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Government should look into revamping investment strategy for town councils.

Letter to TOC – An unhealthy speculative practice

The following is a letter to TOC from Mr Gilbert Goh.

I refer to the recent debacle regarding our town councils' foray into risky investments.

The troubling news nevertheless throw up more queries that need some good answers:

Why allow town councils to invest in risky instruments up to the high limit of 35%? These funds are collected from the service and conservancy fees paid monthly by residents and should not be used for speculation. The total surplus collected seem adequate to last along time even if residents stop paying as the government will also pump in fresh funds into the coffers of town councils. Such funds should be kept solely in safe instruments such as government bonds and fixed deposits notwithstanding the fact that they do not give good returns.

Safety is the key here.

Why takes such high risk to grow a already solid surplus? The high limit of allowing 35% of such surplus fund to be invested in risky investment should also be removed totally. Moreover, town councils are not investment arm like the GIC or Temasek Holdings who specialise in helping us grow our surpluses.

Why this relentless pursuit to grow the funds? One gets this feeling that the town councils are worried that the funds may one day be wiped out by inflation or over use. However, the huge surplus of $2 billion testifies to the fact that the town councils have done a good job of protecting the funds. Even if the funds are kept in safer slow-growing instruments, surely the surplus itself is sufficient to last a long time even if the small return from safer instruments does not outbeat the high inflation during past years. The fund is also monthly top up by residents' contribution ensuring that the fund is always on financial tip top condition.

Who will make up for the loss incurred by the town councils' bad investment? It is common knowledge that the investors of the minibond series will not get back anything much in return. Though town councils have being making gains from such risky investments all these years, what will happen if one day they incur a net loss? Will the residents' sinking fund then suffer a loss? All investments carry risk and there is no guarantee that gains are perpetual. There will be one day that we will make a net loss from such risky investment.

How can the surplus be better used? I think most Singaporeans are pleasantly shocked that we have keep away a solid $2 billion surplus funds at our town councils. It proves that they are able custodians of the country's funds. Nertheless, I feel that there could be ways we can tap on this huge surplus to benefit our fellow Singaporeans in this tough time. For a start, families with laid off breadwinners can be identified and such surplus can be utilised to subsidise their service and conservancy fees for a few months. There is always this feeling that we have a rich government but it's people is desperately poor.

What is the desired surplus amount required by town councils? I agreed that town councils should have the minimal sinking fund required to standby for any emergencies but what is the suitable amount? How much is enough? Two billion? Five billion? The way I see it now is that there is no ceiling to how much surplus funds town councils can accumulate in it's coffers. There should be an optimal amount that town councils can collect and once that surplus is breached, the councils can think of ways to return them back to the residents or even reduce the amount of fees collected for a period of time. There is simply no point hoarding on to so much money without benefitting anyone in the end.

I hope that with this shocking revelation the government will look into revamping the investment strategy of our town councils. Such risky investment strategy to grow the public's money also introduces to us an unhealthy speculative practice that should not be cordoned at all.

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