Invest CPF monies in shares here: SBF
MAJOR business chambers and trade associations are calling for workers' Central Provident Fund (CPF) monies to be used to help revive Singapore's lagging stock market.
"Currently, our CPF money is pooled with our other reserves and managed by GIC. Unlike other jurisdictions where their pension funds have provided strong support for their stock markets, Singapore rides against the wave by specifically stating as a policy that the funds managed by GIC are to be invested abroad," wrote the Singapore Business Federation (SBF) in a new economic position paper released yesterday.
Describing the Singapore share market as "moribund", SBF said that the Government "should consider separating the CPF component and managing it differently as how pension funds are managed".
"This will free these funds from the GIC investment restrictions and will likely result in some investments in the Singapore market. These investments will send strong signals on our market to other investment professionals," it added.
CPF members currently receive a fixed interest rate on their CPF funds.
The interest is paid out from Special Singapore Government Securities that are issued and guaranteed by the Government which the CPF Board has invested in with the CPF monies.
GIC manages the CPF proceeds as well as other government assets.
This was just one of many bold recommendations floated in the 36-page economic strategy proposal, which the SBF will present to Heng Swee Keat, Finance Minister and chairman of the Committee on the Future Economy, at a conference on Tuesday.
The paper calls for, among other things, the Government to review its foreign manpower policies.
It also asked the Government to explore the possibility of creating a new market that can exist between the mainboard and the Catalist junior board for the growing number of "middle class" companies with stable earnings.
The report is backed by 28 trade associations and chambers and some 70 top-level executives, including Singapore Press Holdings chief executive Alan Chan.
"There is no better time than now to take bold and decisive moves that will strengthen Singapore's position," said SBF chairman S. S. Teo.
"The newly elected Government has a fresh and strong mandate."
Mr Teo also noted that some of the ideas proposed could appear "radical" and require "substantial changes" to existing policies.
"But we have to act decisively or risk greater failure in the years ahead," he said.
Lee Kuan Yew School of Public Policy research fellow Christopher Gee advised caution over SBF's suggested approach on CPF monies.
Mr Gee said: "The notion that domestic savings should be used to invest in domestic industries has a certain appeal, but it is inappropriate. The role of CPF is to provide guaranteed, zero-risk return to the residents; investment in private ventures will expose the CPF money to more risks and fluctuation.
"It would make more sense to simply have GIC also invest in Singapore assets. That will give the local businesses the support they need without radically changing the CPF risk profile."
Securities Investors Association Singapore chief executive David Gerald said: "A CPF member would rightfully expect better returns on CPF investments. The overseas investments have over the years given better returns. The question is can Singapore companies give the same returns as overseas companies?"