That $16m question
Town Council chief saysprudence has kept riskexposure to acceptable level
Tuesday November 18, 2008
Ansley Ng
ansley@mediacorp.com.sg
THE size of the burnt investments had earlier been described loosely as a couple of percentage, and yesterday, the hard figures amounting to$16 million in all were revealed for the first time.
Roughly $12 million, or 0.6 per cent, of Town Councils total funds available for investment had been sunk into Lehman Minibond notes, DBS High Notes 5 and Merrill Lynchs Jubilee Series 3, shared Senior Minister of State for National Development Grace Fu in Parliament.
These were investments by the Holland-Bukit Panjang and Pasir Ris-Punggol Town Councils, which had put in 6.7 per cent ($8 million) and 2.6 per cent ($4 million) of their total investible funds that is, their accumulated surpluses and sinking funds.
Six more Town Councils shared a $4-million exposure to Lehman Brothers-linked products, through their fund managers investment portfolios, revealed Dr Teo Ho Pin, co-ordinating chairman of the 14 Peoples Action Party (***) town councils, in a press statement.
The six are Aljunied, Ang Mo Kio-Yio Chu Kang, Hong Kah, Marine Parade, Tampines and Tanjong Pagar.
Since the revelation two weeks ago that several Town Councils had sunk money into Lehman-linked products, some Netizens and letter-writers to the media have called for the full picture to be given, and asked if Town Councils should even be dabbling in such investments with money collected from residents service and conservancy (S&C) charges.
In Parliament yesterday, Nominated Member of Parliament Eunice Olsen asked if there really was a need to continue with such complex and risky financial instruments.
Were the people at the Town Councils (responsible for these investments) aware of the risks involved, which included losing the entire sum?
Ms Olsen, the only parliamentarian to ask about this issue, also wanted to know if the Ministry would further cap beyond the 35-per-cent limit imposed just last year the proportion of Town Council investments allowed in non-government securities and bonds.
No, said Ms Fu, as Town Councils were best placed to determine their own risk tolerance and needs.
Some Town Councils prefer to charge higher S&C charges so they put their savings in very safe investments. With the inflation of six to seven per cent we have witnessed this past year, that leaves a significant inflation gap that the town councils will have to meet in the long run, she said.
Other town councils collect very low S & C charges but when the time comes for major repair works, they may have to collect from residents a significant amount.
And then there are those that take the in-between route: Collect average S & C charges, invest their sinking funds in the middle-range so that they can try to mitigate the inflationary gap ... They are able to meet the needs in the long run and, at the same time, they are not imposing significant pressure on their residents.
As for whether they were aware of the investment risks they had taken, Ms Fu said: We should ask the town councils and it is something the residents should pose to their respective town councils.
SUBHD:
When TODAY put the same question to Dr Teo later, he declined to comment, saying that events were still unfolding with the Monetary Authority of Singapore reviewing the matter.
What was the town council doing to recover the value of its investments? Going ahead, would there be changes in the way it invests its money? Dr Teos response was that it was always prudent by not putting all its eggs in one basket, and it would follow the ministrys guidelines.
In his press statement, Mr Teo noted that the 14 *** town councils had achieved an average annual rate of return on investments of over three per cent more than three times the average interest of about 0.9 per cent earned on fixed deposits over the same period.
He stressed that they exercised prudence with a diversified investment portfolio, hence keeping overall risk exposure down to an acceptable level.
On concerns about the dent in sinking funds used for long-term improvement works such as lift-replacement Mr Teo assured his own residents that the town councils funds remauined healthy.
There will neither be a deterioration of Town Council services nor a delay in the works and plans the Town Council had in place before the financial turmoil, he declared.
In the past six years, the town councils kitty has grown from $62.6 million in 2002 to $118.8 million as at March this year and 43 per cent of the increment was attributable to investment income, he pointed out.
Dr Ahmad Magad, chairman of the Pasir Ris-Punggol town council, said its average annual investment income and return over the last five years were $4.36 million and 3.4 per cent respectively.
Despite the current depreciation in value of its intesvment, he said: Our long term outlook remains positive.
source :
http://www.todayonline.com/articles/287786.asp