TR EMERITUS

This is the 3rd and final installment of Eh, Goondu series. Watching Indranee, 2nd Minister of Finance, explain land reserves back in Nov 2022 parliamentary debate, and reading Ho Ching’s Jun 24 post in Facebook on same matter, is an exercise in incredulity. Indranee expounded “ownself declare ownself” accounting principles and Ho Ching basically regurgitated same same. What I find exasperating is when word salads from the two luminaries threw Singaporeans into confusion, no one from academia or The Society of Accountants take it upon themselves to come forward to present their views. A community depends on the collective wisdom of our professionals to participate in intellectual discourse that helps shine light for everyone. Without doubt Indranee and Ho Ching are highly respected and brilliant individuals, but having a lawyer and engineer expound accounting matters is as good as an economist performing a surgery. Singaporeans must learn the danger of argumentum ab auctoritate, or argument from authority fallacy. Basically, this is a tendency for people to think that well the explanation came from such a high official, or expert, it must be true and correct. Where is state land booked? It is not accounted for by SLA which is merely the agency that handles the buying and selling of land on behalf of the government. State land is either acquired or reclaimed, so there is a cost which is the book value. In which agency of the government is this asset accounted for, we don’t know. Operating lease or financial lease model Accountants would talk in terms of these models regarding sale of land on 99 year leases. Indranee merely said “There is no net increase in the reserves when land returns to the State after the lease expires, as the value of the lease did not include the value of the reversionary interest.” From this we know the sales are all operating leases. That means the land reverts to government at zero cost after 99 years. Reserves Fig (a): As explained in 2nd installment of Eh, Goondu, our national reserves is the net assets of government + statutory boards + (GIC,Temasek). Net assets = Equity which is made up of Capital,P&L, General/Specific Reserves. Why is Equity shown on the right side with Liabilities? Because Equity is what the entity owes to shareholders. It’s what’s due to shareholders, thus it is a liability from the entity's point of view. In fig (a) our national reserves is $200m. So where are the assets that make up this $200m? Well, we don’t know specifically. We know $200m of the total assets of $600m are our national reserves. So the point is, if you want to know how much our national reserves are, don’t look at the assets side, look at the liabilities side. Valuation Fig (b): Now that you know what our reserves are, you want to know are the asset values realistic. Accounting standards require certain assets to be marked-to-market, eg listed equities and securities. Other assets are carried at historical cost less impairments, such as investment in unlisted companies. Mark-to-market gains/losses and impairment are unrealised. We are just writing the assets up or down to recognise changing values. To recognise means to take into P&L. The change in values affects both assets and our reserves, ie Equity (P&L) as shown in fig (b). Eg a plot of land cost $20m. It is now worth $22m. Asset and Equity are adjusted by $2m accordingly. For assets that cannot be marked-to-market, valuation is left to management. It’s basically "ownself declare ownself". In the case of Temasek for example, 53% of it’s $382b total assets are shares in private unlisted companies. You can appreciate the implications, especially now that they have stopped publishing statutory audited accounts. Disposal Fig (c): On disposal such as in sales, 3 things happen. (a) Asset type changes. (b) Value change (whether gains or losses) are now realised. (c) If the value change is higher than what has been recognised so far, the additional change affects reserves. Eg if that plot of land is now sold for $26m, the realised gain is $6m. Earlier, $2m of the gain had already been recognised. So $22m asset (land) has now been changed to asset (cash) $26m, and reserves (P&L) increases by another $4m. Indranee : “There is no net increase in the reserves when state land is first sold and the sales proceeds are transferred to the financial assets. It is just a conversion of one asset form to another.” The minister looked only on the Assets. What happened to Liabilities side of the Balance Sheet? If the cost of the land is $20m and realised for $26m, the Minister was writing new accounting principles to not recognising a $6m profit. I wonder if her colleague the Commissioner of IRAS will agree. State land Per CNA : “She explained that under Singapore land laws, which can be traced back to English land laws, all title to land in Singapore is derived from the State and the state leases the land to others.” Indranee : “Land that was not leased out by the state remains state land, and under Singapore’s Constitution, all state land forms part of the country’s reserves” Actually Singapore adopts the Torrent land registration system which is an Australian system. Is the minister saying there is no land in fee simple (freehold)?. When she said “all state land forms part of the country’s reserves”, we need to unpack this properly. Is she referring to “reserves” as defined under the Constitution (which means “net assets”)? If sold under 99 year leases, the asset has gone out of the Balance Sheet. From the legal perspective, ownership of the leased land remains with the government in the case of operating leases. The government owns reversionary rights to lands leased out, ie the land reverts back to government at the end of lease term. But from accounting perspective, the land is gone. It is no longer an asset in the books. Now if we were to compute the country’s wealth, then it is a completely different perspective altogether. We can include all those land sold off under operating leases because governmen retains ownership. This is taking the view that latent assets are wealth in the same way like untapped oil and gas reserves under the land or sea, or minerals, or forests, are wealth to some countries. So we need to be clear that here we are talking about the Constitution which uses the accounting concept of reserves. So those leased out land no longer forms part of the reserves. And to be absolutely clear, nowhere in the Constitution does it mention “all state land forms part of the country’s reserves”. There was misinformation or disinformation on the part of the minister and 90 odd members of parliament took it all in. Land as past reserves Indranee : “….. the reversionary interest in that parcel of land had all along formed part of our past reserves.” Ho Ching: “So land is part of our past reserves, and an inheritance to conserve and protect for our future generations. Hence, whenever we sell land, we must lock up the net proceeds as part of our past reserves.“ Here we have once again misinformation or disinformation by Indranee and Ho Ching. Singaporeans need to be crystal clear here. Nowhere in the Constitution does it define past reserves. The number of times the term “past reserves“ mentioned in the Constitution is ZERO. Yap, this is fact. The Constitution makes constant reference to what is not permitted to be “drawing on the reserves of the Government which were not accumulated by the Government during its current term of office”. There are 2 clear inferences here. (a) reserves are “accumulated” or built up, or gains made, by a government. (b) accumulation by present government can be considered “current reserves” and accumulation as at commencement of current government are “past reserves”. And in case you are wondering, the Constitution most definitely never mentions that proceeds from land sales cannot be spent. 100% fact. Because like I said, Constitution, like accountants, think of reserves on the Liabilities side of the Balance Sheet, not on the Assets side. I explained in the 2nd installment, assets are not fungible so we cannot itemise specific assets to represent “reserves”. Suppose just for the sake of illustrating a point, we look at a plot of land 100,000 sq ft acquired in 1970 at $10 psf. Cost is thus $1,000,000. Suppose it was sold in 2022 for $8m, thus making a gain of $7m. The proceeds is $8m. According to both Indranee and Ho Ching, the entire $8m are past reserves which cannot be spent. Well actually Ho Ching said net proceeds of $7m ($8m- $1m) must be invested as past reserves. Under the Constitution we need to see reserves are accumulated by which government. And this depends on government accounting policy. The present government term started in July 2019. If policy requires valuation gains/losses to be recognised yearly, then $4m of increase in reserves is due to past government, and $3m is accumulated by present government. So of the proceeds of $8m, past reserves is $5m (valuation gains + cost) and current reserves is $3m. But if policy is to carry land at cost, then there is no valuation. This is the case with government accounting, In this case, $1m is past reserves and gains on sales of $7m occuring in 2022 is entirely current reserves. Remember, the distinction of past or current reserves is important to the issue of whether the government can or cannot spend it as dictated by the Constitution. Past reserves NO, current reserves, YES, government can spend. Government policy on land sales It is government policy not to spend the net proceeds on land sales but to transfer the cash to the sovereign wealth funds to invest. There is nothing wrong for the government to make policy it deems fit so long as it does not conflict with any legislation. In this case, there is no conflict with the Constitution as regards restriction on spending past reserves. Seen in this light, the issue is crystal clear. Since it is government policy, it is open to challenge by opposition. There is nothing wrong with Leong Munwai asking all those questions and making suggestions. Indranee and Ho Ching’s bla bla bla on land reserves are confusing and tantamount to misinformation and disinformation.   Patrick Low * Article first appeared on Down The Rabbit Hole.      Read More →

I again express my views and concerns as a citizen. Not too long ago, two of lhl's cabinet ministers, K. Shanmugam (KS) and Vivian Balakrishnan (VB) publicly threatened to sue Lee Hsien Yang (lhy) if he fails to apologise and pay damages for what he has said about the renting of their Rideout Road black and white bungalows etc. Both pap ministers offered to donate any monetary compensation received to charity too. Lhy didn't take too long to reply. His reply was that what he has said happened in the United Kingdom (UK) and if both pap ministers decided to pursue their case legally, they should sue him in the UK. It was plain and straight forward and anybody who has read what he said will understand it. So far, as far as the public is concerned, both cabinet ministers are totally quiet about whether they will sue him in the UK or not. I ask what happened because I consider the question of credibility to be on the line. Both the UK and Singapore are members of the Commonwealth. It is unlike we both have different legislative backgrounds and laws such as chalk and cheese. When a threat is issued, much less one coming from none other than the honourable ministers, I, as a citizen expect my ministers to either follow through with their threats and if they decide to back down, then please let Singaporeans know the reasons because I believe that many citizens are concerned, are watching and are following the developments and they deserved to be informed . There is a Chinese saying that loosely translates as coming as a tiger but leaving like a snake's tail (蛇假虎威). Coming so strongly like a tiger and leaving like a snake's tail will aptly fit the above description if nothing more is forthcoming from both KS and VB as far as their threats to sue lhy is concerned. . Think.   Simon Lim        Read More →

As our country turns 58, it is glaringly apparent that Singapore has regressed as a Nation for well over a decade. Our neighbours,such as Indonesia,have made impressive strides in their economic and social progress,but Singaporeans are probably at their lowest ebb since we achieved Independence. Our people look on forlornly as the crushing burden of inflation saps the national spirit,exacerbated by a government which only adds to their burdens through incessant hikes in taxes and fees such as GST and S&CC. Our young see their dream of starting a family diminishing by the day as property prices have become out of reach for many. Our Total Fertility Rate stands at a abysmal historic low of 1.05. The spate of scandals which has engulfed the government in recent times has only compounded Singaporean woes. Our people’s trust in government has been shattered and deep cynicism of the elites and the establishment, who call themselves public servants,has set in.The government is bereft of fresh ideas to move our country forward. We have a tired Prime Minister who leads a tired government. A malaise has set into our Nation. More than ever,our Nation and people need to reinvent ourselves.The stasis which has permeated our society for many long years must be scrubbed away. The old narratives which the PAP and the establishment trumpet as “stability” must be destroyed. Only when we have the courage to change will we and our next generation enjoy better days. And change must start with the politics of our country. It is time for Singaporeans to step from the Old into the New. Let us start our reinvention and renewal this coming Presidential Election and let us make further progress in the next General Elections. On this 58th year of the birth of Independent Singapore, Peoples Voice wishes all Singaporeans a very Happy and Joyous National Day!   Lim Tean Leader,Peoples Voice      Read More →