HDB and COE: the right comparison?

National Development Minister Lawrence Wong might have been on to something when he compared HDB flats to cars, in that there is a clear distinction when it comes to ownership between the ownership of a chattel (the physical car) and the right to use it in certain ways.

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Read the news coverage of Mr Wong’s comments here.

In car ownership, the ownership of the physical car is separate from the ownership of the right to use that car on the road (the COE). One can buy a physical car and not own a COE. You can use it on a private race track, park it on property you have rights to, or dangle it over your establishment entrance.

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For however long it lasts. Photo: Tripadvisor

You can look at it, get in and out, even drive it around (private places, or abroad) if it can move, you can will or sell it to whomever you wish and they will then have the right to do all those things. You can scrap it, or keep it as a rusting hulk of metal. These are your rights as an owner of a car, in perpetuity. That is ownership of a chattel.

This aspect of car ownership value depreciates not because of the passage of time, but because of the condition of the item. The ending value, far, far into the future, is probably whatever a few hundred kilos of steel is worth.

Then you also own (hopefully) a COE. It lasts for 10 years when it is new. The COE gives you the right to use your Singapore-registered car on Singapore’s roads (as long as you also fulfil your other legal obligations for public driving). It is tagged permanently to a physical vehicle.

This aspect of ownership depreciates because of time, and nothing else. The ending value is zero. You could make money selling your COE/car combination if market forces change, but if I told you that this was an appreciating asset, you would slap me and say that I am stupiak.

A HDB flat is half-and-half. It is, in one payment, the right to take limited-time possession of a space hanging in the air that is made accessible and useable by a physical building. You own the physical item, but only as long as the intangible item (the lease) lasts. If you ever return it to the HDB, you only need to return it with bare walls. The value of your flat could appreciate over the short-medium term, given the right conditions, and you could sell it for a profit with the right purchase/sale timing. But the end value after 99 years is zero.

So when Mr Wong says that we own a HDB flat, he is correct in that we own the right to the dwelling. We do not, however, own any physical thing in perpetuity. This is unlike, say 38 Oxley Road, which is freehold. If LKY’s house crumbles to dust, the land itself is still valuable after 100 years. Its owners (whoever wins the battle of the siblings, perhaps?), will be able to use it or build on it or sell it. They own the physical land, and not just the right to exploit the land.

Leasehold for property is a great policy to make Singapore a place for social mobility, and to prevent a rentier class from forming (ergo the state becomes the rentier). I personally support it. But when Mr Wong says “There is a high likelihood that over a period of time, if the economy does well, if incomes rise, then property values will appreciate together with the fundamentals of the economy, and your stake in the nation – your home – can also appreciate in value.” He is only telling us half the story.

A HDB flat – actually ANY leasehold property – is a depreciating asset. It may not depreciate in a straight line, and it may not even depreciate every financial year, but it is ultimately a depreciating asset. The implication, and what Mr Wong never mentions explicitly, is that we need to plan to sell. We need to have an entry AND exit strategy for our HDB flats.

In Mr Wong’s words, in order for “our homes [to] be an important and valuable asset that we can use as a retirement nest egg”, we need to do the following:

1) buy a property that is larger/more valuable than what we will need in retirement so that we can downgrade (this is inevitable if we want to unlock the value of the “nest egg”)
2) sell it at the right price during the right market conditions (but no guarantee of profit)
3) take as cheap a loan as practicable and pay it off as quickly as possible (interest payments eat into any profits you may make); if you pay 3 per cent interest on 80 per cent of a property for 30 years and the property is sold 30 years later at DOUBLE the original price, YOU STILL LOST MONEY, and you haven’t even counted inflation yet (of course, you have to compare this to the cost of renting).

A HDB flat is an asset with a long lifespan. It gives you more time to cash out. You can argue if it is or isn’t ownership all day long (it is ownership, but not an ownership of land in the way you own a car), but please don’t tell me that a HDB flat is an appreciating asset. Or else you will look stupiak.

 

 

P.S.: I was tiring of the word “nest egg”, which is used to describe money saved for the future. That was until I discovered the second meaning of “nest egg”, a real or artificial egg left in a nest to induce hens to lay eggs there, which sounds terribly apt for what is happening right now.


Photo by chuttersnap on Unsplash

 

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Ben Davis and Singapore’s fears and aspirations

I’ve just got back home from the UEFA U19 Championship match between France and Ukraine, played in Vaasa, Finland. That’s 22 youngsters, Ben Davis’ age, playing top-notch football, vying for the world stage. I wondered if any of them would have to shelve their football careers for two years to swell the ranks of their national armies.

Mindef’s decision to deny Ben Davis his deferment is a death sentence for our aspiring athletes. It’s a clear sign that our sportsmen stand no chance, no matter how good they become, if they don’t win world-class competitions before they’re 18. Which is basically impossible, especially in team sports.

This fear will ripple through our sporting culture, bleed the talent out of it, and scuttle our aspirations of sporting glory to feed our fear of foreign invasion.

But Mindef’s decision, like so many before it, follows a consistent (some would call this fair) and transparent logic that has been applied for years. The troubling thing about the Ben Davis situation is not how MINDEF makes these decisions.

The troubling thing is that Singaporeans are faced again with the feeling that we are not in control of our destiny as a community and as a people. We don’t get a say in what kind of country we want to be. We don’t get to say that this level of military obsession is too much or too little. We don’t get to say that we would rather press our boys into service in sports than press them into service as armskotemen or army clerks or cannon fodder.

SMS for Defence Heng Chee How called it a “good balance”. But what does that mean really? Who decides what is good or balanced?

“For a country like Singapore, we want to value every Singaporean and we want to develop our talent of course, but at the same time, we must also remember that the purpose for all this development is that we have a country and that all of us actually have a duty to one another and this country. So we have got to make a good balance between our duty to this country and our very genuine urge to enable everybody to reach their highest potential.”

Do we sacrifice our people so that we can have a country? That sounds like Dulce et Decorum est (read the poem). What is our duty to our country? And what is our country’s duty to us? Do we have dialogue about this or is it a done deal to be shoved down our throats by some higher-up?

From all the reactions so far, it is clear that many Singaporeans feels that we don’t have a say in what we want Singapore to be. That’s why we are cynical about Our Singapore Conversation and whatever newfangled conversation the 4G leadership claims it wants to have with us. That’s why we want Ben Davis to break the law, become a fugitive and chase his sporting dream. We want to live vicariously through Ben.

As far as I can see, the perception is that the G simply wants to uphold a standard set in the 1960s as if it was perfectly relevant today. There will be no public input to re-evaluate how important NS is to us, or how important sporting and other pursuits and aspirations are to us. Our aspirations are frozen in time, dominated by the fears and aspirations of an era past – economic, military, civil order, control.

But don’t we fear existence without substance? Don’t we fear life without beauty? Don’t we fear the meaninglessness of an endless reach for wealth?

Aren’t we afraid that we’ll never get to talk about how to build this country into something more meaningful for us?

 

 

 

Sometimes, “efficiency” is just passing the buck

Singapore has an efficient G. We pride ourselves on spending the least, proportionally, on things like education, healthcare, while still attaining good outcomes compared to other nations. We run a good system, so we think, because it ticks all the KPI boxes that we measure – cost, ratios, outcomes.

But are there hidden costs involved?

Mr. Always Late

My personal pursuit of efficiency comes in many forms. One of these is that I love cutting my timings close – deadlines, meetings, appointments. The result is that I am often late for meetings. This suits my personal measure of “efficiency” just fine – I hardly waste a minute waiting for other people as I am the last to arrive. I am very efficient in that sense.

The cost, hidden from my calculation, is other people’s time. If I hold up two people for five minutes, I have gained five minutes at the cost of a 10 minute loss to them. The loss doesn’t come on my tab, so why should I care? But the fact is that the group/society/system as a whole becomes more inefficient even as I gain efficiency.

The cost of my tardiness is socialised, and it doesn’t bite me in the back until much later, and I may never realise that it may be precisely my tardiness that knocks on – maybe 100 degrees of separation later – to work out as low quality service from my waiter at a meal, which I hate.

A chat with a friend online (and a lunch with another) also surfaced this thought – that costs that aren’t socialised at the national level could be socialised at other levels, and often these costs are somewhat hidden, and almost always unquantified.

Who pays for an individual’s bad choices?

What one friend raised was family problems. We got down to talking about how bad choices by one or more members of a family had an outsize effect on the other members of the family (in the SG context) because the state/society held to a strict policy of insisting that when an individual makes a bad choice, his family must pay for it first.

Is it better for four people to pay for one person’s burden, one out of every five times (one bad actor in one out of every five families of five persons) or for 96% of people to pay for 4% bad actors?

I’ll not debate the merits of socialising bad personal choices (poor money management, habits like gambling, or neglect and irresponsibility) here. My point is that just because we are not spending it out of the national budget, does not mean that Singapore doesn’t pay for it. Broken families, debt shouldered by the rest of the family, lowering the productivity of otherwise-productive family members – all these are unquantified effects and costs of allowing a family to pay for mistakes of one of its members first, before society steps in to help.

So here’s a question for our philosophy of mandating that family members pay first for the needs and/or failures of their kin: The numbers look great on paper, but what’s the drag on society as a whole?

Who pays for welfare?

Another example is how our social welfare system depends heavily on private funding. To describe the Singapore system simplistically, the G spends a tiny amount to fund some social welfare initiatives. The rest of the burden is placed on VWOs, some of which are fund-matched by the G.

The VWOs provide ground-feel and have a mandate to be extremely efficient with their funds (because they do not suffer from the “big pockets” psychology that the G might have). They also help to galvanise engagement of individuals with charity work, often within a given social framework – business/religious/race.

Some of my friends praise this use of VWOs – they ideologically believe that there should be no or little mandated social welfare: Citizens in a nation have no/low baseline responsibility to provide living basics for one another via taxation. Bleeding hearts should pay first, and wealthy bleeding hearts before everyone else. Singapore’s VWO-reliant system allows those with means and will (well-off and/or bleeding heart) to bear a disproportionate burden. If you are poor or selfish, you do not need to carry the burden, but the 250% tax exemption creates an incentive for those that are selfish and rich (assuming they cannot find another way to avoid taxes).

One unmeasured side-effect of this is how tapping on private money and labour for social welfare may actually take private funding away from other areas of social development that the state should not engage in  (or engage too much in). The arts, sports, culture, media, civil rights – in other countries such initiatives are often backed by foundations and trusts, or other privately funded organisations.

In Singapore, the pressing need for VWOs to fund basic standard of living means that priority is taken away from these other social pursuits. Whether this is by design, I’ll not speculate here.

Who pays for education?

I was asked again today about whether the Finnish education system would be better for my kids. My answer is “yes”. It’s not that the Finnish system has better measurable outcomes (Singapore consistently ranks marginally higher on PISA, and Finland spends more than Singapore per capita). With six kids, I’ve come to realise that it is very difficult to ensure good outcomes for all my kids as a whole.

Not only is the school system stressful for them, in order to achieve optimal/individually maximised outcomes, our family has to spend resources for tuition, enrichment, etc. It is simply not possible with six children. The cost of education is passed on to children and parents and teachers who are over-stressed. The “system” is efficient – spending and outcomes look great. The people outside of the measurement pay the price – a billion-dollar tuition industry, teacher attrition, and student suicides.

In conclusion

In conclusion, Singapore is a society/state that has, for better or worse, decided that we would not want to socialise many of our costs at the top level. We allow costs to trickle down.

We need to be conscious of this choice and this effect and, based on that awareness, decide anew how much and how we want to socialise costs, and measure “efficiency”.

This is what defensiveness looks like

Dr Maliki Osman attempted a rebuttal of Associate Professor Teo You Yenn’s influential book This is what inequality looks like. The commentary published in The Straits Times took a swipe at the book from the get go, with the headline “This is what helping families looks like”.

The commentary follows Sudha Nair’s warning about giving help to the undeserving, and reads like an unmitigated defence of the status quo. It initially rebuts “some commentators”, and attributes AP Teo’s points to this broad group, but eventually names AP Teo and her book closer to the end. To be honest, it doesn’t really answer Teo’s points well; there are chapters in Teo’s book that directly critique Dr Maliki’s points. It seems that only those who have not read Teo’s book would give much weight to Dr Maliki’s article.

There is also a major internal weaknesses in Dr Maliki’s argument, which is how he says “we need to be careful about using some particular cases or groups to generalise about the poor, the system, and the outcomes”, but then spends more than half of the article using particular cases or groups to support his claim that the system is a-okay.

But I’m letting the little things distract me. Of more concern is piece of the big picture Dr Maliki’s article (and Ms Nair’s) helps to fill, and it is shaping up to be an ugly picture. The picture shows that the G, is not listening to even the most fair-minded and well-meaning criticism.

Finance Minister Heng Swee Keat’s promise that the new batch of political leaders will “listen with humility and respect” has been shown to be untrustworthy, and this as the G gears up to run another round of “conversations” with Singaporeans.

“The fourth generation leadership will listen with humility and respect. We will consider all views with an open mind, and adjust our course accordingly. We will communicate the thinking behind our decisions clearly. We will bring Singaporeans together and give everyone a role to turn good ideas into concrete action.’’

Tracing from events as recent as the Parliamentary hearing on fake news, where Dr Thum Ping Tjin was grilled for six hours about his doctoral work on Operation Spectrum. He presented an interpretation of historical documents that ran against the G’s long-held narrative, and became the target for ministerial excoriation.

Then, ST Editor-at-Large Han Fook Kwang’s suggestion that the G communicate more clearly, with less jargon and empty words, was met with a stern letter from the Ministry of Finance, which completely missed the point of his column and took him to task for some minor point.

Even Mr Seah Kian Peng’s stirring plea to balance economic values and moral values was met with Minister for Education Ong Ye Kung’s cold-sounding call to “self-discipline” via a “clean wage”. That was followed by MCCY Minister Grace Fu’s insistent defence of the cleanliness of MP parking fees. We then discover that they pay a mere dollar a day to park in any HDB car park in the nation.

All this considered, the picture is forming of a G that talks about listening to us, but really means that they are listening defensively – to rebut, to invalidate, or to keep tabs on our thoughts. Or perhaps the best we can hope for is that they pretend to listen so that we can vent our frustrations, in the hope that we may be amenable to waiting for change that will never come.

 


Note: Independent research has indicated that about 10 per cent of Singapore’s resident population earn below $500 per capita – a definition of financial hardship. Of these about 60% are working, 20% are unemployed, and 20% are retired. There are many G schemes to help, like Silver Support and Com Care, but their total payouts fall desperately short of any reasonable subsistence level.

Featured image from Pexels.

 

How we raised 6 kids on more than $3,000 a month

There’s been some debate around the family that is raising seven kids on less than $3,000 a month. It’s irresponsible. It’s fantastic. They’re leeching off society. They’re building Singapore’s future. Respect. Rage.

I guess my story is something like that, and I’m a little more comfortable sharing about it now that we are moving to Finland for the next few years. My wife and I have six children, and I’m somewhat the sole breadwinner. Our kids qualify for the MOE Financial Assistance Scheme (free books, uniforms, transport and after-school care subsidy, most school activities free) but that’s a matter of mathematics: the threshold for qualification is a per-capita income of $690. That’s $5520 for our family of eight. My monthly salary is below that threshold and I earn enough to pay the other bills.

Singapore is a lot more “welfare” than most people think, if you know how to navigate the system. The PAP is mostly true to its promise that no Singaporean will want, but that is contingent on knowledge and the willingness to access that aid. At that per-capita income level we also qualify for rather heavy subsidies for pre-school childcare, plus various perks from community groups and programmes.

I employ my wife under one of the businesses I control – her job description is to take care of our children. It’s a real job, and far more work than I ever do. I pay her an exploitatively small salary and CPF (think FDW), and as a working mother she qualifies for all the attendant benefits. She is a professional stay-at-home-mum, and a very good one. We do not want to employ a helper.

(Finland treats stay-at-home parents as contributors to society, and pays them a benefit of several hundred Euros a month; Singapore sees non-working parents as a socio-economic liability. More on that some other day).

My wife and I have no expectations of financial support from our kids when we are older. I have no intention of ever stopping work, and we have a property we can downsize from. We have some other long-term investments. We are well-insured. My parents sometimes give us support. Friends too. We have enough to show generosity to others.

Are we leeching on society? Yes we are, right now. Even if we paid for our school fees and kids’ transport and uniforms and childcare we would STILL be leeching on society. Education is subsidised for all citizens. Healthcare is subsidised for all citizens. For most of us with children, the direct taxes we pay are far lower than the subsidies we access every year. Consider education:

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Government Recurrent Expenditure on Education Per Student (I can’t embed the HTML with my free WordPress account)

Even if you are a well-off, you can send your kid to an anchor operator childcare and get $300 a month basic subsidy. You can get treatment in a C class ward or the polyclinic and enjoy hefty subsidies.

In return, my children will serve NS (where applicable), pay taxes when they work here, and make money for their employers, which will produce even more tax. They will spend money to live, which will fill GST coffers. They will contribute to CPF, which the G will (at least in part) take and invest into NIRC (and more reserves). That’s 20 years from now, when you will need someone to pay taxes to fund your retirement. Maybe mine, but I don’t intend to retire.

If you want to be calculative, think of it as paying a short-term cost for a long-term investment for the nation. But really, these children are our people, our citizens. We owe it to all our citizens to provide an environment where they can develop to their full potential. It is a sensible financial decision, as well as a sensible moral decision.

 


Featured image from Pexels.

Stop telling me success is “possible”

The words mean nothing. Every time some ultra-high net worth individual or politician goes around touting that “hey folks, there’s a social ladder to climb, go climb it”, they are actually (often deliberately) distracting us from the real issue of probability. We need to talk about probability, not possibility.

Now I’m not saying that in my context (Singapore) we are in a dire situation and that we need major reform or that they are lying to us. Inequality exists here, and if you were the comparing sort, we’re probably in the top half of the world when it comes to ossification and negative social impact. The question is what level we want to aspire to – to be a world leader in social mobility, or do we think that social mobility is a bad thing beyond a certain point (for example, an argument that “no rest for the rich” is bad because it disincentivises aspiration)?

Either way, we need to learn to stop it with the platitude that “whatever your situation is, if you work hard, you can succeed” and see the platitude for what it is whenever such throwaway words leave someone’s lips (and get waved around by the media as a slogan).

With the revelation (I hope the G can publish the source for other schools, because Mr Ang Wei Neng got it from the former RI principal) that not even half of Raffles Institution’s students come from non-elite primary schools, the odds are clearly stacked against the have-nots, even in the heart of our “meritocratic” education system (which is a subset of our “meritocratic” national system.

Ms Teo You Yenn’ s latest book “This is what inequality looks like” (BUY THIS BOOK), also shows the ways that inequality in Singapore has become sticky as we create systems that try to incentivise effort and hard work. This is a problem that many MPs have highlighted over the last week.

So the President and the Ministers say “they want to listen”. I’m then confounded by the tone-deafness (I hope it is unintentional) that is so apparent when someone stands up to say “anyone can succeed if they work hard”. This is either universally true or untrue. Even if you were a slave, you could “succeed” against the odds by leading a rebellion, or by winning in the fighting pits to regain your freedom – rebellions and skilful slaughter are hard work! Or if you were a European peasant, you could still rise to the ranks of nobility by joining the crusades to slaughter innocents, or perhaps star in some fairytale, or scheme and seduce your way into the pants of some countess-to-be (please see Game of Thrones for tips).

Has the world been an equal-opportunity place all this time? Garbage. Inequality exists, and it exists in Singapore. The playing field is NOT level. We don’t want to hear about the universal truth (or the universal lie) of hard work and success because it blinds us to the real issue in society.

What’s important are for the G to tell us what the odds are, across different risk factors. What are they doing to equalise these odds across education, social spending, employment, social networks, etc? Is the playing field getting more level, or less level, as time goes by? Which systems have to change to make it better?

Political leaders tell us about probabilities and the policies that will shape them. Politicians tell us about “possibility” and pipe-dreams, and turn our eyes away from important questions.

 

Photo by Jordan Whitfield on Unsplash

I trust our generals!

I trust our generals wholeheartedly. I trust them to plan our national defence, and to manage the military. I trust them to muster and motivate the armed forces to war in times of need, and to show strength to keep the peace.

As a soldier, when they tell me to go, I go. When they tell me to stay, I stay. What part I need to play in the bigger plan. How the resources at their disposal work together best.

I trust them because they have done this job from the beginning of their decades-long careers, when they started at the bottom of the (officer) ranks and amassed experience and learned specific skills, handled weapon systems and technology. They are the best men for the job.

But put them in another world and they have little credibility. If I am going to scale Everest, I want a Sherpa by my side, a Sherpa with no formal education, a Sherpa who has never left his province. I do not want a general to guide me up the treacherous mountain. I do not want the Pope to lead me on that journey either. I do not want Warren Buffet to show me the way.

That’s why it is disconcerting when SMRT starts touting the military credentials of their incoming (and outgoing) CEO. Mr Neo Kian Hong is intelligent, I’m sure. He’ll learn eventually. It seems that his predecessor Mr Desmond Kuek has learned enough after six years, and is stepping down. Will Mr Neo take six years to learn as well?

Mr Kuek faced a steep learning curve when he jumped industries. Mr Neo will face the same. Did Mr Kuek successfully transition? Did he achieve what the board set out for him to do? What does his success or failure say about Mr Neo’s chances?

I think I’m most curious about the process that has put (save Ms Saw Phaik Hwa) a military man on the “throne of the trains” for the majority of the company’s existence. That alone is quite astounding. It makes one puzzle over how wide a search has been done. How unattractive could the job be to professionals in this field? Is the pay unattractive? Is the job impossible?

Good luck to Mr Neo. He has ability to shoulder big responsibilities. I hope for all our sakes that he manages to overcome the obvious disadvantages he will suffer from jumping from the public sector to the (officially-)private sector, from one industry to a completely different one. I don’t need to trust him. I hope he succeeds, but deep down I have my doubts.