I REFER to the recent debacle regarding town councils' investments in risky products.
The troubling news throws up some queries which need to be answered:
→ Why allow town councils to invest in corporate bonds and equities up to a limit of 35 per cent?
The limit is too high, and should be reduced.
These funds come from the monthly service and conservancy fees paid by residents, and should not be used for speculation.
They should be invested solely in safe instruments, such as government bonds and fixed deposits.
Why take such high risks to grow an already-solid surplus?
→Why was there such a strong need to grow the funds?
Town councils might have been worried that inflation or overuse could wipe out the funds.
However, the huge surpluses testify to the fact that the town councils have done a good job of protecting their funds.
Even if invested in safer instruments with lower returns, the funds would have been sufficient to last a good length of time, and are also constantly topped up by residents' contributions.
→Who will make up for the losses?
It is well-known that investors of products such as Minibonds will not get much back.
While town councils have been making gains from similar investments over the years, what will happen should a net loss be incurred?
→How can the surplus be better used?
I think most Singaporeans would have been pleasantly surprised at the high level of surplus funds town councils have.
It proves that they are able custodians of residents' contributions.
Nevertheless, I feel that there are other ways we can tap on such huge surpluses for Singaporeans' benefit.
For a start, families with unemployed breadwinners can be identified, and subsidies for service and conservancy fees can be drawn from surplus funds and extended to such families for a few months.
→Is there a cap on surplus funds held by town councils?
Town councils need a level of sinking funds, but what amount is considered sufficient?
There seems to be no ceiling on the level of surplus funds town councils can accumulate.
There should be a maximum limit set for surplus funds, and councils can come up with ways to return the excess funds to residents, or reduce the fees collected for a period of time.
I hope that with the revelation of the paper losses, the Government will look into revamping town councils' investment strategies.
