Govt reviewing property purchases by rail planning officers between 2007 and 2011 after working paper allegations
The statistical patterns are concerning, but do not by themselves establish whether officers had access to non-public information about MRT stations or if it influenced property purchases, says the Public Service Division.
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SINGAPORE: The government is reviewing property purchases made between 2007 and 2011 by officers involved in rail planning to assess if there was "actual misconduct", after a working paper alleged "informed trading by civil servants" who "disproportionately" bought homes near unannounced MRT stations.
The Public Service Division (PSD) said on Friday (Sep 25) that the statistical patterns in the paper were concerning, but "do not by themselves establish whether any individual officer actually had access to non-public information on MRT station locations at the relevant time, or whether such information influenced a property purchase".
"For example, information or speculation about planned MRT lines and stations may already be in the public domain or used to market new property developments," PSD said in a media release.
"An officer may have purchased a unit in such a development for reasons unrelated to any non-public information. These possibilities do not remove the need for scrutiny, but underscore why each transaction must be examined carefully before any conclusion is drawn."
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The review will cover property purchases between 2007 and 2011, which is the period highlighted in the paper, and where the properties were close to locations subsequently announced as MRT stations.
PSD said it would need time to retrieve the available records and examine the circumstances of each case as the transactions took place some time ago.
"If we find evidence that an officer used non-public information to make a property purchase for personal benefit, the case will be referred to the police for further investigation," said the division, which sits under the Prime Minister's Office.
PSD said on Sep 14 that it was reviewing the data and methodology within the paper, and would refer matters to the Corrupt Practices Investigation Bureau "if there is a material basis to do so".
RULES AND SAFEGUARDS
PSD said that the public service has long had rules and safeguards to prevent officers from using non-public information for personal benefit.
This includes a requirement for public officers to declare their property purchases, controls over access to sensitive information and established channels for reporting suspected wrongdoing.
These rules and safeguards have been strengthened over time, added PSD.
"Today, officers with non-public information that may be relevant to a proposed personal transaction – whether involving property, vehicles or financial instruments – must declare this and obtain approval before proceeding," it said.
"The government expects all public officers to uphold the highest standards of integrity.
"Where there are grounds to suspect that an officer has misused non-public information for personal benefit, the matter will be investigated and appropriate action taken.
"At the same time, conclusions of wrongdoing must be based on evidence and the facts of each case."
The paper, titled Do Social Norms Substitute for Enforcement? Evidence from Public Officials' Home Purchases in Singapore, was published this month by the US-based National Bureau of Economic Research (NBER).
The authors of the paper, which has not been peer-reviewed, are Professor Tomasz Piskorski of Columbia University, Professor Amit Seru and Mr Chun Zhao of Stanford University, and Associate Professor Jian Zhang of the University of Hong Kong.
NBER is a private, non-profit research organisation largely funded by research grants, as well as investment portfolio income and philanthropy.
WHAT THE PAPER SAYS
The researchers said they wanted to study whether social norms that are pro-integrity can replace formal enforcement in deterring misconduct by public officials.
They compared private property transactions filed with the Registry of Land Titles between January 1995 and December 2019 with three sources of data to observe property trading activity of public officials and other individuals.
These sources were: the Singapore Government Directory Interactive online database of public officers; the Council for Estate Agencies' public register of licensed real estate agents; and a proprietary dataset of demographic details and residential addresses for a large sample of Singaporean residents as of 2013.
The researchers examined private property purchases near planned MRT stations that took place before the stations were publicly announced, as a "proxy for access to privileged location information".
They drew circular buffers around proposed stations and classified homes within them as "target" properties, using a 1km radius in the main analysis.
They then compared the transactions of the public officials against a control group closely matching the officials in age, gender, marital status and ethnicity.
"We find clear evidence of informed trading by civil servants," said the authors.
"Purchase intensity near planned MRT stations is higher for civil servants than for matched controls, with the difference concentrated one to two years before public announcements."
Against the control group, the authors estimated - based on statistical modelling - that public officials would have made about 50 additional purchases of target properties two years before plans were announced, and 63 additional purchases one year before.
After announcements, civil servants and the control group exhibited similar trading behaviour, which the authors said pointed to pre-emptive buying in anticipation of the station announcements.
"A back-of-the-envelope calculation yields approximately S$138 million in gross target-property acquisition value associated with the excess pre-announcement purchases," they said.
Using ChatGPT to help tag the public officials' ranks, they found that "informed purchases are concentrated among mid-level officials".
They posited that mid-level officials have enough resources to make the purchases, unlike junior officials, and expect lower scrutiny and reputational costs than senior officials.
They also found that "informed purchases" were more prevalent among officials employed in agencies involved in planning of MRT lines.
The researchers also looked up the co-occupants or co-registrants of the officials' residential addresses to identify connected people, whom they called "relatives" for expositional convenience and not because of family ties.
They observed that "relatives of civil servants engage in informed purchases, earn excess benchmark-adjusted returns, and, on average, exit their investments earlier than matched controls".
"Together, these findings indicate that public officials and their relatives derive substantial private financial benefits from informed home purchases," they said.
In the paper's acknowledgements, the authors said they "benefited immensely" from discussions with four academics: University of Chicago economists Chang-tai Hsieh and Luigi Zingales, and Harvard University economists Li Shengwu and Jesse Shapiro. Li is also the estranged nephew of former prime minister Lee Hsien Loong.
Some Singapore academics who are thanked in the authors' acknowledgements have since distanced themselves from the paper, with two from the National University of Singapore asking to have their names removed.
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