Thursday, 5 March 2009
a familee affair
Though probably a pain to the upcoming graduates, the hard landing of Singapore is hardly surprising. The Republic has developed strong economic dependent links with the U.S., Europe and Japan since 1965. And as these hegemons come crashing, so does the little red dot. Export revenue dropped by 35% in January 2009, and MM Lee mentioned a possible further steep drop of 30 to 40% in the second quarter. We should seriously tighten our safety belts, noting that exports account for “three-and-a-quarter times” of Singapore’s GDP.
The silver lining to this is that, according to MM Lee, Singapore will bounce back faster than any other economy as soon as the U.S., Europe and Japan recover. Not to mention that Singapore is at the centre of economically dynamic East Asia. Still, such severe volatility is absolutely no good; why should the extremely good times be mired with the extremely bad times? There is basic economic rationale when Lee Hsien Loong recently suggested a de-emphasis on the U.S. and Europe and Japan now that risk reduction through diversification has become like investment wisdom.
Actually, in retrospect, Singapore has a lot of resources (that’s right, it does) to weather the crisis. Even a 10% shrink, which is roughly US$19 billion as of 2008, is almost matched by the S$20 plus billion offered by Budget 2009. And for fiscal stimulus to multiply its way through the economy there needs to be a functioning financial system. This is the point when we come to appreciate DBS’s 28th and UOB’s 37th and OCBC’s 38th rankings among the world’s 50 safest banks by U.S. Global Finance magazine.
Anyway, the potential loss of US$19 billion pales in comparison with the actual 25% fall in behemoth GIC’s US$300 billion portfolio and the actual 31% “paper” loss, totalling S$58 billion, of Temasek Holdings. Gosh, how I condemn the fact that the media keeps stressing the word “paper.” Singapore may have a lot of financial muscles to withstand the crisis for even 10 more years, but it kind of lacks accountability. Strange, doesn’t MM Lee, or the government, propose higher-than-U.S.-President’s salaries to its civil servants precisely for accountability? Well, ask this: do we remember who was responsible for the jail escape from the Whitley Road Detention Centre just last year? I for one can’t even recall the name of the escapee (should it be shame on me?).
And this: as Ho Ching leaves Temasek Holdings, who should be answerable for the losses? Well just ask ourselves k, because I don’t think anyone dares ask that in Parliament. MM Lee comments as Ho Ching decided to resign that “she thinks it is time.” This frenzied the blogosphere: so Ho Ching could have stayed on for 10 more years if she simply decided so? Onto the losses at the GIC, handsomely paid ministers and members of parliament fervently defended the US$6.88 billion investment into Citigroup as good buys. The reason is, share prices were under-valued then. Indeed, were the financial crisis not wrecking havoc everywhere now.
And so one has to wonder, wouldn’t it be wiser to buy even more Citi shares now as they are dirt cheap? For every dollars and cents paid to every man and woman in Parliament, there was no ear to the idea that share prices might be too good to be true, or that the GIC and Temasek Holdings should manage Singapore’s assets prudently instead of mirroring the practices of global investment banks. A side note to this, the safest bank in the world, according to Global Finance, is KfW Bankengruppe, which had been mocked “Germany’s dumbest bank” by Bild, the country’s leading newspaper. I guess for every dumb person out there, there lives a dumberer.
Well, I am not disqualifying Lee Hsien Loong or MM Lee or Ho Ching for the matter. I may sound like it, but I seriously am not. Against all the underground battings, I have always admired Lee Kuan Yew, and I trust that the Singapore government has the right calibre to manage the country. I am not condemning anyone for mistakes. People make mistakes everywhere and under any circumstance, let alone this the-day-the-earth-stood-still crisis that no one saw coming (maybe except Warren Buffet). If one is bent on criticising the Singapore and its leaders on the basis of poor performance, please be more informed and look elsewhere to satisfy the thirst of illiteracy.
But I don’t like the general lack of accountability in Singapore. It’s not that bad, but there is still plenty of room for improvement to be up to the Singapore brand. like this, admit it when one screws up, and be adult about the consequences.
