Saturday, November 07, 2009

Willing to make decisions

A friend told me this story. A Singaporean migrated to Australia and worked in an Australian company. She was surprised that the Australian managers were willing to make decisions. In Singapore, her managers waited for decisions to be made by the higher ups. This was a big culture change to her.

I did not ask if the Singaporean had worked in the private sector or the civil service. It probably did not matter. Quite likely, the habit exists in both sectors.

Hong Kong tightens sale of deriviaties

2 Nov 2009

HONG KONG - HONG Kong officials said on Monday they have tightened regulation of complicated investment products after thousands of local retail investors were burned by Lehman Brothers-backed derivatives last year.

But lawmakers said the new measures fall short, and urged the government to prosecute banks that misled investors and to ban some risky products outright.

Under the new regulations, banks must issue risk warnings for complex products and record conversations between their sales staff and clients to prevent deception, K.C. Chan, Secretary for Financial Services and the Treasury, said at a legislative hearing on Monday. The government was also considering setting up an investor education body and a financial services ombudsman, he said.

The measures come after 30,000 Hong Kong small investors who bought US$1.8 billion (S$2.5 billion) in Lehman-linked derivatives were left in limbo after the US investment bank collapsed September last year. Upset they weren't fully aware of the risk their investments carried - many of the complex derivatives were innocuously labeled 'mini-bonds' - investors took to the streets.

Hong Kong regulators announced a settlement with 16 local banks in July that returned up to 70 per cent of principal to the buyers, or up to HK$6.3 billion.

Opposition lawmaker Ronny Tong criticised the government for not focusing on legal action. 'I think it's strange that there is not a single case of prosecution after investigating for more than a year,' he said.

Friday, November 06, 2009

Reduce travelling time, cost and congestion

Read this suggestion. We need to change our approach and recruitment practices.

Intelligence Quiz - Online

Do the Intelligence Quiz online here. You can click on "Buy Books" to buy the books to do the quiz offline.

Buying a home

Here is a chapter from my book TKL Financial Planning. It discusses the points to consider when you buy a home.

Rechargeable Torchlight

See this brochure.

Available from here on weekdays 9 am to 6 pm.

Build up the public opinion

Several people asked if there is any point in making suggestions in the media, if the authorities are not paying attention and will not reply to these suggestions.

The purpose of expressing our views is NOT to convince the authorities, as they do not agree with the suggestions and will not want to change their views. Some people say that they do not care.

The purpose is to educate the public and to build the public opinion. If many people are aware that there is a better alternative to the current policies and are willing to express their views strongly, the authorities cannot continue to ignore them.

I urge the public to be willing to express your views and, preferably, to add your name so that they carry more weight.

In other countries, the public will go out to demonstrate in the streets. It is quite sad that the people are not allowed to express their views through demonstration in Singapore. We can adopt the next best approach, and that is to express our views openly, and educate other people to these views. Let us build up the public opinion.

Tan Kin Lian

Thursday, November 05, 2009

Politics and MRT

What has politics got to do with the standard of service in MRT trains? Read my views.

Rechargeable torchlight with locator - as gift for wedding anniversary

A retiree came to my office to buy 10 pieces of the rechargeable torchlight. Another person is using 50 pieces to give away to guests at his wedding anniversay party. They like the concept of the rechargeable torchlight with a locator. More details here.

India is worrying about lower demand for jobs

According to this report, India is now worrying about lower demand for jobs in the future, caused by smarter computers and increased automation.

In my view, there is no need to worry about reduced demand for workers due to technological advances. The solution - everybody work shorter work week and have the available jobs shared among the people who needs to work.

Broaden the tax base

One argument put forward for GST is that it broadens the tax base. Why is it necessary to broaden the tax base? What cause the tax base to be narrow anyway?

Let us start with the primary purpose of taxation. A government needs tax to pay for the cost of providing public services to the community. They are many ways to collect tax. Prior to GST, the government in Singapore collected tax from personal income tax, corporate tax, vehicle tax, worker's levy, sale of land, stamp duties, cigarette and liquox tax, betting tax, estate duty among others. The tax collected from these sources had been more than sufficient to pay for the cost of running the government, leading to large budget surplus.

Why are so many people not paying income taxes in Singapore? Here is the most likely reason. Most of them do not earn enough to meet their living expenses, due to low wages. There is really no need to ask them to pay tax, as they are already taxed indirectly through low wages and high cost of living. Why ask them to pay GST and then give them GST offset packages?

There were some arguments that some hawkers have high earnings and do not pay tax. I believe that this issue has been blown out of proportion. They are not many rich hawkers and if the government wishes to tax them, it would be quite easy to do so.

Some countries have a broader tax base because there is a high wages, and everyone can earn enough to pay their share of the tax. The countries which has a broad tax base and levy GST are also those that provide high welfare benefits (which is not the case in Singapore). They also do not have the high revenue from sale of land and vehicle tax that is levied in Singapore.

I do not understand the argument about the need to broaden the tax base or to levy tax on consumption. These are the "secondary" arguments that leave to an inefficient and wasteful system, which is called GST.

Tan Kin Lian

GST is unnecessary for Singapore

I have always considered GST to be unnecessary and unsuitable for Singapore since its introduction many years ago. Here are my reasons:

a) GST is a wasteful and inefficient method of collecting tax. It requires every transactions to be counted. Each person handles many transactions every day. It cause a lot of work for consumers, business, and tax collectors.

b) It is better to collect adequate tax using the income tax system. Collecting tax by GST adds another layer of administration.

c) Singapore already had an efficient system of collecting tax from income, property, workers levy, vehicle taxes (ERP, COE) and land premiums. There is no need for GST as the government already collected sufficient tax for its needs.

d) Singapore does not spend much on social welfare. There is no need to collect GST to fund the government expenses, unlike other countries that have high welfare benefits.

e) Introducing GST to reduce corporate and personal tax is a bad strategy to attract high income people to move their tax base to Singapore. It takes tax away from other countries and will cause them to retaliate.

f) Giving GST offset to low income people to compensate for GST on essential products is creating unnecessary work and confusion.

The accountants and bureaucrats like GST because it means more business and jobs for them. But this wastefulness has to be paid by the rest of the economy, and in the higher cost of living and a more stressful life.

I understand that Hong Kong does not need to introduce GST. Like Singapore, the government collects sufficient revenue from land sales.

I spoke to a businessman recently. His family had developed a large distribution business in Singapore for over 40 years. They scaled down their operation recently and moved to another Asean country. One of the contributing factor is that GST has made Singapore uncompetitive as a shopping destination.

I know that the Government will not remove GST. But I will still like to point out that it was a mistake for Singapore to introduce GST (and reduce income tax) in the first place. It is one factor that led to our economic decline.

Tan Kin Lian

From Wikipedia - GST in Hong Kong
Goods and Services Tax (GST) was a proposed Value Added Tax in Hong Kong. Consultation over a period of nine months was launched on 2006-07-19 and stirred considerable controversy.

It launched a fierce debate amongst local taxpayers, lawmakers, journalists, politicians, who hotly debated the need for the tax, and the shape any taxes should take. The plan to levy GST was dropped on 2006-12-05.

Cost of Borrowing

Here is a chapter from my book TKL Financial Planning. It advises young people to build up some savings and avoid spending on credit cards,which carry a high rate of interest.

Wednesday, November 04, 2009

Rountable on social and political issues

I had a roundtable discussion with three young people about social and political issues in Singapore. We started with different perspectives and managed to find common ground on the following issues:

a) Educate people about the values of honesty, fairness and public service
b) Tell consumers about their rights under the Consumer Protection and Fair Trading Act and the Unfair Contracts Act
c) The slogan "cheaper, better and faster" is not good and not fair for workers
d) Media to reflect honest and diverse views
e) The standard of business ethics in Singapore is rather bad
f) Singaporeans need to improve our social behavior

Congested roads and lost productivity

The traffic situation in many roads in Singapore has become as bad as Jakarta or Kuala Lumpur. Read my views here.

Insuring your risks

Here is a chapter from my book - TKL Financial Planning. It covers the risks that should be insured with low cost insurance, i.e. not tied to any savings plan.

Health care system in Taiwan

Taiwan studied the health care system of 6 countries (including Singapore) and decided to adopt the single payor system in Canada. Their system has proved to be quite successful. Read this report.

Tuesday, November 03, 2009

Bubble in property market

Singapore homebuyers leave blank cheques with brokers.

Help small business hire again

The key to economic recovery is employment and creating new jobs, especially by small business.

TKL Financial Planning

Someone asked about buying the TKL Financial Planning book. It will be ready by January 2010. It may be available early in PDF copy at the internet shop ( You can get a free copy of draft 6a of this book (90 pages) here.

I am selling some PDF versions of my intelligence quiz and sudoku books. They can also be found at the internet shop. The price is $4 per volume (compared to $7.90 for the printed book).

Patient voices and insurance

Even with insurance, you may not be adequately covered. Read this article.

Term Insurance for 25 years

Here are some tips for buying term insurance:

a) Buy a term insurance for 25 years. You need insurance protection for this period. After this period, you do not need life insurance protection any more, as your children would have grown up and can take care of their own financial needs.

b) Even if your children still depends on you financially, you would have accumulated sufficient savings during the 25 years (provided that you invest in the right products that give you a fair return).

c) Buy a term insurance to cover 5 to 7 years of your earnings. If your earnings is $40,000 a year, you will need $250,000 (say).

d) If you wish to reduce the premium, you can choose a decreasing term insurance (where the sum assured reduces yearly over 25 years). Alternatively, you can buy an income benefit that pays 50% of your earnings over the remaining years.

You can read these examples in my book TKL Financial Planning.

To recap: at the end of 25 years, you do not need any life insurance cover. If you still have a housing loan, you can cover it separately under a mortgage insurance policy. Do not allow an agent to frighten you into buying a whole life policy, with the argument that you will not have any cover after the term insurance expires.

Tan Kin Lian

Exchange traded fund (ETF)

There are many exchange traded funds (ETF) that are being marketed in SGX. The advantages of an ETF are:

a) It is a fund comprising of many underlying shares, i.e. provide diversification
b) It is invested to mirror a market index
c) The management fees are low
d) It can be traded at any time through the exchange

A good example of a ETF is the StateStreet Tracker fund, which is listed as STI ETF. It has an annual management fee of only 0.3%.

The annual fee for ETFs ranges from 0.2% to 1% depending on the fund manager. The ETF that are invested in China or India are likely to have higher fee.

If you buy a ETF, you pay a brokerage of around 0.3% plus GST and other charges. It can amount to 0.4%.

The annual management fee of a ETF is lower than an actively managed unit trust. For the unit trust, the manager will try to outperform the market. But, according to independent studies, most active fund managers had not been able to outperform the market, in spite of their higher fees. It is better to invest in a passively managed fund that mirrors the market, i.e. an indexed fund or ETF.

Tan Kin Lian

Freedom of the press

A new law is being passed to protect journalists about the confidentiality of their sources.

Rainmakers in Wall Street

Who are the rain makers? Why are they paid so much? Read this article.

Democracy as practiced in China

Read some views here.

Singapore's public transport lags behind Hong Kong

Read this letter.

Investing in Life Insurance

Here is a chapter from my book entitled TKL Financial Planning. It covers the key points to look for when you want to invest in a life insurance policy. You have to check the effect of deduction, distribution cost and break-even point to look for a policy that gives you a fairly satisfactory return. Most policies in the market give a poor return to policyholders.

Monday, November 02, 2009

Too big to fail

During the global financial crisis, the regulators discovered the danger of having banks that are too big to fail. The collapse of a large bank would cause other financial institutions to fail, leading to a total collapse of the entire financial system. This is described as "systemic risk".

If this is so dangerous, why did the regulators allowed and encouraged the consolidation of banks in the first place? Even in Singapore, the local banks were forced to merge to become bigger banks.

If I remember the reasoning at that time, it was argued that large banks would be financially stronger and would be able to compete more effectively with other large banks to lower cost for consumers.

But this did not turn out to be the case. The consolidation of banks actually reduced competition and allowed banks to run a cartel to increase banking fees. The large investment banks, provided funds for mergers, acquisations and caused the asset bubble to grow. They made billions of dollars of profits in these "good years".

The lessons are now learnt, but rather late and at great cost to the world economy. The asset bubble grew to be so inflated that it had to find its correct level. This caused the near collapse of the financial institutions. Being "too big to fail", the banks had to be bailed out by the governments.

Going forward, what is a better approach? Smaller banks? More banks?

Tan Kin Lian

Start a Financial Plan

Here is another chapter from my book - TKL Financial Planning. It gives advice on starting a financial plan.

Loyalty and National Service

There are many "loyal" Singaporeans who support the need for National Service. I do not know if they have sons that are about to enter full time NS and have to compete with new citizens for jobs later.

I am also loyal to Singapore and support National Service. But I like it to be done in a manner that is fair to our male citizens. Read my letter to the Straits Times that was not published.

I also wish to ask our "loyal" Singaporeans to read this article by Seah Cheang Nee.

Better, faster and more

Someone asked my views about the slogan "cheaper, better and faster" to ensure that the workers in Singapore will continue to have jobs in the competitive global environment.

My first thought was, "this is an innovative slogan". However, on further analysis, I am worried about this slogan. If our workers can be cheaper, better and faster, surely this will lead to more profits. Will the workers have any share in this profit? But the slogan said that the workers will be "cheaper", i.e. earn less.

I think that the slogan should be "better, faster and more". "More" means that the workers can earn more by helping to produce the increased profits when they are "better and faster".

I also believe that there should be a balance between "working harder" and "have a better quality of life". There is no point in working too hard at the expense of health and family.

Tan Kin Lian

Fourth generation leaders

I am disappointed to read that the Prime Minister is searching for a fourth generation team to lead Singapore into the future. Surely the people of Singapore should have a say in this matter?

I think that it is better for a team to be honestly tested in the real life situation and be accepted by the people, rather than to be selected by the current leaders.

The system adopted in many democratic countries offer a better choice of leaders, and a better bond between the leaders and the people.

On a positive note, I am encouraged by the statements of the Prime Minister addressing the concern of the people about the high cost of HDB flats and the high cost of living. I hope that this will be followed some change of policy in these two important aspects of our life.

Tan Kin Lian

Gender of a computer

Read this story.

Improve the last mile in public transport

A short version of this letter was printed in the Straits Times.

Super Sudoku

I have created many very difficult puzzles, which I am naming as Super Sudoku. They are meant for the Sudoku experts. Each puzzle will take an expert more than 30 minutes to solve manually, without the aim of automated solvers.

Here are samples of these puzzles. Take my challenge and see if you can solve them within 30 minutes.

If you like these puzzles, you can order the PDF copy of my books at only $4 per volume. Each book contains 128 puzzles. You can buy a complete set of 4 volumes at $12 only. You will be given the PDF copy and will be allowed to print one copy only.

Sunday, November 01, 2009

Observation by David Cherbronnier

David Cherbonnier has made some insightful comments about what is needed to put things right in Singapore. Read his comments here.

Dependent adults - victims or spoiled brats?

Read this article.

And here is my view. They are the results of the failed capitalism and false prosperity (build on asset bubbles) of the past two decades.

Asset prices went up too high. The current generation is affluent. But the next generation cannot afford these prices. And their earnings will be low - due to globalisation, international competition and other reasons. So, they have to depend on the generosity of their parents.

They are not spoiled brats. They are placed in an unfair world. This is largely the fault of the previous generation.

Need to put things right in Singapore

Senior Minister Goh Chok Tong paid a visit to his ancestral village in China. An astute observer commented that the visit was intended to show that Singapore is a nation of immigrants and that the local people should welcome the new immigrants from China, India and other countries.

My late father came to Singapore from China 70 years ago. I also visited my ancestral village 20 years ago. I understand the sentiment.

I now have many friends who are recent immigrants into Singapore. I support and welcome their decision to make their future and home in Singapore.

But, I have to say these words on behalf of the local Singaporeans who appeared to be resentful of the competition for jobs, homes and space from new immigrants.

There are many things that need to be put right in Singapore. We are seeing the consequences of many decades of the policy of the current Government. They include:

a) A declining birth rate causing by the insecurity and unsatisfactory quality of life in Singapore
b) The burden of National Service faced by male Singaporeans, including competing for jobs
c) The loss of trust in our commercial and government institutions
d) An unjust society; the small people being treated unfairly
e) The loss of pride in being Singaporeans

Some of these issues have been voiced by many people, including me, over the past years. We need to address them and put things right, so that there is greater unity and cohesion among the people of Singapore. If we are confident and strong as a people, we will be able to welcome the new immigrants and help to integrate them into our Singapore society.

Tan Kin Lian

If you wish to give your honest views, please sign off your comment will your real name - so that it carries more weight.

SCMP:SFC seeks to regulate minibonds

31 Oct 2009

A major regulatory loophole exposed by the Lehman Brothers minibond fiasco is to be plugged under a Securities and Futures Commission proposal that will require all structured products sold to the public to be regulated by it.

Although the SFC is responsible for authorising all mutual fund products, it does not cover structured products such as the minibonds issued or guaranteed by Lehman.

After Lehman's collapse last year, these products became worthless, sparking more than 21,000 investor complaints to the SFC and the Hong Kong Monetary Authority.

Minibonds are not corporate bonds, but risky credit-linked notes that were not subject to SFC regulation because under the law, structured products such as minibonds are classed as debentures and fall under the Companies Ordinance.

The SFC yesterday proposed to plug the loophole by changing the law to transfer the regulation of public offerings of structured products in the form of debentures from the Companies Ordinance to the Securities and Futures Ordinance.

So, unless an exemption applies, unlisted structured products, their offering documents and marketing materials will have to be authorised under the SFO before being offered to the public.

"This will allow the SFC greater flexibility to regulate public offers of unlisted structured products by setting out appropriate standards in the new code on unlisted structured products," the SFC said.

The consultation will last two months.

Legislator Chim Pui-chung, who represents the financial services sector, said it was a move in the right direction. "After this proposed law change, the SFC will have the power to regulate these products. This is a good first step but it cannot solve all the problems," he said.

"The SFC will also need to set tough disclosure standards to require investment banks issuing structured products to disclose all the risks to investors.

"All salespeople must also behave themselves by not mis-selling the products. Otherwise, it still may not prevent a repetition of the minibond fiasco."

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