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The Enormous True Size of the Reserves

During the Budget Debate on Friday 26 February Heng was asked about using the proceeds from land sales in the Budget.

His answer was deliberately disingenuous:

“The current approach of spending the land sales proceeds through the NIRC (Net Investment Returns Contribution) avoids these pitfalls, and allows the Government to make land sale decisions based on what is best for the country’s development, and not because it needs to balance the budget.”

The Finance Minister well knows that the land sales proceeds do not form part of the NIRC. However before we even consider that, we should look at the way the Government calculates the NIRC.

The NIRC is only up to 50% of the expected long term REAL returns, that is the returns over and above expected inflation. A clue to what this rate might be is provided in the returns that GIC chooses to reveal. In a press release dated 28 July 2020 GIC stated that over the twenty years from April 2000 to March 2020 it had achieved an annualised average rate of return of 2.7% over and above the global inflation rate. Something close to this rate (but probably somewhat lower, say 2.5% to be generous) is in all likelihood what the Finance Minister gives to the President for rubber stamping. So the rate used to calculate the NIRC is already much lower than the total return on the reserves.

Heng will say that it is necessary to protect the reserves against inflation and therefore only real returns should be used. However these are as usual only half-truths from a Government experienced at dissembling to its citizens. I can think of at least two points why this is too conservative:

  • Firstly, global inflation as the benchmark is too high since presumably GIC’s returns are calculated in S$ as are Temasek’s. The global inflation rate rate over the last 20 years has averaged at least 3.5% p.a. while Singapore’s average inflation rate as measured by the Consumer Price Index (CPI) has been 1.5% annualised.
  • Secondly, even the CPI overstates real inflation because people will, as far as possible, substitute more of the goods and services which have gone down in price or gone up less for the goods that have gone up more

In addition, by only taking UP TO 50% of the real return the Government is double-counting. If an allowance has already been made for inflation then there is no valid reason not to take the full return above inflation into the Budget calculation.

So assuming that the Government uses a real rate of return of 2.5%, the amount set aside for the NIRC is probably no more than 1%. But of what?

Article 142 of the Constitution defines “relevant assets” for the purposes of computing the NIRC as “all of the following:

(a) the total net assets managed by GIC Private Limited and all its wholly-owned subsidiaries (including those with registered offices outside Singapore) as fund managers for the Government, for any company wholly-owned by the Government and for all the wholly-owned subsidiaries of such a Government company;
(b) such moneys of the Government as the Monetary Authority of Singapore receives from the Government as banker to the Government;
(c) the excess of the assets of the Monetary Authority of Singapore over its liabilities, being assets and liabilities not directly attributable to the Government, and being not already comprised in paragraph (b);
(d) from 1 April 2016, the excess of the assets of Temasek Holdings (Private) Limited over its liabilities,
less the following liabilities:
(i) the total liabilities of the Government that is attributable to its borrowings under the Government Securities Act (Cap. 121A) and the Local Treasury Bills Act (Cap. 167); and
(ii) the total liabilities of the Government that is represented by any Government Fund (other than a Government Fund required by written law to be held, managed and administered separately from other Government funds) established by a public Act for special purposes and not already comprised in paragraph (i).

There is no mention of revenue from land sales anywhere in Article 142 so Heng is being deliberately disingenuous when he says “land sales proceeds” are spent “through the NIRC”. They can never be spent. The only portion that can be spent is what the Government judges to be up to 50% of the expected real return on the sales proceeds. This is unlikely to be in excess of 1% p.a. for the reasons described above.

However there is a further wrinkle which allows the PAP Government to reduce even further the amount of revenue available from the reserves to support spending. The “relevant assets” are calculated only after subtracting the Government’s borrowings and also the monies that have been put into Government Funds.

Total Government borrowings and Funds and Endowments can be found in the Statement of Assets and Liabilities which is part of the Budget Statement. This comprises the whole of the Liabilities side of the Government’s balance sheet apart from a mere $51 billion held in deposit accounts and not allocated to any funds. So that means the entire asset side of the Government’s balance sheet, apart from $51 billion, cannot be used for the purposes of the NIRC.

To exclude Government borrowings is again extremely conservative since the GIC is presumably able to earn a higher return than their cost (otherwise why would the Government want to leverage by borrowing CPF holders’ money in what is a clear conflict of interest) and it would be more accurate to subtract the cost of these borrowings from the total returns. Also since CPF holders’ money is not inflation proofed there is no need to use only real returns which calls into question the whole rationale in the Constitution for saying that only up to 50% of the real returns will be used to calculate the NIRC.

Also excluding Government Funds is another low accounting trick for hiding resources from Singaporeans. Heng might argue that the returns on funds set aside for specific purposes are already being used to fund spending. Indeed, according to the Budget figures, $5 billion was spent in 2020 from Government Funds and Endowments. However I discovered that Heng appears to be brazenly charging this spending, which should be outside the Budget, as part of expenditure used to calculate the overall Budget surplus or deficit. For details please read my analysis of the Budget here. CFOs and CEOs have gone to jail for similar tricks and fake double-counting in the US and other countries!

If therefore none of the Government’s disclosed balance sheet can be used to calculate the NIRC, this provides a very good way of working out what the size of the assets are that Heng says must remain hidden because otherwise our enemies could destroy us. They must also remain hidden from Singaporeans because, as the PAP and Lee Hsien Loong will tell you, they do not belong to you but are being held in trust for future generations! If we use a 1% rate of return as a good guess at the less than 50% of the expected real return that the Government uses to calculate the NIRC, then the amount of hidden assets based on an NIRC of $19.5 billion, is $2 trillion. 

Adding $2 trillion to the net assets of $600 billion (total assets of $1.35 billion minus the Government Securities Fund of $734 billion) revealed in the Statement of Assets and Liabilities means that Singaporeans have $2.6 trillion in assets.  If we applied a 4% return to these assets, as I have argued on many occasions, we could be spending $100 billion over what we are spending currently without depleting our reserves. That would fund universal health care and a universal basic income of $1,000 per month for every adult citizen.

Remember also the Government owns 80% of the land and the income from this asset has not been taken into account

Every Budget time we are treated to the Government’s bleating about the need for austerity and for taxes to go up to fund greater spending. Heng is rushing to put up GST to 9% as soon as possible and no doubt the PAP will raise it higher and higher in future years. Yet my analysis shows that there is no need for this artificial austerity and that the disclosed reserves are only the tip of the iceberg with over three times as much carefully hidden. Even though the Opposition in Parliament are clearly reading my blog, they have not grasped the full picture and remain overly deferential, because as Pritam Singh told me, they do not want to end up like JBJ. It is a pity that you do not have me in Parliament to fight for you!

 

Kenneth Jeyaretnam

 

About the author: I’m a Singaporean economist who became an opposition activist. I blog to provide an alternative to the porkies that the Pinkies tell. It just so happens that my alternative is the truth. That’s why I’ve never been sued in any civil or criminal court no matter how hard hitting my criticism. I’m quoted and interviewed and asked to speak across the world but largely censored in Singapore in an effort to silence my political opinions. The left hate me because they think I split their vote and because I eschew their outmoded economic models. Models that don’t work. The Right and the Conservatives hate me because I’m a liberal. I’m not sure what the middle think of me. I don’t think there are more than a handful of people in the middle, here in Singapore. I’m a Singaporean born and bred, dual heritage, my parents Singaporean established here before the State of Singapore was created. I’m not Eurasian. I read economics at Cambridge and could be broadly described as from the Keynesian school but I believe in interventions. I was formerly a successful hedge fund manager. After economics and politics my greatest interests are history, film and Makan. I run but I run so I can eat like a Singaporean.

 

 

 

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15 Responses to “The Enormous True Size of the Reserves”

  • Totally disgusting!:

    The treasury is overflowing with gold, silver, diamond, whatever, and the gov demands the poor to pay more GST.

    Gov always kpkb no money. What a cheat!

    On another note, why is the GIC so lousy. If the global inflation rate is 2.5%, and GIC reports 2.7% over, that means only 5.2%. This is way below other big gov wealth funds, e.g. Norway’s.

    Singapore gov wealth comes mainly from squeezing people.

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  • No Cambridge chat session?:

    This is almost martian lingo to a sheeple like me Kenneth, but Heng at least owes you a thorough beating down for letting loose this $$$salvo…. can anyone hide endlessly behind their corrupted crony stonewall endlessly while grandpa slogs on at $6/hr and our handsome men and pretty women cringe at the $$$prospects of setting up family households? Oxfam didn’t rank the Singapore government a disgraceful 49th out of 57 countries in income distribution for no sound evidence, I don’t think?
    In the Emperor Dowager’s island kingdom it is austerity for sheeples while the (secret) national treasury remains the prerogative of the oligarchs and their associates….
    Wah lao eh!

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  • TEMUSIK PATRIOT:

    Like I said Ken, your dad had a Legal mind pitted against one of the evilest tongues twister ever seen and heard in Singapore, hopefully NEVER AGAIN…

    This bunch of idiots headed by brain fried to a crisp through bad karma of his father is a sashaying talking DISASTER!!!…

    You need to get into Parliament with Dr Chee to Expose the Horrors that lie along the Corridors of Power…

    Accepted, the system is well OILED and PAID to amassed the $$$ in the Vault through the dedication of the Founding Generation Hard Work…

    Using a Blank Check to stay in Power is never good no matter how well oiled the system is and TOTAL POWER corrupts to a level where…

    “Fainting in Parliament” and “Falling when strike by Lightning”

    The LEEgally Corrupt hangs on to POWER!!!

    You are one of the few who keeps Ponding the streets and Internet even though the Election is over and I wonder how many voters are AWARE of you and Dr Chee’s DEDICATION!!!

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  • KNN:

    Not forgetting those platinum kiong kong by some one.

    Totally disgusting!:
    The treasury is overflowing with gold, silver, diamond, whatever, and the gov demands the poor to pay more GST.

    Gov always kpkb no money. What a cheat!

    On another note, why is the GIC so lousy. If the global inflation rate is 2.5%, and GIC reports 2.7% over, that means only 5.2%. This is way below other big gov wealth funds, e.g. Norway’s.

    Singapore gov wealth comes mainly from squeezing people.

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  • Hm… If Sinkieland has about $2T of reserves, then Jack Ma is richer than Sinkieland since he is rumored to be worth 几千亿.

    Comparitively, $2千亿 is bigger than $2 trillion or not?

    @KNN

    The Platinum was owned by the old man, probably willed to his children liao, nothing to do with the gahment.

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  • Soccerbetting2:

    Reported on the TISG :Quote -”Josephine Teo: Retirement, re-employment ages to be raised next year as planned
    CPF contribution rates for senior employees to go up by Jan 1 next year…

    Anna Maria Romero
    DATE

    March 4, 2021.

    Singapore — Manpower Minister Josephine Teo announced in Parliament on Wednesday (March 3) that the plan to raise the age of retirement and re-employment by July 1 next year will go ahead.

    In March 2019, Ms Teo announced that tripartite leaders had reached a consensus to raise the retirement age and re-employment age beyond 62 and 67. She called this a “significant milestone,” as it would serve senior citizens who want to keep on working.

    The minister announced the plan would go ahead while speaking during the Ministry of Manpower (MOM) budget debate on Wednesday. She added that the public service will fulfil its commitment to raise the ages a year ahead of legislation for its 146,000 officers on July 1 this year.

    SHE EXPLAINED THAT THIS WOULD “HELP TO KEEP US ON TRACK TO RAISE THE RETIREMENT AGE TO 65 AND RE-EMPLOYMENT AGE TO 70 BY THE END OF THIS DECADE.”

    Ms Teo added that raising the retirement and re-employment age will help seniors, add to their savings for retirement and give them the opportunity to work longer..

    She also said that, “barring any unforeseen circumstances,” the planned increase of Central Provident Fund (CPF) contribution rates for senior employees will also proceed as planned by Jan 1 next year.

    This increase should have taken effect this year but was delayed due to the Covid-19 pandemic. Based on how old the employee is, employers and workers are to contribute either 0.5 percentage point or one percentage point more for employees in the 55 to 70 age group.

    The minister also said that one of her ministry’s priorities this year is to help all segments of the workforce, including employees in their senior years, to come out of the pandemic stronger..

    Ms Teo also said that 2020’s $1.3 billion Senior Worker Support Package is aiding employers when it comes to raising the ages for retirement and re-employment.

    Since this took effect, 17,000 older employees in 1,700 firms have been supported by this scheme, with yet another $200 million allocated to aid 75,000 more senior workers.

    The minister said, “The larger goal is to create the momentum and shape a new norm among employers, where many more companies raise retirement and re-employment ages to 65 and 70, well before 2030.

    “A senior worker who can leave the workforce at age 70 instead of 67 and defers the start of his CPF Life payouts accordingly, can get around 20 per cent more per month for life.”

    /TISG”Unquote .

    Response : Think, Why that e*** b**$* Josephine Teo Li Min keep on raising retirement and re-employment ages ? Better wake up how all your CPF funds is slowly going to eat up all of you using super expensive healthcare system ,taxes,and annuity payout will be very minimum and not enough in future !

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  • Harder Truths:

    I can also go out and claim I have 5 million dollars. People will demand proof. But when these con-men talk 61% believe the Reserves somehow magically exist – even though no one has seen them, there has been no audit or any kind of proof they actually exist.

    Until we see these so-called Reserves it is logical to say they do not exist. In which case whatever is said about how they are sued or grown is also moot. Chasing a mirage does not make it real.

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  • xoxo:

    We need to debunk that revealing a nation’s RESERVES is revealing *STATE’S SECRET*?
    Even some BIG GUN’S SALARY IS *STATE SECRET*?
    TIME FOR TRUTH.
    COLLECTING MORE MONEY FROM THE RICH,I AGREE.
    BUT COLLECTING MORE N MORE MONEY FROM THE HAVE-NOTS LIKE MEDISHIT PREMIUM INCREASES AND GST,I THINK IT IS NOT DECENT GOVERNANCE.
    Its tyrannical!

    Take recent $100 B loot to di$h out generous furlough to even non-sgs while granting needy sgs $600 of a per capita $23K.
    Yet increasing medishit premiums and waiting to up GST?

    WHY NOT CLAW BACK FROM THOSE WHO WERE GIVEM HEFTY FURLOUGH.

    H$K IS ANOTHER USELESS MINISTER AND I TOT HE WILL NOT BEHAVE THE SAME SINCE HE GONE THROUGH NEAR-DEATH EXPERIENCE.
    Did he meet the Devil?

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  • Who knows the answer?:

    Who really knows the reserve value?

    KJ estimates $2,600,000,000,000 plus Sg land value. That means every Sinkies has a million dollars in the reserve.

    This is about right, considering that the gov “cheated” every CPF member off a million or two, by earning high investment returns and returning insulting “interest” to members.

    There are many estimates, but who really knows how much is the reserve.

    We know for a fact that MPs don’t know. It’s comical and ridiculous that MPs can kpkb and claim the gov has no money when they know nuts.

    Do ministers know how much is in the reserve? Normal run of the mill ministers surely don’t know. Top secret. No need to know. Just follow the other MPs kpkb no money.

    Do presidents know? They retire before the 56 man-year or 100 man-year work can be completed.

    Do prime ministers and deputy prime ministers know? My guess is that Heng, Goh, Teo, are in the dark. Top secret. No need to know. Just kpkb no money enough already, right?

    So who really knows the answer?

    xoxo: TIME FOR TRUTH.
    COLLECTING MORE MONEY FROM THE RICH,I AGREE.
    BUT COLLECTING MORE N MORE MONEY FROM THE HAVE-NOTS LIKE MEDISHIT PREMIUM INCREASES AND GST,I THINK IT IS NOT DECENT GOVERNANCE.
    Its tyrannical!

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  • TEMUSIK PATRIOT:

    xoxo:
    We need to debunk that revealing a nation’s RESERVES is revealing *STATE’S SECRET*?
    Even some BIG GUN’S SALARY IS *STATE SECRET*?
    TIME FOR TRUTH.
    COLLECTING MORE MONEY FROM THE RICH,I AGREE.
    BUT COLLECTING MORE N MORE MONEY FROM THE HAVE-NOTS LIKE MEDISHIT PREMIUM INCREASES AND GST,I THINK IT IS NOT DECENT GOVERNANCE.
    Its tyrannical!

    Take recent $100 B loot to di$h out generous furlough to even non-sgs while granting needy sgs $600 of a per capita $23K.
    Yet increasing medishit premiums and waiting to up GST?

    WHY NOT CLAW BACK FROM THOSE WHO WERE GIVEM HEFTY FURLOUGH.

    H$K IS ANOTHER USELESS MINISTER AND I TOT HE WILL NOT BEHAVE THE SAME SINCE HE GONE THROUGH NEAR-DEATH EXPERIENCE.
    Did he meet the Devil?

    Bro, the KEY to the VAULT was held by the bast**d now dead when the wooden piece of shit took over the baton “IT does NOT include the KEY”…

    After stepping down and elevating the rising son…the KEY was then handed to the “Useless Son” by the bast**d ensuring only The Lies will OWN it with the Grandson waiting in the wings??? especially NOW with the Jinx making her presence felt on FACEbook

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  • Ah Seng:

    Hello KJ
    I think your questions are not meaningful.
    Has our accounting generals questioned? Why need to question when voters have condoned this secrecy for decades?
    Our people rank highly on PISA .
    Our Accounting grads got question much ?
    Has our Accounting scholars questioned?
    See, we base on Believing.
    In god we trust. In PAP we believe.

    This is SG.

    GD Star Rating
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  • Singaporeans R Free Riders:

    Who knows the answer?:
    March 5, 2021 at 1:37 am (Quote)
    Who really knows the reserve value?

    KJ estimates $2,600,000,000,000 plus Sg land value. That means every Sinkies has a million dollars in the reserve.

    —————————————————-

    You may want to check with these experts :

    NG KOK LIM

    KOK AH SNOOK

    CHRISTOPHER BALDING

    Together with KJ we can construct the size of the reserve.

    GE2024.PAP.Guarantee.Win.HuatAgain
    Majullah $PAP$ $PAP$ Huat$

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  • xoxo:

    @Who knows the answer
    @TEMUSIK PATRIOT

    Thanks for enlightening.
    Guess *KEY TO RESERVES ERECTED PRESIDENT OSO BLUR*?

    GD Star Rating
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  • Soccerbetting2:

    Reported on Straits Times :Quote -”Pay hikes for over 56,000 public healthcare workers from July, with nurses getting up to 14% more…

    MOH will also expand efforts to bring in mid-career joiners by increasing capacity under the professional conversion programme for healthcare professionals.ST PHOTO: KUA CHEE SIONG
    Linette Lai and Shabana Begum
    PUBLISHED10 HOURS AGO…
    SINGAPORE – An estimated 56,300 public healthcare workers – including nurses and support care staff – will get pay bumps over the next two years, starting in July.

    Nurses will see increases of 5 to 14 per cent in their monthly base salaries, while other healthcare staff, such as allied health professionals, pharmacists and administrative and ancillary staff, will get pay rises of 3 to 7 per cent.

    The Health Ministry (MOH) will also increase funding support for salaries at publicly-funded community care organisations in order to ensure that wages in this sector remain competitive. This will benefit another 20,800 staff.

    In announcing the pay increases, Senior Minister of State for Health Koh Poh Koon spoke of how the Covid-19 pandemic has shown Singapore the importance of maintaining a resilient core of healthcare workers.

    “Our healthcare workforce is the lifeblood of our healthcare system, and the work that they do is critical in protecting the health of our society,” he added during the debate on his ministry’s budget.

    “We must maintain the salary competitiveness of healthcare staff against the overall market to attract and retain quality talent.”

    However, doctors and dentists will not be included in the pay rise as their salaries were last updated in 2019.

    Senior Nurse Clinician Seri Sastika told The Straits Times: “2020 has been an extraordinary year, and with the ongoing Covid-19 pandemic, our mission to care for our patients has never been clearer.

    “We are delighted by the thoughtful gesture, initiated by the Government,” added Ms Seri, who works at the National University Hospital.

    Nurses had received pay increases of between 5 per cent and 20 per cent in 2014, following recommendations by the National Nursing Taskforce.

    Their pay was increased again in 2015, as part of efforts to make the profession more attractive.

    Allied health professionals, pharmacists and administrative and ancillary staff last got pay rises in 2016….

    In his speech, Mr Heng had lauded those in the industry for their hard work and dedication, and noted that the sector will grow as ….”Unquote.

    Response :Singapore nursing industry is already super high paid with all those e*** women wing nurses e*** backside earning super high pay still increase their pay some more during pandemic.Which nurse will resign furing pandemic with such high pay and e*** benefits ?Pui! Heng Swee Keat is another e*** b**$* together with Indranee Rajah ! Later more taxes to recover costs ? Obvious pay rise for doctors/dentist will come later just not now only at higher rates ! Pui!

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  • Memo @ soccerbetting2:

    For certain, the people’s MOH has been incorporated under Pappy’s Temasek Holdings for several years now.

    If Poh Koon actually said: “Our healthcare workforce is the lifeblood of our healthcare system, and the work that they do is critical in protecting the health of our society,” during the debate on his ministry’s budget. And…
    “We must maintain the salary competitiveness of healthcare staff against the overall market to attract and retain quality talent.”

    Does anyone perceive that Dr. Koh had thereby delivered the scholastic apex of academic deliberation? Ah Low and Ah Seow also know some how lah…

    The pertinent issue sheeples would rather want the answer to is:
    Why has only S$2 billion of our Medisave funds for the last three to four decades been released to contributing Singaporeans for their healthcare expenditures – when the Pappy government has actually collected just over S$100 billion in those many years??? Surely our nurses and doctors could have been paid a better wage since twenty years ago!

    GD Star Rating
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