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Excessive and Disguised Government Saving Has Harmed Singaporeans for Decades. It’s Long Past Time We Demanded and Got Transparency on the Reserves.

I have just seen an article by Manu Bhaskaran and Linda Lim (BL) from a couple of days ago. This article summarises many of the themes and ideas in my blog over the last ten years. It is unfortunate that they have not acknowledged me but I am just glad to see that my ideas and proposals are gaining widespread acceptance among Singaporean academics and becoming part of mainstream political discourse.

I provide numerous links below to previous blogs of mine going back eight or nine years where I have explained the malign macroeconomic implications of the PAP’s policies as well as recommendations for future policy. My main points have always been:

  1. The Government holds down domestic consumption artificially through CPF forced savings and through its cheap labour policy (no minimum wage coupled with freedom for employers to bring in foreign workers from much poorer Asian countries). Domestic consumption as a percentage of GDP (35%) is about half that of the US and less even than China. In 1961 consumption was over 90% of GDP. This is a good indication of the real living standards of the population not GDP per capital figures which are skewed by an artificially low ratio of dependents to workers and corporate subsidies encouraging MNC transfer pricing.
  2. This results in both a very large current account surplus of about 20% of GDP and a big General Government surplus of up to 10% of GDP. Bhaskaran and Lim (BL) mention the IMF’s figures but these are only the Central Government surplus and not the wider General Government one which should include all the earnings of MAS, Temasek, GIC, Changi Airport Group, SingHealth etc not just the Net Investment Returns Contribution (NIRC). While they echo my point that the NIRC is undoubtedly calculated extremely conservatively (they say less than half of the real earnings but I would estimate much less), BL fall for the Government’s argument that the NIRC represents real spending and benefits Singaporeans. They fail to appreciate that the NIRC are not really spent but just transferred into long-term funds so do not represent actual spending and should not count in the calculation of the surplus.Since these funds are not accountable to Parliament, it is unclear where the monies are spent if at all. Some funds appear in the Government’s Statement of Assets and Liabilities (SAL) but others do not. The number of funds changes from year to year and funds appear and then disappear without explanation. A good example is the Productivity Fund to which the FInance Minister has allocated $3.5 billion. That appears to have been wholly spent but no accounting has been produced to show where. BL also copy me in pointing out the need for an Office of Budget Responsibility (UK) or Congressional Budget Office (US) to provide independent analysis of the Government’s finances.
  3. The surplus is invested externally through GIC and Temasek (but also MAS) to prevent the Singapore dollar appreciating and making exports uncompetitive.
  4. The Government refuses to be accountable and transparent over the size of the reserves or their returns claiming that it is necessary for Singapore’s security that this remains a secret. This stands BL follow me here. However they part company from me in not questioning whether the reserves have been invested wisely. I have pointed out that the public data (in particular the SAL) suggest that the reserves are too low given conservative assumptions about rates of return. The Government (or to be more accurate thes s PM and his wife since they control both GIC and Temasek) has probably mismanaged the reserves. There may even be fraud. Lee Hsien Loong’s determination to raise taxes pre-Covid-19 suggests that there may be problems with the reserves or with their liquidity. BL also fail to point out that GIC’s assets come from CPF and there is a real risk that the leverage may leave CPF holders uncovered as a result of market falls. This risk is accentuated during the pandemic.
  5. Singaporeans lack many of the basic welfare provisions and social safety nets that citizens of other countries on similar levels of income enjoy. There is no good reason for this and for such a high level of Government saving. On the contrary expanding domestic demand and consumption through increased government spending on transfer payments and universal health care would allow our people to enjoy a higher standard of living. It also would answer the criticisms that are levelled at Singapore and other mercantilist countries (like China, Japan, Germany and Korea), principally by the US that their policies are essentially beggar-your-neighbour. The Government should run much smaller surpluses or even deficits. I have suggested that we should adopt a rule like Norway and spend 4% of the total value of the reserves in any year. This should be real spending and not just transfers into new funds as is done at present. BL repeat my point that the claim that it is necessary to have such a high level of reserves “for a rainy day” is unsupported particularly as future generations are likely to be much richer than the current generation. I have said repeatedly that there is no reason for so many elderly Singaporeans to live in third world levels of poverty when we could easily afford an old age pension and universal healthcare. BL also say that Singapore has considerable capacity to run deficits and fund them by borrowing. I have also pointed out that many countries including the US, UK, and Japan have high levels of debt and that has not stopped them from implementing considerably more generous levels of support for their citizens.

BL do not provide any reasons why the Government considers it necessary to maintain such a high level of saving. I have pointed out that the real reason is the degree of control it provides over the country’s resources and to make Singaporeans feel dependent on them and afraid to vote against them. This is clearest in the case of housing (HDB), where Government owns at least 80% of the land and is determined that Singaporeans should not own their own properties, but extends to savings (CPF) and jobs (the Government, through its network of state-owned companies and statutory boards, is responsible for more than 50% of GDP). Singapore is the classic Communist state that was the subject of Hayek’s Road to Serfdom and which the Economist famously called the “stingy nanny.” Another reason is the enormous scope for patronage and co-opting potential opposition it affords. This extends to the PM’s household, where he is Chair of GIC (apparently unpaid) while his wife runs Temasek on a secret remuneration package. Having a major sovereign wealth fund requires someone to run it and this provides jobs for members of your family.

The PAP Government has for too long peddled their own version of zombie economics with dire warnings over the dangers of debt and the need to “save for a rainy day” (read keep imposing austerity on Singaporeans) in order to keep accumulating financial claims on other countries. This mercantilism has no basis in economic theory. In fact the only criteria determining how much a country can borrow should be inflation and the value of the currency. The US (admittedly a somewhat unique case since it enjoys the seigniorage benefits of being the world’s reserve currency) has issued trillions of dollars in new debt during the Trump presidency yet the US$ has strengthened to its highest levels for years and borrowing costs are close to zero.

After the pandemic is over we need a new social contract and complete transparency over the reserves so we can see precisely how much is available for better safety nets and investments in health and education. Lee Hsien Loong and his Government will be hoping that they can get back to business as usual as soon as possible. They will be hoping for another landslide victory in the imminent GE. Singaporeans will have to decide if they want to be slaves or masters.


Changing Austerity For Prosperity

Why Do the Greeks Resoundingly Reject Austerity Yet Singaporeans Embrace It?

You’ll be dead before you can spend it! Singaporeans enter the 20th year of unnecessary, self -imposed austerity.

Heng Swee Keat’s Truly Terrifying Slip About Our Reserves.

Hey Lee Hsien Loong, Where’s Our Money Dude?

What is the Real Surplus?

Sherlock Holmes And The Case Of The Missing ( Or Merely Hidden) Reserves

Smoke and Mirrors in the Government’s Accounts

Budget 2020: Despite Biggest Threat to the Singapore Economy Since 2008 It’s Deja Vu as Heng and His Master Play Their Old Tricks of Hiding The Money

Where have our reserves gone?


  1. Yes , Great Article not only in fact all unfortunately those two MORON and many more only realize now! This cheating of singaporean has been around since that bastard Lee Con You!



  2. Great article. Easy to understand. Anyone with barest minimum of intelligence shud comprehend and agree.
    Wish someone can translate in simple Mandarin and made available for reading by the masses.


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