SWF Transparency doesn’t mean revelation of investment strategies, says NSP

Hazel Poa

The author is the Secretary-General of the National Solidarity Party (NSP). This is a press release by the National Solidarity Party.

The National Solidarity Party (NSP) regrets the continued lack of transparency surrounding our sovereign wealth funds (SWFs). The NSP believes that sufficient public information in the internal workings of GIC and Temasek Holdings is undoubtedly in the interest of all Singaporeans, as is a demonstrably robust system of check and balances in the management of our SWFs.

Singapore’s reserves, as well as Singaporeans’ Central Provident Fund (CPF) contributions, are managed by GIC and Temasek Holdings. In GIC’s 2011 annual report, released last month, the fund claims a 7.2% annualized rate of return in USD terms from its investments over the past 20 years. Converted to SGD terms, the annualised rate of return is 5.1%. Temasek Holdings claims annualized returns of 15% over 20 years. In comparison, CPF only pays out 2.5%. It is also a disturbing state of affairs when Temasek Holdings, with about 400 employees, can report an $8 billion administrative expense without incurring significant public scrutiny. To put it in context, $8 billion is more than one-sixth of our national budget.

The NSP believes that, as a mature, intelligent and financially responsible society, our citizens have the unquestionable right to have the fullest picture of where their taxes and government mandated social contributions go into and what comes out of that. Therefore, we strongly encourage greater public awareness of relevant benchmarks such as Malaysia’s Employees Provident Fund, which guarantees a minimum return of 2.5% p.a. and actually delivered returns of 4% to 8.5% annually since 1960 , and Norway’s SWF which has managed to be highly successful while offering greater disclosure to its citizens.

The longstanding excuse from the privileged few responsible for maintaining the shroud of secrecy around our SWFs is that secrecy aids competitiveness. PAP leader and long-serving former GIC Chairman Lee Kuan Yew has argued that if GIC makes its moves clear, competitors can predict what it does next. We believe that this argument is specious.

There is a world of difference between GIC being transparent to stakeholders (which Singapore taxpayers surely are) on one hand, and foolishly telegraphing its investment strategy to competitors. There are plenty of examples of successful public companies that manage to turn in consistently good returns for stakeholders while providing full disclosure to stakeholders. Where our SWFs are concerned, as we can see from the paltry interest rates offered by CPF, Singapore taxpayers neither enjoy full disclosure nor noticeably remarkable returns.

The NSP also calls for all MPs and their immediate relatives to be open about any compensation that they might be receiving from Temasek Holdings or GIC or other such organizations. The ongoing review on ministerial salaries is a correct, if belated, move in the right direction. But it is only a partial step.

For example, existing and former MPs such as Lee Kuan Yew, Lee Hsien Loong and Tony Tan have served many years in a chairman or deputy chairman role with GIC or Temasek. Close relatives of these PAP dignitaries are also serving in high positions within the SWFs. Additionally, with so many PAP MPs also juggling multiple, sometimes dozens, of directorships and consultancies, it is clearly in the public interest to know who else is paying their MPs and for what purposes.

We strongly recommend that serving MPs offer a full and public disclosure on all remunerated positions, including directorships and retainers, taken out with the official MP position. NSP firmly believes that better financial transparency in our SWFs and Parliament is the best way to serve all Singaporeans, and hope that the new elected President will champion the move as this relates also to the management of our reserves.