Monday, 27 November 2017

While China is transferring money to pension fund, our PAP wants to increase taxes.




The Ministry of Finance in China is to start transferring shares in State-Owned-Enterprises to pension fund for social security.  According to Caixin,

[A (China) Ministry of Finance document said that the move "demonstrates that state-owned companies are owned by all people and should benefit all people."]

China Daily adds that “the move will ensure the sustainable development of the country’s basic pension insurance system.” It can also improve the efficiency of SOEs.
Currently, there are more than 200 million people aged above 60 in China. And there is a shortfall in pension fund, especially in poor provinces and bankrupted state companies..

[Taxes as solutions in Singapore]

While in Singapore, the People’s Action Party government is going to increase taxes. Here are some the headlines:

Singapore to raise taxes as govt spending increases

No contradiction between PM Lee and DPM Tharman on taxes: MOF

As Singapore’s spending needs grow, raising taxes is inevitable: PM Lee


The PAP government says infrastructure investment and social spending are to increase, so do the taxes. Of course, they know how to divide social spending and Central Provident Fund which is the responsibility of individual members or family members. And so, the PAP is only helping citizens indirectly.

[Top up and transfer]

Many CPF members, especially senior citizens (they have low wages when the economy is booming), are not able to meet CPF minimum sum for retirement. Occasionally, the PAP will help to top up the MMS and Medisave.  However, most of time, they want family members to help to top-up CPF savings.

Indirectly, in case of need, mean testing is used to assess whether social welfare can be extended.

This means the country’s wealth is distributed according to PAP’s wish list.

While in China, the new policy will put money directly into the pension fund. This extra funding or top-up will provide additional money to pensioners.   
(state-owned companies are owned by all people and should benefit all people.)

[Temasek, GIC - doing right politically or financially?]

As a start, China will transfer un-listed SOE shares into pension fund. On average, the shares can generate 5% dividend which can then support the pension fund payouts.

This means if the PAP government is kind enough, some percentage of Temasek and GIC shares will go into CPF Board. These shares will generate dividends to support all, especially poor CPF members.

While we going doing the opposite. We are changing the phrase from:

(state-owned companies are owned by all people and should benefit all people.)


To:

(state-owned companies are owned by PAP all people and should benefit PAP all people.)


[Efficiency and transparency]

In an interesting and strange Financial Times report:

China rejects Singapore model for state-owned enterprise reform



FT seems to suggest Temasek model is for efficiency rather than politics: Singapore’s Temasek holds stakes in domestic and foreign companies and is known for making decisions based purely on financial considerations.

While FT claims that “Use of holding companies, a model based on that of Singaporean wealth fund Temasek, had been seen as a middle way between the privatisation of SOEs and the current system, in which top managers are approved by the Communist party and often put politics ahead of commercial considerations.”

As a Singaporean, FT is either too kind to the PAP or does not fully understand the transparency and accountability issue surrounding Temasek, GIC and Singapore reserve.

If Temasek is efficient as FT claimed, then she should report all financial information in a transparent and accountable way.

While we may laughing at Chinese SOEs which are always politics first. However, when the government is transferring SOE shares to pension fund, it means all Chinese pensioners are watching the operations of their shares in related SOEs. These “hungry” Chinese senior citizens are very different from our CPF members.

Comparing to Singapore, CPF members have no say in the operation of Temasek, GIC and our reserve. Which is the better offer?   

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