Cognitive Dissonance: Singapore Fiscal Policy

I kept getting this promoted tweet on my Twitter feed over the last couple of days, from the Lee Kuan Yew School:

2 principles shape SG's fiscal policy: balancing the budget and keeping government small. #SG52 #SGpublicpolicy https://t.co/VLrH1Sg2Ud pic.twitter.com/mJzJRc0Uny

— Lee Kuan Yew School (@LKYSch) August 8, 2017

I usually don’t bother with promoted tweets, but curiosity eventually won over and I read the article. It’s a fair description of Singapore’s fiscal policy framework, although the part on the management of past reserves could have been expanded for clarity (there’s no mention of GIC or Temasek in there for example, or the endowment funds the government set up).

There is however, one part I’m in violent disagreement with (excerpt; emphasis added):

ICYMI: Malaysia’s Pension Crisis

My latest (excerpt):

Challenges of a pension system

ONE aspect of an ageing society is obvious to everyone – care for the elderly will take on greater importance. How adequate are Malaysia’s pension systems?

In western societies, most countries have achieved universal coverage, with net income replacement values ranging from 29% in the United Kingdom, to 96% in the Netherlands (based on OECD data)….

…The challenge in these western economies is one of sustainability. The problem with DB schemes is that they are based on the principle of pay-go – current workers’ contributions pay for the pension entitlements of retirees. This is not an issue if the demographic profile of the country is relatively stable...

Click the link for the rest.

State of the Households II

I was at the launch ceremony at Khazanah Research yesterday, and while the report doesn’t present anything new, it compiles all the various statistics domestically available into one document to present a holistic picture of Malaysian households.

You can download the report here.

Oh, and I love the new interactive socio-economic map of Malaysia!

Thanks go to @Inequality_MYS for the invite.

Malaysia’s Government Contingent Liabilities

A fast one (seems like all I have time for these days are fast ones), on contingent liabilities (excerpt):

Analysts say Govt’s contingent liabilities likely to rise

...In recent years, the Government has relied on what is called contingent liabilities, or off-the-books debt, to fund major development projects. Big-ticket items such as the rail lines cost billions of ringgit, and with Government debt close to its self-imposed ceiling of 55% of gross domestic product, the use of special-purpose vehicles (SPVs) that take the debt burden off the Government’s books has been almost the preferred way of funding such mega projects.

Cumulatively, contingent liabilities amount to RM178bil worth of guaranteed debt by the Government. With government debt at RM630.5bil at the end of last year, the off-the-books debt that is guaranteed by the Government is worth 28% of the public sector’s total debt.

...Structuring debt in such a way is by design, according to economist Datuk Dr R. Thillainathan, who is the former president of the Malaysian Economic Association....

Managing Risk: TPPA Edition

The treaty document has been out for a couple of months now, and the treaty itself was signed last week. But there's still plenty of opposition to the pact, as we will have another couple of years two go under the ratification process - yup, it still isn't a treaty we have to abide by yet.

In any case, some of that opposition is getting a bit shrill, repeating nostrums that don't really apply any more. Part of the problem is the sheer length of the treaty document; another is the legalese language used.

Take ISDS for example. There seems to be this notion that ISDS would override the ability of governments to regulate, including matters of national interest such as labour laws, health and the environment. That's not true.

Pension Adequacy in an Ageing World

[Disclaimer: Since I work for a pension fund, this blog post should be taken as biased and not wholly objective. You have been warned]

From Project Syndicate, Allianz Asset Management on pension adequacy (excerpt):

Rehearsals for Retirement

MUNICH – Over the rest of the twenty-first century, the global human population is expected to keep growing; more important, it will keep growing older. By the year 2100, the United Nations expects there to be more than ten billion of us, up from 7.3 billion today. In the meantime, the number of people older than 60 is expected to double by 2050 and more than triple by the end of the century.

As societies around the world prepare for swelling numbers of retirees, the policy challenge will be to ensure the financial sustainability of pension systems while guaranteeing adequate incomes for those no longer working. Today, according to recent research by Allianz, only four countries appear to have achieved this: Finland, Norway, the Netherlands, and New Zealand....