Archive for May, 2013

Learning wrongly from S’pore

May 30, 2013

Dear Mr Haseltine,

I refer to your 23 Mar 2013 Straits Times article “Learning from S’pore: It pays to make patients pay” [1].

You wrote that Singapore gets much better health care for less than 25% of US health care costs and around half of European healthcare costs. You must not forget that Western nations have much aged populations and hence much higher old age dependency ratios than Singapore. All else being the same, having higher old age dependency ratio naturally means higher healthcare costs. Any comparison of healthcare costs without accounting for differences in population agedness will bound to lead to unfair and ultimately meaningless comparisons. It would be like comparing a young man’s healthcare expenditure to that of an old man’s. You gain no insight other than the common sense knowledge that the old man is more prone to expensive sickness than the young man.

For example, the table [2] below shows that although Italy’s 2011 healthcare expenditure is about 1.5 times that of Singapore’s, its old age dependency ratio is nearly 2.5 times that of Singapore’s. It’s not unreasonable to expect Italy to spend more on healthcare simply due to a higher old age dependency ratio.

Country 2011 old age dependency ratio 2011 per capita health expenditure 2011 regression predicted per capita health expenditure 2011 % healthcare overspending compared to regression predicted value
Italy 31.5 $3,436 $4,305 -20%
Korea, Rep. 15.9 $1,616 $1,765 -8%
Spain 25.3 $3,027 $3,290 -8%
UK 25.6 $3,609 $3,340 8%
Germany 31.2 $4,875 $4,251 15%
Finland 27 $4,325 $3,571 21%
Sweden 28.6 $5,331 $3,837 39%
Belgium 26.9 $4,962 $3,551 40%
France 26.4 $4,952 $3,480 42%
New Zealand 20 $3,666 $2,441 50%
Austria 26.4 $5,280 $3,478 52%
Singapore 12.7 $2,286 $1,248 83%
Denmark 25.8 $6,648 $3,384 96%
Netherlands 23.6 $5,995 $3,020 99%
Ireland 17.8 $4,542 $2,079 118%
Canada 20.8 $5,630 $2,570 119%
Australia 20.3 $5,939 $2,487 139%
Switzerland 25.1 $9,121 $3,255 180%
Norway 22.6 $8,987 $2,852 215%
Luxembourg 20.3 $8,798 $2,486 254%
United States 20 $8,608 $2,426 255%

We can adjust for old age dependency by doing a linear regression of healthcare expenditure on old age dependency ratio for all nations rich and poor. The resulting p-value is 8.4 × 10-23 which means there is a highly significant relationship between healthcare costs and old age dependency ratios. We can make use of the regression coefficient to predict healthcare costs based on old age dependency ratios. Based on regression predictions, Singapore actually overspends on healthcare by 83%. This means that either Singapore is over-consuming on healthcare by 83% or healthcare is 83% more expensive than it should be or a mixture of both. Countries like the UK and Germany which overspend by 8% and 15% respectively are actually more prudent or cheaper than Singapore for the old age dependency ratios that they have.

Neither is Singapore’s healthcare outcome much better than Western nations’. The table below [3] shows very little difference in life expectancies between Singapore and the Western nations, certainly not much better.

Country 2011 life expectancy at Birth (years) As percentage of Japan’s
Japan 83 100%
Switzerland 83 100%
France 82 99%
Australia 82 99%
Spain 82 99%
Canada 82 99%
Italy 82 99%
Singapore 82 99%
Sweden 82 99%
Luxembourg 82 99%
Netherlands 81 98%
Norway 81 98%
Korea, Rep. 81 98%
New Zealand 81 98%
Ireland 81 98%
Austria 81 98%
Germany 81 98%
Finland 81 98%
Belgium 80 96%
United Kingdom 80 96%
Denmark 79 95%
United States 79 95%

In some cases, like cardiovascular and diabetes mortality rates [4], Singapore fares worse than many Western countries.

Country 2008 cardiovascular and diabetes deaths per 100,000 (males) Country 2008 cardiovascular and diabetes deaths per 100,000 (females)
Japan 118 Japan 65
France 128 France 69
Australia 136 Spain 86
Spain 140 Switzerland 86
Switzerland 143 Australia 89
Netherlands 151 Canada 90
Canada 152 Norway 91
Italy 156 Netherlands 93
Norway 158 Italy 102
Belgium 161 Belgium 102
United Kingdom 166 United Kingdom 102
Korea, Rep. 168 Sweden 103
New Zealand 171 Ireland 104
Singapore 171 New Zealand 106
Sweden 179 Finland 106
Ireland 179 Denmark 107
Denmark 180 Singapore 109
Luxembourg 184 Korea, Rep. 115
Austria 188 Luxembourg 116
United States 190 United States 122
Germany 207 Austria 124
Finland 211 Germany 134

The empirical experience [5] of the man on the street is that Singapore’s healthcare is expensive. This truth hasn’t been reflected by healthcare statistics thus far because healthcare statistics have been wrongly compared all this while. Old age dependency significantly impacts healthcare costs. Without factoring in old age dependency, we can never arrive at the true picture of healthcare costs.

[1] Straits Times, Learning from S’pore: It pays to make patients pay, 23 Mar 2013

[2]
• 2011 old age dependency ratio is from World Bank data
• 2011 per capita healthcare expenditure is from World Health Organisation

[3] 2011 life expectancy from World Health Organisation

[4] 2008 cardiovascular and diabetes deaths per 100,000 from World Health Organisation (latest data available)

[5]

• Today online commentary, Spend more, to keep healthcare affordable, 30 May 2013

72 per cent of Singaporeans believe “we cannot afford to get sick these days due to high medical costs”, according to a 2012 Mindshare survey.

• Most Singaporeans Unfamiliar with Healthcare Financing Schemes

http://sph.nus.edu.sg/index.php/health-for-you/health-articles/11-health/266-most-singaporeans-unfamiliar-with-healthcare-financing-schemes

… the general sentiment was that healthcare costs are expensive, current schemes are restrictive and more government intervention is needed to offset rising costs … only 48% of respondents expressed confidence in being able to afford healthcare in the future, citing high out-of-pocket costs as the reason … In fact, expensive healthcare costs is one of the main reasons driving lack of confidence and satisfaction towards Singapore’s healthcare financing framework, with at least 72% of participants indicating that they found hospitalisation, day surgery and chronic disease follow-up procedures costly.

• Singapore Business Review, Why managing healthcare costs must be Singapore firms’ top agenda, 21 May 2013, RAY BOND & DANNY YAP
http://sbr.com.sg/healthcare/commentary/why-managing-healthcare-costs-must-be-singapore-firms-top-agenda

For example, a survey conducted by Towers Watson last year found that Singapore employers were faced with increasing healthcare costs, with the bill for employees’ care rising by 8.5 per cent a year.

Wrong to credit Singapore’s transformation to Lee Kuan Yew

May 26, 2013

Dear Ms Rinehart,

I refer to the 18 Mar 2013 Straits Times report of your video presentation to the Australian Mines and Metals Association during which you urged Australia to learn from the successful economic policies of Lee Kuan Yew, who transformed Singapore [1]. That is a grave misunderstanding of the truth behind Singapore’s transformation. The successful economic policies that transformed Singapore belong to Dr Albert Winsemius, the Dutch economist sent by the United Nations in 1960 to help Singapore industrialise. It was Dr Winsemius who came up with Singapore’s economic plan which Singapore judiciously followed. Many reliable sources confirm Dr Winsemius as the rightful transformer of Singapore:

• He was Singapore’s trusted guide through economically uncharted waters for 25 years from 1960. Through him, Singapore borrowed ideas and strategies that worked for Netherlands and other developed nations. Singapore’s economy is flying high today, thanks in large measure to his sound advice and patient counsel. He is the Father of Jurong, the Dutchman behind Singapore Incorporated. Dr Winsemius was a special person for he had changed Singapore to what it is today. For Singaporeans today, a huge debt of gratitude is owed to the Dutch economist [2].

• He was behind the 10-year development plan that saw the island state transform into today’s high technology, high value added industrial hub [3].

• Singapore’s economic miracle owes something to Dutch economist Dr Albert Winsemius. Dr Albert Winsemius was not merely a consultant, he was someone who revolutionalised and set Singapore’s economy in the right direction [4].

• Dr Winsemius of the Netherlands and Mr I.F. Tang of China were two foreign friends of Singapore who made extraordinary contributions to the economic development of Singapore. They came to Singapore as the leader and secretary of the first UN Industrialisation Survey Team in 1961 [5].

• Goh Keng Swee and Dr Albert Winsemius are generally regarded as the brains behind the coherent export/foreign investment oriented policies that Singapore has followed [6].

• A year after his first visit to Singapore, he presented a 10-year economic development plan. Winsemius also advised the government about large scale housing projects in Singapore and managed to get Philips, Shell and Exxon to Singapore [7].

• Albert Winsemius presented a ten-year development plan to turn Singapore from a port dependent on entrepot trade to a manufacturing and industrial centre. Following the Winsemius Report, the Legislative Assembly passed an Act in 1961 to create a statutory board to promote industrialisation and economic development. The EDB came into being … [8]

• The 1960-61 United Nations mission led by Albert Winsemius helped develop a blueprint for Singapore’s industrialisation and development plan and recommended the establishment of EDB [9].

Mr Lee Kuan Yew himself had this to say about Dr Winsemius:

• Singapore and I personally are indebted to him for the time, energy and devotion he gave to Singapore. I learnt much about Western business and businessmen from him … He gave me practical lessons on how European and American companies operated … showed me that Singapore could plug into the global economic system of trade and investments [10]

More importantly, what is not commonly reported was that Lee Kuan Yew at first pursued the wrong policy of import substitution for the Malaysian common market and actively sought to merge Singapore with Malaya to achieve that goal as evidenced below:

• Lee Kuan Yew and the PAP proposed a political union with Malaysia, which would provide a good-sized domestic market for an industrial strategy of import substitution. Expulsion from the union with Malaysia in 1965, on political grounds by the government in Kuala Lumpur, destroyed the import-substitution strategy [11]

• During the federation period and immediately afterward, Lee’s government initially pursued an import substitution strategy … but the alienation from Malaysia, with its much larger market, rendered the strategy impractical [12].

• Until 1965, the economic strategy of the country hinged on a merger with Malaya to establish the larger domestic market, deemed necessary for economic viability [13].

• Singapore at first adopted the industrialisation policy of import substitution, followed after 1966 by the export of labour intensive manufactured goods [14].

• Singapore’s industrialisation strategy was originally dependent on policies of import substitution within the Malaysian common market, but the attainment of political independence in 1965 led to export industrialisation [15].

• Import substitution was adopted in the early 1960s in anticipation of the Malayan common market. However, Singapore separated from Malaysia in 1965 dashing the hopes of the common market, hence an export strategy was promoted instead [16].

It is commonly acknowledged today that most Third World countries that went the import substitution path ended up worse off than the small handful of East Asian societies that pursued export industrialisation. Thankfully for Singapore, even though Lee Kuan Yew also chose the wrong path of import substitution, we were kicked out of Malaysia in 1965 and hence avoided the pitfall of import substitution. The fact that Lee Kuan Yew actively pursued import substitution through merger with Malaysia while Dr Winsemius didn’t can be seen as follows:

• Lee Kuan Yew, appearing in tears on television when announcing separation, was devastated. His feelings strongly contrasted with scenes in Chinatown where firecrackers were set off to celebrate liberation from rule by Malays from Kuala Lumpur. Most Singaporeans did not share the government’s dismay. Winsemius also did not share Lee’s dismay. He said in a 1981 interview: To my amazement, a discussion had started: can Singapore survive? That is the only time I got angry in Singapore. I said: ‘now you have your hands free – use them!’ It was the best thing that happened during the whole period from 1960 till today [17].

• Dr Winsemius and I.F. Tang in their heart of hearts never believed in a Malaysian Common Market [5].

With Malaysia and import substitution out of the way, Singapore had no other choice but to follow Dr Winsemius’ plans wholeheartedly:

• With Singapore’s secession in 1965, the United Nations Proposed Industrialization Programme for the State of Singapore became the basis for Singapore’s industrialisation strategy [18].

Dr Winsemius didn’t credit Singapore’s success to himself. He had this to say about why he believed in Singapore:

• Singapore has the basic assets for industrialisation. Her greatest asset is the high aptitude of her people to work in manufacturing industries. They can rank among the best factory workers in the world [2].

Ultimately, Singapore succeeded because of Singaporeans.

[1] Straits Times, Follow example of Lee Kuan Yew: Aussie magnate, 18 May 2013

[2] Straits Times, Dr Albert Winsemius Singapore’s trusted guide, 7 Dec 1996

[3] Straits Times, He Believed in Singapore’s Future, 7 Dec 1996

[4] Tactical Globalization: Learning from the Singapore Experiment, Aaron Kon, page 170

[5] A Mandarin and the Making of Public Policy: Reflections, Tong Dow Ngiam, page 66

[6] Multinationals and the Growth of the Singapore Economy, Hafiz Mirza, page 77

[7] Managing Transaction Costs in the Era of Globalization, F. A. G. den Butter, page 38

[8] Lim Kim San: A Builder of Singapore, Asad Latif, page 106

[9] Danny M Leipziger, Lessons from East Asia, Page 240

[10] Straits Times, Singapore is indebted to Winsemius: SM, 10 Dec 1996

[11] The Fraser Institute, Case Studies in the Relationship between Political, Economic and Civil Freedoms, page 155

[12] Lee Kuan Yew School of Public Policy, Asia Competitiveness Institute, Remaking Singapore, Michael Porter and Christian Ketels and Neo Boon Siong and Susan Chung, July 2008

[13] The Dangers of export pessimism: developing countries and industrial markets, Helen Hughes, page 225

[14] Jacques Charmes, In-service training: five Asian experiences, Bernard Salomé, Page 21

[15] Robert Fitzgerald, The Competitive advantages of Far Eastern business, Page 55

[16] Eddie C. Y. Kuo / Chee Meng Loh / K. S. Raman, Information technology and Singapore society, Page 87

[17] The business of politics and ethnicity: a history of the Singapore Chinese Chamber of Commerce and Industry, Sikko Visscher, page 171

[18] Philip Nalliah Pillai, State enterprise in Singapore: legal importation and development, Page 30

No problem with welfare states

May 24, 2013

I refer to the 21 May 2013 Straits Times letter “The problem with welfare states” by Mr Tan Keng Soon [1].

Mr Tan was not comparing apples to apples when he compared Singapore’s tax and government spending with those of Western democracies and Japan. The Western democracies and Japan have much aged populations and hence much higher old age dependency ratios which naturally mean higher government spending and lower tax revenues. The table [2] below shows that Japan has nearly three times as many old people to support per working age person than Singapore. Is it any wonder that the Japanese government spends more and collects less than the Singapore government? As Singapore’s population ages and our old age dependency ratio rises, we too will end up spending more while collecting less.

Country Name 2011 old age dependency ratio
Japan 36.9
Italy 31.5
Germany 31.2
Sweden 28.6
Finland 27
Belgium 26.9
France 26.4
Austria 26.4
Denmark 25.8
United Kingdom 25.6
Spain 25.3
Switzerland 25.1
Netherlands 23.6
Norway 22.6
Canada 20.8
Australia 20.3
Luxembourg 20.3
New Zealand 20
United States 20
Ireland 17.8
Hong Kong 17.2
Korea, Rep. 15.9
Singapore 12.7

If higher tax rate is disincentive for people to work, then company CEOs must be feeling the most disincentive to work compared to Bangladeshi workers since they face much higher tax rates.

Cases of near bankrupt Western democracies have been attributed by some distinguished economists, notably Paul Krugman [3], to the failure of the Euro Zone project, not to the failure of one man one vote. Furthermore, if one man one vote is flawed, then surely Singapore being one man one vote too ought to suffer from the same flaw? Yet we don’t face near bankruptcy. Singapore is living proof that one man one vote doesn’t lead to near bankruptcy.

If what is electorally popular makes no economic sense, then HDB and lift upgrading would make no economic sense. But HDB and lift upgrading enhances flat value [4] and so makes economic sense from the point of view of flat owners.

It’s wrong to say that the Nordic countries went through the equivalent of “Greek crisis” in the 1990s. The financial crises that the Nordic countries went through in the mid-1990s were due to financial market liberalisation [5], quite different from the fiscal issues of the Greek crisis. While the Nordic nations made financial regulatory reforms in direct response to problems arising from financial market liberalisation, they did not quite cut back on welfare spending. The table below shows that the Nordic nations’ social spending today is more or less the same as that in the mid-1990s [6]. So it’s not true that the Nordic nations’ success today is the result of cutting down on social spending. The Nordic nations are living proofs that welfare states work.

Country 1995 social spending (% GDP) 2012 social spending (% GDP)
Denmark 28.90% 30.50%
Finland 30.70% 29%
Norway 23.40% 22.10%
Sweden 32% 28.20%

Mr Tan didn’t explain what he meant when he said that Singapore outperformed most Western countries over the past three decades or so. If he meant Singapore outgrew most Western countries in per capita GDP, then that is nothing out of the ordinary given that Singapore started from a lower base. Malaysia and China also outgrew most Western countries over the last three decades – nothing extraordinary since they started from a lower base.

If Mr Tan meant that Singapore’s per capita GDP had been higher than most Western countries over the last three decades or so; that would be incorrect. The following chart shows the per capita GDP of Singapore and Western countries over the last three decades [7]. Singapore had been close to the bottom from 1980 to 1992, then climbed up to the middle by 1997, then went down again to near bottom by 2003 and then picked up again over the last three years; definitely not higher than most Western countries over the last three decades or so.

per capita GDP

If Mr Tan meant that Singapore’s per capita GDP adjusted for purchasing power parity had been higher than most Western countries over the last three decades or so; that wouldn’t be quite correct either. The following chart shows the per capita GDP (PPP) of Singapore and Western countries over the last three decades [8]. Singapore’s per capita GDP (PPP) had been close to bottom from 1980 to 1987 but rose rapidly to near the top by 1992. It might be reasonable to say that Singapore’s per capita GDP adjusted for purchasing power parity had outperformed most Western countries over the last two decades but not over the last three decades.

per capita GDP (PPP)

What’s interesting to note is that while Singapore’s per capita GDP itself is unimpressive, it becomes impressive after being adjusted for purchasing power parity. In other words, we are impressive only because purchasing power parity says so. Purchasing power parity says that we are cheaper than most Western nations; hence our mediocre per capita GDP gets boosted tremendously to adjust for the idea that the same dollar in Singapore buys us more things than it does in Western nations. How sadly not true that is considering that nearly all international surveys put us as being more expensive than most Western countries. Two big ticket items – the house and the car very clearly put us as being more expensive than most Western countries, in direct contradiction to what purchasing power parity says about us being cheaper than most Western nations.

Finally, although Singapore has lower taxes, Singaporeans pay the government a lot more in many other ways through housing, COE, ERP and so on.

[1] Straits Times, The problem with welfare states, 21 May 2013, Tan Keng Soon

[2] World Bank old age dependency ratio data

[3] New York Times, Legends of the Fail, 10 Nov 2011, Paul Krugman
What has happened, it turns out, is that by going on the euro, Spain and Italy in effect reduced themselves to the status of third-world countries that have to borrow in someone else’s currency, with all the loss of flexibility that implies.

[4] Straits Times, Why HDB lift upgrading takes time, 12 Apr 2012
But the upside, said Mr Colin Tan, who is research head at property firm Chesterton Suntec International, is that the LUP adds value to the units in the block and makes them more marketable if owners want to sell.

[5]
• Lessons from the Nordic Financial Crisis, 29 Dec 2010, Lars Jonung, Department of Economics Lund University Sweden, page 2
The Nordic crises have their roots in the process of financial liberalization that was carried out in a monetary regime based on pegged but adjustable exchange rates. In the 1980s, the financial systems of Finland, Norway and Sweden underwent major deregulation.

• Chapter 3: The Nordic banking crises in the early 1990s – resolution methods and fiscal costs, Knut Sandal, page 78
In a nutshell, deregulation was followed by boom and bust in all three countries.

[6] OECD social expenditure as a percentage of GDP

[7] World Bank per capita GDP

[8] World Bank per capita GDP (PPP)

Comments on Snook’s TR article

May 23, 2013

I refer to the 13 May 2013 TR Emeritus article “Kok Ah Snook: Not true that GIC lost money in UBS & Citigroup”.

Snook’s claim that GIC invested CHF 14 billion in UBS at the height of the financial crisis is incorrect. Instead, GIC invested CHF 11 billion in UBS or SGD 14 billion [1].

Snook’s claim that GIC’s UBS investment paid 10% coupon interest per annum for 2 years is also incorrect. The coupon rate should be 9% instead [2].

Snook’s claim that GIC was the only one brave enough to catch a falling knife by going into UBS when the crisis was raging is again incorrect. An unidentified Middle East investor went into UBS at the same time as GIC did in December 2007 [3].

Snook’s claim that the difference between UBS and Citigroup is in timing is also incorrect. GIC went into UBS and Citigroup in Dec 2007 and Jan 2008 [4] respectively which is merely a month apart and hardly any different in timing. Snook’s claim that unlike in the case of UBS, GIC went into Citigroup when things were bottoming out is also incorrect. The chart below shows that GIC also went into Citigroup roughly in the middle of Citigroup’s share price plunge and it wasn’t until around Mar 2009 or more than a year later that Citigroup shares bottomed out.

Citigroup

The difference between UBS and Citigroup was that UBS’ offer to GIC was in the form of mandatory convertible notes whereas Citigroup’s offer was in the form of perpetual convertible notes [5]. It was therefore mandatory for GIC to convert its UBS notes to shares at the agreed price of CHF 47.7 when the notes matured after two years despite the price being no good. On the other hand, GIC could hold on to its Citigroup notes in perpetuity receiving 7% per annum which wasn’t bad as long as Citigroup didn’t go bankrupt. Therefore, Citigroup had to re-offer a much better conversion rate of US$ 3.25 per share compared to the originally agreed US$ 26.35 per share. So the difference is that the Swiss cut better deals for themselves than do the Americans.

Snook concluded that the final outcome of GIC’s UBS investment is still unknown since GIC continues to hold on to its UBS shares and that the losses are merely unrealised paper losses. However, there is a saying that profit is made when you buy, not when you sell and another about buying low, selling high. The chart below shows that GIC converted its UBS notes to shares at a relatively high price of CHF 47.7, effectively buying UBS shares at CHF 47.7. Buying at such a high price limits GIC’s potential upside gains. Considering the 9% coupon GIC received in the first two years (ignoring time value of money), GIC paid a net price of CHF 39.1 per share for its UBS shares. GIC could have bought UBS shares at between CHF 10 and CHF 20 any time over the last four years. Instead, GIC spent an additional CHF 19.1 to CHF 29.1 per share to buy those same shares. The additional money spent translates to between CHF 4.4 billion to CHF 6.7 billion for the 230.7 million UBS shares that GIC owns. This CHF 4.4 billion to CHF 6.7 billion represents a tremendous additional cost of acquiring UBS shares that could have been invested elsewhere or used to acquire even more UBS shares. Whatever is the outcome of GIC’s UBS investment when it cashes out 20, 30 years later, it would always be CHF 4.4 billion to CHF 6.7 billion poorer than if it had bought at a low price any time in the last four years.

UBS

If GIC’s Citigroup purchase had been in the form of mandatory convertible notes, it would have been forced to convert its Citigroup notes to shares at a much higher price of US$ 26.35 per share effectively suffering the same fate as its UBS notes purchase.

Finally, Snook failed to consider the time value of money when he said that GIC can fully recover its UBS investment if its UBS shares go back to US$ 8 million. If GIC’s UBS shares climb back to US$ 8 million after 20 years, GIC would have lost 20 years of interest earnings or alternative investment returns. To account for time value of money, GIC’s UBS investment should at least match GIC’s 20-year annualised nominal return of 6.8% since Mr Lee Kuan Yew said GIC plans to hold on to UBS stock for two or three decades [6]. That means UBS shares have to go up to US$ 8 × 1.06820 = US$ 29.8 million failing which GIC can be said to have incurred a loss of earnings compared to its average earnings. At the very least, GIC’s UBS holdings must go up to US$ 8 × 1.02920 = US$ 14.2 million to keep up with an annual inflation rate of 2.9% per year over 20 years [6].

[1]
• Snook’s article (wrong)
At the height of the financial crisis GIC invested CHF 14 billion (then US$10 billion) in UBS.

• Business Times, GIC prepared to stay with Citi, UBS, 30 Sept 2010
GIC’s investment of 11 billion Swiss francs in convertible notes issued by UBS

http://www.reuters.com/article/2010/03/05/ubs-gic-idUSSGE62400M20100305
The Government of Singapore Investment Corp [GIC.UL] had invested 11 billion Swiss francs

• Asia One News, GIC invests $14 billion in Swiss bank UBS, 11 Dec 2007
THE Government of Singapore Investment Corporation (GIC) has made its single largest investment ever – a massive 11 billion Swiss francs (S$14 billion) – to buy a major stake in a Swiss bank.

[2]
• Snook’s article (wrong)
The investment was in the form of Mandatory Convertible Preferred Stock with an interest coupon of 10% p.a.

• Asia One News, GIC invests $14 billion in Swiss bank UBS, 11 Dec 2007
GIC’s investment takes the form of subscribing to ‘convertible notes’ which pay an annual return of 9 per cent.

http://www.reuters.com/article/2010/03/05/ubs-gic-idUSSGE62400M20100305
GIC had earned about 2 billion francs from a 9 percent coupon over the last two years

[3] Asia One News, GIC invests $14 billion in Swiss bank UBS, 11 Dec 2007
An unnamed investor in the Middle East is also injecting an additional two billion Swiss francs into the bank, UBS said yesterday.

[4]
• The Straits Times, GIC’s buys are good if UBS, Citi can weather recession: Analysts, 17 Jan 2008
GIC’s investment in Citigroup comes just one month after its US$9.75 billion injection into Swiss icon UBS.

• GIC website
15 Jan 2008 – The Government of Singapore Investment Corporation (GIC) has agreed to participate in Citigroup’s private offering of convertible preferred securities through an investment of USD 6.88 billion.

• The Straits Times, GIC invests $14 billion in Swiss bank UBS, 11 Dec 2007
THE Government of Singapore Investment Corporation (GIC) has made its single largest investment ever – a massive 11 billion Swiss francs (S$14 billion) – to buy a major stake in a Swiss bank.

[5]
• Reuters, Singapore’s GIC will convert Citi notes to stock, 27 Feb 2009
http://uk.reuters.com/article/2009/02/27/gic-citi-idUKSGC00104020090227
In January last year GIC bought about $6.88 billion worth of perpetual, convertible notes in Citi that pay a 7 percent annual dividend.

• Reuters, GIC converts UBS notes, faces $5 bln paper loss, 4 Mar 2010
http://www.reuters.com/article/2010/03/05/ubs-gic-idUSSGE62400M20100305
The Government of Singapore Investment Corp [GIC.UL] had invested 11 billion Swiss francs ($10.22 billion) in mandatory convertible notes in UBS to support the Swiss bank during the financial crisis.

[6]
• Financial Times, GIC incurs SFr5.5bn paper loss on UBS, 4 Mar 2010
http://www.ft.com/intl/cms/s/0/ccac00d4-2781-11df-b0f1-00144feabdc0.html#axzz2TauxHzM9
GIC rarely comments on its investment activities, but Lee Kuan Yew, the former Singapore prime minister who chairs the fund, has said that it plans to hold the stock for “two or three decades”.

• GIC website
http://www.gic.com.sg/en/faqs/search/199-performance-returns#28
In its annual report for 2011/2012, GIC reported 5, 10 and 20-year annualised nominal returns in USD terms of 3.4%, 7.6% and 6.8% respectively. It also reported a 20-year real rate of return of 3.9%. The rolling 20-year real rate of return is the primary metric for the Government to evaluate GIC’s investment performance.

SG’s ex-Political Detainees – they stood for the underdogs’ fight for rights

May 15, 2013

I refer to the 8 Apr 2013 TR Emeritus article “SG’s ex-Political Detainees – What did they really stand for?” by “Singaporean Citizen” / Mr Nathan Chan.

Mr Chan found evidence from the book the “Fajar Generation” showing Dr Poh Soo Kai as being supportive of anti-colonialists like the Vietminh and the Algerians. He didn’t explain why he took issue with Dr Poh’s support for the Algerians but he did say that the Vietminh and Mao’s China were together responsible for 100 million deaths in the 20th century alone (no evidence provided and no mention of the Vietminh’s share) and that the Vietminh had invaded Cambodia. However, Mr Chan’s so-called evidence from the “Fajar Generation” reads like this:

“We supported … the Algerians in their just struggle for independence against colonial France. We supported the Vietnamese against the French and against US imperialism. We were genuine and sincere in this national and anti-colonial struggle.”

So quite clearly, Dr Poh’s support was specifically for the Algerians’ and the Vietminhs’ fight for independence and fight against colonialists. Dr Poh didn’t state his support for Vietminh atrocities. Dr Poh’s support for the Vietminh’s fight for independence and against colonialists shouldn’t be misconstrued as support for Vietminh atrocities.

Mr Chan’s repeated main concern was with Singapore’s ex-political detainees’ claim to oppose Western imperialism on the one hand and their silence on the other hand with acts of imperialism by Left wing countries like the Soviet Union and Mao’s China. Mr Chan explained that the Soviet Union had been guilty of much worse atrocities and abuses like the establishment of repressive states throughout East Europe, crushing attempts by satellite states to break free, setting up communist North Korea, instigating a war with South Korea and seizing Japanese islands. Mao’s China, as Mr Chan explained, had been guilty of the brutal invasion and occupation of Tibet in 1950.

To begin with, half the blame for the establishment of repressive states throughout East Europe falls on Winston Churchill. It was his secret division of East Europe with Stalin that formed the basis for Stalin’s establishment of satellite states in East Europe. Britain supposedly entered the war to save Poland but ended up leaving Poland to the mercy of the Soviet Union.

The Russians and the Japanese agreed to share the Sakhalin and divide up the Kuril Islands in 1855. They subsequently agreed that Sakhalin should go to Russia while Japan gets the Kuril Islands. However, after the 1905 Japanese victory over the Russians, the Japanese seized Sakhalin for itself while keeping the Kuril Islands. The Russians merely returned in kind in 1945 by seizing back Sakhalin and the Kuril Islands. Thus, these islands weren’t entirely Japanese to begin with and the Japanese lost moral high ground by seizing the islands first. Furthermore, the indigenous peoples of the Sakhalin and Kuril Islands: the Nivkhs, Oroks and Ainus are neither Japanese nor Russian. Thus, historically the Sakhalin and the Kuril islands have been subject to both Russian and Japanese imperialism; there is no reason why Mr Chan should argue against Russian imperialism only to favour Japanese imperialism instead.

Tibet’s split from China shortly after the fall of the Qing dynasty was a unilateral one; Tibet was declared a part of the Republic of China at its founding in 1912. There is hardly any international recognition for Tibet’s status as a nation both then and now. Consider what triggered the American Civil War: the Southern states’ unilateral declaration of independence from the Union. The subsequent North’s invasion of the South is not considered an act of invasion but a civil war. Thus, the notion that China ‘invaded’ Tibet is false because Tibet has, since hundreds of years ago, ceased to be a nation but has instead become a province of China which is the same concept as Wales being an integral part of Britain today.

Essentially, Mr Chan was taking issue with what the ex-detainees did not say. But just because the ex-detainees didn’t denounce Soviet or Mao China atrocities doesn’t mean they therefore endorsed or supported them. Silence doesn’t mean consent. This is quite different from specifically stating such support like when LKY said “If I have to shoot 200,000 students to save China from another 100 years of disorder, so be it.”

It was also wrong for Mr Chan to paint the ex-detainees as being only supportive of Left wing struggles through selective choice (or omission) of evidence. Consider one of the books quoted by Mr Chan: “Escape from the Lion’s Paw”. On page 12, it writes:

• He had built a rich heritage of solidarity and friendship from Vietnam to Nicaragua, Palestine to the Yorkshire mines, South Africa to Norway and the people of USA to Cuba.
• When he became passionate about the Arab Spring, he would immediately think about a Singapore Spring.
• When he stood in solidarity with his South African friends demanding the release of their comrades detained in Robin Island.

What has the Palestine, South Africa, Robin Island or the Arab Spring got to do with Left Wing imperialism? These are clear examples of the ex-detainees’ and their families’ support for the underdogs’ fight for their rights that has got nothing to do with being Left Wing.

Furthermore, back then, accurate information about the formerly secretive Soviet bloc was scarce so the ex-detainees may have been ignorant of the atrocities then, a point Mr Chan himself had acknowledged. However, Mr Chan felt that now that the ex-detainees know the whole truth, they should acknowledge those atrocities. Mr Chan tried to look for such acknowledgements in recent books written by the ex-detainees and was disappointed to find none. Mr Chan should understand that those are essentially memoirs or autobiographies that tell the stories of what the ex-detainees went through or experienced then, not what they didn’t experience or didn’t know then.

Mr Chan claimed that the US was targeting chemical weapons on communists hiding in forests, not civilians. But he should acknowledge the inadvertent collateral damage these chemical weapons had on civilians.

In conclusion, Mr Chan’s argument that the ex-detainees were essentially Left wing supporters rather than anti-colonialists was founded on the false premise of selectively highlighting ex-detainees’ support for Left wing struggles while ignoring ex-detainees’ support for none-Left wing struggles. Mr Chan’s portrayal of the ex-detainees as supporters of atrocities because he did not find condemnation of such atrocities in books written by the ex-detainees was unfair and inadmissible by law. No one should be accused of supporting a crime because he didn’t condemn it while writing a book about him or herself. That would be like accusing Lee Kuan Yew of supporting Russian atrocities because LKY didn’t condemn Russian atrocities in his autobiography.

False lessons from Singapore’s success story

May 3, 2013

I refer to the 26 Apr 2013 Straits Times report of Mr Richard Lambert’s speech to University of Warwick alumni.

Mr Lambert set out to find the qualities that differentiate successful nations from potential failure ones and ended up holding Singapore up as the success story to learn from. He gave the example of how tiny Singapore has two universities in the top 12 in Asia compared to gigantic India with only three in the top 100. But should Singapore feel proud that it is better than India or some other poor, populous Third World country? Is success simply about being better than the poorest of nations?

Why not Hong Kong?
Within Asia, both Hong Kong and Israel have done better than Singapore in number of ranked universities per 5 million people [2]. Hong Kong’s score is so much higher than Singapore’s yet is not chosen to be the success story to learn from.

Asian country No. of ranked universities Population Ratio
Hong Kong 6 7,071,600 4.242
Israel 3 7,765,900 1.932
Singapore 2 5,183,700 1.929
Taiwan 7 23,293,593 1.503
South Korea 6 49,779,000 0.603
Japan 13 127,817,277 0.509
Turkey 5 73,639,596 0.339
Saudi Arabia 1 28,082,541 0.178
Thailand 1 69,518,555 0.072
Iran 1 74,798,599 0.067
China 9 1,344,130,000 0.033
India 3 1,241,491,960 0.012

Across the world, many nations have done better than Singapore in number of ranked universities per 5 million people [3], yet none is being held up as a success story to learn from.

Country No. ranked universities Population No. ranked universities per 5 million people Remarks [4]
Iceland 1 319,014 15.7 English widely used
New Zealand 6 4,405,200 6.8 English speaking
Ireland 5 4,576,317 5.5 English speaking
Sweden 10 9,449,213 5.3 86% know English
Switzerland 8 7,912,398 5.1 English widely used
Finland 5 5,388,272 4.6 70% know English
Denmark 5 5,570,572 4.5 86% know English
Australia 19 22,323,900 4.3 English speaking
Hong Kong 6 7,071,600 4.2 English speaking
Norway 4 4,953,088 4 English widely used
Netherlands 13 16,693,074 3.9 90% know English
United Kingdom 48 62,744,081 3.8 English speaking
Estonia 1 1,339,928 3.7 50% know English
Austria 6 8,423,635 3.6 73% know English
Belgium 7 11,020,952 3.2 38% know English
Canada 19 34,483,975 2.8 English speaking
Israel 3 7,765,900 1.9 English usage lower
Singapore 2 5,183,700 1.9 English speaking
United States 111 311,591,917 1.8 English speaking
Germany 25 81,797,673 1.5 56% know English
Taiwan 7 23,293,593 1.5 English usage lower
Portugal 3 10,556,999 1.4 27% know English
Italy 14 60,723,603 1.2 34% know English
France 12 65,433,714 0.9 39% know English
Spain 7 46,174,601 0.8 22% know English
South Korea 6 49,779,000 0.6 English usage lower
Japan 13 127,817,277 0.5 English usage lower
Czech Republic 1 10,496,088 0.5 27% know English
Greece 1 11,300,410 0.4 51% know English
South Africa 4 50,586,757 0.4 English speaking
Turkey 5 73,639,596 0.3 English usage lower
Poland 2 38,534,157 0.3 33% know English
Saudi Arabia 1 28,082,541 0.2 English usage lower
Colombia 1 46,927,125 0.1 English usage lower
Thailand 1 69,518,555 0.1 English usage lower
Russia 2 142,960,000 0.1 English usage lower
Iran 1 74,798,599 0.1 English usage lower
Brazil 2 196,655,014 0.1 English usage lower
Mexico 1 114,793,341 0 English usage lower
China 9 1,344,130,000 0 English usage lower
India 3 1,241,491,960 0 English widely used

Mr Lambert also highlighted Singapore’s superior test scores for 15-year-olds compared to Germany and the US but forgot to consider our inferior Human Development Index compared to Germany and the US. Similarly, Mr Lambert pointed to our superior Human Development Index over France and the UK but forgot to consider that the UK has more ranked universities per 5 million people than Singapore. Mr Lambert’s selective comparison is thus meaningless because any specific example he gave can be countered by other examples that point to the contrary.

Better insight can be gained if all nations are compared together. When all nations / economies are ranked according to the average of reading, mathematics and science scores of 15-year olds, 6 out of the top 9 are East Asian nations / economies. This suggests that Singapore’s excellent 15-year-old test scores is nothing out of the ordinary amongst East Asian societies and that East Asia almost without exception excels in 15-year-old test scores. Furthermore, Hong Kong once again does better than Singapore but is once again passed over as the success story to learn from.

Rank Country / economy Average of reading, math and science Overall reading Mathematics Science
1 Shanghai-China 577 556 600 575
2 Hong Kong-China 546 533 555 549
3 Finland 543 536 541 554
4 Singapore 543 526 562 542
5 Korea-South 541 539 546 538
6 Japan 529 520 529 539
7 Canada 527 524 527 529
8 New Zealand 524 521 519 532
9 Chinese Taipei 520 495 543 520

When it comes to Human Development Index, Hong Kong again scores better than Singapore but is again not held up as the success story to learn from.

Rank Nation / economy 2012 Human Development Index (HDI)
1 Norway 0.955
2 Australia 0.938
3 United States 0.937
4 Netherlands 0.921
5 Germany 0.92
6 New Zealand 0.919
7 Ireland 0.916
7 Sweden 0.916
9 Switzerland 0.913
10 Japan 0.912
11 Canada 0.911
12 South Korea 0.909
13 Hong Kong 0.906
13 Iceland 0.906
15 Denmark 0.901
16 Israel 0.9
17 Belgium 0.897
18 Austria 0.895
18 Singapore 0.895
20 France 0.893

For some reason, Mr Lambert consistently chooses Singapore over Hong Kong as the success story to learn from even though Hong Kong consistently outperforms Singapore in all three factors of university rankings, 15-year-old test scores and Human Development Index employed by Mr Lambert to support his argument.

Qualities for national success
To answer his important question on the qualities for national success, Mr Lambert simply quoted from Mr Lee Kuan Yew’s book “Hard Truths to Keep Singapore Going” which mentioned amongst other things maximisation of human resources through training and education and strong governance and institutions. But Mr Lambert’s quest to prove Mr Lee right through selective comparison of university rankings, 15-year-old test scores and human development proved futile. Singapore better than Germany and US in 15-year-old test scores but worse than Germany and US in Human Development Index is like better education leading to lower national success. Similarly, Singapore better than UK in Human Development Index but worse than UK in number of ranked universities per 5 million people is like achieving greater national success despite worse education.

Mr Lambert didn’t even bother to prove Lee’s assertion about the importance of strong governance and institutions. But if strong governance is the key to Singapore’s success, how come Hong Kong’s laissez faire governance has given Hong Kong even greater success in all three areas of 15-year-old test scores, university rankings and human development? Hong Kong is living proof that strong governance is not necessary for success and that laissez faire governance can bring about even greater success.

Leapfrog and unparalleled international entrepot
Lee may have said that his team brought in the multinationals in order to leapfrog the region. The truth however was that it never occurred to Lee to leapfrog the region and that he actually wanted and actively pushed for a merger with Malaysia in order to realise import substitution for the Malaysian market. But fate has it that we were kicked out of Malaysia which scuttled Lee’s plans. But lucky for us we had Dr Winsemius’ leapfrogging plan which we dutifully followed in the absence of other alternative plans.

Singapore’s merchandise exports as a percentage of GDP is lower than that of Hong Kong’s and so cannot be more than twice its nearest rival.

2011 WTO data (Apr 2013) Singapore Hong Kong
Merchandise exports (million USD) $409,503 $455,573
Services exports (million USD) $128,891 $118,050
GDP (million USD) $239,700 $248,612
Merchandise exports as % GDP 1.71 1.83
Services exports as % GDP 0.54 0.47

Singapore was already a prosperous international entrepot back when we were a British colony [6]. It certainly wasn’t the strong governance of Lee but the combination of astute British colonial governance and local enterprise that gave us our unparalleled international entrepot [5].

Singapore’s period fertility may be 1.2 but our cohort fertilities for women aged 15 to 44 are much higher than 1.2. It is ultimately the cohort fertility that determines how much of our population gets replaced in the long run so we are getting all hyped up over the wrong figure.

[1] Straits Times, Lessons from S’pore’s success story, 26 Apr 2013, Richard Lambert

[2] Times Higher Education World University Rankings 2012-2013, Asian region

[3] Times Higher Education World University Rankings 2012-2013, World rankings

[4]
It is worth noting that nations with high level of English usage tend to be ranked higher than nations with lower levels of English usage. For example, South Korea is ranked in the bottom half, yet there is no reason why South Korean universities are of lower quality than say much higher ranked British universities since their graduates produce such world beating products like Samsung Galaxy while their British counterparts don’t. This anomaly suggests some deep issues with the Times Higher Education university rankings:

• Within Asia, the two Singapore universities scored the highest in international outlook because we have the highest percentage of foreigner students and professors. This in turn is due to our excellent English environment which is easier for most foreigners to immerse in than say a Japanese, Mandarin or Korean environment. The international outlook criterion is unfair to universities in Japan, Korea, China, Taiwan and other non-English medium universities.

• The teaching / learning environment criterion is a popularity contest dependent on the impression of academics being surveyed. English again plays an important role here because countries with mostly non-English medium universities will not be as popular or as well known to academics.

• The industry income criterion is marred by purchasing power parity which, in the case of Singapore, is notoriously wrong. According to purchasing power parity, Singapore is deemed low cost compared to the US even though most recent international surveys put Singapore as being more costly than the US.

[5]
• Derek Thiam Soon Heng, Syed Muhd Khairudin Aljunied, Singapore in Global History, page 57
By the time the Suez Canal opened in 1869 and with the advent of the steamship revolution in the latter half of the nineteenth century, this small settlement and outpost of British imperialism had become a global port that could rival any other in the world.

• Goh Kim Chuan, Environment and development in the Straits of Malacca
page 107
The growth of Singapore to its position not only as the key port of the Straits region by the late nineteenth century but also to a position as a major global port is perhaps the most exciting aspect of economic change in the Straits in this period.
page 114
By the early 1930s, Singapore was estimated to be the fifth or sixth most important port in the world.

• Peggy Teo and Kalyani Mehta and Thang Leng Leng and Angelique Chan, Ageing in Singapore: Service needs and the state, page 43
Singapore’s economy has a long record of being ‘plugged in’ to the global economy. As a major entrepot trading centre in Southeast Asia in colonial times, Singapore has always been connected to international trade and economic trends.

• Abu Talib Ahmad and Liok Ee Tan, New terrains in Southeast Asian history, page 152
Singapore’s entrepot trade was global in character, and the two sides of the entrepot trade were complementary, manufactures being paid for by the Straits produce. Thus, Singapore thrived as the intermediary for the trade between the advanced industrial economies and countries with lower levels of achievement… Singapore was the example par excellence of a colonial port that had prospered on global trade because its overlord had the wisdom not to confine its trade for narrow imperial gain.

• Yeo Kim Wah, Political Development in Singapore, 1945-55, page 14
Since its foundation, Singapore had rapidly developed into a prosperous international free port. Its success was due to joint Sino-British expertise, capital and labour. By the 1930s Singapore had become a trade focus for an immense and wealthy area stretching from the Bay of Bengal to China and embracing the whole of Southeast Asia. This entrepot trade in tropical produce of the surrounding regions and imported manufacturing goods from the West was the backbone of the Colony’s economy

• Sin Kiong Wong, Singapore Chinese Society in Transition: Business, Politics, and Socio-Economic Change, 1945-1965, page 231
This entrepot economy was a combined product of Singapore;s geographical location and the deliberate policies of the British policies after 1819. The international free trade policy of the Straits Settlements Government has also done much to attract the trade of the nearby countries to Singapore and to make the city a clearing house for the products of the area known as south eastern Asia. In 1926 Singapore’s total trade peaked at $1,886.7 million. The international trade of Singapore formed about 1.33% of the total international trade of “the free world” in 1956

• Betts, Raymond F, Uncertain dimensions: Western overseas empires in the twentieth century, page 126
Singapore’s unique role as international entrepot is reflected in its occupational ratios: 66.6 percent of the population was gainfully employed in the tertiary sector in 1921.