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Heng’s Desperate Attempts To Deceive Singaporeans End Up Revealing Enormous True Size of the Reserves

During the Budget Debate on Friday 26 February Heng was asked about using the proceeds from land sales in the Budget.

His answer was deliberately disingenuous:

“The current approach of spending the land sales proceeds through the NIRC (Net Investment Returns Contribution) avoids these pitfalls, and allows the Government to make land sale decisions based on what is best for the country’s development, and not because it needs to balance the budget.”

The Finance Minister well knows that the land sales proceeds do not form part of the NIRC. However before we even consider that, we should look at the way the Government calculates the NIRC.

The NIRC is only up to 50% of the expected long term REAL returns, that is the returns over and above expected inflation. A clue to what this rate might be is provided in the returns that GIC chooses to reveal. In a press release dated 28 July 2020 GIC stated that over the twenty years from April 2000 to March 2020 it had achieved an annualised average rate of return of 2.7% over and above the global inflation rate. Something close to this rate (but probably somewhat lower, say 2.5% to be generous) is in all likelihood what the Finance Minister gives to the President for rubber stamping. So the rate used to calculate the NIRC is already much lower than the total return on the reserves.

Heng will say that it is necessary to protect the reserves against inflation and therefore only real returns should be used. However these are as usual only half-truths from a Government experienced at dissembling to its citizens. I can think of at least two points why this is too conservative:

  • Firstly, global inflation as the benchmark is too high since presumably GIC’s returns are calculated in S$ as are Temasek’s. The global inflation rate rate over the last 20 years has averaged at least 3.5% p.a. while Singapore’s average inflation rate as measured by the Consumer Price Index (CPI) has been 1.5% annualised.
  • Secondly, even the CPI overstates real inflation because people will, as far as possible, substitute more of the goods and services which have gone down in price or gone up less for the goods that have gone up more

In addition, by only taking UP TO 50% of the real return the Government is double-counting. If an allowance has already been made for inflation then there is no valid reason not to take the full return above inflation into the Budget calculation.

So assuming that the Government uses a real rate of return of 2.5%, the amount set aside for the NIRC is probably no more than 1%. But of what?

Article 142 of the Constitution defines “relevant assets” for the purposes of computing the NIRC as “all of the following:

(a) the total net assets managed by GIC Private Limited and all its wholly-owned subsidiaries (including those with registered offices outside Singapore) as fund managers for the Government, for any company wholly-owned by the Government and for all the wholly-owned subsidiaries of such a Government company;
(b) such moneys of the Government as the Monetary Authority of Singapore receives from the Government as banker to the Government;
(c) the excess of the assets of the Monetary Authority of Singapore over its liabilities, being assets and liabilities not directly attributable to the Government, and being not already comprised in paragraph (b);
(d) from 1 April 2016, the excess of the assets of Temasek Holdings (Private) Limited over its liabilities,
less the following liabilities:
(i) the total liabilities of the Government that is attributable to its borrowings under the Government Securities Act (Cap. 121A) and the Local Treasury Bills Act (Cap. 167); and
(ii) the total liabilities of the Government that is represented by any Government Fund (other than a Government Fund required by written law to be held, managed and administered separately from other Government funds) established by a public Act for special purposes and not already comprised in paragraph (i).

There is no mention of revenue from land sales anywhere in Article 142 so Heng is being deliberately disingenuous when he says “land sales proceeds” are spent “through the NIRC”. They can never be spent. The only portion that can be spent is what the Government judges to be up to 50% of the expected real return on the sales proceeds. This is unlikely to be in excess of 1% p.a. for the reasons described above.

However there is a further wrinkle which allows the PAP Government to reduce even further the amount of revenue available from the reserves to support spending. The “relevant assets” are calculated only after subtracting the Government’s borrowings and also the monies that have been put into Government Funds.

Total Government borrowings and Funds and Endowments can be found in the Statement of Assets and Liabilities which is part of the Budget Statement. This comprises the whole of the Liabilities side of the Government’s balance sheet apart from a mere $51 billion held in deposit accounts and not allocated to any funds. So that means the entire asset side of the Government’s balance sheet, apart from $51 billion, cannot be used for the purposes of the NIRC.

To exclude Government borrowings is again extremely conservative since the GIC is presumably able to earn a higher return than their cost (otherwise why would the Government want to leverage by borrowing CPF holders’ money in what is a clear conflict of interest) and it would be more accurate to subtract the cost of these borrowings from the total returns. Also since CPF holders’ money is not inflation proofed there is no need to use only real returns which calls into question the whole rationale in the Constitution for saying that only up to 50% of the real returns will be used to calculate the NIRC.

Also excluding Government Funds is another low accounting trick for hiding resources from Singaporeans. Heng might argue that the returns on funds set aside for specific purposes are already being used to fund spending. Indeed, according to the Budget figures, $5 billion was spent in 2020 from Government Funds and Endowments. However I discovered that Heng appears to be brazenly charging this spending, which should be outside the Budget, as part of expenditure used to calculate the overall Budget surplus or deficit. For details please read my analysis of the Budget here. CFOs and CEOs have gone to jail for similar tricks and fake double-counting in the US and other countries!

If therefore none of the Government’s disclosed balance sheet can be used to calculate the NIRC, this provides a very good way of working out what the size of the assets are that Heng says must remain hidden because otherwise our enemies could destroy us. They must also remain hidden from Singaporeans because, as the PAP and Lee Hsien Loong will tell you, they do not belong to you but are being held in trust for future generations! If we use a 1% rate of return as a good guess at the less than 50% of the expected real return that the Government uses to calculate the NIRC, then the amount of hidden assets based on an NIRC of $19.5 billion, is $2 trillion. 

Adding $2 trillion to the net assets of $600 billion (total assets of $1.35 billion minus the Government Securities Fund of $734 billion) revealed in the Statement of Assets and Liabilities means that Singaporeans have $2.6 trillion in assets.  If we applied a 4% return to these assets, as I have argued on many occasions, we could be spending $100 billion over what we are spending currently without depleting our reserves. That would fund universal health care and a universal basic income of $1,000 per month for every adult citizen.

Remember also the Government owns 80% of the land and the income from this asset has not been taken into account

Every Budget time we are treated to the Government’s bleating about the need for austerity and for taxes to go up to fund greater spending. Heng is rushing to put up GST to 9% as soon as possible and no doubt the PAP will raise it higher and higher in future years. Yet my analysis shows that there is no need for this artificial austerity and that the disclosed reserves are only the tip of the iceberg with over three times as much carefully hidden. Even though the Opposition in Parliament are clearly reading my blog, they have not grasped the full picture and remain overly deferential, because as Pritam Singh told me, they do not want to end up like JBJ. It is a pity that you do not have me in Parliament to fight for you!






  1. I recalled in the earlier days before 2000, GIC used to trumpet that its returns was world beating averaging 13-15% pa thereabout. But the strangest thing which I discovered was the returns was reported in US dollar terms but not in SGD. This to me is a misnormal as our base currency is SGD. So that was the first Red Flag to me (what was it that they were trying to hide?). Any corporation would and should report their financials in their home currency where its based at the minimum.

    Its pretty shocking that now they claimed the annualized returns of GIC was only 3%-5%. We do not expect it would continue to make those World Beating 13%-15% annual returns but a drastic fall that dragged down the entire portfolio including past returns can only meant there were massive loses sometime and somewhere which wasn’t revealed.

    Mind you most returns or performance of Temasek were contributed by injection of national assets at very Cheap valuation rather than because it has done a wonderful jobs in growing its investment. Example being Singtel, StatsChipac, POSB (given cheaply to DBS) etc. Most of the returns made by Temesak are contributed by its portfolio of investments in SG i.e. Singapore is its Cash Cow.

    HK, Norway nor most other developed countries aren’t hiding their reserves nor did they claimed it could be attack if its known. If our reserves is truly so strong then there is even less reasons to be afraid. So there’s obviously some secret that PAP government is desperately trying to hide and I can only guess its because the True Reserves is in worst shape then it has been presented – If they ever present any concrete Statements of Account, an audit of the accounts would reveal the frauds. Many could be thrown in jail.

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