On 16 June Leon Perera, a Workers Party NCMP, asked a question in Parliament. I reproduce a screenshot of his post below:

Unfortunately there seems to be some befuddlement among both those who left comments on the post, Ravi Philemon’s daughter Jewel who is a journalist at the Independent Singapore and also in the mind of Leon Perera himself who should really know better as his Wikipedia entry says he studied Politics Philosophy and Economics PPE) at Oxford.

Many of those leaving comments on his FB page asked where the $22 billion loan capital is coming from that Heng mentions in his answer and the terms on which it is lent including how the loan will be repaid. Perera has said these are “pertinent questions” and that “we may need to wait till after the GE to shed some light on these questions.” There is also misunderstanding of what Heng means when he says “Loan capital, which we expect to be repaid in the future and is hence fiscally neutral”

Loan capital actually comprises loans made by the Government to other sectors (in this case the corporate sector). The reason it is fiscally neutral is that the loans are repayable and not actual spending. The actual spending will only be the amount of losses in the even that the loans are not repaid. In fact the loans are made by the banks and guaranteed by the Government. If the borrowers fail to repay the loans the banks will be required to try to recover the loans from the borrowers through the courts first by seizing the assets of the companies. Only in the event that the banks fail to recover the loans in full will the Government be on the hook and then only for the amounts that the banks lose. The problem with this method is that the banks may still be reluctant to make loans to marginal borrowers because of the time-consuming process that they will have to go through in order to recover the loans.

Despite what Leon Perera and many others might think the Government is not borrowing money. It should have no need to since I have shown that even under conservative assumptions it should have net assets of $1.5 trillion.

Heng’s answer illustrates perfectly my point that Heng should have issued a POFMA to himself and Ms Tin Pei Ling for his deliberately misleading statement to Parliament on the amount of support given to Singaporeans. PAP MPs like Ms Tin bandy around fake figures like $92.9 billion. However if we subtract the $22 billion we get to $71 billion. The difference between this and Heng’s figure for the overall budget deficit of $74.3 billion is presumably the provision for loan losses ($1.9 billion set aside in the Solidarity Budget).

But Heng’s deficit figure of $74.3 billion is itself bogus, typical of the PAP’s chicanery by which it seeks to pull the wool over Singaporeans’ eyes as to the real level of spending. This is what I said when I wrote to the Finance Minister demanding that he issue a Correction Notice to Ms Tin Pei Ling:

Another way of measuring the Government’s support is to look at the projected budget deficit in the Fortitude Budget Statement of $74.3 billion and subtract both the Top-Ups to Endowments and Trust Funds of 17.3 billion and the allocation of $13 billion to the Contingencies Fund. This gives a figure of $44 billion. You have already allocated $20 billion to the Jobs Support Scheme to help fund up to 75% of the wages of Singapore citizens and PRs. However given that probably more than half of the economy should be classified as being in the public sector and that a large proportion of the Jobs Support Scheme will go to Government-linked companies (GLCs) we should probably deduct half of the $20 billion as just a transfer payment from central Government to other entities in the public sector. We should also deduct $1.9 billion provided from past reserves under the Temporary Bridging Loan Programme and the Enterprise Financing Scheme shown in the Solidarity Budget since the Government is acting as a guarantor only. The final cost will depend on the loss that is left after the banks have exhausted the recovery process. The current cost of these guarantees is zero and they do not constitute actual spending.

Unfortunately your Government’s guiding principle of obfuscation and hiding the true surplus from the people means that I am forced to make assumptions. As a minimum you should publish the General Government surplus, which should include all entities in the public sector including GLCs and take account of changes in the value of all assets including land as well as the true figure for the reserves. Thus I have no idea of how much the real deficit is and am forced to guess.

I calculated the real support for Singaporeans (not companies the majority of which are Government owned and many of the remainder foreign owned) at $2.5 billion,or a per capita figure of around $600, not the fake $23,225 claimed by Ms Tin.

Perera’s confusion on this point amply illustrates why Singaporeans need real economists not fake ones in Parliament if the Opposition is ever to do a proper job of holding the Government to account. You also need MPs who will be tenacious and dogged in pursuit of the truth and will have done their homework properly. My hope is that in the impending election Singaporeans will vote nicely and not just as though they are picking a football team by the colour of their strip and how close to the PAP they claim to be.

There is another important point to be made. If the Government has provided loan guarantees of $22 billion then it needs approval from the President under the Constitution. I took the Government to court over its loan commitment to the IMF. Despite my showing that a loan commitment was substantially similar to a guarantee the AG’s equivocations on this subject were accepted by the judges who furthermore ruled that Singaporeans had no right to use the courts to hold the Government to account for wrongdoing unless they were affected personally. However the circumstances provide much less room for the Government to weasel out. If Heng has breached Article 144 of the Constitution and not obtained the President’s approval for the loan guarantees of $22 billion then this a serious matter and he is unfit to be Finance Minister or the future Prime Minister. Unfortunately Singaporeans’ rights to sue the Government have been removed courtesy of our judiciary who are appointed by the Prime Minister.

Published by kjeyaretnam

I'm a Singaporean economist who became an opposition activist. I blog to provide an alternative to the porkies that the Pinkies tell. It just so happens that my alternative is the truth. That's why I've never been sued in any civil or criminal court no matter how hard hitting my criticism. I'm quoted and interviewed and asked to speak across the world but largely censored in Singapore in an effort to silence my political opinions. The left hate me because they think I split their vote and because I eschew their outmoded economic models. Models that don't work. The Right and the Conservatives hate me because I'm a liberal. I'm not sure what the middle think of me. I don't think there are more than a handful of people in the middle, here in Singapore. I'm a Singaporean born and bred, dual heritage, my parents Singaporean established here before the State of Singapore was created. I'm not Eurasian. I read economics at Cambridge and could be broadly described as from the Keynesian school but I believe in interventions. I was formerly a successful hedge fund manager. After economics and politics my greatest interests are history, film and Makan. I run but I run so I can eat like a Singaporean. View all posts by kjeyaretnam