I have been reading recently about the trial in the US of Mike Lynch, the founder of Autonomy, a once high-flying software company that was at one time tipped as Google 2.0. Lynch is accused of inflating Autonomy’s revenues to make the company look more profitable than it really was and thus falsely induce the US computer and software giant, Hewlett Packard (HP), to pay more than US$11 billion to buy Autonomy in 2011. After the CEO at the time was replaced by Meg Whitman, HP wrote the value of Autonomy down by nearly US$9 billion and sacked Lynch.

According to the prosecution, ‘Autonomy used so-called “round trip” arrangements with customers, whereby it paid them money effectively so they could pay it money back, to inflate its revenues. Using a hypothetical example of a firm paying a customer $110 so that it paid $100 back, on Monday the assistant US attorney Adam Reeves said: “Add a few zeroes, and that is what Autonomy was doing.”’

and:

Through a “variety of accounting tricks” and deals that “made no sense, unless you were trying to falsely inflate your revenue”, the government alleges Autonomy constructed “an elaborate, multilayered, multiyear fraud”.

Reading the report I was struck immediately by the similarities between what Lynch, as CEO of Autonomy, allegedly did and what the PAP Government does, perfectly legally of course, with the grants it provides every year to HDB so it can purchase land at inflated prices from the Singapore Land Authority. In the 2024 Budget these grants amounted to about $7 billion. The Government also provides subsidies of more than $1 billion to CPF holders for HDB purchases. This is money from the Budget that could be spent on other items such as old age pensions or child benefit or on providing free healthcare. It fits the definition of “round tripping” since the money goes from the Government through the Budget and back to the Government when it sells land to HDB. This money is channelled into the reserves where it becomes unavailable for ordinary spending and is supposedly safeguarded for future generations, but whether future generations of first generation immigrants or of Singaporeans remains opaque. It also bolsters the high valuation of land in Singapore, which Singaporeans shouldn’t need reminding is largely state-owned and was acquired for minimal cost back in the 1960s and 1970s. This kind of accounting trick obviously raises the theoretical value of Singapore’s total reserves, including both non-financial and financial assets.

The Government will of course argue that this system is necessary because of the high price of land in Singapore and the need to keep housing “affordable” for the 90% of Singaporeans who live in public housing. It insists that HDB is paying the “market” price. However there is no real market in land in Singapore because the Government owns 80-90% of the land and all land sales are leases which revert back to the state at the conclusion of the lease.

The current system seems to serve no purpose other than to inflate the value of Government spending, in much the same way as at least 50% of the Net Investment Returns Contribution is saved not spent. It would be simpler and easier for the Government to instead price the land at a level that is in line with HDB’s cost structure and the prices it charges to homebuyers so that there is no need for grants or CPF subsidies. This would free up budgetary resources that are currently spent on grants and fake subsidies to be spent on directly improving Singaporeans’ lives.

Just like the US Prosecutor asked the jury rhetorically, “Does this deal make any sense”, Singaporeans should ask themselves whether the PAP Government’s round tripping of supposed spending, while not breaking any laws as far as I’m aware, is just another subterfuge to conceal resources from the people. These “subsidies” also help to bolster the Government’s frequent claim that Singaporeans at low to median income levels receive far more in financial assistance than they pay in taxes. I don’t have time here to do so but It would be interesting to know how eliminating these subsidies and just pricing the land at a price consistent with HDB’s prices would affect the calculations. If Singaporeans want transparency on the resources available and to have them directed to benefit them then they have to realise they aren’t going to get it from the PAP.

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