Adopt a constructive approach

Sam Tan said:
Beware Fellow Singaporeans, It is PAP deliberate ploy to constantly provoke and attack WP in parliament to create DRAMA (corner WP to say and do wrong things) so that PAP can take these words/ actions against WP in next GE campaign ACCUSE WP for being an irresponsible/ destructive Opposition like those in other countries.

Hence convince Singaporeans to stick with a one party system so that PAP can control Singaporeans with their iron fists and implement all policies they want without consultation, debate and obstruction from Opposition and Singaporeans.

Remember this, every alternative policy/ suggestion has its pros and cons and PAP will attack the cons of whatever WP suggest and WP will never win the debate with PAP majority in the parliament. https://sg.news.yahoo.com/pm-lee-asks-low-thia-khiang--where-do-you-stand-180324245.html

REPLY
The pugnacious approach of our PAP leaders is not constructive. They set a bad example. 
They should be open minded to get the views of other people and seek a better solution to many of the "elephants in the room", i.e. problems that they have been ignoring or unable to solve for a long time.

Does the CPF Minimum Sum include the amount set aside for Medisave?

Someone asked:

I am curious about CPF Minimum Sum and Medisave Minimum Sum. If I am not mistaken, the Retirement Account compromise of Ordinary Account + MediSave Account + Special account once the person turns 55. So should not it be the minimum sum for CPF wef 1 July 2014 be $155,000 and out of that, $43,500 from the Medisave? Need correct interpretation please

REPLY
The minimum sum for retirement is $155,000 and for Medisave account is $40,500. Together, the total is $195,500.

Read
http://mycpf.cpf.gov.sg/CPF/my-Cpf/reach-55/Reach55-2.htm
and
http://mycpf.cpf.gov.sg/CPF/my-cpf/reach-55/Reach55-4.htm

Can a person earning $3,000 at age 25 meet the minimum sum at 55?

To answer this question, I present two scenarios:
a) Moderate salary increase. 
b) Low salary increase. 

The results can be found here:
http://c-onyx.com/page/1856

Analysis of CPF Life

THE FIRST EVER ANALYSIS OF CPF LIFE !!!

A CPF member reaching age 55 in or after 2014 will have the "minimum sum" portion of the CPF savings transferred to CPF Life. The member is given a choice of two plans, known as the standard and basic plan, which gives a monthly payout from age 65, payable for life, and a bequeath to the family on death. If the member does not exercise a choice, the default choice is the standard plan.

The standard plan has a higher payout than the basic plan, but give a lower bequeath to the family on death of the annuitant.

The PDF below contains an analysis of the payout and bequeath and helps the CPF member to decide on the choice of the plan to opt.

http://c-onyx.com/page/1851

Your CPF savings are safe

 I wish to address the issue on whether the CPF is able to pay off all its members, if it is dissolved today. 

The annual report of the CPF at 31/12/2012 showed total amount owing to CPF members to be $230 billion. This is invested in Singapore Government Securities totaling $229 billion, with a few other billions invested in other assets.

If CPF were to be wound up, will the government be able to pay the $229 billion?

The answer is clearly "yes". The reserves of the government comprises of $198 billion in Temasek Holdings, $305 billion in MAS and "over $100 billion" in GIC. The total is over $600 billion.

If this were to happen, will the government be able to sell the assets to raise $230 billion to pay the CPF members? There is no need to. If the government were to issue bonds of $230 billion, that is backed by the $600 billion of actual assets, it should have not much difficulty.

Another way is for the government to "print $230 billion" of money to pay back the CPF members.

The actual amount that the government needs to pay back the CPF members will be much less than $230 billion. The outstanding loans owed to the HDB (which is a part of the government) should be a large sum. Surely, if the government were to pay back the CPF balances, the members should also pay back the balance of the HDB loan?

If you wish to verify my figures, you can check them here:

The winding up of the CPF is completely hypothetical and inconceivable. I have used this scenario to illustrate that the savings in the CPF is safe, and that the fear that there is no money to pay back the CPF balance is totally unfounded.

However, I do not support the current system where most of the savings are stashed away by an ever increasing minimum sum. This has to be reviewed, and a portion of the savings should be allowed to be withdrawn at age 55, even if the savings is inadequate to meet the minimum sum.

Tan Kin Lian

Easy way to mark tests and examinations

We have developed a software to allow teachers to mark OMR answer sheets easily. It has been used a few times and several practical issues have been identified. These issues have been resolved, and the software is now quite easy to use.

The attached PDF shows an example of the use of this software. If you are interested to try the software, you can contact us using the e-mail shown in the PDF.

If you have encountered difficulty using the OMR equipment provided by your school, you can try this software and see if your issues have been resolved. As this software is convenient to use, you can use it for your regular tests and quizzes during the term, in additional to the final examination at the end of the term.

http://c-onyx.com/pdf/1849

How to determine a fair wage?

What is a fair wage? How is this to be determined? The answer to this question is important, as it sets the foundation for a fair and vibrant society. 

There are three main methods to determine the fair wage, as adopted by most countries:

a) By collective bargaining between the the workers and the employers
b) By government decree
c) By leaving to market forces

All of them do not work well. But it seems that method (a) has a better chance of working well, as shown is some successful countries, such as Germany.

Singapore follows method (c) and the results have been quite poor, leading to a high wage disparity.

In my view, the right answer is a combination of the three methods, and to use the modern tools to achieve it. A wage panel can be formed to determine the recommended wages for the various types of jobs, after considering the inputs of the workers, relative difficulties of the jobs, and adjusting the wages yearly based on supply and demand (i.e. market forces).
Employers are allowed to employ workers within a margin from the recommended wages.

Introduce flexibility in CPF withdrawal

After thinking much about the CPF, minimum sum scheme, and getting the views of other people, my conclusions are:

1. The CPF is generally a good scheme
2. The minimum sum scheme is a good feature, as it requires people to keep some savings for the future
3. The current level of the minimum sum scheme, with 50% to be pledged in property, is reasonable
4. The member at age 55 should be allowed to withdraw up to one-third of their savings and this can take higher priority over the minimum sum. This will reduce the monthly payout at age 55, but it is the choice of the member.

Why do I have to pay to file a return to ACRA?

I submitted my annual return to ACRA. It took me 1/2 hour to make the submission including an occasion where the browser hang and I have to re-enter the website. 

After completing the transaction, ACRA required me to pay $20. I opt to pay by credit card. In the process of making payment, the eNETS hang. So, my transaction cannot be completed.

It is ridiculous. Even making a payment is a hassle. And why must ACRA ask the business user to pay the $20 to make a compulsory submission? Why can't the forego this unnecessary step?

Help-desk has to be more helpful

I called the ACRA helpdesk. And I got reminded on how inconsiderate our government agencies are.

They force me to hear all kinds of "nonsense" and after pressing "0" to talk to an officer, I am asked to wait many cycles for an officer to be available. 

ACRA does not seem to know that people have other matters to attend to. 

This is also the style of most government agencies. They really know how to give trouble to the public and then make them waste a lot of time on their so called "helpdesk".

Simplify websites of government agencies

As a business owner, I have to comply with regulations from many government agencies, i.e. ACRA, IRAS, MOM, CPF, etc.

Many of their websites are designed in a complicated manner, requiring the public to spend a lot of hours to make a simple submission. Their payment systems are a hassle. 

If you need help and have to call their so-called help desk, you also have to spend a lot of time. 

I have given this feedback to the government agencies on many occasions during the past three years. Nobody bother to make any change.

I am sure that this problem is faced by many other people. This increases the operating cost in Singapore and make Singapore an expensive place to do business, and this high cost is passed to the consumers.

Make Singapore more pedestrian friendly

Our town planners design roads and crossings to be friendly to cars and unfriendly to pedestrians. 

The put barriers in the middle of the road to force pedestrians to walk a longer distance to a traffic crossing. These barriers are not helpful. 

If there are no barriers, the pedestrians can use their judgment on crossing the road, when there are no cars. If there are cars, they will walk to the crossing.

In housing estates, the do not provide short cuts for pedestrians to reach the road or bus stops. The pedestrians have to walk the long way, along the roads used by cars.

Even large commercial or industrial buildings are fenced in, forcing pedestrians to walk the long way to the main gate. This may be for "security", but is it really necessary?

I have a gut feel that the town planners in other cities are more friendly towards pedestrians.

Checking passport against Interpol database

I read a Yahoo report that Air Asia has decided that they will check the passports of their passengers against the Interpol database of stolen passports.

They claimed to be the first airline to decide on making this check. I think that it should be quite inexpensive to do the live checking, as it can be handled by computer link.

I am disappointed that Singapore Airlines did not make take this decision earlier to be the first airline, and to get mentioned in the international press.

It seems that Air Asia is more "on the ball". Singapore Airlines has missed a chance to show that they are still innovative and ready to respond.

This is how it can be done:

At the time of booking, the passenger has to provide the passport number. As each booking is confirmed, i.e. the ticket is issued, the airline can make a live check against the Interpol database to make sure that the passport is valid. It should be quite easy and inexpensive. If the passport is invalid, the billing will be REJECTED. It should be a SIMPLE PROCESS to build automatically into the system.

Bad communication from the public sector

The app "MyTransport" from LTA has a function to show the bus stops for each bus service. It shows the bus stop number and name, but leave out the road and KM of the stop. 

I emailed to LTA to suggest that the road name and KM should be included, as they are part of the printed guide for the bus service. 

I could not find an email address to send to, so I sent it to the LTA head of communications, with a request to forward it to the relevant person.

I did not receive any reply or acknowledgment from this communication head. It is a bad practice not to give a simple acknowledgement.

Four weeks later, I received an e-mail reply from another officer than they have considered my suggestion and will be adding the road name but will not be adding the KM, which they consider to be not useful. 

I immediately gave a reply, "Please call me at 66599611 to discuss with me. The KM is the most important information". 

I also found that my telephone number and email was clearly stated in the original email. It is bad to make a decision without understanding the problem.

This is an extremely bad practice, that is quite prevalent in our government agency. 

Even our ministers do not reply or acknowledge suggestions given to them. They may be busy, but they do have an army of assistants who could reply on their behalf. The bad behavior is now being followed by their subordinates in the civil service.

Tan Kin Lian

Personal savings for the future

Many people found that they do not have any savings when they reach age 60 and their CPF savings is locked into the minimum sum. Some of them have debts to pay.

There is nothing much that can be done for the older people, except for the CPF policy to be changed.

For younger people, especially those who have just started work, I wish to give the following advice:

1. Set aside 15% of your income as personal saving, in addition to the compulsory savings in the CPF.
2. Invest your personal savings in the STI ETF to get a good yield over the long term. This investment is better than bonds, or investing in individual shares.
3. When you buy a property, make sure that the monthly installments can be paid entirely from CPF savings. Do not buy an expensive property that require you to pay cash, in addition to the CPF savings.

These principles are explained in my book "Financial Planning for Young People", available at www.c-opal.com/pdfbook/33

Review of CPF policy

Many people have expressed in the social media that they are not happy that the CPF savings cannot be withdrawn at 55 or even 65. They felt strongly that the government did not have the right to delay payment and are doing so, as they do not have the funds to pay back the CPF.

It is quite easy for the government to print money to pay back the CPF, so this "lack of funds" is not the reason.

The stated reason of the government is that it is better for the savings to be withdrawn in monthly installments over the lifetime. This is why the CPF Life was being introduced.

While I understand the genuine intent of the government, I believe that they are following the wrong policy and are not aware of the problem faced by the ordinary people.

Here are the underlying problems:

1. Many citizens do not have any savings besides CPF. Some of them have accumulated debts (e.g. due to unemployment or education of their children) and need the CPF savings to pay off these debts.

2. The high cost of HDB flats have wiped out most of their personal savings and CPF savings, leaving them with with no spare funds to withdraw, after setting aside the minimum sum.

3. For people who are short of funds, their immediate need is to have access to the money now, rather than to keep it for the future.

It is important for the government to recognize the real financial issues facing many people, and to review their current policy of continuing to increase the minimum sum.

Tan Kin Lian

Malaysian Airlines MH 370 went missing on 8 March 2014. There were 270 passengers and crew on the plane.

A crisis management expert told me that the handling of the crisis during the first few days was a disaster. He explained the difficulties that had to be faced by the crisis team - insufficient information, unreliable information, the need to decide on what can or cannot be released and many other issues.

Daily briefings were given to the family members and to the media. The responsible officials took and answered questions. The ad-hoc answers, which were outside of the official scripts, sometimes became the source of further confusion and distrust.

The families of the missing persons on the plane were most distraught and emotional. They wanted to know what was happening and what was being done to locate the plane and to save the lives of the passengers. They did not get answers that they like to hear.

Later, the handling become more professional, as a crisis management expert must have been called. Still, the family members felt that information was being withheld and that wrong information was being given to them deliberately. There was a high level of distrust.

I wish to share my perspective about the underlying challenges and how they could be handled better.

http://c-onyx.com/pdf/1845

The rationale for unemployment insurance

In the economy that is open to global and local competition, some businesses will fail and their workers will be retrenched. Even if the business does not fail, it may have to downsize and retrench some of its workers.

It will take the worker 6 to 18 months to find a new job that is suitable for their experience and skills. Sometimes, the worker may have to accept a job that pays a lower wage.

By now, many people who understand the trauma that the retrenched worker has to face. They may have faced it themselves, or have seen friends or co-workers gone through the difficult period. The pain of unemployment is real.

Many countries have introduced unemployment insurance to help the retrenched workers to ride over a period of adjustment. The unemployment benefit does not compensate for the full amount of the income that is lost, but does pay a certain percentage of the regular wage to help the unemployed worker for a period of one to two years.

The unemployment insurance system have a way to manage the potential abuse by workers who are too lazy to find work and want to enjoy the benefit. While they are not able to stop all the abuses, they do go some way to reduce the impact. Most workers also prefer to find work, so the unemployment benefit really goes to help people who are genuinely in need.

Assume that the unemployment people represents 5% of the workforce. If they receive a benefit of 60% of their regular wages, the cost of this benefit is 3% of the wages of the working people.

Are you willing to contribute 3% of your wages, so that if you should be retrenched, you will receive a benefit of 60% of your regular wages over 12 to 18 months? If you are not retrenched, the payment goes to somebody who is retrenched.

Suppose your company has to downsize and 5% of your co-workers will lose their job. Do you want a situation where everyone will try to protect their job, including back stabbing their co-workers to protect themselves, or do you prefer that those who keep the jobs should contribute 3% of their wages to provide the relief to the co-workers who have to leave?

This is the rationale for unemployment insurance. It reduces the uncertainty and allows the displaced workers to find a new job, without having to suffer a large financial loss.

Tan Kin Lian

Speech by Tan Kin Lian on Wages and Employment, 3 May 2014

Introduction

1.      In olden days, most people work in the countryside. They grow crops and rear animals, and are able to produce enough to raise a family. Life was simple but was free from stress.

2.      Today, most people live in the city. They need a job to earn a wage to pay the bills - the mortgage for their home, utilities, food, clothes, school fees, transport fares, medical bills.

3.      They need the wages to be adequate. If the wages are too low, they have to work long hours or to work on two jobs. They will not have sufficient time for rest and leisure and will be harmful for their health.

Singapore

4.      While Singapore has one of the highest per capital income in the world, many of our workers do not earn enough to meet the high cost of living. The cost of living is high because of the wide disparity between the high and low income earners. The high income earners are able to pay high prices for properties, cars and other goods and services, jacking up the prices beyond the reach of the low income earners.

Minimum Wage

5.      To improve lives for people at the lower income levels, we need to introduce a minimum wage. This minimum wage should be set at a level that is adequate for a person, working a full day, to earn enough to raise a family at a modest standard of living.

6.      The minimum wage should apply to all jobs and will give dignify to the manual and service jobs. It will encourage our local workers to accept these jobs and reduce the reliance on foreign workers.

7.      There is a fear that the minimum wage will result in higher prices to be paid by consumers. The increase in consumer prices will be modest, as the low wage earners take up only a small part of the total cost, and is likely to be partly offset by a lower share taken up by rental and profits.

9.      I have visited Jakarta regularly over the past five years. Five years ago, the minimum wage was about $120 a month but the cost of cost of living was also quite low.

10.    The minimum wage has since been increased to $250 a month, which is doubled over five years. The last increase of 40% was approved by the newly elected Governor of Jakarta Joko Widodo two years ago. He argued that the minimum wage has to be adequate to meet the cost of living in Jakarta. While several members of the business community complained about the increase, a few several business owners said that the increase was fair and necessary.

11.    The following year, the labor unions asked for a further increase of 40%, but the Governor turned it down. He had demonstrated leadership and courage to do the right thing when it was necessary, without being pressured to repeat the increase.

12.    I believe that setting a minimum wage at an adequate level is one important step that must be taken in Singapore. We are only of the few countries in the world that still do not have a minimum wage.

Adequate jobs

13.    It is equally important that there should be enough jobs for the people and that the people should feel assured that, if they are capable, adaptable and willing to work, they will be able to get a job that can pay an adequate level of income. On their part, the workers have to be willing to adapt to changes caused by global market forces.

14.    To achieve this goal, we need a vibrant economy and also, control over immigration of foreign workers to ensure that the local workers are not displaced. The large scale entry of foreign workers into Singapore during the past years has been harmful and not be repeated.

Unemployment insurance

15.    In a competitive and free economy, some people will be retrenched due to business failures. To overcome the negative impact to the retrenched workers, we need to introduce unemployment insurance to provide short term relief. The benefit can be set at a modest level and for a short duration of 12 to 18 months, and can be managed to avoid abuse.

16.    There is a fairly widespread belief, which is largely misplaced, that unemployment insurance will make people lazy and encourage them to abuse the system. While some people may abuse the system, the majority will prefer to work, if they are able to. In any case, most countries have been able to introduce fairly effective measures to manage the abuse, while giving help to those who are genuinely in need of it.

17.    Most well developed countries have a system of unemployment insurance. It is time for Singapore to study this system and have an open mind to examine its merits.

National Service

18.    National service has now become a heavy burden on male citizens when they have to compete for jobs. First, their entry into the work force is delayed by two to three years, of which two years are in full time national service and up to one year is caused by waiting to be called up and to fit into the university schedule. After completing full time service, the reservists have to be called up at regular intervals for reservists and remedial training, causing disruption to their work. Some employers find the disruption to be a disadvantage in employing male citizens with these obligations.

19.    While national defense continue to be an important priority, there is no need to impose such a heavy burden on our male citizens. We can rely more or fully on a professional army or at least, reduce the full time and reservist obligation by half. The experience of many countries showed that it is possible to train a soldier in one year, not two. There is also possible to reduce the period of reservist called up to five years, instead of the current ten to twelve years. This change will reduce the disruption to the careers of our male citizens and allow them to compete in the employment market with a reduced disadvantage.

Funding the cost

20.    There is a fear that unemployment benefits will increase the cost to the government and will need to be funded by higher taxes or GST. This fear is exaggerated. There is more than adequate surplus in the government budget to provide to provide this benefit without increasing the tax burden on the working people.

21     The introduction of a minimum wage will impact the small businesses which are now struggling with high operating cost. The government can provide some assistance to these small businesses, for example, by paying the employer's CPF contribution for these companies.

22.    If the introduction of unemployment insurance is too big a step for Singapore, an alternative is to allow the unemployed to withdraw a monthly sum from his CPF account to meet his cost of living

Conclusion

23.    The role of a government is to provide a better life for the people in the country. They have to set the right policy and strategy in running the country, to achieve this goal. The top priority must be to ensure that the people have a job that provides an adequate wage to meet the cost of living and to raise a family. It is time for Singapore to review the need for a minimum wage and unemployment insurance.

Tan Kin Lian

What actually happens when America introduces Quantitative Easing?

Quantitative Easing (QE) sounds like a respectable word. It seems to be a legitimate tool that can be used to stimulate the economy. So, it seems.

When the US Federal Reserve Board or FED introduce this term, it is a nice word for reducing the interest rate in the economy. This is achieved by printing money, and making large supply of US dollars available to businesses at low cost. The aim is to stimulate the economy.

It also benefits the US government by reducing the interest rate that the it has to pay for the debt, or government bonds that it has to issue to fund its deficit.

Normally, when a debtor increases its debts, it has to pay a higher interest rate to compensate the lenders for the risk of inflation and depreciation of the currency. But, it does not happen to America. The world and its lenders seem to have confidence in the US government, in spite of its increasing debts. They continue to be quite happy to take up the new issue of long term bonds, even when the interest rate is rather low and inadequate to compensate them for the risk of inflation and a small risk of default.

The lenders are the countries with large surplus in its balance of trade, such as China and Japan. They continue to invest in the debts of the US government.

After a few years, the lenders start to worry. They are holding on to too much US debts. They are not so keen to take up additional debts. They start to look for other countries to invest their surpluses.

What does the US government do? They need to have lenders to invest in the new debts that they have to issue to fund their deficits, and to refinance the maturities of the old debts. If it is clear that the foreign funds are not investing in the new debts, the interest rate will increase sharply. There will be a crisis - a loss of confidence.

Who can be counted to invest in the US government bonds, to replace the major lenders who are now feeling shaky about the quality of the debts? Who will not ask any question and invest in the bonds as a duty under "national interest"? Of course, it has to be the Americans - the corporations, fund managers and the individuals. It is important to protect the "national interest".

Unfortunately, these institutions and individuals are not so patriotic. The individuals and institutions have to look after their self interest. This is how the free market and private interest works.

There is one institution that can be counted to be the lender of last resort, that can take the burden of looking after the national interest. It is the faithful US FED. They can buy over the bonds that foreigners and even their own private investors are not keen to buy.

They introduce a new concept, called "asset purchases". The US FED will buy over the bonds and other mortgages that other investors are not keen to have.

The US financial experts are truly innovative. At first, they print money and issue government bonds at low interest rate. Later, when the foreign and private investors are not keen to invest in these bonds at the miserable interest rate, they get their own FED to take over these debts and give it a nice term, called "asset purchase".

The US FED is now reducing its "asset purchase" program, but it reality they are still continuing the buy the debts, but of a smaller quantity. The total debt of the US government continues to increase to a very large number, in trillions of dollars.

So far, so good. As long as the foreign investors are willing to hold on to the debts, and continue to invest in the new issues, it will be all right. But, what if they decide to panic?

Tan Kin Lian