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Where have our reserves gone?

“Let me tell you the  truth, as spending increases significantly sooner or later taxes must go up too.”   Thus spake the PM in his National Day Rally Speech. Apart from that so-called truism, the NDR speech was totally without interest being the usual PAP message of austerity for Singaporeans ( what the PM calls being tough as individuals) but largesse for everyone else.

Let me tell you, the PM’s truth  is actually just one opinion and I believe it is far from the truth. Firstly, we should have enough money in savings to pay for all conceivable heath care needs even with an ageing population. After all in Singapore all health care and the cost of an ageing population is on a pay as you go basis where costs are almost entirely borne by the individual. In fact our population is not increasing, native-born Singaporeans are declining and the New Immigrants are all young.  So spending should not be increasing on a scale to make a tax hike necessary.

Secondly we should have enough savings.

A greying population is a global phenomenon. One universal truth is that people are living longer and having fewer babies on the whole. It’s not new and other nations such as Norway have set up SWF’s specifically to set aside money for their pensions and health care needs.  The PAP raison d’être for why they alone should continue to rule Singapore is that they have amassed huge reserves. In fact their favourite method of attacking the Opposition used to be to accuse figures like my father, JBJ of wanting to deplete the reserves through welfare payments.   These huge reserves are supposed to provide a cushion of assets for a rainy day and a hedge against future catastrophes . So again, why would they need to raise taxes? Does the PAP need more money because it is planning a big expansion of the Welfare State? I hardly think so.

The NDR message was merely a reiteration by the  PM of hints that there would be a tax hike in his speech to the Economic Society, by the MOF Tharman announcing that not much more could be spent on health by the government, without tax rates rising to 60% (2012 Budget speech ) and by Ng Eng Hen at a Reach forum who chipped in with an alarming warning that taxes would have to rise because the government does not have a budget surplus.

In my open letter to the Finance Minister  on 2 June  2012, I queried the alarming and rapid increase in public debt and asked for an explanation. This debt was at some S$367 billion according to the July Monthly Digest of Statistics. In one sense the rise in debt is perfectly understandable because of rising inflows into our forced savings scheme, CPF, and the fact that almost all its free cash flow, other than withdrawals to pay for housing or medical expenses, is lent to the government.

However if the government is making such a poor rate of return then the logical thing would be for it to do would be to cut CPF contribution rates or reduce the interest rates paid. Why do CPF contribution rates need to be so high and why have the PAP extended the date at which we can take it out? It doesn’t make sense for  the government to increase CPF borrowing.  The Prime Minster said that our net returns are 2% of GDP which is a return of less than 1% on total assets (savings).  Yet the government pays between 2.5% and 5% to the CPF which in turn pays us the account holders. For the citizen it is really no different to a tax where you are forced to buy government debt.   It is inexplicable why the PAP government is always seeking ways to reduce the outflow from CPF by putting back the payout date and forcing us to buy annuities. Or rather it is explicable, if the money is not there or is tied up in illiquid investments that our talented investment managers cannot sell.  While 2.5% to 5% interest rates on our CPF savings may not be historically high they do seem challenging given the current investment environment and the returns the government seems able to achieve. In addition Singapore could no doubt borrow more cheaply in public debt markets given its current AAA rating. No doubt the relatively high rates of interest are necessary to make Singaporeans put up with the continual deferral of the date on which they can take out their savings. Limits on withdrawals and paying above market rates of interest are both classic hallmarks of Ponzi schemes.

We have to seriously consider the possibility that our reserves have been depleted through bad investments and are no longer sufficient to repay the CPF.

If this is the case then the government only has  two alternatives:

  1. It can print more money but the likely implication of that move is to devalue our currency
  2. As I said back in June, the government can raise the money through a combination of higher taxes and more borrowing.

Scenario 2 seems to be a likely probability as the debt has indeed been increasing and the PM’s National Day Rally has confirmed that the PAP feels taxes will need to rise.

Where Has The Money Gone?

Let us look in more detail at the supposed cushion of assets and see if it explains why taxes would need to rise. Every year as required by our Constitution the Finance Minister  presents to Parliament an audited balance sheet of Singapore as at the close of the last financial year showing the total assets and liabilities of Singapore. As at 31st March 2011 total assets were shown as $705 billion and net assets were some $316 billion (after deducting debt and pension liabilities). This works out to roughly S100,000 per Singaporean in equity over and above our CPF savings (which are invested in government debt). S100,ooo per head should be sufficient to provide for the foreseeable needs of a stable or declining population without having to raise taxes, particularly if the government is as good at investing our money as it claims.

For the record our government  claims 17% annualized returns over 38 years on Temasek and 7% p.a. on GIC. Actually that discrepancy in returns itself is ludicrous, as if Temasek was really able to replicate those kind of returns over such a long period why would the government not transfer all the assets from GIC to Temasek?

But what is even more worrying is that. based on the most conservative assumptions about asset returns and the cost of debt, total assets should be much greater and the cushion of net assets belonging to Singaporeans correspondingly larger.  In my letter to the Finance Minister of 2 June I pointed out that using the IMF’s figures the total General Government surplus from 1990-2010 amounted to $429 billion. However the government’s own net asset figures shown in the Statement of Assets and Liabilities (ALS) amounted to only some $316 billion (after deducting debt and pension liabilities).

A Worrying Discrepancy

Since the General Government surplus includes both investment and interest income and capital receipts but excludes all expenditure it is difficult to see why net assets should be over a $100 billion smaller than accumulated surpluses. More worryingly, in September 2011 IMF the General Government Surplus for the years 1990-2010 was $271 billion but in April 2012 this was restated to $429 billion. The Statistics Singapore figure remained unchanged at $300 billion.

Was this restatement as a result of pressure from the IMF? There are certainly questions to answer but which will go unanswered as long as we have an Opposition in Parliament that regards it as its patriotic duty to follow the PAP whip and a President who is intent on being the PM’s poodle .

I had in fact already asked some of these questions in my article Chesapeake Energy and Temasek: A Tale of Two CEOs and Shareholder Democracy ( when I wrote:

Recently I wrote an open letter to the Finance Minister asking him to explain some apparent discrepancies between the government’s annual Statement of Assets and Liabilities (ALS) and the reported general government surpluses. Using the IMF’s own figures as well as those kindly provided (after much prodding, to be explained in a separate post) by the Department of Statistics, I pointed out in my letter that the total reported surpluses are of the order of S$429 billion since 1980. This contrasts with my calculations from the ALS which show that real net assets (excluding land) are only some S$280 billion as of 31st March 2011.

While there I was talking about the period 1980-2010 the general government surpluses for the years 1980-1989 (I have to use the Statistics Singapore data since the IMF data only start from 1990) only amount to $14 billion. If we accept the IMF restatement as definitive rather than the Statistics Singapore figures then total surpluses between 1980 and 2010 are at least $443 billion.

However total assets according to the government’s balance sheet at 31 March 2011 were $705 billion. If, as stated above, we subtract from this government debt of $358 billion and advance deposits of $20 billion we arrive at a net assets figure of only $326 billion which is $117 billion short of the reported general government surplus of $443 billion over this period. Arguably one should also take the $10 billion provision for pension fund liabilities off the net assets figure since pension fund contributions should come out of operating expenditure which reduces the net assets figure to $316 billion and increases the shortfall to $127 billion. In the paragraph above I refer to a net assets figure of $280 billion and not $316 billion. However the government’s ALS contains provisions for many items that should properly have been part of the Budget if it was presented according to the IMF GFS 2001 framework. I have chosen not to subtract them from net assets as it is not clear whether they will ever actually be spent. I have already dealt with the issue of the funds and how the accounts for many of them have not been presented to Parliament despite a legal requirement to do so in “Smoke and Mirrors in the Government’s Accounts”, ( I have also pointed out that the Net Investments Returns Contribution (NIRC), which was supposed to fund current spending, is actually allocated as capital contributions to new funds whose accountability to Parliament is tenuous or non-existent.

If we look again at the IMF GFS 2001 framework, which I first set out in the RP’s Budget 2012 response ( the IMF’s definition of general government surpluses should include everything including holding gains and losses on both financial and non-financial assets as well as investment income, interest income and capital receipts from land sales. Perhaps the difference between the Statistics Singapore numbers and the IMF numbers is due to holding gains on financial assets? Nevertheless, even if this were the case, it does not explain why the IMF figures were restated only in April 2012, after I first started raising the question of discrepancies and omissions in the government budget.

An Inexplicable Shortfall Even On The Most Conservative Assumptions

There are still serious reasons to be concerned however. If we look purely at the government’s primary balance (operating revenue minus operating expenditure and development expenditure) and add to this the government’s net incurrence of liabilities (from the IMF) we get a figure for the amount of money available for investment each year. We can carry this forward at the advertised rate of return of GIC which is 7% per annum in USD and add it to the next year’s figure. We then repeat the operation each year from 1980 to 2010. To take account of debt service costs we subtract interest at 3.5% on the government’s liabilities. I can provide the spreadsheet to anyone who wants it.

Assuming that all assets earn 7% in SGD while debt costs 3.5% (which seems on the high side but reflects the interest rates the government pays on CPF accounts of between 2.5% and 4%) we get a theoretical total assets figure of about $950 billion rather than the $705 billion shown in the ALS. Assuming an average debt service cost of 3% rather than 3.5% raises the assets total to close to $1 trillion. It is only by reducing the rate of return on assets to 5.2% that one gets to a theoretical total assets level of roughly $720 billion which is close to the figure for total assets shown in the government’s ALS. This is in line with what an unhedged return of 7% in USD would have been in SGD terms because of the appreciation of the SGD over this period.

Whatever way you look at it these returns are extremely poor. However there is worse to come. We have not included Temasek’s net assets contribution. We know that Temasek was seeded with $374 million in 1974 and we have been told that the Total Shareholder Contribution has been 17% compounded for the last thirty-eight years. I have omitted this $374 million from my calculations of theoretical net assets. Adding the $166 million MOF operational surplus from 1974 and compounding this at 17% for thirty-seven years gives a TSR of about $180 billion. Adding this to total assets would mean that the government’s total assets should be around $900 billion even on the direst assumptions about the returns GIC has earned.

However we are neglecting another item which is not insignificant. Revenues from land sales need to be added since this is another source of revenue separate from investment or interest income and is not in the Primary Balance numbers. As with everything else in Singapore, historical statistics on net land sales revenues are hard to come by as they are not shown as a separate item in the general government surplus numbers. However from the URA’s website the total land sales revenue since 1992 are given as about $47 billion. Adding in revenues earned by HDB, JTC and SLA and compounding these revenues at 7% p.a. it seems conservative to assume that the forward value of total land sales revenues amount to in excess of $100 billion.

Summarizing these results in the form of a table:

31/3/2011$ billion Assuming 7% Return and 3% Cost of Debt Assuming 7% Return and 3.5% Cost of Debt Assuming 6.2% Return and 3% Cost of Debt Assuming 5.2% Return and 3.5% Cost of Debt
Theoretical Assets 1002 952 864 722
Temasek TSR 180 180 180 180
Land Revenues 100 100 100 100
Total 1282 1232 1144 1002
Theoretical Net Assets 884 834 746 604

The Inevitable Conclusion

Even on the most conservative assumptions there should be nearly double the level of net assets (and double the level of equity belonging to Singaporeans). There would seem to be only two conclusions:

  1. There are substantial hidden assets and the Finance Minister has presented a misleading statement of Singapore’s balance sheet to Parliament and the President. For instance MAS had over $300 billion of foreign exchange assets on its balance sheet which should be in the ALS since MAS is a Schedule 5 company. However the counterpart of MAS’s assets are the liabilities it owes to the government in the form of SGD deposits and in fact its net equity is only about $25 billion. To include both in the ALS would be double-counting. Alternatively Temasek or GIC’s assets might not be in the ALS. Again this would be both a Constitutional breach as well as extremely unlikely as another entity (a stealth fund) would surely show up in regulatory filings somewhere in the world.
  2. Returns have been extremely low, maybe even lower than what the government has been paying out to CPF holders which explains why it has been changing the rules on payouts to disadvantage account holders and lengthen the period it can hold onto their money.

There is a third scenario which is extreme but without answers and transparency how do we actually know anything?  However even without this extreme scenario we should question why the returns achieved are so at variance with the government’s claimed returns.

Before they contemplate raising taxes, the Finance Minister and the PM should come forward and give a proper explanation of the discrepancies in the government’s accounts. They also need to give an accounting of their management of our money and why performance has been so poor.  It is up to you not to let them get away with it.


  1. Hi Kenneth,
    On behalf of the concerned & less educated citizens, I would like the thank you for your time and tireless effort to reveal the state of our country’s financial situation. Many Singaporeans are led by the nose into believing the state of affair of our country by the pro-government media with their biased reporting and usually misleading reports.
    Let me share my frustration with you. I attended a ministerial dialogue at Pasir Ris C C in 2007. They were then trying to propagate the dishing out of $800+ to the citizen from the excess collection from property taxes. During the Q & A, I asked the panel “how about adding the profits from GIC & Temasek to make the package more attractive. I got a mouthful of replies that the gains from the 2 said corporations were for R & D and re-investment. One of them shut me off by threatening me that this is a country’s secret. I replied that I am not asking them to reveal their operation and detailed figures. All I am requesting was to take a portion of the gains and plough them into the citizen’s accounts; afterall they used our CPF money to start the business (correct me if I am wrong). But is 2009 the ST headline showed GIC & Temasek made losses. If these 2 corporations’ results were our country’s secret, how come they can publish in ST. I also found out from my contacts that GIC handed out a huge bonus of many many months to their staff in 2007. I am very frustrated with their high handed and arrogrant handling of the electorate and citizens who helped to make Singapore a success.


    • Dear Sir, Thank you for your kind letter which cheered me up after failing to get an Open Court hearing today. However I must disagree with your phrase, “on behalf of the less educated citizens”. I may have a degree or two and know some basic maths but it is the citizens who educate me all the time. I don’t subscribe to the elite theory or the scholar’s theory or that some people are better or more fit to be rule. In other words government by plutocrats. I believe in democracy which is government of, for and most importantly by the people. You have proven that you are equally educated to raise these subjects as you have vital first hand and personal experience. I merely have a certain skill set. My CPF holdings are minimal as I was in involuntary exile for so many years but you are a true stakeholder. I’ll continue to rake through the figures but all stakeholders must continue to express their frustrations as you mention and never to stop complaining about the biased and government managed Media. Your support is much appreciated.


  2. In EU, if taxes goes above 45%, private spending freezes. So 60% is nonsense. Next, KJ can you calculate the effective tax revenue of the govt. from non-income tax and corporate tax component? We know COE is a fantastic tax revenue close to 6% in contribuition to the budget.


    • I do not support the “Crowding out” hypothesis which says that if you increase public spending private spending will decrease by the same amount. However which theory of the economy you support is irrelevant to the question here which is whether we would need to increase taxes to 60% to fund a universal healthcare scheme. I say no. As you rightly point out there are many regressive taxes and user charges such as COV which means that the total tax take on median earners and below is much higher than just the average income tax rate.


  3. keep asking your questions KJ but be careful that you can substantiate every claim otherwise you will see attack dogs launched after you. stay cool, don’t let yourself be provoked into a mistake and keep sniping!


    • @cephas. I tend to ask questions rather than make claims and I have never, do not and never will make unsubstantiated claims. I back up my articles with links to government publicly available information, quotes from the individuals, Hansard, figures, spread sheets and so forth. I am not in the business of making sensational claims in order to court publicity. I am in the business of transparency and getting at the answers. Where that is impossible then I will highlight discrepancies and challenge inconsistencies. After all we have an Auditor General. Questioning the information and not taking it as stated is what an auditor does.


    • @FPC. Thank you for alerting me to this. TOC says that one of their editors has been given a tipoff that Temasel Holdings are about to instigate legal proceedings against me for this article or phrases contained therein. What do you think? A blatant attempt to try and chip away at support before my IMF trial?


  4. are you saying that we cannot add the 180 billion from MAS to the 700++ billion from the balance sheet number gotten from IMF because the net equity of MAS is only 25 billion.

    Therefore singapore only has a balance sheet size of 700++ + 25 billion?


  5. I recall someone getting sued for the words “where’s our money”. However as the days go by and more questions are being asked without any reasonable response from the government I too am having serious doubts in my mind, I guess I will just give up by citizenship and go settle in Cambodia or Burma with my CPF money while I still can.


    • I don’t think anyone got sued for the words, Where’s our money”. Or at least there is no link to it that I can find. If you have a link please let me have it. I believe there was some incident over a public nuisance charge or similar. I’ve said, Where’s our money, I’ve said it again and again. I’ve put it in public letters. I’ve posted it here and on other sites and blogs. I’ve helped pen official Press releases for my Party. All of them publicly asking for explanations of the discrepancies. No-one is suing me. No-one is answering either. Maybe the two are linked. In order to sue me they’ll need to supply some answers. But then I’m not shouting my questions from a loud hailer in a public place.


        • Thanks for the link but it seems to be a link to a forum post written about something that the writer had read on another forum. As I said to another reader here (see “proud to be a quitter”‘s comment below) “I don’t think anyone got sued for the words, “Where’s our money”. Your link doesn’t clear that up. I’ve found no press article or legal document referring to Soon Juan being sued for saying those words. I am more than merely curious. Obviously it is quite important to what I’m doing. However until I see any proof, I will write this off as an apocryphal tale designed to spread the climate of fear and keep you all acquiescent in the removal of your right to freedom of expression.


  6. Very well analysed. The govt won’t response coz they know that the kitty is nearly empty, and if they tell the truth, they will not be in power the next election. So they carry on with the lies and make more lies to cover up the initial lies that were told to the public.!


  7. “It is the highest impertinence and presumption, therefore, in kings and ministers to pretend to watch over the economy of private people, and to restrain their expense. … They are themselves always, and without exception, the greatest spendthrifts in the society. Let them look well after their own expense, and they may safely trust private people with theirs.” — Adam Smith (1723-1790) Scottish philosopher and economist


  8. Dear Keneth: as I read your insightful exposé, a horror scenario springs to mind. Even if delaying CPF payout to account holders may put off the impact of any illiquidity, this delay only truly applies to native citizens. In contrast, permanent residents can “pull their money” as you wrote, simply by renouncing their PR-ship. If PRs do that en-masse, e.g. retiring professionals from China might return to PRC in the coming years (honestly, I don’t see them sticking around till draw-down age), would this cause a run on the CPF that would leave us citizens stuck with an even bigger hole?! Would you please comment on the likelihood of this happening and its impact? Thanks.


    • Hedge funds often impose gates on their investors when they get a lot of withdrawals at once to ensure that those who withdraw early do not get an unfair advantage over those who are left in. I agree that if foreign PRs were to leave Singapore en masse and all apply to withdraw their CPF at the same time then this might result in those left in CPF having to take losses. Or, as the PM has said, taxes might have to go up on those remaining in the country to pay back the CPF. In an extreme situation the government could just print money though they are constitutionally barred from borrowing from MAS.


  9. I tend to believe what you said; there is NO money in the CPF. That is why the govt keeps delaying and increasing the amount of CPF to be held.


    • Thanks for the comment. I don’t say there is no money in the CPF. I say this issue of what is in the Govt’s balance sheet and what is not is akin to mediaeval theologians debating how many angels can you fit on the head of a pin? Maybe I should have asked where are our figures? I use my training as an economist and my experience as an investor to look at the information that is available and to attempt to throw light on that by suggesting possible scenarios.


  10. Kenneth, this is an excellent article and I feel its a shame the govt doesn’t respond and engage on the issues you’ve raised. Thank you for bringing these up. This should be a commentary article in the ST (if of ST has the courage to carry it). Please keep on with the incisive writing!t


  11. Superb incisive analysis, Ken! Let’s see if our government and president TT could shed light on these glaring discrepancies. Thanks Ken, for another great post!


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