Health Care System: Where is the role of PAP Govt in taking care of Singaporeans?

The following is the report from Taiwan's media on the conference held in Singapore with regards to Health Care in Asia conference.

This report is an alternative report to our local MSM's spin on our health care system. The Taiwanese Minister of Health has criticized the Singapore's system as one that the government has shirked off their social responsibility towards the citizens in terms of providing basic health care.

Incidentally, I have been studying the Taiwanese Medical Insurance system which has provided a Universal coverage for ALL its citizens as well as foreign workers. I have put up my proposal to NSP manifesto committee on revamping the Medishield system.

The basic idea of this new Medical Insurance scheme is to have the government and employers to share part of the premiums paid as Medishield for their Singaporean workers. As for Foreign workers, the government will not share the burden of their premium while the employers will take up more of the responsibility.

This is a fair system whereby the Government and employers take up their social responsibility towards the citizens' health care insurance. The workers will still pay the bulk of the Medishield follow by their employers and the Government. For family members who are not gainfully employed, there will also be a co-payment of Medishield premiums.



The Medishield coverage should be widen. The payout by Medishield is only close to 55% of total premium collected for each year. This is lesser than Group Medical Insurance scheme, which has a much higher payout rate of 75%.

Anyway, the details of my proposal would be finalized in NSP manifesto in time to come. For the time being, here is the media report in Chinese, by Taiwanese online media (I have translated the important part mentioned about Singapore in the text below):


楊志良分析全球健保制度引起熱烈迴響

* 2010-03-30
* 新聞速報
* 【中央社】

　衛生署長楊志良今天在經濟學人資訊社（EIU）的亞洲醫療論壇討論健保財政課題時，清楚的把現存4種制度的優劣進行分析，引起迴響，多國代表並希望參考台灣的健保制度。

　正在台灣推動二代健保的楊志良，受邀在經濟學人亞洲論壇的閉門會議中，討論亞洲政府健保財政的難題。

　楊志良把全球現存的健保財政制度分為4種，他說，第1種是英國和大英國協國家實施以稅收劃定一定比例作為健保費的國民保健服務制；第2種是社會保險制度，例如台灣的健保；第3種是使用者付費和私人保險搭配的制度；第4種是結合上述3種的綜合體。

　楊志良分析，英國這套制度，雖以稅收作為健保預算，感覺非常公平，可避免道德危害，但缺點是由於醫療保險預算是固定的，醫院和醫生多看病人收入也不會增加，因此不願意多看病人，讓等候看病的名單過長，造成政府失能。

　楊志良說，社會保險制度則是站在社會福利的角度來照顧全民的健康，也照顧到低收入者的醫療，這是台灣為什麼要採用這套制度的原因。

　但是楊志良也坦承，這套制度的缺點，是會造成公民失能（civic failure），因為人民都有政府的健保照顧，所以就不會注意照顧自己的健康，浪費醫療資源，導致醫療消耗愈來愈高。

　不過，楊志良指出，台灣的健保制度實施迄今，滿意度超過70%，代表這套制度確實有可取之處。

　談到第3種制度，楊志良說，這項制度的概念就是使用者付費，結果造成低收入者無力負擔醫療費，政府等於沒有在照顧人民的醫療需求；而先進國家採取的私人保險制度，更導致貧富產生醫療差距。

　由於在席間有人提起新加坡的3M（保健儲蓄、健保雙全和保健基金）架構，楊志良不改直言本色，分析新加坡醫療制度的優劣。

　

楊志良表示，新加坡的3M制度基本上就是強制人民有保健儲蓄，也就是從人民身上拿錢，等於是使用者付費的觀念，那政府照顧人民的責任在哪裡？

Yang Ziliang (Taiwan Minister of Health) said that Singapore's 3M system is basically a system that forces its citizens to pay for their own Medical Insurance (Medishield). i.e. taking money from the people. Thus, it is basically a system that consumers pay for themselves. If that is so, where is the Government's role in taking care of its citizens?

　楊志良指出，這種模式在許多國家實行有困難，因為這個制度必須強迫人民醫療儲蓄，但收入低卻達不到領取社會救濟金的族群，薪水已經夠低，還被迫扣除一部份薪資作為保健儲蓄，生活更加困難，有違社會福利和社會照護的精神。

Yang Ziliang pointed out that it would be difficult for many countries to implement such a system because this system needs to force citizens to pay for their own medical insurance. But some of the lower income group who are not eligible for social welfare may have too low an income to have any deductions made from their salaries to pay for their own premiums. It would further lower their standards of living and this is against the spirit of social welfare and social responsibility (of the government).

　由於楊志良的直言，也引起在場與會各國代表的迴響，甚至延續到後面的分組討論，與會者在討論時，「台灣的部長」至少被提到4次。

　

包括印尼、馬來西亞代表在內的多個國家代表最後認為，新加坡的制度也許很好，但只能適合在新加坡使用，其他國家無法仿效，有人並以中國為例，指中國曾經仿效最後宣告失敗。

At the end of the conference, many representatives including Indonesian, Malaysian and other countries concluded that Singapore's system may be good but it may only be implemented in Singapore as other countries may not be able to emulate it. Some have even used the failed experiment used by China as an example to reiterate this point.


　此外，印尼、馬來西亞、澳洲等國代表，也都發言表示，希望自己的國家能參考台灣的健保制度。

On the other hand, Indonesian, Malaysian, Australian and other countries' representatives have indicated that they hope their own countries could take Taiwan's comprehensive Health Care Insurance scheme as a reference for their reform.

Goh Meng Seng

HDB: Myths and Truth II

Out of the blue, after three weeks from my initial email to MOF for the request of more information of the $460K assistance given to the poor family over 60 years, I receive an email from Ministry of Finance. Well, although this very late reply is far from the quality assurance that the auto-reply emails have promised of replying within 3 working days, this is better than nothing.

The reply leads me to the link on MOF website which is an Annex to the Minister's speech. I am still looking at it closely but I believe readers of this blog could come up with their very own conclusions.

Now, back to the main issue of HDB Myth.

MYTH II: HDB flats are unaffordable.
HIS RESPONSE:
# On top of the CPF Housing Grant of $30,000 or $40,000, there is an Additional Housing Grant (AHG) for lower-income families of up to $40,000. As of Jan 31, the Government disbursed more than $330 million in AHG to more than 20,000 families.

The grants are a fixed amount and have not been revised to take into account the large increase in HDB prices. Buyers buying a flat today therefore have to pay substantially more than a buyer who bought a HDB 1 year earlier and was able to obtain the same level of grant. In fact, 30 years ago, Singaporeans also get the same amount of grant of $30K!

# The median house price is 5.8 times the median household income in Singapore. In comparison, the ratio is 7.1 in London and 19.8 in Hong Kong.

There is a need to verify the numbers. If these are based on the numbers used in the article released by Prof Tu, then there are serious statistical comparability issues. There are already some analysis put up on the net about the inappropriate comparison.

HDB flats are leasehold flats without strata titles. This is totally different from private condominiums and apartments. It would be grossly inappropriate to make such comparisons because strictly speaking, HDB flat owners don’t own the whole piece of land which thier flats are built on. i.e. Condominiums owners own the whole piece of land in strata titles. When there is an enbloc sales, the land of the whole development fenced up would be considered as part of the asset owned by each owners. i.e. HDB flat owners don’t even own the corridors and void decks below their flats!

Afternote: In HK, there are flats sold to lower income group without the land cost being imputed in the costing. These flats are comparable to our HDB flats and should be used as a comparison.

# The average mortgage payment for new flats in non-mature estates sold in 2009 was 22 per cent of monthly household income. This is well below the affordability benchmark of 30 per cent to 35 per cent.

According to HDB website, the Median Household income is not derived from more objective source but based on applicants income in their last sales exercise. What does this actually mean?

First of all, it only shows the Median Household income of those who could afford to buy their flats and that is the reason why they have registered to buy a flat in the very first place. For those who could not afford, will not be in the data set! So how could one use such data to justify the “affordability” of HDB flats?

For example, there may be X number of couples who wanted to buy a flat of their choice but could not afford it due to the high prices. If these couples are taken into account, it would mean that the MEDIAN HOUSEHOLD INCOME would drop tremendously.

On the other hand, what we are observing is that, even if we use HDB’s measure of “Median Household Income”, it has suddenly increase from $3900 in 2009 for a “normal” 4 room flat to $4300 in 2010! Did our young couples enjoy such a huge increase of 10% in their pay checks within a year?

Moreover, this data is totally inaccurate as a measure for another two reasons. If we are interested to know about the affordability of these flats for our YOUNG COUPLES, such data is not representative at all as it includes those who are applying for their second flats as well. On top of that, if we observe carefully, for the other 4 room flat in SkyVilla and SkyTerrace @ Dawson, the Median Household Income has shot up to $6000. It means that these similar size of 4 room HDB flats are no longer affordable to the NORMAL couples. Obviously, those who couldn’t afford will have no ways to apply for these “SPECIAL” 4 room flats.

All these basically mean that such measurement of “AFFORDABILITY” is totally flawed. The goal post will keep shifting and the statistics do not represent the real picture on the ground. What is the real picture on the ground then?

For any young couples who had just joined the labor market, it is unreasonable to expect them to earn a total of $4300 per month. While a small percentage of graduates who have exceptional grades or graduates with Honors degrees may be able to get higher starting salaries, most university graduates will not be able to garner that kind of wages. Furthermore, if university graduates have difficulty in getting that kind of pay, what about those with lesser qualifications?

Most graduates from Polytechnics and Universities have to repay their study loans after they found a job. If we add all these up, it seems that it is really difficult for them to afford a flat before 30. The situation will get worse if the prices of HDB flats keep going up under the present HDB policy. It will definitely in turn affect late marriages and fertility rate of Singaporeans.

# Four out of five Singaporean new flat buyers service their housing loans from CPF savings, without any cash payment.

Singaporeans who service their housing loans need to be employed in order to have CPF savings. If key members of the household lose their job, the household will have problems servicing their HDB loan. This is especially so, given that the tenure of most HDB loans is 30 years. Given the current economic environment, it is imprudent to assume that households will not face retrenchment or reduction in salary in the next 30 years.

On the other hand, when all CPF savings in OA is used for financing the 30 years mortgage loans, it would mean that there will be very little left for retirement. As I have shown in my previous article here, the idea of using HDB flat as retirement financing is a very DANGEROUS one, with a lot of unrealistic perfect scenario assumptions being made.

High HDB prices alone will affect more than the affordability of the flats by young couples. It will also affect retirement financing as well as late marriages and fertility rate. It will create a whole lot of social-economic problems in the long run.

HDB should discard their ill representation of “affordability” by using some self-justifying data which is inherently bias. Minister Mah and those HDB planners should walk out of their Ivory Towers to get proper perspective of the problems that our youngsters are facing before they just shoot their mouths off about the “affordability” of their HDB flats by just looking at “cold figures”. In fact, I think it would do them good if they give us the data on the age of applicants with respective to the income groups. Only then we will have a fuller picture and proper perspective of “affordability” of HDB flats.

Goh Meng Seng

HDB: Myths and Truth I

It has been more than 2 weeks since I sent in my email to MOF to obtain the data/methodology for Mr Tharman’s statement in Parliament which said that poor income families in Singapore would be helped to the sum of $460,000 for. In spite of sending reminder, I have yet to receive a response.

If the numbers are accurate and correct, it is unknown why MOF would refuse to release the data/methodology. Without transparency, there can only be rumor and speculation about the accuracy on what Mr Thraman claimed.

Well, throwing numbers and figures in a serious place like Parliament could be pretty easy. However if such so call "statistics" or "figures" are not and could not subject to public scrutiny to the fullest details, then I guess such talk is just Highfalutin expression without any solid foundation.

I have also written to HDB to seek clarifications on what Minister Mah has brought up in parliament about the affordability issue. Similarly, I have been ignored. This is a government that self-proclaim to be the First World government, but without any "Transparency" in action. A government that dare not provide any proof that could withstand public scrutiny. It is really up to Singaporeans to decide whether to believe such talks or not.

I shall now move on to Minister Mah's HDB MYTHS and TRUTH.

MYTH I: There are not enough HDB flats to meet demand.
HIS RESPONSE:
# The HDB released 13,500 new flats last year and will release another 12,000 or more this year. This is more than the total number of flats in Clementi or Jurong East (about 23,000 flats each).

Based on the HDB website, it takes 3 years on average for a new HBD flat to be built. The 13,500 new flats released in 2009 will therefore only be available for occupancy in 2012. Similarly the 12,000 HDB flats released in 2010 will not be available for occupancy until 2013.

There is a housing shortage in Singapore NOW. From 2003 to 2008. the total population increased by 17.6% while resident population increased by 8.2%. The number of HDB flats however only increased by 1.2.%.



The inadequate new HDB flats to meet demand caused a destructive boom-bust cycle to be formed. Prices of HDB prices have skyrocketed as people need HDB flats NOW. The subsequent flooding of the market with HDB flats in 2012/2013 will mean that there is likely to be collapse of HDB prices by 2012.

A conservative estimate of the need to provide 4% more flats compare to 2003 would mean a need to increase new HDB flats by at least 24,000 flats. This should be on top of the natural annual demand of new flats derived from new couples.

YPAP has published Mr Mah Bow Tan’s speech in Parliament

http://www.youngpap.org.sg/index.php?option=com_content&view=article&id=148:mnd-cos-debate-on-affordability-of-hdb-flats&catid=24:political-discussions

To avoid misquoting Mr Mah, I had waited for a copy of the speech to be released on an official PAP platform before commenting on it. There are some parts of the speech which I do not understand. I have written in to the Ministry of National Development to clarify what Mr Mah meant, but as I have said earlier, I have been ignored totally.

In view of the inability of HDB to meet demand for 2003 and 2008, I would like to discuss Mr Mah’s Build-To-Order (BTO) system and how it caused the current HDB housing bubble.

Under the BTO scheme, HDB flats are built based on application demand. In Mr Mah’s own words, the intent of the BTO scheme is so that HDB is not stuck with a large inventory of unsold flats.

To prove his point, Mr Mah then sprouts out an impressive looking set of statistics to show that the BTO system is working and that there are sufficient HDB flats to meet demand.

The fatal flaw in Mr Mah’s reasoning is that it takes 3 years or more for BTO flats to be built. What happens then if there is a sudden spike in housing demand? What can Mr Mah do?

ABSOLUTELY NOTHING !

Sudden spikes in housing demand coincide with booms in the Singapore economy. During such booms, the labor market tightens. To keep wages down and prevent Singaporeans from job hopping, large numbers of FT are allowed into Singapore. These FT need a place to stay and therefore push up rental and property prices. PRs could only buy from the HDB resale market but the truth is, how many Singaporeans could afford to sell their HDB flats without buying another HDB flat for them to live in? Without a stockpile and a 3 years time lag for new HDB flats to be built, what can Mr Mah do about skyrocketing HDB prices?

ABSOLUTELY NOTHING !

If we stick with the current BTO system, we will have a continuous series of destructive boom-bust housing cycles. During such cycles, there will be a small group of individuals who earn supernormal profit. There will however be a much larger group who will suffer large paper losses and be saddled with a huge debt for possibly the rest of their lives.

The total mismatch of IMMEDIATE demand and supply in the HDB resale market is basically caused by the lag effect of HDB supply of new flats. Singaporeans could not possibly sell their flats to PRs due to PAP's own liberal FT policy basically because they could not get any new flats from HDB at all.

This in turn created a round robin feedback effect on the whole system. HDB resale prices went up, causing the prices of new HDB flats to go up as well. This in turn cause deferment of purchase of new HDB flats by the lower income couples.

There is nothing much which can be done to help the victims of the current boom-bust housing cycle caused by Mr Mah’s BTO system. The best that can be done is to change the system to protect future generations. As part of comprehensive HDB housing reform, I would like to propose

1) Revert to the previous Build-To-Sell system

2) Maintain a strategic stockpile of HDB flats which can be released into the market to stop housing bubbles from forming

3) Reduce the time to build HDB flats

4) Have a long term policy of matching available HDB flats to the Total Population of Singapore.

Goh Meng Seng

HDB for retirement financing? Think again...

I have written about Minister Mah's idea of turning HDB flat into retirement instrument as DANGEROUS in my last posting. Some people has ponder over it and realize that it is indeed a "look good but infeasible" idea. As I have mentioned, it is an idea that lacks basic economic sense.


You can read something interesting abt HDB-CPF-Retirement Financing at the following blog:

En Bloc Block - Block Collective Sales @ - Trilogy : Part C PM said, I am saying


The following is a comment left by a reader "Now Not Talent Anymore" in Temasek Review about how the idea of HDB flat as a means of retirement financing is a total flaw:

By 2030, there will be at least 900,000 65 year old and old retired Singaporeans.

Assuming an average of S$500 pm CPF Life payment, or S$6,000 per annum.

It means there is a drain of S$5.4-billion per annum from CPF Corporation. In 2030, has PAP Government got the fund to service this CPF Life annual payout?

Assume PAP Government agreed to apply Reverse Mortgage Scheme for 2-room, 3-room and 4-room flat as a means to help out retired Singaporeans.

Assume 500,000 HDB dwelling units are eligible in 2030.

Assume an average of S$10,000 per annum payout to each HDB dwelling unit.
It means an annual outlay of S$10,000 x 500,000 = S$5-billion per annum.

America is now using 17% of its GDP for medical and healthcare.

Presently, the budget for healthcare is about 3% of GDP.

Assuming that due to ageing baby-boomers, healthcare budget doubels up, meaning about S$4-billion per annum is needed just to take care of teh need of an ageing population in terms of subsidised medicine, hospitals, community hospitals, geriatrics polyclinics, nurisng homes and hospices.

And of course, by 2030, PAP Government can easily spend about S$1-billion per annum for LUP, MUP and SERC.

Add up the future burden in 2030 due to our ageing infrastructures and ageing HDB estates, plus 900,000 unproductive consumers of 65 year old retired SIngaporeans, and we have to find money of at least:


5.4 + 5 + 4 + 1 = S$15.4-billion.

7% GST = S$7-billion collection.

And dear Singaporeans, I envisage that GST will go up to 15% (on par with European countries today GST rate) by 2030 just to service all those soical welfarism which we enjoy today…cleverly packaged as Workfare, Progressive Payment, etc.


And the above S$15-billion is a piffy sum as compared to the looming financial disaster, starting in 2030..and yes, the very foundation of PAP Government Success Story – our very own HDB Estates.

I dimly remembered a reinforced cocnrete handbook that I read which indicated that reinforced cocnrete strength starts to deteriorate after 75 years; and worse if it is post-tensioned (PT).
And we use lots of PT slabs and PT beams due to our prefabricated methid of construction.

Imagine you are leaving in a 3-room HDB flat built in 1965. It will be 65 years old in 2030.
You bought it from resale market in 2010 at S$300,000; hoping that it will increase by at least 50% to S$450,000 by 2030.

And if you are lucky and there is another Property Bubble, you can sell it for S$600,000!!!

But the Seller forgot one little fact.

Can the prospective buyer gets a bank loan for a 60+ year odl flat with only 39 of lease remaining?

So, poor Seller is “asset rich, cash poor” as he or she simply cannot find any buyer and may very well have to lower the selling price to attract buyers!!!

Therefore, Mah Bow Tan’s assumption of a continual upward curve of appreciating values hold no water for those poor saps snapping up all those 30+ year old HDB flats – built in the 60s – to the tune of S$250,000 to S$350,000 in 2010.

Then, the chain reaction starts.

There is a large overhang of 60s and 70s HDB flats with no buyers, and will certainly depress the HDB resale market – meaning there is no asset appreciaiton for HDB flats by 2030.

Instead, there is price stagnation due to thsoe unsellable 60+ year old HDB flats in the market.

Then, how will those affected – say 300,000 to 500,000 HDB householders retire if they can’t cash in their “asset appreciated” HDB flats to downgrade to a smaller HDB unit?

Imagine 500,000 60+ year old HDB flats that no buyer will want.

And PAP Government has no choice but to Reverse Mortgage those 500,000 HDB units to enable retired SIngaporeans to have a decent pension funds.

Assume an average price of S$300,000 per HDB unit.
Then, 500,000 units = S$150-billion!!!!!

If the payout is S$5-billion per annum, then those 500,000 HDB house owners will receive their payment during a 30 year period.

Now, what if in 2030, your HDB block is declared struturally unsafe and must be demolished?

Then, force majuere comes into play and you may end up with zilch as your expected asset appreciation of S$450,000 instantly ebcomes worthless as your home is no more, demolished and the land revert back to HDB, i.e. PAP Government.

At one stroke, you are 65 year old, hapily looking froward to retirement.

Then, WHAM! BAM!

You “asset apprection” of a HDB flat is no more but a pile of rubbles and you become an instant pauper with 30-year of hard earned CPF money just turned into conrete dust.

Therfore, Mr. Mah Bow Tan, has you ever think of a 60-year old, and rapidly ageing year by year – HDB flat will ever appreciate on an upward curve when buyers will hesitate, not because they can’t get a bank loan, but becaue of the inherent nature of reinforced concrete strength starts to deteriorate after 75 years or more?

Apparently the only solution to ensure continual asset appreciation I can think of is sadly that for 60 year old HDB blocks (and even private dwelling units), is en bloc, demolishment and re-building.

Meaning that HDB ownbers will need to fork out money to pay for:
- to renew the land elase bakc to 99-year.
- to pay for a newly constructed HDB flats.

I trust you all can see the fallacy of Mr. Mah Bow Tan’s lovely advice of “your HDB flat will appreciate and you can then sell it, downgrade to a smaller unit and retire on the capital appreciation”.

And of course, it is always better to buy brand-new HDB flats.

The frist batch was in Queenstown in early 60s..maybe 1963.

Toa Payoh at Lorong 1, 2, 4 & 5 are in 1965.

Lorong 7 is 1965, and my fmaily moved in in 1969, Block 13 – and it is still standing there.

That is, the first batch of HDB blocks are now 45 to 47 year old.

And in 2030, they will be 65 to 67 year old where P65ers are 65 year old and start to retire.

Now, when a 3-room HDB flat is 60+ year old, and you want to sell in the resale market at say S$450,000 for yoru retirement needs, the question is will there be buyer for a HDB flat with 39 leasehold year remaining?

Adn will commercial banks willing tyo loan out a 30-year mortgage loan for this 60+ year old HDB flat?

And what happen tot hat 2nd buyer who paid S$450,000 for a 60-year old HDB flat; only to see it worthless in another 30 to 40 year time?

Asset appreciaiton of course will not work for the 2nd buyer.

Of coruse, if you are unfortunate and perhaps afetr moving in in 2030 and then 10 to 15 years later, the HDB block sid eclared strucuturally unsafe…..and where those affected fmailies move to?

As I said that if a 50 year old HDB flat is udner SERC and completely demolished, then those affected HDB residents will either move away or wait 4 years for rebuilding ebfore moving back to the ned HDB blocks.

But who will fund all these rebuilding works under SERC?

Imagine throughout a 30 year period, an average cost of building one dwelling unit is S$200,000.

Then, just to rebuild new 500,000 dwelling units starting in 2030 – and ending in 2060 – the funds required is 500,000 x S$200,000 = S$100-billion.

Or about S$3.3-billion per annum, starting in 2030.

That is, which ever way you look at it, if PAP Government plans to put all 60 year old HDB blocks under SERC to rejuvenate ageing HDB estates, funds are needed.

And under SERC, say you want to cash in by selling yoru 3-room, 4-room or 5-room back to (and downgrade to 1-room or 2-room) PAP Government, then PAP Government will need to fidn billions to pay out these “asset APPRECIATIONS” to 65-year old SIngpaorean retirees.

HDB's Flawed Policy Direction

I have watched the Talking Point of Mr. Mah's effort to defend his HDB policies. After watching it, I feel very worried about the future of Singapore.

It has confirmed my initial guess of what this PAP government is up to, although I have heard about it from a professor whom might have helped to mold such policy direction.

MBT started off with three main points:

1) HDB flats are for Home Ownership, for Singaporeans to "own" their flats. This "asset" you could "sell it and you can keep everything that you made"

2) Extensive Coverage. Over 80% Singaporeans are within this scheme.

3) HDB is also acting as a form of retirement income. Singaporeans can "monetize" their flats, downgrade, rent out... etc. just for retirement financing.

Mr. Mah responded to my constant ranting on the ground that with a 30 years mortgage, our children will not be able to have sufficient money in their CPF for retirement financing. If our children married at 30 years old, they could only finish their mortgage payment by 60 years old. Almost all money in CPF apart from Medisave will be used for this mortgage payment. There will be very little money left for retirement financing.

Mr. Mah responded saying that we could "monetize" our HDB flat for this retirement financing. The assumption that one could actually "monetized" our HDB flats to finance retirement is totally flawed. There are many issues here. When you pay high prices for your first HDB flat, by the time you finish paying the 30 years mortgage, you would be buying almost 50% more than the price you initially bought in terms of interests.

Case I

Take for example, if you are getting a loan of $225K for a 4 room flat, you will be paying about $865 for a 30 years mortgage. Your interests paid at the end of the mortgage is a total of about $103K at the HDB's concessionary interest rate of 2.6%. It means that if you are to make any money out of your flat, you must be able to sell at least $328K by the time you finished paying the 30 years mortgage. Please bear in mind that your lease will be left with 69 years. This is the reason why PAP wants the resale price of HDB to stay high.

However, if you sell off your HDB flat, where are you going to stay? Assuming that the studio apartment by then will cost you $100K. (Very conservative estimate indeed.) So you will have $228K left for retirement financing.

Case II

Could we do better than this? If the price today is priced at cost price, maybe $50K less. The amount of interest you will save will be about $23K with the same 30 years mortgage. You will be paying $190 less per month for your mortgage payment. This $190 will be in your CPF account earning an interest of 2.5%. At the end of the 30 years, you will get about $109K from this monthly saving of $190.

You will be taking a loan of $175K and paying $675 per month for your flat. Total interest paid will be about $79K. So in order for you to break even, you will need to sell $254K. Deducting that $100K studio apartment, you will get $154K plus the CPF extra saving of $109K. A total of $263K!

Please bear in mind that this is selling at break even, at lower price than Case I. If the flat could be sold at the same price as Case I, $328K, you will have another extra amount of $74K!

Besides, nobody could possibly predict what price the resale market will be in 30 years time! For the Case II, you will definitely get $109K first regardless of whether you can sell your flat or not. If you take $1000 per month for monthly expense, this $109K savings could last you about 9 years.

The above is a simple example. However, I have not come to the other problems of Mr. Mah's method. If HDB insists on high HDB flat pricing based on resale market prices which are subjected more to excess liquidity from foreign sources rather than real income growth locally, the pricing mechanism will price young couples out. It is already taking effect on the lower income people now.

If we were to take Mr. Mah's policy direction at face value, it would mean that the resale market has to grow by at least 2.6% per year in order for the plan to be successful. However, can the Minister guarantees that our income growth could also grow at this rate for ALL Singaporeans? Apparently, by historical data for the past 10 years, the wages for the middle-lower income group has been stagnant or even regressed!

If more and more Singaporeans are priced out of the HDB property market, forced to stay with their parents, such a scheme will collapse. You may have 80% of Singaporeans staying in HDB but not all adult Singaporeans owning their flats! How could Mr. Mah's "HIGHFALUTIN IDEA" of using HDB flat as retirement financing works then?

On the other hand, more and more Singles and Divorced Singaporeans will be priced out by the system because the system is basically based on two income earners assumption. In the end, they may be forced to buy studio apartments or 2 room flats. If that happens, they couldn't possible downgrade further, could they?

Besides, this system is in danger of turning into sub-prime. At this rate we are going, there is no guarantee that everyone will be able to stay employed for the whole 30 years of their lives without decreased wages. Even Government agencies and GLCs are totally biased against older applicants who have passed 40 years old.

This is basically the reason why more and more Singaporeans are unable to fulfill their mortgage payment, ended up having their HDB flats being repossessed, evicted out of their flats. This is no laughing matter. They would have lost everything in the whole process or even ended up still owning HDB money after losing all their CPFs and the flats. At the very least, if they have kept that $190 per month savings in CPF as in Case II, they would still have some funds for retirement in future!

The other problem with this model is that there will be a great possibility of over building of studio apartments in view of an aging population. There will be a peak of this aging population and then it will decline, stabilizing at sometime later. During the peak of the aging population, the resale market may just collapse! This is basically because many people who follow Mr. Mah's direction would have to sell their flats to finance their retirement. Thus, Mr. Mah's hope of having high resale market price by the time of our retirement may be just fat hope.

On the other hand, the HDB may not react sufficiently to provide enough studio apartments to these people because they will be very concerned of over building. It will be a very delicate balance to maintain. By HDB's track record back in 2007 and 2008, it doesn't seem to be very nimble in estimating demand.

The situation would be great demand on studio apartment but there are competing resources now. HDB would have to build and cater to TWO big groups of people, the young couples and the retirees. If we do not have more PRs to buy up the resale flats from these retirees, we will be in trouble! There will be a huge oversupply of flats in the market.

Thus, the "downgrading" option is not economically sound at all. What about "reverse mortgage"? How much money do the government of the day needs to fork out to satisfy this system? Especially for an aging population when the PEAK of retirees begins to surface? Is that sound at all for the financial system to put in so much money to finance an "unproductive" investment?

How about the renting out option? First of all, there must be enough demand. If we do not have enough foreign workers working here to rent the flats during the peak of aging population, we are doomed. Furthermore, more PRs would prefer to buy their own flats and rent them out as well! Could anyone guarantee that there will be so many foreign workers around? If that is so, our own Singaporeans may just face depressed wages as well! The problem of affordability of HDB will come back to haunt us again especially so when we need the wage to grow as fast as the flat prices to grow at the rate of 2.6% per year.

Thus I think the suggestion of using HDB flat as "retirement financing" is really a very dangerous one. It has no basic sound economic foundation to start with. It is just based on some "ideal situation" scenario which is totally unrealistic. The premise of the "ULTIMATE PLAN" of PAP's retirement financing for Singaporeans is totally flawed. This system cannot work at all.

The better bet is the second case scenario whereby flats are sold at lower prices and Singaporeans could continue to save their money in CPF to be used for future retirement financing. To bank on Mr. Mah's policy direction on High HDB price for Future Retirement Financing is a very dangerous move. There are so many variables to take care of. There are just too many unrealistic assumptions made but possible scenarios arising from the aging population not taken care of. His plan that aims to solve one problem, will eventually create more problems for Singaporeans and future government.

Goh Meng Seng

Give us HDB Flats AT COST, NOT 30yrs mortgage Enslavement!

I have created a Facebook Group named as above. The reasoning is as below:


HDB used to be a very unique and successful socialist approach to provide basic adequate housing for Singaporeans. The HDB scheme was made possible by the power of Land Acquisition Act that allows the government of the day to acquire land at dirt cheap prices. It is a social contract between the people and the government to empower them to acquire land at cheap prices while in return, the people's basic housing needs are taken care of by the government providing HEAVILY SUBSIDIZED HDB flats to more than 80% of the population.

The break down of Cost price of HDB was made available back in 1981 when the government showed us how much COST SUBSIDIES have been given to the citizens.

However, since the introduction of "Asset Enhancement Program" in early 1990s and subsequently the introduction of "Market Price Subsidy" in the pricing of new HDB flats, new HDB flats are no longer cheap. The PAP government has subtly avoided their responsible embedded in the social contract. The PAP government has used very creative accounting to avoid showing how much money they have earned from selling new HDB flats while shamelessly claiming that a "Market Subsidy" was provided. This is no more than mere "DISCOUNTS" with no real subsidy given.

When asked to provide the breakdown of the COST of building these HDB flats, there was surreal silence from HDB. Why could they provide breakdown of cost back in 1981 while reluctance to provide it now?

We just want an honest price from HDB for our young Singaporean couples, at least a COST PRICE of HDB for our young in return for the enormous power that we have given the PAP government in Land Acquisition Act which it has used to acquired huge land stock at dirt cheap prices.

This group will act as a campaign to pressure the PAP government to fulfill their role as a responsible public housing provider. To fulfill their part of the social contract as embedded in the Land Acquisition Act.

Goh Meng Seng

Transport Minister vs HDB Minister

I am still waiting for MOF's reply at this moment, after sending them a second reminder email. But now, I have an interesting "survey result" from Ministry of Transport. Minister Raymond Lim claims that a survey of 3000 people came up with a result that 94% of commuters are "satisfied" with the bus and MRT services.

I guess any readers here who take public transport frequently would have much doubt on such claim but Minister Lim is quick to qualify that commuters are still unhappy about the waiting time. Nothing was said about the cramp conditions that many experienced during peak hours.

I am tempted to email the LTA or Ministry of Transport for their methodology of survey and any publication of their survey results. I am even more tempted to get volunteers to do my own survey with proper sampling methodology to show otherwise.

However, when I read that at last the Minister has admitted the problems raised here, about the inadequacy of public transportation and the unusual high volume of COE issued, even to roll out measures to solve these problems, I guess I will just leave him alone. I mean, compared to Minister Mah of HDB who is still insisting that his HDB flats are affordable after so many people have put up their views against him, Minister Raymond Lim is still not too bad. At the very least, he has made the SMRT to increase 150 MRT trips per week! At the same time, he is going to review the COE quota system to prevent the unusual increase of COE for the past few years.

However, he has fallen short of doing good for the bus services. Increasing the number of Mandatory Give Way Bays are not going to solve the problems! If you travel frequently on buses, you will notice that most of the time, the bus drivers will try to snail their way through the journey even though the road is clear and good for them! Why do they do that? Most probably under the instructions of Bus companies! This is to ensure that the bus will spend maximum time on the trip! This is part of the trick that bus companies are using.

On the other hand, Minister Mah is still sticking to his line of argument that HDB is still affordable. He does not admit that his market-based pricing mechanism for new HDB flats is the key problem of high HDB prices. He has rolled out quite a number of measures but it seems that they are aimed at resale market. So far, these measures are ineffective. Maybe Minister Mah does not understand the meaning of supply and demand mismatch. Anyway, I shall leave this to my coming postings on his Myths that he is living on.

The key message is this: both public transport and public housing are BASIC SOCIAL SERVICES. Entities that provide these basic social services have more social responsibility than just mere private enterprises.

In the case of public transport, it is better not to privatize the vendors of public transport services in a small country like Singapore. The market does not allow adequate competition to grow or rather, these public transport companies have actually colluded to provide segmented monopolies. Yet, the regulator, LTA has allowed this to happen. The basic premise of a privatizing public transport companies is that it could be more efficient with competition inbuilt. But the truth is, in Singapore's context, there are basically no competition at all! Buses are not competing with MRT on the same routes, unlike in Hong Kong whereby mini buses are very competitive.

Thus it is important for the regulator and the minister in charge to keep a high alert on these private public transport companies. They will basically collude and monopolize their segments, resulting in higher prices and lower service standards.

The problems of public housing provider like HDB is different. Although the government, through the MND minister Mah, has almost full control on HDB, it fails its basic role as provider of basic housing for Singaporeans. For the whole period of 2003 to 2008, the housing stock only increase by less than 2% while resident population increases by 8%! How could that happen? It just happened right under the nose of Minister Mah!

As for the pricing mechanism for new HDB flat, it is totally flawed for a government entity. HDB has totally forgotten its roots and roles as a basic social service government provider. It is sad for an entity that is based on socialist ideals to turn into a money making machine.

I will continue my contest against Minister Mah as long as he still refuses to revamp the system. As for Minister Raymond Lim, we will still continue monitor the situation but leave him alone for the moment.

Goh Meng Seng

After note:

I have this comment left on this article:

The way the survey results are reported is not credible.If you want to understand why, have a look at this url.

http://www.lta.gov.sg/images/PTCSS%202009_Annex-A.pdf

The satisfaction score for each question was measured using a 10 pt scale. If you look at the mean score, the mean score averages between 6 to 7. The % satisfied is however very high.

The classification of "satisfied" is not provided in the release. Based on the numbers, it is likely that as long as a person gave a score from 6 to 10, he is classified as "satisfied".

This is a non-standard methodology in survey research. It inflates the results as it groups "indifferent" respondents with the "satisfied" respondents. A more common grouping is

8 to 10 Satisfied
6 to 7 Neutral
1 to 5 Dissatisfied

Even using this highly questionable methodology, we see some alarming results. At the bottom of the release, we see a table on crowdness. On a 10 point scale, almost 50% of respondents gave a score of 1 to 5.

Well, it seems that aurvandil has practically exposed the kind of flawed methodology and presentation of statistics that Minister Raymond Lim used in parliament. I have been looking through HDB statistics which Minister Mah depended on and seeking clarifications by writing to HDB again to ask about how Minister Mah has come to the conclusion of using certain statistics. I am giving them a chance to make clarifications before I write about their funky statistical myths. On the other hand, Ministry of Finance has not replied to my earlier query.

We have to keep ministers on their toes and not let them use some funny statistics in parliament for their debates. We shall see how "solid" their statistics are in the coming week.

Sorry no enough Minister Khaw

This is the third day after my first email to Ministry of Finance but I am still waiting for the reply. Ministry of Finance has an automatic reply which states that "We will get back to you in 3 working days or less depending on the complexity of your query/case." I really hope that my little request is not too complex for them and I believe that when the Minister of Finance made his claim in parliament, all details and statistics would have been made readily available for public scrutiny.

While we are waiting for Ministry of Finance reply, I would like to deal with other issues. But this time round, I will not deal with Mr. Mah's myth yet. I will deal with Mr. Khaw's Health Ministry.

Mr. Khaw has apologized publicly about the lack of hospital beds but we do not have a full clear picture how acute the problem is. I shall illustrate the seriousness of the problem here.

The following chart is for this illustration:
The above chart shows the percentage increase in population, demand of hospital care (admission to both public and private hospitals), supply of hospital beds (both public and private) and the supply of doctors and nurses.

The demand of hospital care has increased more than the increase of population growth. This is mainly due to the rapid aging population. Although the supply of doctors and nurses in public hospitals have increased more than the growth in population and hospital care demand, the bottle neck seems to be stuck at the supply of beds.

The Private hospitals have reacted to the increase in demand by increasing the both the number of beds, doctors and nurses. However, the public hospitals, under the supervision of the Ministry of Health and Mr. Khaw, has DECREASED the number of hospital beds during this period from 2003 to 2008!

Facing a INCREASE in demand and a DECREASE in supply of beds, no wonder Singaporeans are feeling desperate when their love ones are being deprived of beds when they are sent to the hospital on emergency need!

I have friends who have complained about waiting for more than 8 hours, some at 12 hours for a bed when their family members were sent to hospital during emergency. This is a matter of life and death!

The Ministry of Health has promised to build the Yishun Hospital way back in 2001 but it turned out to be BROKEN PROMISES. As I understand, they were supposed to build one hospital in the West, Jurong or Boon Lay, but turn out to be empty plan again. When they decided to build Yishun Hospital after GE 2006, they complained about high cost basically because due to the competition on resources by the construction of the two Casino resorts!

We are now seeing a distinctive pattern in this multi-millions PAP government. They have sat on the problems without doing anything to anticipate the impact due to the increase of population, which in turn due to their flawed liberal Foreign Talent policy.

As Singaporeans, we could tolerate congested public transport and even higher HDB flat prices. But I think there is a limit to our tolerance when the life and death of our love ones are threaten just because the PAP government, particularly the Ministry of Health, did not do their job in coping with the very liberal Foreign Talent policy that they have embarked on.

My message to Mr. Khaw is this, SORRY NO ENOUGH! This is a matter of life and death of Singaporeans. The hospitals have increased their billings on Singaporeans over the years without improving their quality of services, in terms of providing adequate hospital beds. I seriously hope Mr. Khaw get the message loud and clear. Please don't tell us to visit hospitals in JB or Malaysia. It would be a total shame for a self proclaim First World government not able to take care of its citizens' healthcare needs but to ask Singaporeans to depend on Third World countries to give them faster, cheaper and faster care.

Goh Meng Seng

Budget Debate 2010 - Myths of HDB and 460K for poor over 60 years?

I have written to the Ministry of Finance to ask for a detailed breakdown of their numerical calculations on how they actually come to that assertion that the Minister of Finance Tharman made in recent parliamentary sitting on the Budget Debate.

It is hardly believable that the PAP government is so generous when it comes to providing basic welfare to our needy citizens. It was not so long ago that our memory is still fresh about the "heated" argument presented in parliament over a mere $30 increase in monthly allowance for the needy. Thus, I am really curious to know about the methodology and assumptions made in Minister Tharman's assertion on the seemingly HUGE handouts that the PAP government is going to give every year over the next 60 years (well, providing PAP could be the ruling party for that long) is going to be a "INFLATION ADJUSTED" of a total $460K.

As far as I know, there isn't any "inflation adjusted" methodology in PAP's very limited welfare approach (remember the debate on the increase of mere $30?). So I am all open and curious about the new methodology that they are putting in place.

On the other hand, I know my readers are eager to know what I think about Minister Mah Bow Tan's Mtyhs. I would say that he is living in his own Myths after I read his responses in parliament. I shall devote a few articles in subsequent days on talking about his Myths.

But let's wait for Ministry of Finance response first.

Goh Meng Seng

TOC: A minister must fall in the process of change, says NSP sec-gen

A minister must fall in the process of change, says NSP sec-gen
Tags: general elections

By Fang Shihan

Longtime opposition stalwart, Mr Goh Meng Seng (picture right, middle), is no stranger to Singapore’s politics. Having just been elected Secretary-General of the National Solidarity Party (NSP), the former Worker’s Party politician is decidedly confident.

“The PAP is ultra capitalist!” he says. “They think that running a country is like running a company… but in a country, surplus and deficit is not the same as profit and loss… [they have] no moral bearing in a political sense.”

Effectively bilingual, the owner of a small business in Ang Mo Kio and part-time translator switches between the two languages with ease during the interview. He also sees this as an asset should he come up against Mr Mah Bow Tan in Tampines GRC in the upcoming elections.

Views on the current political system

An economist by nature, Mr Goh compares the political system to a marketplace. He feels that the opposition must be the spurs in the PAP’s hinds to make the PAP more competitive.

Only by challenging the PAP’s power status will the PAP ‘up’ its competitiveness. This, he clarifies, is not the same as asking for welfare, which merely functions as a stopgap measure. Quite often, systemic faults are the cause of unemployment, preventing people who want to have an opportunity to work from lifting themselves out of poverty.

Drawing an analogy with the public transport system, which he derides as inadequate and not competitive, he says, “If you had a total monopoly of power, there is no incentive to do better…. There is no urgency or need for those in authority to heed your demand.”

Aside from the opposition, there needs to be participation from the people in order to get a more responsive and caring governance. A multi-pronged approach with the media, the social worker and politician as equal partners negotiating with the state would make for the ideal political system. Opposition leaders, he explains, are needed as political leverage to threaten the ruling party with the danger of losing voters.

“If Singapore wants to set the best deal for government, it needs [political] opposition in contestation for power.”

Another paradigm-shifting party?

Mr Goh says that the political system must change to serve the new electorate. Unlike the previous generation which was willing to sacrifice political freedoms for economic growth, the post-65 voters do not feel beholden to the PAP. The fact that the ageing Minister Mentor Lee Kuan Yew is largely responsible for holding the integrity of the ruling party together , and that post-65 voters will form more than 50% of the electorate in the next elections, there is an imperative to think about Singapore’s political future in the post-LKY phase.

According to Mr Goh, these post-65 voters are more educated and want to see political debate. More importantly, they wish to see substance in the political process.

The NSP, he says, “may be small, but it has a role [to play] to be the agent of change.”

The NSP, Mr Goh says, will be very open about its political strategy, something never seen before in Singapore. In line with the post-65 electorate that wishes to see more political debate and substance in the political process, the NSP will not wait for the 9-day campaigning period to begin educating voters on its vision for Singapore.

“Voters cannot make a good assessment within 9 days,” he reasons.

What NSP will be pushing for

Mr Goh declares that the NSP is planning to contest in Tampines GRC with its Malay candidate at the fore. There has never been a Malay MP from the opposition, which has led to a myth that only Malay PAP MPs can take care of the community’s welfare.

The NSP’s minister-policy centered strategy will see the NSP targeting Mr Mah Bow Tan, questioning him on the HDB policies which have led to rocketing flat prices. “Look deeper into the problem,” Mr Goh explains. “It is not just asset devaluation. We must ask: Is the minister doing his job?”

He will also be pushing for a minimum wage policy. Attacking the latest ESC (Economic Strategies Committee) report, which proposed levies for foreign workers, he says that this will only escalate the existing price war between lower-skilled local and foreign workers.

There is an imbalance of supply and demand in the labour market, driven by unlimited supply from foreign workers, he explains. These workers are therefore bound to be exploited through wage suppression as their wages are driven down by price competition.

Singaporeans are even worse off, he continues, as unlike their foreign counterparts who are able to rent rooms at $160/mth fromgovernment agencies, they instead have to pay a mortgage for their flat. Even if they were to rent a flat, a subsidized 2 room rental flat costs between $205 – $275/mth for second timers, if the gross household income lies between $801-$1500. Foreign workers also enjoy an effective lower cost of living, as their families are overseas.

“The burden is shifted to the foreign workers who have to settle for even lower wages. Levies don’t make sense without minimum wage,” he insists.

He thus proposes a limitation of supply by quota, together with minimum wage, to level out the competition platform. When asked if this would make locals uncompetitive, he responds that there needs to be a distinction between labour competitiveness and labour exploitation.

“A minister has to fall” in the process of change

The PAP came about through a people’s power movement, he says. But now, because there is no fear of competition, it has become a monarchy, building its palace and walls and shutting themselves off from the people. Citing the recent TOC feature on homeless people in Singapore, he asks if the MCYS knew about the homeless. And if they did, were they too busy to do anything about it? This, he says, has led to a situation of disaffection.

The ruling party should not think of how to maintain a monopoly, he urges. For example, the electoral system is structured such that a minister would be removed if the opposition won a GRC.

“Imagine if you lose a good minister because of the system that has been built. Is that good for the nation?”

He has no doubts that the PAP would still be dominant. However, this would mean that, upon losing a GRC, the PAP would still be in power, but with inferior stock.

The NSP believes in proportional representation, he says, for the sustainability and stability of the political system. A more dynamic model that reflects the wishes of the people is needed, instead of one that is designed to perpetuate a monopoly. However, he muses, change will only come in view of a reluctant monopoly of power – a minister must fall in the process.