TR EMERITUS

Foreward:  I have worked out the size of the Singapore reserves. The only person in Singapore that can show you this. It has a pretty high level of confidence you can take it to the bank.

As the presidential election heats up, the ruling party feels enough unease of an outsider Tan Kin Lian nipping 2 contenders backed by them. State media CNA released a series of videos called "Singapore Reserves Revealed". It's mere propaganda and politicking and reveals nothing. It's a clicktrap title, the same I employ here except I reveal the closest one can get to the real size of the reserves.

What is the size of Singapore’s national reserves? Kenneth Jeyaretnam has consistently mentioned S$3 trillion, Munwai has his own figures. What is yours? Kenneth has double first class honours degree in economics from Cambridge. If you are a Singaporean economist and never pondered this question of national reserves, you should return your degree to your alma mater.

I asked the Drunken Leprechaun guarding our treasure trove and he doesn’ t know either. (A trivial for those who don’t understand. Leprechauns are little creatures in Irish folklore that guard hidden treasures. Drunken Leprechaun is an Irish screwdriver or cocktail.)

Frankly, I can only see Kenneth worked at macro economics level but exactly how he arrived at the S$3T figure I do not really understand, so I had never accepted it. I never have then, and I still do not, share KJ’s, and as well Munwai’s, persistent calls for higher social spending on the back of a huge national reserve. I explain below.

I am as curious as all Singaporeans who still have a mind of their own. Curious doesn’ t quite describe it. Concerned it is. And so I took a deep dive to work out the size of our national reserves. Unlike KJ, I took the micro route, using information in the public domain, and a best efforts estimation on GIC numbers. My computation is strictly based on the Constitution’s definition of ‘Reserves’.

Singapore Constitution states reserves “means the excess of assets over liabilities of the Government, statutory board or Government company”.

If you have not yet done so, do watch my video first for a full understanding : "To find out how much is the reserves, you must first know what is is."

Before I get to the numbers, a few points to note :

(1) The figures for government, statutory boards, MAS, and Temasek are from public domain. They are on group consolidated basis, meaning, inclusive of subsidiary companies. Details are in the embedded spreadsheet below. Unfortunately they are not homogeneous in the financial report date. Most are as at 31 Mar 2022. Nevertheless they provide a factual basis.

(2) There is a total of 63 statutory boards. The financials for 3 of them are not available. Missing are Hotels Licensing Board, Intellectual Property Office, and Defense Science and Technology Agency. HLB and IPO are small and with insignificant numbers. DSTA is most likely to be significant. Unfortunately, its financials are obviously classified, and quite rightly so.

(3) GIC data is classified. We have no choice but to make educated guesses. Its numbers are of course massive and thus affect the accuracy of the size of the reserves I am making here. The basis of my estimation is shown below.

(4) Missing completely from my computation is EDBI (S) Pte Ltd. This is the investment arm of Economics Development Board. It is obviously not included in EDB’s financial statement. I do not know why it is excluded and I was also unable to obtain its financials. EDBI has a massive investment portfolio of about S$80B but I have no idea what its net asset, or reserves is. EDBI is an oddity. The Economic Development Board Act certainly does not mandate EDB to operate an investment wing. More importantly, is any other statutory board also running any unknown investment companies kept away from public view? For side gossip, EDBI has in its portfolio the unlisted Livspace, the company where Minister Shan's son is the CEO.

(5) A persistent reader kept insisting reserves figures are readily available at various websites such as IMF and World Bank, and financial news media. What he really meant was foreign news folks are better than us locals because they are able to obtain GIC figures from the government that which PM Lee reiterated again a few days ago, is classified. If you have skin in the game you know the figures we see from those said foreign sources are predicated on 2 things – (a) Singapore's budget report to IMF does not follow their standards, (b) the GIC info from these financial media, including a dedicated site on sovereign wealth funds, are based on info extracted from investment tracking sites, such as Crunchbase, in other words, not a complete picture at best, and at worse, it is about portfolio size, not about reserves. There is a world of difference.

(6) The figures shown here are book figures. Accounting standards require certain assets to be marked-to-market which we simply rely on auditors’ certification of compliance. There are, however, massive portfolios in GIC, Temasek and EDBI which are unquoted stocks. These values are simply management valuations. I am not suggesting fraud or misrepresentations, but when these unquoted assets are massive and form a huge proportion in the portfolio, such as 53% in Temasek, it is concerning. For example, would the S$375m investment in FTX still be in Temasek’s books had CoinDesk not made the shocking revelation that led to the crypto exchange’s downfall? The point is, valuation has a way of turning up nasty surprises.

(7) On the other hand, in contrast to (6), state land remains at book value in accordance with government cash accounting. This means a significant undervaluation of reserves in view of real estate appreciation in land scarce Singapore. A caveat here. I have no understanding of how and where state land and reclaimed land is accounted for and where are the assets booked. We have been told, in sort of by-the-way moments, that land acquisition and reclamation are funded by past reserves. What are the implications on the accounting and reserves figure is unclear.

With that out of the way, here are the numbers:

The good news is, our reserves are indeed massive. Reserves, ie Net Assets, or Equity, is estimated at S$1.9T. I have only 2/3 of KJ's estimate of S$3T. How good are my figures? The "Total from published financials" line, or S$1.6T of the Reserves, we can have 100% confidence level, bearing in mind this is a book figure. The GIC estimates have been skewed more to the conservative side. So overall, the total reserves of S$1.9T I would venture a 80% confidence level

The bad news is, the amount available for discretionary spending is not what you think. S$1.9T is a heck of a lot, but before you bring out the champagne, understand that 65% of the Reserves are tied up in capital and committed uses. Only S$649B are in surplus funds. These surpluses are predominantly with GIC and Temasek. A substantial 53% of Temasek assets are in illiquid unlisted shares, and we can probably expect same with GIC. How much is actually left for discretionary spending? Not enough for the social spendings loud voices are calling out for.

After massive transfers to Reserves Management Government Securities recently, the Official Foreign Reserves of MAS is currently (July 31) S$452.5B. Those who still harbour the belief (Critical Spectator and his FB followers) that OFR is part of Reserves need only to look at MAS' Equity which is just S$34.3B. What this shows is OFR is not accumulated with Reserves (savings) but debt.

Details of published financials are in the embedded spreadsheet here.

Here are details of my estimation of GIC numbers.

(a) GIC started operations in 1981 with a capital of S$100M. I assume this has not changed. GIC was initially tasked to manage the investment of MAS's excess foreign reserves.
(b) Budget surplus of S$3B/year.
(c) NII is Net Interest Income which is dividends received + interest revenue less expenses in portfolio management. 50% goes to budget spending, 50% re-invested.
(d) NIRC is Net Investment Returns Contribution. This is NII + NIR. NIR is net interest returns on portfolio at 20 year rolling real interest rate. 50% goes to budget spending, 50% re-invested.
(e) Net proceeds of lands sales.
(f)(g) Funds from proceeds of government securities and deposits of other entities held by government. These are actual numbers.

(b)(c)(d)(e) are just estimates which are skewed to more conservative side to absorbs the chance certain amount is occasionally transferred to Temasek.

A higher level of confidence is possible if someone can invest time and effort to do some research at archives kept at Lee Kong Chian Library. I am not up to that. However, the format I set out here can be used by anyone with a different opinion of what each line item ought to be. Simply replace my estimates with yours and you can have your own idea of what the size of our national reserves is.

 

Patrick Low

* Article first appeared on Down The Rabbit Hole.

 

 

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