By Aaron Low

THE People's Action Party (PAP) has assured Singaporeans the town councils it runs are in good shape financially.
Also, the $2 billion in the sinking funds its 14 town councils manage is in good hands, said Mr Khaw Boon Wan, the party's first organising secretary.

Mr Khaw, the Health Minister, gave the assurance in a 90-minute interview with The Straits Times at the PAP headquarters on Wednesday, aimed at addressing the issues raised by the public over the investment losses of some town councils.

The bottom line, he said, was this: 'Your funds are safe. Yes, there will be some losses in some individual transactions but, on an overall basis, the principal sum is there and we've made profits in the previous years.'

Parliament heard last month that eight PAP-run town councils had $16 million worth of investments exposed to toxic products, such as those linked to the failed Lehman Brothers investment bank.

The money was from the councils' sinking funds, which are for long-term maintenance work like repainting blocks and lift upgrading, and are available for investment.

The $16 million represented 0.8 per cent of the $2 billion in the sinking funds.

The disclosure of the losses generated debate over the role of town councils, the funds they hold and the losses incurred.

Mr Khaw found the outburst understandable.

'I've been reading the discussions in the mainstream media as well as the new media. And the public reaction is, of course, totally understandable,' he said.

'The unhappiness, I think, is totally justified and absolutely reasonable. And the worries and concerns are also to be expected because, like it or not, this is public money.'

But Mr Khaw felt that there were many lessons to be learnt from the episode, not least the realities of what town councils do, why they chalk up large savings, and how they hold that money for the long-term needs of housing estates.

He emphasised that the PAP town councils adopted an open attitude towards their accounts and investments, and these were all detailed in their annual reports.

'It's absolutely transparent because this is not a secret society activity where there is secrecy and so on,' he said.

'We have to account for every cent of what we spend and so on, and that's why I show you this annual report which you can flip through any time you want.'

Anyone who wants to know how much money a town council spends, including its investments, will find the information in the annual reports.

'There is nothing to hide,' he said.

He drew on the experience of his own Sembawang Town Council to explain what goes on behind the scenes, and the care taken to ensure that the large sums entrusted to it were handled well.

He urged concerned Singaporeans to take a step back and look at the big picture, instead of just dwelling on the negatives. The reality is that town council funds are healthy and well managed.

Mr Khaw also hoped that Singaporeans would recognise the reality of the times.

The current global financial turmoil was unprecedented, causing a decline in value of every asset class, including stocks, gold and property.

He noted that in these unprecedented times, even the best of investors would have lost money because every asset class has suffered.

'For investors specifically, this year is a difficult year. All serious investors all over the world would have lost money,' he said.

'But you hope that over time we will be able to make good those losses because the economy must recover and, if we have staying power, you have an opportunity.'

He also said that the financial prudence of the fund managers appointed by the town councils meant that even though some losses were made this year, the overall balances in the sinking funds were still healthy.

But Mr Khaw was sympathetic to the public's sentiments, saying their concerns were justified.

'The worries and concerns are to be expected because, like it or not, this is public money,' he added.

He assured Singaporeans that there was no question of service and conservancy charges being raised as a result of the investment losses.

But as with many other charges, they could not remain unchanged over time. Given that a big part of conservancy fees goes towards paying wages, which will rise, the charges would also rise in future.

'(It's) just like hospital fees. I cannot guarantee your hospital fees will stay (the same) forever. I can't, unless you say you allow service to drop. So those charges will have to go up,' he said.

'But the funds are intact.'

This article was first published in The Straits Times on December 19, 2008.