PM Lee Defends His Own Grassroots Activists From Internal Flak

As the PAP continues with its post-election reflections and musings, a certain new theme emerges. It seems as if the PAP's grassroots activists are getting some of the flak, for the party's poor performance in the elections.

The allegation is that these activists failed to give the MPs adequate feedback, causing the MPs to lose touch with the ground (that is, with the people of Singapore). Here's PM Lee leaping to their defence.

Don't be discouraged, PM Lee tells activists

by S Ramesh (TODAY)

SINGAPORE - Citing the criticism levelled at grassroots activists in the aftermath of the recent General Election (GE), Prime Minister Lee Hsien Loong yesterday defended the work of the activists who had given "their honest feedback, which unfortunately we sometimes failed to interpret correctly".

Speaking at a dinner to thank volunteers of his Teck Ghee division in Ang Mo Kio Group Representation Constituency (GRC), Mr Lee also acknowledged that "clearly there were problems which were missed" and areas where the People's Action Party (PAP) "can and must improve".

But it would be unfair to blame the activists, said Mr Lee, as the majority have committed time and energy to community work and have done their best to serve residents.

He said community leaders and PAP activists played a crucial role in the run-up to the GE, with some even taking leave during the nine days of hustings.

"People say various things: They say that (the activists) stood between the Members of Parliament and residents, you shielded the MP, or you didn't respond enough to the residents' needs, or you didn't speak candidly enough when the residents were giving feedback and the MP didn't get a good sense of what was on the ground," he said.

"Some grassroots leaders and party activists reading this have been discouraged. My response is, don't be discouraged."

The Prime Minister said that shortcomings in the PAP will be remedied and the party will strive to do better.

I don't know how much the PAP MPs rely on their grassroots activists to give them feedback about the ground. I do wonder if the PAP MPs are aware of the inherent weaknesses of such a feedback mechanism.

The first problem is that some grassroots activists are probably not genuinely interested in helping the PAP. They are there just to gain certain specific personal advantages for themselves.

For example, years ago, my wife once considered becoming a PAP volunteer. This would enable our son to  gain priority for admission into the PAP kindergarten near our home. The kindergarten was three minutes away from our home, so it would have been really convenient.

In the end, we decided not to do it. One reason was that the kindergarten looked rather run-down. Neither the curriculum nor the teachers impressed us, when we went for the open house.

However, the fact is that even if my wife had decided to become a grassroots activist, she would have done it just to clock the hours and get the admission priority. Mrs Wang has no love for the PAP. She wouldn't have been interested at all in giving genuine feedback to the MPs.

Especially if the feedback was negative and would annoy the MPs (therefore jeopardising the priority for kindergarten admission).

Now, the second problem for the PAP is that some grassroots activists ARE genuinely interested in helping the PAP. These are the hard-core, true-blue PAP supporters, who will take nine days of leave from work to help out during the GE; and wave the flag and banners; and hug their MPs; and take the chartered bus from one rally to the next and to the next, just to make up the crowd.

The problem here is that such grassroots activists are inherently unable to give negative feedback to the MPs. You can safely assume that a large part of of their loyalty is blind. Whatever was the result of a PAP policy or decision, these activists will automatically view as wonderful, and good, and desirable. Asking them for criticism is like asking an ardent Lady Gaga fan to criticise Lady Gaga - it's an exercise in futility.

That is why such grassroots activists are lousy at providing feedback. (They are good for some things, such as waving flags and banners. But they are lousy at providing feedback).

In the near future, I may blog about how the PAP can get its best, most useful feedback. Of course, such feedback comes from its worst enemies - the Opposition.

Baca Selengkapnya »»

Lui on the Train - Much Ado About Nothing

Today the Straits Times has an article about Transport Minister Lui Tuck Yew being spotted on an MRT train. The article goes like this:

NEW Minister for Transport Lui Tuck Yew was once again spotted taking the public transportation. This time, he was seen riding a MRT train during morning rush hour on Monday.
A commuter identified only as Nat snapped photos of the minister after seeing him in the crowded train, and posted them on citizen journalism website STOMP.

Nat said: 'I snapped pictures of him on the train this morning at 7.45am, on the North South line heading towards Jurong East at Bukit Gombak. Welcome to the crowd!'

Mr Lui was last week seen riding a public bus last Tuesday, and photos of the sighting were also posted on STOMP."

Well, it's not a bad thing if he takes the public transport to see what it is like. But to me, it's an overkill  to pitch this as a good thing. If some Singaporeans think that this is a good thing, then I have to say that their expectations of our government are too low.
 
Personally, I would expect the Education Minister to visit schools from time to time, to see what's going on. I would expect the Defence Minister to visit army camps and bases for the same reason. I would expect the Heath Minister to visit our polyclinics and hospitals, and yes, I would expect the Transport Minister to ride on the trains and buses. 
 
Expecting any less from our ministers is to have unduly low expectations for them. We're not paying them peanuts - we shouldn't be getting monkeys.

Baca Selengkapnya »»

The Presidential Elections

Very shortly after the PAP had lost in Aljunied GRC, the media asked ex-Foreign Affairs Minister George Yeo if he would run for President. He replied quite affirmatively that he would not.

The decisiveness in his response would have surprised some political watchers. After all, George had just become jobless. Furthermore he has the right sort of background to be President. One would have expected George to at least reserve his position and say something along the lines of "I don't know yet. I'll think about it and decide later."

But a more recent TODAY article (that is not even about George Yeo) gives us a clue as to why George Yeo had been adamant about not running for President. The background to this article is that ex-PAP MP Tan Cheng Bock had just expressed his interest in running for President. And this is what his ex-fellow PAP MPs had to say about it:

PAP MPs surprised Dr Tan might run for President

04:47 AM May 28, 2011
by Teo Xuanwei

SINGAPORE - News that his former comrade-in-arms Tan Cheng Bock, 71, has declared his intention to run for President caught veteran backbencher Inderjit Singh off guard.

The Ang Mo Kio Group Representation Constituency Member of Parliament (MP) told Today: "For Presidential Elections, there's always been a candidate that the Government supports ... it's quite clear that we will be fully behind this person so it will be very awkward (to have Dr Tan in the contest)."

What do these lines tell you? Firstly, that the PAP had already decided who should run for President. Secondly, that George Yeo was not the guy. Thirdly, that the PAP groupthink is so strong that George absolutely would not consider rocking the boat. George does not dare to be the President, if the PAP has already decided that someone else should be.

This brings to mind George Yeo's parting words, when he spoke to the media and said that he would not run for President. He said something like this, "I'm too much of a free spirit to run for President". This was a somewhat curious choice of phrase - and in fact, it attracted a degree of speculative twitterings among Singaporeans. One can't help but wonder - why would being a free spirit obstruct a person from being the President, any more than, say, being the Foreign Affairs Minister?

Perhaps I'm reading too much between the lines. But my instinctive feel is as follows. As mentioned earlier, the PAP has already decided who should be the President - and the PAP has decided to give him its full support (note Inderjit Singh's words - "we will be fully behind this person"). Whoever he is, this person himself would no doubt have been heavily involved in the discussions.

And if he does become President, it may well transpire that he feels beholden to the PAP (which selected him, and endorsed him, and gave him its full support). The expectation may arise that he is obliged to lend his support to the PAP. In other words, the President would not be a "free spirit". He can't do what he really wants. He can only do what the PAP wants. The favour has to be repaid.

This is pretty scary - especially if you understand what the President's role is all about. Let me explain. One of the President's main functions is to preside over the the appointment and dismissal of very senior civil servants and public officers. Specifically, the President has veto powers to stop the government from dismissing these people:

(1) the Chief Justice, Judges and Judicial Commissioners of the Supreme Court;
(2) the Attorney-General;
(3) members of the Presidential Council for Minority Rights;
(4) members of the Presidential Council for Religious Harmony;
(5) a member of the Legal Service Commission;
(6) the Chief Valuer;
(7) the Auditor-General;
(8) the Accountant-General;
(9) the Chief of Defence Force;
(10) the Chiefs of the Air Force, Army and Navy;
(11) a member of the Armed Forces Council;
(12) the Commissioner of Police; and
(13) the Director of the Corrupt Practices Investigation Bureau.

What's the idea here? Well, the President is supposed to protect these senior civil servants / public officers so that they can perform their duties without fear of political reprisal. This is a very important check & balance.

Just for example, suppose one day, a PAP minister is suspected of criminal wrongdoing - let's say that it's something to do with misuse of government funds. The Auditor-General discovers this while performing an audit, and would want to make a police report. The Commissioner of Police would want to launch a full-scale investigation against that PAP minister. If there is sufficient evidence of wrongdoing, the Attorney-General of Singapore would want to prosecute the case, and the District Judge would want to hear it.

But at the same time, all these persons - the Auditor General; the Commissioner of Police; the Attorney-General; the District Judge - could be afraid to do the right thing. After all, they might get sacked (it's the government that employs them, after all). This is where the President comes in. The President has the power to protect these people. Unless the President agrees, none of these people can be sacked or otherwise removed from their posts.

That's why it is important to have a truly independent President. A free spirit, if you want to call it that. A President who didn't receive any favours from the PAP, and who doesn't feel obliged to return any.

Baca Selengkapnya »»

Possible Formulae for Determining Ministers' Salaries

Mak Yuen Teen is an associate professor at NUS Business School. He has an article in TODAY which discusses ministerial salaries. Excerpts below:

Reviewing ministerial salaries: Seven lessons from the private sector
04:46 AM May 26, 2011
by Mak Yuen Teen

Last week, I taught executive and director pay to an executive MBA class and, during lunch, the subject of conversation at my table was ministerial pay in Singapore - a regular topic among the executives attending the programme over the years.

While most of the rest of the world is concerned with high executive pay, this must be the only country where ministerial salaries are of more interest.

Quite coincidentally, on Saturday morning, I had begun writing a commentary with the tentative title of "Ministerial pay: Lessons from corporate scandals and the financial crisis". That night, I saw on the news the Prime Minister's announcement that he was setting up a committee to review ministerial pay.

When you pay poorly, you might still get good people but, undoubtedly, the pool you select from will be smaller. You may also attract some who are willing to take low pay because they want to use their position for other benefit, such as taking bribes or getting directorships in companies.

When you pay very well, the pool will be larger, but you also risk attracting the wrong people who are motivated purely by money. People who are attracted to politics because of the money (or power) might still want to use their positions for their own benefit because for some, it is never enough.

I personally do not believe that high pay is effective for fighting corruption; I think it is an affront to the many who make an honest living on low pay to suggest that paying little encourages corruption.

I agree with Mak. Not only that, I think that it is also an affront to the many who make an honest living on high pay to suggest that paying them less would encourage corruption. I mean, just take a look at this nice, honest-looking man over here:

This man earns a lot of money (about 3 or 4 million dollars per year, excluding bonuses). He is also a well-respected man, who has held public office for many years. And in all those many years, there has never been any reason to believe that he has ever done anything corrupt.

But you know what his father says, and has said for many years, right? According to Daddy, if his son's salary was cut (for example, to only 1 or 2 million dollars per year), then he would feel tempted to become dishonest, and to cheat, and take bribes.

Now, if I were the son, I would feel very insulted by such remarks. For if I were a genuinely honest man, I would never think of taking bribes and Daddy's remarks are therefore indeed an insult to me. And the only temptation I would feel is the temptation to slap my father's face.

But that wouldn't be very nice. At least, I wouldn't do it in public - it would be politically incorrect. Daddy, after all, is a pretty powerful man. In practical terms, perhaps my only feasible course of action would be to  wait, wait and wait ... until Daddy grows very old, and retires. Then I could go about taking steps to change his long-standing policy on ministers' salaries.

However, it is very difficult to determine what is the "right" pay for CEOs, people with very specialised skills - and government ministers. For CEOs, certain "benchmarks" have been suggested, such as some percentage of profits, some ratio to average employee pay, the pay of sports stars and celebrities or fellow CEOs. None of these are wholly satisfactory.

Benchmarking ministerial pay to other professions has its limitations because they are totally different jobs, and different jobs come with different lifestyles and employment risks. When I look at my peers who have gone to the private sector, many are earning a lot more than I do now, but they do not have my more flexible lifestyle as an academic, and they are not able to achieve tenure which gives better job security.

In any case, I believe that the best people in any field are those who are driven first by their passion and calling.

IT'S HOW THEY EARN IT

As a corporate governance advocate, it has never been my concern if someone is well paid and earns it in the right way. I would be outraged if someone makes a lot of money but does so in an illegal or unethical manner, where it is not related to appropriate measures of performance, or the pay determined is through a contaminated process.

The corporate sector suggests the following "best practices" which should be followed in setting senior executives pay:

- An "arms length" process for determining remuneration policy and packages
- Benchmarks used should be comparable (similar job responsibilities, similar size and industry, etc)
- There should be a reasonable mix of short- and long-term pay
- Pay should be based mainly on factors within the executive's control
- Performance measures used for evaluation should have strong links with the corporation's long-term performance
- There should be minimal benefits and termination payments that are generally unrelated to performance
- There is good disclosure and transparency
A private sector approach which treats running a country as equivalent to running a corporation is, of course, flawed to start out with. After all, a government can always print money, raise taxes, determine whether it wants to make a profit (budget surplus) or a loss (budget deficit) and so on.

Tying ministerial bonuses to annual GDP growth can create the same perverse incentives as tying CEO pay to annual revenue growth. For example, it can lead to incentives to invest in projects with high economic payoffs, but with attendant high social costs and under-investing for long-term growth.

"Projects with high economic payoffs, but with attendant high social costs" ...? Hmmm, that sounds like two things to me.

Firstly, our massive import of foreigners - which leads to economic growth, but strains our public infrastructure such as housing and transport.

Secondly, our two new casinos - which lead to economic growth, but also cause a variety of social ills such as crime, gambling addiction and the destruction of families.

What's also quite tragic is that many Singaporeans still don't realise that high economic growth doesn't necessarily translate into a better standard of living for citizens in general. High economic growth simply means that:

(1) Companies are producing and selling more goods and services; and
(2) The government gets to collect more corporate taxes.

Normally, (1) means that citizens get to earn more money, because successful companies can pay better salaries and bonuses and hire more employees. However, if labour & immigration policies are extremely lax, the companies don't actually pay citizens better, and won't invest in training them. Instead the companies will just hire plenty of cheap foreigners who earn a very large part of the extra money that might otherwise have gone to the citizens.

Normally, (2) means that the government has plenty of extra money which it can reinvest in society and redistribute to the people, for example, in areas such as education, healthcare and housing. However, if the government has the obsessive mindset that every extra cent must be channelled into the reserves and the reserves must never be touched until the end of the world has arrived, well, basically the people won't gain any benefit from (2).

Other problems are that high economic growth typically leads to increased inflation, which means that the cost of living escalates (hmmm, coincidentally that was the top election issue in Singapore) and furthermore the wealth created by a high GDP doesn't necessarily get distributed evenly across society (i.e, the rich get richer, and the poor get poorer - and guess which country holds the world record for having the largest income gap?)

But I digress. Back to Mak's article: 

But if we are determined to follow a private sector approach to setting ministerial pay, then we should go the whole nine yards and adopt similar sound pay practices, which could involve the following ....

 DEFER PAY, BE TRANSPARENT

One, have an independent ministerial pay committee to oversee ministerial pay policy and levels (members must be independent and perceived to be so).

Two, adopt a small number of macro performance measures which capture overall performance in a holistic way (such as average GDP growth, average wage growth, Gini coefficient and unemployment rate) and micro performance measures which directly reflect a particular minister's performance (such as traffic accident rates, average expressway speeds, admission rates of Singaporeans into local universities, percentage of low-income families owning HDB flats).

Three, tie a minister's pay primarily to his individual responsibilities and performance, based on his portfolio (a small component can be tied to more macro measures but these may be more relevant to assessing the performance of the "chief executive", that is, the Prime Minister).

Four, benchmark targets such as GDP growth to trends in comparable economies, to better ensure that improvements are not largely due to external factors (for example, a significant increase in GDP growth - just like a significant increase in a company's stock price - may be driven more by general trends in the inter-connected global economy).

Five, defer a part of a minister's pay for a number of years and put in place conditions under which the deferred pay may be reduced.

Six, eliminate or significantly reduce pensions and other benefits not linked to a minister's performance. And seven, publish a report each year on the actual amount of each minister's pay and its breakdown.

This may sound like an awfully tedious process for setting ministerial pay. Unfortunately, corporate scandals and the recent financial crisis have taught us that poorly designed pay schemes set through a flawed process and which lack transparency can create perverse incentives and undermine governance. The current approach to setting ministerial pay emulates the pay levels in the private sector but not the sound pay principles that well-governed companies follow.

Some good ideas there, and all worth considering.

There is also a simpler idea which Mak did not mention. Yes, I know that it needs some tweaks and adjustments, but basically the idea goes like this. Firstly, ensure that the civil service has a rational system for determining salaries. Secondly, extend this system to the ministers.

Why? Well, in any normal organisation (and the civil service is not different), your salary depends on where you stand, in the hierarchy. Junior employees earn less than middle management, and middle management earns less than senior management. And the most senior guy in senior management earns more than the other guys in senior management.

A minister occupies the highest position in his ministry. The Permanent Secretary of that ministry occupies the 2nd highest position. So the minister should earn a salary anywhere from 5% to 20% higher than the Permanent Secretary. Similarly, we would expect the Perm Sec to earn 5% to 20% more than the civil servants who occupy the rank immediately below him.

Now, if the pay structure of the civil service is correctly rationalised across the board (and that should be the ongoing aim of the civil service anyway), what we would get is a natural pegging of ministers' salaries to private sector salaries anyway.

Why? Because the civil service and the private sector are in natural economic competition for employees all the time. For example, government hospitals and private hospitals are continuously competing to hire  doctors and nurses all the time. Government schools, private schools and tuition centres are continuously  competing to hire teachers. Any ministry which wants to hire fresh grads has got to compete with private-sector companies who also want to hire fresh grads.

If civil service salaries are generally fair and competitive at every level, then pegging our ministers' salaries to the permanent secretaries (and paying the ministers incrementally more) makes good sense.

Of course, this logic will probably reveal that currently, our ministers are grossly overpaid and have been grossly overpaid for many years.

But then we already knew that. Didn't we?

Baca Selengkapnya »»

Poems on the Radio and on the Trains

Mediacorp contacted me yesterday and asked for permission to read out a poem of mine on one of their radio programmes. I said yes, and planned to tune in, but woke up too late this morning and missed the programme (it started at 7:10 am). Oh well.

The poem was Palmistry, which I also read at a poetry event at the Esplanade Xchange last weekend. That event was part of the Moving Words project (jointly supported by the National Arts Council, The Literary Centre and SMRT). Selected poems by 12 Singapore poets will be featured - in the coming weeks - at various MRT stations and on the trains.

The poems come in the four official languages. Here's a nice one from Liang Wern Fook (梁文福）, who is also well-known as a songwriter.

岛

我和我的父亲相遇


在他的肩膀上

我小小的脸贴着他温热的颈项

（人们都说：这么年轻 这个父亲）

而我最初的看见

就是他背后的遥远



父亲以年轻让我追赶上他

以严厉让我学会眺望

以改变让我怀念

以挥手（又像招手）

叫我离开又让我想回来



我和我的父亲再度相遇

在我新车的后视镜里

我和他真的很像

（看起来还这么年轻 人们都这么说）

但近来大家说什么他都听成风的回响

年龄不是问题（我告诉自己）

距离才是问题



我是他的儿子

我最清楚父亲需要的远和近

放轻一点　别说得太急

他就可以　字字句句都听进去



父亲坐在后座

我开往明天的晴和雨

路还很长 再往前走

海岸线外

大海不是尽头

The Moving Words project comes with a competition that's open to the public (click on the earlier link). Prizes include an iPad2; book vouchers; and the chance to be published in a new book to be launched later this year in conjunction with the Singapore Writers Festival. Winning poems will also get featured on the MRT stations and trains. So wake up your muse, and start writing.

Baca Selengkapnya »»

George Yeo and His True Legacy for Singapore

Now that George Yeo is quitting politics, many people are saying that this is such a pity for Singapore's foreign affairs. Personally I am somewhat hazy about what George Yeo actually achieved in this area, but perhaps that's just because Singapore's foreign affairs is not an area to which I've paid that much attention.

Instead I will remember George Yeo as the minister who brought the casinos to Singapore. Yes, in case you've forgotten, George was the guy who first proposed the idea and pushed for it. Even within the PAP, there was plenty of debate and resistance about the casino proposal (to such an extent that another ex-minister, Lim Boon Heng, recently broke down in tears when he revisited those memories). But in the end George prevailed.

(George Yeo was also the man who famously said, "But we are building integrated resorts, not casinos". I found this statement very annoying, not merely because of its inherent dishonesty, but because it also assumed that Singaporeans were so stupid that they would fall for it. However, let's not digress.)

George Yeo's true legacy for Singapore is the casinos, for they will continue to exert an influence and impact on our society long after George himself is dead and gone. Billion-dollar infrastructure projects backed by serious international investors will not just fold up and expire tomorrow - once they are here, they are here to stay.

I am not one of those people who are fervently against casinos. Firstly I am not a Christian nor a Muslim and therefore have no religious objections against gambling.

Secondly, I recognise that the casinos do earn easy tourist dollars and create jobs (even though I do not think well of many of these jobs - would you really encourage your son to pursue a career as a professional croupier?).

Thirdly, I am not terribly persuaded by the argument that the casinos will spawn widespread gambling addictions among our people. That's because (in my view) such addictions may just as well arise in relation to 4D, Toto, Big Sweep or mahjong, all of which are forms of gambling which were here in Singapore long before the casinos ever came.

My concern about the casinos is that they will breed a lot of crime in Singapore. As long-time readers of this blog know, I began my legal career as a DPP, working frequently with the police as well as with CPIB and the Central Narcotics Bureau. Through my work experience, I have developed an intuitive sense of the kinds of environments and conditions under which crime, like magic, will spontaneously appear and flourish.

Casinos strike me as a rich, natural breeding ground for many types of crimes. Casinos are to criminals what garbage dumps are to rats, or shit is to houseflies. Specifically, a casino environment is supportive of the following species of criminal offences - theft, robbery, extortion, cheating, drug trafficking, consumption of illegal drugs, illegal moneylending, money laundering, vice activities, human trafficking and other immigration-related offences.

The two casinos have opened only in the recent past, so some of you will argue that it is too early to say if I am right or wrong. In fact I hope to be proven wrong about what I have said about the casinos - for who would want to live in a crime-infested country? Nevertheless, we can already begin to get a flavour of George Yeo's true legacy for Singapore. See below:

"AN UNEMPLOYED man was charged in court on Thursday with armed robbery of $450,000 from a businessman at a hotel room in Marina Bay Sands last week. No plea was taken from Octavius Tok Tien Howe, 37." LINK

"SINGAPORE: A punter who cheated the Marina Bay Sands casino of S$31,500 (US$24,800) with the help of a dealer was sentenced on Monday to 54 months jail. Thirty-two-year-old Tan Tiong Loon is the first person to ever be convicted and sentenced for being in cahoots with a dealer to cheat a local casino." LINK

"A VIETNAMESE woman was fined $700 on Wednesday for soliciting at the Marina Bay Sands casino after she lost money in gambling ... A district court heard that at 1.30am last Saturday, police received a call from security staff of the casino that they had detained a woman for soliciting for the purpose of prostitution." LINK

"SINGAPORE: A former croupier at the Resorts World Sentosa casino and a full-time gambler were jailed Tuesday for working together to cheat the attraction of nearly S$29,000 between October 2 and 9 last year." LINK

"A Singaporean man has been charged with acting as a bookie at the Resorts World Sentosa casino. 50-year-old Ng Ah Chye allegedly committed the offences between 11 July and 17 August, last year." LINK 

"SINGAPORE: A court in Singapore has framed charges against five Indians for allegedly using fake casino chips at a resort in the city state, local media reported on Saturday. The Indians are accused of using an unknown number of counterfeit chips valued at SGD 1,000 each ..." LINK

"After gambling and losing the $1000 he had brought to the Resorts World Sentosa casino, an Indonesian tourist resorted to theft. 49-year old Paulus Djohar has been sentenced to 4 weeks' jail for the attempted theft of a $500 cellphone. He followed 18-year old student Lim Tse Min from behind at Changi Airport and took the phone from her backpack." LINK

"A CHINESE national gambled with $250 in casino chips that did not belong to him while an Indian national stole $12,180 worth of electrical cables meant for Marina Bay Sands so as to get some money to bet with. On Wednesday, the two construction workers pleaded guilty. Ni Guo Jian, 45, was jailed nine weeks for criminal breach of trust. Kakkayan Govindarasan, 26, was jailed seven months." LINK

For better or for worse, this is George Yeo's legacy. For all of us, in this country.

Baca Selengkapnya »»

The Recycling of PAP Ministers and the Fall of the US Dollar

From the TODAY newspaper:

Risk of crisis if US loses AAA rating: GIC
04:46 AM May 10, 2011

by Chris Howells

SINGAPORE - A major crisis could erupt if the United States loses its triple-A credit rating, according to Government of Singapore Investment Corp (GIC) deputy chairman and executive director Tony Tan.

"We face the possibility of another major financial and economic crisis if the world's risk-free asset, hitherto US bonds, loses its AAA credit rating in a disorderly manner," Dr Tan said at a 30th anniversary conference of GIC yesterday.

Speaking at the same event, Prime Minister Lee Hsien Loong, who is also a deputy chairman of GIC, said: "The US has had its credit rating put on negative watch. It hasn't affected bond rates so far. But whether or not the rating agencies' views affect the market, the reality of the unsolved problem is that this fiscal challenge is looming and growing. That must eventually affect the confidence in the economy and the ability of Americans to continue to finance their debt, and, ultimately, with international implications, the value of the US dollar."

The comments come after Standard & Poor's last month cut its long-term outlook on US sovereign debt to negative, from stable, while keeping its triple-A rating. The ratings agency cited political gridlock in Washington over plans to cut government deficits as a key reason for the downgrade. 

First, a small digression. Some of you are still misguidedly mourning the defeat of foreign affairs minister George Yeo in the recent General Elections. For you believe that this means that Singapore has lost the services of a very talented, capable man.

But look carefully at the article above. See that name Tony Tan? Yes, that's our former Deputy Prime Minister (who was also our ex-Defence Minister, ex-Education Minister, ex-Home Affairs Minister etc).

Tony Tan retired from politics in 2005. But as you can see, he didn't end up as a quiet old man passing his days away by doing taichi and growing orchids in his garden. Today, Tony continues to hold a variety of important appointments. Among other things, he is the Deputy Chairman of GIC; and the Chairman of Singapore Press Holdings.

Ex-PAP ministers never really die, until they are really dead. They just get recycled into other lucrative roles, whereby they still get to control your CPF money, your mainstream media and various other aspects of your life. Sure, their public profile ceases to be so high, but they're not going to give up on the money so easily.

So members of the George Yeo Fan Club need not fear. Hsien Loong is probably identifying job vacancies for George now. If there isn't any existing vacancy, Hsien Loong will probably just create a new job for George.
_______________

Back to the TODAY article. I think that the title is misleading. Tony did not say that there is a risk of a crisis if the US loses its AAA rating. Tony said that there is a risk of a crisis, if the US loses its AAA rating in a disorderly manner. There's a difference.

Personally, I do not think that the S&P decision to place the US on negative watch was a surprise to anybody. Since the financial crisis, no one really cares that much about S&P ratings anyway, since they are no longer considered that reliable - remember how AAA-rated CDOs collapsed almost overnight into less than junk?

Relative to Asian currencies, the US dollar has been steadily declining for a long time, and the decline will just go on and on, quite irrespective of anything that S&P has got to say about it. My own financial adviser has told me to stay out of US dollar assets, unless they are one of those funds which also use USD/SGD hedges. And the main reason why gold and silver prices had been going crazy is that investors worldwide have been getting out of the US dollar and needing somewhere else to jump into, eg precious metals.

Baca Selengkapnya »»