View this powerpoint to learn how the shape quiz can give you hours of fun, keep dementia away and train a flexible mind. You can buy the Shape Quiz at www.easysearch.sg (Internet Shop)
Wednesday, January 13, 2010
Investment principles for 2010 and beyond
Read this article in Market Watch.
Principles
1. The markets are a dangerous place. They are little more than legalised casinos.
2. Fear and greed drives the markets.
3. Technical analysis does not work.
4. Stay liquid and diversify
Advice
a) Never invest with money that you may need in an emergency
b) Money that you may need should be in a saving account, to be used in an emergency
c) Investments are always priced at watch they are worth
d) Actively management funds rarely beat the benchmark
The 4th principle is useful and has to be read many times.
Principles
1. The markets are a dangerous place. They are little more than legalised casinos.
2. Fear and greed drives the markets.
3. Technical analysis does not work.
4. Stay liquid and diversify
Advice
a) Never invest with money that you may need in an emergency
b) Money that you may need should be in a saving account, to be used in an emergency
c) Investments are always priced at watch they are worth
d) Actively management funds rarely beat the benchmark
The 4th principle is useful and has to be read many times.
Tuesday, January 12, 2010
Adapting to the competitive school environment
Dear Mr. Tan,
My son attended an Elementary School in America when he was in First Grade and Second Grade. He enjoyed school very much and was very participative in class as the teachers would encourage the pupils to speak up even though they may not give the right answers at times.
We returned to Singapore when he was in Primary 3 and he continued to enjoy schooling and did very well in school. He was then posted to the best class in primary 5 and 6. It was a very competitive class and the students are rather conscious with their marks and grades for everything they did. My son was under a lot of stress and began to lose confidence in himself. He constantly feels that he is not good enough and started to worry too much about examinations. We have always assured him that we would be proud of him no matter what grade he gets. Learning to him is no longer fun but a competition for higher marks.
Fortunately, he did reasonably well in PSLE and is now in Secondary One. He is making new friends and is adapting well to the new environment. We can see that he is gaining his self confidence slowly and we are glad that he is enjoying school again.
My son attended an Elementary School in America when he was in First Grade and Second Grade. He enjoyed school very much and was very participative in class as the teachers would encourage the pupils to speak up even though they may not give the right answers at times.
We returned to Singapore when he was in Primary 3 and he continued to enjoy schooling and did very well in school. He was then posted to the best class in primary 5 and 6. It was a very competitive class and the students are rather conscious with their marks and grades for everything they did. My son was under a lot of stress and began to lose confidence in himself. He constantly feels that he is not good enough and started to worry too much about examinations. We have always assured him that we would be proud of him no matter what grade he gets. Learning to him is no longer fun but a competition for higher marks.
Fortunately, he did reasonably well in PSLE and is now in Secondary One. He is making new friends and is adapting well to the new environment. We can see that he is gaining his self confidence slowly and we are glad that he is enjoying school again.
Excesses and redemption
The free market, unregulated capitalism in America during the past two decades has caused a lot of damage to the global economy. It has created sub-prime mortgages, which were then packaged into collateralised debt obligations (CDOs) and backed by credit default swaps (CDSs) and dubious credit ratings and sold all over the world. It created a big, unsustainable bubble in housing prices, which has since collapsed, causing the biggest financial crisis in several decades.
In spite of its shortcomings, there are redemptive features in the American system. The poltical leaders have realized their mistakes and are enacting new laws to protect consumers, taxpayers and to stop the predatory practices.
Their state attorney generals are willing to step forward and take action on behalf of consumers to address cases where financial institutions could have broken the law in misrepresenting products to consumers or were negligent in giving bad advice. In many cases, the financial institutions were willing to settle the cases out of court and to compensate the consumers. The financial institutions knew that they had acted wrongly and that they are likely to be found guilty by the American system of justice.
Many consumers in Singapore have suffered similar damages on similar products sold in Singapore. It is possible for the Attorney General's office in Singapore to take a similar measure on behalf of these consumers who are not able to engage their own lawyers (at unaffordable fees). Their only recourse was through FIDREC (dispute resolution), but the outcome had been tedious and long and usually unsatisfactory. They have to bear their losses silently (as public protests are not allowed).
The poor level of consumer protection in Singapore will cause long term damage to our reputation as a financial hub. I hope that this serious shortcoming can be addressed before it causes irrepairable damage.
Tan Kin Lian
In spite of its shortcomings, there are redemptive features in the American system. The poltical leaders have realized their mistakes and are enacting new laws to protect consumers, taxpayers and to stop the predatory practices.
Their state attorney generals are willing to step forward and take action on behalf of consumers to address cases where financial institutions could have broken the law in misrepresenting products to consumers or were negligent in giving bad advice. In many cases, the financial institutions were willing to settle the cases out of court and to compensate the consumers. The financial institutions knew that they had acted wrongly and that they are likely to be found guilty by the American system of justice.
Many consumers in Singapore have suffered similar damages on similar products sold in Singapore. It is possible for the Attorney General's office in Singapore to take a similar measure on behalf of these consumers who are not able to engage their own lawyers (at unaffordable fees). Their only recourse was through FIDREC (dispute resolution), but the outcome had been tedious and long and usually unsatisfactory. They have to bear their losses silently (as public protests are not allowed).
The poor level of consumer protection in Singapore will cause long term damage to our reputation as a financial hub. I hope that this serious shortcoming can be addressed before it causes irrepairable damage.
Tan Kin Lian
Educating our young
I have been invited by a political party to give my views on the following. I am not able to attend that meeting, due to clash of schedule, but I will be giving my views in this blog.
1.What are the education policies needed to prepare our next generation?
2.How can we make education as the key means of enhancing social mobility and employability of Singaporeans?
3.What are the education plans for Special Need/Disabled Children?
I like to invite my readers to give your views on these topics.
Read here for my views.
Tan Kin Lian
1.What are the education policies needed to prepare our next generation?
2.How can we make education as the key means of enhancing social mobility and employability of Singaporeans?
3.What are the education plans for Special Need/Disabled Children?
I like to invite my readers to give your views on these topics.
Read here for my views.
Tan Kin Lian
Capitalism and socialism
The free market capitalism that the world has gone through in recent years has caused the collapse of the global financial system. Without regulation and restraint, it has created a large asset bubble in housing and has produced unjustified huge profits for the financial sector. The wealth taken away by the financial sector has improverised the rest of the economy and cause long term damage.
Some people think that the capitalist system will continue to work well, if there is stronger regulation. I agree that it is better than weak regulation, but it will still not solve the underlying problems of unemployment, exploitation of the weak and insecurity.
To solve these fundamental problems, we have to adopt socialist principles. It means higher taxes but better social security, such as employment, old age pension, affordable health care and education. More of the basic needs should be provided by society, and funded by taxation, rather than be paid individually (which allows the consumers to be exploited by the providers).
Examples of exploitation of consumers are the high charges taken away by financial institutions, doctors and lawyers for their services. The consumers cannot afford these high charges. If the basic services are provided by the state, and paid by the state, there is less need for consumers to have to pay higher charges for these basic services. These professions can continue to offer their services to the affluent and rich.
There is the fear that services provided by the state can be wasteful and abuse. This is a valid fear, but it can be managed and minimized by adopting transparency and accountability. Under the free market capitalism, there are also abuses, but they take the form of exploitation of the ignorance of consumers (i.e. cheating) and by profiteering (i.e. overcharging).
Socialism and democracy can go hand in hand. Europe has a democratic socialist model. It worked reasonably well in giving a satisfactory life for its people. It is not perfect, but neither is capitalism.
Some people don't like the world "socialism" or "democratic socialism". Professor Paul Krugman has used the world "social democracy", which sounds more acceptable.
What the people need to avoid are abuse of power by the people in charge. This applies to socialist and capitalist systems equally. There are some capitalist economies that are undemocratic and do not respect the will of the people.
Tan Kin Lian
Some people think that the capitalist system will continue to work well, if there is stronger regulation. I agree that it is better than weak regulation, but it will still not solve the underlying problems of unemployment, exploitation of the weak and insecurity.
To solve these fundamental problems, we have to adopt socialist principles. It means higher taxes but better social security, such as employment, old age pension, affordable health care and education. More of the basic needs should be provided by society, and funded by taxation, rather than be paid individually (which allows the consumers to be exploited by the providers).
Examples of exploitation of consumers are the high charges taken away by financial institutions, doctors and lawyers for their services. The consumers cannot afford these high charges. If the basic services are provided by the state, and paid by the state, there is less need for consumers to have to pay higher charges for these basic services. These professions can continue to offer their services to the affluent and rich.
There is the fear that services provided by the state can be wasteful and abuse. This is a valid fear, but it can be managed and minimized by adopting transparency and accountability. Under the free market capitalism, there are also abuses, but they take the form of exploitation of the ignorance of consumers (i.e. cheating) and by profiteering (i.e. overcharging).
Socialism and democracy can go hand in hand. Europe has a democratic socialist model. It worked reasonably well in giving a satisfactory life for its people. It is not perfect, but neither is capitalism.
Some people don't like the world "socialism" or "democratic socialism". Professor Paul Krugman has used the world "social democracy", which sounds more acceptable.
What the people need to avoid are abuse of power by the people in charge. This applies to socialist and capitalist systems equally. There are some capitalist economies that are undemocratic and do not respect the will of the people.
Tan Kin Lian
Monday, January 11, 2010
HDB flats and population growth
Recently, there has been a great deal of interest in the run up in property prices. The following are some statistics from the Yearbook of Statistics 2009 which can help explain why.
Number of HDB flats | Total Population | Resident Population | |||||
2003 | 874,183 | 4114.8 | 3366.9 | ||||
2004 | 876,985 | 0.3% | 4166.7 | 1.3% | 3413.3 | 1.4% | |
2005 | 877,546 | 0.1% | 4265.8 | 2.4% | 3467.8 | 1.6% | |
2006 | 878,820 | 0.1% | 4401.4 | 3.2% | 3525.9 | 1.7% | |
2007 | 883,448 | 0.5% | 4588.6 | 4.3% | 3583.1 | 1.6% | |
2008 | 884,920 | 0.2% | 4839.4 | 5.5% | 3642.7 | 1.7% | |
From 2003 to 2008, the total population increased by 17.6% The resident population increased by 8.2%.
The number of HDB flats however only increased by 1.2%.
It is unclear why HDB has been building so few HDB flats from 2003 to 2008. The numbers very clearly suggest that the HDB building program has been unable to keep pace with the increase in population. The current boom in housing prices is therefore not fueled by "irrational speculation" or HDB pricing polices. Rather it is due to a very real supply shortage in housing to meet the demands of our growing population.
The danger in these type of situations is that the large price increases will bring about a very sharp market correction. In response to criticism, the HDB has recently announced that they will step up building.
Large number of private developers have also launched new projects to "cash in" on the record prices.
On the demand side, MOM has also recently implemented policies so that it is more difficult for foreigners to come and work in Singapore.
The market will therefore almost certainly overshoot and we can be assured of a very dramatic fall in housing prices, most probably in 3Q2010 to 4Q2010.
Aurvandil
Learning from Europe - social democracy works
Read this article by Paul Krugman and weigh the facts.
Term insurance - buy directly
Many consumers find it difficult to buy Term Insurance directly in Singapore. When they call the hotline of the insurance company, their case is passed to an agent who quotes them an unrealistic high price for term insurance and pushes Investment Linked Policies or Critical Illness policy as a consumer, giving misleading advice that these savings policies give better value (which they do not!).
If you insist and do get a quotation for Term Insurance, you can compare it with the rates quoted in this website, which offers the term insurance in America. I am not suggesting that you buy from America, as there are other issues that you need to consider. But, at least you can find out if the rate for Term Insurance quoted in Singapore is fair.
For example, in my website, I gave a "benchmark" premium of $541 for a male age 30 insuring $200,000 for 20 years. If you find a better offer from a Singapore company, it is acceptable. However, if you are offered a much higher premium, you know that the agent is trying to mislead you with an unrealsitic quote.
I tried the above website and found rates (for a non-smoker in regular good health) to range from $327 to $506 for the 9 companies listed. So, it is possible to get lower premium compared to my "benchmark".
Tan Kin Lian
If you insist and do get a quotation for Term Insurance, you can compare it with the rates quoted in this website, which offers the term insurance in America. I am not suggesting that you buy from America, as there are other issues that you need to consider. But, at least you can find out if the rate for Term Insurance quoted in Singapore is fair.
For example, in my website, I gave a "benchmark" premium of $541 for a male age 30 insuring $200,000 for 20 years. If you find a better offer from a Singapore company, it is acceptable. However, if you are offered a much higher premium, you know that the agent is trying to mislead you with an unrealsitic quote.
I tried the above website and found rates (for a non-smoker in regular good health) to range from $327 to $506 for the 9 companies listed. So, it is possible to get lower premium compared to my "benchmark".
Tan Kin Lian
More jobs in health care sector
This article explains the increase in jobs in the health care sector, in spite of a weak economy in America. The same trend will apply in Singapore as well. There will be more jobs in health care in the future.
Economic recovery depends on government stimulus
This article suggests that the economic recovery is fragile and depends on government stimulus. The global economy continues to be in bad shape.
In my humble opinion, it will take a long time for the global economy to recover, if we continue with the free market capitalism. Here are some obvious problems with free market capitalism:
a) wide disparity of income
b) insecurity of jobs
c) financial sectors makes huge profits, without creating real value
d) bad business ethics and cheating
e) poor protection of workers and consumers
f) poor leadership from government leaders
If I am wrong, the global economy will recover soon. If I am right, be prepared for a decade of economic depression, or a change towards socialism (which is a better economic system, so I think).
In my humble opinion, it will take a long time for the global economy to recover, if we continue with the free market capitalism. Here are some obvious problems with free market capitalism:
a) wide disparity of income
b) insecurity of jobs
c) financial sectors makes huge profits, without creating real value
d) bad business ethics and cheating
e) poor protection of workers and consumers
f) poor leadership from government leaders
If I am wrong, the global economy will recover soon. If I am right, be prepared for a decade of economic depression, or a change towards socialism (which is a better economic system, so I think).
Regular savings in a bank
Some banks offer regular savings plan that pays higher interest rate. Here are the terms from DBS Bank (see MySavings Account).
This is suitable for young people to set aside some regular savings. If you have to withdraw your savings, you do not have to suffer any loss of your savings (unlike a life insurance policy, where more than 50% of your savings is taken away).
This is suitable for young people to set aside some regular savings. If you have to withdraw your savings, you do not have to suffer any loss of your savings (unlike a life insurance policy, where more than 50% of your savings is taken away).
Sunday, January 10, 2010
HK: Bank staff did not understand mini-bonds
According to this report, the Securities and Futures Commission in Hong Kong admitted that they found the bank staff did not understand the mini-bonds that they sold and that their risk assessment was superficial. The same situation applies in Singapore, except that we are not so honest in admitting our mistakes.
Walk away from your mortgage
Here is an advice to home owners whose properties have fallen. It is given in the context of America where the financial institution may not have recourse to the borrower. The legal situation in Singapore may be different.
Benefit illustration - Life or Investment Linked Policy
Many agents will tell you about the new products that have been recently introduced. Most of these products have the same features - marketing gimmicks, complicated to understand, high charges, poor return to the investors. Do not believe what the agent tells you, as they will usually exaggerate the good features (such as potential high return) but hide the bad features (i.e .not guaranteed, returns are exaggerated). They usually do not tell you that more than half of your savings is taken away from you to pay their commission during the initial few years.
If you have received a benefit illustration on a life insurance policy, and you are not sure what you have bought, you can send it to me at kinlian@gmail.com. I will help you to see if you have been given the correct information by the agent.
Tan Kin Lian
If you have received a benefit illustration on a life insurance policy, and you are not sure what you have bought, you can send it to me at kinlian@gmail.com. I will help you to see if you have been given the correct information by the agent.
Tan Kin Lian
Students and young people should avoid saving in life insurance policies
I told this story a few months ago, and wish to repeat it.
A polytechnic students told me that he received a monthly allowance of $600 from this father, who is a bus driver. His friend sold him two life insurance policies that takes away $300 a month in premium. He knows realize that it was a bad decision, as he needed the money for his schooling and other expenses, and finds it difficult to pay the monthly premium. If he gives up the policies, he would suffer a large loss in the premiums that he had paid. He is now in a dilemma.
I like to advice young people to avoid taking life insurance policies, as a large part of the premium during the first few year goes to pay the commission to the agent. If you stop the policy, you will lose more than half of the premiums that you have saved. You will need the savings for other unexpected events.
My same advice goes to young people starting work for the first time. The insurance agent will sell you a life policy or investment-linked policy. They are all the same. You will get a poor return and a large part of your premium goes to pay commission to the agent.
Many people save in a life insurance policy (and be tied up for 20 years for a miserable 2% return), and roll over their credit cards paying 24% per year. This is bad financial management.
It is important for you to save, but you should save in a bank account. If you need to withdraw your savings, you do not have to suffer a penalty. If you wish to invest, do it at a later date, and invest in an exchange traded fund (such as the STI ETF) which has low transaction charges and gives you a good long term return.
But, before you invest, you can read my book "Practical Guide to Financial Planning", which will be available in March 2010, or join the Financial Services Consumer Association, FISCA (www.fisca.sg)
Tan Kin Lian
A polytechnic students told me that he received a monthly allowance of $600 from this father, who is a bus driver. His friend sold him two life insurance policies that takes away $300 a month in premium. He knows realize that it was a bad decision, as he needed the money for his schooling and other expenses, and finds it difficult to pay the monthly premium. If he gives up the policies, he would suffer a large loss in the premiums that he had paid. He is now in a dilemma.
I like to advice young people to avoid taking life insurance policies, as a large part of the premium during the first few year goes to pay the commission to the agent. If you stop the policy, you will lose more than half of the premiums that you have saved. You will need the savings for other unexpected events.
My same advice goes to young people starting work for the first time. The insurance agent will sell you a life policy or investment-linked policy. They are all the same. You will get a poor return and a large part of your premium goes to pay commission to the agent.
Many people save in a life insurance policy (and be tied up for 20 years for a miserable 2% return), and roll over their credit cards paying 24% per year. This is bad financial management.
It is important for you to save, but you should save in a bank account. If you need to withdraw your savings, you do not have to suffer a penalty. If you wish to invest, do it at a later date, and invest in an exchange traded fund (such as the STI ETF) which has low transaction charges and gives you a good long term return.
But, before you invest, you can read my book "Practical Guide to Financial Planning", which will be available in March 2010, or join the Financial Services Consumer Association, FISCA (www.fisca.sg)
Tan Kin Lian
Dhanabalan: Bubble in bets on events
Dear Mr Tan
In today's straits times, Dhanabalan said "the financial crisis is not the result of bankers making ill-judged loans to the real economy; it is the result of a bubble in bets on events in the real economy"
I do not know why he used the unusual word "ill-judged loans" but i believe he is talking about the subprime loans existing prior to the crisis of 2009. According to many internet articles I have read, and also a YouTube video explaining the Financial Crisis, the crisis was caused by sub-prime loans which are chopped and repackaged to CDOs etc. to spread the risks to the unwary investors. As a layman, I can understand this.
But Dhanabalan said it was nothing to do with these. He said the Financial Crisis was due to "a bubble in bets on events in the real economy". The Straits Times writer also added that it was a bubble "formed from bets on how events in the economy would pan out". I have absolutely no idea what Dhanabaln or the writer is saying about "bubble in bets on events".
REX
REPLY
This is how I interpret Mr. Dhanabalan's views. By real economy, he meant lending to companies to manufacture products, distribute goods, employ people. By taking bets, he meant that they were speculating on the asset prices through sub-prime, collateralized debt obligations (CDOs), credit default sways (CDS), and other derivatives.
If the housing prices continue to go up, they all win their bets. When the housing prices fall, the financial system collapse.
In today's straits times, Dhanabalan said "the financial crisis is not the result of bankers making ill-judged loans to the real economy; it is the result of a bubble in bets on events in the real economy"
I do not know why he used the unusual word "ill-judged loans" but i believe he is talking about the subprime loans existing prior to the crisis of 2009. According to many internet articles I have read, and also a YouTube video explaining the Financial Crisis, the crisis was caused by sub-prime loans which are chopped and repackaged to CDOs etc. to spread the risks to the unwary investors. As a layman, I can understand this.
But Dhanabalan said it was nothing to do with these. He said the Financial Crisis was due to "a bubble in bets on events in the real economy". The Straits Times writer also added that it was a bubble "formed from bets on how events in the economy would pan out". I have absolutely no idea what Dhanabaln or the writer is saying about "bubble in bets on events".
REX
REPLY
This is how I interpret Mr. Dhanabalan's views. By real economy, he meant lending to companies to manufacture products, distribute goods, employ people. By taking bets, he meant that they were speculating on the asset prices through sub-prime, collateralized debt obligations (CDOs), credit default sways (CDS), and other derivatives.
If the housing prices continue to go up, they all win their bets. When the housing prices fall, the financial system collapse.
Saturday, January 09, 2010
New York Times: 31 places to visit in 2010
Singapore missed this list in 2010. I hope that it will be included in 2011, when the two casinos open for business.
Financial planning - learn before you leave school
My friend suggested that I give financial planning talk to couples when they get married. I said that it would be too late. I have to give the financial planning talk to students before they leave school or university and start to work.
Here are the key points:
a) Save 50% of your earnings for the future. You can count your CPF as savings, so you only need to save 15%. You should repay your study loan or other borrowings early.
b) Keep your savings in liquid form, e.g. in a bank account . Do not worry about investing it yet.
c) Buy Medisheld to cover medical expenses and Personal Accident insurance to cover accidents.
When you are ready to invest the savings, choose a money market fund or exchange traded fund (ETF) where the expenses are low. Do not buy a life insurance policy yet, as it is rigid and gives a poor return (due to high expenses). Do not talk to an insurance agent (including your friend) at this time. Do not buy any structured product or investment product sold by a marketing person.
Read my book on Practical Guide on Financial Planning or join FISCA (Financial Services Consumer Association). You can think about investing later on, after you have been educated about the financial products.
Tan Kin Lian
Here are the key points:
a) Save 50% of your earnings for the future. You can count your CPF as savings, so you only need to save 15%. You should repay your study loan or other borrowings early.
b) Keep your savings in liquid form, e.g. in a bank account . Do not worry about investing it yet.
c) Buy Medisheld to cover medical expenses and Personal Accident insurance to cover accidents.
When you are ready to invest the savings, choose a money market fund or exchange traded fund (ETF) where the expenses are low. Do not buy a life insurance policy yet, as it is rigid and gives a poor return (due to high expenses). Do not talk to an insurance agent (including your friend) at this time. Do not buy any structured product or investment product sold by a marketing person.
Read my book on Practical Guide on Financial Planning or join FISCA (Financial Services Consumer Association). You can think about investing later on, after you have been educated about the financial products.
Tan Kin Lian
Rubik Cube
The Rubik Cube was introduced in 1980 and was the craze for a decade. It has recently been re-introduced and has become popular. For people who are interested to learn to solve this puzzle, here are some instructions from Dan Brown on Youtube. I find the instructions to be excellent and easy to follow.
Part 1: http://www.youtube.com/
Part 2: http://www.youtube.com/
Part 1: http://www.youtube.com/
Part 2: http://www.youtube.com/
Friday, January 08, 2010
NSRCC: Planning your finances early
Published in National Service Resort and Country Club magazine.
When should you start a financial plan? How do you go about it?
The answer is, “As soon as you start work”. And your financial plan should be, “Allocate 50% of your earnings for your current expenses and 50% for the future”. The allocation for the future is to be used mainly for the purchase of a home and for retirement, but a small portion can be used for your children's education and emergencies.
Save 50% of earnings
Hey, wait a minute. Do I really have to keep 50% for the future? Maybe, my starting salary is quite low and is insufficient for me to get by.
Well, if you are working in Singapore, you are already saving 34.5% of your earnings in the Central Provident Fund or CPF. Your contribution is 20% of earnings and your employer is contributing 14.5% for you. So, to make the total of 50%, you only need to set aside 15.5% for your personal savings account. This still leaves 84.5% of your net pay to spend now.
And how do you invest the 15.5%? Don’t worry about that now. Keep it in your savings account at the bank. Although the interest rate is less than 0.5% a year, it does not matter. When you have accumulated a few thousand dollars, you can then start to look for ways to invest the savings.
Repay your study loan
If you have a study loan, taken for a university education, you should try to repay it as early as possible, using the balance of your earnings.
Contribute to family expenses
If you are staying with your parents, your personal expenses are likely to be quite low. But, you have to be fair to your parents and make a contribution towards the household expenses. May, you can give 30% of your earnings? Talk to your parents about it.
Avoid borrowings
During this time, you should avoid incurring debts, especially on credit cards where you have to pay interest of 2% per month on the roll-over. This works out to more than 24% a year on a compounded basis.
If you are not careful, you can early chalk up a large credit card debt just by spending money freely at expensive joints, buying jewellery or going on a holiday. The monthly interest payment can take away a large part of your earnings. Just imagine, how hard you have to work to earn your salary. So, do not give it to your bank.
Lend to yourself
Do you know that your savings can earn you interest of up to 24% a year? No kidding - you can lend the money to yourself.
Suppose someone falls seriously ill or meet with a serious accident and a large medical bills has to be paid. Where can you raise this money? Or you have lost your job and you need money to start a small business.
If you do not have any savings, you have to borrow from your bank or use your credit card. This can cost you interest at up to 24% a year.
If you have accumulated some savings in the past, you can draw down on your savings and save this large interest expense. You can lend the money to yourself.
If you lend to yourself, you also have to pay it back. You should make additional savings from your future earnings to replenish the savings that you have drawn down. This is a necessary discipline - sign a contract with yourself on the repayment.
Summary: start a financial plan now and set a goal to save 50% of your earnings (including CPF) for the future
When should you start a financial plan? How do you go about it?
The answer is, “As soon as you start work”. And your financial plan should be, “Allocate 50% of your earnings for your current expenses and 50% for the future”. The allocation for the future is to be used mainly for the purchase of a home and for retirement, but a small portion can be used for your children's education and emergencies.
Save 50% of earnings
Hey, wait a minute. Do I really have to keep 50% for the future? Maybe, my starting salary is quite low and is insufficient for me to get by.
Well, if you are working in Singapore, you are already saving 34.5% of your earnings in the Central Provident Fund or CPF. Your contribution is 20% of earnings and your employer is contributing 14.5% for you. So, to make the total of 50%, you only need to set aside 15.5% for your personal savings account. This still leaves 84.5% of your net pay to spend now.
And how do you invest the 15.5%? Don’t worry about that now. Keep it in your savings account at the bank. Although the interest rate is less than 0.5% a year, it does not matter. When you have accumulated a few thousand dollars, you can then start to look for ways to invest the savings.
Repay your study loan
If you have a study loan, taken for a university education, you should try to repay it as early as possible, using the balance of your earnings.
Contribute to family expenses
If you are staying with your parents, your personal expenses are likely to be quite low. But, you have to be fair to your parents and make a contribution towards the household expenses. May, you can give 30% of your earnings? Talk to your parents about it.
Avoid borrowings
During this time, you should avoid incurring debts, especially on credit cards where you have to pay interest of 2% per month on the roll-over. This works out to more than 24% a year on a compounded basis.
If you are not careful, you can early chalk up a large credit card debt just by spending money freely at expensive joints, buying jewellery or going on a holiday. The monthly interest payment can take away a large part of your earnings. Just imagine, how hard you have to work to earn your salary. So, do not give it to your bank.
Lend to yourself
Do you know that your savings can earn you interest of up to 24% a year? No kidding - you can lend the money to yourself.
Suppose someone falls seriously ill or meet with a serious accident and a large medical bills has to be paid. Where can you raise this money? Or you have lost your job and you need money to start a small business.
If you do not have any savings, you have to borrow from your bank or use your credit card. This can cost you interest at up to 24% a year.
If you have accumulated some savings in the past, you can draw down on your savings and save this large interest expense. You can lend the money to yourself.
If you lend to yourself, you also have to pay it back. You should make additional savings from your future earnings to replenish the savings that you have drawn down. This is a necessary discipline - sign a contract with yourself on the repayment.
Summary: start a financial plan now and set a goal to save 50% of your earnings (including CPF) for the future
Home purchase and financial planning
Someone asked me about my recent interest in HDB flat. This is part of my research for my financial planning book.
In my book, I advised that a person should set aside up to 25% of their family income towards the purchase of a home. They should not exceed 25%.
I decided to carry out some research into the price of HDB flat, as it affects 85% of the people in Singapore. If they are able to keep their purchase commitment to an affordable level (i.e. 25% of their family income), they would be able to have sufficient savings for other purposes. This is explained in my financial planning book.
My book will be sent for printing in January and will be available in the bookstores in March 2010.
In my book, I advised that a person should set aside up to 25% of their family income towards the purchase of a home. They should not exceed 25%.
I decided to carry out some research into the price of HDB flat, as it affects 85% of the people in Singapore. If they are able to keep their purchase commitment to an affordable level (i.e. 25% of their family income), they would be able to have sufficient savings for other purposes. This is explained in my financial planning book.
My book will be sent for printing in January and will be available in the bookstores in March 2010.
Are home buyers prudent?
I carried out a survey in my blog about the price of HDB flats. 50 people replied. 47% replied that their monthly repayment to the housing loan (including CPF withdrawals) is within 20% of their family income. I consider this to be prudent, as it is within 25% (which is my benchmark).
Another 38% said that the repayment is 30% of their family income. 15% said that the repayment is 40% to 50% of their family income. The commitment is clearly excessive for this 15%.
I would consider that two thirds or 66% (i.e. 47% plus half of 38%) are prudent and that the remaining one third is over-stretching their finances towards their HDB flat.
Another 38% said that the repayment is 30% of their family income. 15% said that the repayment is 40% to 50% of their family income. The commitment is clearly excessive for this 15%.
I would consider that two thirds or 66% (i.e. 47% plus half of 38%) are prudent and that the remaining one third is over-stretching their finances towards their HDB flat.
Thursday, January 07, 2010
Financial planning for a child
I wish to write an article on financial planning for a child. The key features are:
a) annual expenses for a child's education
b) savings for tertiary education of a child, especially if the child wishes to go overseas
c) insurance for the child's medical expenses arising from accidents and illnesses.
Are there any other special needs? What are the key concerns of a parent?
The annual expenses should be met out of current income. The parent should consider the need to spend money on enrichment programs and tuition, which seem to take a significant monthly budget. The best way to save for tertiary education is to have a savings plan that gives a good yield. The child can be insured for Medishield or private Shield, but the expense should be kept low.
Any views?
a) annual expenses for a child's education
b) savings for tertiary education of a child, especially if the child wishes to go overseas
c) insurance for the child's medical expenses arising from accidents and illnesses.
Are there any other special needs? What are the key concerns of a parent?
The annual expenses should be met out of current income. The parent should consider the need to spend money on enrichment programs and tuition, which seem to take a significant monthly budget. The best way to save for tertiary education is to have a savings plan that gives a good yield. The child can be insured for Medishield or private Shield, but the expense should be kept low.
Any views?
Asset enhancement
Since the mid 1980s, the Government implemented market pricing and the asset enhancement policy for public housing, i.e HDB flats. The aim was to allow the heartlanders to have a chance to enjoy the appreciation of their HDB flat, which represents the the key assets for most of them.
This policy has led to a more than 10 fold increase in the price of HDB flats during the past 30 years. For most HDB flat owners, the increase in asset price does not translate into real wealth. They still need a place to live in, as the HDB flat is the only home that they hold. If they sell the flat, they have to buy a private propety at an even higher price.
The only people who can benefit from the appreciation in the HDB flats are those who emigrate from Singapore and the few who are able to downgrade to a smaller flat. Some of these people are permanent residents who are able to cash out on the appreciation to return to their original country.
For the majority of Singaporeans, the increase in price is actually a financial burden, as the monthly installment will represent a larger proportion of their earnings. The high prices hit the future generation harder who now has to pay a much higher price and monthly replayment for a roof over their head.
Too many people are paying too much for a HDB flat. To be comfortable, a person should not spend more than four or at most five years of the combined family income (after deducting the cost of employing a maid) to buy a home. I believe that many people are over-streching to six years or more.
Tan Kin Lian
This policy has led to a more than 10 fold increase in the price of HDB flats during the past 30 years. For most HDB flat owners, the increase in asset price does not translate into real wealth. They still need a place to live in, as the HDB flat is the only home that they hold. If they sell the flat, they have to buy a private propety at an even higher price.
The only people who can benefit from the appreciation in the HDB flats are those who emigrate from Singapore and the few who are able to downgrade to a smaller flat. Some of these people are permanent residents who are able to cash out on the appreciation to return to their original country.
For the majority of Singaporeans, the increase in price is actually a financial burden, as the monthly installment will represent a larger proportion of their earnings. The high prices hit the future generation harder who now has to pay a much higher price and monthly replayment for a roof over their head.
Too many people are paying too much for a HDB flat. To be comfortable, a person should not spend more than four or at most five years of the combined family income (after deducting the cost of employing a maid) to buy a home. I believe that many people are over-streching to six years or more.
Tan Kin Lian
Stabilising the market
The annual report of the Housing & Development Board (HDB) showed a variation of up to 50% in the price of a 4 room HDB estate in Punggol during 2008/09. Why should the price of the flat vary by so much for the same location, type and year? If we allow for closeness to MRT station or amenities, the difference should perhaps not exceed 15%. A large part of the difference could be due to the volatity of the property market during this year.
While the market was volatile during this period, due to speculation, it would be better for the HDB to stablise the market by setting the benchmark pricing, rather than add fuel to the speculation. If the HDB were to offer a large number of new flats at stable prices, it will give comfort to the home buyers that prices will be stable (and still reflect the market) and will not increase sharply due to supply shortage or speculative demand. It will reduce speculation and fear.
I hope that the HDB will play this important role of stabilising the market and still have prices that reflect the economic growth of the country and the income level of the people. The Singapore economy will be stronger, if the prices of housing and many other cost of business are kept stable (and still reflect the market price in Singapore or globally) and not manipulated by speculators.
Tan Kin Lian
While the market was volatile during this period, due to speculation, it would be better for the HDB to stablise the market by setting the benchmark pricing, rather than add fuel to the speculation. If the HDB were to offer a large number of new flats at stable prices, it will give comfort to the home buyers that prices will be stable (and still reflect the market) and will not increase sharply due to supply shortage or speculative demand. It will reduce speculation and fear.
I hope that the HDB will play this important role of stabilising the market and still have prices that reflect the economic growth of the country and the income level of the people. The Singapore economy will be stronger, if the prices of housing and many other cost of business are kept stable (and still reflect the market price in Singapore or globally) and not manipulated by speculators.
Tan Kin Lian
Improve transparency of prices of new HDB flats
The HDB (i.e. Government) should improve the transparency of the prices of new HDB flats. This can be done as follows:
(a) Publish the prices of new flats offered for sale
(b) Publish the prices of new flats purchased in recent years, with details of locations, size, floor level and other relevant factors
(b) Publish statistics on the average price of new flats by location, type and size.
This will set a good example to the market, of providing transparent information for the buyers to make an informed choice.
(a) Publish the prices of new flats offered for sale
(b) Publish the prices of new flats purchased in recent years, with details of locations, size, floor level and other relevant factors
(b) Publish statistics on the average price of new flats by location, type and size.
This will set a good example to the market, of providing transparent information for the buyers to make an informed choice.
S'pore workers clock up longest work hours: ILO
http://business.asiaone.com/Business...05-189718.html
DESPITE the recession that hit towards the end of 2008, Singapore workers still clocked up the most hours, says a report by the International Labour Organisation (ILO).
Shorter work weeks and temporary lay-offs introduced to save jobs during the downturn trimmed working hours here to below the mandatory cap of 44 a week - but only slightly. With working hours still way above 40 a week, Singaporeans put in more hours than workers in 12 other countries used for comparison in the recent report, an update on ILO's Global Wages Report 2008-09 released in November 2008.
The report shows 11 of these 13 countries posted a fall in working time in 2008 and the first three months of 2009, compared with 2007. Average working hours in the 13 countries declined from 39 to 38.2 per week.
'Men and women have both been affected,' the report says. 'Among the six examples with disaggregated data, we find that hours worked by women declined from 36.4 to 35.8, while hours worked by men declined from 40.7 to 40.'
The report says the cuts in hours contributed much to slower growth in monthly wages, which eased from an average 4.3 per cent to 1.4 per cent for 53 countries. 'Overall, while a majority of countries could maintain declining but positive wage growth in 2008, more than a quarter experienced flat or falling monthly wages in real terms,' the report says.
One of them is Singapore, where real wages slipped one per cent. The others include the US (zero per cent), Germany (-0.6 per cent), Switzerland (-0.7), Japan (-0.9), South Korea (-1.5) and Iceland (-4.8). Wages fell 3.6 per cent in Taiwan and 6.2 per cent in Hong Kong.
'Compared with the annual average of 2008, real wages in the first quarter of 2009 fell in more than half of the 35 countries for which data is available,' the report says. Although the report was released recently and quotes International Monetary Fund figures from October 2009, it does not go beyond June last year.
Working hours overall, including those in Singapore, should have fallen further as the recession deepened in Q2 2009. And that means wages as well. 'The picture on wages is likely to get worse in 2009 - despite the beginning of a possible economic recovery,' the report says.
Only workers in Iceland - which nearly went bankrupt - put in almost as many hours as Singaporeans in 2008 and Q1 2009. South Korean workers, who, like Singaporeans, are expected to work 44 hours a week, clocked up fewer than 40. Taiwanese workers also put in fewer hours, while the Japanese held constant.
DESPITE the recession that hit towards the end of 2008, Singapore workers still clocked up the most hours, says a report by the International Labour Organisation (ILO).
Shorter work weeks and temporary lay-offs introduced to save jobs during the downturn trimmed working hours here to below the mandatory cap of 44 a week - but only slightly. With working hours still way above 40 a week, Singaporeans put in more hours than workers in 12 other countries used for comparison in the recent report, an update on ILO's Global Wages Report 2008-09 released in November 2008.
The report shows 11 of these 13 countries posted a fall in working time in 2008 and the first three months of 2009, compared with 2007. Average working hours in the 13 countries declined from 39 to 38.2 per week.
'Men and women have both been affected,' the report says. 'Among the six examples with disaggregated data, we find that hours worked by women declined from 36.4 to 35.8, while hours worked by men declined from 40.7 to 40.'
The report says the cuts in hours contributed much to slower growth in monthly wages, which eased from an average 4.3 per cent to 1.4 per cent for 53 countries. 'Overall, while a majority of countries could maintain declining but positive wage growth in 2008, more than a quarter experienced flat or falling monthly wages in real terms,' the report says.
One of them is Singapore, where real wages slipped one per cent. The others include the US (zero per cent), Germany (-0.6 per cent), Switzerland (-0.7), Japan (-0.9), South Korea (-1.5) and Iceland (-4.8). Wages fell 3.6 per cent in Taiwan and 6.2 per cent in Hong Kong.
'Compared with the annual average of 2008, real wages in the first quarter of 2009 fell in more than half of the 35 countries for which data is available,' the report says. Although the report was released recently and quotes International Monetary Fund figures from October 2009, it does not go beyond June last year.
Working hours overall, including those in Singapore, should have fallen further as the recession deepened in Q2 2009. And that means wages as well. 'The picture on wages is likely to get worse in 2009 - despite the beginning of a possible economic recovery,' the report says.
Only workers in Iceland - which nearly went bankrupt - put in almost as many hours as Singaporeans in 2008 and Q1 2009. South Korean workers, who, like Singaporeans, are expected to work 44 hours a week, clocked up fewer than 40. Taiwanese workers also put in fewer hours, while the Japanese held constant.
Wednesday, January 06, 2010
Practical Guide on Financial Planning - additional materials
After receiving feedback, I will be adding the following pages to the book:
Glossary of terms
Real life experiences - 5 people wrote to share their stories previously
Glossary of terms
Real life experiences - 5 people wrote to share their stories previously
TKL Practical Guide to Financial Planning
I am sending the book for printing soon. It comprise of about 100 pages. This is based on draft 6 (which was published earlier) but has since been further corrected. The book is expected to be ready by early February in the bookstores. Please give your views of an acceptable price for this book.
A new pricing formula for HDB flats
I will be stating what is obvious to most people - the Government is able to control the prices of public housing in Singapore.
As private housing (i.e. landed properties and condominiums) is very high relative to the income level, most people have to depend on public housing built by the Housing and Development Board (HDB), by buying a new flat directly from the HDB or from an existing owner on the resale market.
The HDB now uses the resale price on the market to set the prices for new flats. In turn, these prices will determine the prices on the resale market. This seems to be an incestious situation.
A market works well only if there is elastic supply, elastic demand and market competition. In the case of public housing, the supply is virtually in the hands of a monopoly, i.e. the HDB. The demand is also not elastic, as each person has to find a place to live in and is allowed to own only one HDB flat. In the resale market, the seller has to find another place to live in, before he can sell his HDB flat on the market. Hence, the demand cannot drop, even if the prices are too high.
By controlling the supply of new flats, HDB is able to control the prices in the resale market, and indirectly the prices of new flats.
There is also a large element of speculation. If the market perceive that HDB is restricting supply, the speculators (e.g. people renting flats) will buy the flats in the resale market and cause a panic that prices are rising. This causes prices to rise.
If we recognize that the resale market is not a true market (and is affected by supply control and speculation), it is better to adopt a different policy to price the new flats. I suggest that it should be priced relative to average national income - a benchmark price is computed on this principle and the actual price is adjusted to reflect relativities due to location, distance to MRT station size of flat and standard of construction.
HDB should release a large supply of new flats (still under construction or ready for occupation) to be selected by the people on the waiting list, based on these pre-determined prices. If there are several buyers vying for the same flat, the flat can be allocated by a ballot - which can be efficiently managed using IT technology. The unsuccessful applicants will automatically be considered for the next flat of their choice.
The flats determined by HDB will be much higher than the cost of land and construction and will give a profit margin which is revenue to the state. It will stabilize the prices of new flats to be more reflective of the true market (rather than prices that are affected by speculation and lack of information). In turn, the market for resale flats will follow the prices of the new flats, on a relative basis.
As housing has become a large part of the cost of living in Singapore, it is time for the Government to review the pricing for HDB flats, and to find a better system that reflects the true market and keeps the prices in line with the ability of the people, based on their income levels, to afford them. We may return to the good days of Singapore a few decades ago.
Tan Kin Lian
As private housing (i.e. landed properties and condominiums) is very high relative to the income level, most people have to depend on public housing built by the Housing and Development Board (HDB), by buying a new flat directly from the HDB or from an existing owner on the resale market.
The HDB now uses the resale price on the market to set the prices for new flats. In turn, these prices will determine the prices on the resale market. This seems to be an incestious situation.
A market works well only if there is elastic supply, elastic demand and market competition. In the case of public housing, the supply is virtually in the hands of a monopoly, i.e. the HDB. The demand is also not elastic, as each person has to find a place to live in and is allowed to own only one HDB flat. In the resale market, the seller has to find another place to live in, before he can sell his HDB flat on the market. Hence, the demand cannot drop, even if the prices are too high.
By controlling the supply of new flats, HDB is able to control the prices in the resale market, and indirectly the prices of new flats.
There is also a large element of speculation. If the market perceive that HDB is restricting supply, the speculators (e.g. people renting flats) will buy the flats in the resale market and cause a panic that prices are rising. This causes prices to rise.
If we recognize that the resale market is not a true market (and is affected by supply control and speculation), it is better to adopt a different policy to price the new flats. I suggest that it should be priced relative to average national income - a benchmark price is computed on this principle and the actual price is adjusted to reflect relativities due to location, distance to MRT station size of flat and standard of construction.
HDB should release a large supply of new flats (still under construction or ready for occupation) to be selected by the people on the waiting list, based on these pre-determined prices. If there are several buyers vying for the same flat, the flat can be allocated by a ballot - which can be efficiently managed using IT technology. The unsuccessful applicants will automatically be considered for the next flat of their choice.
The flats determined by HDB will be much higher than the cost of land and construction and will give a profit margin which is revenue to the state. It will stabilize the prices of new flats to be more reflective of the true market (rather than prices that are affected by speculation and lack of information). In turn, the market for resale flats will follow the prices of the new flats, on a relative basis.
As housing has become a large part of the cost of living in Singapore, it is time for the Government to review the pricing for HDB flats, and to find a better system that reflects the true market and keeps the prices in line with the ability of the people, based on their income levels, to afford them. We may return to the good days of Singapore a few decades ago.
Tan Kin Lian
GST exemption - penalty or benefit
Printed in Today paper, 5 January 2010
I run a small business with a turnover that falls within the GST exemption limit.
This exemption was supposed to be a benefit to assist small businesses but it turned out to be a penalty. I have to pay GST on my rental, utilities and purchases of supplies and services, but I am not able to recover the GST inputs from my sales to business customers. I cannot increase my prices to these customers to cover my GST inputs, as they do not receive any GST credit for purchases from exempt entities.
With great reluctance, I decided to “volunteer” to be a GST registered business and bear the burden and cost of keeping GST records and submitting quarterly returns to IRAS.
IRAS accepted my voluntary registration and sent me a written notice that have to attend a GST briefing within three months, failing which my registration would be cancelled. I tried to register for the next briefing but it was fully taken up. I sent an e-mal to register for the next briefing but have not received any reply after two weeks. I get the impression that IRAS does not really welcome a small business to volunteer to be registered for GST.
Instead of making life difficult for small business, I hope that IRAS will tell the Minister of Finance why small businesses are volunteering to register for GST, when they are not required to, and why it is troublesome for IRAS to collect small amounts of GST revenue from these volunteers.
It will be better for the penalty on small businesses to be removed, so that they do not have to volunteer to be registered for GST. This can be achieved by allowing all eligible purchases by business entities to be treated as GST credit, regardless of whether they were purchased from exempt or non-exempt suppliers.
Apart from helping the small businesses, it will simplify the GST system and reduce the burden to businesses of keeping separate records to comply with the accounting of GST. The loss of revenue to IRAS would be quite small and could be offset by the savings in their administrative cost. More importantly, there will be cost savings for the economy by reducing the unproductive work.
Tan Kin Lian
RESPONSE
I receive a call from IRAS to explain the delay in replying to my registration. I told them that the delay is unimportant. It is more important for the Minister of Finance to review the implementation of GST to remove the unintended consequences, i.e. many people "volunteering" to register for GST when they pay little GST. This has caused unnecessary work for the small business and IRAS.
I run a small business with a turnover that falls within the GST exemption limit.
This exemption was supposed to be a benefit to assist small businesses but it turned out to be a penalty. I have to pay GST on my rental, utilities and purchases of supplies and services, but I am not able to recover the GST inputs from my sales to business customers. I cannot increase my prices to these customers to cover my GST inputs, as they do not receive any GST credit for purchases from exempt entities.
With great reluctance, I decided to “volunteer” to be a GST registered business and bear the burden and cost of keeping GST records and submitting quarterly returns to IRAS.
IRAS accepted my voluntary registration and sent me a written notice that have to attend a GST briefing within three months, failing which my registration would be cancelled. I tried to register for the next briefing but it was fully taken up. I sent an e-mal to register for the next briefing but have not received any reply after two weeks. I get the impression that IRAS does not really welcome a small business to volunteer to be registered for GST.
Instead of making life difficult for small business, I hope that IRAS will tell the Minister of Finance why small businesses are volunteering to register for GST, when they are not required to, and why it is troublesome for IRAS to collect small amounts of GST revenue from these volunteers.
It will be better for the penalty on small businesses to be removed, so that they do not have to volunteer to be registered for GST. This can be achieved by allowing all eligible purchases by business entities to be treated as GST credit, regardless of whether they were purchased from exempt or non-exempt suppliers.
Apart from helping the small businesses, it will simplify the GST system and reduce the burden to businesses of keeping separate records to comply with the accounting of GST. The loss of revenue to IRAS would be quite small and could be offset by the savings in their administrative cost. More importantly, there will be cost savings for the economy by reducing the unproductive work.
Tan Kin Lian
RESPONSE
I receive a call from IRAS to explain the delay in replying to my registration. I told them that the delay is unimportant. It is more important for the Minister of Finance to review the implementation of GST to remove the unintended consequences, i.e. many people "volunteering" to register for GST when they pay little GST. This has caused unnecessary work for the small business and IRAS.
Tuesday, January 05, 2010
Price of new HDB flat
I wanted to carry out some research into the cost of a new HDB flat, to see if it is still affordable. I had a difficult time to get the relevant information.
I visited the HDB website to find out what is the price of a new flat. I found this page but could not get the information that is needed. I was only able to find the prices of resale flats here. I don't know why HDB don't want to publish the price for new flats in a similar table, as this is helpful to home seekers.
After some effort, I was able to find some information about new flat prices from the HDB annual report but I was quite surprised at the wide range of prices (difference of up to 50%) for the same type of flat in the same estate within a period of one year.
Maybe, HDB wants to peg its place for new flats based on the market price for resale flat and for new home owners to be given a housing grant. I did some search for this grant and came to this page. It seems to be quite complicated to find out about the amount of housing grant that the buyer can get.
I do not know why buying a new HDB flat should be made some complicated, with no published price list for new flats and a complicated structure for the housing grant. I am afraid that, with this type of complexity, many people will not be able to make a sensible decision about getting the flat that they can afford, which is convenient for them to live in. It would be better if things are made simpler, so that the ordinary people can make the right decisions.
Tan Kin Lian
I visited the HDB website to find out what is the price of a new flat. I found this page but could not get the information that is needed. I was only able to find the prices of resale flats here. I don't know why HDB don't want to publish the price for new flats in a similar table, as this is helpful to home seekers.
After some effort, I was able to find some information about new flat prices from the HDB annual report but I was quite surprised at the wide range of prices (difference of up to 50%) for the same type of flat in the same estate within a period of one year.
Maybe, HDB wants to peg its place for new flats based on the market price for resale flat and for new home owners to be given a housing grant. I did some search for this grant and came to this page. It seems to be quite complicated to find out about the amount of housing grant that the buyer can get.
I do not know why buying a new HDB flat should be made some complicated, with no published price list for new flats and a complicated structure for the housing grant. I am afraid that, with this type of complexity, many people will not be able to make a sensible decision about getting the flat that they can afford, which is convenient for them to live in. It would be better if things are made simpler, so that the ordinary people can make the right decisions.
Tan Kin Lian
Investing savings of $10,000
Someone wrote to ask for my advice. He has savings of $10,000 and wish to have a better return compared to bank interest. He wanted to pick some stocks to buy and sell when there is a profit. I advised him that it is not suitable to trade in stocks, as the transaction cost and spread will eat away the gain from the stock. There is the risk of capital loss that he must also consider.
I hesitate to suggest that he invest in ETF, as the stock market is rather high and the economy is has not recovered. Do you have any suggestions?
I hesitate to suggest that he invest in ETF, as the stock market is rather high and the economy is has not recovered. Do you have any suggestions?
Financial Planning for Ladies
I am asked to write an article on financial planning for ladies. How are the needs for young ladies different from young men?
Most of the needs are similar, i.e. to save for the future, to have liquidity, to have a good yield and to protect against risk of premature death or illness.
There are some risks of female illnesses and events connected with childbirth. And females live longer than males, so there is a need for more savings to take care of a longer life expectancy and long term care.
There is also the special needs for unmarried females. However, this situation should also apply to unmarried males.
I like to invite comments on this matter, especially from ladies.
Most of the needs are similar, i.e. to save for the future, to have liquidity, to have a good yield and to protect against risk of premature death or illness.
There are some risks of female illnesses and events connected with childbirth. And females live longer than males, so there is a need for more savings to take care of a longer life expectancy and long term care.
There is also the special needs for unmarried females. However, this situation should also apply to unmarried males.
I like to invite comments on this matter, especially from ladies.
Monday, January 04, 2010
Health insurance for an aging population
There is a school of thinking that the state should not provide health care for the aging population, as this would be too costly and, due to limited resources, this is best left to the private market.
I disagree with this argument. With limited resources, it is important that the resources are used efficiently and not wasted. The private market allocate these resources to those who can afford to pay, but it is likely that the limited resources will be used wastefully, especially as the final allocation is also also determined by the profit earned by the medical profession.
If health care for the elderly is provided or paid by the state, there will be control over the unnecessary medical treatment, as they would be disallowed by the state. Private individuals are not able to know what is necessary or not, but the medical experts working for the state would be in a better position to make this type of decision on the optimal use of the state resources.
Even in America, the health care for the elderly is borne largely by the state. There is a need to prevent excessive consumption of health care by the elderly, but this is a challenge that has to be faced and overcomed. Pushing the problem to the private market does not solve it, as it will lead to worse outcomes.
Tan Kin Lian
I disagree with this argument. With limited resources, it is important that the resources are used efficiently and not wasted. The private market allocate these resources to those who can afford to pay, but it is likely that the limited resources will be used wastefully, especially as the final allocation is also also determined by the profit earned by the medical profession.
If health care for the elderly is provided or paid by the state, there will be control over the unnecessary medical treatment, as they would be disallowed by the state. Private individuals are not able to know what is necessary or not, but the medical experts working for the state would be in a better position to make this type of decision on the optimal use of the state resources.
Even in America, the health care for the elderly is borne largely by the state. There is a need to prevent excessive consumption of health care by the elderly, but this is a challenge that has to be faced and overcomed. Pushing the problem to the private market does not solve it, as it will lead to worse outcomes.
Tan Kin Lian
Unfair application of exclusion
A policyholder took a travel insurance policy. He met with an accident and lost a tooth. He required immediate treatment overseas and follow-up treatment in Singapore. He submitted a claim for the dental expenses. He was told that his travel insurance policy excluded "all dental expenses".
This is an unfair application of the exclusion. The exclusion was intended to exclude claims for treatment due to poor dental health, but should not (in my view) be applied to dental treatment arising from an accident.
This is an unfair application of the exclusion. The exclusion was intended to exclude claims for treatment due to poor dental health, but should not (in my view) be applied to dental treatment arising from an accident.
Sunday, January 03, 2010
Economist debate: European Holidays
Motion: "This house believes that Europeans would be better off with fewer holidays and higher incomes"
Do Europeans take too many holidays?
Dear Reader,
We have a winner in our debate on vacation time. The team arguing against the motion has won the debate convincingly, with 79% against 21% of the votes. This house does not believe that "Europeans take too much holiday."
The voting record shows the weight of opinion has been consistently 4:1 against the motion from the outset, though the pro team's Robert J Gordon did shift his share of the vote by a few percentage points in the course of the debate. The final vote (and the many laments from the floor by overworked Americans) shows that most readers believe lost income is a price worth paying for extra holidays.
For his part, John de Graaf, arguing against the motion, eloquently made the case that there is more to life than work and money. His argument that Europe has established a better balance between work and leisure was bolstered by the contributions from guest commentators.
John O'Sullivan
Debate Moderator
Economics Correspondent
The Economist
Do Europeans take too many holidays?
Dear Reader,
We have a winner in our debate on vacation time. The team arguing against the motion has won the debate convincingly, with 79% against 21% of the votes. This house does not believe that "Europeans take too much holiday."
The voting record shows the weight of opinion has been consistently 4:1 against the motion from the outset, though the pro team's Robert J Gordon did shift his share of the vote by a few percentage points in the course of the debate. The final vote (and the many laments from the floor by overworked Americans) shows that most readers believe lost income is a price worth paying for extra holidays.
For his part, John de Graaf, arguing against the motion, eloquently made the case that there is more to life than work and money. His argument that Europe has established a better balance between work and leisure was bolstered by the contributions from guest commentators.
John O'Sullivan
Debate Moderator
Economics Correspondent
The Economist
UK Companies Investigation Branch
From UK Daily Mail
2 January 2010
Robert Burns has a blunt message for cheats who set up companies to con the public. 'There is an organisation that can take action against you and put you out of business,' he warns. That organisation is the Companies Investigation Branch. You may not have heard of it - much of its work is confidential - but it may have quietly taken action to stop you falling victim to sharp practice.
Some traditional types of malpractice recur. One involves 'land banking', where plots of land are purchased and sold to investors on the basis that planning permission will be granted.
'We find time and time again that the prospects of planning permission are south of zero,' says Burns.
'In one case, the land had everything wrong with it from a development point of view. It was green belt, a heritage site and was on a flood plain. There was just about every conceivable obstacle.'
2 January 2010
Robert Burns has a blunt message for cheats who set up companies to con the public. 'There is an organisation that can take action against you and put you out of business,' he warns. That organisation is the Companies Investigation Branch. You may not have heard of it - much of its work is confidential - but it may have quietly taken action to stop you falling victim to sharp practice.
Some traditional types of malpractice recur. One involves 'land banking', where plots of land are purchased and sold to investors on the basis that planning permission will be granted.
'We find time and time again that the prospects of planning permission are south of zero,' says Burns.
'In one case, the land had everything wrong with it from a development point of view. It was green belt, a heritage site and was on a flood plain. There was just about every conceivable obstacle.'
The benefits of social insurance
Social insurance is operated differently from private insurance. Social insurance is operated by the state, and is usually compulsory. It is funded partly by contributions from the insured members with the deficit covered by tax revenue.
Examples of social insurance are the unemployment insurance and old age pensions operated by many developed countries. In America, this is called social security. It is popular in America, which is the capital of capitalism and free market. Many countries also have health care insurance operated as a social insurance, e.g. UK, Canada and most countries of Europe.
Under a social health care insurance, there is no need to worry about pre-existing or congential conditions as they are covered. There is the risk of over-consumption of health care services which are paid by insurance, but this can be controlled to a large extent. There is also the need to control the charges made by doctors and hospitals. When the control is exercised by the state, backed by the law, it produced better results than control by private individuals exercising market choice, as can be seen by the high cost incurred by private health care insurance in America.
Singapore has stayed away from social insurance on the fear that they can be abused. This fear is exaggerated, and reflects the mindset of Singaporeans, including our leaders, in avoiding taking personal judgement and responsibility. We have to change this mindset and find new solutions to problems that have been ignored a long time. Private insurance is not suitable to handle problems such as unemployment relief and affordable health care.
Tan Kin Lian
Examples of social insurance are the unemployment insurance and old age pensions operated by many developed countries. In America, this is called social security. It is popular in America, which is the capital of capitalism and free market. Many countries also have health care insurance operated as a social insurance, e.g. UK, Canada and most countries of Europe.
Under a social health care insurance, there is no need to worry about pre-existing or congential conditions as they are covered. There is the risk of over-consumption of health care services which are paid by insurance, but this can be controlled to a large extent. There is also the need to control the charges made by doctors and hospitals. When the control is exercised by the state, backed by the law, it produced better results than control by private individuals exercising market choice, as can be seen by the high cost incurred by private health care insurance in America.
Singapore has stayed away from social insurance on the fear that they can be abused. This fear is exaggerated, and reflects the mindset of Singaporeans, including our leaders, in avoiding taking personal judgement and responsibility. We have to change this mindset and find new solutions to problems that have been ignored a long time. Private insurance is not suitable to handle problems such as unemployment relief and affordable health care.
Tan Kin Lian
Responsible communication
Here are two rulings by the Supreme Court in Canada that recognize the importance of responsible communication made in the public interest.
Saturday, January 02, 2010
Risk and how to manage them
Many people think of risk as "something can go wrong". Actually, risk is defined as variation from the expected.
Everyone has to die one day, so this is expected and is not a risk. The risk is that one may die at a young age, and have dependents that cannot support themselves.
As we grow older, we expect to be sick more often and to incur higher medical bills. This is not a risk, as it is expected. The risk is that the medical bills may be too high and beyond our means.
This risk can be managed by making better decisions. The medical specialists have a vested interest to get the patient to spend a lot of money on treatment, even if the chance of recovery is slim. There could be better ways of dealing with the illness that is not so costly.
Buying expensive medical insurance is not really a good way to deal with this risk, as the insured may be misled into taking expensive treatment that is not effective, and may have to bear a significant portion of the bill through the co-payments.
Many health care risks can be managed through having adequate savings, and making an informed decision on how to choose the right doctors and treatment. For most people, it is better to go to subsidized wards, as the risk of given expensive, unnecessary treatment, is minimised. The high cost can be covered by basic Medishield. This will allow us to avoid the situation in America where health care takes up 16% of the GDP.
Tan Kin Lian
Everyone has to die one day, so this is expected and is not a risk. The risk is that one may die at a young age, and have dependents that cannot support themselves.
As we grow older, we expect to be sick more often and to incur higher medical bills. This is not a risk, as it is expected. The risk is that the medical bills may be too high and beyond our means.
This risk can be managed by making better decisions. The medical specialists have a vested interest to get the patient to spend a lot of money on treatment, even if the chance of recovery is slim. There could be better ways of dealing with the illness that is not so costly.
Buying expensive medical insurance is not really a good way to deal with this risk, as the insured may be misled into taking expensive treatment that is not effective, and may have to bear a significant portion of the bill through the co-payments.
Many health care risks can be managed through having adequate savings, and making an informed decision on how to choose the right doctors and treatment. For most people, it is better to go to subsidized wards, as the risk of given expensive, unnecessary treatment, is minimised. The high cost can be covered by basic Medishield. This will allow us to avoid the situation in America where health care takes up 16% of the GDP.
Tan Kin Lian
A more caring community
We live in a community. Are we prepared to stand by and watch the weaker members of our society, including their children, go hungry or had a hard life? Or, do we want to help them, so that they also can have the hope of a better future?
Most people are generous and kind in nature, and will want to play a part to help the poor and the weak. This is where charity comes in, but there is also a selfish reason - if others have a decent life, there is no need to resort to theft or crime, and there is no need to have many criminals put into jail (which is also costly).
Mostly, people are poor as they do not get adequate wage and the cost of living is high. They will get into financial difficulty, if someone in the family falls sick and has to incur expensive medical bills. They may lose their savings through bad investments, or have been cheated by investment scams.
Some people are poor due to gambling, drinking and other vices - but they do not represent the majority of the poor. We can leave aside this problem for a separate discussion.
In a competitive world, we all have to work and compete hard to make sure that our business succeed. However, we have to balance competition with compassion. We should not push competition to the extreme, to the extent that other people (who may not be so smart as us) gets employed and helpless.
The European societies have a more proper balance in their lives. They pay adequate wages, have a shorter working hours and more holidays. They may be less competitive globally but they give a better quality of life to their people. They pay higher taxes, so that the ordinary people have better health care and old age pension. They may not be very rich, but they have better distribution of income and are a more caring community.
Recently, the Economist magazine carried out an online debate. 80% of the voters (probably from around the world) voted in favor of the European system of having more holidays. Many people feel that the competitive world force them to work too hard.
I prefer the European system (especially Scandinavia) of higher taxes, more social benefits, less working hours and a more caring community.
Tan Kin Lian
Most people are generous and kind in nature, and will want to play a part to help the poor and the weak. This is where charity comes in, but there is also a selfish reason - if others have a decent life, there is no need to resort to theft or crime, and there is no need to have many criminals put into jail (which is also costly).
Mostly, people are poor as they do not get adequate wage and the cost of living is high. They will get into financial difficulty, if someone in the family falls sick and has to incur expensive medical bills. They may lose their savings through bad investments, or have been cheated by investment scams.
Some people are poor due to gambling, drinking and other vices - but they do not represent the majority of the poor. We can leave aside this problem for a separate discussion.
In a competitive world, we all have to work and compete hard to make sure that our business succeed. However, we have to balance competition with compassion. We should not push competition to the extreme, to the extent that other people (who may not be so smart as us) gets employed and helpless.
The European societies have a more proper balance in their lives. They pay adequate wages, have a shorter working hours and more holidays. They may be less competitive globally but they give a better quality of life to their people. They pay higher taxes, so that the ordinary people have better health care and old age pension. They may not be very rich, but they have better distribution of income and are a more caring community.
Recently, the Economist magazine carried out an online debate. 80% of the voters (probably from around the world) voted in favor of the European system of having more holidays. Many people feel that the competitive world force them to work too hard.
I prefer the European system (especially Scandinavia) of higher taxes, more social benefits, less working hours and a more caring community.
Tan Kin Lian
Friday, January 01, 2010
Singaporeans are able to see beyond racial lines
Dear MR TAN KIN LIAN
I like to share with you a hearty observation about Singapore Idol competition results. This competition showed that Singaporeans are able to see beyond racial lines, when choosing their singing idol.
In the Singapore Idol competition, we saw Malay topped the competition consecutively from Season 1 in year 2006 to Season 3 in Y2009. This is a 100% winning streak for Malay singers, who won by on-line polling. This is despite the fact that Malays are minority in Singapore. This shows that Singaporeans have grown beyond racial line. Nobody entered the competition with preferential treatment. No single race is protected by any preferential arrangement”. Yet, our Malay fellow brothers won in three clean sweeps.
This showed that Singaporeans will vote for you if you are good and continue to improve.
I think this is another example Singapore Government should seriously consider setting a timeline to eliminate GRC for general election. In the future, it may be even difficult to define who is an Indians, for example. I see many inter-racial marriages in Singapore today.
** Record of winners for Singapore Idols **
Singapore Idol 1 (Y2004) Taufik Batisah beat Sylvester Sim.
Singapore Idol 2 (Y2006) Hady Mirza beat Jonathan Leong
Singapore Idol 3 (Y2009) Sezairi Sezali beat Sylvia Ratonel
CASHEW NUT
I like to share with you a hearty observation about Singapore Idol competition results. This competition showed that Singaporeans are able to see beyond racial lines, when choosing their singing idol.
In the Singapore Idol competition, we saw Malay topped the competition consecutively from Season 1 in year 2006 to Season 3 in Y2009. This is a 100% winning streak for Malay singers, who won by on-line polling. This is despite the fact that Malays are minority in Singapore. This shows that Singaporeans have grown beyond racial line. Nobody entered the competition with preferential treatment. No single race is protected by any preferential arrangement”. Yet, our Malay fellow brothers won in three clean sweeps.
This showed that Singaporeans will vote for you if you are good and continue to improve.
I think this is another example Singapore Government should seriously consider setting a timeline to eliminate GRC for general election. In the future, it may be even difficult to define who is an Indians, for example. I see many inter-racial marriages in Singapore today.
** Record of winners for Singapore Idols **
Singapore Idol 1 (Y2004) Taufik Batisah beat Sylvester Sim.
Singapore Idol 2 (Y2006) Hady Mirza beat Jonathan Leong
Singapore Idol 3 (Y2009) Sezairi Sezali beat Sylvia Ratonel
CASHEW NUT
Apply foreign worker levy to other jobs
Hi Mr Tan
The large immigration of foreigners into Singapore is one of the most divisive issues in Singapore today. There are many Singaporeans who are unhappy and bitter about the large number of FT that have been allowed into Singapore. They feel threatened by these foreigners as many of them have proven themselves to be as hardworking and capable as Singaporeans. Their salary expectations are significantly lower. A fresh graduate from NUS for example expects to earn $2,500 to $2,800. A graduate of similar calibre from China or India is willing to work for between $1,500 to $1,800.
The large gap in salary expectations has led to large amount of economic pressure to employ foreigners rather than Singaporeans. The common thinking among many Singaporeans who are employees is that businesses are greedy and immoral. In the pursuit of profit, they would sack their own countrymen and employ foreigners.
The truth however is a lot more complex. All businesses have to operate in a competitive global environment. Consumers value goods based on quality and price; they do not take into account who made them. Within Singapore, if you employ only Singaporeans while your competitors use foreigners, you will not be able to compete. Outside of Singapore, you will lose to global competitors who are willing to use the cheapest source of labour to produce their goods. Hence ultimately if you use a Singaporean only policy to run your company, then your business will most likely fail.
Recently, in response to negative sentiment on the ground, MOM has begun to tighten the issue of the various types of passes. Many speculate that this is window dressing ahead of a widely anticipated election. Regardless of the intent, this is not a viable long term strategy. This is because technologies like the Internet have made it very easy for business to cross national boundaries. As such, if MOM persists with a policy of not allowing foreigners into Singapore, the Singapore economy will eventually be hollowed out.
The emergence of an abundance of cheap and capable foreign labour means that the income of Singaporean workers WILL fall over the next 5 to 10 years. The unemployment rate among workers who are Singapore citizens will also rise. There is no known economic theory or policy which can stop or reverse this. This fall will continue until a new equilibrium is reached. This equilibrium is such that the income of Singaporean workers is comparable to that of workers from India and China. Here it should be noted that there is no magic economic law which states that the income of Singaporean workers must always be higher than those from India and China.
This unpleasant economic truth needs to be communicated to Singaporeans so that they can understand and accept the new economic reality. If the economic reality is hidden behind half-truths like “job redesign” and “productivity improvement”, then the bitterness and resentment will be even greater then the truth is known. I label “job redesign” and “productivity improvement” as half truths as they are completely ineffective ways of addressing the problem. This is because any training or re-design improvements that you do for Singaporeans, you can also apply foreigners. Singaporeans are not so special so that the training or job re-design can only apply to them.
Open and honest communication is also necessary so that Singaporeans do not make the wrong decisions based on unrealistic expectations. At present, there is a property boom in Singapore. Many Singaporeans are borrowing large sums of money to buy property in anticipation of “More Good Years” and the ability to sell the property at a higher price. Eventually the property bubble will burst and there will be a sharp decline in prices. If we superimpose this against higher unemployment and lower wages, then we are setting the stage for a very painful and bitter period for Singaporeans.
Other than open and honest communication about the future, what we also need are policies which moderate or slow the expected decline in income. Also useful would be policies which help people cope and adjust. The following is a policy recommendation which will address many issues simultaneously.
The root of the problem is the salary gap between Singaporeans and foreigners. In recognition of this gap at the low skill level, MOM has implemented a foreign workers levy for maids and other foreigners that work in Singapore under the work permit system. Given the success of this policy, it would now be timely to extend this levy to those in Singapore under the employment pass or permanent resident scheme. The successful implementation of the foreign workers levy for so many years suggest that if it were applied to the employment pass/permanent resident scheme, it would not “chase away the talent”.
With the money collected from the levies, we can then move to restructure the CPF scheme. The Employer CPF contribution can slowly be reduced to 0%. This would be replaced by payment made from the levies collected from foreigners working in Singapore. As the number of foreigners in Singapore increases, this CPF contribution would increase.
By implementing a policy like this, we put substance into the nice-sounding policy announcements that “foreigners are in Singapore for the benefit of Singaporeans”. It would help heal our society which is increasingly being polarized along the lines of Singaporean and Foreigner. Also we moderate the narrowing of the wage gap between Singaporean and Foreigner in a manner that is least painful to Singaporeans.
Aurvandil
The large immigration of foreigners into Singapore is one of the most divisive issues in Singapore today. There are many Singaporeans who are unhappy and bitter about the large number of FT that have been allowed into Singapore. They feel threatened by these foreigners as many of them have proven themselves to be as hardworking and capable as Singaporeans. Their salary expectations are significantly lower. A fresh graduate from NUS for example expects to earn $2,500 to $2,800. A graduate of similar calibre from China or India is willing to work for between $1,500 to $1,800.
The large gap in salary expectations has led to large amount of economic pressure to employ foreigners rather than Singaporeans. The common thinking among many Singaporeans who are employees is that businesses are greedy and immoral. In the pursuit of profit, they would sack their own countrymen and employ foreigners.
The truth however is a lot more complex. All businesses have to operate in a competitive global environment. Consumers value goods based on quality and price; they do not take into account who made them. Within Singapore, if you employ only Singaporeans while your competitors use foreigners, you will not be able to compete. Outside of Singapore, you will lose to global competitors who are willing to use the cheapest source of labour to produce their goods. Hence ultimately if you use a Singaporean only policy to run your company, then your business will most likely fail.
Recently, in response to negative sentiment on the ground, MOM has begun to tighten the issue of the various types of passes. Many speculate that this is window dressing ahead of a widely anticipated election. Regardless of the intent, this is not a viable long term strategy. This is because technologies like the Internet have made it very easy for business to cross national boundaries. As such, if MOM persists with a policy of not allowing foreigners into Singapore, the Singapore economy will eventually be hollowed out.
The emergence of an abundance of cheap and capable foreign labour means that the income of Singaporean workers WILL fall over the next 5 to 10 years. The unemployment rate among workers who are Singapore citizens will also rise. There is no known economic theory or policy which can stop or reverse this. This fall will continue until a new equilibrium is reached. This equilibrium is such that the income of Singaporean workers is comparable to that of workers from India and China. Here it should be noted that there is no magic economic law which states that the income of Singaporean workers must always be higher than those from India and China.
This unpleasant economic truth needs to be communicated to Singaporeans so that they can understand and accept the new economic reality. If the economic reality is hidden behind half-truths like “job redesign” and “productivity improvement”, then the bitterness and resentment will be even greater then the truth is known. I label “job redesign” and “productivity improvement” as half truths as they are completely ineffective ways of addressing the problem. This is because any training or re-design improvements that you do for Singaporeans, you can also apply foreigners. Singaporeans are not so special so that the training or job re-design can only apply to them.
Open and honest communication is also necessary so that Singaporeans do not make the wrong decisions based on unrealistic expectations. At present, there is a property boom in Singapore. Many Singaporeans are borrowing large sums of money to buy property in anticipation of “More Good Years” and the ability to sell the property at a higher price. Eventually the property bubble will burst and there will be a sharp decline in prices. If we superimpose this against higher unemployment and lower wages, then we are setting the stage for a very painful and bitter period for Singaporeans.
Other than open and honest communication about the future, what we also need are policies which moderate or slow the expected decline in income. Also useful would be policies which help people cope and adjust. The following is a policy recommendation which will address many issues simultaneously.
The root of the problem is the salary gap between Singaporeans and foreigners. In recognition of this gap at the low skill level, MOM has implemented a foreign workers levy for maids and other foreigners that work in Singapore under the work permit system. Given the success of this policy, it would now be timely to extend this levy to those in Singapore under the employment pass or permanent resident scheme. The successful implementation of the foreign workers levy for so many years suggest that if it were applied to the employment pass/permanent resident scheme, it would not “chase away the talent”.
With the money collected from the levies, we can then move to restructure the CPF scheme. The Employer CPF contribution can slowly be reduced to 0%. This would be replaced by payment made from the levies collected from foreigners working in Singapore. As the number of foreigners in Singapore increases, this CPF contribution would increase.
By implementing a policy like this, we put substance into the nice-sounding policy announcements that “foreigners are in Singapore for the benefit of Singaporeans”. It would help heal our society which is increasingly being polarized along the lines of Singaporean and Foreigner. Also we moderate the narrowing of the wage gap between Singaporean and Foreigner in a manner that is least painful to Singaporeans.
Aurvandil
Treat immigrants fairly and well
Many Singaporeans disagree with the recent policy of the Government to allow a big influx of foreigners into Singapore for whatever reasons, i.e. to boost our economic growth or to compensate for our low birth rate. This has created a lot of problems for the locals, which has not been properly recognized, i.e. competition for jobs, over-crowding and other social problems.
Some have suggested measures to differentiate between "old" and "new" citizens, between citizens and permanent residents and so on. I think that it is better to adopt a policy of treating everyone equally, as far as possible, in the daily lives.
We have to remember that many immigrants have made big sacrifices to come to live and work in Singapore. Some have borrowed and paid large sums of money to migrate to Singapore. If we accept them, it is our duty, as decent people, to treat them fairly and well. We should not deny them the right to have proper housing and fair wages. If they become permanent residents and citizens, they should be entitled to the usual benefits that are given to residents.
We should get away from the bad policy of differentiating different groups of people according to their residency status, graduate status, type of housing, income levels and other "rules". This causes disputes and unhappiness, pits one group of people against another group and will result in a fractious society.
We have to recognize a severe disadvantage placed on our male citizens in having to serve two years of full time National Service and the continuing liability of being called up regularly for in-camp training. We need to find ways to reduce or remove this disadvantage.
Tan Kin Lian
Some have suggested measures to differentiate between "old" and "new" citizens, between citizens and permanent residents and so on. I think that it is better to adopt a policy of treating everyone equally, as far as possible, in the daily lives.
We have to remember that many immigrants have made big sacrifices to come to live and work in Singapore. Some have borrowed and paid large sums of money to migrate to Singapore. If we accept them, it is our duty, as decent people, to treat them fairly and well. We should not deny them the right to have proper housing and fair wages. If they become permanent residents and citizens, they should be entitled to the usual benefits that are given to residents.
We should get away from the bad policy of differentiating different groups of people according to their residency status, graduate status, type of housing, income levels and other "rules". This causes disputes and unhappiness, pits one group of people against another group and will result in a fractious society.
We have to recognize a severe disadvantage placed on our male citizens in having to serve two years of full time National Service and the continuing liability of being called up regularly for in-camp training. We need to find ways to reduce or remove this disadvantage.
Tan Kin Lian
Community based loans
I have suggested a "community based" scheme to provide loans to families that are need money for their daily expenses due to loss of employment, high medical bills or other factors beyond their control. I have received some questions on how this scheme can operate. I will answer them:
a) Who provides the funds? The community (i.e. the Government)
b) Who bears the loss of bad debts? The community will have the right to place a lien on the assets, e.g. CPF savings, of the borrowers. If there are insufficient assets, the bad debts will be written off and will be borne by the community, i.e. the taxpayers.
c) Who decides on the people who should be granted these loans? Loan assessors working on the set of eligibility criteria.
d) What rate of interest should be charged on the borrowings? 1% to 3% higher than CPF interest rate.
This community based scheme will operate on principles that are different from commercial banks or loan sharks, and will still aim to make the borrowers responsible for repaying the loans. However, these loans should be provided at an affordable interest rate, so that the borrowers are not burdened with exorbitant interest payments.
This scheme requires responsible people to be loan assessors to carry out investigations into the financial situation before the loan is granted. The assessor has to interview the borrower and visit the family to make personal judgement (which is a skill that needs to be developed, as many Singaporeans prefer to decide on paper and avoid taking personal responsibility to make judgement).
This will provide an alternative to borrowing from loan sharks, leading to bankruptcy, petty crimes and other social problems.
Tan Kin Lian
a) Who provides the funds? The community (i.e. the Government)
b) Who bears the loss of bad debts? The community will have the right to place a lien on the assets, e.g. CPF savings, of the borrowers. If there are insufficient assets, the bad debts will be written off and will be borne by the community, i.e. the taxpayers.
c) Who decides on the people who should be granted these loans? Loan assessors working on the set of eligibility criteria.
d) What rate of interest should be charged on the borrowings? 1% to 3% higher than CPF interest rate.
This community based scheme will operate on principles that are different from commercial banks or loan sharks, and will still aim to make the borrowers responsible for repaying the loans. However, these loans should be provided at an affordable interest rate, so that the borrowers are not burdened with exorbitant interest payments.
This scheme requires responsible people to be loan assessors to carry out investigations into the financial situation before the loan is granted. The assessor has to interview the borrower and visit the family to make personal judgement (which is a skill that needs to be developed, as many Singaporeans prefer to decide on paper and avoid taking personal responsibility to make judgement).
This will provide an alternative to borrowing from loan sharks, leading to bankruptcy, petty crimes and other social problems.
Tan Kin Lian
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