Saturday, October 30, 2004

What working women want 

The Straits Times reports that only one out of two women in Singapore works. Excerpt:

Only 1 woman in 2 here works
When it comes to being family-friendly, Singapore firms lag behind those in developed countries. One indication is the lower number of working women here as more of them tend to quit their jobs after they have children. Only 54 per cent of women in Singapore work, compared to 80 per cent in Norway, 73 per cent in Finland and 609 per cent in the United States.

This led Dr Vivian Balakrishnan, Acting Minister for Community Development, Youth and Sports, to renew a call to firms here to develop a pro-family culture so they can attract and retain employees... [A]t a seminar...to discuss family-friendly work practices yesterday...there was no lack of role models to learn from as Norwegian and Singaporean firms shared how they strike a balance between work and family life by doing a variety of means. These include allowing employees to work from home, taking time off to care for children or work flexible hours...

For Norway, its slew of family-friendly policies such as 10-month maternity leave and 10-day childcare leave, as well as an entrenched flexible work culture, have paid off. Employees are more productive — not only at work but also in childbearing as fertility rates have risen.

However...Dr Balakrishnan noted the Republic has chosen not to use legislation to get companies to be more family-friendly. “We do not want to introduce excessive rigidities to our labour laws and hence affect the flexibility of our labour market,” he explained...
Some people say that in Singapore, you either work 110 percent or you don’t work at all. Hardly a conducive working environment for mothers.

I can understand why the government is not using legislation to enforce family-friendly practices at the work-place. Apart from introducing rigidities and distorting the labour market, legislation also creates administrative hassle and, unfortunately, also often don’t work. In some companies, demanding bosses will discriminate against employees who choose schemes like work-from-home, flexible hours and extended leave when it comes to promotions, bonuses and raises. As the Norwegians noted, culture counts.

Having said that, many other companies are not offering such schemes only because of inertia. Legislation can make a positive difference in such companies. The government should not write off legislation as a solution.

Wednesday, October 27, 2004

Guidelines on switching of investment products 

The MAS has issued new guidelines to protect investors dealing with financial advisers. Excerpt from the news report:

MAS issues guidelines on switching to protect investors
The Monetary Authority of Singapore has issued guidelines on the switching of designated investment products. The guidelines broadly aim to protect investors...

The MAS guidelines will ensure that financial advisers put in controls, processes and procedures that deter undesirable switching activities. They also include disclosure requirements to ensure that consumers are fully informed of the costs and implications of switching.

The guidelines recommend that financial advisers structure remuneration packages that reward representatives who provide professional advice to consumers...
The fact is that at present, most financial advisers in Singapore remain little more than insurance and unit trust salesmen, with the emphasis on selling rather than advising. Until financial advisory firms restructure the remuneration packages for their advisers, this will remain a problem, the new guidelines notwithstanding.

Caveat emptor.

Friday, October 22, 2004

GIC staff fined for insider trading 

Singapore’s businessmen and officials have often been accused of being slow and excessively rule-bound. This incident may give some people hope, while making some others give up. Excerpt of news report:

GIC trio fined $715,000 by MAS
In its first such move, the Monetary Authority of Singapore (MAS) has taken civil penalty action against three Government of Singapore Investment Corporation (GIC) employees for insider trading involving Japanese shares, fining the individuals a total of $715,000. The trio...had used confidential price-sensitive information in February last year concerning a proposed offering of shares by Japan's Sumitomo Mitsui Financial Group (SMFG).

By selling the shares before SMFG made the announcement, they avoided a loss of about $710,000 for GIC. The “gains” — which GIC has volunteered to give to MAS — were not pocketed by the three employees, said the regulator in a statement yesterday...

The trio have admitted to the misconduct... In a statement, GIC said it has “severely reprimanded” the trio in writing, after considering the hefty fines borne personally by them, and the fact that “they had not personally benefited from the transactions”. They remained employed by the Singapore investment giant. However, it has “warned them that future infractions will not be tolerated”.
GIC appears to have been rather lenient in allowing the three to continue to work in the company. No doubt, the reaction would have been quite different if it had not “benefited” from the illegal action.

Nevertheless, if the trio continue to deal for GIC, I can’t help wondering whether it will affect confidence in the company.

Thursday, October 21, 2004

Cable TV prices to go up 

Bad news for Singapore’s cable TV subscribers: StarHub is raising prices. Excerpt of the report:

Singapore’s StarHub Raises Cable TV Prices
StarHub Ltd., Singapore’s monopoly cable-television operator, said Thursday it will raise prices from next month, a week after investors panned the loss-making company’s initial public offering. StarHub will from Nov. 3 charge S$15.75 per month for three sports channels, nearly double the current S$8.40 price. Because of this, various StarHub packages that include the sports channels will cost more — some as much as 17%...

StarHub said the hike is “inevitable” as the cost of sports programs has “skyrocketed” in recent years. A StarHub spokesman didn’t say how much more revenue the rate increase will generate, nor what percentage of its 393,000 subscribers get the sports channels...its cable-television operation has been loss-making. Just 36% of Singapore’s 1 million households have cable-TV, too few on current monthly spending patterns for it to make money...

StarHub has dropped 5% since its 95 cents-a-share IPO debut on Oct. 13. Some investors worry StarHub's capital-intensive cable-TV business isn't generating enough revenue to be profitable, placing more pressure on its profitable mobile-phone business to deliver revenue growth in a saturated market.
Coming on the back of the merger between MediaWorks and MediaCorp TV — and with it, the likely closure of Channel i — this is obviously not good news for television viewers, especially sports fans.

Monday, October 18, 2004

Presidential parody 

Janadas Devan writes some rather sharp opinion pieces for The Straits Times. Today’s article parodying the presidential debate in the United States shows he can inject some humour into his writing as well.

In the article, he calls President George W. Bush Tweedledum and Senator John F. Kerry Tweedledee. On the question of cutting the budget deficit, he had Tweedledum give this proposal:

Tweedledum: Cut taxes. Tax revenue is not the government’s money. It belongs to taxpayers.

My opponent has a different philosophy. He believes the government should raise taxes and spend the money. I believe the government should return to taxpayers money the government doesn’t have, and spend Japanese, Chinese, European and Arab money instead.

My opponent calls me a unilateralist. That’s not true. My fiscal policy is more multilateralist than even Ronald Reagan’s was. It is more multilateralist than even my Daddy’s. Daddy and Reagan, after all, were a little ashamed of their deficits and raised taxes. I have no shame.
On the question of over-stretched US forces around the world, he had Tweedledee give this response:

Tweedledee: I have a plan. I’ll begin withdrawing US forces from Iraq within six months of taking office. I’ll train reluctant Iraqis to fight a war we started. And I’ll call a summit and get the French and Germans to join the fight.

A Tweedledee administration will stop outsourcing jobs and begin outsourcing national security.

Ask not what your country can do for you; ask what other countries can do for your country.
I wonder whether he’ll ever get around to giving Singapore politics the same treatment in The Straits Times.

Saturday, October 16, 2004

MOE on the PSLE Science paper 

After receiving a number of complaints regarding the difficulty of this year’s Science paper in the Primary School Leaving Examination (PSLE), the Ministry of Education has responded with its explanation, which was reported in The Straits Times today:

This year’s batch was the first tested on the revamped Science syllabus introduced in 2001, but there was no change in the format and type of questions, or in the balance between easy and difficult. All questions were based on what was in the syllabus, said the ministry and the Singapore Examinations and Assessment Board, which jointly set the PSLE papers... All questions were a mix of those which tested students on facts, as well as those which required them to apply basic scientific concepts to solve problems.

The Straits Times put questions to the ministry after getting many calls and letters from parents and teachers who felt the paper was exceptionally tough this year. They said questions were phrased in a tricky way and required excessive analyses of data. Worse, they charged, some questions went outside the Primary 6 syllabus... Many pupils...were unable to complete the paper, with some reduced to tears.

But an exams board spokesman said it was not sure what had caused the hue and cry. The science paper contained questions to test thinking and process skills, and they should have been accessible to pupils with a good grasp of scientific concepts... Many teachers had attended workshops and courses on how to conduct activities that would get their pupils to investigate and analyse science concepts...
I see three possible reasons for the hue and cry. One, of course, is that, despite the Ministry of Education’s response, the Science paper really is tougher. The second is that it was not designed to be more difficult but came through as such because pupils had not been properly prepared for it, either academically or psychologically, by their schools and parents. The third reason is that there will always be some pupils who will not perform well and out of these, some are likely to complain that the paper is too difficult.

Whatever the true reason, getting the educational system just right is never an easy task. Relatively speaking, schools in the West tend to emphasise thinking skills while those in the East tend to emphasise facts and rote learning. Singapore is trying to change from the latter to the former. Such a transformation was never likely to be easy. Apart from getting the balance right, good change management is also needed to prepare teachers, pupils and parents to smoothen the transition. Whether this is being properly done, only the ministry can answer.

And it is not just in Singapore that we have debates on education. It is also common in the United States. Just today, I stumbled on this one on the blog of J Bradford DeLong, a professor at the University of California at Berkeley.

Friday, October 15, 2004

Improving the improvement movement — Part 2 

As mentioned in an earlier post, the ExCEL committee — which promotes continuous learning and continuous improvement in the civil service — has revamped its convention and award ceremony to reduce the time, effort and cost involved in the presention and evaluation of projects.

The convention was held on Wednesday. At the convention, both ExCEL committee chairman and Second Permanent Secretary for Foreign Affairs Bilahari Kausikan and head of civil service Lim Siong Guan made exhortations to change the system. As reported in Today:

Mr Kausikan opened this year’s session by saying that though things had changed in a year, the need to constantly re-look accepted practices was crucial to growth. He added that to overhaul “the politics, the bureaucracy and unthinking procedures”, it would be necessary to get rid of “rituals” and the “numbers mentality” that engineers in the civil service are so fond of.

Civil service chief, Mr Lim Siong, echoed the call. Specifically, Mr Lim blasted managers and supervisors who say “Just give me the numbers, I don’t care how you do it,” and thereby “reduce the system to a numbers game”. Criticising such leaders, he added: “The perception that there is a ‘numbers game’ is a manifestation of poverty in leadership and communication. We have made ourselves slaves to our rules.” Mr Lim asked civil servants to get used to constant change in order to be nimble, adding that the “unquestioning” need not apply.
I agree that the management and transformation of organisations is more than just a matter of “numbers”. On the other hand, there is a management adage: What gets measured, gets done. Maybe the problem with the ExCEL movement is not so much that people are looking at numbers but that they are not looking at the right numbers.

People’s behaviour within an organisation is usually influenced by the system under which the organisation operates. This system, in turn, is — or at least should be — the product of top management thinking and direction. Therefore, when senior management within the civil service complain about the behaviour of their civil servants — accusing them of poor leadership and communication — they risk opening to question the effectiveness of their own leadership.

Having said that, I think the increasing openness of the civil service and its growing recognition of its shortcomings — manifested in self-criticism, both internal and public — is a good thing and should be encouraged.

Tuesday, October 12, 2004

Learning how to learn the Chinese language 

During Prime Minister Lee Hsien Loong's National Day Rally speech, he had indicated an intention to change the way the Chinese language is taught in schools. Yesterday, the Singapore government unveiled a little more of its plans.

Chinese language review proposals to be debated in Parliament in Nov
The learning of Chinese in schools is all set to change — from cutting down the number of characters students have to rote learn for examinations to even plans to teach Chinese as a first language for some lower Primary students.

A high level committee presented these proposals to make Chinese more relevant to Singapore students at a dialogue on Monday. The dialogue was chaired by Minister Mentor Lee Kuan Yew who gathered feedback from Chinese community leaders before the plans are put into a White Paper for Parliamentary debate in November...

The key is to give parents choice, and not to force children to try to master two languages to equal ability — which Mr Lee says he now acknowledges is not possible.

Educators acknowledge that what is urgently required is to reform the way the language is now taught — so that children find it easier and more relevant to study the language... Other changes proposed by the committee include a more flexible and modular system for the Chinese curriculum. There will also be more emphasis on listening, character recognition and verbal skills rather than writing skills, and more modern teaching methods. They are also expected to make a push for a greater use of IT in Chinese Language learning. Teachers would have to be retrained and recruited to meet the changing demands of Chinese language education.
Mr Lee Kuan Yew’s personal reflection was also interesting.

Mr Lee said: “My friends tell me, including Mr Lim Kim San that if my children had not become bilingual, this problem would not become so serious. Because I thought they could do it, well other people’s children should be able to do it. Even though it may not be to the same level...

“Most important is do not turn the student off, which is what we have succeeded in doing, by forcing them to achieve the standard, we have turned off one generation. Which is a great pity, they are fed up, they are forced by their parents, they are forced by their schools. They hate it. They want to have nothing more to do with it, which I think is a tragedy. I never considered that point, because I did not come across such people, but it was happening.”
The last point provides a very good reason why the composition of governments should always reflect the composition of the population as far as possible, minus of course the crooks and crackpots. Or alternatively include people who are able to empathise with the masses and minorities.

Monday, October 11, 2004

Improving the improvement movement 

The civil service is continuing on its cut-waste crusade. The following excerpt is from a report in The Straits Times.

Revamp of civil service quality drive
A civil service movement to encourage workplace innovation and service improvement has been revamped this year in response to last year's frank critique by a top civil servant.

Permanent Secretary Bilahari Kausikan, who heads the ExCEL movement, declared last year the movement had lost its way. He did so after a survey found that one in two civil servants preferred to stay away from the many Work Improvement Teams (Wits) set up to improve workplace efficiency...

Mr Kuasikan's diagnosis: Too many man-hours were wasted on elaborate preparations for the annual ExCEL convention... As a result, this year's convention...will do away with the element of competition. It will take just one day, unlike last year when it took four days for 100 judges to select 48 award winners from 400 teams.
The Singapore government has often been criticised for excessive changes. Too many changes causes cynicism among those affected and burn-out among those who have to implement them.

And yet, continuous improvement is the hallmark of great organisations. Change to eliminate waste in government is, I think, especially desirable. Furthermore, this revamp appears to be an improvement of a system designed to encourage improvement, so hopefully this change that Kausikan has kick-started will have compound effects.

Details about ExCEL and the new convention and award ceremony are available from its website.

Not everybody is so optimistic about Singapore’s civil servants. AcidFlask is off on another rant against A*STAR.

Friday, October 08, 2004

Falling coffee prices not passed on to the cuppa 

The Straits Times today reported that the price of coffee beans has fallen sharply since 1997 due to the increase in production from Vietnam. The country is now the second largest coffee exporter after Brazil.

It’s unusual to see a commodity price fall nowadays. Rising demand from China has been pushing up the prices of most commodities. Apparently, the rise in coffee-drinking in China has not made enough of an impact yet to offset the increase in coffee production.

Having said that, the graphics in The Straits Times shows that the price of a pound of coffee fell from 180.44 US cents a pound in May 1997 to a low of 41.17 US cents in September 2001, but has since climbed to 58.46 US cents in July 2004. That is an increase of 42 percent over less than three years.

The Straits Times also reported that the price of a cup of coffee in Singapore is not likely to fall soon.

Coffee shop owners and cafe chain operators interviewed say the fall in the prices of “green” or unprocessed bean, along with ground coffee, does not translate into lower retail prices for a cup of coffee. They say the cost of coffee beans makes up a very small proportion of the actual cost of the end-product... In fact, there is actually upward, rather than downward, pressure on retail prices.

Mr Hong Poh Hin, the president of the Foochow Coffee Restaurants and Bar Merchants Association,...said the price pressure came from other factors. “For coffee shop owners, a large part of our overheads comes from rental and labour costs, and these have been rising in recent years. So, despite cheaper ground coffee, our costs have been going up, and our members have been clamouring for a price increase for the past two years.”

However, according to Mr Hong, the consensus among members seems to be to keep the price of black coffee at 60 to 70 cents for now. He said: “Our customers are heartlanders, and to them, a 10-cent increase is a big deal, so for the sake of customers, we are absorbing the rise and coping with lower profit margins.”
How noble of him. The reality, of course, is that with overall inflation in Singapore still relatively low — overall consumer prices in August rose only 1.6 percent from a year ago, and this is inclusive of the increase in the goods and services tax of one percentage point — it would be difficult for coffee shops to get customers to tamely accept higher prices for their cups of coffee.

It is getting harder and harder for sellers to justify price increases by claiming inflation.

Thursday, October 07, 2004

More air links between Malaysia and Singapore? 

After the visit by Singapore Prime Minister Lee Hsien Loong to Malaysia and his discussions with Malaysian Prime Minister Abdullah Badawi, there is now a possibility of expanded air links between Malaysia and Singapore.

Golden route for all?
LONG accepted by the aviation industry as a no-fly zone for airlines other than national carriers Singapore Airlines (SIA) and Malaysia Airlines (MAS), the lucrative, high-volume Singapore to Kuala Lumpur (KL) route is now within the sights of budget airlines.

On Tuesday, during a visit to KL, Prime Minister Lee Hsien Loong spoke candidly about enhancing ties and exploring new opportunities with Malaysia. The aviation sector was cited as one area that would benefit from increased cooperation between the two countries. Said Mr Lee: "There is opportunity for the industry and for the two countries, because the more linkages between the two countries, the greater the benefits for tourism and business."... Malaysian Prime Minister Abdullah Ahmad Badawi added that his government would allow the countries' airlines to talk to each other and find ways and means to collaborate.

And by pledging to expand aviation ties, a new optimism, albeit a cautious one, is resurfacing in the fledgling low-cost carrier (LCC) market. It is no secret that Singapore-based LCCs have been eyeing Malaysia as a destination, with KL being one of the most sought after spots... Indeed, the KL to Singapore route is the fourth busiest in the region with 1.9 million passengers.
This is good news for travellers, especially if the low-cost carriers get part of the pie. The latter would not be good news, though, for the two national carriers, Malaysian Airline System (MAS) and Singapore Airlines (SIA), who would have to give up their duopoly on the route.

Anyway, MAS has other problems on its hands.

Malaysia Airlines plane grounded after wires found tampered with
A Bangkok-bound Malaysia Airlines plane was grounded Tuesday after maintenance staff found some electrical wires in the cockpit were tampered with, The Star newspaper reported Thursday. It marks the third such incident reported by the national air carrier since October last year.

The Airbus A330 plane...was due to fly to Bangkok...when the maintenance crew found the tampered wires while carrying out preflight tests just two hours before the flight time. According to the daily, the airline engineers going through the flight system found "a serious malfunction" in the flight instruments in the cockpit. A check revealed that wires under the instrument panel located under the captain's seat had been cut...

The first incident happened on Oct. 2 last year involving another A330 plane that was bound for Perth. On Nov. 26, a Boeing 777 headed for Mumbai was the second plane to be grounded.
Makes you really want to think twice before flying MAS.

Wednesday, October 06, 2004

DBS branch in Hong Kong crushes contents in “safe” deposit boxes 

DBS has gotten itself into an embarrasing spot in Hong Kong. Excerpt from a TODAYonline report:

'Accident' destroys 83 DBS (HK) safe deposit boxes
WHAT began as routine renovation work at a DBS Bank (Hong Kong) branch over the weekend has turned into a nightmare for the bank and some customers. In what DBS described as a "human error", some 83 safe deposit boxes ended up being crushed in a scrap yard, along with their contents...

The incident happened on Saturday at DBS' Mei Foo branch in Kowloon, which is undergoing renovations. The bank was phasing out its small safe deposit boxes and a contractor was supposed to remove 837 empty safe deposit boxes to a dumpsite to be destroyed. But somehow 83 boxes that were still in use were also removed from the bank vault and destroyed.

In a joint statement with Jones Lang Lasalle, the bank's property consultant and manager, DBS called the incident a "matter of great regret" and said it would honour its "ultimate responsibilities" to affected customers and compensate for what they lost... Compensation will be a complex task as renters of safe-deposit boxes don't need to declare to banks what they store in the metal boxes.
Apart from being an embarrassment for DBS, the mistake is also a potentially open-ended source of liability for the bank.

Not surprisingly, this incident is attracting quite a bit of attention in Hong Kong.

Tuesday, October 05, 2004

Medisave hassle for Singapore entrepreneur 

It looks like the Medisave top-up requirement I wrote about in a previous post is causing some problems to entrepreneurs, or at least to this one.

The Economic Development Board boasts on its website that Forbes has ranked Singapore the second best place in the world to start a business. As far as I am aware, that ranking was done in 2002. Maybe it needs to be updated.

Sunday, October 03, 2004

Education and career choices 

The Sunday Times today featured families in Singapore who sold their homes to finance their children’s education.

These families are not poor. The families featured appear to be middle-class families living on private property.

Rather, it’s that their children’s education — in overseas universities — is expensive. One couple was preparing to pay $500,000 for their daughter’s fees and other expenses to study in London.

Are such sacrifices worth it? Are the parents over-indulging their children?

I think it depends on exactly what proportion of the families’ total assets are being used. It’s not clear to me that the families featured would not be able to afford a comfortable life after financing their children’s education, since their total assets are not mentioned. It’s conceivable that the families sold their homes and moved to cheaper ones to maintain a comfortable cash buffer and not because they are actually hard up.

In fact, the couple mentioned above whose daughter will be studying in London actually sold their second home; they will continue to live in a semi-detached house. So it’s not quite the poorhouse for them.

Having said that, I hope that the families involved have really thought through their actions.

Young people, having not experienced much of life, often don’t know exactly what they want. Parents may indulge their children’s current desires to assuage a sense of guilt but it may not be the best course of action. How often have we heard stories of youths who find themselves stuck in careers that did not live up to their expectations?

Or even if they know what they would be happy with, are they aware that there may be alternatives available? Alternatives which may not tax their parents’ finances as much.

Very often, young people express their desires in terms of the university course or career that they want, for example, medicine, engineering or business. If the course or career is not available in Singapore, they look overseas.

But these courses or careers are usually not the underlying desires. These are just what they associate the underlying desires with.

For example, a person who wants to be a singer may simply want to be admired or popular. Once the latter is recognised, he or she may realise that careers like modeling or sports may be good substitutes, especially if he or she has good physical attributes that don’t quite include the vocal cords.

Similarly, a young person who grew up mesmerised by one of the charismatic national leaders like Bill Clinton or, here in Singapore, Lee Kuan Yew may be tempted to go into politics. But if it is power that he wants, he can just as well set up his own business and lord it over his employees instead.

Of course, I am by no means suggesting that young people not work toward their aspirations, or that parents should not support their children. Rather, young people should be aware what their underlying desires are and explore alternatives that exploit their strengths without placing excessive demands on attributes that they lack, including financial attributes.

And their parents, with their greater experience in life and greater understanding of the value of their hard-earned money, should help their children in deciding whether their choices are correct and whether the price paid is worth it.

Let me end with a story I remember reading many years ago.

There was this executive who was successful in his career, but his busy lifestyle made him feel highly stressed. So he decided to go to a remote monastery to learn how monks meditate and relax in the hope that this knowledge would help him cope with his job better. After a few months there, he became so comfortable with his new lifestyle that he gave up his job and took up monasticism.

An extreme example, perhaps, but never underestimate how your outlook in life can change with the right guidance.

Saturday, October 02, 2004

Taiwanese Foreign Minister hurls snot at Singapore 

Foreign Minister George Yeo’s speech at the United Nations General Assembly warning of the dangers of Taiwan’s push for independence continues to generate unhappiness.

In his speech, Mr Yeo had said that cross-strait tensions could get out of control and that the push by certain groups in Taiwan for independence could spark war with China which could drag in other countries.

Following that speech, Taiwan’s Foreign Minister Mark Chen accused Singapore of “currying favour with China”, as reported by Channel NewsAsia. “Even Singapore, a country the size of a piece of snot, can criticise Taiwan at the UN,” he told a pro-independence group. Other news agencies had more colourful translations of his remarks (see Asia Times and eTaiwanNews reports).

Now, pro-independence groups in Taiwan have burned the Singapore flag in protest.

Singapore’s Foreign Ministry has been restrained in its response to these actions. After Mr Chen's remarks, it stated: “Many other countries also believe that Taiwan is pursuing a dangerous course towards independence. Resorting to intemperate language cannot assuage these concerns.”

The problem is that in Taiwan, temperance is not the norm in politics, especially when it comes to an emotive issue like Taiwanese independence.

Singapore has gotten itself mired in a highly sensitive situation ever since then-Deputy Prime Minister Lee Hsien Loong paid a visit to Taiwan in July. After getting criticised by China over the visit, it has been trying to patch its relationship with Beijing by criticising pro-independence activism in Taiwan. Since the pro-independence movement in Taiwan is actually quite popular, the Taiwanese are obviously not going to be too happy with Singapore, hence the current imbroglio.

Singapore is in a no-win situation, in my opinion. With emotions and stakes high on both sides of the Taiwan Strait, it needs to handle the situation in a very sensitive manner. Unfortunately, sensitivity is not a trait that Singapore has a reputation for having.

Friday, October 01, 2004

MediShield reserves exceed $500 million 

The Straits Times reported today that the government-run insurance scheme MediShield has reserves of $524 million comprising both premiums collected and investment income. As a comparison, up to the end of last year, it had paid out a total of $516 million in claims. According to The Straits Times, the claims paid out each year have never exceeded the premiums collected.

In spite of this, the Health Ministry is planning to raise premiums. Financial planner Leong Sze Hian questions the need for this as, according to him, commercial insurance companies usually work on a loss ratio of over 100 percent, which means that they pay out more in claims than they collect in premiums, with profit coming from investment income.

Many would no doubt consider this as just another example of the government’s obsession with accumulating surpluses.

I wonder, though, whether the problem is really one of inadequate investment income, which then needs to be supplemented with higher premiums to meet claims.

This would be consistent with another article in The Straits Times today, which reported that ratings agency Standard & Poor’s (S&P) has claimed that the Singapore government achieves “markedly inferior” investment returns on its assets over the last five years compared with Hong Kong.

It needs to be pointed out, though, that the S&P obtained the Singapore government’s investment returns by dissecting figures in the budget statements as well as those in financial statements from the Accountant-General. This is not likely to be very accurate.

And, of course, returns from Medishield funds may differ substantially from the returns of other government funds.

Nevertheless, the fact remains that in a period of high unemployment and generally low inflation, the government needs to be sensitive to cost-of-living issues. And especially with prices that it control, it must be vigilant in ensuring that they do not rise unjustifiably.