Sinking funds are meant to be sunk in maintenance and repair works. Unfortunately, sunk instead is Singapore's ruling People's Action Party's (PAP's) reputation for financial prudence. Its town councils put millions of dollars of sinking funds — public money — into bad investments.
Two town councils — Holland-Bukit Panjang and Pasir Ris-Punggol — invested about 12 million Singapore dollars ($7.8 million) in troubled financial products such as DBS High Notes, Lehman Brothers' Minibond Notes and Merrill Lynch's Jubilee Series 3, which have become almost worthless following the Wall Street meltdown.
Other town councils such as Aljunied, Ang Mo Kio-Yio Chu Kang, Hong Kah, Marine Parade, Tampines and Tanjong Pagar also have exposure to Lehman Brothers, reports Channel NewsAsia.
The question is were they unlucky or careless? Other investors say they did not know these "mini bonds" offered no money-back guarantees. But the monetary authorities say that was explicitly mentioned in the brochures. So did the town councils or their financial advisers read the literature?
Every PAP town council has between 30 million and 150 million Singapore dollars in their sinking funds and can invest 65 per cent of the funds in government bonds and up to 35 per cent in bonds and equities, reports Channel NewsAsia.
Reassuringly, all 14 PAP-run town councils said only a small percentage of their total investments was spent on the affected products. The Holland-Bukit Panjang Town Council invested about eight million Singapore dollars or 6.7 per cent of its available funds, while the Pasir Ris-Punggol Town Council invested some 2.6 per cent, totalling four million Singapore dollars, reports Channel NewsAsia.