Monday, April 18, 2011

About Time To Come Clean

It was Workers' Party's Low Thia Khiang who first pointed out that profits from land sales for construction of HDB flats end up at the Singapore Land Authority. The money from land sales on long lease is not included as part of the budget for current government spending, but goes into the mysterious reserves of the balance sheet, Low cited a previous official reply in Parliament, the black box that President Ong Teng Cheong was not allowed to query.

On Saturday, Mah Bow Tan explained the mechanism in play, “This is because all land is sold at prices set by the Chief Valuer, and the land sale proceeds go into the reserves. When he says that I’m going to finance this by lowering the value of land, basically what he’s doing is taking money from the reserves. It is not a matter of left pocket to right pocket, it’s a matter of taking, dipping into the reserves.” The administration of these national reserves remain opaque except to some undisclosed individuals.

The prices set by the Chief Valuer are presumably at or close to market rates. This was a precedent set by Dhanabalan when he was Minister of National Development, using his perverse logic that land allocated for public housing could have been easily sold to the private sector for pure profit, the difference representing a market opportunity cost. This is a far departure from Lim Kim San's original noble mission of providing affordable housing for the masses, with land acquired at zero or nominal cost.

The question that arises from Mah's revelation is where the profit for the land sales is posted. As it appears, HDB is made to look like paying a high cost for land, with the huge profits shelved to SLA, the large sums of which must be mighty tempting for its officers, especially those with a predilection for fast cars. Either way, if the effect is to boost the GDP statistic, we can see where the slippery road leads. As Ministers are paid a bonus pegged to the GDP number (8 months if the GDP grows by 10% or more), they have a vested interest to make this figure look good.

While the analogy may not be perfect, the games accountants play have a horrific parallel in corporate history.

The collapse of Enron was due to the finagling of Chief Financial Officer Andrew Fastow who used mark-to-market accounting whereby anticipated future profits were tabulated as if real today. An accounting entry referred to as Special Purpose Entity (the black box, a term CEO Jeffrey Skilling himself admitted) was devised to misrepresent earnings and modify the balance sheet to portray a favorable depiction of its performance. The artificial earnings boosted share prices, translated into bonus payouts for its directors and executives. Enron's shareholders lost $74 billion in the 4 years before the company's ultimate bankruptcy.

When Wall Street Analyst Richard Grubman complained that Enron was the only company that could not release a balance sheet along with its earnings statements, Skilling had replied "Well, thank you very much, we appreciate that . . . asshole." ("Conspiracy Of Fools: A True Story", Kurt Eichenwald). It is imperative, for the sake of the people and the nation, that HDB's books be opened for public scrutiny. The alternative is just too ugly to contemplate. The only upside is that a Minister could move to Changi Prison.


  1. hmm...the black box. Tan did not say who can view the black box's record. At least we all knew that even our great former President Ong Teng Cheong was not allowed to query.

    Beside LTA who else is task to look into our land issue? What about URA? I have the impression that URA has nothing to do with out government but lately I discovered that URA is related to our government. Am I right to say so?

  2. Perhaps the 4 million dollar prata man can press MBT to answer. Isn't he paid to do this kind of thngs?

  3. In any corporation whether big or small, there will always be some playing the good guy and some will turn out to be the bad guys afterall.

    Our former President reminds me of the good guy played by Clint Eastwood in the movie "The Good, the Bad and the Ugly". Who do you think would be excellent for acting as "the Bad and the Ugly" guys ?

    I suppose the horse and the dogs can play excellent supporting roles if they are cast in movies like "The Fall Guy" or "For a Few Dollars More". Otherwise why would the Bad and the Ugly guys pay so much just for using the party animals.

  4. Due to the escalating price of HDB flats, buyers are taking longer (25-30yrs) and bigger mortgage loans to ensure that their monthly instalment remains manageable, which means that they are in debt throughout their working lives. Is this the way the govt grow our reserves through the heavy debt burden of the people? The government always tell the people that the two sovereign wealth funds are there to grow our reserves through investment. Now with MBT's revelation, since when did they start to use citizen's debt to keep the country's reserves afloat?

  5. I personally think that it is the white or black cat issue.

  6. When Jeff was a Harvard student was asked if involved in a company that manufactured potentially harmful products, what would he do? He said he would keep making and selling them. His job is to be a profit center and maximize return to the shareholders. It's the government's job to step in if a product is dangerous. Years later, when he became CEO, whistleblowers, with good intentions to point out to this emperor with no clothes had either their duties reduced or transferred. All challenges were thwarted and finally the protesting stopped. That included against employee making inflammatory statements about Enron executives. Mind you, Respect/Integrity/Excellence were the org ethos. In practice, it can only be good news, not bad. What followed is a systemic unaccountability that led to its failure, and the rest is history.

    Today, the WorldBank ranked SG lowest in its Voice & Accountability in a WW Governance Indicators. In fact, its citizens indicators has deteriorated in a decade from 60% to 50% to 35% over the period 1998/2004/2009; behind Taiwan, Korea, HK, Indonesia & Thailand.

    Remember the Lehman minibonds? Well, the government said “It’s the investors job to evaluate the risk in the products”. Hopefully, we didn’t have to hear on hindsight someday about “It’s the voters job to give us the mandate to govern”.

    Far better to come forward to a first world check & balances than a buyers remorse later. After all, is about risk management.

  7. Agree with 12:49.
    It is only prudent on our part to ask ruling party who is today our government, to come clean about the vast reserves, its usage, how much is enough, and all that purported complexity MBT likes to hide behind HDB matrix. We the citizens owe it to ourselves to ensure we are all securing our future together!! All that tone-deaf by PAP so far is hardly any display of its own manifesto "Sustain our collective will to safeguard the nation’s security and preserve what we have built up together" .

  8. Isn't it is obvious the money from land sales go into reserve and endup in the Lee's family for Hojinx's Temasek Holding and PapaLee's GIC for gambling in disastrous investment fiasco ? How else can we have lost $100 billions ?

    $100,000,000,000 . This is the ridiculous amount that is lost and only in this country can our govt lost so much money and still reign arrogance, mocking citizens for been daft, and give themselves million salary increment. SinCity must be a very perverse city .

  9. I remember when OTC's opponent for President was Auditor General. The "establishment" was very careful not to have this ex-AG win. I was originally asked to help in the election hustlings. We prepared posters, decals, flyers etc but was told later in the piece that the "establishment" did not allow us to use them. I remember that despite not doing much for the hustlings,it was an extremely close fight and the "establishment" asked for a recount to ensure that they won. Didn't occur to me then, but now thinking back, it would have been bad for an ex-AG to be President as he would have been able to get his figures and perhaps asked embarrassing questions. I wonder, why is it that this city allows such public information to be non-transparent. What is there to be afraid of? What are they trying to hide? Are public servants not serving the people but rather public masters?

  10. I think someone should tell the tunnel vision MG Chan that a country can also go kaput due to internal complacency shrouded in mystery or secrets in an opaque system where only 1-3 people have access to, before falsely rallying its people to chase after ghost shadows.


  12. Just a reminder that one past Minister of MND we were told did the "honourable thing" as a Oriental gentleman ...

  13. looks like Teh Cheang Wan died in vain. whatever Teh CW took for himself, HDB flats were at least still affordable during his tenure

    fast forward and we see HDB flats costing an arm and a leg under Mah BT, despite Mah being paid millions of $$

    Mah BT really ought to do the honourable thing and swallow like Teh CW...sporeans should be allowed to sponsor the dosage for Mah.

  14. I doubt even insiders like MBT and SR Nathan know the true size and extend of the reserve. The only people who have the complete knowledge of the reserve are the Lee's.

    How can a country be run like a private affair? This opacity is worse than the Philippines under Marcos and Indonesia under Suharto.

    Perhaps the only way to get to the bottom of this is the change of government. Then hopefully we will get a FULL accounting of the reserve in the past half century.

  15. I suppose that's why LKY will never give up power until his last breath.

  16. HDB is running a profiteering scam as a monopoly to sell us OVERPRICED public flats. HDB flats are PUBLIC flats because the land rights are NOT sold or leased to us. We are only leasing the rights to the apartment ONLY. Read your HDB Agreement For Lease document to clear all doubts. Any and every lawyer in Singapore will also not dispute this fact.

    So when HDB says land costs are high, it is bullshit and a distraction — that expensive land is NOT sold to us, and still belongs to HDB. All that HDB should do is to charge us the construction cost of the HDB flats and to cover the cost of operating HDB — staff costs, services and admin costs etc. It is definitely not $300K to $400K for a new flat direct from HDB.

    Please check out for govt tenders including HDB. I list down the most recent 4 HDB tenders that has been awarded for public flats below:-

    Award Date: 30 Mar 2011
    Tender : HDB000ETT10000496
    Tender Ref. No.: HDB000/10DPQ01
    Description: Part A – Building Works At Punggol West Contract 20 (Total 1072 Dwelling Units); Part B – Contingency Works
    Award Price: SGD 192,225,000
    Average Cost Per Unit: SGD 179,314

    Award Date: 23 Mar 2011
    Tender: HDB000ETT10000457
    Tender Ref. No.: HDB000/10DP071
    Description: Part A – Building Works At Bukit Panjang Neighbourhood 6 Contract 10 (Total 741 Dwelling Units); Part B – Contingency Works
    Award Price: SGD 102,880,000
    Average Cost Per Unit: SGD 138,839

    Award Date: 21 Mar 2011
    Tender: HDB000ETT10000443
    Tender Ref. No.: HDB000/10DP069
    Description: Part A – Building Works At Jurong West Neighbourhood 1 Contract 30 (Total 465 Dwelling Units); Part B – Contingency Works
    Awarded To: Jian Huang Construction Co Pte Ltd
    Award Price: SGD 51,500,000
    Average Cost Per Unit: SGD 110,752

    Award Date: 28 Feb 2011
    Tender: HDB000ETT10000418
    Tender Ref. No.: HDB000/10DP065
    Description: Part A – Building Works At Sengkang Neighbourhood 4 Contract 11 (Total 504 Dwelling Units); Part B – Contingency Works
    Award Price: SGD 72,000,000
    Average Cost Per Unit: SGD 142,857

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  19. @ Amused,
    There is something which adds to the mystique about our reserves and how much there is in it. When the current incumbent PM said that the aid given to citizens during the Great recession in 2009 was part of what was taken from the reserves and that once the Recession is over, we would have to save again to safeguard our future as a country...this leaves many with this question of how much our national reserves really are. Canada, the USA and various other countries in the world are quite forthright about their reserves and national debt situation, and also, seem to thrive even with this transparency. I honestly do not know if it is a good statement to even make in such a situation, because at times, some have questioned the real nature of the national reserves, as to whether they are depleted or whether it is just rhetorical posturing.

  20. 50 years have passed and we do not know how much we have saved in our reserve. The question we need to ask is "should we continue in this state?"