I couldn’t help but recall this old dinosaur (see box below) when I read this:

[NKF] failed to pass on the rebates it got on its bulk purchase of medicine (e.g. one drug costs $25. It gave patients a $13 discount and charged them $12. But NKF paid only $8.20 for the drug. It pocketed a 46% profit.

From the ST Aug 6, 2004 HDB pricing keeps new flats affordable to most Singaporeans I REFER to the letters, ‘What goes into pricing of HDB flats’ (ST, July 23) by Mr Hiong Kum Meng and ‘Subsidy should be based on flat’s building cost’ (ST, July 27) by Mr Mohamed Rafiq Hamjah. Mr Hiong concluded that the increase in HDB resale prices has outstripped wage growth, based on a comparison of changes in the Resale Price Index with changes in average nominal wages between 1993 and 2003. We would like to explain that resale flats are transacted in the open market on a willing buyer-willing seller basis. The prices are not set by HDB. Prices can fluctuate, depending on factors such as the economic outlook, employment situation and sentiments in the property market. What is important is that HDB prices its new flats so that the majority of Singaporeans can afford one. From 1993 to 2003, the prices of new four-room flats increased by 2.6 per cent per annum, below the annual increase of 5.3 per cent in average wages cited by Mr Hiong. New-flat prices did not rise as steeply as resale-flat prices, because HDB prices new flats below their equivalent market price, that is, at a subsidy. Mr Mohamed asked why HDB’s subsidy for new flats is related to the market price and not the building cost of a flat. Today, first-time HDB flat buyers can buy either resale or new flats. Those who opt to buy resale flats from the open market can take up a housing grant of $30,000 or $40,000, which allows them to enjoy a discount off the market price of the flat. Those who opt to buy new flats from HDB also enjoy a discount off the equivalent market price of the flat. The difference between what the buyer pays HDB for his flat and what it is actually worth in the market is a direct and real subsidy provided by HDB to the buyer. Like the housing grant for resale flats, the provision of such a market-related subsidy in the case of new flats has enabled HDB to keep its flats affordable for the majority of Singaporeans. DESMOND WONG Deputy Director (Marketing & Planning) for Director (Estate Administration & Property) Housing & Development Board

Please take note of how the nouns subsidy and discount are laid out in the above letter.

Here’s some English lessons:

• subsidy
  noun
  Inflected Form(s): plural -dies
  a grant or gift of money: as a : a sum of money formerly granted by the British Parliament to the crown and raised by special taxation b : money granted by one state to another c : a grant by a government to a private person or company to assist an enterprise deemed advantageous to the public.
• discount
  noun
  1 : a reduction made from the gross amount or value of something: as a (1) : a reduction made from a regular or list price (2) : a proportionate deduction from a debt account usually made for cash or prompt payment b : a deduction made for interest in advancing money upon or purchasing a bill or note not due
  2 : the act or practice of discounting
  3 : a deduction taken or allowance made

What is the point I am trying to make here?

It is my considered opinion that a subsidy is an amount of real money given out at one’s own expense, while a discount is simply a figure struck off from the real amount without any real money exchanging hands.

In other words, the HDB is really just giving a discount to first-time flat buyers, while in reality, the direct and real subsidy is actually given by the buyer to the seller when the first-time buyer resell his flat after a certain amount of years.

Still don’t get the what the babble is all about?

Ok. Let me give an example. Say, the flat prices for a resale 5-room HDB is $300K at some ulu location. You pay the HDB $200K for a new one at the same ulu-location as a first-time buyer. The HDB claims that it has given you, $100K in ‘real and direct subsidies’. Now, say when you sell your flat 5 years later – you have to stay in it for five years if you are a first time owner – and the price evaluated is $280K now because you are so fortunate to be selling during a slump. You made a profit of $80K but what has happened to the $20K which the HDB claims to be your ‘real and direct subsidies’.

Better still, your flat’s price has gone up to $400K. Does that mean that the HDB has actually give your $200K in ‘real and direct subsidies’?

Well? You get the idea.

So, I must say, there is really no issue with the NKF having claimed to have saved patients more than $3.5 million by offering them lower drug prices and subsidies while actually made close to $1 million each year, in 2003 & 2004, in gross profit from the sale of such drugs.

Really, if the HDB calls such as subsidies and it appeared to me that they have been consistent in their public letters to call it as such, then the NKF is right to do the same, isn’t it?