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Why Chris Kuan is wrong. Black hole in the government finances? No, just S$174 billion missing

GIC-696x464An article concluding that there is no shortfall in the government’s statement of Assets and Liabilities has recently gone up on social media called “Black Holes in the Government Finances?”According to  The Independent SG it’s from the Facebook page of someone called Chris Kuan.

“Republished from Chris Kuan’s FB.

This article was edited after it was published.”


You’ve probably read it already because it was published on Febraury 19th. In this Facebook article Mr Kuan sets about ridiculing Singapore’s bloggers who write about CPF and concerns over the reserves.   Kuan summarises my work, discredits me by saying my arguments contain omissions and errors and comes up with the conclusion that I’m wrong and that there is no shortfall.

Unfortunately my work is accurate and it is he who is in error. I would have refuted Kuan’s wrong assumptions earlier but Mr Kuan made sure to not mention me by name, not to attribute my work and even to embed a link in his article to my blog which mysteriously leads to someone else’s blog altogether.  In making sure to keep my name out of an article which was a hatchet job on my ideas he very successfully  flew under my radar and his slightly fantastical ideas were able to  avoid my eagle scrutiny. very much in the manner of a sneak thief in the night.  But I have seen the article now and will refute him because I would not want you to think that the government’s statements are in order. There IS a shortfall  and I estimate it to be in the order of  S$174 billion as of 31 March 2014.

Why is Chris Kuan so keen to defend the government’s accounting?  From what I can see he is an expat Singaporean working out of Tokyo. As an expat of many years’ standing, living in Japan with the protection of corporate health care and a company pension, I suppose he does not much care whether there is a shortfall or not. Unlike me he is not invested in CPF or Medishield either literally or figuratively.

So let’s take a closer look.  (Mr Kuan’s writing in italics my responses in bold.)

Kuan: Global financial markets are in turmoil so as night follows day, the season of that big black hole in the Singapore government finances is here again.

Jeyaretnam There is no season. My work on the reserves or discrepancies in the budget  is not an idea I come up with when markets are bad. I have written about it consistently for 7 years. My first article on the reserves was published on TOC in 2009.  If there is  a seasonal aspect to my writing it is because the budget is produced on an annual basis. So I analyse it annually.  My analysis is not linked to stock market reports and indeed how the stock market is faring is not of great interest to me. I am not writing to help you pick stocks or invest in anything other than your freedom and rights. The overarching theme of my work,  is an examination of our loss of rights as citizens and the constitutional crisis that is created when a government fails to report on its assets using any  globally acceptable methodology and when there is no oversight in parliament on the executive. In other words I am not a market pundit but a transparency and accountability defender. I just happen to be a highly qualified economist as well. 

Kuan: According to a local blogger, the shortfall is close to $200b while in the recent past, a China-based American academic thought the black hole was $500b or more.

Jeyaretnam:  “a local blogger” is me even though originally the hypertext led through to someone else’s blog.  On the Independent it still misdirects but on TOC they have corrected this. (Why would anyone go to such lengths to avoid me discovering that they are refuting my work?)
I do not use any hysterical and  unscientific terms like black hole.
I estimate a shortfall of S$174 billion not S$ 200b.
The American academic (also not named)  is of course Chris Balding. I have nothing to do with what he writes and his methodology is his own. I have helped him get back on track previously when he has double counted but apart from that one time we do not collaborate or even communicate, yet independently we reach the same conclusion. He shares the same concerns as me if not the same final figure.  Balding’s figure for the shortfall might seem off the scale but there is no compelling evidence to refute Balding either. Though his figures look outlandish he also reaches the conclusion that there is  a shortfall and maybe it is just me who is too conservative.

Kuan: Apparently the evidence is in the government’s Statement of Assets and Liabilities which shows that the government owned $834b of assets comprising quoted and unquoted securities and deposits. The Statement also reported a large liability of $401b under the Singapore Government Securities Fund which accounts for the debt the government owed to CPF and to investors in Singapore Government Securities (SGS).

That leaves $433b of assets that ought to have been invested from budget surpluses and past returns generated by GIC. By deducting Temasek’s $169b of shareholder equity and subtracting various estimates of surplus and reported rates of returns by GIC and Temasek, the end result is a negative balance of between $200b or $500b depending who one wishes to follow.

Jeyaretnam: Kuan is referring to my article  “Is Your CPF at Risk if Stock Markets Fall Any Further” which was itself an update of my previous analysis in “Show Us the Money or the Funny World of PAP Accounting” where I say:

Total assets  [in the Government’s Statement of Assets and Liabilities] are given as $834 billion as at 31 March 2013.

Firstly we can take off $169 billion for the shareholder equity in Temasek as at the same date. 

This leaves $665 billion.

Next we can take off accumulated revenue from land sales. This amounts to $170 billion since 2006 alone. Let us say conservatively that the value of revenues from land sales amounts to $340 billion since 1980 including reinvestment income.

That would leave $325 billion.

Then we can subtract $75 billion for operating surpluses since 1989. That is assuming no reinvestment income from the surplus. Let us say $100 billion including interest.

Taking that away from total assets leaves us with $225 billion.

The problem is that according to the Statement the Government Securities Fund (which represents both Government market debt and the debt owing to CPF holders) is $401 billion.

Taking that away from $225 billion leaves a negative balance of $176 billion

If the Statement is correct GIC has lost about half the value of the CPF monies invested in it via the Government since it was set up in 1980.This flies in the face of its claims to have achieved a near 5% 20 year annualised real rate of return which would be considerably in excess of what it has had to pay to CPF holders.


Kuan: “In my humble opinion, both have made omissions and incorrect assumptions in their interpretation of the Statement of Assets and Liabilities. The fundamental error is to assume the Government is a holding company which leads to the further error that the Statement is akin to a consolidated balance sheet report. This is patently not the case because standard reporting of government financial positions around the world does not consolidate the assets and liabilities of arms-length or standalone government agencies and enterprises such as the giant KfW of Germany and Fannie Mae and Freddie Mac of the US into those of the respective government.

This means the Statement does not consolidate the assets and liabilities of the Constitutionally- defined Fifth Schedule entities such as MAS and Temasek Holdings.

If the Statement is a consolidated balance sheet report, then assets and liabilities will be much larger since they must include all other Fifth Schedule entities such as CPF, Land Authority, EDB, LTA etc. On this alone, one can disregard the black hole because those arguments are based on the assuming (sic)  Temasek (and MAS) are consolidated into the Statement.”

Jeyaretnam: This part of Kuan’s article is a mish-mash of irrelevant comparisons and vagueness. I had already covered the possibility that the Statement of Assets and Liabilities (the “Statement”) was not complete. This is what I said in my first article when I listed three possibilities:

So there can only be three possible conclusions:

  1. There are substantial hidden assets that the Government is not telling us about. This is the most likely scenario. But this would be a Constitutional breach because Article 147(4)(b) and (5)(e) of the Constitution requires the Finance Minister to present to Parliament and the President, as far as is practicable, a statement of the assets and liabilities of Singapore. Surely it is not difficult to include Temasek, Changi Airport Group and an estimated value of the Government’s other assets including its land holdings within that.
  2. There has been mismanagement on a massive scale by GIC and the money has been lost. The Government and the management of GIC have lied to Parliament and the public over the returns achieved by GIC. Lee Hsien Loong is Chairman of GIC.
  3. There has been fraud and monies have been diverted into another account or accounts. While it may seem to be the least likely of the three scenarios it remains a theoretical possibility. Nobody thought there was anything wrong with Bernie Madoff and his fraud went on for years undetected.

 Kuan also completely misses the point about legal requirements and the legal obligations of our government. If indeed as he supposes, the Statement does NOT include the assets of Temasek, Changi Airport Group and other Fifth Schedule entities then it would be a Constitutional breach since Article 147(4)(b) and (5)(e) require the Finance Minister to present to Parliament and the President, as far as is practicable, a statement of the assets and liabilities of Singapore.  Including these entities is eminently practicable and not to do so creates a misleading impression of the Government’s finances.

Kuan has not thought this through. If the Finance Minister has not included them then he has breached the Constitution and should be impeached. So on this alone we can disregard the idea that  the MOF have left off any assets of Temasek etc.

In fact I never suggested that the Statement of Assets and Liabilities included MAS though it could include the value of MAS’s equity which amounts to less than $10 billion. CPF is not Government money but is already included under the Government Securities Fund which is a liability.

Kuan then advances the idea that Temasek’s value is only shown at book value rather than market value.

Kuan: “Besides, since Temasek’s shares has no market price, it is far more likely than not that the government recorded the value of its equity at historical nominal prices which means far less than $169b shows up in the Statement.”

 Jeyaretnam: However this would again run foul of the obligation to present the true picture of the Government’s finances particularly as Temasek itself issues an annual report showing the total value of its portfolio and shareholder equity at what it claims are current market values.

As Kuan lists his occupation as Group Treasurer he must be aware of the obligation under most countries’ Generally Accepted Accounting Principles (GAAP) to list assets at fair or market value. I really hope he does not take this blase approach to legal listing requirements at work.

Finally Kuan claims that:

“Finally one cannot simply take an estimate of the overall budget surplus (including land sales revenues and retained investment earnings) of close to $400b according to IMF data since 1990 and assume all of the surplus must show up as assets in the Statement.

First not all returns are re-invested since 50% of net investment returns are extracted into the budget under the Net Investment Return Contribution rule.

Second, the Statement reports only financial assets and does not include land holdings. Surpluses are not always invested in financial assets – they have also gone into increasing the land bank through acquisition, land development and reclamation.

DPM and former Finance Minister Tharman has admitted that financial assets in the reserves have been drawn down on numerous occasion and reinvested in land.”

Jeyaretnam: Oh dear! Now Kuan is resorting to using a red herring. What happens to the NIRCs is irrelevant as well as being  a red herring. Those figures for the accumulated surplus are calculated after all expenditures have been deducted.  The overwhelming majority of the NIRCs are saved and not spent (seeSmoke and Mirrors in the Government’s Accounts” “How to Make a Surplus Disappear Without Anyone Noticing” and “What is the Real Surplus?“) since the Finance Minister puts them straight back into the reserves by allocating them to long-term funds. As an example he set aside $8 billion for the Pioneer Generation Package in 2014 which exactly matched that year’s NIRCs. The $8 billion is supposed to cover spending over at least 20 years so was not a real expense. It is only when we use the IMF accounting framework rather than the PAP’s uniquely Singaporean one that we get a true picture of the surplus.

The same principle applies to Government investment in land and land reclamation. Expenditure on land reclamation and land development forms part of the Budget. For example the Finance Minister set aside $3 billion in last year’s Budget for work on the new terminal at Changi Airport. Property investments by GIC and Temasek show up in their respective accounts. Revenues from land sales is presumably net of the amount spent on land purchases by LTA, if there is any.

If the total cumulative surplus does not show up in the Statement of Assets then there is a problem with the accounts. The total surplus (including reinvestment income) just over the period 1999-2012 using the IMF format was $258 billion and bringing it up to date would take the accumulated surplus past $300 billion (see here)

The problem with Kuan’s argument is that speculation as to what the Statement includes or does not include is a waste of time as long as we have no way of finding out or of holding the Executive accountable.  The  Executive does not feel bound by the Constitution and has left much of it deliberately vague so that it can interpret it in the way it pleases. As long as it appoints the judges it feels no need to be bound by the law as the judiciary sees its role as “green-lighting” the Executive according to former CJ Chan Sek Kheong (the man who ruled that the PM being in the polling station was not an offence as he was not within fifty feet of a polling station!).

When I took the Government to court over the IMF loan  i discovered that little people are not allowed to hold the Government accountable even if it breaks the law. We wil simply be told that we have no locus standii – no right to call the government to account. What Kuan sees as an accounting issue is really a legal one. The only body which can discover the truth and force the PAP Government to be transparent is Parliament. Unfortunately the Opposition MPs see their role as protecting their pay and benefits including the revenues from Town Council management rather than scrutinising the Executive.

As I have demonstrated, Kuan has made some basic accounting errors. He has not succeeded in allaying my concerns about the Government’s finances. But he is right in one particular: until we succeed in lifting the veil of secrecy and forcing the Government to be more transparent and accountable its finances will continue to demonstrate discrepancies.  I will continue to demand that the globally acceptable IMF framework is used. This year as I do every year you can expect a detailed and hard hitting scrutiny from me of the government’s budget presentation.






  1. You cannot do anything about government’s account, so do no waste your time writing about it. Most of the Cabinet are no the same as LKY time, who knows their job and works Top down. Now it is the other way round, Bottom-up and that is when there wanted to do something, it is their junior telling them what to do.

    Even wanting to build road needs citizens advice. Did LKY ever did it. As the government, you have to lead, no lead by the citizens to give you opinion. These things have happened twice. 1st when building the flats at Toh Yi, there go to ask the citizens for approval and there were objection, went round to look for other sites and finally still built at the proposed site.
    The second time was to build a school and finally still use the original site. These show how incompentence the our government are now.


    • Yes, Landragon123 probably true. But I’m not suggesting that the government asks for the people’s approval. I am saying that my analysis of gaps in the budget statements is correct and that Chris Kuan is wrong.


  2. Yup, it appears Chris Kuan is in dire need of lessons on interpreting/understanding of figures from publications emanating from the Singapore govt. Maybe he needs a revision course on book-keeping or economics. He can do with some coaching from KJ but whether KJ will coach him gratis is another matter.

    Liked by 2 people

    • Thank You for your confidence in me Richard. I’ve been trying to work out who Chris Kuan is and what his qualifications are. He’s not a banker and not an economist. He appears to be a Treasurer but may actually be retired or unemployed. I can’t tell from his linked in profile. Anyway he lives in Tokyo and works mostly overseas so I suppose he is not that affected. I did write to him pointing out that he had not attributed me correctly by referring to me as ” a local blogger” but he didn’t change it. TOC’s editor also said they didn’t want to attract negativity by correctly naming me and put “local blogger” in order to disguise my identity. How bizarre! It seems they are all afraid of me pointing out their errors. Maybe the last word should be left to a comment I saw left on Chris Kuan’s article on some blog which simply said ” lackey!”


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