Feb 18, 2009

The SAF Needs To Fix Its RT System

An email from one of my readers.

Hi Mr. Wang,

My name is Lim. I'm a normal [XX]-year old graduate working in a normal company and living a very normal life. Basically, I'm a nobody.

I'm sure we're all familiar with National Service and Reservist and how we positively hate how the gahmen still manages to intrude into our personal life even after we've served our NS liability.

Here's my story.

After I left the army, I became unfit and unable to pass my IPPT. I knew I had to pass my IPPT in order to avoid remedial training which is 8 sessions of physical training. Thus I started running and getting some exercise.

My birthday falls in [XXXXXXX] and I started training somewhere in [YYYYYYY].
By [XXXXX] I was confident of passing my IPPT. Unfortunately, I pulled my
hamstring in [XXXXX] and I was unable to do the test.

( I know at this point Mindef will point out that's just an excuse and I could have done the test earlier. Even a medical certificate would have been rebuffed. FINE. Not going to argue).

I was hauled down to Mindef and slapped with a S$100 fine. (Not going to argue).

So they sent me to this lady who told me to select dates for my remedial training. I had 3 options (twice a week)

1) Monday 6pm to 10pm / Sat 10am to 2pm

2) Wed 6pm to 10pm / Sat 4pm to 8pm

3) Thur 6pm to 10pm / Sunday 4pm to 8pm

Note that they assume everyone can get off work at five (You have to be there half an hour early). I think they got us confused with Australia.

Here is the catch, you can only pick one of the options. You can't under any circumstances mix and match the dates. For example I can't take Monday evening from option 1 and put it together with Wed evening from option 2.

All the options were bad for me, due to work / family commitments but I simply had to pick one (FINE, not going to argue).

I suggested to the lady if I could just take my test, pass it, and avoid all of this nonsense. And she replied with a smile "I'm sorry, our system won't allow you to take your test until you have completed your RT". (A system designed by scholars no doubt).

So basically I HAVE to do the RT no matter what. EVEN if I can pass the test. Here's what really irritates me. (sorry I'm getting there).

1) The S$100 fine is to punish me. (or they just want my money)

2) The inflexibility of the schedules is insipid, why can't they let us choose which dates we can do the RT? After all, if we do it twice a week it shouldn't matter at all. (So i guess, its just to punish me since i'm at fault)

3) I have to attend the RT, even if i'm willing to take the test immediately. If I miss a single RT date, they'll fine me again (Who saw that coming? An opportunity for them to make more money)

My question is: Are Mindef simply interested in making us 1) fighting fit or are they just trying to 2) punish us and 3) take away our money.

Maybe all of the above since I'm a terrible citizen for missing my IPPT. I deserve it.

P.S I know this is a rather unimportant issue compared to the other sociological / economic issues on your blog.

Best regards,

In the above email, I have deliberately obscured a few details, (as you can see with the "XXXXXX" and "YYYYYY") in case some overly clever person at Mindef decides that he must do some investigation to ascertain who Lim is, and have him charged under the notorious, all-encompassing Section 25 of the SAF Act.

NSmen, if you have any other issues or problems with the Remedial Training system, please feel free to provide your feedback in the comment section. If there are enough substantive comments from you readers, I will collate them and pass them to the Singapore government.

Feb 17, 2009

Singapore Must Think That Badminton Players Are Very Stupid

ST Feb 17, 2009
Promising shuttler quits
Badminton officials told him to become a citizen or leave squad
By Terrence Voon

ONE of Singapore's rising foreign badminton talents has quit the national team, complaining that he was told to either take up citizenship or go.

Doubles specialist Riky Widianto, 17, who has been here since 2005, flew home to Indonesia yesterday after tendering his resignation to the Singapore Badminton Association (SBA) earlier this month.

Badminton officials had wanted him to become Singaporean in time to represent the country at this year's South-east Asia Games, but Riky said his parents felt he was too young to make the move.

'I wanted to stay and fulfil my dream as a badminton champion for Singapore,' he told The Straits Times. 'But I had no choice because the association told me I had to become a citizen now, or quit.

'My family told me to wait another year or two, but the SBA couldn't wait.'

Riky is 17 years old this year and the SBA wants him to become a Singapore citizen so that he can represent Singapore in the SEA Games this year.

And if Riky becomes a citizen this year, what would happen to him NEXT year, when he turns 18? National Service. Two years of his life gone. What a major disruption to his badminton aspirations.

So OF COURSE his family advised Riky to wait a year or two. He needs to avoid the NS liability that kicks in, when he turns eighteen.

The most convenient way for Singapore to win gold medals is actually to import foreign female sports talents.

Men are just too troublesome. If they are citizens, their sports training gets disrupted for two years (around age 18 to 20) and if they are not citizens, they won't be allowed to represent Singapore.

"Oh well, it wasn't such a bad deal, after all" Riky must be thinking. "Over the past three years, I got to play in some tournaments, I received some good training AND while I was still in Singapore, the badminton association paid me a salary every month. Even when I was only 14 years old."

The Mystery of the Malaysian Parents

ST Feb 13, 2009
Pro-S'porean policy in jobs, housing impractical

THE notion of a pro-Singaporean policy is noble but not practical. What many policymakers and many well-meaning citizens fail to recognise is that many Singaporeans are married to non-Singaporeans.

Non-Singaporeans may, for one reason or another, not be in a position to take up Singapore citizenship. This may be because they have elderly parents in their native country or they do not meet general requirements to take up citizenship.

As someone in this category, I find that this pro-Singaporean policy penalises this segment of the population. Over the years, we have contributed thousands of dollars to the Singapore economy, we pay taxes and levies and we have decided to setup of our family unit in Singapore. We have bought an HBD flat and look forward to being proud owners of a home in Singapore.

I am not in a position to take up citizenship, as it is my responsibility to take care of my parents in Malaysia. They have chosen their home and I cannot, in good conscience, force them to relocate here.

Imagine this. Our flat will be ready only in 2012. Of our two incomes, I earn more than my wife. My income pays for almost everything, including rent (which has increased astronomically). The cost of living has gone up, and even cooking at home is no cheaper then eating outside. Paying utility bills, insurance premiums, car loan, education loans and so on leaves us with just enough to make ends meet. In recent months, we have had to dip into our savings to pay for many things.

We used to consider ourselves slightly better off than middle class, but now we are not even in that category. If I lose my job, because I am not a Singaporean, where would that leave us?

Consider this as well. I pay goods and services tax (GST), income tax, Central Provident Fund (CPF) and every other payment as Singaporeans do, but I get few if any benefits. I do not get GST refunds; nor am I a beneficiary of any other monetary initiative to relieve the sufferings of Singaporeans, despite the fact that I am forming a family unit with a Singaporean in Singapore.

Adrian Gopal

I don't follow the logic. I don't understand why Adrian Gopal cannot take up citizenship in Singapore just because he has parents in Malaysia. I'm sure that most foreigners who take up citizenship in Singapore also have parents in other countries.

Could it be that for as long as he's still in Singapore, Adrian just wants to enjoy the benefits of citizenship in Singapore, without actually taking up citizenship?

And then one day if it doesn't make sense for him to stay here any more, he can run back to Malaysia where he will enjoy the benefits of the Malaysian citizenship that he never gave up?

Feb 10, 2009

The Saga of the Structured Notes - What Next for the Struggling Investors (Part 3)

As my regular readers know, I am a lawyer. I specialise in derivatives. I work in an investment bank. I also have some CMFAS qualifications (which are compulsory for all personal financial advisors in Singapore). In addition I have worked as a structurer, creating structured products and executing structured transactions for sophisticated clients.

My work scope is, and has been, very international. I regularly deal, and have dealt with, clients and assets across many different countries. These include London, New York, Hong Kong, Singapore, Dubai, Seoul, Bangkok, Manila and Taipei.

Thus I think it is fair to say that I know structured products much, much better than the average layman.

Now, let me tell you something else. Personally, I have never invested in any structured product. Not even once.

Don't get the wrong impression. Structured products are not all bad. In fact, structured products can be very useful. They are specially tailored and designed to meet the needs of powerful, complex, sophisticated clients. Such clients could be hedge funds, other banks or even sovereign wealth funds such as GIC or Dubai World.

Now, why have I personally never invested in any structured product?

Because I am not a hedge fund. I am not a bank. I am not a sovereign wealth fund. I am not even an MNC. My needs are much, much simpler. I am merely an ordinary citizen, living in a HDB flat, married with two kids. In other words, I am very much like most of you.

Of course I do need a good personal financial plan (and so do you). I need a strategy to ensure that I can meet my daily expenses; to protect my family against any possible misfortunes such as illness; and to achieve long-term goals like sending my children to university and saving enough for my retirement.

However, that plan does not require any fancy structured products. Instead a sound combination of traditional, much simpler products will do fine. For example, I have a savings account; some fixed deposits; medical and life insurance; a CPF and SRS account; and some unit trusts.

And that's pretty much about it.

I do not need an illiquid rated first-to-default credit-linked note issued by a bankruptcy-remote Cayman Islands special purpose vehicle; linked to a basket of reference entities and their reference obligations; and secured by a portfolio of underlying assets whose cash flows have been modified by cross-currency and interest rate swaps with a swap counterparty called Lehman Brothers.

Mind you, I know exactly what the above means. I know exactly how it works. I could easily give a talk or presentation to explain such structures. (And actually, I have).

However, I personally do not need such an instrument. I simply have no need for it. For the purposes of my personal financial plan, it is completely unnecessary to own a Lehman Minibond, or anything like it.

And frankly, I cannot imagine why such a complicated thing would be appropriate, suitable or advisable for retail investors.

This is not merely my own opinion. Simply go to any bookstore, and look at books on personal financial planning for the individual. You will find that the books discuss cash, bonds, equities, insurance, funds, REITS. But you will find that the books do not discuss structured products at all. Certainly not credit-linked notes. Why? Because, as I said, such products are completely unnecessary for the man in the street.

In Part 4, I will discuss legal issues relating to the sale of unsuitable financial products to the unsuspecting general public.

Feb 9, 2009

$330, One Youth and a Minister

An article from TODAY:
‘It’s not for the rewards’
Just 19, this teen is no stranger to reaching out to the elderly and poor
Monday • February 9, 2009
By Alicia Wong

HE QUESTIONED if public assistance recipients were getting enough, and discovered, maybe not.

Upon learning that Singapore’s needy received $330 monthly, 19-year-old David Ang was taken aback.

“Even a meal at McDonald’s is well over $5. For food, transport, healthcare and other necessities, I couldn’t imagine that $330 was enough,” he told Today.

So he rounded up his friends, and with grassroots leaders, surveyed nearly 100 needy in Tanjong Pagar GRC over two weekends last November and December.

Struggling with the language barrier, they worked in pairs to conduct the survey.

It turned out that every month, those polled spent all of the $330 and any other money they got. On average, a third of their money went to food alone.

“Some had lost their families, and others their jobs. Some just never settled down and somehow, life landed them in this situation,” said David.

“There is no easy answer on how to help them, but we have to try, regardless.”

David’s initiative so impressed his Member of Parliament (MP) Sam Tan that the latter highlighted him as an example for others during Parliament last week.
Good job, David. Unfortunately, PAP Minister Dr Vivian Balakrishnan probably won't agree with you.

You must recall that previously, the PA handout was only $290. This figure was reluctantly raised to $330, only after strenuous, strenuous argument in Parliament.

And in March last year, Dr Vivian had once again gone to great pains to explain to Singaporeans why $330 per month is more than enough for a needy person to live on.

Among other things, Dr Vivian said that a needy person can always try to rely on free hong baos from some charities.

The government shouldn't get too involved, because we need a government that is "lean, efficient, rational, disciplined and competent" (Dr Vivian's words).

Dr Vivian seemed to suggest that if the PAP government gave more than $330, then it would somehow become a bloated, inefficient, irrational, ill-disciplined and incompetent organisation.

How exactly that would happen - I do not know. But then again, Vivian's imagination is probably much more powerful than mine.

Dr Vivian also suggested that if we give more than $330, we might end up destroying Singaporeans' foundation of success by "eroding their work ethic and self-reliance".

So what exactly are you trying to do, David? Act seditiously? Are you trying to ruin the country or what?

Feb 3, 2009

The Saga of the Structured Notes - What Next for the Suffering Investors? (Part 2)

Laymen and judges think differently about the law. Here is one of the differences.

A customer is angry with his bank. He takes the bank to court. The customer feels that in some way, the bank has treated him unfairly. The customer has come to the court to present his case and to seek some form of redress or compensation.

The customer is really just thinking about his own problem. However, the judge has to think deeper than that. Achieving justice and fairness result in this particular case will not be the judge's only consideration.

The judge also has to think about public policy. The way that he handles this one case will affect all similar future disputes between banks and their customers. The way that he handles the case will even influence the future direction of the retail banking business as a whole.

FIDREC is not a court. But the way it handles the structured note disputes will similarly have an important effect, above and beyond the actual cases. Banks and retail investors alike are watching the FIDREC cases. The eventual outcomes will influence:

(1) the way banks make decisions about the type of products they sell to the retail public;
(2) the way banks manage their selling process; and
(3) the level of confidence that Singaporeans have in their banks.

When FIDREC starts hearing its cases, it should bear in mind the wider context of these disputes. Worldwide, many events in the global financial crisis have exposed serious flaws and weaknesses in the ways that banks are being regulated and managed. Many of the old ways just don't work any more.

FIDREC must be wary of mechanically following and adopting the old ways of thinking. FIDREC needs to boldly push its cases in the new directions towards which the banks ought to evolve.

Back to my previous post - where I had discussed the customer risk-profiling process. Here we have a very basic, very fundamental problem. In Singapore, the risk-profiling process is carried out by the very same salesperson who's going to try to sell you some structured product.

In other words, there's a conflict of interest. Suppose I am a bank salesperson. I will get a big commission from selling riskier products. However, I can only sell riskier products to customers who have a more "aggressive" risk rating. At the same time, I am the person who hands the questionaire to the customer and guides him through all the questions. The customer is not a financial expert and may not fully understand the questions and their implications. Therefore I am in the position to influence the answers that he gives.

And of course, it is to my own benefit to influence the customer to give answers that lead to a more aggressive risk rating. Then I can make more money by selling him riskier products.

(Apparently the Hong Kong Monetary Authority has recently caught on to this problem. It was reported that HKMA is now preparing a new set of regulations. One of the new rules is that the the customer risk-profiling process should be carried out not by the salesperson, but by another bank officer who will not stand to gain any fee or commission. The salesperson is allowed to meet the customer only after the risk-profiling process is completed).

As mentioned in my previous post, it appears that a few banks have decided not to compensate investors, on the basis that they had been classified "Moderately Aggressive". The bank's position would be that the structured notes were suitable for such investors.

I don't agree with this. Among other things, the banks' risk classification of these investors as "Moderately Aggressive" must be treated with suspicion. After all, this classification was the result of a process that is fundamentally flawed (because of the conflict of interest).

As a matter of public policy, FIDREC must be wary about allowing a bank to defend itself on the basis of its own flawed processes. The bank would be disincentivised from improving and cleaning up those processes.

As for the retail investors, think back to the time when you did that questionaire at that bank. Did you really pay attention to what was being asked? Did you understand the questions? Were they properly explained to you? Did you really know the significance of the questionaire, or were you led to think it was just some kind of not-very-important formality? Were you just happy to go along with the answers that the RM suggested you should be happy to go along with?

Do consider whether you were fairly treated, during the risk-profiling process. If not, go to FIDREC and challenge your "Moderately Aggressive" rating.

Feb 1, 2009

The Saga of the Structured Notes - What Next for the Suffering Investors? (Part 1)

According to news reports, 58% of the investors will get some or all of their money back. Any investor who is unhappy with his outcome may seek further recourse through the Financial Industry Disputes Resolution Centre (FIDREC).

Of course, many of those unhappy investors who turn to FIDREC will be the ones to whom the banks had offered no compensation at all.

A little bird has just told me that the banks, in deciding which investors to compensate, seems to have relied heavily on their internal risk classification of the clients.

What does this mean?

Before a bank sells you a product, it is supposed to ascertain your risk profile. The salesperson goes through a questionaire with you, and you answer various questions about your age; your savings; your financial goals; your willingness to take risk etc.

Based on your answers, the salesperson then determines your risk classification. It's common for banks to use a 5-tier system. For example, the customer could be classified as either "Aggressive", "Moderately Aggressive", "Balanced", 'Moderately Conservative" or 'Very Conservative".

Based on your risk classification, the salesperson will recommend suitable products to you. For example, if you are a "Conservative" investor, the salesperson will recommend lower-risk products (which are safer, but also offer lesser chances of a high return). If you are "Aggressive", the salesperson may recommend riskier investments to you.

Back to the Lehman Minibonds and the High Notes. At the time that the customer first made his investment, the bank would have determined his risk classification. And now, it seems that the banks are relying heavily on that risk classification, to decide whether they will compensate that investor or not.

For example, it appears that as a general rule, DBS is not compensating High Notes investors who had been classified as "Moderately Aggressive" or "Aggressive". In other words, DBS is taking the position that the High Notes were a suitable investment for "Moderately Aggressive" or "Aggressive" investors. Therefore these investors do not deserve compensation.

In my next post, I will discuss the problems in this line of reasoning.