Singapore Upside-Down

Just heard some depressing news from a friend recently. She has just gained admissions to a top business school in the States and has been running around to gather her funding sources for her studies. However, due to the turmoil in the credit markets, loans from the US for an alien like her is close to impossible and her US hope (as opposed to the Singapore dream) seems a tad more difficult now.

One may wonder why can't my friend borrow her funds locally? Before we answer that question, let us look at her available choices. Local banks will only lend up to 10 times of her current salary which will not be enough for her overseas education. With the US borrowing option out, that just leaves her with the trusty CPF. Unfortunately, the CPF Education Scheme cannot be used for overseas education. The reason provided by the CPF board is on the basis of risk. These are the exact words from the CPF website, "Local education at approved institutions is heavily subsidised by the Government. Students should thus be able to repay the CPF savings used. On the other hand, overseas education is very costly. If the student is unable to repay the CPF savings used in cash, it would have serious consequences on the parents' or his own retirement savings". This sounds like a "if you are not spending in Singapore, you cannot take your back your FD you have deposited with me" argument. If only we can choose when and where to make our deposit.....

I can provide anecdotes that will contradict the rationale of CPF's risk argument. I know of local grads that are getting paid less than $1500 (which is artificially propped up to $2500 - $2700 by MAS under some employment scheme with our tax money) in our prized financial sector or architects that graduated with equivalent masters degree earning less than $2000 in their first job. The typical undergraduate/graduate education in Singapore is therefore expensive, thus risky, with respect to the expected return from that education. The fact that the government is a baseline guarantee for that return, therefore capping the risk involved, is of little consolation since the marketplace for professionals is increasingly global and the entrance of foreign "talent" into our tiny job market resembles that of a broken dam.

But instead of quoting statistics, I would like to offer a personal point of view in this matter. I am fortunate enough to attend some of the best educational institutions that our country has to offer. A good proportion of my more academically capable classmates have gone abroad for their education, either on scholarships or on their rather significant family fortunes. We still meet up for dinners or drinks on their vacations back home to sunny Singapore. While this may be a very biased opinion but till date, no one from this group of friends have expressed disappointment or regret in their decision to leave. While some of them have indeed returned, no one that I know had done so due of career prospects or quality of life etc. They returned because of their roots, of their family ties. One wonders if the parents were able to uproot from Singapore, will there any other reason for our brightest to return to their nest here?

Anyway, we are sidetracking from my friend's issue. My point is that since banks and CPF are willing to lend money for local education and purchases of over-priced condominiums, I cannot see any rational reason for refusing to do so for my friend, who in my humble opinion and experience, is making at least as good an investment as the former two. The measurement of risk locally is flawed. It is based on local assumptions and projections, without any global consideration. Risk is justified simply based on the fact that since "everyone in Singapore is doing it, it cannot be wrong" mentality. Talk to your friends now that you are thinking of going abroad for an education for a year, they will exclaim at your courage and endeavour in this time of uncertainty. Tell the same group of friends that you want to buy a HDB or condo that cost easily 3-5 times more, they will say that its a worthwhile investment since "property is quite cheap now".

Everything is upside-down here. A good friend is hoping his brother, who is studying in Australia because he cannot get into a decent course in our prestigous universities, will be able to apply Australian PR for him and his family because he is not qualified enough to do so.

I have a feeling that someone somewhere Down-Under is laughing at the irony of it all in upside-down Singapore.