June 22, 2017


Electronic Road Pricing (ERP) on Nicoll Highway by Dickson Phua

by Ryan Ong

SINGAPORE’S national sport is complaining about the cost of living. As far as the average Singaporean’s concerned, the entire country is basically a giant, out-of-control money-sucking machine. So with the GE coming up, I thought it might be useful to narrow down what exactly we’re complaining about. Here’s a quick look at how prices have gone up in our favourite areas of complaint:


A brief rundown on some costs

Sure, we could look at broad numbers like the Consumer Price Index, but let’s look at how prices rose in some specific areas:

  • Housing
  • Public Transport (Bus, MRT, Taxi)
  • Food
  • Healthcare

(We will look at food and healthcare in Part 2, so make sure you get your updates by liking us on Facebook, heh)


  1. Housing

Resale flats

Singapore’s resale flat prices saw a big jump between 2005 and 2015, up by almost 87 per cent. Household income growth within the same period was a little bit behind, growing by around 72 per cent.

This rapid price spike was fueled mainly by rampant Cash Over Valuation (COV), and easy access to cheap home loans. In 2011, median COV rates hit an all-time high of $36,000.

This was partly due to low interest rates (a consequence of the 2008 Global Financial Crisis), which saw a rush of property buyers who drove prices upward.

At one point the Swap Offer Rate (SOR), upon which many non-HDB home loan interest rates are based, even hit negatives. Private bank loans became even cheaper than HDB loans, and still are.

If you have a SIBOR- or SOR-based home loan from a bank, for example, you’d be paying around 1.9 per cent interest for your home loan, whereas HDB loans have been at 2.6 per cent for a while now*.

(*HDB loans are pegged at 0.1 per cent above the prevailing CPF OA rate. But please don’t read this and imagine we’ve given you some kind of financial cheat code. Historical interest rates for private bank loans are around 4 per cent, and they can climb back up. In fact, the threat of rising interest rates is now a cost of living concern for those seeking or holding bank loans.)

To summarise: property loans were cheap and easy to get, and many people were unfazed by high COV prices.

The G eventually stepped in with seven rounds of cooling measures, and prices started to fall as a result of the measures. Resale prices are now down 6.7 per cent from the peak in 2013.

However, we’re still looking at resale prices that are much higher compared to a decade ago. Median resale prices still range from around $310,000 to over $680,000.

Estimated Angst Factor: 2 / 5, mainly from people unable to afford staying where they want.


BTO Flats

A recent Straits Times survey shows Singaporeans think BTO flats are more expensive than they actually are. The Ministry of National Development gave us some price ranges back in 2014:

  • Two room flats average around $110,000 in non-mature estates
  • Three room flats average around $187,000 in non-mature estates
  • Four room flats average around $295,000 in non-mature estates
  • Five room flats average around $386,000 in non-mature estates

Note that prices will differ significantly based on location, and flats cost more in mature estates.

Given the full range of subsidies, a two room flat can be reduced to around $40,000, which would make it manageable for someone earning $1,000 a month. Whether you’ll want the stress if you earn that little is another matter.

Estimated Angst Factor: 3 / 5, mainly due to overestimation of prices by the public.


  1. Public transport

Public Transport, MRT

Here’s a timeline for MRT fare changes, for adults.

  • July 2005: 1 to 3 cent increase in adult card fares
  • October 2006: 1 to 3 cent increase in adult card fares
  • October 2008: 4 cent increase in adult card fares
  • April 2009: 2 cent reduction in adult card fares
  • October 2011: 2 cent increase in adult card fares
  • April 2014: 4 to 6 cent increase in adult card fares
  • April 2015: 2 to 5 cent increase in adult card fares

A total adult fare increase of around 16 to 25 cents over 10 years. With the current maximum fare at $2.07, this represents an increase of about 14 per cent at the top end (remember that household incomes grew around 72 per cent during this period). This discounts some of the rebates and freebies as well (e.g. children seven years or younger travelling free, and concessions for students and senior citizens which would make the fare hikes lower).

There’s also talk of an additional 1.9 per cent fare reduction coming in December.

Estimated Angst Factor: 2 / 5 with regard to fares, 572 / 5 with regard to breakdowns and crowding.


Public Transport, Bus

And here’s the same timeline for bus fare changes.

  • July 2005: 1 to 2 cent increase in adult card fares
  • October 2006: 1 to 3 cent increase in adult card fares
  • October 2007: 1 to 2 cent increase in adult card fares
  • October 2008: 4 cent increase in adult card fares. An additional fare band was added (over 35 stages), which stretched the maximum possible card fare to $1.42 (non-aircon buses) or $1.67 (aircon buses)
  • April 2009: 2 cent reduction in adult card fares
  • October 2011: 2 cent increase in adult card fares
  • April 2014: 4 to 6 cent increase in adult card fares
  • April 2015: 2 to 5 cent increase in adult card fares

Altogether, an increase of around 15 to 26 cents over 10 years. With the current maximum fare at $1.86, this represents an increase of about 16 per cent at the top end. As with the MRT, do note that senior citizens and students had lower fare hikes than adults.

Estimated Angst Factor: 1 / 5. They probably catch less criticism because the buses run well.


Public Transport, Taxi

We pieced together the fare hike events for cab companies, from 2005 to 2015. This is patched together from old newspaper reports, but should be approximately accurate:

  • July 2005: Imposition of late-night surcharge, ranging from 10 to 50 per cent, between the hours of 11.30pm to 6am. This tackled the “midnight taxi problem”, assuming the problem was customers having too much money after midnight.
  • July 2006: Comfort DelGro raises flag down rates by 10 cents, to $2.50. Mercedes cabs have their flag down rates raised by 20 cents to $2.80.

Trips under 10 kilometres are charged at 10 cents for every 210 metres, as opposed to the previous rate of 10 cents for every 225 metres (roughly six per cent increase).

For trips above 10 kilometres, charges were raised to 10 cents per 175 metres, from 10 cents per 200 metres (roughly 12.5 percent increase)

  • December 2007: The flag down rate is increased from $2.50 to $2.80. Peak city surcharge is raised by 300 per cent. Or just from $1 to $3, if you’re on their side.
  • July 2008: Additional 30-cent diesel surcharge on all taxi rides. Diesel gets more mileage than petrol and lowers costs, so this remains one of the great unexplained mysteries of the universe.
  • December 2011: Flag down fares raised by 70 cents for limousine taxis and 20 cents for other models. Advance booking fees raised by $2 for limousine taxis and $2.80 for other models.

City area surcharge now applies to Sundays and public holidays.

Extra charges for peak hours are extended to Sundays and public holidays, but are reduced from 35 per cent to 25 per cent of the metered rate.

Peak period booking extended to Sundays and public holidays, but booking fees reduced by 20 cents.

Singaporeans swear a little less at cab companies, but now do so on Sundays and public holidays as well.

  • January 2014: Speculation that flag down rates will be raised to $3.80, with the meter adding 30 cents for every 400 metres traveled. Cab companies expect it to help taxi drivers earn more. Smarter people expect to help Uber drivers earn more.

Estimated Angst Factor: 4 / 5. Not only are cab prices widely acknowledged as being high, availability is still an issue.

In Part Two, we’ll look at the food and healthcare hikes. But do comment, and give us your take so far. Are you okay with the rising costs? What worries you the most? Give us a shout out and let everyone know.


Featured image Electronic Road Pricing (ERP) on Nicoll Highway by Flickr user Dickson Phua. CC BY-ND 2.0.

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screenshot of GIC report

by Ryan Ong

GIC Private Limited is a sovereign wealth fund, tasked with managing Singapore’s foreign reserves. The purpose of GIC is to ensure our reserves at least stay afloat in the face of global inflation, and preferably to obtain returns above that.

Long story short: they manage the government’s funds like your insurer or asset manager handles your portfolio. With the difference being that your asset manager doesn’t have to deal with 3.8 million pissed off customers when they mess up.

The GIC is also one of the most hotly politicised topics in Singapore.

Anti-government types will claim it’s a Ponzi scheme, an unfair use of CPF dollars, a mismanaged fund, an Illuminati plot to awaken evil Gods, etc. Half of the online criticism reads like a Dan Brown novel if Dan Brown had never heard of spellcheck.

On the other end of the spectrum, arguments in favour of the GIC sound less like reasoned analysis, and more like proclamations of faith.

So before we get into another long debate about the GIC this GE, let’s try to raise the bar. Don’t get me wrong, the debates will still end with someone disparaging another commenter’s mother, and a Hitler reference. But maybe we’ll all sound a tiny bit smarter.


The Complete Layman’s Guide to Working out the GIC Report

First, a quick note for all you who are familiar with reading annual reports: GIC does not disclose the amount of the funds it manages (although we know it is “well above” US$100 billion). There is no profit and loss statement.

This is to prevent economic sabotage. It also makes anyone arguing against GIC sound like a complete idiot, since there are no numbers to pick at, but that’s surely a coincidence.

Now, open up the GIC report (it’s available online), and jump into the section titled Investment Report.

Don’t worry about reading the entire report from start to finish. Most of it is ridiculous amounts of miscellaneous information, from corporate governance policies to perhaps even the length of the chairman’s individual armpit hairs.

Now let’s look at each general part of the investment report:


  1. Long Term Investment Performance

This part will tell you the average annual real return over 20 years. It’s called a real return because that’s what’s left after removing the effect of inflation.

(E.g. If you get 7.2 per cent returns on your investments, but the inflation rate is 3.2 per cent, your real return is just four per cent.)

According to the most recent annual report, we can see the real return is 4.9 per cent, up from 4.1 per cent a year ago.

You will also see the nominal rate of return. These are returns generated before subtracting things like taxes, fees, and inflation. Nominal returns are 6.1 per cent in the latest report.

For the most part, returns that beat inflation by at least two per cent are considered decent investments*. Over a 20 year period, GIC seems to be beating that twice over, in spite of momentary ups and downs. Remember that, when bringing up their notorious multi-million dollar loss of 2006.

(*Opinions differ. At least one chest-thumping “expert” is now sending me an e-mail to explain how even 5,000 per cent return is the work of less naturally endowed men.)


  1. Asset Allocation

This shows you the composition of assets that make up GIC’s portfolio. They’re diversified between things like:

  • Private Equity – Shares in companies that are not publicly listed (not bought and sold on the stock exchange).
  • Real Estate – Land or buildings. A very Asian obsession.
  • Inflation Linked Bonds – These are bonds that guarantee a real return if held to maturity.
  • Nominal Bonds and Cash – Boring old bonds (you lend money and get paid back with interest), and cash.
  • Developed Market Equities – Shares, from developed countries like the United States, Canada, Germany, etc. Places where it’s improbable that a mustached General will start a Civil War over a crate of corn.
  • Emerging Market Equities – Shares, but from countries where a mustached General just might.

GIC seems to aim for (in general) 65 per cent equities and 35 per cent bonds. Without turning this into International Finance Semester Four, let’s just say that more equities = more risk and potentially higher returns. The more a portfolio takes on equities, the more aggressive its approach.

GIC’s asset allocation is primarily defensive, geared more toward avoiding losses than making money.

You can find out more about which teams / experts GIC has looking into each of these in an adjoining section: Managing the Portfolio.


  1. Investment Expectations

This is an overview of what the GIC predicts will happen to its portfolio in the coming years. It will also explain a little about how the GIC will cope with incoming problems or take advantage of opportunities.

At present, the GIC is expecting lower returns over the next two decades. This is being attributed to the aftermath of Quantitative Easing (QE), which took place during the Global Financial Crisis. Simply put, valuations (the prices of assets) are high, but returns and the economic outlook have not improved.

And that’s mostly it. The rest of the report is an elaboration on GIC’s role, its purpose, how it’s governed internally, etc. which doesn’t change much from year to year.

So while the report may not give you as much detail as you like, it still leaves you with a range of things to discuss (i.e. get into Internet fights about). If you want to weigh in on the discussion, you could always yell about their asset allocation (too defensive! too aggressive!), insist their investment expectations are a list of excuses, grumble about their high returns compared to your standard of life, etc.

But please, let’s see if we can keep the lunatic fringe conspiracy theories from seeping in this GE.


Actually wait, we’re not done.

Okay, I wanted to tiptoe around this but I may as well go ahead. Let’s talk about transparency.

For those of you who are wondering, not all sovereign wealth funds follow GIC’s method of covering up tighter than a woman at an ISIS prayer meeting. If you look at Khazanah Nasional across the causeway, for example, you’ll see the exact value of the fund is visible (RM 145.5 billion). You’ll also see the breakdown of their investments to the last ringgit.

(Before you ask, 1MDB is not a sovereign wealth fund. It’s a strategic development company.)


But not making the numbers visible makes corruption easier, right?

If auditors and managers of the fund are in cahoots, it won’t really matter whether you can see the numbers. Because numbers don’t have to be hidden to mask corruption, numbers can also be made up.

In fact, if GIC was corrupt they would be more likely to fill their report with numbers, because creative accounting is an easier way to lie. When you want to hide what you’re doing, the last thing you do is draw suspicion by outright hiding your figures. That would be like trying to burgle a bank by joining the queue in a ninja outfit.

I’m not saying it’s impossible for corruption to ever happen to GIC – just that the hidden numbers may not be as relevant to this issue as we think. If the corruption is real, we’ll simply check one day and find there’s no money, too little money, or the money goes to the wrong places. That could happen whether the numbers are hidden, or just made up.


The more relevant issues with undisclosed numbers

As I mentioned above, there are real strategic reasons for not disclosing the actual dollars and cents of GIC. It prevents speculative currency attacks, and potential enemies would be happy to know what we have in the reserves to handle emergencies.

The prickly bit is that concealment prevents a convenient way to evade certain discussions.

For example, consider if the GST can be lowered, or if the next GST hike is necessary. Right now, with the books closed, it’s pretty easy to argue that we need the money to keep the country going. Where is all the money to come from if not taxes, right?

But when there’s a public report that says we have a couple of billion dollars sitting in GIC, you can bet someone is going to point at it and ask “Hey! Why can’t we use THAT money?”

It’s a lot harder to push, say, a bill to raise taxes when you have a few billion dollars parked in front of the public.

I’m not going to venture an opinion as to whether it would, in fact, be right to take money out of GIC and spend it to mitigate GST hikes, on health care, education, etc. That’s a whole separate discussion (the sort that leads to angry typing on Facebook at three in the morning).

All I want to point out is that Singaporeans won’t unanimously agree on how much should be left in GIC, and how much should be taken out and spent on welfare.

Perhaps it’s believed that, if the amount is disclosed to the average Singaporean, we won’t understand the need to retain so much money. We’ll insist on using it for upgrading, healthcare, lower taxes, etc., and we’ll be swayed by populist politics (Oh there’s $100 billion in GIC? Free flats for everyone!). Within a couple of years, we’ll have squandered our reserves.

Now we’re probably not that stupid; that’s the point of spending 3.1 per cent of our GDP on education. But it’s also not without substance to assert that this is prudent, despite the elitism it smacks of.

Maybe it’s a simple fact that we can’t flash money in front of a mob, and expect it to be well spent. Perhaps Singapore as a society is not quite as grown up as some of us would like it to be. And issues of strategic security aside, we may not be ready to know certain things, like our GIC numbers.


What do you think? Should GIC fully disclose its numbers? Let us know.



Featured image from GIC website.


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6 1576
Photo By Shawn Danker.
Bank of China Singapore office at Raffles place.

by Ryan Ong

CHINA was an exciting place to be last week, but only in the same way Iraq has been. In a series of sudden plummets, China’s stock market lost around 30 per cent of its value in less than a month, and the government applied literal brakes on the trading. Here’s a simplified explanation on what’s going on, and how it may affect you:

What happened in China?

From January 2014 to June 2015, China’s stock market surged in value. The Shanghai Composite index, one of China’s two main stock exchanges, rose by 150 per cent. If you’re not into stocks, just imagine an investment that more than doubles your money in six months – it was that good.

But around 12th June 2015 (the peak), the market started to dip. No one panicked, because they figured it was either a correction (the market falling to normal levels after a strong rally), or that it would recover.

Well the market decided otherwise, and instead plummeted like a fat man with a broken bungee cord. In less than a month, the Shanghai Composite index fell 25 per cent, and the Shenzhen Composite fell 35 per cent. But those percentages don’t do it justice. Look at it in terms of dollars and cents:

Around $4 trillion in share value was lost.

Do you have any idea just how much money $4 trillion is? A roomful of teenagers wouldn’t cost that much in-game damage in Grand Theft Auto V if they played for a year. The Greek debt looks like a homeless man’s spare change by comparison. Also, the Singapore stock exchange is worth about $978 billion. If we suffered a similar loss, it would be enough to wipe out Singapore four times over. In less than a month.

This was followed by a 4.5% recovery in the Shanghai market last Friday, thanks to the Chinese government’s efforts. But that’s about as relieving as finding a small glass of ice cubes in the middle of a house fire.


What caused it?

As always, it is not easy to determine exact causes of stock market crashes. Many factors contribute to one, and a great deal of speculation is involved. But these are probably the main culprits, in order of importance:

  1. Over-leveraged investors and media hype
  2. Toxic financial products
  3. Panicked wave of sellers


  1. Over-leveraged investors and media hype

If you look at China’s stock market growth from 2005 to 2007, you’ll see it coincides with China’s growing economy. If you look at their stock market during the 2008 financial crisis, you’ll see it contracted. That makes sense: the equities market grows or shrinks with the country’s economic output.

But the surge in China’s stock market in 2014 coincided with slower growth in the Chinese economy. That breaks the rules: how can the equities market rise 150 per cent, when the companies that those shares reflect are slowing down?

The answer is over-leveraged, overeager investors.

Starting in 2010, the Chinese government gradually lowered restrictions on margin trading (the practice of investing in stocks with borrowed money). The more lenient a country’s rules on margin trading, the easier it is for the average citizen to invest in its stock market.

China’s state media and brokerages actively encouraged Chinese residents to do this, as they believed it would help grow the economy.

But the surge of money drove stock prices sky high. Companies ended up with stock prices way above their real, intrinsic value. It is quite similar to the dot com bubble in the 90s, when millions of dollars were thrown at companies that had no proper revenue or growth plan.

But prices inevitably correct themselves, because when the businesses fail to perform as expected, the share prices drop.

Now if said share prices were a little bit higher than were correct, that might mean a loss of a few hundred dollars. But for someone who bought the shares when they were inflated way past their real value (near the 12th June peak), they’re looking at a fall that wipes out a quarter or a third of their total investment.

When this started to happen, it resulted in a wave of panic selling (see point 3).


  1. Toxic financial products

For those who didn’t invest in shares directly, many Chinese banks offered toxic financial products that exposed them to it anyway. These Wealth Management Products (WMPs), although they may as well be called Weapons of Mass Poverty in this context, are high risk, complex investments.

At the simple end, some WMPs work like structured deposits – you commit your money to the bank for the length of time, the bank invests it in…something, and if it works you get a return on your money. The functional word being “if”.

China’s WMPs promised unusually high returns (five to eight per cent), often with no principal protection (that means you can lose even the initial sum you invested.)

As with structured deposits, these WMPs are dangerous products because few people understand where the money goes. Very often, the money is invested in risky assets that are poorly regulated, or completely “off the books”.

Another form of WMPs seem to be a close imitation of the Collateralized Debt Obligations (CDOs) that devastated the United States in 2008. These WMPs are tranche products: the investors are divided into slices (called tranches) ranging from the most senior to the most junior.

Investors in the junior tranches get higher returns, while those in the senior tranches get lower returns. In the event of losses however, the investors in the junior tranches absorb the losses before those in the senior tranche. Here’s a simplified diagram*:

(*The following is not a direct or indirect reference to any specific bank’s products. It is only a general description of a form of tranche product.)


Here we have the divisions between investors, who are making a combined investment of $10 million. The most senior tranche, which may be reserved for the bank itself, will get the lowest returns.

But look what happens in a loss scenario:


The investment doesn’t work, and there’s a loss of $6 million.

The most junior tranche absorbs this loss first. If the loss wipes them out, the loss then moves on to the next most junior tranche, and so on – until the entirety of the loss is absorbed. The senior tranche has a good chance to come out unscathed. This is the reason junior tranches offer such high rates of return.

Now in places like the United States and Singapore, tranche products are mostly sold to institutions (e.g. insurance companies, large mutual funds, and so on). These institutions have – in theory – the ability to work out the risks and absorb the losses.

But in China, many of these products were sold to individuals. When the crash came many were in the junior tranches, getting mowed down like WWI infantry.

Now this is good news for the Chinese economy as a whole, because its major institutions aren’t declaring bankruptcy.

It’s not so great for the individual Chinese citizens who made these investments. You may recognize this as exactly the kind of thing that makes poor people angry at rich people, which is why the Chinese government is in damage control.


  1. Panicked wave of sellers

Everything in points 1 and 2 have convinced existing investors to run for the exit. This mass selling drives stock prices downward very quickly, and once the momentum is gained it’s very difficult to stop. This kind of panicked sell-off is not specific to the Chinese situation, and is the expected result of most stock market crashes.

The Chinese Communist Party (CCP) dealt with this in their usual subtle manner: by outright suspending trading, and telling organizations to buy stocks. I’m going to go ahead and imagine they did so with a lot of black, unmarked cars parked outside, because it’s not easy to persuade people to buy into a market that just lost $4 trillion. For publicly listed companies, many top level executives were told to buy back their stocks and barred from selling.

They also started the China Securities Finance Corp. (CSFC), which grants credit (more margin trading!) to organizations looking to buy stock. It’s hoped that these measures will put the money back in.


How will this affect us?

We’re either in a lot of trouble, or not at all – nothing in between. Consequences depend on whether the Chinese government is able to stem the rout, and how much of their assets Chinese citizens have put into equities.

If it turns out that a large number of China’s population had a sizeable investment in stocks, then we’re in a lot of trouble. Mass poverty could result in backlash against the CCP, and political instability in China will make waves around the world – China accounts for 17 per cent of the world’s Gross Domestic Product (GDP), beating out the United States by one per cent. Many companies are invested in China, or depend on China for their supply of manpower and manufacturing facilities. If a revolution breaks out there, you can bet the prices of goods almost everywhere are going to soar.

But odds are, the Chinese government can keep it under control. That’s one of the advantages of not being a democracy (an advantage to the rest of us, that is. I don’t know how much it benefits their own citizens).

It is strategically crucial for China that the stock market rout not destroy confidence. Part of China’s “silk road” strategy, which pits it against the US in terms of trade deals, requires that they develop a reputation for a stable, more open economy. Investors in China would do well to monitor international reactions to Beijing’s coping strategies in the next few months.



Featured image by Shawn Danker.

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Photo By Shawn Danker.
OCBC Bank at Battery Road.

by Brenda Tan

THE Baby Bonus scheme, according to a recent IPS survey, is having trouble enticing Singaporeans to have more children, so it should come as no surprise that the Child Development Account (CDA), which is part of the scheme, seems to have been neglected by Singaporean parents as well.

More than 11,000 parents have yet to even open a CDA, much less deposit any money into the dollar-matching (up to a cap based on birth order) fund that can be used only at Approved Institutions – mostly medical and pre-school needs.

Now the Baby Bonus Online System has undergone a revamp to make it easier for parents to join the Baby Bonus Scheme and open a Child Development Account (CDA) online.

Previously, parents would have to complete relevant CDA application forms found in the Baby Bonus kit obtained from the hospitals’ birth registration counters.  Even after submitting the application forms at those counters, parents were still required to visit the participating agent banks to open the CDA with an authorisation letter sent to their homes by mail.

With the new online system, either parent can join the scheme and open a CDA online with one of the three banks (DBS, OCBC and UOB), and appoint one parent to be the CDA trustee.

Also, there are changes to the banks managing the CDA. Standard Chartered Bank will phase out its CDA arrangements by the end of 2018, and DBS and UOB will become managing agents this week. All CDA banks save outgoing Standard Chartered will now offer an interest rate of 2 per cent per annum for their CDA holders, compared to 0.5 to 0.8 per cent per annum previously.

This would mean that for a first child whose parents have contributed S$6,000 for the G to match dollar-for-dollar (making it $12,000 in all), the interest rate will yield S$240 per year! That’s quite a lot of money in all, if you have the cash to put aside.

The CDA must not be confused with the outright cash gift component of up to $6,000 or $8,000, depending on birth order, given to parents under the Baby Bonus scheme. Meant to help parents cope with the additional expenses for the newborn, this cash gift is credited into the parents’ bank accounts in 3 instalments following the child’s birth; 50% at birth, 25% when the child is 6 months old, and the final 25% when the child is 12 months old.

Cash gift and CDA - two different parts of the Baby Bonus scheme (screen capture of Baby Bonus website)
Cash gift and CDA – two different parts of the Baby Bonus scheme (screen capture of Baby Bonus website)

The CDA, on the other hand, is a special co-savings account where parents’ deposits are matched by the G, up to a cap ranging from $6,000 to $18,000, depending on the birth order of the child.

CDA funds cannot be withdrawn in cash, but parents can make GIRO arrangements from the CDA to pay for Kindergarten or Childcare fees, or Medisave-approved private integrated insurance plans, or access the fund using the provided NETS card to pay for visits to the GP or dental clinics or even to purchase a new pair of spectacles from approved optical shops.  There are over 900 Approved Institutions registered with the Ministry of Social and Family Development (MSF), and these services may be utilised by any of the child’s siblings, regardless of age.

However, the CDA funds cannot be used to purchase that bicycle or air tickets for the kids for that family holiday in Vietnam, no matter how much a parent may wish to consider those an educational experience.

For children born in or after 2006, their CDA will be closed when they are 13 years old and any balance in the account will be transferred to the child’s Post-Secondary Education Account (PSEA) managed under the Ministry of Education. However, if parents have not saved up to the G’s contribution cap, they can still do so until their child reaches 18 years old.

Like the CDA, the PSEA funds may be used by the child or his siblings to pay for fees at institutions like the ITE, G-approved Special Education schools, the Polytechnics and local universities.

Interestingly, the take-up rate of CDA is about 95%.  By July 2014, about 11,600 parents have yet to open a CDA for their child.

This leaves me wondering about why these parents have not created the CDA when their children were born.

1. We didn’t know.

It’s not unlikely that parents don’t about the CDA because the Baby Bonus scheme carries two components and can be confusing, especially for new parents overwhelmed with pregnancy, birth, hospital charges, Medisave considerations, maternity and leave applications… Furthermore, the cash component (which is the same amount as the matching G contribution for the CDA) is directly credited into parents’ bank account, so some parents may think that that’s the whole of the Baby Bonus Scheme.

2. We knew, but it’s not urgent, right?

A second group of parents know about the CDA, but as the CDAs can only be used by Approved Institutions, they don’t see the urgency to get the CDAs created.  These parents may wait until their babies are kindergarten age to create the accounts for GIRO arrangements to pay their children’s school fees.

3. We knew, but we don’t have the money.

Unlike the second group, this group may not have spare cash to open the account or contribute to it.

I’m wondering if instead of a cash contribution for these families, whether they could use their CPF monies for the contributions.  It would also be helpful for families that have more than 2 children close in age, as the amount for cash contributions will exponentially increase.

After all, the monies cannot be taken out for frivolous expenditure, but would be use for the family’s healthcare and educational purposes.

4. We already have the CDA for korkor or jiejie.

This group may have the mistaken understanding that since the CDA can be used by the child’s siblings, they do not need to create a separate CDA for subsequent children to get the G’s dollar-for-dollar contribution.  Or they may think like the second group of parents that it is not urgent to create the CDA for the younger kids, and ensure that the full amount is put into the elder sibling’s CDA before creating a CDA for the younger child.


Of my three children, only the two younger ones have the CDA because my eldest was born two years before the Baby Bonus Scheme was created.  But my eldest has benefitted from using his younger sibling’s CDA funds for making spectacles and visiting the GP.

Nonetheless, although I made the accounts for the younger kids, I did not contribute to the account very regularly to maximise the interest rates on the accounts, despite knowing that the G would match my contributions dollar-for-dollar.

Like many parents I know, the lump sum of S$6,000 and S$12,000 is difficult to put into a savings plan that cannot be withdrawn in cash.

The CDA is useful and the contributions by the G is appreciated, but it doesn’t pay for toys and books and other living expenses. Also, the cash gift in the first year is usually very quickly utilised for general family expenses.  As many in the sandwiched class understand, a family’s expenses aren’t just focussed on the children; the changing financial needs of the extended family at a time when the children comes along can be unexpected and many.

Furthermore, when a family has more than one child close in age, like the G hopes we will, that family may find it even more difficult to fork out that lump sum at the start. Therefore, even with the enticement of 2 per cent per annum interest rates, this would only benefit families that have the means to set aside S$6,000 to S$12,000 at the onset to maximise that interest.

For my family, we stretched out the contributions over our children’s first six years. We used the CDAs as a savings account for the younger kids – all of meimei and didi’s cash gifts: one-month-old hongbaos, birthdays, and Chinese New Year monies, were put to their CDAs until they were six years old.  When the kids were in kindergarten, I would also top up the accounts to ensure there was enough money for the school’s GIRO deductions.  I only made sure to deposit fully to the G’s contribution cap when meimei was six years old as the extension to the CDA scheme wasn’t announced then.

It was only when my younger ones were in primary school that we opened up a savings account for them to save their pocket monies and cash gifts.  Over the years, and we have periodically put back those pre-primary cash gifts that we deposited into their CDAs into their personal savings account.

Now that the CDA contribution window has been extended until the child is 12 years old, and for the PSEA until the child is 18 years old, it is good for families that thought their opportunity to deposit had passed to maximise the G’s dollar-for-dollar matching.  Parents can check the status of their children’s CDA remaining cap via the Baby Bonus Online System.

Besides, the ease of using the CDA NETS card for payments at the Approved Institutions for any of the children really is a bonus.



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by Ryan Ong

IT LOOKS like this National Day, Singaporeans will be celebrating it in our usual patriotic manner (i.e. in Malaysia). The falling ringgit is making it look as if the Great Singapore Sale moved across the causeway, and applied itself to everything. It might be good to understand why it’s happening though, and that it’s not all discounts and roses:

by Ryan Ong

WITH every passing hour, Grexit (the exit of Greece from the European Union) is looking more probable. Thanks to Greece’s successful efforts at encouraging tax evasion, the country now has a debt to GDP ratio of about 177%. This makes it tempting for Greece to simply default on its debts, and leave the EU. But while that itself won’t impact Singapore much, the follow-up effects might in the near future:

Photo by Shawn Danker. Shared Copyright.
The mall of Medini in Iskandar.

by Ryan Ong

One of our favourite complaints is that the G won’t trust us with our money. But while the “nanny state” mentality chafes, it’s hard to argue that a lot of Singaporeans really are bad with their money.

Iskandar is a prime example. This is so spectacular an example of herd mentality, it should be studied by veterinarians, not property analysts. In 2013, Iskandar property agents could have demanded buyers wear cowbells in the showroom and the only response would have been “moo”.

These days, Iskandar fever has cooled a bit, but there are still Singaporeans pouring money into it – and many prior investors can’t bring themselves to cut their losses and leave. Why? Because too many of us still follow the way of the cow, and it ends in a slaughterhouse.

For the initiated, in other words, those who aren’t part of the herd, Iskandar Malaysia was established in November 2006. This an area about 2,200 sq km, covering Johor Bahru, Pontian, Senai, Pasir Gudang, and Nusajaya (which is the intended administrative capital of the region).

The Iskandar boom started around 2012 to 2013, with Australian billionaire Lang Walker investing S$1.59 billion in the region’s land development. Mr Robert Kuok, Malaysia’s richest man, soon followed suit.

Iskandar’s attraction is its close proximity to Singapore – it should, in theory, be popular among Malaysians who work in Singapore, and Singaporeans who live in Malaysia. Likewise, Singaporeans often shop in Malaysia (and vice versa), so easier access will only speed up economic development in the region.

Major industry players long ago expressed interest in Iskandar, like Singapore’s Temasek Holdings and Malaysia’s Khazanah Nasional, builder CapitaLand, and investors such as billionaire Peter Lim. Singapore Business Review reported in March 2013 that more than 3,500 Singapore businesses, mainly SMEs, have set up shop in Iskandar, pumping in more than RM5 billion. That was two years ago.

Investments grew significantly after Feb 19 2015, when the Prime Minister Lee Hsien Loong and his Malaysian counterpart, Mr Najib Razak, agreed on the construction of the High Speed Rail (HSR). This rail line will connect Jurong East to Kuala Lumpur in a 90-minute trip, supposedly by the year 2020.

The HSR is relevant to Iskandar investors because it’s imperative to the region’s growth. DTZ Malaysia Consultancy & Research Head Brian Koh said: “The HSR will have a significant impact on population growth in Iskandar”. 

Another unnamed property analyst told The Malaysia Reserve: “It could be said the success of Iskandar does hinge on the rail project.”

Unfortunately most of this exists in the imagination. And with each passing month, cracks in the Iskandar dream become more obvious.

Red Flags Everywhere

Singaporean investors in Iskandar have had multiple warnings – some from the government, some from banks, and some from the muted voice of their common sense begging to be let out of the closet.

Without going into details (a simple Google search will highlight a multitude of issues), here are the warning signs:

  • There are around 336,000 private residences still about to be built in Iskandar. This number exceeds the number of private residences in Singapore, and does not yet include 1,400 hectares that will be space for even more residences after 2020.

On top of that, Iskandar is projected to have a population of about one-fifth of Singapore (around 1.3 million) in 2025. Landlords had better be ready to price war each other to death.

  • Malaysia’s Budget 2014 set a “magic number”: RM $1 million. This is the minimum amount a property must cost before a foreigner can buy it.

So a Singaporean investor who bought a property valued at, say, RM $700,000 before the budget announcement now cannot sell it to another foreigner. Not unless the property value goes up to RM$1 million.

But can local buyers (people living in the Iskandar region) afford properties in the RM $700,000 – RM $900,000 range? We don’t know. If it turns out they can’t, and foreigners also can’t buy it, the property just becomes a liquidity problem.

In addition to this, Malaysia imposed a 2 per cent property levy, and increased sales tax.

The late Minister Mentor already warned us about this : “This is an economic field of co-operation in which, you must remember, we are putting investments on Malaysian soil, and at the stroke of a pen they can take it over.

The Budget 2014 announcement already gave us a taste of that. But still, Singaporeans investors kept buying.

The recent HSR confusion about where the rail should end, in Johor or Jurong East, should be an awakening. While the Malaysian authority was just misquoted, it raises a key issue: the HSR doesn’t exist yet. And should Malaysian or Singaporean authorities change their minds, the HSR project can be drastically altered or abandoned. That could send Iskandar property values plummeting in short order.

But in spite of all the warnings, some Singaporeans continue to pour money into Iskandar.

The Key Lessons on Herd Investing

There are three main takeaways from the Iskandar situation:

  1. The bigger the herd, the more likely you are to stay in it

Most of us don’t like admitting we’ve made a mistake. So when property investors are told that they’ve sunk money into a disaster, their first recourse is almost always to band together.

They’ll raise their concerns to their property agent (who will of course try to dismiss them) and side with others who have made the same investment. It’s psychological strength in numbers.

When the herd is especially large, we can get confirmation from even more people. And we rationalise that “this many people can’t be wrong”. Case in point, discussions like this one, which don’t address the over-supply issue and seems to explain things with “even the Chinese are in on it”.

It’s a defensive argument you’re sure to hear if you talk to many Iskandar investors.

  1. Within the herd, warning signs are often inverted

See Point 1 for an example of this. The massive influx of Chinese developers should be taken as a threat, as it means potential oversupply. But the herd mentality inverts this warning sign: instead, it’s taken as evidence that Iskandar must be a good investment because of all the attention it’s getting.

When reminded that Iskandar is a very large area with a very small population, a common retort from investors (probably learned from property agents in Iskandar) is that it just means you get more space for your buck.

That’s actually only great for owner occupiers who are living there, not for people making an investment – you want land scarcity to drive up property prices. But again, it’s a negative that becomes perceived as a positive, just because a lot of people have said it often enough.

  1. By the time you hear a property is hot, it is probably not

Iskandar had to be a centre of investment and high speculative values in order to make it into the news. So the media hype doesn’t predict the value of an asset (this works the same way with stocks, bonds, etc.), it only tells you the value has risen after the fact.

By the time everyone is talking about something and buying into it, the herd is already formed and stampeding. It’s almost always too late to get into the same deal without becoming one of the cattle.

  1. Joining the herd can mean being stuck with it

You know what large herds attract? Whips and lassos. The more rampant and noisy people get over something, the more likely it is to attract government attention. Like Bitcoin (banned in China), property (attracts new taxes and loan restrictions), etc.

More seasoned investors have a radar, and often know how to quit when they’re ahead. They sell at the peak of the hype and have usually moved on before the slew of regulations kick in.

Amateur investors don’t – they stay with the herd too long and get caught. Case in point: Malaysia’s Budget 2014 announcements. As mentioned above, people who bought property to the tune of RM $700,000 – RM$900,000 may now be stuck. They may not be able to sell and run even if they want to.

Singaporeans have a long way to go in terms of becoming savvy investors. The bulk of us still know little beyond our flat and CPF, and the main way investments are sold are still by word of mouth: we buy what relatives and friends recommend. We’re still more willing to trust personal relations – as inexpert as they may be – over qualified financial experts.

Financial advisers and other Singaporean wealth managers will understand what I’m getting at, and they’ll be happy to give you an earful if you ask them.

Perhaps a part of this propensity is, ironically, due to a certain trait in our national character to play as a team and pull in the same direction. Unfortunately, there are some issues that a one-directional stampede will not overcome.



Featured photo by Shawn Danker.

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Photo By Shawn Danker
Maxi Cash Pawn Shop in Marine Parade.

by Ryan Ong

I don’t know why you’re in a situation where you can’t get any loan, and need one so urgently that it can’t wait a few months. I get the feeling it involves an investment strategy with a lever you need to pull, or derivatives closely connected to the number 21. And now, you’re faced with lenders of last resort. Fine. Borrow from them if you must, but remember: between moneylenders and the pawn shop, go to the pawn shop first.

A Cautionary Note about Credit

We do not encourage readers to borrow irresponsibly, or to resort to further borrowing when they are already in debt. Our point is not that you should be out there pawning everything you own; just that if you must choose between moneylenders and pawn shops, the latter is almost always better

Desperate? Go to Pawn Shops First and Money Lenders Last.

The difference between pawn shops and money lenders? Here’s a quick summary:

When you go to a pawn shop, you give the shop something of value – your pledge – and they in turn give you a loan. The loan amount depends on how much the pawn shop values the pledge, which might be 60 – 80% of its estimated worth (this could be much higher, it’s up to the person making the valuation).

Once you repay the loan (with interest), you get your pledge back. If you don’t repay the loan for six months, the pledge is forfeited and the pawn shop will auction it.

Now there’s always a temptation, among some people, to use moneylenders because they don’t have to part with their valuables. It’s psychologically unappealing to give up your watch, wedding ring, commemorative gold zodiac tablet, etc. Moneylenders seem appealing because you can get cash, and still hold on to your stuff.

But it’s a terrible idea, because if you use a pawn shop instead:

  • The consequences of default are more limited
  • Terms are simpler to understand
  • Pawn shops have lower interest rates than moneylenders and credit cards
  • You may even get a bit of cash back after the auction
  1. The Consequences of Default are More Limited

Say something goes wrong, and you can’t repay the loan. If you’re dealing with moneylenders, you can expect to be on the receiving end of (legal) harassment.

Expect debt collection agencies to call you at odd hours, embarrass you at your place of work, and even reach out to your friends and family. And in order to avoid confrontations with collectors, you could find yourself literally living in the dark.

Remember, licensed moneylenders exist simply because it’s better than having people go to unlicensed ones. That’s one rung above a tattooed gangster squatting in a dark alley.

With pawn shops however, the worst consequence is that your pledge gets auctioned off. The debt won’t even snowball, because the auction (which happens in six months) basically writes off the whole amount. You can just treat it as if you sold the pledge.

  1. Terms are Simpler to Understand

You leave your things (watch, gold, jade, etc.) with the pawn shop, and they give you money. When you pay back the money (with interest), you get your things back. 10 year olds have more complex toy sharing arrangements.

Compare this to moneylenders or even banks: the terms and conditions are so dense, a rainforest dies every time they print it. When you get credit from them, you’re agreeing to a bewildering range of rip-offs, like:

  • Late fees that range from $400 to several thousand, just for being a day late.
  • Obscure processing fees (e.g. charging you $150 per loan disbursed)
  • Raising interest rates sharply under well hidden terms and conditions (oh, you’re a day late? Pay a $600 late fee and that “low” interest rate just doubled)

If you wonder why some older Singaporeans prefer pawn shops to banks, even when they could get bank loans, this is often the reason. They don’t have to read and understand 50 pages of legal gibberish to pawn something.

  1. Pawn Shops Have Lower Interest Rates than Moneylenders and Credit Cards

Pawn shops typically charge 1.5% interest per month, with some charging less for the first few months. By comparison, the interest rate of the typical credit card is 2% per month, and the rate of moneylenders has just been capped at 4% per month.*

In short, pawn shops have what is likely to be the lowest interest rate you will find outside of a bank.

(*A personal instalment loan from a bank is still cheaper than all these options, at 6 – 8% per year. We assume you are looking at these options only because such a loan is not available to you. )

  1. You May Even Get a Bit of Cash Back after the Auction

When your pledge is auctioned, there’s a chance it may sell for more than expected (the person making the valuation isn’t always right). So if you pledge a watch for $5,000 and it sells for around $5,600, what happens?

You get to pocket the extra $600 (minus a few other possible charges). That’s not as good as getting your watch back, but where else can you default on a loan and still have a chance of getting a bit of money back?


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MOH MediShield Life webpage (Image screen capture from www.moh.gov.sg/content/dam/moh_web/MediShieldLife/MSHL3/FEC%20Campaign/English.pdf).

by Yen Feng

Unless you’ve been living under a rock, the new and improved MediShield Life is coming and about two-thirds of all Singaporean families will need to go and confirm or update their household data. Unsurprisingly, not many have done it. MSM reported today that of the 750,000 households that have been asked to do so, only about half have obliged. Actually, that’s not too bad. You can almost hear why people haven’t done it: “Harr? Simi update? Why mus confirm? Garmen know everything one what, still must do meh?”

Let’s take a few steps back. The new MediShield Life is going to replace the existing national health insurance, MediShield. The two are largely the same – they help pay for your large hospital bills – but with a couple of key differences: (1) It’s compulsory and for everyone (2) It will cover pre-existing conditions.

This is about as close to universal healthcare as Singapore has ever got – but what it means is that everyone’s premiums are going to go up. That’s where the household data will come in handy – because not everyone will be able to pay the higher premiums, the data will help the G decide how much in income subsidies to give out – so that those who need more will get more. Even for those who can afford the increase – there are “transition” subsidies that decrease over the next four years – making the price hikes a little easier to swallow.

Medishield Life Subsidies table. (image source: https://www.moh.gov.sg/content/moh_web/medishield-life/premiums---subsidies/types-of-premium-subsidies.html)
Medishield Life Subsidies table (Image source: https://www.moh.gov.sg/content/moh_web/medishield-life/premiums—subsidies/types-of-premium-subsidies.html).

Now if you think the G knows everything about you – well, they sure can if they wanted to. But the reality is that Big Brother is too busy watching its borders and economic growth to pay attention to you – the average, middle-income, colouring-within-the-lines Singaporean. And in fact, a lot of the household data that the Government does have are not updated and are not shared across agencies. Take a look at your IC – is the address on it actually where you live?

Is it a big deal? Probably not. For the households that do not confirm or update their data by this Friday, the G will compute their subsidies based on existing records.

And if there are people who need a little extra help, there are additional premium support schemes in place for them. One thing that the G has promised that really does deliver that peace of mind: Even if you really can’t pay the premiums, you won’t lose your coverage. Confirm.


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