A Short Explanation about MediShield Life

MediShield Life is as close to universal healthcare that Singapore has ever had.  It is the basic health insurance administered by the CPF Board.  It is a replacement for MediShield, the low-cost basic medical insurance introduced in 1990.

MediShield and MediShield Life coverage is for subsidised treatment in Class B2 and C wards of public hospitals.  It is the bare basic coverage.  Staying in a B1 or A class ward, or in a private hospital, you are still covered by MediShield but because the bills are higher since there is minimal government subsidy.  If people can afford it, it is advisable for them to get an integrated plan.

Features

MediShield Life began replacing MediShield coverage from November 2015.  The new premiums are in force from the next premium anniversary.  It has the following features, distinct from MediShield.

It covers all Singaporeans and Permanent Residents.  The current MediShield does not.  This coverage is automatic.  There is no need to apply for it.

It is specific for B2 / C class wards.  There is another plan to be introduced in 2017 for B1 wards.

It covers pre-existing conditions.  The current MediShield does not.  This coverage for pre-existing conditions is provided even if you have previously been rejected for that exact same condition.  This coverage does not extend to the private insurance portion of an integrated plan.

Covering pre-existing conditions for all Singaporeans and Permanent Residents is expensive.  Those with pre-existing conditions pay 30% extra for their premiums for the next decade.  The government stressed that this does not reflect the actual cost of coverage.  Additionally, insurance companies have pledged not to raise their premiums for one year.    As to what constitutes a pre-existing condition serious enough to warrant this extra 30% loading, MoH will release that at a later date.

Younger people will pay a slightly higher premium to compensate for a lower premium in their old age.

The coverage is for the entire natural life.  The current MediShield terminates at age 92 next birthday.

All of the MediShield Life premiums are now payable by Medisave.  Previously, there were claim limits ranging from $800 to $1,400.

The policy year claim limit has been raised to $100,000.  Previously, it stood at $70,000 per policy year.

The lifetime claim limits have been removed.  Previously, the maximum lifetime claim limit was $300,000.

The daily claim limits for normal wards and Intensive Care Units have been raised by up to 55%.

There is an increase in the claim limits for surgical procedures by between 25% and 93%.

There is an increase the daily claim limit for Community Hospitals by 40% from $250 to $350.

There is an increase in the claim limits for outpatient chemotherapy and radiotherapy treatments.  This covers more of the cost of subsidised cancer treatment.

The co-insurance rates have been lowered from the current 10 to 20%, to 3 to 10%.  This means MediShield Life can be used to cover a larger proportion of the medical bill.

Premium rebates are supposed to begin from age 66 next birthday, instead of the previous age 71.

Subsidies

There are four types of premium subsidies.  This is needed because in some cases, the premiums go up substantially. 

The first type is the Pioneer Generation Subsidies.  Their subsidies are between 40-60% regardless of their household per capita income or the Annual Value of their home.  After the subsidies and top-ups, Pioneers pay lower premiums for MediShield Life than they would have paid under MediShield.  Pioneers will receive $200 to $800 a year in Medisave top-ups for the rest of their life.  This will be used to pay for their MediShield Life premiums.

The second type is the Transitional Subsidies.  This is for all Singapore Citizens whose net premiums, after Pioneer Generation Subsidies or Premium Subsidies, increase after the introduction of MediShield Life, regardless of their household income or the Annual Value of their home.  It is only available for the first 4 years of MediShield Life.

In the first year, the Government pays 90% of the net increase in MediShield Life premiums, less other premium subsidies, above MediShield premiums.  This means that we pay 10% of the net increase in premium for the first year.  The subsidy decreases to 70%, 40% and 20% of the net premium increase in the second, third and fourth years of MediShield Life respectively.

The third type is Premium Subsidies for lower- to middle-income families.  They must have a household monthly income of $2,600 and below per person, and living in residences with an Annual Value of $21,000 and below.  Simply getting enough people such as your parents to stay with you will do this.  Those eligible can receive subsidies of up to 50% of their premiums.  Permanent Residents receive half the subsidy rate applicable to citizens.  This is a permanent feature of the Scheme.

The final type is the Additional Premium Support for families who require assistance with their premiums even after the above subsidies and Medisave use.

Analysis

It is estimated that covering pre-existing illnesses will cost just over $1 billion in the next five years.  Insurance companies will see the claim history for a year before deciding how much to raise the premium of the integrated portion of their respective Shield Plans.  The 30% loading over the next 10 years is definitely not enough to cover the cost.  As such, the government has to raise that funds elsewhere.  That would likely be found in an increase in the GST.

Based on data on deductible, withdrawal and co-insurance breakdown, the pay out of the plan as a percentage of the hospital bill is about 44%.  In contrast, the average increase in premium is close to 90%.  This is double the percentage pay out.  This is very high for a national health insurance.

The current system is also running at a surplus since it is the practice of the administration.  The national health insurance should not be seen as another profit centre.  What it means is that even though the features are attractive, and MediShield Life has merit, it is actually still expensive and not as cost-effective as it should be.  Also, once the one-year moratorium on the raising of premiums for the private health portion of the integrated plan is over, the premiums are likely to rise substantially.  What we will see is that cost-wise, the cost of health insurance will still rise faster than the lower to middle income can likely afford. 

Some Thoughts about the Minimum Wage

The following are some of my thoughts about the minimum wage.  By minimum wage, we are referring to a living wage, meaning wages that are not exploitative, and by which people are not reduced to being working poor.  In calculating a minimum wage, the challenge is not to price the lowest skill levels out of the market, thus increasing net unemployment.  The government is against a minimum wage.  Here are some of the points that opponents of a minimum wage have raised.

According to the government, a minimum wage is not an effective means of alleviating poverty; rather, it will produce a net increase in poverty due to the higher cost of hiring.  They then invoke the fear that jobs will be outsourced to countries with lower labour costs.  This will then result in higher long-term unemployment.

They also claim that it excludes low-cost competitors from the labour market.  This would hurt SMEs more than corporations.  They would compensate by reducing the number of hours worked by individuals, or eliminating a number of jobs.  SMEs are hampered from offering their more valuable employees attractive wages due to the cost of workers paid a minimum which businesses may view as artificially high.  They project that this may cause price inflation because businesses will try to compensate by raising the prices of the goods and services.

One of the examples that are used against a high minimum wage is the United States.  There, it is arguable that a high minimum wage has not done much to reduce social inequality.  Or they would cite studies that show that in many EU countries, high minimum wages have been accompanied by high unemployment, affecting people with the lowest skill sets the most severely.  They could point out that in Western Europe, the average jobless rate is twice as high in countries with a minimum wage.  They could cite Hong Kong as an example, and they would seem to have an iron clad case.  Mind you, this is the common line by NTUC.

What a minimum wage is supposed to do, is to alleviate the stress of an insufficient income so that people are not forced to work two or more jobs simply to make ends meet.  This helps the economy by lowering healthcare costs in the long term.  With that added time, people can actually attend skills training.  The NTUC model does not work since workers on poverty wages cannot afford skills training, or if they are sponsored, they cannot attend because they are working to make ends meet.  Or, even if they do attend, they would be too tired to actually learn anything.

The Singapore economy is not labour-intensive.  It was never meant to be.  Our focus has always been high technology and innovation since we recognised very early that we could never compete with countries such as Indonesia, India, Philippines and China with their deeper labour pool.  A business model based on low-cost labour is already not a major component of our economy.  How would it greatly impact the labour market?  If, after 50 years of economic development, we are competing with Malaysia for labour costs, then something is seriously wrong with the structure of our economy and these companies.

All these arguments about the minimum wage not being effective in alleviating poverty and lowering the GINI coefficient are false.  Firstly, a minimum wage is merely a tool in an entire programme for poverty alleviation.  Its immediate impact is providing people a working wage.  It provides an immediate increase in the standard of living for the poorest and most vulnerable class in society.  This eventually creates a new consumer base by stimulating consumption and has a long term positive impact on small business owners and industry.  This will then lead to increased job growth and job creation since there is an actual incentive to take jobs.  Other methods of transferring income to the poor such as food subsidies or welfare payments are not tied to employment.  Because people are incentivised to work, they are less likely to pursue illegal avenues of earning.  This has a direct positive impact on society.  This also decreases the cost of government social welfare programmes.

The government’s use of the US and Hong Kong as examples of why the minimum wage does not work is disingenuous.  The US has serious institutional problems, and the minimum wage is both inadequate and offset by other measures designed specifically to defend corporate interests.  Hong Kong has to deal with a serious internal migration issue, being part of China.  They have complications Singapore does not have.

The case of the EU and Western Europe is an example of omission of facts.  It is true, that the average jobless rate is twice as high in countries with a minimum wage than those without.  It cites the fact that countries such as Switzerland, Austria, Germany and all the Nordic countries do not have a minimum wage.  What they omit to mention is that they have very strong independent trade unions who negotiate collective agreements that function as a minimum wage for specific groups.  In effect, they have several categories of minimum wages.

None of the reasons cited by the government in opposing a minimum wage actually stand up to scrutiny.  I can only speculate here, but we have to consider the fact the government is the largest single employer, directly or indirectly.  The government and the GLCs employ a substantial proportion of the workforce in Singapore.  Some estimate that there is more than 50% ownership of all major Singapore corporations, either directly, through investment vehicles or stakes that government owned entities take in other companies.  The STI is an index of the 30 largest listed companies, and over half have the Singapore government as the largest shareholder.  A rough estimate based on the value of these companies adds up to over US$100 billion, and this is certainly conservative since our sovereign wealth funds are secretive about their investments.

There is no minimum wage to keep business costs down, so as to make Singapore more attractive to foreign investment, and rise GDP.  This is not inherently wrong.  And when much of that business operating cost is tied directly to government entities, it is our money paid out.  However, we need some balance.  Keynesian economics applied means that setting a minimum wage will address the GINI coefficient, while putting more purchasing power in the lower middle class and lower class.  This still contributes to our GDP and economic growth.  Our system is unsustainable when some benefit our progress far more than others.  We cannot afford to have a segment of the population disenfranchised.

Temasek Holdings & Olam International: Our Money at Work

Olam International Limited is a global processor and trader of soft commodities.  It was established in 1989 as the Kewalram Chanrai Group.  Olam Nigeria Plc was set up as a non-oil based export operation to secure hard currency earnings in order to meet the foreign exchange requirements of other group companies operating in Nigeria.  The success of this resulted in Olam establishing an independent export company.  The agribusiness was headquartered in London and operated as Chanrai International Limited.  They began with the export of cashews from Nigeria and expanded into cotton, cocoa and sheanuts.

Between 1993 and 1995, they grew from a single operation into multiple origins, spreading from West Africa to East Africa, and then back to India.  This move into multiple origin countries coincided with the deregulation of the agricultural commodity markets.  This deregulation was one in a series that lead to the next two financial crises.

On the 04^th July 1995, Olam International Limited was incorporated in Singapore.  In 1996, the then Trade Development Board, now International Enterprise Singapore, invited Olam to relocate their entire operations from London to Singapore. In exchange, the Singapore Government awarded Olam the Approved International Trader status, now called the Global Trader Programme; this granted Olam a concessionary tax rate of 10%.  This was reduced in 2004 to 5%.

In 2003, Temasek Holdings, through its wholly owned subsidiary, Seletar Investments, took a stake in Olam.  On 11^th February 2005, Olam International Limited was listed on the Main Board of the Singapore Exchange.  In 2009, Temasek Holdings made a strategic investment in Olam in 2009.

In November 2012, Carson Block of Muddy Waters Research accused Olam of “deciding to take huge leverage and invest in illiquid positions”, and asked difficult questions about its accounting practices.  Muddy Waters Research also accused Olam’s board of an “abject failure of leadership”.  Olam responded that the allegations were “baseless rumour-mongering” and unsuccessfully sued Block for libel; its shares fell 21%.  In response to this, in December 2012, Olam raised S$1.2 billion selling bonds and warrants in a right issue backed by Temasek Holdings.  Temasek Holdings then became Olam’s largest shareholder, with a 24.6% stake.

Muddy Waters responded to Olam CEO, Sunny Verghese and the Board of Directors with the following open letter: “In the two and one-half years Muddy Waters, LLC has been openly criticising publicly-traded companies, we have not seen a response as defensive as yours – not even from Sino-Forest.  On Monday, our Director of Research gave a brief talk on Olam at a well-respected charity event.  He presented facts about Olam along with Muddy Waters’ opinion that Olam is at risk of collapsing due to multiple factors, including its debt load.  As Olam has since said, his comments were not overly substantive.  But based on this alone, Olam halted its stock, scheduled two conference calls, discussed buying back shares, and issued statements that included saying it is not a ‘fly-by-night company’.  It has further evidenced a bizarre fixation on baseball caps.

Olam’s disproportionate reaction is extraordinary in our experience.  Should Olam come to collapse (as we believe it will), its use of much-needed cash to buy back shares at this time should give rise to questions about whether fiduciary responsibilities have been breached – particularly given the possible existence of individual motivations that are not necessarily aligned with those of Olam’s lenders.  We also note Olam’s attempts to impugn our credibility.

You and your investors should note that attempting to silence critics is not a plan of corrective action.  In no way does it make Olam stronger.  The February 2011 CLSA report, which raised far fewer concerns than we have identified internally, and that Olam itself made so controversial, should have caused you to work toward repairing what ails your business and your balance sheet.  Instead, Olam has since increased its a) debt load by approximately S$900 million, b) cumulative investment cash burn by approximately S$2 billion, and c) cumulative operating cash burn by approximately S$500 million.  In other words, you did the exact opposite of what you should have done.  Your actions have been an abject failure of leadership.

Companies that attack criticism the way Olam does fail to understand that raising money from the public is a privilege.  Because Olam has received significant investment from the government of Singapore, Olam’s mismanagement of the public trust is that much less forgivable.  Know this: You voluntarily came to the market, you subjected yourselves to its forces, and you must bear the consequences of your ineptitude.

We do not work for an investment bank, and cannot be bullied the way other analysts can.  Our research into Olam has been exhaustive, and we plan to resolutely stand by it, regardless of any attempts you might make to discredit it or us.

We therefore suggest you find better uses of your time than focusing on criticism. For instance, you might want to work on plans to reign in your CapEx and de-leverage.  The clock is likely ticking.”

Muddy Waters Research Group is a private equity research company.  The company is known for spotting fraudulent accounting practices, specialising in Greater Chinese companies.  Muddy Waters Research Group came to fame when it released reports on Sino-Forest Corporation’s timber holding.  Sino-Forest eventually filed for bankruptcy in Canada and is facing a massive investor lawsuit.

Olam’s behaviour in this case raised further suspicion.  It is also similar to the way that Temasek Holdings and the Singapore government react, and that is not a coincidence.  Some of their accounting practices can be described as similar to Temasek Holdings’ in opacity.

On the 13^th March 2014, a consortium led by Temasek Holdings said it would put up S$2.53 Singapore billion to buy the remainder of commodity trader Olam International.  Temasek Holdings’ consortium partners were actually Olam’s founding shareholders, and 10 members of Olam’s executive committee; together they already owned 52.5% of the shares.  In their filing to the Singapore Exchange, the consortium said it intended to pay S$2.23 per share, a 12% premium over the last traded price.  Temasek Holdings’ offer valued Olam at S$5.33 billion, about 1.3 times book value.  Temasek Holdings had already been quietly increasing its stake since listed Olam was called into question by Muddy Waters in November 2012,

Prior to the Muddy Waters’ report, Olam’s debt level was already a source of concern for investors.  The company completed 10 sale transactions in from the middle of 2011 to the end of 2012, selling assets to raise cash.  Olam aimed to sell S$1.5 billion in assets from 2011 to 2014.  This was necessary, as Nomura Securities analyst Tanuj Shori wrote in a note, “Olam has long struggled to justify its balance sheet and growth plans.”

The deal was done through Temasek Holdings’ Breedens Investments unit.  As of now, Temasek Holdings is the majority shareholder of Olam.  It owns 1.4 million shares through Breedens Investments and Aranda Investments.  This represents 51.4% of the total issued share capital of Olam.

What was never really asked, and this is important, considering that Temasek Holdings is using our money, is why was it willing to pay a 12% premium on a stock that had already appreciated almost 33% since the beginning of 2014?  And this was in a period where the company in question was facing a loss of equity value as investors fled it.  If this was a strategic decision and an opportunity, they could have driven down the price and got it cheaper.  That could mean the management of Temasek Holdings are not very good at estimating the value within their own portfolio, let alone without.  In the last quarter of 2013, Olam shares traded around the S$1.5 range.  It was announced at the end of their financial year, on the 30^th June 2013, that profit had declined 13%.  If Temasek Holdings saw something in the longer investment horizon for Olam, they should have bought then.  Instead, they waited for the stock to appreciate by over 30% months later and then offered a 12% premium on top of it.  As of today, Olam’s shares are still trading well below what Temasek Holdings paid for them.

Or, if I were to be a bit more suspicious, and all this is only speculation, this normally happens when the people within the company already knew there was going to be an eventual buy out, and they were building their positions prior to this.  Olam’s debt to asset ratio were alarming enough to be flagged by many analysts.  There is no rational reason for the price of the stock to increase by a third.  To further compound it, the STI was flat for the year because of concerns in major markets.  And it is awfully convenient that Temasek Holdings’ consortium partners were actually Olam’s founding shareholders, and 10 members of Olam’s executive committee.  Personally, I think we could have done better.

Singapore’s Sovereign Wealth Numbers: Confusing by Accident, or Confusing by Design?

The following points concern Singapore and our Sovereign Wealth Funds.  The numbers are estimates, rounded off, and drawn from whatever was publicly available at the time.

The 2015 Numbers, as They Stood

The official balance sheet of the Government of Singapore, as at 31^st March 2015, showed total income at S$150 billion, and net surplus at S$111 billion.  Cash and cash assets stood at $256 billion out of total assets of S$1.366 trillion.  Temasek Holdings reported assets of S$256 billion as at that date, since revised upward to S$266 billion.  Combined with the stated portfolio figure, that alone accounts for S$512 billion.

Outstanding Singapore government borrowing, as at the same date, stood at S$396 billion, undoubtedly larger since.  Taking that as the outstanding liability, and treating Singapore as a giant corporation, which is not an unreasonable comparison given how it manages its reserves, shareholder equity works out to S$970 billion.

In the twenty years since 1975, government debt rose by almost S$350 billion.  The IMF put Singapore’s operational surplus over that period at S$280 billion.  Temasek Holdings claimed an average return of 17% across those two decades, and 19% in one year alone.  GIC claimed a 5% average return over the identical period.

Why the Arithmetic Refuses to Reconcile

Run the numbers backwards from those claimed returns, and the total assets should be considerably larger than the $1.366 trillion reported as at 31 March 2015.  Compounding at even a blended rate somewhere between GIC’s 5% and Temasek Holdings’ 17% over twenty years produces a figure the disclosed balance sheet does not come close to matching.  Taken at face value, the actual realised return implied by the reported totals sits under 1% across the full period, a number that makes both GIC’s and Temasek Holdings’ own headline claims look, at best, disconnected from the consolidated figures the Ministry of Finance and the Monetary Authority of Singapore publish.

The Ministry of Finance states this outright, in its own published guidance: “We do not disclose the amount each term of Government has protected as Past Reserves, nor the amount accrued to the incoming term of Government, as this could allow speculators to arrive at a more accurate estimate of the full size of our reserves.”  That is not an oversight.  That is a stated policy of incomplete disclosure, written into how Singapore’s reserves are governed under the Constitution’s Fifth Schedule, covering GIC, Temasek Holdings, MAS, CPF Board, HDB, and JTC collectively.  As recently as 2024, independent estimates placed Singapore’s total reserves at a conservative S$2.5 trillion, with the Ministry itself acknowledging, in a separate public document, that even GIC’s own management figure, “well over US$100 billion,” is stated only as a floor, not a ceiling, “as our reserves form a key part of our strategic defence against threats that undermine the interests of Singapore and Singaporeans.”

Why the Confusion Cannot be Resolved from Outside

The numbers released by the Ministry of Finance and MAS on one hand, and by Temasek Holdings and GIC on the other, are incongruent because they were never designed to reconcile in public.  Every figure disclosed is a partial figure, filtered through a constitutional framework built specifically to prevent exactly the kind of backward calculation attempted above.  The elected presidency itself exists as the sole institutional check on this opacity, holding a veto over any government attempt to draw down Past Reserves, a “second key” introduced in 1991 precisely because Parliament alone was judged insufficient to guard a sum too large, and too politically consequential, to ever be fully counted in public.  Citizens funding this system through CPF contributions and taxation are asked to trust returns nobody outside the institutions themselves can verify, audited by a mechanism whose entire design assumes the public should never possess enough information to check the sum for itself.

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Terence Nunis | Executive Chairman, Equinox Zenith | Author, The 1% Playbook: The Billionaire Cheat Code

Typos Can be Deadly

Typos can be deadly for companies.  All limited liability companies in the United Kingdom are required to register with a government agency called Companies House, which records financial statements and other corporate information.  This is their equivalent to Singapore's Accounting & Corporate Regulatory Authority.

In 2009, Companies House reported that Taylor & Sons Ltd., a 124-year-old engineering company, had been declared insolvent.  That was news to the management and employees of Taylor & Sons, a very much functioning company.  Almost immediately, they were plunged into crisis.  Believing the company had collapsed into bankruptcy, customers cancelled orders, contracts were declared void, and suppliers stopped offering credit.  To compound matters, the company’s managing director was on vacation, causing clients and creditors to believe he had fled the country.  Operations slammed to a halt, and Taylor & Sons found itself forced to close for real.  All 250 employees were laid off.

As it turned out, Companies House actually meant to record the closure of Taylor & Son, an entirely different company from Taylor & Sons.  The now-liquidated Taylor & Sons sued Companies House and won; the judge ruling the agency completely responsible for the collapse of the £8.8 million company.  Now, if they had some form of liability protection, they could have mitigated this immediately.

Our GDP to Public Debt Relationship with Our CPF

This is a short explanation on why the Singapore government has embarked on a growth at all cost economic strategy that has increased our GINI coefficient and diminished our social safety net.  It also gives an insight into why they are so firm on the Population White Paper.

One of the issues that should concern Singaporeans is the nature of our public debt.  The public debt, also known as government debt, national debt and sovereign debt, is the cumulative debt owed by our government.  This is distinct from the annual government deficit or surplus, which is the difference between government receipts and spending in a single year.  A deficit is the increase of debt over a particular year, and a surplus is a decrease.

Public debt is a method of financing the government operations.  Our government can also monetise its debts by creating money.  This removes the need to pay interest on the debt, but it actually reduces interest costs rather than outright cancelling the debt.  There are limits to this, otherwise it might lead to hyperinflation.  Governments borrow by issuing securities, bonds and bills.  Our public debt consists largely of Singapore Government Securities (SGS) and Special Singapore Government Securities (SSGS), which is issued to assist the payments on the Central Provident Fund.  Singapore does not borrow from international financial institutions, therefore, we have no external public debt.

Here are some points about our public debt.  Singapore has amongst the highest public debt to GDP ratio.  This is because Singapore does not borrow externally to fund its fiscal policy.  According to MOF, “The Singapore Government operates on a balanced budget policy and does not need to finance her expenditures via the issuance of Government bonds.  It has enjoyed healthy budget surpluses over terms of Government in the past decades.”

Singapore only borrows domestically, the Singapore Government does not have any external debt.  Why do we have such a large public debt?  SGS are issued to develop the domestic debt market.  There are three principal objectives of SGS issuance.  Firstly, it is to build a liquidity in order to provide a risk-free benchmark against which other private debt securities are priced off.  Secondly, to grow an active secondary market for cash transactions and derivatives.  And finally, to enable efficient risk management; and encourage both domestic and international issuers and investors, to participate in the Singapore bond market.  It has succeeded to an extent.  As at December 2011, SGS stock is valued at S$79 billion, while the stock of Treasury-Bills is valued at S$59 billion.  Being government bonds, the yield is extremely low.

SSGS, on the other hand, are non-tradable bonds specifically issued to address the investment needs of the CPF.  CPF monies are invested in these special securities, fully guaranteed by the Government.  These securities earn the CPF Board a coupon rate pegged to CPF interest rates that members receive.  As at December 2011, SSGS stock is valued at S$216 billion.  In the 3^rd quarter of 2014, the amount of outstanding SGS bills and bonds, which account for 52% of total government bonds, was S$101 billion.  It was up 1.0% quarter on quarter, but declined 20.9% year-on-year.  New issuance of SGS bonds fell 26.9% quarter on quarter, and 66.5% year-on-year in the 3^rd quarter of 2014.  These numbers do not include the SSGS.  Singapore’s public debt was 106.7% of GDP in 2014, 104.7% of GDP the year before.

What Singaporeans must be cognisant of is the fact that public debt is an indirect debt upon us as taxpayers.  A broader definition of our public debt includes all government liabilities, including future payments, and payments for goods and services contracted but not yet paid.  This includes the money that is supposed to be paid into our CPF as a guaranteed interest.

In general, it can be said that Singapore practices Keynesian economics, where there is a tolerance for high levels of public debt to pay for public investment, which can then be paid back from tax revenues.  Our high public debt is not in itself a concern as long as we can generate GDP growth.  And that is why the Singapore government has embarked on this economic policy.  They need that growth to sustain the high public debt.

To understand the nature of our of public debt and analysing its risk, we need to estimate the projected value of our public assets being constructed, in future tax terms or direct revenues.  This is especially difficult for Singapore because a lot of our assets are held through Temasek Holdings, and they are not transparent.  As such, it is a challenge to determine whether much of our public debt is being used to finance consumption.

Because of the CPF, the government has implicit debt, which is the promise by a government of future payments from the state at a fixed rate on all deposits into the CPF.  A major problem with these implicit public insurance liabilities is that it is hard to cost accurately.  The amounts of future payments depends on so many factors.

Firstly, claims are unpredictable.  Population projections predict that when the current generation retires, the working population is insufficient to fund future payments.  Our total fertility rate as per the Population White Paper is 1.19.  We need a TFI of about 2.1 to adequately replace the population.  One way that the Singapore government is going around it is by drastically increasing the population.  And secondly, there is no maturity limit for payments of this nature.  As long as there are CPF accounts, and as long as the owners of these accounts live, the interest has to be paid.

Now, if the population by which revenues are raised to sustain these payments has a much lower TFI, the population will shrink without another form of growth.  And that means, the government will have increasing difficulty keeping up with payments and allowing withdrawals.  And that could also be a reason why the withdrawal age and the minimum sum is going up: they might not have the money to pay up on withdrawals.

In summary, these are relatively quick fixes to problems that have developed over the last few decades.  On hindsight, Lee Kuan Yew’s stop at two policy worked far too well, and we are now having to pay an expensive price to reverse this.  It either means we all have to work at having larger families, or we have to accept the reality of increased immigration.

Some Implications of the Trans-Pacific Partnership (TPP) on Singapore

The Trans-Pacific Partnership (TPP) is a proposed trade agreement between Singapore and several nations across the Pacific Rim.  It is a comprehensive agreement concerning many aspects of economic policy.  The TPP seeks to lower trade barriers such as tariffs, enforce common standards for labour law, avoid double taxation, establish a common intellectual property framework, and organise a common investor-state dispute resolution mechanism.  The TPP is an expansion of the Trans-Pacific Strategic Economic Partnership Agreement (TPSEP or P4) signed by Brunei, Chile, Singapore, and New Zealand in 2006.  From 2008, 8 additional countries joined for a broader agreement: Australia, Canada, Japan, Malaysia, Mexico, Peru, the United States, and Vietnam.

The original goal of wrapping up negotiations was in 2012.  However, agriculture, intellectual property, and services and investments were some of the contentions that are still being negotiated.  The latest round of negotiations was schedule to take place in July 2015.  That has been delayed due to events in member countries.  After the Election victory, the PAP are in a stronger position domestically to push ahead with the TPP.  And with no significant Opposition presence in Parliament, they can rush through the reading of the bill as they have always done.  To date, there have already been 19 rounds of negotiations.

The negotiations have been conducted in secrecy and the text of the treaty has not been made public.  This means that by the time domestic opposition can build, the treaty would likely have been ratified in most member countries.  WikiLeaks has published several leaked documents pertaining to the TPP since 2013.  Controversial clauses in drafts leaked to the public do not give us much confidence that it is actually to our best interests.

So what are the main points being negotiation?  There is nothing on the official sites of the Singapore government.  However, on the website of the Office of the United States Trade Representative has a list of chapters there.  Of interest to us are the chapters on competition, cross-border services, customs, e-commerce, financial services, government procurement, intellectual property, investment, labour, legal issues, market access for goods, rules of origin, technical barriers to trade, telecommunications, temporary entry, and trade remedies.  The USTR further that the contents of the TPP seek to promote comprehensive market access, facilitate the development of production and supply chains among TPP members, create regulatory coherence and promote “comprehensive and robust market liberalisation”, amongst other things.

One of the most controversial agreements is the Investor-State Dispute Settlement (ISDS).  Based on the draft agreement from WikiLeaks, the treaty essentially elevates a corporation to equal status with the sovereign state in enforcing sections of the treaty.  This means foreign investors in a company can sue the member state governments for any sort of infringement.  This presents a major problem since governments, even the newly elected governments that were not yet in office at the ratification of the TPP are constrained from enacting domestic laws and regulations that might contravene the treaty.  This puts the interests of companies over the interests of citizens.  This provision is at the expense of our sovereignty.  A more aggressive interpretation means that corporations and foreign interests can force the repeal of laws that contravene the free flow of trade and persons.  To put this in a way Singaporeans can understand, this means that the Singapore government cannot limit, for example, the flow of foreign workers and enact laws to protect Singapore jobseekers.

This treaty allows corporations to challenge domestic legislation of public interest.  On the 26^th March 2015, WikiLeaks released the TPP’s Investment Chapter.  According to the documents released, under this treaty, global corporations have the power to sue governments in international tribunals and obtain taxpayer compensation for loss of expected future profits due to government actions.  That means, if a future government of Singapore were to enact a legislation protecting, say, the interest of Singapore PMETs and require companies to hire a certain percentage of them, a corporation based here can sue the government for loss of profits, and they will win.  The tribunal will decide damages and that money will come from our taxes.  That is not ideal.

Joseph Eugene Stiglitz, the Nobel prize-winning economist said, based on leaked drafts, it “serves the interests of the wealthiest.”  Organised labour groups in the U.S., New Zealand, Australia, and Canada have come out against it.  Economic policy think tanks oppose it, including the Economic Policy Institute and the Center for Economic and Policy Research, arguing that it could result in further job losses and declining wages.  Other renowned economists against it include Avram Noam Chomsky, Paul Robin Krugman, and Robert Bernard Reich.

What does it mean for Singaporeans in a nutshell?  It is a mechanism to depress wages, while manipulating currency through massive movement of bank instruments.  In the long term, in its default state, this will shrink the middle class and create an entrenched lower class over the long term.  It will significantly affect our GINI coefficient, meaning that the gap between the wealthy elite and the rest of us will widen, and eventually become insurmountable.  It is not a recipe for a stable economy.  In summary, in the hope of future profits brought about by increased trade, we have made a calculated bet.  The only people who will benefit greatly from the TPP are major corporation in the banking, pharmaceutical and technology sectors.  Of course, now that the US has declined to sign it, under a Trump presidency, it can be argued that the TPP will be modified.  This does not mean, in future, a government having the same policy philosophy would not attempt a similar deal.

CECA at Twenty: Why the 2005 Deal Still Cannot Be Fixed

On the 29^th June 2005, Singapore, under Prime Minister Lee Hsien Loong, and India, under Prime Minister Manmohan Singh, concluded the Comprehensive Economic Cooperation Agreement.  What followed became a genuine, recurring concern for ordinary Singaporeans, and the concern was never really about trade in goods.  It was about Chapter 9: Movement of Natural Persons, and specifically Annex 9A, a list of 127 professions Singapore contractually agreed to keep open to Indian nationals, without the right to apply labour market testing, economic needs testing, or “other procedures of similar effect” as a precondition for entry.

Why It was Not Well Thought Out

The clause on intra-corporate transferees compounds the problem directly.  A company can open a nominal office in both India and Singapore and use that structure to parachute professionals, technicians, and managers into the Singapore labour market with a guaranteed approval of short-term stay, bypassing the scrutiny every other work pass applicant faces.  This was not a minor drafting oversight.  It was a structural loophole, written into the treaty text itself, and treaties are considerably harder to unwind than domestic policy.

The consequences showed up in the numbers almost immediately.  The “other work passes” category grew by roughly 22% in both 2012 and 2013, then by 30% in the first six months of 2014 alone.  Professor Tommy Koh Thong Bee explained the underlying wage mechanism plainly: Singapore pays certain workers low wages “not primarily because their productivity is inherently low, but largely because they are competing against an unlimited supply of cheap foreign workers,” and the fix required either reducing that supply, introducing a minimum wage, or targeting specific sectors for wage enhancement directly.  None of that fix was available to Singapore unilaterally, because the treaty had already locked in the supply side of the equation.

Why the Issues Have Still Not Been Adequately Resolved

The Third Review of CECA has been ongoing since September 2018.  As of the joint statement issued in early 2025, both governments were still describing their task as making “progress on initiation” of that Third Review, meaning a review launched in 2018 had not even been substantively concluded seven years later.  Compare that to the First Review, concluded within two years, in 2007.  The Second Review took eight years and drew direct parliamentary criticism over the delay.  A Third Review now stretching past seven years without resolution is not evidence of careful diplomatic calibration.  It is evidence that the two governments cannot agree on how to unwind a structural problem neither side wants to be blamed for creating.

Singapore has, in the meantime, tried to patch the wound domestically rather than at the treaty level.  The Complementarity Assessment Framework, COMPASS, introduced for all new Employment Pass applications from September 2023 and extended to renewals from September 2024, requires a minimum score of 40 points across salary, qualifications, workforce diversity, and support for local employment, specifically to prevent any single nationality from dominating a firm’s professional workforce.  It is a genuinely more rigorous filter than anything Singapore had in 2015.  It also does not touch the original problem.  Multiple immigration advisories confirm that certain intra-corporate transferees remain COMPASS-exempt under the specific provisions of CECA itself, and separately, any Employment Pass applicant earning above S$22,500 a month is exempt from COMPASS scoring entirely, regardless of nationality concentration at the hiring firm.  Singapore built an elaborate new points system explicitly to manage exactly the risk CECA was already contractually forbidden from letting it manage, for the one category of applicant the original 2005 agreement was actually written around.

The trade case for the agreement remains genuinely strong, and pretending otherwise would be dishonest.  Singapore was India’s largest source of FDI in 2013-14 at US$5.98 billion, roughly a quarter of India’s total inflows that year, and Temasek Holdings alone has continued growing its India-linked exposure, with its net portfolio value rising to S$389 billion partly on the strength of US and Indian investments.  Bilateral trade, having expanded from US$4.2 billion in 2003-04 before CECA to considerably higher levels since, has been genuinely volatile, reflecting global conditions as much as the agreement’s own design.  None of that commercial success addresses the specific structural flaw the movement-of-persons chapter created, and no amount of GDP growth retroactively justifies signing away the labour market testing tools every other trade partner is permitted to retain.

The Verdict

CECA was not badly negotiated because Singapore lacked capable trade negotiators.  It was badly negotiated because the negotiators optimised for corporate access and geopolitical diversification away from China, and treated the domestic labour market consequences as a manageable afterthought rather than a central design constraint.  Twenty years, three review cycles, and one entirely new immigration points system later, the core structural loophole, intra-corporate transfer without labour market testing, remains contractually intact, patched around at the edges rather than fixed at the source.  A treaty that takes longer to renegotiate than it took to originally draft is not a living agreement being carefully maintained.  It is an admission that both governments know exactly what is wrong with it, and neither has found the political will to actually change it.

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Terence Nunis | Executive Chairman, Equinox Zenith | Author, The 1% Playbook: The Billionaire Cheat Code

How to Calculate Your Coverage When Buying Insurance

The following are some of the formulae for a suggested needs analysis and an explanation of how they might be used.  This is a simple, and useful means to check if your coverage is sufficient.

Income Protection

This is the amount your family would need in the event of your death.  This is especially important if you are the sole breadwinner, or the principle breadwinner.  The whole idea is to have enough set aside that their standard of living is not severely affected.  Things to consider include funds set aside for the future education of your children, for the maintenance of the house and for the settlement of debts.

The Formula: (Monthly Amount Required x 12 x No. of Years) + Immediate Expenses + Outstanding Liabilities + Emergency Fund - Existing Death Coverage

The monthly amount required is the amount needed to pay the monthly bills with a little more set aside to maintain the standard of living.

The number of years refers to the time this funds need to last before someone else in the family is able to address the imbalance in the family income stream.

The immediate expenses are the expenses of a funeral, the estate expenses and the hospital bills, if any.

The outstanding liabilities include debts in the name of the deceased, or undertaken on behalf of the family.  They include housing loans, student loans, bank loan and car loans.

The emergency fund refers to the buffer amount in the family savings account that might mitigate this loss of income stream.

The existing death coverage includes any and all arrangements that would pay out upon your death into your estate.

The calculation for the accident coverage also uses this formula since the considerations are the same upon death.  If they lead to disability, then they use the formula below.

Disability Protection

This is the amount required by you to maintain your standard of living in the event of a disability, as well as the costs involved such as the acquisition of wheelchairs, walkers and such; the modifications needed to your living space to accommodate your unfortunate inadequacy; the cost of a caregiver and the immediate and ongoing treatment which may not be covered under a hospitalisation plan.

The Formula: (Monthly Account Required x 12 x No. of Years) – Existing Disability Coverage

The monthly amount required is the same as the above.

The number of years here refers to two things.  It refers to the time this funds need to last before someone else in the family is able to address the imbalance in the family income stream.  It also factors the number of years you will live with this disability.  In general, 20 years is a reasonable period to consider.

Critical Illness Protection

This amount factors two things.  It factors the amount required by you to maintain your standard of living in the event of a critical illness.  And it considers the cost of treatment.  This is important because even though you may have a hospitalisation plan, your condition may require innovative forms of treatment that may not be covered in the schedule of treatment.

The Formula: Total Lump Sum Benefit Required – Existing Lump Sum Benefit

$700,000 is a reasonable amount required in Singapore for a comprehensive treatment plan for cancer, a major killer.

Hospitalisation Expenses

This is the amount required by you for your daily expenses.  This is especially necessary for people who are daily rated such that not working would mean no earnings, and for proprietors.

The Formula: Monthly Earnings / 30 – Existing Coverage

The monthly earnings is the average earnings per month.  This is used to calculate the daily earnings.  If that is already known, then it is unnecessary.

Retirement & Savings Requirement

The retirement requirement is the amount required to maintain a reasonable standard of living upon retirement.  This is important because in Singapore, the average retirement age is between 62 to 65 years of age.  However, the life expectancy of a man is 84 years and for a woman is 88 years.  This means that the average person is expected to live more than 20 years without an adequate income.  This is also the age where medical expenses rise, as well as the attendant costs.

The Formula: Monthly Amount Needed x 12 x No. of Years – Existing Arrangement

The monthly amount needed is the amount required by you to maintain your standard of living.  A reasonable amount to start would be 80% of your last drawn salary.

The number of years is the number of years you expect to live.  We normally take it as the average life expectancy less the age of retirement.

Summary

It is important to note here that the vast majority of people are still underinsured.  We live in an age where people do understand the need for insurance.  However, people tend to underestimate their liability and their requirements.