Dear Ms. Lagarde,
I am the Secretary-General of the Reform Party in Singapore. I am also an economist with a double First Class Honors BA and an MA in Economics from Cambridge University. I have almost 30 years uninterrupted experience in the global finance industry in both Asia and the UK with an unblemished record of registration with the FSA. I am therefore writing to you as an economist, as an advocate for democracy, and also as an ordinary Singaporean citizen.
I note your press release dated June 19 2012 at the conclusion of the G20 summit in Mexico. One of the countries you announce as having immediately pledged additional resources towards your goal of building a US$456 billion global firewall is Singapore, with a commitment of US$4 billion. In your communiqué you give some of the credit for the successful outcome of the talks to our Finance Minister, Tharman Shanmuguretnam, in his role as Chairman of the International Monetary and Financial Committee.
Meanwhile here in Singapore since February, I have been raising the issue of opacity in our government's budget, failure to adhere to IMF standards and grave concerns over the constitutionality of our country's pledge to the IMF, to the same gentleman amongst others, albeit with a considerably less successful outcome.
Under our Constitution our government is required to obtain both Parliamentary and Presidential approval before a loan commitment or guarantee of this nature is granted.
The parliamentary record shows that Parliamentary approval was not sought. In addition the aforementioned Minister of Finance has failed to respond to any of my open letters raising questions and has failed to reasonably provide any accountability or transparency. His Excellency, President Tony Tan Keng Yam, did respond and referred my letters to MAS, thereby confirming that Presidential approval had not been sought. The MAS is merely the manager of the official foreign reserves on behalf of the government and not the owner of the reserves. But in any case they have now failed to respond.
Given our grave concerns over the constitutionality of our republic's loan commitment, I believe that the IMF cannot rightly accept these funds. At least not until the citizens in the Republic from whence it originated have received an assurance that the proper democratic and constitutional steps have been followed.
Even if our government intends to hide behind some loophole, the loan commitments involve the potential use of our reserves or government savings that come from taxes on the people of Singapore. In a robust democracy a government does not hide behind technicalities and dispense with the need to make itself accountable to the people for the use of their money.
Ms Lagarde, let me assure you, in Singapore we do pay our taxes. I realize that to many international institutions and Western governments it must be extremely convenient to have the support of a nation that has managed to build up such a large stock of foreign assets, basically by imposing years of unnecessary austerity on its people.
Singapore is presented to the outside world by our government as a very rich country and its high levels of GDP per capita are often cited. However, when you drill down to GDP per hour worked, Singapore is near the bottom of the league of advanced nations, ranking only above the Czech Republic and South Korea. Singapore is really only a city and has no rural areas or population to drag it down. Any viable comparison would be GDP per hour worked in a city of a similar size.
With no minimum wage, no universal health care insurance or free education (indeed no compulsory education beyond primary level) and a minimal social safety net, the median Singaporean is worse off than the median citizen of the Eurozone countries that the additional IMF resources are primarily targeted at.
Please note I am not here raising any objections to the aims behind building the firewall nor adding my opinion to the debate on whether the IMF should be bailing out the Eurozone. My concern over the loan commitment at this stage is only with proper Parliamentary and, in our case, also Presidential scrutiny. Ms Lagarde, I am not unsympathetic but Singapore is allocating more to the IMF than it spent on its own people on health in 2012!
Please bear in mind that Singapore has no Freedom of Information Act and despite regular elections cannot be considered a democracy.
On 14th May 2012, long after the pledge was made, one written question was tabled in our Parliament. The question was put to Mr Shanmuguretnam by an MP who is not only one of his own loyal backbenchers but a member of his own Group Representative Constituency team (I will not bother you with detailing the affront to democracy that GRCs represent). The question and answer was couched in language intended to elevate it out of the reach of the common man. Suffice to say the tabled question was a carefully scripted and stage-managed exercise dispensed with in minutes.
This may have been presented to you as a vigorous debate in Parliament. Make no mistake. In the case of this loan there has been no debate, whether robust or sickly. In fact it has been impossible to even hold a decent conversation.
As the former French Finance Minister you may regard it as more important to move swiftly to attempt to save the Eurozone than to worry about whether an individual member's loan commitment has been democratically obtained. I believe that the goals and needs of the IMF cannot ride roughshod over our own citizen's rights.
I might even accept the view that our domestic struggles with lack of accountability and transparency, directly related to the absence of democracy, may simply not fall within your mandate. That view is considerably weakened by the appointment of our Finance Minister as the head of the International Monetary and Financial Committee.
Singapore announced its support to the IMF goal without even the caveat that they would have to obtain parliamentary approval, whereas you announced that countries such as Russia, India, China and Brazil had made private pledges but did not want to go public until they had discussed them 'back home.' It must be very beneficial to have a nation that can be relied on for support when it comes to funding, without having to worry about troublesome domestic opposition or the speed humps of democracy.
Is there not a potential conflict of interest in the appointment as Chairman of the International Monetary and Financial Committee of a Minister of Finance from a nation that can approve a loan to you without any scrutiny back home and will not even provide basic transparency to its citizens? It concerns me that when you made this appointment you may have been unaware of the lack of democracy and transparency in Singapore. In fact by appointing Singapore's Finance Minister to a key role at the IMF are you not encouraging a lack of democracy for Singaporeans?
More pressingly, by dismissing the basic issues of transparency and accountability in countries like Singapore in favor of political expediency, you risk creating greater problems for the global economy in the future.
The foreword to the IMF manual sets out an analytical framework for budgets and states that one of the aims of the framework is to provide an early warning system as to when things start to go wrong. Whilst my concerns with our loan pledge are about its constitutionality, my concerns with our budgets and the government's finances center on opacity, omissions and discrepancies.
Specifically the Budget for 2012 as presented to parliament by the same MOF, Mr Shanmuguratnam, Chairman of the International Monetary and Financial Committee, does not even adhere to the IMF's Special Data Dissemination Standards. Mr Shanmuguretnam uses his Ministry's own unique method, rather than your widely followed one.
I have written to our Finance Minister, published press releases and sent open letters to the media requesting answers to questions about these troubling omissions and discrepancies and failure to adhere to IMF standards. I have also attempted to get an answer as to the state of our reserves.
There may be a reasonable answer to the many concerns that have been raised. But Mr. Shanmuguretnam has failed to provide even an unreasonable one. This surely falls far short of the standards of integrity and transparency required by the IMF.
The failure to provide the fullest picture of the government's finances, including total investment income and capital receipts from land sales and our sovereign wealth funds to parliament could be construed as contempt of Parliament. Worse, as your manual points out, by not adhering to the IMF's analytical framework we are denied that early warning system. How will we know if things are going wrong?
In the current economic climate where a failure in Europe's banks affects us all in South East Asia and vice -versa, I had expected the IMF to strive to see that IMF Committee heads act as role models upholding the highest levels of clear reporting.
We are not Norway. We do not have any exhaustible resources. Instead our Sovereign Wealth Funds have been built up by a policy of forced saving and government surpluses. The government captures huge economic surpluses from its citizens and returns little to them in the form of social expenditures. Our health and education spending as a percentage of GDP is among the lowest in the developed world. Our chronic current account surplus of around 20% of GDP is another indicator of how much the government takes out of income so as to accumulate overseas assets.
Without accountability there is a real danger that these forced savings, which cause real hardship for many poorer Singaporeans, could be dissipated through poor investment returns before we can do anything about it. This is not merely an idle academic exercise. It was not so long ago that Greece's accounts were shown to be have been manipulated.
Ms Lagarde, this brings us in a neat circle back to one of the reasons you need that firewall in the first place.
I would be happy to come to Washington to present my data, provide background information and discuss my concerns with a member of your team.