Lim Chih Yang / Writer
On 31 October 2008, I wrote an article for The Online Citizen entitled, Town Councils – be accountable to constituents. That was when the first whiff of trouble that Town Council had invested in toxic products by Lehman-link structured products first raises its ugly stench.
In today’s Parliament sitting, as reported by Channel News Asia, Dr Teo Ho Pin revealed that Holland – Bukit Panjang and Pasir Ris – Punggol invested a total of $12 million from the sinking fund in failed investments products. In addition, there were 6 PAP run town councils that had an exposure of about $4 million in Lehman Brothers through their fund managers’ portfolio.
Three questions naturally arose from the whole saga.
- Beside the failed investment in Lehman Brothers – link structured products; did the Town Council rake up any losses that had not been reported to Parliament? Could Dr Teo Ho Pin give a detailed account of the losses in other investment products that Town Councils could have mistakenly invested the sinking fund?
- Channel News Asia highlighted that “…During a six-year period starting from 2002, the return on its investments totalled about S$24 million…” Any finance sophomore will be able to highlight to you that the period of 2002 to 2007 was the uptrend period in economic cycle, where the world economy is about to start the bull run which ended spectacularly in 2007. In investment reporting, the time period for accounting is of paramount importance as it could mean the difference between losses or gains. Could the Town Council provide the net investment gained or loss in the period from 2006 to 2002? Could the Town Council give us the net gain or loss of the town councils’ sinking fund investments since the day they started their foray into investing residents’ sinking fund.
- What are the checks and balances in place to prevent any rogue investment adviser from blowing away the sinking fund? Senior Minister of State for National Development Grace Fu told Parliament that “… it was not practical nor desirable for the ministry to be overly prescriptive in enforcing the guidelines, which seek to achieve an optimal balance between reasonable returns and financial prudence…” If a rogue trader, Nick Leeson, could cause the downfall of England’s oldest bank, what checks and balances are there within the Town Councils’ controls to ensure that there will not be any embarrassing failed investments by the town councils?
The stench arising from losses by PAP-run town councils in Lehman link structured products has rouse the anger of many residents who feel that the town councils had been irresponsible with the stewardship of the sinking funds. While the current stench can be attributed only to Lehman link structured products, are there more variety of stench to arise from other failed products that may have resulted in losses? Are there more skeletons in the closet yet to be revealed?
Perhaps all the 16 PAP Town Council would like to come clean on their investments gains or losses to lay all the ghosts of its investment past to rest. Perhaps then the stench will be blown away and the skeletons permanently buried.