He cautions against complacency and ignoring warning signs that things could go wrong
THE economy may be booming and Singapore's prospects over the next decade are favourable, but Minister Mentor Lee Kuan Yew warned yesterday of a 'dark side'. Concerned over what he saw as 'too much euphoria everywhere', he warned Singapore against becoming complacent and ignoring warning signs that things could go wrong.
'Setbacks could come suddenly,' he said, noting how one such warning came recently with the global meltdown of stock markets in August.
While the markets have since recovered, he believed the underlying problems, linked to the United States mortgage woes that have not been cleaned up, have not gone away.
He cited other nagging worries: inflation going up, prices of commodities rising, and concerns over a volatile region caused by the instability in Myanmar.
Mr Lee painted this backdrop at a forum with Nanyang Technological University students, as he commented for the first time on the recent Central Provident Fund (CPF) changes. He counselled caution against those who had pressed for higher CPF returns.
A thorny issue in the suite of changes to the CPF is the extra 1 percentage point being given to members for the first $60,000 in their balances.
MPs had asked for more. Some suggested tapping into the reserves and pegging CPF interest rates to the returns of Temasek Holdings' and the Government of Singapore Investment Corporation (GIC).
Yesterday, Mr Lee noted that amid this debate, there was one worry over a possible downturn in the US economy and resulting inflation worldwide. And that might lead to a repeat of the low growth and high inflation, or stagflation, of the late 1960s and 1970s.
It was during this period, he recounted, that Singapore's reserves suffered losses.
That was what prompted the Government to set up the GIC in 1981. It was so that there could be a dedicated team that could work at protecting the value of the reserves and investments, and especially at that time when inflation was raging.
'We never invested the CPF money in shares or bonds. We always invested the CPF money in Singapore Government bonds where the Singapore Government guarantees a fixed return and you're always going to get it,' said Mr Lee, who is the GIC chairman.
'In other words, you will never lose. And if anybody thinks he can do better, he's welcome to take his money and go to a fund manager and try and do better.
'The fact that we have done well was not because the GIC had a lot of geniuses. It's just that they learnt how to do it.'
Besides the turbulence of the global markets, Mr Lee also urged Singaporeans to remember that their country is in a 'volatile region'.
He believed that an unstable Myanmar was a time bomb that would rock South-east Asia. That was why it was in the best interest of Asean to help stabilise the country, he said.
In such a volatile region, it was all the more important for Singapore to continue to distinguish itself through better standards of governance.
The Government had already put in place the 'big pieces' of national solidarity, English as a working language, industrial harmony and an incorruptible system.
The founding leaders also had the 'basic principles' of building a clean and safe system with world-class infrastructure welcoming to investors.
This whole system evolved because of political leadership that insisted on meritocracy and incorruptibility at every level, he said.
'So our future depends on Singaporeans realising that we always have to be different, cleaner, more transparent, more efficient, always better,' he said, before an hour-long dialogue with students that touched on topics such as global warming and the Singapore media.
'Then we'll survive the competition against those with bigger girth, oil, gas, forest, rivers, whatever. And the next 40 years, if we heed those principles, we should do as well as the last 40 years, provided we change each time the world changes.'
'YOU'LL NEVER LOSE' WITH CPF
'We never invested the CPF money in shares or bonds. We always invested the CPF money in Singapore Government bonds where the Singapore Government guarantees a fixed return and you're always going to get.
'In other words, you will never lose. And if anybody thinks he can do better, he's welcome to take his money and go to a fund manager and try and do better.'
MM LEE, counselling caution against those who had pressed for higher CPF returns
Related Video Link - http://tinyurl.com/2zy7khMM Lee on why CPF monies were never invested in stocks & bonds
Minister Mentor Lee Kuan Yew today defended the new CPF interest rates and explained
why it cannot be tagged to stocks and bonds.
In Parliament recently, some MPs had questioned why the average CPF interest rate had to hover between 3 and 5 per cent when the GIC, they said, could earn interest of around 8 per cent.
Speaking at the NTU forum, Mr Lee said Singapore's reserves suffered heavy losses in the late 1960s/70s because of ballooning deficits in the US.
This led to stagflation and losses for Singapore's stocks and bonds.
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