Benedict Chong, I don’t know if that’s his real name, has responded to my recent piece about wanting to give Singaporeans a stake in the wealth of  our country.  I reproduce it here as a separate article. He makes many interesting points and it is well worth reading.  Please feel free to comment on it.

With regards to your article on the privatisation of both Temasek and GIC, I note certain solutions and process that you (KJ) are suggesting the Singapore government implement in order to “create a true property owning democracy”. While I like the idealism of such an idea, I am afraid that practically, it is unrealistic. And I give you the reasons below.

I will of course, focus on the answers to the questions you broached and add a few of my own.

The figure you give shows that every citizen would have a claim of up to $100,000. While this figure itself is disputable and extremely subjective, as you have stated yourself, let me bring your attention to the crux of the issue. Will the issuance of such a huge and nominally equal sum of money to every citizen in the country really make the lives of the general population better? Based on comparative analysis, the relative wealth of citizens in the country will remain equal. There is no net benefit between me and my neighbour since we are both receiving the same amount. On a ceteris paribus assumption, I would be no better off.

The injection or rather, distribution of such a huge amount of shares to the public will also result in the need to increase the monetary base/supply of SGD substantially. I assume that cumulatively, GIC and Temasek as a whole will be worth around 500 billion SGD. The distribution without payment of such shares will result in sudden inflows of apparent “wealth” that increases the total market capitalisation of SGX listed companies by up to 55%. But the money to purchase or even sell such shares has to come from somewhere. This will lead to two possibilities; inflation as money “earned” from sale of distributed shares are pumped into the economy or plunging prices as supply of such shares outstrip demand for it, making those who sold their holdings first more advantaged (so much for democracy) since transactions are carried out on basis of price and first come first serve.

Your comment on the government no longer required to make budget surpluses or even balance the budget is perhaps extremely irresponsible. There is little need for me to point to the problems in Eurozone countries as well as USA as evidentiary support for my stand. In addition, your comment on the government investing possible surpluses into SWFs also brings a moral issue to the table.

Whether you like it or not, government money in any entity means that that particular institution has been given an unquantifiable asset of implicit sovereign guarantee. In this case, will the SWFs be considered private corporations or mere Government Sponsored Enterprises? GSEs have shown throughout history to be less than prudent in their finances, regardless of whether they are publicly traded or not. So much for transparency that comes with a stock listing..

The other questions that you are merely scratch the surface. I would like to pose a few of my own questions which I hope you can answer.

1) What happens if those former SWFs meet insolvency issues in the future? Should the government backstop them or let them fail, keeping note of their huge presence in the markets?

2) Is the securities market in Singapore liquid enough to sustain such a listing?

3) Will the government regulate the company or allow is to determine its own risk profile?

4) Who will lead the former SWFs? A government appointee or member of the general public?

5) Should the incumbent government issue a set of guidance, directives or risk parameters to the company?

Published by kjeyaretnam

I'm a Singaporean economist who became an opposition activist. I blog to provide an alternative to the porkies that the Pinkies tell. It just so happens that my alternative is the truth. That's why I've never been sued in any civil or criminal court no matter how hard hitting my criticism. I'm quoted and interviewed and asked to speak across the world but largely censored in Singapore in an effort to silence my political opinions. The left hate me because they think I split their vote and because I eschew their outmoded economic models. Models that don't work. The Right and the Conservatives hate me because I'm a liberal. I'm not sure what the middle think of me. I don't think there are more than a handful of people in the middle, here in Singapore. I'm a Singaporean born and bred, dual heritage, my parents Singaporean established here before the State of Singapore was created. I'm not Eurasian. I read economics at Cambridge and could be broadly described as from the Keynesian school but I believe in interventions. I was formerly a successful hedge fund manager. After economics and politics my greatest interests are history, film and Makan. I run but I run so I can eat like a Singaporean. View all posts by kjeyaretnam