Archive for April, 2012|Monthly archive page

Property: Rich Indons buying in London

In Indonesia, Property on 30/04/2012 at 7:17 pm

More wealthy Indonesians are looking to buy a second home in London, while interest in Singapore has waned, according to Property Report, a real estate magazine, citing a study by global property consultancy Knight Frank, earlier this month.

“Interest from Indonesian-based purchasers in London property increased by over 100 per cent last year … Indonesia moved up two places last year in Knight Frank’s rankings of Asian buyers in London, from 11th in 2010 to ninth position… weakening of the British pound against the rupiah has made the idea of buying property in London more attractive to wealthy Indonesians”.

Even though Singapore remains the No 1 destination for Indonesian property investors, the Republic’s recently-introduced additional buyer’s stamp duty was having a “cooling effect”, the report said.

BTW, lots more Muslims and rich people there. The Arabs love London, so do the Russian rich.

Knight Frank also said Singapore remains the favourite for the Indonesians, “Indonesians are among the top-three property buyers in Singapore after China and Malaysia. Last year, Indonesians bought 1,714 properties in Singapore. In the first quarter of this year, the number was 137”.

“We estimate that Indonesians spent 1.5 trillion rupiah (S$204.5 million) on property in Singapore (last year)”.


Integrating FTs: It’s our problem now/ News management

In Political governance on 29/04/2012 at 10:01 am

As readers may have noticed (a friend already has) that I’m getting less critical of the governing PAP. I told him (a Quitter done gd overseas) that after Raymond Lim “resigned” shumething is being done abt public tpt, there is more help from the poor by “Kee Chui” Chan (unlike the grudging, belittling efforts of VivianB, his predecessor), something (other than denial) is being done in public housing and flood control, got rid of a policy that incentivised civil servants to “make money” from us, and at least the govmin is “talking the talk” in immigration. I’m not too fussed abt the attempts to control us bloggers. Now if shumeone like Shanmugam was put in charge, I’d be a bit more concerned. But Yaacob (the minister who presided over two once in 50-yrs floods in two months) is the guy in charge of taming the internet deluge.  Yes inflation is a problem but I’m sure Tharman will solve it.

Besides I’ve been brought up to recognise when a person corrects his mistakes, even if he refuses to acknowledge them. Well the governing PAP is correcting some of its mistakes, even if it refuses to acknowledge that it can goof.

But I’m very annoyed that  Deputy Prime Minister Teo Chee Hean said according to a CNA report that“Singapore needs to remain open and to welcome diversity … Mr Teo said Singapore needs to pay extra attention to facilitating the new immigrants who are ready to sink roots here, so that they integrate into society more quickly … urged Singaporeans to do their part to make newcomers feel welcome, and to help them imbibe the values that have made Singapore strong as a society.”

Hey minister and governing PAP, it’s yr problem. Fix it. S’poreans did not ask the government to liberalise immigration. It was govmin policy to liberalise immigration so as to force feed GDP growth with cheap labour and to compensate for the refusal of S’poreans to breed like rabbits. GDP growth has been gd, but the benefits did not accrue to retirees like me (OK I exaggerate, I’ve benefited from increasing listco and reits payouts, and gd, low-cost service from FTs) or ordinary S’poreans who faced stagnant wages but escalating property costs, ever-increasing public transport fares on ever more crowded, and dangerous buses and trains).

On a totally unrelated topic, the CNA report that contained the above has been re-edited re-written and expanded to almost focus on “Social media is a double-edged sword: DPM Teo” as the headline now reads. The previous headline had the word “open” in it. The only mention of immigration now is, “Another driving force – immigration. Mr Teo said Singapore needs to pay “extra attention” to new immigrants who are ready to sink their roots here. He urged Singaporeans to play their part in making new citizens feel more welcome.”

Wonder why the constructive, nation-building did this?

The Philippines: Its time has come finally?

In Emerging markets, Temasek on 28/04/2012 at 10:25 am

With even my dogs knowing abt the Indonesian story, while investors are getting excited about Cambodia and Burma, rightly, and rediscovering Vietnam (later abt it in the week), the Philippines has been quietly (a surprise as Filipinos tend to be excitable, boastful and noisy) getting things right.  

But some investors are aware and reaping the benefits. Last yr, the Philippines stk market was the 7th best performer (and I think tops, 2.% rise, in Asia: yup was a bad yr overall for Asian and global mkts), and so far this yr it is among the top 10 globally, up more than 20%.

The Philippines, after years of indebtedness, is a net creditor.
the country is getting its fiscal house in order. … The deficit has narrowed from a worrying 5-6 per cent a decade ago to a manageable 2 per cent …
the political situation is vastly improved. (The FT (recently) via Today.

Remember that Brazil is finally becoming the powerhouse it always had the potential to be after almost 100 yrs of disappointing investors regularly. But then Argentina has gone the other way. Bulls can only hope that Filipinos are more like Brazilians, even though they like the Argies have Spanish blood, rather than Portugese blood)

BTW, Temasek is Filipino-lite. When it was unfashionable to own shares in the Indonesia, it had major stakes in Danamon (now being sold to DBS) and BII (sold at very high valuation to sucker MayBank) and in Indosat (sold at nice profit). It doesn’t own anything direct in the Philippines: no banks, no telcos.

Local banks presence is pretty light in the Philippines when compared to Indonesia. DBS has a 21.4% stake in BPI via its 40% stake in Ayala DBS where Ayala has the majority 60% stake. UOB seems to have a 2% stake in BDO Unibank which has juz called a massive US$1bn rights issue. OCBC doesn’t seem to have a presence in the Philippines. All three local banks have subsidiaries in Indonesia.

Singtel has major investments in the Philippines (via Globe 47% which it controls together with Ayala 32%) and in Indonesia. Global is the second largest telco in the Philippines.

Temasek’s Chinese banks have an unending appetite for capital

In Banks, China, Temasek on 27/04/2012 at 6:54 pm

Regular readers will know that Temasek’s investments in Bank of China and China Construction Bank are great investments. It came in as a pre-IPO cornerstone investor and unlike the Western banks that had similar status had not sold out. Gd friend of China. It trades out and in of these stocks to make realised profits. But these trading profits are peanuts as the trading positions are peanuts in relation to its holdings in these banks

And that it recently bot Goldman Sach’s remaining stake in ICBC, at a slight discount to its mkt price. 

As this article explains these banks have an unending appetite for capital because they are “squeezed for capital”. So Temasek has to be willing to cough up more of our money if it wants to avoid being diluted when rights issues are called.

SMRT: Reality hits shareholders

In Infrastructure on 26/04/2012 at 7:47 pm

SMRT is down another 2% today closing at 1.70 (-o.o35). It was down 4% yesterday (Wednesday) closing at 1.735 (-0.075)

Well with Tuesday’s announcement that SMRT’s eight-year $900m programme to upgrade many infrastructural and systems components on the North-South and East-West lines would exceed what it had spent on repairs and maintenance in the past 10 years, and

— no details on how the cost will be co-shared with the Land Transport Authority (to be negotiated); and

— no details on many parts of the upgrading programme,

the sell-offs were to be expected.

What was surprising was that the stock was trading 1.81 on Tuesday  As I mentioned here last week, I was surprised that the stock had not fallen after the most recent problems on the Circle Line. In fact the stock had gone up since 9 April , when OCBC called a buy at 1.74. This despite the ongoing inquiry had yet to allocate blame, and no announcements (then) of spending plans to maintain and upgrade the system so that it would be fit for purpose.

Mkt in SMRT shares was not efficient.

Yaacob’s “Three steps” to Heaven”: Analysing Steps 1 & 2

In Internet, Media, Political governance on 26/04/2012 at 7:25 pm

(Or “Doc’s cure Part I: a purgative)

PAP’s Heaven that is. Hell to us netizens. OK, let’s not exaggerate, more like Purgatory.

Sorry, Back to the headline. There are three steps that Yaacob wants taken to tame “cowboy towns”:

Step 1: “The Internet community creates a code of conduct for responsible online behaviour”

Step 2: “Citizens set up websites that offer constructive viewpoint” i.e. he said that the best way to go is to encourage other sites to emerge, “that can continue to offer constructive ideas and useful suggestions”.

Step 3: “Major media cos could help set the right tone online”

Step 1 has been well covered by netizens since he articulated it many moons ago. All I will add to the noise is this analysis

— If the government tries to regulate us bloggers, it’ll do more harm than good, for the government itself, the PAP and for S’pore. The government and PAP are no good in designing social systems: even the CCP in China acknowledges it cannot be the only social architect, it is only one of the players, albeit the one that can throw other players into jail.  The PAP government has a further problem given government’s desire for a knowledge-based economy, but with knowledge and the economy increasingly dependent on access and the use of the internet, it can no longer control the information S’poreans get. The internet and, in particular, social media have created a level of transparency never ever seen before in S’pore. Even taking into account the lack of publicly available government data, people can still research complicated issues with a few clicks of a mouse. The PAP government can no longer control the agenda or the framework within which discussions take place.

Even manufacturing is becoming social: read the Economist, the magazine where the government got its ideas for COEs, and CBD charges, among other “screw the poor” ideas.

— In the context of the other two steps, it is totally irrelevant. It has nothing to do with getting citizens to set up websites “that offer constructive viewpoints” or” with the local media helping readers to “separate the wheat from the chaff”.

— And even after asserting that the internet should grow as a platform for “serious discussion”, Dr Yaacob said a site cannot be stopped “just because we disagree with it”. There’s “nothing wrong” with “more sites available that offer alternative views, but as long as they are constructive … based on proper analysis”.

On Step 2, “Citizens set up websites that offer constructive viewpoint”, my first tot was, “Err whatever happened to FTs, that ministers so treasure? They don’t do “constructive” websites? Or are they banned from doing “constructive websites” but allowed to do “unconstructive” websites (citizens are discouraged from doing these sites)? Or are FTs banned totally from setting up websites on S’pore? Or all websites?”. If the last “wah lan” what kind of FTs do we want? Only goodie-two shoes (as defined by the PAP) like “No NS for me” from Msian-born Puthu or “Food is gd is M’sia” from Msian-born Ms Foo”. Incidentally, both became PAP MPs.

And he is talking rubbish, “If there are no good online sites or platforms that offer good views, people will naturally gravitate toward those that are popular and available.” Well people will always gravitate to sites that support their point of view. Ask the watchers of Fox TV in the US. And to “yellow culture” websites that promote decadent lifestyles.

But my biggest grouse with him on Step 2, is that what are “good” and “constructive” websites with “proper analysis” to  enable “serious discussion” and “useful ideas”, are defined by the PAP government. It’s the usual “setting the agenda”, framing the issue game that the government is always playing.

And it’s clear that by saying the local media can help readers to “separate the wheat from the chaff … our major companies, which have an established presence, can set the right tone online as well, with good practices of information sharing and moderation on the various online platforms”, his definitions of “good”, “constructive”, “proper analysis”, “useful ideas” and  “serious discussion” are the same definitions used by the PAP government to describe its ideal mainstream media, and the local media when it describes itself. He only left out “nation-building”*.

As this post is getting too long, I leave for next week examples of what I speculate are the practices he wants our “citizen”, “constructive” websites to learn from the local media: publishing misleading photos or rewriting letters-to-the-editor  to misrepresent the views of the writers?

For now, I’ll leave you with some light relief, “[T]o disagree with the Government is not a crime, but let’s put it on a rational objective footing. The Government has never shied away from that and that is something we look forward to, so that the Internet community can add to the discourse.” Wonder if the late JBK, Dr Chee or TOC would agree?


* Actually he didn’t The Jakarta Post reported that he “noted that Singapore’s media model is one based on forging consensus and facilitating nation-building, in which social cohesion is preserved while empowering people to make informed decisions as a society.”

Not another excuse to promote S-Reits?

In Financial competency, Property, Reits on 25/04/2012 at 6:37 pm

(Or “S-Reits: Is an amber light flashing?”)

Regular readers will know that I’m up to my eyeballs in Reits (AMP, Fraser, Lippo and Ascendas India, ya I know AI is a biz trust, but it’s a Reit except in form). Greedy for the yield, what with inflation at above 5%. And no high salary to fall back on. In fact no salary at all. (((

Generally Reits are up 10% in 1Q, and taz without taking into account the payouts! So I’m not complaining.

But I’m getting concerned abt future total returns (price + payouts) when the expected appreciation of the S$* is given as a reason to buy Reits. “If they [investors] expect the dollar to appreciate … there will be more interest in Singapore-dollar-denominated assets … Reits that are listed in Singapore and traded in Singapore dollars will benefit as well,”  someone senior from SIAS Research was quoted by MediaCorp as saying recently. And remember that SIAS is the self-proclaimed watch dog for retail investors!

WTF, ever heard that quite a number of Reits are diversified geographically, or are exposed to a specific country like India, China or Indonesia? If a Reit has oversea income, that income would be “reduced” when translated into an appreciating Singapore dollar.

Anyway, as of last week, DBS Vickers liked Mapletree Logistics Trust, Ascendas India Trust and Frasers Commercial Trust. These were Reits to accumulate ahead of payout declarations because it expected the payouts to exceed mkt expectations.

CIMB favoured CapitaMall Trust and Frasers Centrepoint Trust for their retail exposure and strong growth potential. And OCBC prefered industrial REITS, which offer yields in excess of 8% to outperform.

But do remember that unlike companies, Reits have by law to payout out 90% of their income. There is no such thing as keeping something for “a rainy day”. Something that “dividend stocks” like Haw Par, SPH or F&N do. With a Reit, if income drops, the payout drops and the share price will drop to reflect the reduced payout.

As a Reit investor, you got to sell when the going gets good, or be prepared to hold it through down-cycles and be prepared to cough up monies then for rights issues to shore up the financials.  Net-net, could use up the payouts you got in gd times.  


*Following the recent announcement by the central bank to allow the Singapore dollar to appreciate at a faster pace.

Sex & the State

In Political governance on 24/04/2012 at 7:19 pm

(Or “What MinorGate tells us abt the “system” netizens love to hate)

Ignoring the personal tragedies of disproportionate consequences for the accused even if they are acquitted, and the sordid details, there are some important facts that we should take note of.

Among the scion of a rich family, an expat ang moh ex-banker from UBS, professionals from the finance industry, an executive director of a company, and senior managers are a former school principal, a former head of strategic planning at the Police Training Command, a former senior lawyer for Singapore’s environmental agency, a scholar-teacher and a naval officer. What it means is that senior public officials can afford to pay between $450 and $750 for one session of sex (the alleged range of fees).

So it is clear that salaries in the public sector are now comparable with that of the private sector. No need to worry about talents leaving public service for more money in the private sector.

(BTW, wonder if the senior officials used cheap hotels or were using the expensive hotels, including Marina Bay Sands, and M Hotel. If the latter, the WP and Lina Chiam should be asking questions in parliament abt whether the salaries being paid to senior officials and officers are excessive.)

Next, as this under-age sex case comes less than three months after Singapore removed its chief of civil defence and replaced the head of its police anti-drug unit in an investigation by the anti-corruption watchdog of “serious personal misconduct”, as “public” servants constitute 13% of the cases brought in MinorGate, and as there are rumours that an ex-senior, high-flying SAF officer, will also be charged, one can reasonably, mischievously and sardonically wonder if there is a hunger among senior public officials for illicit sex?

And given that these officials do not seem to have a hunger to make money illegally, maybe high public sector salaries to make sense. And maybe the Pyramid Club (where the elite of the public servants relax) should arrange sex sessions for members so that senior public servants don’t feel that they have to hunt for sex?

Seriously, the government should be concerned that these senior public officials seem to have an attitude to sex that is not reflective of the wider public mood. The public seems to be more puritanical than these officials, when it comes to sex: cheating on the wife, and using prostitutes are not acceptable behaviour. If the public starts getting the idea that there are many more senior public officials who are cavalier abt sexual morals, there will be a serious loss in the moral authority of the government.  

So the HR people in the public sector should be seriously thinking of conducting courses for scholars and other high-flying senior officials on how they should behave sexually. And perhaps provide confidential counselling sessions for those who have trouble controlling their urges?

The government should also be concerned abt the loss of talent and the money wasted on educating and training these scholars and the others.

Now something nice to say abt the “system”.

The “PAP and government are bastards and always wrong” brigade are at it again. They rant and rage that the men charged, shouldn’t have been charged because the charged men didn’t know. (Obviously, they are gullible enough to believe the men’s defence. Don’t they realise that the men would say this, wouldn’t they?)

And that anyway the consequences for the men whatever happens to them is out of proportion to the charges. Very true this.

But if charges had not been brought, with only the pimp being prosecuted, these same people would be ranting and raging “cover up” because the “rich and famous”, an ang moh FT banker, scholars, and other senior government people were involved. “The system is corrupt,” would be a cry we would read in TOC and TRE, and SgDaily and S’pore Surf would be chock-a-block with links carrying the same message. And Yacoob would have another excuse to call us netizens “irresponsible” and other nasty names.

As it is, there are the usual anonymous defamatory allegations on, for example, TRE, that the gal is well-connected. And all because it is the law that she cannot be named publicly, because at the time she was allegedly having sex with the accused, she was still a minor. The authorities have no discretion on the matter of naming the girl.

The government, the police and the Attorney-General* deserve some credit for allowing the law to run its course so that justice is not only done, but seen to be done? A lot of credit in my opinion.


*There is a gd public policy reason for prosecuting all the alleged cases of paid sex with the gal, even if it is proven that the gal is a “hard core prostitute”. It is to ensure that the “excuse” of “I didn’t know” is never ever available in any such a case. Otherwise, every Ah Beng, Brudder or Countryman will claim “Didn’t know” as an excuse when making representations to the AG not to prosecute, and then bitch, moan and rant that he isn’t well-connected enough when the AG decides to prosecute.

BTW, ever tot that the gal has mental health problems? We juz don’t know, and shouldn’t rush to condemn her on media reports, and the statements of lawyers representing some of charged men.

Corporate governance: Better value elsewhere in region?

In Corporate governance, Economy on 23/04/2012 at 7:24 pm

Chart shows that the authorities are pricing S’pore out of fees to themselves, and to the accountants, lawyers etc based here by making S’pore more expensive than HK when it comes to charging cos fees to set-up and maintain here. HK is the leading Asian centre for registrating and maintaining offshore companies outside of the “Sunny places for shady people” to misquote Somerset Maugham.

And S’pore non-executive directors are well paid and do less work vis-a-vis our neighbours.

Non-executive directors (NEDs) in Singapore got the second-highest pay when compared with directors in Malaysia, Indonesia and Thailand, a report by Hay Group showed yesterday. Those in Indonesia were better than S’porean NEDs.

But boards in Singapore also meet the least often, and hold the least number of committee meetings compared with their regional peers.

The management consultancy analysed data collected from 200 large companies in the four countries from 2008 to 2010.

The results showed that at the median level, NEDs from large companies in Singapore were paid US$75,300 in 2010, second to those in Indonesia, who took home US$178,600.

By comparison, NEDs in Thailand and Malaysia received US$46,600 and US$46,300 respectively.

In Indonesia, NEDs take home a substantially higher pay because state-owned companies and some private companies stipulate their pay to NEDs as a percentage of the president-director’s compensation for both the salary and bonus portions. These which are supposedly linked to performance – already made up about four-fifths of NEDs’ pay.

Most of the remuneration for NEDs in Singapore, Thailand and Malaysia is made up of a flat fee, not performance-linked.

The salary of NEDs in the region have been heading higher over the past few years.

In Singapore, the increase was 9% in both 2009 and 2010, while in Malaysia, the NED pay rose 17% in 2009 and 3% in 2010.

In Indonesia, the increase was% 13% and 10% respectively in 2009 and 2010. In Thailand, the NED pay rose 14% in both years.

Thai companies held the most number of board meetings between 2008 and 2010, on a median level. In 2010, an average of nine board meetings were called by the 48 Thai companies reviewed.

Singapore fared the worst, with the 50 companies calling just five board meetings each in 2010. Malaysia’s top companies held six meetings, while those in Indonesia conducted seven.

Indonesian companies also had their audit committees meet more than 10 times a year between 2008 and 2010, which is significantly more often than in Singapore – at four times a year – and Malaysia, at five times a year.

As audit committees have a heavier responsibility than other committees, in Singapore, the chairman and members of the audit committee get higher annual retainers than those in other committees. Thai cos also do something similar

The median tenure of independent directors is the highest in Singapore, which stands at seven years. Malaysia follows with six years, Indonesia is at four-and-a-half years and Thailand has a median tenure of three years.

Proposed revisions to Singapore’s Code of Corporate Governance note that companies must explain the reasons that a director who has served more than nine years on the board is still deemed independent.

Hay Group’s review showed that 62% of the top companies in Singapore have at least one independent director who has served more than nine years on their board.

S-Chips are not the only Chinese junk exports, ask the US and HK

In China, Hong Kong on 23/04/2012 at 6:44 pm

The 180 Chinese companies that went public around the world since the beginning of 2010 are trading at an average of 21%  below their IPO prices, Bloomberg News reports.

In Singapore, the third-biggest market for such listings after Hong Kong and New York, eight Chinese companies that went public in 2010 have declined an average of 47 percent from their offer prices, the data show. That compares with a drop of 15 percent for the 23 non-Chinese firms that had IPOs in 2010.

And trading volumes are shrinking. In the last 12 months, trading volumes in S-Chips have halved. [Update on 24 April 2012 at 7.20pm]

But HK and the US are doing something. Regulators in Hong Kong are set to propose rules that would make banks liable for faulty IPO documents, Reuters reports. And earlier today, Hong Kong’s securities regulator fined a brokerage firm and revoked its corporate finance licence. Mega Capital (Asia) has been fined HK$42m (US$5.4mfor “inadequate and sub-standard” diligence work and “failure to act independently”. The firm was the sole adviser to Hontex International, which had raised HK$1bn via a share sale in 2009. BBC Online

In the US, the SEC and FBI have been investigating people allegedly involved in fraud in China-based companies listed on US exchanges. Latest [25 April 2012] SEC investigations and analysis of the complicated structure that overseas listed Chinese cos (including S-Chips) have to adopt to list overseas which makes malpractice easier..

Err waz happening here? We are told by an SGX non-executive director that SGX is “a private club” despite it regulatory role. He said this recently when representing SGX in court as SGX’s lawyer in a case involving a S–Chip. Article 14 analyses the case.

When will this happen to a S-Chip?

In China, Corporate governance on 22/04/2012 at 7:20 pm

It may be a tiny Chinese educational company worth a little over $200 million. But the ChinaCast Education Corporation has found itself embroiled in a battle worthy of a John Grisham novel.

Its ousted chief executive, Ron Chan, has been accused of aiding in the disappearance of ChinaCast’s chops — ornate corporate seals that are needed to approve everything from paychecks to contracts.

And recently more than a dozen men claiming an association with Mr. Chan burst into the company’s Shanghai office twice, violently carting off several computers from the finance department, according to a United States regulatory filing.

No wonder S-chips are finding it difficult to get people to be non-executive or independent directors.  And the row between China Sky’s former independent director Yeap Wai Kong and SGX doesn’t help. He took SGX to court in an attempt to quash its public reprimand issued against him in December 2011. The court is hearing the case.

What Tin Pei Ling could teach Dr Lam

In Political governance on 22/04/2012 at 7:06 pm

(Or “PAP MP calls for welfare for poor, ill PRs: What abt locals?”) 

After the Ministry of Health (MOH) announced a general reduction of healthcare subsidies for PRs*, the chairman of the GPC for Health, Dr Lam Pin Min publicly said that some PRs may still need further help to adjust to the changes. Dr Lam hoped that the MOH can set up a special fund to help PRs who cannot afford their medical bills and have nowhere to turn to for support.

While Singapore PRs should be glad that there is at least one Singapore MP looking after their interests despite them not having the vote, Dr Lam is peeing on the wrong tree.

He shld know that in S’pore, self-help (including help from family, relations and friends) and, if that fails, aid from charities is what S’poreans in trouble are conditioned to do. The government has always said welfare should be the last resort, not the automatic default. If this is true for true blue S’poreans, why should PRs be any different? PRs tua kee, is it Dr Lam?

When one Tin Pei Ling found out that there were poor, elderly S’poreans in her ward who were having problems paying their SingHealth medical bills, did she stomp her foot, and demand that the government give more subsidies?

No. She somehow raised a $150,000 fund to help “squeezed” elderly constituents with their SingHealth medical bills.

If Dr Lam is genuinely concerned abt the plight of poor, ill PRs, he should learn from Tin. Don’t ask the for government handouts, but go raise the money for a fund that will help PRs pay their SingHealth medical bills.

BTW, I’m wondering why Sengkang West SMC doesn’t have any “squeezed” elderly constituents who need help with their SingHealth medical bills? I do know that the area’s polyclinic is chock-a-block, which shows that residents can afford to use SingHealth.

Or is it juz that he doesn’t care about the voters in his SMC? They will always a PAP MP, no matter what.


*With the adjustment, the subsidy for PRs in most income bands will be revised to about half the corresponding subsidy that Singapore citizens receive.

Burma: Wake up S’pore

In Emerging markets, Political economy, Political governance, S'pore Inc on 22/04/2012 at 6:39 am

Japan has agreed to write off more than US$3.7bn of debt owed by Burma and to resume development aid.  The leaders of both countries  also agreed to plan a special economic zone near Rangoon.  This could give Japanese firms a head start in winning business in what is seen as one of Asia’s last frontier markets.

Hey could have been S’pore planing a SEZ with Burma! We are “old friends” of Burma. And GLCs and TLCs got experience of building biz parks in Vietnam and China. Come on Georgie Boy. Go broke deals between S’porean cos and Burmese ones and the government. Too comfortable, what with big fat pension? Or planning to reform PAP? Or planning to be president?

(Ya aware that three postings in row abt Northern ASEAN countries. But taz where the biz and investment opportunities are coming from in this region.)

Pru eyeing Thai insurance assets

In Uncategorized on 21/04/2012 at 9:29 am

British insurer Prudential Plc  is thinking of bidding for the insurance business of Thailand’s Thanachart Bank, Reuters and the FT report, in a abt US$500 million (310 million sterling) deal. The Pru wants to expand further into SE Asia but has only 2% of the Thai market, unlike Indonesia where it has extensive operations.. It has not tried to do a major deal since shareholders aborted a US435bn bid for AIA in early 2011.

The Thanachart Bank unit, which is set to be auctioned, is expected to include life and non-life assets as well as a bancassurance arrangement. Some Japanese and European insurers are also expected to participate in the process.

Note ING , which is in the process of selling its Asia insurance and asset management businesses, also has assets in Thailand that are up for sale.

Cambodia: 10 IPOs a yr?

In Emerging markets on 21/04/2012 at 9:09 am

State-owned Phnom Penh Water Supply Authority (PPWSA) started trading on April 18, while Telecom Cambodia and Sihanoukville Autonomous Port are preparing to go public.

“Cambodia is going to be a very attractive market as investors benefit from the nation’s economic development. Many inquiries are being placed for possible listings … dozens of companies will list their shares within five years. Listings of five-to-10 companies are possible a year.”

BBC report

ANZ Bank attractive to Chinese strategic buyer?

In Banks, China on 20/04/2012 at 7:24 pm

An Australian who recently retired as head of Standard Chartered’s business in China believes there’s a strong chance of a major Chinese lender picking up a cornerstone stake in one of Oz’s big four banks within a few years. The Age carried an interview with Mike Pratt, , who says it’s “highly possible” that a major Chinese player will take a stake of up to 15%  in a major Australian bank this decade”.

ANZ Bank would make the most sense, given its super-regional bank strategy. Commonwealth Bank is increasing its presence in Asia but is nowhere as regional as ANZ Bank.

Westpac (a portmanteau of “Western-Pacific”) despite its name, and National Australia Bank both focus on Oz after misadventures abroad.

S’porean hedgie runs into choppy waters

In Financial competency on 20/04/2012 at 6:33 pm

Dymon Asia Macro Fund — which tries to profit from macroeconomic trends by punting on bonds, currencies, stocks and commodities — has lost about 2% this year. A Eurekahedge Pte index that tracks macro funds in Asia gained 1% through March, after returning 0.6%  in 2011.  So Dymon is recruiting a former head of SAC(another hedgie)’s, Asian office, to manage risk mgt and operations so that the Yong, the founder and boss of Dymon, can focus on making money again.

Yong’s background: true blue S’porean. Let’s wish him well.

Seeing the funny side of SMRT’s woes (Part II)

In Infrastructure, Political governance on 19/04/2012 at 7:19 pm

(Part I)

I also had a laugh when despite Second Solicitor-General Lionel Yee pointing out from the start that the inquiry looking into the December 2011 breakdowns “is not an adversarial proceeding but a fact-finding one”, the lawyers for LTA and SMRT put the blame on each other’s client.

(Leading to a Voice to comment, “Since it has been stated upfront that the proceedings are non-adversarial, why is there a need to hire expensive senior counsel, some at the expense of taxpayers? … SMRT Corp and the Land Transport Authority must have competent senior officials who are capable of assisting the COI with the investigations.”)

I can understand SMRT wanting to evade responsibility for commercial reasons. It could be fined heavily, and made to spend more on maintenance, depriving it of revenue to pay management bonuses and shareholder dividends. But should be so be so aggressive trying to pin the blame on SMRT. Scared of showing LTA was less than competent?

LTA’s lawyer Andrew Yeo, from Allen & Gledhill, took issue with the SMRT’s maintenance regime which could be improved, although it was “comprehensive and satisfactory”.

Citing a report by the transport operator’s internal investigation team, Mr Yeo said: “SMRT’s maintenance expenditure and manpower headcount for the maintenance of trains and trackways has not been increasing in recent years, at the same rate as the increase in kilometres travelled per train,” said Mr Yeo.

According to Mr Yeo, SMRT records showed that there has been a reduction in the number of wheel-profiling works between 2009 and last year even though there has been an increase in incidents of wheel defects over the same period. He also said that SMRT’s maintenance budget had not kept pace with the increasing ridership.

SMRT also “could do better” in terms of record-keeping, especially in the tracking of defects. “That would in turn enable any lapses or deficiencies in maintenance work to be easily detected and rectified,” Mr Yeo added.

Mr Yeo’s comments drew a response from SMRT’s lawyer Cavinder Bull. The Senior Counsel from Drew & Napier asked: “Whose duty is it to do what?”

He pointed out that the infrastructure was technically owned by the LTA. Also, any modifications to the infrastructure “must be submitted to the LTA for their review and approval”, Mr Bull said.

Alluding to findings from a team of experts, Mr Bull said that the SMRT has acted with “appropriate due diligence” in terms of its maintenance and engineering regimes.

Mr Bull added that any wheel defects or third rail gauge variation – which may have contributed to the higher vibrations, which in turn may have contributed to the dislodgement of claws – “did not occur due to a lack of maintenance”.

In fact, he said, the SMRT’s maintenance regime has been more stringent than what is recommended by the manufacturers: The various checks on the third rail are done every three or six months, which is more than the yearly inspection which manufacturers recommended.

Mr Bull also stressed that the dislodgement of the multiple claws which led to the breakdowns was caused by “a rare confluence of factors, none of which individually could have resulted in the incidents”.

Reiterating that it was not the SMRT’s intent “to shirk its responsibilities”, Mr Bull said that after discussions with the LTA, SMRT intends to change all the claws to “fifth generation” ones, which are installed on the Circle Line, as well as the Changi Airport and Boon Lay Extensions. Today article

Seeing the funny side of SMRT’s woes (Part I)

In Humour, Infrastructure on 19/04/2012 at 7:10 pm


— a foreign wire, AFP, reporting, “Services were disrupted along a new multi-billion-dollar Singapore metro line on Wednesday, the third straight day of rush-hour delays for the city-state’s gleaming train system”; and

— ST

—— pointing out, “No fewer than five disruptions took place within a week since last Friday, with all of them affecting rush-hour commuters”; and

—— “Statistically, this frequency far exceed the average one-per-week disruption that lasted more than 10 minutes between April 2010 and March last year, and the 0.6-per-week average recorded between 2007 to mid-2009”,

I couldn’t help but wonder if OCBC would change its mind on SMRT because on 9 April, OCBC issued a BUY call  on SMRT which was then trading at 1.74. BTW it closed at 1.81 today, so the recent problems have not affected the share price, another laugh there


OCBC report on SMRT dated 9 April 2012

Strong selling pressure as anticipated by more than half of the street failed to materialise with the counter trading tightly range-bound for slightly more than two months.

During this period, SMRT has also kept to a lower profile with the announcement of work completion from its Internal Investigation Team as the only major development.

Ahead of the upcoming earnings release at the end of the month, we continue to stress that SMRT is likely to see an upswing in fuel costs, following the run-up in prices as well as the additional train runs commissioned in the face of higher ridership and public pressure.

Coupled with higher staff costs related to seasonal merit increments and additional headcount to meet service requirements, we are likely to see the weakest quarterly performance for FY2012.

In terms of fallout from the December 2011 service disruptions, we do not expect any incremental costs at this juncture as the more important inquiry by the Committee of Inquiry (COI) has yet to be completed.

While SMRT’s FY2012 results are likely to stay uninspiring, the counter’s attractiveness as a dividend play remains its key selling point. SMRT’s management has maintained and reiterated its commitment to maintain its dividend payout policy.

Although its prospects going forward will be challenging – COI findings, no fare increments – SMRT’s ‘customer’ base is still growing.

Ridership levels continue to grow especially with support from the current trend in COE prices, while rental and advertising yields are naturally competitive given the high foot traffic locations of their stations.

With this backdrop and earnings support and stabilisation in SMRT’s price, we continue to call for an attractive entry point for SMRT.

Maintain ‘buy’ at an unchanged fair value estimate of $2.04.

Mandarin Ngiam on “elitism”, “social divide”, education etc

In Political economy, Political governance on 19/04/2012 at 6:58 pm

(or “Analysing Ngiam Tong Dow’s March 2012 speech (Part II)”)

As I wrote in Part I, because Professor Lim Chong Yah’s “shock therapy” proposal is a variation of what was implemented the early 1980s (until the 1985 recession: neutral article on the recession and one blaming it on the original “shock therapy”), when one Ngiam Tong Dow* was Permanent Secretary in the Ministry of Trade and Industry, I thought it would be interesting to reread a speech Ngiam made in March because MTI had once upon a time analysed the problem of severe manpower shortages and the economy’s increasing reliance on lowly paid foreign workers. Its solution was to restructure the economy by raising wages substantially to dampen employers’ demand for lowly paid workers, what Professor Lim is recommending.)

The speech is long and can be broken down into a sociopolitical analysis of S’pore, and an economic analysis of S’pore.

 This post reports and comments on the sociopolitical aspect of his speech**. In Part I, I did the same on the economic part of the speech.


Colonial system

Although this appears in mid-speech, it’s a good introduction to his sociopolitical thoughts.

“When Sir Stamford Raffles founded Singapore in 1819, his town planner demarcated the town into several ethnic enclaves. Kampong Glam (Malays/Arabs), Chinatown (Hokkiens, Cantonese, Teochews), Little India (Tamils), and Tanglin (Europeans). Empress Place on the left bank at the mouth of Singapore River was the administrative and civic centre. The British governor presided from the Istana … Each racial group was free to conduct their own trades, practice their own religions, set up their own schools, and largely married within their own race and ethnic group. The colonial government provided the overarching framework of law and order and schooling in the English medium.

‘Being a British colony, the language of administration was English. Access to English medium schools was open to all races. English became the lingua franca acceptable to all the races as none has any
in-built advantage over the other.”

Differences in the body politic

He talked of the difference between his generation of undergraduates at the then University of Malaya (NUS today) and those of today, “Except for the few activists of the University Socialist Club, my contemporaries at university were politically passive but not naive. In the political environment … we thought it prudent to keep our thoughts to ourselves.”

(So they were not sheep, just cautious, crafty mouse-deer of Malayan folklore?)

But “NUS undergraduates today are more articulate. They have courage of their own convictions,expressing their views vigorously at tutorials or the cafeteria.” (But are they wiser than Ngiam and his contemporaries, or just more noisy? “Remember “Still waters run deep” and “Empty vessels make the most noise”.)

He pointed out that the PM “has to deal with an electorate that is vastly different from … his father’s generation”. “The command politics of his father no longer works … PM has … to appeal to reason”. What surprised me was his comment that Lee Kuan Yew “appealed to emotions”. What I respect abt LKY’s speeches from that era are their simplicity and internal logic.

Uniquely S’porean

“[C]an Singapore be considered a democratic state?”. His answer was it can’t. “We are not a theocratic state like the Vatican or present day Iran. We are … not ideological states like North Korea, Cuba or China.”

He compared the western concept of democracy (“government of the people, by the people, for the people”) with that of the Chinese imperial system, “China’s emperors had to gain the consent of the people to earn the mandate of heaven to rule.” He seems to imply they are somewhat similar.

A difference is that losing heaven’s mandate often involved some form of violence. Mind you, in places like Nigeria, Kenya, the Philippines, Thailand, Bangladesh and India, democracy often involves violence.

He went on to say, “In my view the core purpose of government is to raise the livelihood of the people.” and says, “The PAP won the mandate to govern because it delivered jobs and housing”, pointing out that the PAP has “won every one of the seven general elections since independence in 1965.” Can’t argue with these points.

“There are two competing strands in our body politic.”

“ The first strand is meritocracy. It is modelled on the Chinese imperial scholar system where the best minds compete in nationwide examinations presided over by the emperor himself. The Singapore President Scholar is akin to the Chinese Imperial Scholar.

‘Both systems aim at identifying the best talent to serve the country.” What he missed out is that the Chinese intellectuals and activists (admittedly they usually had some form of Western education often via Christian missionaries) who wanted to reform and modernise the Chinese system in the late 19th and early 20th century criticised the imperial examination system for producing people who were only good in memorising the set examination texts (Classics like the Analects of Confucius). These “modernisers” argued that rule by these scholars under the Manchus led to the decline of China as a military, economic and scientific superpower, repeatedly being bullied and humiliated by the Western powers and Japan. The facts seem to support this analysis.

If the Chinese system was meritocracy at work, give me something else, please. Enlightened nepotism or Plato’s philosopher king, anyone?

Also selection by examinations should not be the only criteria of identifying “the best talent to serve the country”. What abt execution of duties? Or courage or integrity? Or manners? Or even sexual restraint?

“The second strand relates to the system of selecting leaders. It is modelled on Plato’s Republic [where] peers select their own leaders until the philosopher king emerges. As the first among equals, he is accountable to no one but himself. Over time, peer selection breeds a leadership that becomes complacent. Though our state is rooted in meritocracy, we must beware of the dead hand of peer selection. Elitism creeps in imperceptibly.”

He gave an example,“The recommendation by the ministerial salaries review committee to peg ministerial salaries to the median income of the top 1,000 income earners reflects an elitist mindset which is troubling. If the primary purpose of government is to raise the livelihood of the people, a better statistical measure of livelihood would be the median income of all workers, not just the top 1,000 income earners or the MX9 salary scale of the Civil Service.”

He pointed out the WP shares this elitism, “Curiously, both the government and the Workers Party accept that ministerial salaries be pegged to high income earners rather than the median of the work force, which is [US]$3,070 a month as at June 2011.” (WP is close clone of the PAP?)

He said that bonuses for the Cabinet should be pegged to increases in the median income of the work force, rather than the GDP.

Social divide

Much later in the speech, after talking about the economic situation here (covered in Part I), he returned to the theme of the social divide caused by the “widening income gap”.

“In 2012, what will be the threat to social stability? …Future social unrest will arise not from racial or religious differences [He had reminded that even though from its founding 1819 to when Singapore was granted self-government in 1959), S’pore’s races lived lives of passive co-existence, S’poreans witnessed the three racial riots in the 1950s-60s] but from the growing class divide caused by widening income gaps.”

‘The top 1,000 earn million-dollar annual salaries while the rest a monthly median income of US$3,070. The gap is untenable. In the past, equal opportunities in education have provided the social mobility to enable the bright boy from a poor family to make good … The spread of private tuition has changed the [level] educational playingfield.”

He said that during his school days in the 1950s (and mine too in the early 1970s), “only the academically weak students of rich parents take remedial tuition … Today, any parent who can afford the fees will send their children not for remedial but enhancement classes to give their children a head-start”.

This means that, “Though there will still be the exceptional individual who triumphs against all odds, more and more of our state scholars will come from upper, middle income families with professional parents.”

“There is no easy answer to the problem of an uneven playing field in our schools.”

His solution? “The challenge is to level up, not to level down. One suggestion I have is to make classes for academically weaker children smaller. The student-teacher ratio should be more favourable than in brighter classes so that the teacher can give more personal attention to each student, which is what private tuition is all about.”

He acknowledged that the government is doing something about the income gap, “The 2012 budget is politically adroit, replete with spending proposals which basically are income transfers from the taxpayer to the poorly paid, the disadvantaged and the aged.” But there is a hint of criticism, “Income transfers are palliatives, temporary reliefs to abate rising social discontent.”

Fostering entrepreneurs

He said that spending money to expand the then industrial training centres fostered entrepreneurs,

“[O]ur ITC [Industrial Training Centres, the precursor of today’s Institutes of Technical Education] trainees with barely O levels went on to start their own factories producing parts and components for MNCs.” (Bit of an exaggeration this. These entrepreneurs included teachers who were recruited to be managers, then moving on. In the 1960s and 1970s, MNCs recruited teachers because the workers were young and inexperienced, and teachers were experienced supervisors of the young. But the teacher-managers who moved on were often the non-graduates.)

Higher education not compatible with entrepreneurship

“It is hard to find the university graduate who becomes a successful entrepreneur. The prevailing reward system drives our graduates to become bureaucrats/managers both in government and business. White collar jobs pay better than blue collar jobs”


I’ll end with this remark, “[W]hy our concentration on engineering and science-based education is not yielding dividends in productivity and innovation. Instead, the employment share of low-wage, low-skilled personal services is rising. Are we overeducating our children? This is a heretical thought contrary to all my basic EDB instincts. In EDB, our article of faith is that the higher the education level, the more rewarding will our jobs become.”

He tried to answer this issue when he talked of S’pore’s reliance on “low-wage, low-skilled foreign labour to drive economic growth” and why S’pore should be“raising total factor productivity” a priority. I covered these in Part I.


*Ngiam was in the 1980s one of Lee Kuan Yew’s and Goh Keng Swee’s most trusted civil servants and if anyone, could be called a co-driver of S’pore’s drive from third world to first world, it would be he.

**The quotes are taken from a transcription published in BT.

ComfortDelgro: Int’l value investor kept selling

In Infrastructure on 18/04/2012 at 6:59 pm

Obviously it is not impressed with ComfortDelgro getting $733m or 67% of the $1.1bn package despite paying the state only 20% in dividends over the years*

Silchester International Investors LLP sold 21.49m shares in Comfortdelgro Corporation on March 30 at an estimated price of $1.56 each. This reduced its holdings by 15% to 123.893m shares (5.92%).

It had sold 42.62m shares from Nov 8 to Dec 12, 2011 at estimated prices of $1.425 to $1.44 each and 63.37 million shares from October 2009 to February 2011 at estimated prices of $1.62 to $1.54 each. Overall, the fund manager’s stake is down by 127.48m shares or 51% since October 2009.

Note the 13% rise in the share price since the second half of December 2011 from $1.385.


*The S’pore Labour Foundation (a statutory board affiliated to the NTUC which has 12%) has received dividends of roughly $150.46m from FY2003 to FY2010 (Comfort and Delgro merged in 2003, and SLF had a stake in Comfort.

Why S’porean bid for Rangers might fail

In Footie, Humour on 18/04/2012 at 5:56 pm

(Or “Is Bill Ng a “fit and proper person” to own Rangers?”)

Bill Ng, who is fronting a S’porean consortium’s bid for troubled Glasgow Rangers, is right to be wary of the syndicate  being tipped by the media as the front-runner to win the bid for Rangers

As footie fans will know, Scottish footie is very nationalistic. There are also very serious undertones of sectarianism, racism (interesting distinction between racism and racial discrimination discussed here) and violence. So last yr’s brawl involving Hougang United and Bill Ng’s subsequent comments could count against the consortium because it could give rabid nationalists and racists an excuse to demand rejection of the bid on the ground that Bill Ng would not be a “fit and proper” owner of Rangers despite the tradition of violence among the club’s fans.

In May last yr, match officials were forced to abandon the tie between hosts Hougang United and defending champions Etoile FC before kick-off, after players from both teams started fighting during the warm-up session. Witnesses MediaCorp spoke to said the scenes resembled a gang fight, with players chasing each other and some rushing onto the terraces.

Bill Ng, the chairman of Hougang, said he was angry and would conduct an internal investigation.

Anyway, for bringing the game into disrepute both clubs were fined S$10,000, with S$5,000 suspended so long as they steer clear of trouble this year. They were also docked five points each.

Ng said Hougang would not let the matter rest, claiming the fine imposed on the club and points deducted were unfair. The “evidence … is not concrete” and the FAS disciplinary committee failed to take into account the actions of club officials to diffuse the matter. He also grumbled that the disciplinary actions would make it difficult to attract new sponsors.

Hell’s bells, whatever the provocation, his players were brawling. Surely that is wrong?


Billy Boy to own Rangers?

In Footie, Humour on 17/04/2012 at 6:54 pm

(Or “S’poreans Boleh: Hougang boy can own a part of Scottish history”)

So the S’pore consortium fronted by one Bill Ng*, chairman of footie team Hougang Hooligans  (Does the team have WP as a sponsor? PAP not likely to sponsor a team that fights on the field?) is now the favourite to win the bid for Rangers.

The Blue Knights consortium seeking to gain control of Rangers says it is “stepping back” from the process. It was the orginal favourite. The group led by former club director Paul Murray says it cannot compete with Bill Ng’s consortium.

Ticketus, the firm whose money financed Craig Whyte’s takeover, with funding set against revenue from future season ticket sales at Ibrox, has been working alongside the Blue Knights but has also opened talks with Ng.

And the Blue Knights claim its Singapore-based rival had made the offer of a “substantially” better deal.

BTW, Bill Ng shld make up his mind whether he was a Rangers fan from his school days; or only became a fan abt 10 years ago. He has told reporters both these conflicting versions.


*When he was in stockbroking, he was known as “Brudder Bill” or “Billy Boy” or “Billy the Kid”. When an ex-employer heard that he is reputed to be worth US$80m, he laughed and said he might remind Bill that he, Bill, had debts to settle, and to touch Bill for a loan, “He’s worth a lot more than me”. He also added, “Everyone’s now in private equity” when he heard Bill claimed to be in private equity.

Analysing Temasek’s investment in another Chinese bank

In Banks, China, Financial competency, Temasek on 16/04/2012 at 7:06 pm

Temasek has agreed to buy Goldman Sachs’s shares in the Industrial and Commercial Bank of China (ICBC), the world’s largest bank. It will buy US$2.3bn worth of ICBC shares, taking its stake to 1.3% in the bank.

In an interview with Reuters at the end of March, Ho Ching’s presumed successor-in-training, Temasek’s head of portfolio management,acknowledged the heavy allocation to financials, but noted that it holds four very good banks: Bank of China, China Construction Bank, DBS Group and Standard Chartered. Well it has added ICBC to this list, and at a price close to the market price, unlike the stakes in the other two Chinese banks where it got a “special” price as a pre-IPO cornerstone investor.

But is it a wise move?

True, since the lows last October of the Chinese and HK stock markets, the shares of the four leading Chinese banks (including Bank of China, China Construction Bank and ICBC) have gone up by more than half, easily outperforming the broader market.

But since March, prices have been off (but masked by general market falls) because of concerns abt China’s growth, bad loans and comments by the  Chinese PM, Wen Jiabao, who hinted  of breaking the monopoly state-owned lenders have enjoyed in China’s banking sector. (The sector is dominated by four big state-owned banks and Temasek now has significant stakes in three of them.)

Mr Wen said that their monopoly was hurting businesses in the country, as they had few options to raise capital.

“Frankly, our banks make profits far too easily. Why? Because a small number of major banks occupy a monopoly position, meaning one can only go to them for loans and capital,” he was quoted as saying by China National Radio. “That’s why right now, as we’re dealing with the issue of getting private capital into the finance sector, essentially, that means we have to break up their monopoly.”

The lack of easy availability of capital has often been cited as threat to growth of small and medium-sized businesses in China. There have been fears that some of these businesses, seen as key to China’s growth, may turn to unofficial sectors for capital, increasing their borrowing costs substantially

But Temasek could be betting on, “Wen has one year left [in his term].” This was said by an unnamed Chinese state banker quoted by Reuters. “This is a task for the next generation of leaders. It cannot be accomplished within one year.”

But the banker could be wrong, Wen could be telling us what has been agreed upon between his generation and the next generation of leaders.

Remember, It took a beating on its finance industry holdings after the 2008 crisis, losing about $5 billion in stakes held in Barclays and Merrill Lynch, now part of Bank of America. It has since trimmed its financial holdings by 4 percentage points to 36 percent of the portfolio. Last month, it sold a 1.4 percent stake in India’s No.2 lender ICICI Bank. From said Reuters reported.

And of the remaining two “very good banks” where Temasek has significant stakes, DBS has juz decided to buy Temasek’s stake in Bank Danamon. Management will now be preoccupied with getting the deal approved by the Indonesian authorities, then integrating the bank into DBS. Before this deal, management had finally got to grips with DBS’s operational problems. The danger is that the focus on the Danamon deal may lead to backsliding in the area of operatons.

The genuine jewel is StanChart, but by global standards, it is “peanuts”.

Analysing Ngiam Tong Dow’s March 2012 speech (Part I)

In Economy, Political economy, Political governance on 15/04/2012 at 6:56 pm

Given that Professor Lim Chong Yah’s “shock therapy” proposal is a variation of what was implemented the early 1980s (until the 1985 recession: neutral article on the recession and one blaming it on the original “shock therapy”), when one Ngiam Tong Dow* was Permanent Secretary in the Ministry of Trade and Industry, I thought it would be interesting to reread a speech Ngiam made in March because MTI had once upon a time analysed the problem of severe manpower shortages and the economy’s increasing reliance on lowly paid foreign workers. Its solution was to restructure the economy by raising wages substantially to dampen employers’ demand for lowly paid workers, what Professor Lim is recommending.)  

Rereading Ngiam’s speech, I don’t think he would agree with Dr Lim’s proposal because Ngiam says, “Rising productivity enables workers to be paid more. Inflation sets in only when wages are raised without any increase in productivity.” So productivity comes first, then wages rise as a consequence. Dr Lim would go back to the 1980s plan of raising wages to force up productivity.

(BTW, the government, especially Tharman, keeps “talking the talk” of raising productivity, despite not walking the walk. I’m sceptical of its announced plans to cut the “FTs are betterest” policy until I see how it is being implemented.)

The speech is long and can be divided into an economic analysis of S’pore and a sociopolitical analysis of S’pore,

In this post (Part I), I report and comment on the economic part of the speech**. In Part II (later this week), I will report and comment on the sociopolitical aspects of his speech.


Evolution of the policy of importing cheap foreign labour

“Singaporeans of my generation remember vividly the slums, joblessness, dirt and disease of the 1950s. Through dint of hard work and discipline, we moved rapidly from a labour to a skill-intensive economy. By the early 1970s, we achieved full employment with an unemployment rate of 3 per cent.

‘In the early 1970s when we achieved full employment, some of us in the EDB began to ask the question about the critical size of populations. We did some desktop research and found that there were several industrialised European countries with population size of around 5-6 million. These were Israel, Norway, Sweden and Finland. Our town planners went to work and concluded that Singapore with a land area of 670 square kilometres can comfortably accommodate a population of 5-6 million … we allowed in one million foreigners in the last decade.”

He went on, to give another reason for the FT policy, “As our births fell below replacement levels, we resorted to immigration as an instrument to top up the babies that young Singaporean couples are not having. There are also elements of political re-engineering. Submerged in our immigration policies is the belief that to maintain racial harmony, we need to keep the current population balance constant.”

He challenged the premise that S’pore needs a bigger population pointing out that

– “Singapore is already straining at the seams with a current resident population of five million … The economic assumption is that we can increase our GDP if we can accommodate more people … even doubling our population to 10 million people will not make things better. More likely, a larger population can only make matters worse.”

– “[C]omputer technology has made many manual operations in production obsolete. The key is to produce more with less manpower.”

Knowledge-based economy

“The great challenge … is that we have reached the limits of our skill-based model of growth. Singapore has to move from a skill to a knowledge-based economy. The products and services … are characterised by high technological content. To position ourselves for such an economy, Singapore devotes the greater part of our national budget to education and training.”

“When I was in school in the 1950s, only three out my O level class of 40 went on to university. Today, 30 per cent of a primary school cohort enrol in tertiary education. Raising our average educational level from primary to post-secondary should make a world of difference for our international competitiveness.”

“Our higher education levels and superior infrastructure enable us to compete in knowledge-based industries and services.”


“I observe with some dismay that the manufacturing share of our GDP dropped from a high of 30 per cent in the 1980s to 20 per cent currently.”

“Our total factor productivity should be rising not stagnating. In my view, productivity and real wages of the bottom 20 per cent of our work force have not risen because our labour policies allow employers easy access to low wage foreign labour.”

He explains that for S’pore as a whole, there are costs to this easy access to cheap foreign labour, “If we add the cost of housing, transportation, health and other social services which employers have to provide for their foreign work force, they may be better off training and equipping their Singaporean employees to raise their productivity. Rising productivity enables workers to be paid more. Inflation sets in only when wages are raised without any increase in productivity.”

“Productivity can only be raised when CEOs … take direct charge of the production process. They have to be hands on, not resorting to outsourcing. Productivity should be the key KPI (key performance indicator) for the award of bonuses to CEOs and management.”

“Like any other country in the world, Singapore now competes in a global economy. In such an economy, importing cheap foreign labour is no longer a viable strategy. It is a dead end.”

“We have to grow through raising productivity, not higher headcount. We need to be smart enough to produce more with less. Our higher education levels and superior infrastructure enable us to compete in knowledge-based industries and services. We transformed ourselves in the 1970s from a labour to a skill-intensive economy.”

But he accepted that “raising total factor productivity .. is not easy. A Japanese scholar pointed out … that the optimum rate of productivity increase achieved by [Japan] averaged 4 per cent annually … Japanese are one of the most diligent people in the world.”

Why importing cheap labour is not the solution – it’s a race to the bottom

“Singapore now competes in a global economy. In such an economy, importing cheap foreign labour is no longer a viable strategy.  It is a dead end.”

“In a global economy, you will be competing not only with friends and classmates but with the best and brightest of your generation in India, China, Brazil, Russia and Eastern Europe. University graduates in China and India are willing to work for a tenth of what our young engineers and scientists expect. If we fail to raise our total factor productivity, Singapore would just be an also-ran in the race to be a knowledge-based economy. The window to raise total factor productivity through application of knowledge and training is fast closing with the opening up of India, China and Indonesia. Singapore has lost two decades relying on low-wage, low-skilled foreign labour to drive economic growth.”

What can help

– “Our managers and administrators are among the best paid in the world. They will have to get off their high horse and personally lead the drive for higher productivity. Outsourcing is a bad word in my vocabulary. Companies and government ministries should figure out how to train their staff and redesign jobs and processes to achieve more with less.”

– “[I]nterest free loans should be given to enterprises with clear roadmaps to re-equip and raise the productivity of their workers.

What he is against

“Grants should not be given to management (consultants) to do a job they are already paid to do.”

‘I am against job credits in any form because they are simply wage subsidies which do not raise productivity in any way. My personal observation is that job credits simply add to the bottom line for payment of bonuses to management who do not have to lift a finger to raise the productivity of their enterprises.” Based on this, I suspect he would also be against having a minimum-wage.

“The 2012 budget is politically adroit, replete with spending proposals which basically are income transfers from the taxpayer to the poorly paid, the disadvantaged and the aged. Income transfers are palliatives, temporary reliefs to abate rising social discontent. They do not help to raise productivity.”

Final warning

“We failed to bite the bullet in the 1980s to restructure our economy. There may be no second chance the next time around.”


*Ngiam was in the 1980s one of Lee Kuan Yew’s and Goh Keng Swee’s most trusted civil servants and if anyone, could be called a co-driver of S’pore’s drive from third world to first world, it would be he.

**The quotes are taken from a transcription published in BT.

S’pore’s average wage relative to other countries

In Economy, Hong Kong, Humour on 15/04/2012 at 9:23 am

S’pore’s average wage is juz behind Germany’s and juz ahead of Australia. HK is a long way below us. So Gordon Lee and David See (TOC contributors) stop talking BS when comparing S’pore to HK. Lots of things wrong with S’pore but there is a difference between facts and rubbish. (Funny that TOC use their stuff when TOC has contributors of the quality of Ghui and Uncle Leong.)

Funny also the our mainstream constructive, nation-building doesn’t report how well S’pore ranks globally. Cock-up or subversion by friends of Gordon and David in the newsrooms of our constructive, nation-building media? ISD should investigate.

M’sia dominates global sukuk issuance mkt

In Malaysia on 14/04/2012 at 6:21 pm

It had 68.8% share of the US$84.4bn of sukuks issued (sukuk is a form of Islamic bond) in 2011  And Islamic banking assets make up around a quarter of the country’s total. Given Indonesia’s tiny share of this mkt (3.7%), and Indonesia’s growing stature as a major emerging economy in Asia and the world, the sukuk market can only grow, making KL a future major global centre along the lines of Zurich, Edinburgh, or Boston i.e. a global centre of one type or a related group financial products.

Indonesia: Showing its strength globally

In Indonesia on 14/04/2012 at 10:36 am

Indonesia is the world’s 11th biggest grocery market by revenue, ahead of Spain but behind Italy. BRICs occupy all but the second position and third that is held by US and Japan in the top six.  By 2015, the BRICs (Brazil, Russia, India and China) will have pushed Japan out of the top five slots, leaving America as the only remaining rich country in the top five.

David Cameron, the UK’s PM, announced a £326m deal to sell 11 Airbus A330 aircraft to airline Garuda Indonesia when he was in Indonesia in Indonesia on his trade tour of East and South East Asia.

In February, Lion Air confirmed a deal, announced last year, to buy 230 Boeing planes worth US$22.4bn.The order is the biggest in Boeing’s history

The Indonesian airline in February also placed an order for 27 ATR aircraft for its regional subsidiary Wings Air, in a plan to service the country’s smaller airports.The deal, valued at US$610m, would make Wings Air one of the largest operators of such aircraft. One of the big contributors to Indonesian air travel growth is likely to be travel between smaller cities and airports in the country’s various islands. And increased spending by authorities in infrastructure development would also help boost demand.

F&N: Trading at deep discount to RNAV says DBS

In Property on 13/04/2012 at 6:07 pm

As the shares closed at  6.74 today, I tot readers might be interested in DBS’s continued call to buy F&N.

My problem with this stock is that there doesn’t seem to be any plans to reshuffle the portfolio of assets (Asia Pacific Breweries, F&N Berhad, Times Publishing, properties and a few other things) to extract more shareholder value. It’s more of the same. But dividend is sustainable, yielding abt 2.7% (trailing). Better than leaving money in the bank.

DBS Group Research | Mar 30

Close: $6.70

 … announced that its wholly owned subsidiary, FCL (China) Pte Ltd, is proposing to privatise its 56.17 per cent-owned, Hong Kong-listed entity, Frasers Property (China) Ltd (FPC). The proposed privatisation will be undertaken jointly with Riverbook Group Ltd, a wholly owned subsidiary of Ascendas Land International Pte Ltd. Riverbook is also the second largest shareholder of FPC with a 17.16 per cent stake. The main assets of FPC include the 157,610 sq m Vision Shenzhen Business Park and Shanshui Four Seasons in Shanghai with 737,000 sqm earmarked for residential/commercial uses.

We believe that the rationale for this exercise is that the current traded price does not reflect its value as FPC is trading at a 43 per cent discount to its NAV.

Furthermore, FPC’s trading value is relatively low at less than HK$1 million a day. The privatisation is likely to provide more flexibility for the major shareholders to extract value, in our view.

We continue to see value in F&N, as it is trading at a 24 per cent discount to our RNAV ($9.02), with the potential to progressively unlock value over the longer term – Asia Pacific Breweries, F&N Berhad, Times Publishing, properties, etc. In the meantime, the group’s earnings will benefit from the strong performance of its brewery unit, stable investment property earnings, coupled with about S$1.7 billion in unrecognised property development sales in Singapore. We believe its low landbank and partnership strategy for land tenders will better insulate it from policy risks in this uncertain market.

Burma: Stock exchange coming/ Cambodia: Starting soon

In Emerging markets on 12/04/2012 at 7:23 pm

Burma is to get a new stock exchange, after the Tokyo Stock Exchange and Daiwa Securities received preliminary approval to help set one up.

Meanwhile, Cambodian brokers and wannabe investors, and foreign investors are preparing for the country’s first ever IPO.

PAP in Hougang: Young blood, old ideas

In Political governance on 12/04/2012 at 6:40 pm

(Or Why let’s go eat Teochew mui in Hougang”)

So, Desmond Choo is a “very good man”,  DPM Teo Chee Hean said. Err waz a DPM doing making a speech an opening ceremony of the temporary car park in Hougang. Surely he has more impt things to do?

I analysed shumetime back that in Aljunied, the PAP is focusing its renewal efforts on bringing in fighting fit and enthusiatic geriatrics to replace tired, worn-out younger leaders As to their ideas, we will have to wait to see if they got new ideas to win back Aljunied.

But the potents For Aljunied are no good based on waz happening in Hougang. In Hougang, despite having a team led by 30-something unionist Desmond Choo, the PAP are not trying anything new. Desmond Choo and his PAP PA activists are focusing on serving Teochew mui at two temples every sunday.

The regular attendees of these temples are older and less-educated Te0chew speakers. The younger voters don’t do temples. If anything going by the latest stats, they are likely to attend churches, like the one Yaw attended (More opportunities to meet sexual partners in churches, going by Yaw’s alleged affairs?) And I’m sure they prefer bland, tastless Western fast food to high quality Teochew mui.

What is even sillier for the PAP is that these older S’poreans have been the main-stay of Low’s support since 1991. Lest one forget, Hougang and the surrounding areas like Ponngol, Cheng San and Aljunied, were once staunch Barisan Socialist territory.

So the PAP is now reduced feeding the hand that has been biting it all these years?

Never mind, it ain’t the PAP’s money. It’s tax-payers money.  Remember the funding for the People’s Association comes from the taxes we pay. So us oldies from other parts of S’pore who want to eat good quality Teochew mui (this is PA/ PAP stuff after all) can catch a cab (ST reported a lady who took a cab to eat there: doesn’t fare cost more than the free porridge? But then S’poreans are suckers for “free” or “subsidised” stuff), or take public transport, or drive to Hougang.

With an enemy like Desmond Choo, Low can afford to relax. If need be, he can remind voters that Desmond’s uncle (someone who he has admitted to as inspiring him) was a PAP MP and convicted cheat who continues getting into trouble with the law: he is facing a corruption charge.

The only thing that can cause Low a problem is if Yaw comes out to say that Low knew of his sexual habits before anointing him as Low’s successor in Hougang. Remember Low has denied knowing anything about Yaw’s personal life, despite anointing him as a his suceesor after mentoring him for many a year. People who don’t like Low are saying that they have heard people claiming to know Low say that Low said he knew of Yaw’s staggish behaviour long before anointing him as his successor.

But so far, none of Low’s enemies have dared openly to accuse him of lying. Two of them, I know, are banging their balls in silent frustration, that they can’t bring him down. Only Yaw can do it.

Advantage Low and WP in Hougang.

Desmond Choo was thrashed badly by Yaw Shin Leung in the 2011 GE. Geeky looking stag head-butted a he-man looking eununch

And all indications are that he is limbering up to take on Low Thia Khiang’s nominee  in a rematch. And that he will be thrashed again even if the NSP or Tan Jee Say or KennethJ try to score points with the PAP by giving voters a wider choice of candidates. Indications are that the NSP Old Guard cannot find a candidate willing to lose his or her  deposit even if the Old Guard towkays pay for all the election expenses (including said deposit). Apparently even one Goh Meng Seng has passed up this opportunity for some cheap publicity (bit of a surprise there), even though he gallantly volunteered Nicole Seah for the task.

NSP Old Guard: don’t make fools of yrselves by taking on Low in Hougang, unless you can pay Yaw to rat on Low. Maybe you and Desmond Choo can make Yaw an offer he cannot refuse? And Tan Jee Say and KennethJ control yr personal obsessions for cheap publicity stunts. It ain’t worth the effort, shumething even GMS realises.

True, the WP has no God-given right to Hougang, but neither have any of you chaps. The WP deserves to fight the PAP unhindered because the WP and Low have been serving the people there since 1991.  Where were the NSP Old Guard, TJS and KennethJ then?

As this post is already too long by half, I’ll leave for another day (later rather than sooner) my tots on Tan Cheng Bok’s speculation that a possible strategy for PM Lee would be to call for a by-election in his Ang Mo Kio GRC together with Hougang single member constituency. “This will be very interesting as the politics of voting will change, especially if PM promises the people of Hougang that Hougang will be part of his Town Council.”

Role Reversal for Bank of America and Citigroup

In Banks, GIC, Temasek on 11/04/2012 at 7:22 pm

Going into the earnings season, these two big banks have reversed roles: Bank of America, which last year faced concerns about its health, has rallied this year, while Citigroup now confronts doubts.


For the record:

— Temasek dumped its stake in BoA in 2009 when hedgies were buying, losing, it is estimated US$4.6bn;

— GIC is now sitting on paper losses on its remaining stake in Citi (stake was profitable last July, see link below); and

— one LKY said in 2008 that these (and UBS, where GIC still has unrealised losses) were beyond long-term investments. There were 30-year investments.

Internet: Chinese media sounds like Yacoob & friends

In Internet, Political governance on 10/04/2012 at 7:35 pm

Below are relevant extracts from a BBC Online article on how the Chinese state-controlled media analyse the “problems” the internet  pose to society’s stability.

The country’s push against internet rumours continued on Tuesday. Beijing Times says a guild of online media operators has appealed for “law-abiding operations” among internet firms.

A commentary in Shanghai Morning Post insists that the introduction of “real name” rules for online forums and micro-blogging sites is the “cure” to the problem*, citing similar examples from Western countries.

A second editorial in the Southern Metropolis Daily says it is a shared responsibility of the public and the government to boycott the spread of rumours, while a commentary in the People’s Daily claims in its headline that “tolerating rumours is not a quality of democracy”.

The Global Times’ bilingual editorial also take the chance to lash out at the power of the internet.

“The perception projected by internet opinions is quite far from the real situation. For example, online opinion holds that grassroots livelihoods are a mess in China,” says the editorial.

“In addition, it states that reform has come to a standstill and public anger has boiled over to the extent that China could descend into chaos any time.”

*Reminder: Tan Kin Lian, the People’s Voice, who lost his deposit in last year’s presedential candidate advocates similar rules here on posting on the internet.

Related rant:

Rising electricity prices: Tell us the truth

In Economy, Energy, Political governance on 10/04/2012 at 7:01 pm

Article 14 has got it absolutely right last week He is right to point out that SP Services explanation of why electricity prices have to rise (that the price of natural gas is going up) is absolutely rubbish. World prices of natural gas have collapsed as Article 14 pointed out.

The explanation is simple, but I suspect it is an explanation that SP Services and the government want to “hide” from ordinary S’poreans who don’t follow energy prices and trends, or the evolution of the energy industry over the decades. The sad but funny reason is that there is no selfish or self-serving reason to “hide” anything.

Here’s an opportunity for the PM (“working together”) or Tharman (“I think it’s important for us to retain a relationship of trust between whoever is the elected government and the people”) to show that they are “walking the walk’ of “engaging” us.

As it’s the economics and evolution of the natural gas market that make us pay more for natural gas while prices keep going down, this should not affect perceptions of the government by reasonable (the majority) of S’poreans.

Over a week ago, the NYT reported,  the price of one million Btu of natural gas fell below US$2.20 for the first time since 2002, while oil prices slipped a little but remained above US$100 a barrel. The last time natural gas was this inexpensive, oil cost about US$20 a barrel.

Unlike the oil market*, the natural gas market, is not a global, nor an efficient one (outside of the US). (I’ll explain this in detail later using S’pore and Qatar as examples).There is only a limited global trade in gas (the S’pore government is trying to encourage such trade with the building of a gas terminal), which can be transported in tankers, but mostly gas must move in pipelines over land in Europe and North America, the biggest users of energy. Example: natural gas prices have been rising in Britain this year even as they have been falling in the US.

Supply has soared in the US because of increased production from hydraulic fracturing (a newish technology), but demand in the US cannot change rapidly. Power plants that can burn gas or oil were shifted to gas long ago. And a relatively mild winter in the US has reduced demand. There is now a glut there.

S’pore, as readers, will know gets its supply of gas from gas fields in Indonesia and Malaysia. The energy MNCs who developed these kind of fields did not develop these fields until they were assured that there were assured long-term buyers of the gas (This is still true today). There are a lot of upfront costs and the lead period from the time the fields are being developed to the first shipment of gas to the customer are measured in decades. Example: gas was discovered in Qatar in large quantities in the 1980s. It became a major exporter only in the early to mid-noughties. It took that long to build the facilities to ship the gas to places like Japan and South Korea, taking into account the time to negotiate the contracts.

Then there is the issue of pricing. Until very recently, natural gas contracts were priced off the price of oil because they were often found together, and both were scarce.

When the gas contracts for S’pore were negotiated all those many years, the price of the gas that S’pore pays was priced off the price of oil. Hence one reason of the paradox of us paying higher prices for gas when the price of gas is at a 10-year low. Another reason is that S’pore is locked into long-term contracts, and another is that until the gas terminal is operational  in the second quarter of 2013, we can’t get gas from another source. BTW, the plans for a gas terminal show that the government can get things right.

Now S’poreans are not the only people who got “screwed” by the breakdown between the price of gas and oil. KKR and TPG, giant and successful US private equity investors invested billions of their investors’ funds in TXU. One of the things they were betting on was that gas prices would be priced-off oil prices for the foreseeable future. Err now even Buffett has lost money buying TXU bonds.

So why don’t we get told the truth of why we are paying higher prices when the price of natural gas has collapsed, when the answer has nothing to do with government or its agencies incompetency?

One reason could be that the PR people in these organisations are still stuck in the pre-internet model of news management. They believe and advise that “news” can be manipulated to fool the people all of the time.

More seriously, the government and its agencies may want us to think that their value (and high salaries of the senior staff) lie in making the right long-term decisions all of the time.

They should realise that S’poreans are no longer dependent on the government, its agencies and the constructive, nation-building local media for facts and analysis.

And that S’poreans have realised that long-term decisions don’t always result in benefits for S’poreans. We know that already because of the FTs, and public housing and transport problems, the result of long-term planning and decisions.

In the case of gas, it was (and still is outside the US) a rational decision to buy on long-term contracts gas that is priced off oil. It’s not a balls-up on the lines of the FT, and public housing and transport policies which has the government throwing money at the public housing and transport systems, and telling us that it’s changing its “FTs are betterest” policy.

Finally, market expectations are that this time next year, oil prices are expected to be almost where they are now, while natural gas prices are forecast to have risen more than 50%. What a great time then to shout about the competency of the government, when telling us that electricity prices are relatively stable?

My point is that facts are changing, what may look bad for the government one day, may look good another day, depending on the facts. It shouldn’t “hide” the truth (especially when the truth doesn’t discredit the government) if it wants S’poreans to regain trust in the government.


*Oil moves around the world in tankers that can be diverted from one destination to another in response to shifts in demand. A sharp change in demand or supply in any place is likely to show up in prices everywhere. Oil prices can also be affected by geopolitical concerns. Example: oil prices have risen on worries that Israel might attack Iran, leading to a drastic reduction in Iranian oil exports.

S’pore is tops, but MSM does not report it

In Economy, Political economy on 09/04/2012 at 6:06 pm

Analysts Maplecroft rates five countries at the “extreme” level of risk for the pandemic spread of influenza, with Singapore top, followed by the UK, South Korea, the Netherlands and Germany.

Singapore is rated the highest for the speed at which influenza could spread, because of its dense population (all those FTs?) and its status as a global travel hub.

BBC article.

WP: No longer believes in public tpt nationalisation

In Political governance on 08/04/2012 at 6:59 pm

This week, one of the topics to be debated in parliament will be the public transport system especially the government’s plans to inject $1.1bn into the bus system.

In its 2011 General Election Manifesto the WP wrote: Instead of public transport being provided by profit-oriented companies, all public transport including the MRT & public buses servicing major routes should be brought under a National Transport Corporation, a public body, to ensure a smooth integration of the overall national transport network and to avoid unnecessary duplication of services and overheads incurred by multiple operators.

In simple English, the WP manifesto called for the nationalisation of the MRT and bus systems.

But, I’ve been reliably told, that the WP will not be calling for the nationalisation of the public transport system in the debate on public transport this week. It will keep silent on its manifesto call.

If my source (a WP member in gd standing) is correct, and I hope he is wrong, one can only wonder if the WP has forgotten its manifesto call on the nationalisation of public transport (see somewhere here) or changed its mind on public transport nationalisation? And then one can wonder why the forgetfulness or change, when the facts and public mood seem to favour nationalisation.

Granted, at the time, there was very little mainstream (to be expected) or new media (more surprising this) attention, and very little public interest (not surprising, given the lack of awareness on this call) on this issue. But things are different now.

There have been several major failures of the MRT system, resulting in chaos, and public anger.

With $1.1bn of tax-payers’ money going into the bus system (two-thirds or 67% of it, $733m, going into ComfortDelgro where the state has a shareholding that is “peanuts”*), there are many voices wondering why private shareholders should benefit from a public good?

Example: Since housing and transport are both necessities of life, and public transport is the only choice of the lower-income group, it is not unjustifiable to commit resources to keep the cost of public transport low … government spending on public transport is a form of income redistribution …

The key concern in the S$1.1-billion package to purchase and operate buses is not that it subsidises public transport per se but whether public funds could benefit a small group of shareholders, to whom bus companies are ultimately accountable.

This is what the Government will need to account to taxpayers.

Even BT, part of the nation-building, constructive media had this to say, The public transport model has come under scrutiny ever since a $1.1 billion package was announced by the government to supplement the existing privately run bus fleet with 550 buses.

How has the government responded?

The minister responsible for throwing $1.1bn at the problem can only parrot repeat what his predecessors used to say, Our current model leaves the operations of trains and buses to commercial entities as we believe the long term public interest is best served this way. The profit incentive drives the operators towards higher efficiency and productivity, which keeps costs as low as possible . . . Otherwise, if the system is inefficiently run, the public will ultimately pay for the higher operating costs, either through higher fares, or greater government subsidies.

He should be asked in parliament this week why despite the “higher efficency and productivity” (“which keeps costs as low as possible”) of the private companies, commuters keep paying more and more while getting worse and worse service, so much so that the government has to subsidise the companies to improve bus service quality.  The minister’s The profit incentive drives the operators towards higher efficiency and productivity, which keeps costs as low as possible, can and should be challenged.

So the WP has plenty of ammunition to rubbish the government’s public transport policy And remind the government and the voters that it called for nationalisation last year. But it seems it will not call for nationalisation.

Parliament is the best place to debate the issue and the WP should not let this opportunity be missed especially as it called for nationalisation in its election manifesto. If it does not raise this issue, S’poreans must hope that PAP newbie FT MP, Puthucheary (“No NS for me”) will raise the issue. He had suggested in the last session of parliament that nationalisation might be a gd option.

There should be a more selfish, self-serving reason for the WP to use this opportunity to call for nationalisation.  If  the WP doesn’t believe in its own manifesto or keeps quiet when it changes its mind on a manifesto issue, why should, we, the voters believe in the WP?

The PAP pointed out earlier this year (rightly) that the WP’s benchmark for ministers’ salaries had changed from the poor (in said manifesto) to a civil service senior grade (Gerald Giam in parliament). The WP could not rebut the PAP charge.

The voters who voted for the WP believed its call for the need of a co-driver, to keep the PAP honest and competent. If voters cannot believe in the PAP and the WP, what should the voters do? Vote SDP?

The WP might want to be reminded that in countries with first-world parliaments, the election manifesto is a very important document, not something to be chucked away after a general election. If the WP does not call for nationalisation of the public transport system in parliament this week, it should remove the link on the front page of its website to its manifesto.

*Using back-of-the envelope calculations and figures in annual reports, since it was listed SMRT (over a decade ago) has paid $562.79m in dividends to Temasek (which owns 74%), and ComfortDelgro has paid the S’pore Labour Foundation (a statutory board affiliated to the NTUC which has 12%) dividends of roughly $150.46m since 2003 (Comfort and Delgro merged in 2003, and SLF had a stake in Comfort). The amount that ended up with the government was $713.25m, with SMRT contributing 79%. But ComfortDelgro is the main beneficiary of the $1.1bn bus plan, given that, at present, SBS Transit (a listed co 75% owned by ComfortDelgro) provides most of the buses. ComfortDelgro is getting $733m or 67% of the $1.1bn package.

Related rant


Err Temasek can do savvy deals too

In Indonesia, Temasek on 08/04/2012 at 7:36 am

TRE’s and TOC’s readers, and other S’porean netizens may not realise it, but Temasek doesn’t always lose money on its overseas investments.

In 2008, just before the financial crisis, Temasek sold its majority stake in BII for a price that put a value of the Indonesia bank of 4.6 times book value. The  sucker buyer was MayBank of M’sia. It paid Temasek US$1.13bn. NYT article. MayBank later justified its cock-up by pointing out that around the same time, HSBC paid around the same price (book value wise) for another Indon bank. Critics pointed out that in the context of MayBank’s financials, the amount was a big a sum while HSBC’s purchase was “peanuts” relative to HSBC’s financials.

Analysts now say that MayBank’s plans to sell a stake in BII for the same price as it paid Temasek is unrealistic.

Well the price that DBS is paying Temasek for its majority stake in Bank Danamon works out to be 2.6 times book value, and is considered reasonable but pricey. The premium over book has dropped substantially. But it is a gd deal.

And going back in history, Temasek got a great deal when it sold its PosBank stake to DBS. Foreign broker analysts (though not local broker analysts and our constructive, nation-building media) were grumbling that Temasek was getting DBS shares at a big discount to DBS’s fair value. FTR, no foreign analyst is arguing that Temasek is getting DBS shares at a big discount to its fair value in the Bank Danamon deal.

Moral of these examples: Temasek can do savvy deals with M’sians and DBS. Nothing to do with fact that DBS is controlled by Temasek. It’s that DBS likes to do “strategic” deals and, there are studies (dispued) which show that because strategic deals involve paying over the odds, shareholder value is destroyed in the process.

And consider this too.  RRJ and Temasek have been big backers of the trend to use natural gas. Last year they put US$250m into Nasdaq-listed Clean Energy Fuels, a US-based group that provides natural gas fuel for transportation at gas stations in the US at a saving of US$2 a gallon.

That transaction, which closed in January or February this year, has already more than doubled in value.  

And this looks pretty savvy too. Singapore state investor Temasek Holdings and private equity firm RRJ Capital bought nearly half of the shares in the $1.34 billion offering by PetroChina Co’s unit Kunlun Energy Co Ltd, two sources with direct knowledge of the deal said on Tuesday. $=US$

Kunlun Energy and Clean Energy Fuels have a similar mandate and RRJ hopes to bring the two together, according to one report. BTW RRJ is founded by a Malaysian Chinese.

Bang yr balls in frustration Ho Ching detractors, and all haters of the S’pore government and its agencies. Temasek can do savvy deals if M’sians are involved. Either as suckers buyers or as co-investors.

Jokes aside, remember the lines from “If”

If you can meet with Triumph and Disaster
And treat those two impostors just the same;

Well in investing, as in other aspects of life, the line between success and failure is very, very narrow.


 KKR and TPG, giant US private equity investors invested billions of their investors’ funds in TXU. One of the things they were betting on was that natutal gas prices would be priced-off oil prices for the foreeable future. Err now even Buffett has lost money buying TXU bonds. The problem is that recent  technological developments mean that natural gas can be extracted from shale, decoupling its price from that of oil. Natural gas is no longer a scarce commodity.

Now all three have extremely gd track records as savvy investors. BTW Temasek’s Merrill Lynch deals would be like this deal. The conventional wisdom was that the deals were risky but that the prices paid reflected the risk and that in all probability the deals would work out for the investors.

Now the conventional wisdom was that the investors got things wrong* . But as FT’s Lex reports:

They paid too much. That was the consensus when 3G Capital took Burger King private in 2010 for a total enterprise value of $4bn, or nine times trailing earning before interest, taxes, depreciation and amortisation. How did things go? Well, Justice Holdings has just paid $1.4bn and will get 26 per cent of Burger King’s common shares in return. This now puts the enterprise value of Burger King at $8bn – an ev/ebitda multiple of 16 times (14 times if you follow Burger King’s practice of excluding restructuring and other costs). By comparison, the multiples for global powerhouses McDonald’s and Yum Brands are 11 and 14 times. Arcos Dorados, the largest Latin American McDonald’s franchisee, trades at 12 times.

3G’s partners put $1.2bn of cash into the original deal and borrowed the remainder of the price. They also paid themselves a near $400m dividend last year, thank you very much. If they had sold the whole company at the price Justice has paid, 3G would have more than doubled its money in a year and a half. Over the same period, McDonald’s and Yum shares have returned 38 per cent and 64 per cent, respectively. Consensus now: would you like fries with that, gentlemen.

*Bit like Temasek’s Shin deal. Brokers were telling their clients with shares in Shin to tender the shares. They would never see such a price again. But our nation-building, constructive media failed to report these views here.

Why India is no longer flavour of the season

In India, Telecoms on 07/04/2012 at 7:31 am

Why MNCs and  int’l investors are giving India a miss while still liking the other “I”: Indonesia.

Seven international trade associations have written to Indian Prime Minister Manmohan Singh criticising a new tax proposal under which even 50-year-old corporate deals could be scrutinised.

The proposals were announced as part of India’s federal budget last month.

The associations warned that the firms they represent could reconsider their business ventures in India.

And the cancellation of telecoms’ licences doesn’t help.

Why UOB is “betterest”?

In Banks, Corporate governance on 06/04/2012 at 7:41 am

Bank results down 4%, CEO’s salary down 18%.

Own shares in Haw Par which has stake in UOB.

Link between changes in PR rules & ministerial salaries?

In Financial competency, Property, Wit on 06/04/2012 at 6:39 am

The move to scrap one avenue for rich foreigners to fast-track their permanent residency applications by parking large sums of money here will have little impact on the Republic’s economy, analysts noted.

In fact, an analyst went as far as to describe the Financial Investor Scheme (FIS) – started in 2004 – as having “outlived its usefulness.

The devil whispered in my ear, “What this means is that there will be less people applying for leave to buy houses in District 10, and less demand for places in Sentosa Cove, and super high end luxury apartments. Remember there is a group of S’poreans who have had their salaries cut by about half. Less competition for them now when it comes to buying luxury-end properties?”

“Perish the tot,” the angel of the Lord said. “These are the people who introduced GRCs.”

“My point exactly,” said the MU supporter.

Angel of the Lord, “Since 2010, these businessmen, have not been allowed to include the cost of buying a private home as part of their required investment.”

MU supporter, “The pigs knew they were going to have to cut their salaries. Pre-emptive move to ensure they are not affected by the cut in salaries.”

Angel, “OMG! What can I say? You may have a point!”

Templeton on Burma, Cambodia, Indonesia and Thailand

In Emerging markets, Indonesia, Vietnam on 05/04/2012 at 7:14 am
Investors should be cautious when pursuing the opportunities for growth present in Myanmar and Cambodia, Southeast Asia’s frontier markets, Templeton Asset Management Ltd says, according to a Bloomberg report.

While Myanmar’s natural resources of oil, gas and minerals are positive factors, there are “areas of concern”, Templeton portfolio manager Dennis Lim wrote in a note last week on chairman Mark Mobius’s blog.

Although Cambodia is “ideally located” to benefit from trade with Thailand, Vietnam and Laos, investors need to study corporate governance standards, he said.

“Weaknesses we’re especially mindful of in Myanmar are lack of a proper legal structure, the lack of a well developed banking system, and the lack of solid foreign exchange operations. In Cambodia, I would caution potential investors to monitor corporate governance standards to ensure investors are treated fairly.”

In Cambodia, state- owned Phnom Penh Water Supply Authority will have its IPO next month, making it the first to be traded on the stock exchange that opened last July without a single listed company.

The Cambodian government has said it wants to spur economic development by selling off state- owned companies and encouraging private enterprises to expand with new funding.

Mr Mobius, who oversees more than US$50 billion in emerging-market assets as executive chairman of Templeton Emerging Markets Group, has said he’s watching the Cambodian railroad industry “with particular interest'”

Indonesia, whose natural resources include timber and coal, can benefit from increasing global demand for commodities as emerging markets invest in infrastructure, Mr Lim said. Thailand, which suffered its worst floods in almost 70 years in 2011, will have a sound economic recovery and has “positive'” long-term fundamentals, he said.

“For value investors like us, current valuations in Thailand generally remain attractive, though the potential growth obstacles do bear ongoing scrutiny”. He cited agriculture, tourism and offshore gas as drivers of growth.

Interesting, no mention of Vietnam which is now in the dog house because of high inflation and other problems.

Singapore’s stock exchange is a conduit through which Templeton can access new markets because of listings by some companies from the frontier economies, he notes.

Err do judges read TOC, TRE etc?

In Political governance on 04/04/2012 at 5:57 pm

I was pleasantly surprised to read that a High Court judge on Tuesday dismissed the attorney-general’s arguments to have an application dismissed. The application had asked the court to determine the prime minister’s discretionary powers in calling by-elections in Singapore.

What this means is that the Court is satisfied that there is an arguable case and that the courts recognise the need for clarification on the constitutional questions raised in the application. It does not mean that the court has made a decision against the prime minister on the merits of the application.

As a trained lawyer, I tot that the court would strike out the application on the grounds as argued by the attorney-general’s representative in court that the application was “wholly misconceived”, “legally unsustainable and unarguable in law and fact”.

I tot that the application was made too early*. The lady who sought it should have waited until July (about six months after the seat was deemed vacated) before trying her luck.

I tot the only issues would be whether the AG would ask for punitive costs to deter future “frivolous” applications by cleaners and other “lesser mortals”, and whether the court would do agree to do so.

But never mind, it’s gd that the court is prepared to hear the application, and not rely on a technicality to dismiss it.

Which brings me to the point of this posting.

I believe that a famous American judge once said that the American Supreme Court judges read the newspapers, implying that they are aware of political and social trends. When I was a law student in England, the English judges had a reputation for claiming not to follow social or political developments. They often even claimed ignorance of daily life. When I was back in S’pore, I was sure that the local  judges didn’t read the constructive, nation-building local newspapers. And who can blame them?

But going by this result, I’m sure that one judge, at least, even if he doesn’t read the local newspapers, must read some of the sociopolitical blogs. So Ravi, you may have done some good at TOC. And Richard, keep on plugging away, legal threats, trolls, flamers and unhappy family members.

Update at 6.30pm on $ AApril 2012: Juz read The attorney-general is dissatisfied with the decision of judge Philip Pillai and has filed a Notice of Appeal against the decision by the Honourable Judge and they have filed a Summons application for the Appeal to be heard on an urgent basis.

Sore loser. Let justice be seen to be done. And not hide under behind technicalties.


*The Prime Minister had already announced in Parliament on 9 March that he “intend[s] to call a by-election in Hougang”, and that the court has no jurisdiction in compelling the Prime Minister to call one within any specific time frames. It also argued that  “a court’s power to intervene in an act of the Executive is premised… on there being a controversy requiring such intervention … is no such controversy in the present case … the Prime Minister has not refused to exercise his discretion, there is no executive decision that could legitimately be the subject of a judicial review.” (Yahoo! report).


In Banks on 04/04/2012 at 6:40 am

So investors sold DBS on news of its Bank Danamon purchase. It closed 0.39 lower (2.75%) to 13.79. About a quarter of the sellers seemed to have bot UOB which closed up o.36 (1.97%) to 18.64.

As to OCBC, it closed down 0.03 (o.33%) to 8.96. Unlike DBS and UOB, a large chunk of its profits comes from life insurance. Hence, it was of no interest to those who wanted out of DBS but wanted exposure to S’pore banks. And there is the uncertainity of what the new CEO will want to do. The retiring CEO did a good job: he stuck to the basics of banking and life insurance.

Property: So long as prices don’t go up in a str line, Colin

In Financial competency on 03/04/2012 at 11:41 am

It’s a correction, Colin. ))) This is S’pore. If prices really correct, PAP government will have lost its “mandate from heaven to rule us for forever and a day.

Is this the worst that the most drastic set of cooling measures ever to be imposed can do to prices and sales? And that its future impact can only dissipate over time? It certainly doesn’t look good.

Note: I deleted an earlier posting on this topic because of “font” issues. The “fonts” were in Italics despite indications to the contrary. Couldn’t fix the problems. So thrashed it.


DBS: Investors don’t like the Indon deal

In Banks, Corporate governance, Indonesia, Temasek on 03/04/2012 at 11:34 am

Well DBS is down 0.44 to 13.74 some 3% from Friday’s close.

Despite all the propoganda from our constructive, nation-building mainstream media, aided and abetted by the wires and most brokers, investors don’t like the Bank Danamon deal. To be fair, investors nowadays don’t like their investee companies doing mega strategic deals (like Pru’s attempted purchase of AIA last year) because the historical numbers (still disputed) seem to show that strategic deals destroy shareholder value.

Well the non-Temasek shareholders of DBS will have an opportunity to reject the deal, if they think that Temasek benefits far more than DBS? BTW, did you know that when DBS bot PosBank from Temasek all that many years ago, it was a great deal for Temasek, not so gd for DBS .

What price human dignity or safety?

In Political governance on 03/04/2012 at 5:58 am

(Or “It’s official: cheating is “bigger” crime than brutal assault”)

I tot of these headlines last Saturday as I read that a High Court judge allowed a $400,000 bail set by the lower court for each of the three directors of Profitable Plots to be reduced. He ordered bail for two amg moh FTs – John Andrew Nordmann,  and Timothy Nicholas Goldring – to be cut to $200,000 each, while Singaporean Geraldine Anthony Thomas, Nordmann’s wife, had her bail reduced to $150,000.

All three were still at Singapore Changi Prison, where they have been remanded since they were each charged in the Subordinate Courts with 86 criminal counts of abetment for conspiracy to defraud investors of US$2.42 million on investments related to an industrial lubricant called Boron early last week. They are trying to raise funds to post bail, it is understood.

The defendants’ lawyer had asked for bail to be reduced to $15,000 each because the three had not absconded and had abided by bail conditions during investigations. But the deputy public prosecutor  disagreed, rightly, saying that the situation is different now that the three are charged in court. The three pose as flight risks given the size of the losses and that they, if convicted, may be jailed for up to 10 years per charge.

One can only wonder why the authorities placed such a low value of around $12,000 bail, I believe, per ang moh FT, in the case of the ang moh FTs who brutally beat up several S’poreans at Suntec City in 2010. It was set so low, that two of them tot it smarter to run away and forfeit their money, when they were allowed to travel overseas.

Why the discrepancy between the dollar value of a crime and its consequences on human dignity or safety is what the Home Affairs minister and DPM should be asking the relevant people in Home Team and other relevant agencies.  The minister had said in parly in March,”If there were any lapses or negligence, the police will take appropriate disciplinary action against the officers involved. We expect the internal inquiry to be completed next month.” Hopefully, he would now ask them to explain why the authorities placed such a low value on human dignity and life. But pigs would fly first, I suspect.

This is S’pore and money talks. Remember the MP who said that he could only respect those earning serious money?  Dr Lim was reported by the Chinese press in 2011 as having said:“If the annual salary of the Minister of Information, Communication and Arts is only $500,000, it may pose some problems when he discuss policies with media CEOs who earn millions of dollars because they need not listen to the minister’s ideas and proposals, hence a reasonable payout will help to maintain a bit of dignity.”

True he finally apologised saying, “Dignity cannot be and must not be measured purely in monetary terms”. But boy did he twist and turn before he decided to apologise.

No I’m not exaggerating. Minister Teo was asked about the assessment of foreigners for flight risk, the measures taken to prevent such foreigners from absconding and the criteria applied in the assessment of whether extradition proceedings against such foreigners who have fled jurisdiction will be commenced. In reply, he said that there is a standard set of procedures for the handling of accused persons, whatever their nationality, from arrest, to investigation, to charging them in court, and to police bail (Emphasis added).

Better to beat up a S’porean by bashing his head against a pillar, than cheat a S’porean of his money is my understanding of the way the two cases were handled and the minister’s words seem to confirm that my interpretation is reasonable. BTW, he tried to deflect blame from Home Team and the other authorities saying that the court had the final say in deciding bail. Err who makes the request in the first place, minister?

Temasek: Meritocracy at work?

In Corporate governance, Temasek, Vietnam on 02/04/2012 at 6:28 am

So the S’porean MD of Singapore Technologies Telemedia (ST Telemedia), a 100%-owned unit of Temasek, Lee Theng Kiat, is now a president of Temasek, and its general counsel. He is in exalted company as one of the other two presidents was once a contender to be CEO of BoA.

But it was also reported last week by the wires  that Eircom applied for court protection as expected last to allow it to restructure its 3.75 billion euro (S$6.29 billion) debt, a move it said was “necessary and unavoidable”.

The application follows the company’s agreement to support a proposal under which most senior lenders take control of the company from current majority shareholder ST Telemedia and cut its debt by 40 to 50%.

ST Telemedia bought 65% of Eircom in 2009 for 140 million euros in cash and shares. An employee share trust owns the other 35%. Eircom has 4.1 billion euros of gross debt and more than 300 million euros of cash on its balance sheet, giving net debt of around 3.75 billion euros.

Lee was the MD of ST Telemedia when Eircom was purchased.

Well the Communist Party and Government in Vietnam are not so forgiving of executives who goof. Nine top officials have been given tough jail sentences for their role in the near-bankruptcy of one of Vietnam’s largest state-owned companies. Err they  were convicted of being directly responsible for a loss of US$43m Peanuts when compared to Euros 140m.

BTW, came across this comment about Merrill Lynch recently, “From July 2007 to July 2008, a total of [US]$19.2 billion vaporized – or [US}$52 million in losses per day!” For the record, Temasek bot into ML in December 2007 and in late July 2008.

Temasek’s loss ran into billions of US dollars The Vietnamese officials would have been hung, drawn and quatered if they had been held responsible for such a loss. Nothing happened to Temasek officials.

Is Vui Kong a spoiled brat?

In Uncategorized on 02/04/2012 at 6:01 am

Update on 2 November 2014: Vui Kong has since chickened out and is helping the state, and so he won’t be hanged but he doesn’t want to be caned and M Ravi is again going to court for this spoiled brat. Why doesn’t he ask for air-coned cell and meals from Crystal Jade?

(Or “Why Vui Kong should take responsibility for saving his own life, and not depend on his groupies to spin tales” or “Why is Vui Kong spinning such a tangled web?”)

So the Court of Appeal will be giving its latest verdict on Wednesday on the latest attempt of Vui Kong and his groupies to save him from judicial murder.  I doubt very much that the court will allow the appeal*.

Wonder then what lie we will told next by his groupies in an attempt to save his life? The last was a lie too far even for a cynic like me: that S’pore discriminated against VK because he was a Malaysian.
What this piece didn’t tell us that he refused to testify against the alleged drug mastermind, hence he was charged with a hanging offence (see the link below). If he had been willing to testify, he would not have been charged with a crime that carries with it the penalty of judicial murder. Even now, as I understand it, if he changes his mind, the state will ensure that he does not get judicially murdered. Fair exchange, as I see it. “You want yr life, the state wants you as a witness”.
But not to him. He refuses to trade, and his groupies say on Facebook that it is because he is afraid that his family will be harmed.
Is it a resasonable fear? Well there is a S’porean that has agreed to testify against the alleged mastermind, and there is no evidence that his family has been put in danger. This S’porean was charged with a lesser offence which ensured that he only got a very long custodial sentence, what VK wants too but only on VK’s terms. Sounds like a spoiled brat with a gigantic sense of entitlement to boot.
Beggars and condemned men can’t be choosers, VK should realise. He lost his right to pick and choose and behave like a spoled brat when he was caught smuggling drugs into S’pore. Now no-one forced him into doing that, did they? He knew he was commiting a hanging offence, but is not willing to accept the consequences of his crime.
He wants to live, but on his terms, not the terms that the state is willing to grant him life. What a spoiled brat, he is. And what a sense of entitlement: the world must let him live, despite his refusal to help himself.
But this isn’t all. His lawyer argued in the Court of Appeal that his rights have been violated because the state refused to compel him to testify against said mastermind.
Let me get this right. The state respects his right not to testify against someone because he is afraid his family may be harmed, yet the state is accused of violating his rights by not forcing him to testify. By not forcing him to testify, the state is respecting his freedom to choose. Is this so wrong?
And by not forcing him to testify, the state is not forcing him to choose whether to endanger his family or not. Isn’t this generous of the state?
It is so surreal, like something out of Alice-in-Wonderland. Maybe it is Or maybe someone forgot to take his medicine before appearing in court.
Whatever it is, I wish someone who cares for him would shake him by the shoulders and tell him,”Boy you are going to die sooner or later. You can make it a lot later by agreeing to give evidence against the person you alleged is the mastermind. You are prepared to testify if the state compels you to, so why can’t you do so of yr own free will?”
*Let me be clear: I hope VK will not be murdered by the state. True, drug smugglers deserve to be severely punished, but state-sanctioned murder is a step too far. I don’t believe in the death penalty but I accept that this is a minority view even in countries like the UK, and I accept that society has the right to murder those that breaks its laws, even if the punishment is disproportionate to the crime.

Rushing to do biz, invest in Burma?

In Emerging markets on 01/04/2012 at 11:02 am

Better read this first.  [W]hat has been achieved so far in reforming the country in such a short period of time rests on the trust established between the slight, bespectacled former general and the charismatic daughter of Aung San, the country’s liberation hero.

Banyan goes on to point out that both of them are not in best of health and that the Burmese president has many enemies who want to push the clock back.