03 May 2008

Packable politics and its press

On command, the issue of the alleged terrorist's escape was packed away from the mainstream media. This ability of a government to manipulate headlines leads to great risks for the country. Consider, for example, the question of Singapore's 11 billion Swiss Franc investment in UBS.... Full essay.

8 comments:

Rush said...

GIC finds itself in a precarious position. It does enjoy regulatory advantages in that it does not report. While I agree that as a citizen I would like to know how my national coffers are invested, at the same time I cannot divorce the investor in me that values this regulatory advantage, assuming (unrealistically?) that internally the management has proper controls and procedures.

All firms internationally constantly evaluate the regulatory environments they are party to, and theoretically they constantly lobby for less regulation as they suffer economic consequences of regulation. While the magnitude of these economic consequences vary, it is fact that these economic consequences exist.

Thus, we may have a situation of logical incorrigibility. We need GIC to both be opaque, giving us an advantage in the generation of good returns in view of the competitive nature of different SWFs and scarce investment opportunities while at the same time transparent, to properly be able to account to it's shareholders (in this case, citizens).

The argument that it will be able to better raise capital(lower it's cost of capital) by providing information (through reports) does not apply as GIC does not raise capital from individual investors (i.e.: citizens in this case). We may, if we are adventurous, view the concept of "cost of capital" for traditional body corporates as instead "political capital". Thus, may we move the next step and find faithful management of funds in the public government?

Financial markets today are stretching the reporting frameworks we have developed. Financial engineering and structuring is pervasive. Different kinds of funds, fund of funds, different underlying instruments, customized contracts... have pushed accountants and audits to the brink. How do you measure fair value, and what is historical cost? Financial statements are fundamentally flawed in the form they are presented today. What is income - fundamental income, or comprehensive income, non-operating income, accrued income, deferred income? I would be skeptical of any financial report as fundamentally there is no positive theory for accounting.

Even if GIC were to report, would it really be any good? How do you propose they balance the trade-off: to show the hand, or to appease the citizen? It is a difficult question.

Personally, I think there needs to be a certain kind of disclosure that assuages my short-run need for assurance that my national funds are doing well. I offer no solutions. I am not sure that disclosure of financial figures will be able to reach that objective. What I do know, is that obvious cock-ups like the escape in broad-daylight certain does not offer me any peace of mind. It does not help that the same embarrassed government manages approximately... half a trillion dollars?

It is not the case that the entire sum is controlled by an individual. It is managed by a team of very well qualified and experienced managers which I have a great respect for. They are, after all, chasing returns on national funds, helping our nation advance - a noble objective!

But I still have my structural concerns. Whoops, long comment. Cheers :)

feedmetothefish said...

Hi Mr Aw,

Thank you.

At the rate that it's going with the power that is with their running dogs, life in Singapore is just so full of crap!

However, when I read your articles, like when I read Mr Leong Sze Hian's, Xenoboy's and those contributors in TOC like Andrew and Gerald, I feel there's hope yet in being a Singaporean who cannot get out of Singapore!

Please keep up the good work!

I just wish to share a little email sent to me from a 60-year-old lady. It may be old news to some but to me, this request is so refreshing and so "what I want to tell him but don't know how!" This is what she forwarded to me.

-----------------------------------

"Dear Prime Minister,

We citizens of Singapore urge you to PLEASE MIND YOUR OWN BUSINESS.

We DO NOT NEED your help. Every time, you mention HELP, we have to run for cover!!!

Help the poor? Raise GST!

Help traffic flow? Up ERP!

Help passenger service? Up Bus fare/MRT fare!

Help us get taxi? Raise taxi fare!

Help us get good government? Raise Minister and Civil servants' salary!

Everytime YOU WANT TO HELP, we all PAY FOR IT!!!

THANK YOU THANK YOU...TOLONG LAH, please, we will HELP OURSELVES, no
need your help liao.

We DARE NOT ask for help any more!!!

Sir, most honoured sir, I urge you NOT TO HELP Singapore INVEST also!

Everytime your wife invest, we all lose money! Kao liao, kum siah!

Just let us have a dose of bad governance, like recently the Mat Selamat case, like dat....so far, it is ok, your incompetence, we ACCEPT!

PLEASE DO NOT help us have better security! Wait we all kena PAY FOR
IT!!

I believe ALL SINGAPOREANS PREFER NOT TO HAVE CRUTCH MENTALITY!

I think it is ok lah, please just take your salary and enjoy life ok?

Thank you thank you,

I am very chin chai one, any how any how, no need to help oso can one."

-----------------------------------

For whatever crap they throw at us, they expect us to be a good boy and just accept it.

For whatever mistakes and self-serving legislations they do, they expect us to move on and get over it!

The full machinery of their media dogs will be working overtime to make sure we do.

Well, maybe enough is enough!

The times, they are a-changing!

Thanks again for the breath of fresh air instead of the stink we so often get from msm!


feedmetothefish

yuen said...

many years ago Kishore Mahbubani wrote the book "can asians think", using asia's economic success to deny western journalists' assertion that asians lack ability to think for themselves; after doubts were thrown on the thesis by the prolonged recession after the 1997 asian financial crisis followed by 2000 dotcom crash and 2002-3 sars epidemic, asia, in particular china, made spectacular economic progress, whereas usa produced its own crisis through overconfidence with real estate and financial engineering prodcts, allowing a revival of the thesis

I find necessary to point out however that the anxiety to prove to the west that asians can think, is itself an indication of a cultural deficiency, that asia requires affirmation by the west; the keenness, even haste, shown by GIC and Temasek to become shareholders of Merryl Lynch and CitiBank, the way asian universities desire to copy MIT/Stanford, even Ma Yingjiu's being almost moved to tears by Bush's congratulation message saying that Ma's election was a triumph of asian democracy, all point in that direction

perhaps kishore need to address the issue of this feeling of inferiority in future books and talks

Anonymous said...

Sometimes I find things happening in Singapore just laughable.

We claim to have an elected President who job is to look after our reserves and I do not seem to hear a squeak from him about the losses on our investments in the troubled western banks.

We have a national trade union (NTUC) claiming to represent thw worker's interest, but in reality more like furthering the interest of employers and the Government by allowing the unlimited inflow of foreign workers working cheaply to improve the profits of the employers at the expense of its members. Amd sottomg at the top is non other than a government minister, the only trade union in the world with that distinction.

We have a consumer's watchdog that falls asleep when prices were skyrocketing and now talking about where to buy what things at cheaper price, when in reality they should have made a stand against such price increases in the first place.

Laughable, just laughable.

Anonymous said...

What is more scary is MM's attitude. He seems to be the only one in control of what to buy and for how long to hold. If this is still our money, what I wouldlike to know is do they even mark to market on yearly basis before paying out bonuses or do they take the profits on good deals and just put aside duds as long term investments? Even MM says we are stupid if we think they cannot make mistakes! So wont he practise what he preaches? (I know, we are asking too much huh)
Yes our President is unbelievable. What does he do for his almost 4 million salary?

KiWeTO said...

On the bright side of its 'investment' in UBS:

its a convertible bond.

which means, we could just walk away after 2 years, with 9% per year income.

Sure, we wouldn't gain any capital upside, but if the shares still suck then, well, we didn't lose.

Of course, the question is whether UBS will even still be in existence in 2 years time when the bond is due.

And most importantly, all the above is just speculation based on the lack of actual detail given out of the transaction.
(which is funny, given that its a listed firm, so shouldn't such a large transaction be fully transparent to the rest of its devalued stockholders?)

oh well.

c'est la vie.

they play with our money. Then again, most of us never did have a 'choice' to be Singaporeans; we just are, where our only choice is to be NOT Singaporeans.

Its fine to be have secrecy and all to protect investment 'strategies' and monetary value in global markets; just stop treating the greater population like children with the 'trust us with your money' spiel, and provide some real checks and balances NOT drawn from the employed public service.

I'm sure there can be plenty of retired financial experts who are citizens that can be persuaded to volunteer. Maybe something for MCYS to stick its volunteerism nose into.


E.o.M.


E.o.M.

Yawning Bread Sampler said...

kiweto -

I don't think after 2 years GIC can just ask for their money back. I see the term "mandatory convertible" bandied about... it seems they have to convert it to shares, with the only question that of the conversion rate which no doubt is based on some pre-agreed formula. Why that pre-agreed formula is nowhere to be found from a websearch, I don't understand.

Anonymous said...

>pre-agreed formula is nowhere to be found

usually the conversion price is the share price at the time the bond is issued, i.e., the conversion price is much higher than the current price as the market value has fallen a lot since then

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