Wednesday, 15 August 2007

OPQ 16 July 2007: University of New South Wales

I know that this is probably a little dated, and in future I'll try to be more current in my updates on Parliamentary sittings. But in light of the recent news that UNSW Asia may be declaring itself insolvent and hence unable to repay all of its debts, I think there's still some currency to this.

In fact, I've filed an OPQ for the August sitting, to ask whether the EDB extracted any guarantees from the parent university in Australia when negotiating the packages (fairly common in commercial transactions), and whether the EDB had sought to extract any protection for UNSW Asia's staff (from news reports, it seems that they are really being left to the mercy of UNSW).

In any case, I think it's worth setting out in detail some of the more interesting parts of the debate on UNSW Asia during the sitting on 16 July 2007. I filed an OPQ, and also asked two supplementary questions.

The first supplementary question was about our ability to recover grants that had been disbursed. The Minister had stated that the grants were disbursed to help UNSW Asia build up their initial capacity, and were "given for different milestones". I took it to mean that different grants were made for different milestones, and UNSW Asia may have achieved some of those milestones, in which case theoretically we would not be entitled to recover those grants. So I wanted to clarify this. From the Minister's response, it seems that none of the milestones had been reached, and so in principle, we should be able to recover all of the grants disbursed.

The second supplementary question was about the amount of attention paid to protecting enrolled students during negotiations, which was something I had asked about in my OPQ but was not covered by the Minister's initial response. His reply to my OPQ also did not touch on what was done -- or not done -- during negotiations, but instead reiterated what actions were taken in reaction to the closure. I can then only infer that this was not something that was discussed during negotiations.

Throughout this entire affair, it seemed to me, from the Government's tone and language, that they saw it as a case of UNSW asking us to pour money down a bottomless pit, to essentially bear the financial risk for UNSW (through the revisions to the already-agreed support package that were repeatedly requested by UNSW) without any commitment from UNSW in return. The Government seemed to come from the position that they were dealing with public funds, and so had to be careful how those funds were to be spent.

And all that is well and good. But I thought public opinion was a little different. It also focused on public funds, but in terms of accountability, and also in terms of the pre-emptive planning (if any) by the authorities to prevent students and academic staff from being unduly affected in case of just such an event. I still think that the EDB failed on the accountability test, since it had persistently declined to state the figures involved all the way until the Parliamentary sitting (and yes, I did notice that nothing was said about those confidentiality obligations that the EDB sought to rely on to justify its silence).

And I think we also failed on the front of protecting students and staff. Yes, I know, caveat emptor and so on and so forth, there is always such a risk when someone quits and joins a new set-up, etc etc etc. But we need to remember that Singapore's plans to be a "Global Schoolhouse" are heavily premised on trust -- trust in the Singapore brand, trust that Singapore institutions are reliable, honest and of satisfactory quality, trust that none of these bad things that have happened in the private education sector this past year will happen in Singapore. I'm not sure if that trust is being eroded, both by the UNSW fiasco and by the Government's continued non-regulation of the private education sector.

Surely the preservation of the Singapore brand and the trust that is so implicit in it is an objective important enough to warrant us trying to secure guarantees from such universities as to what would happen to their students and staff in case of a failure. Contingency planning is something everyone is familiar with, so why not in this case? Unfortunately, the answers to this particular question still elude us, and I'm not sure if I can extract them in Parliament either.

(Impact of pullout and related issues)

5. Mr Inderjit Singh asked the Minister for Trade and Industry, in light of the recent pullouts by the University of New South Wales in 2007 and John Hopkins University in 2006, (a) if he will explain why Singapore has not been able to retain its foreign universities; and (b) whether he is confident that we will be able to continue to attract reputable universities to set up campus in Singapore.

6. Mr Seah Kian Peng asked the Minister for Trade and Industry (a) how does the pullout of the University of New South Wales Asia affect Singapore as an education hub; (b) what were the considerations that led to this pullout; and (c) how much of this can be attributed to the expectations of the Economic Development Board in terms of student enrolment.

7. Dr Lim Wee Kiak asked the Minister for Trade and Industry (a) what are the Ministry's plans to make Singapore an education hub; (b) how has the withdrawal of the University of New South Wales from Singapore affected Singapore's image as an education hub; (c) what are the reasons for the University's decision to withdraw from Singapore; and (d) what were the University's needs which the Economic Development Board was unable to accede to.

8. Prof. Thio Li-ann asked the Minister for Trade and Industry (a) how much has been spent by the Government on the UNSW Asia project and what are our outstanding liabilities to third parties such as banks, construction companies and other service providers; and (b) what is being worked out with UNSW in relation to financial compensation payable to Singapore.

9. Mr Siew Kum Hong asked the Minister for Trade and Industry (a) during the negotiations between the Economic Development Board (EDB) and University of New South Wales (UNSW), what safeguards were taken to mitigate the risk of UNSW pulling out from Singapore; (b) how were the interests of enrolled students protected; and (c) in view of UNSW's public statements on its liability and losses arising out of its pullout and its duty to report to the Australian Parliament, whether EDB remains bound by confidentiality obligations and, if so, why.

10. Ms Eunice Elizabeth Olsen asked the Minister for Trade and Industry in the memoranda of understanding with foreign educational institutions setting up in Singapore, how is due emphasis given to secure adequate commitment to these projects so as to ensure that they are not easily abandoned.

The Minister for Trade and Industry (Mr Lim Hng Kiang): Sir, with your permission, may I take Question Nos. 5 to 10 together?

Mr Speaker: Yes.

Mr Lim Hng Kiang: Mr Speaker, Sir, I thank Members for their questions and interest in the UNSW project and the broader issue of what this means for Singapore as a global education hub.

Let me first give the background of the UNSW project.


Mr Speaker, Sir, UNSW's decision is a business decision. While we as Government can play a role in giving support to investors who want to set up operations in Singapore, we cannot issue a blank cheque. We must ensure that public funds are well utilised and yield strong benefits to Singapore. EDB's support package for UNSW was therefore premised on the basis that UNSW would undertake a long-term commitment to establish a university of significant scale in Singapore that will create new economic value. EDB's grants and loans are conditional on UNSW achieving pre-agreed milestones such as student enrolment, failing which they become recoverable.

To date, EDB has disbursed S$15 million in loans and S$17.3 million in grants to UNSW. As UNSW will not be able to meet the performance indicators that it committed to EDB in 2004 and 2006, UNSW is required to return the disbursed loan and grant to EDB. The disbursed loan is backed by a bank guarantee. EDB is currently discussing with UNSW on the recovery of the disbursed grant. The Government does not have any outstanding liabilities to third parties with regard to the UNSW project.

We regret UNSW's decision to pull out, but this is their business decision and we will have to respect it. The Government's bigger concern was the impact of UNSW's decision on the students. EDB therefore worked closely with UNSW and the Ministry of Education to assist the affected students.


Dr Lim Wee Kiak: Mr Speaker, Sir, I would like to thank the Minister for the very comprehensive answer. I understand surely that it is not the Ministry's role to evaluate the business plan. But, however, I understand that all business plans must have contingencies before the Government itself gives out any funding or grant. I am sure the Government has evaluated in terms of their plans and any contingency if the enrolment drops below the projected numbers. So, I am wondering whether these contingency plans were evaluated and, if they were, why these contingency plans were not implemented.

Mr Lim Hng Kiang: The support package that EDB provided for UNSW was, essentially, in two parts. One was loans to help build the campus, and that loan was backed by a bank guarantee. So if they do not build, of course, we can recall the loan. The second support package was a set of grants to help them build up their capabilities, particularly in the science laboratories. So, of course, if they do not build the science laboratories, the grants are not disbursed. We also gave out some grants to help them build up the initial capacity, and they were the grants that were disbursed at the early stages, so that they could start up their operation and build up initial capacity. So, the grants were given for different milestones, and for those which were given at the startup to help them come in, those were the grants that were disbursed, and that is the S$17 million that we have to recover now.


Mr Siew Kum Hong (Nominated Member): Sir, I have two supplementary questions. Firstly, I would like to ask the Minister, of the grants that were already disbursed, how much was disbursed where the milestones have already been reached, which will make them non-refundable to Singapore. My second question is: in the course of the various negotiations and discussions with EDB, I would like to ask the Minister what pre-emptive measures and steps were taken to minimise the impact on students. Because, at the end of the day, I think these students stay in Singapore to study in UNSW and those plans have been fundamentally changed. So, I would like to know when we negotiated with the university, how much consideration was given to their interests.

Mr Lim Hng Kiang: Mr Speaker, Sir, as I explained just now, the grants were disbursed, essentially, as startup grants to build up the capacity and, because they have not met the required commitments, these grants can be clawed back. So, we are discussing with UNSW Asia to see how they can return us the grants that were disbursed to them.

As for the students and the very sudden closure, this is something unfortunate. Even up to May, we were still discussing with the UNSW Asia how to continue the operations. But, at the same time, we cannot provide them with a blank cheque. Obviously, they must show commitment to undertake the milestones and the projects as indicated to us. As I said in my reply, we were prepared to give them two years to let the operations settle down. Then, they can give us a new plan with the scaled-down projection and we will support them commensurate with the benefits that the new scaled-down plan will give to Singapore. But the university decided that they are taking unnecessarily a high level of operational and financial risks, and so they decided to close down. Once they had made the decision to close down, both sides worked very closely to try and mitigate the impact on the students. I must say UNSW Asia went out of its way in providing the scholarships, in talking to the students, to make sure that the students' welfare was taken care of. On our side, EDB and the Ministry of Education also worked closely with UNSW Asia to make sure the students were looked after.

Mdm Cynthia Phua (Aljunied): Can the Minister clearly let us know what is his assessment of the recovery of the amount of $17 million that has been granted? I note that the sum has been spent. But how can you recover it? The second question is this. We know that there are many Singaporean students who have taken the foundation course, and I understand that the university is still continuing with this foundation course. Would our own universities recognise these students who have undertaken the foundation course for the next year's university entry as well?

Mr Lim Hng Kiang: We are still in the process of discussing with UNSW Asia on the recovery of these grants. So, I cannot give an estimate of how successful we will be. As far as the foundation course and the future admission to our local universities are concerned, I think this can be better answered by Minister Tharman later on.



Yawning Bread Sampler said...

One thing that seems to be downplayed in this fiasco is what role the EDB played in bringing UNSW to Singapore in the first place. With all this talk about grants and loans and how UNSW is responsible for repaying them, we may be overlooking the moral responsibility that EDB had in inviting them here.

It's not as if we had an open door policy for universities to come in, and if they're interested, the EDB evaluates their business plans and proposes loans and grants accordingly.

From what I heard in conversation with Warwick University, the EDB went out to target Warwick and UNSW, and might have painted a rosy picture of prospects for a Singapore campus in their initial dealings with them. If that is so, to now say UNSW did their sums wrong and so owe us money, while technically true, might not fully reflect the moral state of play.

family man said...

something not related to this - Lim Boon Heng mentioned that the annuities will become compulsory. I do not understand this - who does the GIC investments and Temasek Holding investments below to? Does this not finally belong to the People? Should it not be in the mandate that the returns from such investments be made available to the CPF holders / Singaporeans such that they can get an annuity when they reach say 65 years old? Can someone explain to me how our CPF / Reserves / GIC / Temasek Holdings are linked and what scenario will our reserves be activated? To pay off the subprime loans? Or is these monies only used to build IR / F1 track etc etc? I always thought our CPF was rock solid, best in the world, highest savings rate in the world. Was there mismanagement somewhere in our planning? Best rgds

Siew Kum Hong said...

To yawning bread: I'm not sure if EDB owes a moral obligation to UNSW. I would be inclined to say that as between EDB and UNSW, they were dealing as big boys in an arm's length transaction, so morality really has nothing to do with it. But I think it's different with the academic staff and students, who probably relied at least quite a bit on the Singapore brand name.

To family man: I think we will see more details in the PM's National Day Rally on Sunday. As I understand it, the CPF Board issues bonds to governmental agencies such as GIC and Temasek. The CPF guaranteed interest rate is based on these bonds. CPF is "rock solid", due to the guaranteed rate. But it's never purported to be the highest savings rate in the world. I don't know about mismanagement. But I would say that CPF funds need to attract better returns, otherwise we will never be able to properly address the issue of an aging population.

family man said...

When I was in my 20s, Singapore was touted to have the highest savings rate in the world. The CPF was touted as the key to our old age. It appears that I have been misled.

We have all the reserves in GIC / Temasek Holdings. It appears that the reserves are growing and growing, and the only people enjoying the fruits of this is the employees / management of the GIC/ Temasek Holdings via the salaries. Not her citizens. Not her senior citizens who have slogged for the nation and where the poorest need only $290 per month from the government. This is not right, after watching Martyn See's video.

Siew Kum Hong said...

To family man: If I am not wrong, at one point CPF had an aggregate contribution rate of 50%. That would almost certainly have given Singapore the highest savings rate in the world.

Of course, those days were shortlived and we are now at a much lower percentage.

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