes irrelevant to the closure of that sale. Instead, if the objective is to ensure that investors are properly advised, then the operative rule must be that financial advisers properly advise them. When that is the letter of the rule that financial advisers have to abide by, there is little wriggle room left. In the course of writing this speech, I have come across a number of very good suggestions of possible refinements to the existing regime. These include the elimination, or at the minimum, a stringent restriction of the so-called Option 4 (no advice option) in the sale process, a cooling-off period for the sale of investment products, disclosure of the commissions and fees earned from the sale of investment products – similar to what takes place for insurance products – and even a separation of general banking and investment sales functions in banks, as has been recommended in Hong Kong. But these are refinements to existing rules, and they preserve the primacy of the rule-based approach. I believe that it is necessary to introduce principle-based regulations as well, particularly in regulating the sale process. The principle-based approach is not a panacea but is certainly essential. Otherwise, ingenious sales persons will simply find new ways to comply with the rules while continuing to sell investment products that are not in investors' best interests. And we will eventually see a repeat of what happened with the Lehman-linked products.”
“" This quote has nothing to do with structured products, but it highlighted a fundamental truth about frameworks and processes and forms and disclosures. We can have all the rules in the world, we can require financial advisers to jump through all sorts of hoops in the sale process in an effort to ensure that investors' interests are appropriately protected, but we would still be missing the woods for the trees if we do not understand that the rules are just the ends to the means, and not the ends in themselves. An exclusively rule-based approach is fundamentally unsound, so long as financial products are sold by sales persons who are remunerated by commission. Sales people being what they are, they will always seek to close a sale in such a way as to comply with the rules with minimal effort by them. It is important to understand that and to have the right regulatory approach in response. By this, I do not seek to impugn sales persons. I spent one year working as the in-house legal counsel in a sales company, and my current employer's sales team is one of my internal clients. They are not better or worse than other people simply because they work in sales. They are simply intelligent human beings; so they will behave according to how they are incentivised. And when they are incentivised by commissions, they will always seek the path of least resistance in closing that sale, so as to get at that commission. That is why an exclusively rule-based approach is deficient. The smart sales person will always figure out how to work the system, how to get what they want while not breaking the letter of the rules.”
“The two approaches are not either or, or mutually exclusive. Instead, jurisdictions which practise the principle-based approach, such as the UK, Taiwan and Malaysia, do so in combination with the rule-based approach, seeking to strike an optimal mix of both. However, the FAA, as it currently stands, seems to be primarily, if not almost exclusively, rule-based in a single-minded focus on the various steps that are required in the sale process. We set the objective of ensuring that an investor has been properly advised by a financial adviser, but we do not make that the sole requirement. Instead, we have prescriptive rules on the steps that a financial adviser must take. Well, has this rule-based approach been sufficient or effective to protect investors against mis-selling? I think the ongoing saga of the Lehman-linked structured products has shown up the flaws in this sort of mechanical, tick-the-box, rule-based approach. The financial institutions (FIs) involved may have followed the letter of the rules, but it is clear that they have disregarded the spirit in many, if not most, of the cases. While it is therefore encouraging that MAS had asked FIs not to be overly legalistic in resolving the complaints, that request by MAS implicitly suggests that FIs could have avoided responsibility if they did choose to be legalistic. I recently read an article in the Straits Times on 10th January 2009, about the scandal surrounding Satyam Computer Services of India. There was a quote, from the head of a prominent local audit firm that really resonated with me, which was: "In real life, the rules are a lot of form and no substance.”
“ Mr Speaker, Sir, thank you again for allowing me to speak. As with the Securities and Futures Act, these amendments to the Financial Advisers Act (FAA) do not incorporate any of the lessons from the structured deposit saga. Nevertheless, I will say a few words about what amendments I think this Bill should have included in light of that, but did not. I have two broad points to make, corresponding to the two components that are necessary for a successful functioning regulatory regime, namely, the regulations that are in place and the enforcement of those regulations. The FAA, as it currently stands, represents a rule-based approach to regulation. This is to be contrasted to a principle-based approach. The Financial Services Authority (FSA) in the UK is widely recognised as the foremost practitioner in the world of the principle-based approach. So what exactly is it? According to the FSA website and I quote: "Principles-based regulation means, where possible, moving away from dictating through detailed, prescriptive rules and supervisory actions how firms should operate their business. Principles-based regulation means placing greater reliance on principles and outcome-focused, high level rules as a means to drive at the regulatory aims we want to achieve, and less reliance on prescriptive rules." At the sitting of this House on 20th October 2008, my colleague, Mr Gautam Banerjee, asked about whether we should move towards a principle-based approach. The response of the Minister then expounded on the roles and responsibilities of the different stakeholders in the sale process, including investors, but did not touch on the merits of Mr Banerjee's suggestion. I will now attempt to explain some of those merits.”
“The financial crisis would have curtailed the excesses of financial institutions in creating products that were once praised as being innovative, but are now clearly reckless and exploitative. But rest assured, the financial engineers will return, and we absolutely need to make sure that our regulatory regime is able to guard Singaporeans against their worst abuses. The Bill currently before this House does not address these issues. I certainly hope that MAS will draw the correct lessons from this structured product debacle, and do what needs to be done to protect consumers. Sir, with that, I support the Bill.”
“I did not understand where the money was being made, and I did not know who was making the money and so I concluded – perhaps cynically, but certainly correctly – that it would not be the investors who are making the money. But I thank my lucky stars for my good fortune and my relative risk averseness to have been spared. I certainly do not put it down to any special intelligence on my part. The role of regulation is not so much to protect people like the Members of this House, whom I am sure are intelligent and sophisticated enough to take care of ourselves, but to protect the gullible, the unsophisticated, the vulnerable. We can and must maintain a balance between maintaining a flexible regulatory regime that as a rule does not substitute the regulator’s decision for individuals’ decisions, and building in sufficient differentiated treatment to protect those who need such protection. We cannot veer too much to either end, whether for ideological or other reasons. I have chosen my words carefully – overly-complex, overly-risky and overly-unfair products should be prohibited from over-the-counter sales to retail investors. I am not advocating an outright prohibition, but rather that such products be disqualified from over-the-counter sales to retail investors. A retail investor who really wants to purchase such products should still be permitted to do so through other channels. This would preserve freedom of choice and mitigates the problem of moral hazard, while preventing repeats of the structured products saga, or at least making them rather more unlikely. Over the past two decades or so, we have seen that the ingenuity of financial engineering knows no bounds.”
“Minibond investors had essentially insured the issuer, Lehman Brothers, against the risk of a credit event by the reference entities. So not only did Lehman Brothers make money from structuring and selling the Minibonds, it also insured itself against its own investment risks, a state of affairs that was not explicitly disclosed as such in the pricing statement or prospectus. Given the potential returns from the Minibonds, in the range of a few percentage points, was this wholesale transfer of risks to investors justifiable? Was it fair? Should such products ever be permissible for sale to retail investors over the counter? In the case of the Minibonds, the disclosures were not clear. But even if they had been transparently clear, should that make a difference to the issue of whether to allow the Minibonds to be sold to retail investors over the counter, given how inherently unfair they are? My views should be clear. I do believe that some products can be so complicated that the disclosures can never be adequate for over-the-counter sales to retail investors, and that some products can be so high-risk or so unfair that they should not be sold over the counter to retail investors. Just look at the Minibonds. They are an extremely clear case in point. I am sure that some people will say that investors need to take responsibility for themselves, that if they do not understand a product then they should not buy it. I think this is too simplistic a view, and also smacks of hubris. I myself have never bought structured products, because I did not understand them.”
“And Dr Oliver Chen from the NUS Risk Management Institute and Dr Anand Srinivasan from the NUS Business School have stated: "A key consideration in deciding whether such structured products should be marketed to retail investors should be whether the risks involved can be readily understood. Some structured products, whose risks are very difficult to understand, may never be suitable for retail investors." Let me just repeat that – "some structured products, whose risks are very difficult to understand, may never be suitable for retail investors." Both Dr Oliver Chen and Prof. Png are far more learned and know much more about financial matters than I can ever hope to know. If even the experts find these structured products complex and difficult to understand, what hope is there for common people like me, much less the retiree uncles and aunties who have always kept their money in fixed deposits? Can disclosures, however transparent, ever justify the sale of such complex products to retail investors over the counter? The second aspect is this. Can investment products that are so high-risk or so unfair to investors that they should not be sold, especially to retail investors over the counter, regardless of the disclosures made? On 31st October 2008, the Straits Times carried a report on a forum organised by DBS for High Notes 5 investors the day before. DBS reportedly admitted at the forum that the product was not high-risk, that on a scale of 1 to 10, 10 being the highest risk, the product should be between 8 and 9. That makes High Notes 5 an immensely high-risk product. It should not have been sold to investors then. As for unfair products, Minibonds are a striking example.”
“" Surely we also need to recognise this simple fact of life and then address it, instead of continually asking investors to read the documentation and make informed decisions, knowing that the documentation is such as to make that realistically impossible for most or almost all retail investors. In any case, disclosures, as they are presently made, are really a one-size-fits-all approach to complying with the SFA's requirements. But most 70-year-old retirees will have a lot of trouble understanding credit default swaps, reference entities and credit events. They can all be disclosed. They can all be written in bold on the front cover of the document, but would the retiree understand? Would even a 30-something working professional understand? I, for one, am quite sure, I would not. Much has been said about a statement in bold printed on the front cover of High Notes and Minibonds prospectuses, stating that investors may lose all of their investments. But this bold statement, in and of itself, cannot be adequate to satisfy the obligation for adequate disclosure, without being accompanied by either a quantification of the risk of total loss, or an explanation of the ways in which such loss may occur. A mere disclosure cannot be enough – it must be a meaningful disclosure. And when investment products are being sold over the counter to retail investors, and disclosures are put in documents that run into the hundreds of pages, can it ever be possible to have a meaningful disclosure for products as complicated as these structured products were? No less than Prof. Ivan Png, a former Nominated Member, has confessed to not being confident that he fully understands the Minibonds, in his newspaper articles on the subject of structured products.”
“Let us look at the CPF Investment Scheme, for a very clear example of a regulator adopting a differentiated approach in terms of products that are deemed to be too risky for investment. This House recently debated the limits on Town Councils' powers to invest their sinking funds in high-risk products. We make all these decisions for Singaporeans. So, why is the regime under the SFA so different? While we should seek to preserve the maximum investment freedom of individuals under the SFA, that cannot be at the price of suitable protections. So, the question is really about the limits of the disclosure-based regime, about where we should draw the line. I would frame the question thus: are there products that are inherently unsuitable for sale to retail investors over the counter, regardless of the level of disclosure made? There are really two aspects to this question. Firstly, are there investment products that are so complex, that it would never be possible to have meaningful disclosures to justify their sale to retail investors. Disclosures have to be meaningful for the disclosure-based system to work. As one Mr Ng Kwong Yee pointed out in his letter to the Straits Times Forum on 14th October 2008, "It seems the current disclosures serve more to indemnify financial institutions than inform investors in their very complicated and technical method." Indeed, the Hong Kong Monetary Authority, in its report on Lehman-related structured products, explicitly recognised that "investors will not read and understand copious documentation, which is often designed more for the protection of the issuer than for the enlightenment of the customer.”
“ Mr Speaker, Sir, thank you for allowing me to join in this debate. The Minister has explained that this Bill does not address the issues raised as a result of the structured product issue. Even so, I hope that this House will bear with me as I point out some of the changes that I think should have been included in this Amendment Bill. The Securities and Futures Act (SFA) was enacted in 2001, to introduce a disclosure-based regime. The idea is that such a regime will empower investors to make informed decisions. I think it remains undisputed that, on the whole, this is preferable to a merit-based regime, where the regulator decides on the products that may be offered on the market. But that is the general rule. There are, of course, exceptions – situations where rigid insistence on the disclosure- based regime could be more due to dogma than merit, where even the most transparent of disclosures would not be adequate. This idea of an exception is not radical. The SFA itself permits a differentiated approach for products that are limited to so-called "accredited persons" under the Act, which includes high net worth individuals – meaning individuals with net personal assets exceeding $2 million or annual incomes exceeding $300,000. So, at one end of the spectrum, we have different treatment for sophisticated investors. Why should we also not have different treatment at the other end of the spectrum, to protect unsophisticated investors as well? Indeed, logic dictates that at the margins, a one-size-fits-all approach is likely to be inadequate, and that differentiated treatment is likely to be required. And let us go further, beyond the ambit of the SFA.”
“This makes it critical that we ensure that, even as we focus on helping businesses survive the downturn, they are nevertheless required to treat workers fairly and justly. Some of the issues that I have chosen to speak on in this speech may be more relevant to foreign workers than to local workers. I chose to speak on these issues, because the relationship between employers and foreign workers is often much more unequal than between employers and local workers, making foreign workers more vulnerable. In a glooming downturn, it becomes even more important to ensure that the law effectively protects foreign workers, just as it protects local workers. That is why I felt compelled to raise these issues in this debate, and I hope that the Acting Minister will give my proposals due consideration. Sir, with that, I support the Bill. 4.52 pm”
“The Ministry imposes a levy on foreign work pass holders, on the basis that this levy is necessary to avoid local workers being priced out and to prevent businesses from unduly favouring foreign workers over local workers as the cheaper option. At the same time, many foreign workers are clearly being under-paid. Many foreign domestic workers receive salaries of less than $300 a month, while some non-domestic foreign workers, such as those in the shipyard and conservancy sectors, are paid daily wages as low as $14 a day, or $322 or so, a month. These figures are almost certainly far less than the economic value of their services. Meanwhile, the levies on foreign work pass holders range from $150 to $450 a month. If the purpose of the levy is essentially to equalise the cost of employing a foreign worker, then there is no reason why at least part of the levy cannot be passed on to the worker, because the cost to the employer remains the same. This would be fairer to foreign workers, and would also help those who have incurred debts in coming to Singapore to clear their debts faster. Alternatively, even if the Ministry is not minded to directly pay the levy to foreign workers, it could nevertheless use the levies collected for their welfare, for instance, by funding health or repatriation insurance schemes for them. While employers of work pass holders are required to take out health insurance for their workers, the insurance coverage required is low and is usually inadequate for protracted hospital stays or extensive medical treatment. I urge the Acting Minister to consider using the levies for the benefit of the workers without whom there would be no levies in the very first place. Sir, the coming years will test our economy and our workforce.”
“In any case, there are some aspects of the Employment Act which could be extended to cover foreign domestic workers, without affecting the nature of their work. For instance, protections governing the termination of employment can be extended to cover the termination of employment of foreign domestic workers, without affecting their ability to perform their duties. This should not be controversial. I would also like to take this opportunity to call for a compulsory rest day for foreign domestic workers. Much has been said before about this issue, and I will only add a few words. It is to me inconceivable that we consider ourselves a developed society, and yet we do not grant a maid even one day off a month as of right. Imagine that. We cannot find it in ourselves to say that the very bare minimum amount of rest that a human being should get, is one day off after working 29 or 30 days in a row. However, we try to dress that up, however we justify and rationalise the status quo, our failure to prescribe a mandatory rest day is wholly unacceptable and fall far short of the standard of the developed country. Sir, I now turn to my fifth and final proposal which pertains to the wages and welfare of foreign workers. During the public consultation exercise, there was a call for the legislation of a minimum wage. The Ministry rightly rejected this, correctly pointing out that a mandatory minimum wage would lead to rigidity in the labour market, compromise Singapore's cost competitiveness and adversely affect workers. I think that must be correct. Having said that, I believe that there is nevertheless room for some form of wage protection for foreign workers.”
“I therefore hope that the Acting Minister would relax this six-month requirement, and increase the period to a year. Sir, I now come to my fourth proposal, which relates to domestic workers. This Bill extends the Employment Act to cover many more classes of workers, but continues to omit domestic workers, regardless of their nationality. This issue was addressed during the public consultation on the changes to the Employment Act. The Ministry's response then, was that: "Given the nature of their work, it would be difficult to regulate their employment conditions (eg, hours of work, overtime, etc) under the Employment Act. Instead, foreign domestic workers (FDWs) are protected under the Employment of Foreign Manpower Act, which requires the employers to provide for the workers' well-being, safety, accommodation, and salary payments." Sir, this response by the Ministry only addresses foreign domestic workers. But the definition of "domestic worker" under the Employment Act includes gardeners and drivers as well. There are also local domestic workers, some of whom are employed by cleaning agencies, whether on a part-time or full-time basis, to provide maid services to customers. With neither the Employment Act nor the Employment of Foreign Manpower Act applying to them, all of these workers are bereft of any statutory protection, left exposed and unprotected. Furthermore, as I understand it, the Employment of Foreign Manpower Act only prescribes general requirements in work passes, without specifics like in the Employment Act. In the absence of specific requirements, protection for foreign domestic workers may be weak.”
“This is quite understandable, and such workers could be severely disadvantaged by the one-year time-bar. For instance, fixed-term employment contracts are increasingly common in Singapore. Many contract workers sign one-year contracts, while others sign two-year contracts. But this one-year time-bar means that a worker on a one-year contract, who was shortchanged from day one but was reluctant to make a claim until the contract finished, will have to lodge a claim on the first day after the end of the contract. This is unrealistic and unnecessarily restrictive. The problem is especially acute for foreign workers. Their work passes are at the mercy of the employer, creating an even greater deterrent against complaining while they are still serving the contract. Furthermore, foreign workers are typically on two-year employment contracts and work passes. This means that if they wait until their two-year contract expires before making a claim, they will not be able to get recourse for breaches occurring during the first year of their contract. Foreign workers are therefore caught in a Catch-22: complain and see the current contract terminated, or keep silent and have no recourse for breaches in the first year. Furthermore, all claims must be lodged with the Labour Court within six months of the worker leaving employment. Contrast this with the Work Injury Compensation Act. Under that Act, a worker can make an accident claim within one year of the date of the accident. There does not seem to be a good reason why a worker who has suffered a work injury has up to one year to claim for compensation, whereas a worker who has been exploited by the employer only has six months to file a claim.”
“These enhancements are necessary to give teeth to the Labour Court's orders, to ensure that they do not end up being mere pieces of paper. My second proposal is related, and it pertains to the plight of foreign workers who have successfully won their claims before the Labour Court. I understand from the NGOs working in this area that a foreign worker, who is trying to enforce the order against the employer, may sometimes not be allowed to remain in Singapore. While the Ministry will normally grant a Special Pass to a foreign worker pending the resolution of his claim before the Labour Court, I am told that the enforcement of the resulting order is not considered as falling within the ambit of the Employment Act, and therefore the worker may not get his Special Pass extended, such that he can remain in Singapore to enforce the order. If this is true, then the foreign workers who have not found alternative employment and hence have to rely on a Special Pass to remain in Singapore would be unable to enforce the orders. If the Ministry intends to retain the current system whereby foreign workers have to enforce orders of the Labour Court itself, then it should ensure that they can stay on in Singapore for a reasonable period to enforce their judgments. My third proposal concerns the court's jurisdiction over workers' claims. The court may only decide upon matters arising up to one year before the date of lodging of the claim. This one-year time-bar is arguably too short, and should be extended to at least two years. In many cases, especially in bad times where alternative employment could be hard to find, workers will be reluctant to lodge a claim against an employer who has shortchanged them so long as they remain in its employment.”
“Furthermore, this presupposes that the execution is successful – if not, the worker would be out-of-pocket on these legal costs which means it is a bit of a gamble on whether to take up a writ of execution. In cases where an unscrupulous employer plays hardball with a worker and refuses to pay despite the Labour Court's order, a worker could be left without any real recourse despite winning an order from the Labour Court. In such cases, justice would have been denied to the worker. This undercuts the objective of empowering the Labour Court to hear and decide disputes in the first place. So my first proposal is for the Labour Court’s powers to be expanded, in one or both of the following manners. Firstly, the Labour Court could be empowered to order the employer to pay the sum in question to the Labour Court in escrow – who will then in turn pay it to the worker. Employers are much less likely to withhold the sum in question when it is payable to the Labour Court, instead of the worker. A failure to pay within the prescribed period could also be made a contempt of court or an offence punishable by a fine. Secondly, the Ministry could set up a dedicated unit to help the workers enforce the Labour Court's orders. This unit's services would be free to workers, but recoverable from employers as legal expenses, which the Ministry can then retain to fund this unit's operations. Access to this unit could be limited to low wage workers. This proposal, if adopted, could result in claimants before the Labour Court being better off than plaintiffs in court proceeding. I would argue that this outcome is justifiable, on the basis that workers relying on the Labour Court are normally disadvantaged plaintiffs who merit this additional help.”
“After all, the Employment Act is meant to protect workers against exploitation by unscrupulous employers. What does it matter, if the workers in question are foreigners? As a developed society, as a civilised society, we have to be committed to protecting the rights of all workers, not just locals. Because all workers, whether local or foreign, are more than just abstract factors of production; they are human beings, flesh and blood, worthy of our protection. With these principles in mind, I now turn to my proposals for the Acting Minister’s consideration. My first three proposals concern the Labour Court. The Labour Court is empowered to inquire into and decide disputes between workers and employers, relating to the terms of the employment contract or the provisions of the Employment Act. Orders of the Labour Court are enforceable as judgments of a District Court. So if a worker goes before the Labour Court and wins, but the employer does not pay up, then the worker has to take out the necessary writs of execution against the employer in the District Court, to enforce the order. This can cause the worker hardship in certain cases. If the dispute is over unpaid salaries, then the worker will probably be low on cash in the first place. Yet, he is expected to find the money to engage a lawyer to take out writs of execution against the employer. This cannot be right. As a question of law, a worker will be entitled to recover legal costs against the employer. But the worker will have to put up a substantial amount of cash as an upfront deposit, either to cover the lawyer's cost or to the court’s bailiff in the case of a writ of seizure and sale, or to both.”
“Mr Speaker, Sir, I rise in support of this Bill. Sir, this Bill is a timely update to the Employment Act. Since the last substantive update to the statute in 1995, we have seen significant changes to the labour market in Singapore. It is therefore an opportune time to revise the Act. Sir, I do not propose to speak about the actual amendments that the Acting Minister has introduced in the Bill. I am sure the other speakers in this House will do far better than I could. Instead, I will touch on some areas not addressed in the present Bill, which I hope the Acting Minister will consider. But before I go into them, I think it is useful to first set into context the function and purpose of the Employment Act. Sir, our economy is built on capitalist principles, with the fundamental premise being that the operation of the free market should result in the most efficient, and hence best, outcome for society. But events over the past few months have shown that the unregulated free market can be a dangerous thing. It can lead to undesirable, even extreme, results. Clearly, there is a role for government in a free market, and we should not be reluctant or afraid to regulate where appropriate. In the labour market, unequal bargaining power can lead to unfair treatment and exploitation of workers. It is easy enough to point to employees’ freedom of contract, but that freedom can be illusory in many circumstances. This is why we need legislation like the Employment Act, to provide for workers’ rights and to protect workers against exploitation. And, in this regard, there should be no distinction between local and foreign workers. Indeed, the Employment Act itself does not make such a distinction.”
“Sir, I have two supplementary questions for the Minister. First, will the Minister name these statutory boards in question? Second, the statutory boards that have invested in these products in the search of higher returns would have undertaken higher risks. So, I would like to ask the Minister what were the overall returns of these statutory boards' investments over the past five years. Particularly, did the statutory boards have a good historical track record of investments so as to justify the undertaking of such higher risks in search of higher returns?”
“Sir, I have three supplementary questions. My first question for the Minister is whether MAS will expand the scope of its review to include how such products are structured, in particular to examine instances where retail investors end up effectively insuring the originator of the product as with the mini-bonds. And will MAS also consider whether originators and distributors of structured products should be required to clearly disclose their profit margins and commissions earned, as with insurance products? Sir, my second question is to ask what is MAS' view on the recent complaints by investors that DBS has been acting too slowly and, in some cases, has even been non-responsive. My third question is whether MAS is taking proactive steps on other structured products not linked to Lehman Brothers where mis-selling could, nevertheless, have occurred.”
“Mr Speaker, Sir, I would like to thank the Minister for his response and assurances to this House. I only have one supplementary question, which is to ask the Minister what is the status of the inquiries by MINDEF into the deaths of the late 2LT Clifton Lam and the late REC Andrew Cheah, and, given the public interest, will the results be made public.”
“Sir, I have four supplementary questions for the Acting Minister, but they are all related. The first question: the Acting Minister has referred to special passes for workers who are required to stay to be prosecution witnesses. I would like to ask the Acting Minister at any given time, approximately how many workers will be on such passes, and of these workers, how many of them actually do manage to make use of the temporary work pass to find alternative employment. My second question is this: of these workers who are asked to stay behind to be prosecution witnesses, are there any special provisions to assist them with housing? Because there will be a period of time where they are looking for alternative employment, and so they will not have accommodation, and what assistance will we be giving to them, given that we are asking them to stay in Singapore? The third question relates to the workers who are not required to stay as prosecution witnesses. My understanding is that they are then repatriated back to their home country. Is there any allowance to help them look for alternative employment because, as I understand it, all these workers want to stay in Singapore to work to pay off their debts incurred when they come here. And that leads me to my final question, Sir. Does the Ministry intend to relook the industry structure because all of these workers are vulnerable because of the debts that they incurred when they come to Singapore, which is why they want to stay? Does the Ministry intend to investigate this and look into how the industry can be better structured, so that the workers are not saddled with very high debts before they start work?”
“When the investments by GIC and Temasek perform poorly in a financial year, could this affect the expected long-term real rate of return in the next financial year, which would then affect the amount of funds available to the Government to use in helping Singaporeans? It will be even more unsatisfactory to Singaporeans, if they learn of more big investments using their reserves that do badly, and are told by the Government that it does not micro-manage GIC or Temasek and that they invest for the long term. That was the answer given when the investment into Shin Corp was made, and when the investments into the financial institutions such as UBS, Citigroup and Merrill Lynch were made, and many Singaporeans were not satisfied with that answer. We can expect them to be much more unhappy in similar cases in future, because their well-being could become much more directly affected by the performance of such investments. The Government will have to be much more conscious of this moving forward, and will have to better accommodate and address the concerns and questions of Singaporeans with regard to our reserves. Sir, I have made some criticisms of the Bill, and have touched on some areas of concern that I hope the Minister can clarify. But there should be no mistake in whether I agree with the objectives of this Bill. I firmly do, and I endorse it even though I am not able to vote on it. With that, I support this Bill.”
“This would be the perfect answer to those who are concerned with ensuring that the performance of Temasek and GIC are adequate. There is also a question over the treatment of unrealised capital losses. The definition of "realised capital gains" includes realised capital losses. So, how will unrealised capital losses be addressed? Does GIC adopt any form of mark-to-market accounting that would capture such losses? I hope the Minister can shed some light on this. Finally, I would like to take this opportunity to touch on the investments made by Temasek and GIC in the recent past. I do not propose to discuss the merits or otherwise of the massive investments into the financial institutions. I believe that it is perhaps too early to tell whether or not they were wise. However, I would make this point. Now that the returns from the reserves have assumed a much more important role in the Government’s budget, the reserves have become even more relevant to the people. This Bill will more closely align the size and performance of our reserves, with the well-being of Singaporeans. Singaporeans frequently ask, "What is the point of having massive reserves that are never touched and are never used to help us?" With this Bill and with these changes, the point should start becoming clear to the people. That being the case, Singaporeans will expect more transparency, more accountability and sustained good performance in the management of our reserves. That is because the Government’s ability to help and improve the lot of Singaporeans will become more tied to the continued strong performance of our investments.”
“One would also expect the expected long-term real rates of return to be consistent over time, but there is no way for the public to ascertain whether the agreed rates between the President and the Minister are indeed consistent over time, or whether they change radically from year to year. These are potential flaws that could weaken the strength of the system we have put in place to protect our reserves. Still on the issue of the expected long-term real rates of return, these rates effectively set a benchmark for the performance of GIC. That must be so, because the rates effectively state the returns that we expect the assets managed by GIC to achieve over the long term. That being so, I hope the Minister can confirm whether the long-term performance of GIC will be assessed against these agreed rates, and if so, how that will be translated into a system to measure the annual performance of GIC, which admittedly will fluctuate from year to year. But if the Minister does not intend to use these agreed rates as a benchmark for measuring GIC’s performance, I hope the Minister can clarify why not. Indeed, this further strengthens the case for including Temasek Holdings under the new formula. When the Government was queried on the performance of Temasek Holdings and GIC in the past, it has consistently maintained that it looks at their performance over the long term. This is an answer that, I dare say, has not sat well with many Singaporeans. We now have a mechanism for assessing the long-term performance of our reserves. So, why not take advantage of this opportunity to place both Temasek and GIC within this framework, so that in future there is an objective benchmark against which the performance of these companies can be measured?”
“Following from this exclusion of Temasek’s portfolio of assets from the new formula, it becomes possible for the Government of the day to manipulate the actual amounts that become available for use under the new formula. If the Government of the day wants to increase the returns from the reserves that are available for usage as net investment returns, it may seek to transfer assets from Temasek's portfolio into the assets under GIC's management, so that these assets then become relevant assets to which the new formula applies. This possibility cannot be desirable. There should be more transparency, and more controls, over the allocation of reserves between the respective portfolios of Temasek and GIC, so as to prevent such situations. Of course, bringing Temasek Holdings under the umbrella of the new rule will obviate any such manipulations. Also, on the point of transparency, the President and the Minister have to agree on the expected long-term real rates of return of our reserves at the start of each financial year, and the Minister then has to certify to the President the amounts available for spending using the agreed expected long-term real rates of return. Prof Thio has rightly noted that the President may have difficulty in determining whether the Minister's proposed rates are appropriate. Furthermore, the Constitutional provisions do not require the rates of return, or the basis upon which they were calculated, to be published. There is, therefore, no way for Singaporeans or this House to evaluate whether the agreed rates are appropriate.”
“Having said that, I have a few concerns that I hope the Minister can address and, perhaps, clarify. Firstly, the new formula will not apply to Temasek Holdings' portfolio of assets which is not included in the definition of "relevant assets" introduced by clause 3(d) of the Bill. The new formula applies only to relevant assets which will comprise only the assets managed by the GIC and the assets of MAS, less the Government's liabilities. The Minister has stated the reasons for excluding Temasek Holdings, but this exclusion remains surprising. After all, Temasek is reported to have achieved a historical annual rate of return of 18% or so. Temasek is perceived to be similar to a private equity fund, which is prepared to make higher-risk investments than GIC. In a way, it is the higher-risk and higher-return portion of the Government's diversified portfolio. Presumably, the higher rate of return enjoyed by Temasek over GIC is at least substantially due to capital gains in Temasek’s portfolio. To exclude Temasek’s portfolio from this new formula would be to undercut the new formula and remove much of the potential benefits. The sizes of GIC’s and Temasek’s portfolios are not publicly known. It is, therefore, impossible for the public, and indeed this House, to ascertain what are the effects and repercussions of excluding Temasek’s portfolio of assets. Hopefully, the Minister can elaborate on why Temasek’s portfolio is excluded from the new formula, and what impact this exclusion will have on the amount of incremental budget that would have been available to the Government. In this regard, it will also be very helpful if the Minister could shed some light on what are the Government's estimates of the fiscal effect of these changes.”
“Mr Deputy Speaker, Sir, thank you for allowing me to participate in this debate. As a Nominated Member, I will not be able to vote on this Constitutional Amendment. Nevertheless, I wish to express my support of this Bill. Sir, the world is on the verge of a global recession or has possibly already entered one. Indeed, Singapore is already in a technical recession and things will almost certainly get worse before they get better. The Government has always said that it is building up the reserves for a rainy day. Well, it is going to thunderstorm over the next few quarters and Singaporeans will be expecting the Government to use the reserves to help Singaporeans. So the timing of this Constitutional Amendment could not have been better. This Amendment will unlock more of the investment returns from our reserves to fund social expenditures than are needed today. The economy has in recent years become less reliant on direct taxes and become more reliant on indirect taxes. But with the upcoming economic troubles that Singaporeans will inevitably start running into, this means that there will be less tax revenue precisely at the time when more help is needed for struggling Singaporeans. So being able to tap on more of the returns from our reserves will go a long way in helping the Government balance its books. The Minister has explained the mechanics of this Constitutional Amendment and I will not go into that. It suffices to say that the current formula artificially excludes capital gains from the calculation of investment returns from the reserves and the new formula corrects this by including realised capital gains in the returns that may be used, and hence presents a much more accurate measure of these returns.”
“Sir, my final question is to ask the Minister how would he evaluate the performance of MAS as compared to, for example, the Hong Kong Monetary Authority which has faced very similar situation, very similar instances of consumers being mis-sold and yet seems to have been much more proactive in managing the situation?”
“Sir, I have three supplementary questions for the Minister. My first question comes back to the question of timeline for MAS' investigations. Given that MAS has given the financial institutions four weeks, a timeline of four weeks to review each complaint, I think most consumers in Singapore would also expect MAS to commit to some kind of timeframe, perhaps a question of months. So I hope the Minister can give this House some assurance that there will be a commitment on the timeframe. My second question, Sir, relates to the Minister's comments on the priority being given to vulnerable investors. I would like to ask the Minister whether this means that other investors, who have been subject to mis-selling by the financial institutions, will not receive due recourse because if the focus in the FAA is on appropriate conduct by the FIs, then it does not really matter whether or not the investor is vulnerable or not. The focus should be on mis-selling and not on the status of the investor. Sir, my third question is on the manner of disclosure. The Minister has given a very detailed response in terms of how disclosures are captured in the prospectus and how the MAS reviews the prospectus. But, Sir, prospectuses are very complex, huge documents that very few people read. So I would like to ask the Minister whether or not MAS agrees that these kinds of disclosures are not meaningful and do not result in informed consent and also there is a very valid question on those who are not English-educated.”
“Sir, I would like to thank the Prime Minister for a very comprehensive speech and response, but I have two clarifications for the Prime Minister. Firstly, the Prime Minister has described our system as being a second model where voters vote for a party and not the candidate. Is the Prime Minister then advocating some sort of system of proportional representation which is really the pure form of such a second model? And my second clarification, Sir, is that this second model is about voting for a party. Is it then the PM's position that, if in future an opposition party holds more than one seat in Parliament and one seat is vacated, he will allow the other MPs of that party to cover for the vacated seat?”
“Sir, may I ask the Prime Minister for two clarifications?”
“It would stretch reasons and credulity to argue that a by-election is not necessary even if half or more of the elected Members for a GRC have vacated their seats. Sir, this motion presents an opportunity for this House to advance the call of representative democracy in Singapore. I myself support the motion even if it does not go as far as I would like it. Sir, with that, I support the motion. 5.31 pm”