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In what seems like a response to the SDP’s questioning of the management of our reserves, the Ministry of Finance (MOF) has released a list of questions and answers that attempt to explain the operations of our sovereign wealth funds (SWF).
A few weeks ago this website published a series of articles (see here, here, here and here) where we raised questions regarding the transfer of our reserves, its usage to buffer investment losses, President in safeguarding the reserves and so on.
The MOF addressed each of these on its website yesterday. We highlight some of them here and provide initial comments with the intention of examining them further in subsequent posts. We encourage Singaporeans to do the same.
Specifically, the Singapore Democrats had resurrected the controversy of reports of the Government amending the constitution to allow it to transfer funds from our reserves to Government-linked companies (GLCs) and statutory boards without the transfer being deemed a draw on the reserves.
If such withdrawals from our reserves are not considered draw-downs of our reserves, the President’s approval is not needed and the public need not be informed. This seemed to by-pass the President whose job is to guard our reserves. In its statement the MOF explained that
The Constitutional amendments make clear that there is no draw on Past Reserves as long as (i) Past Reserves are being transferred among entities that are within the Reserves protection framework, and (ii) the receiving entity undertakes to protect the Past Reserves that are transferred over. In such circumstances, the overall amount of Past Reserves being protected is unchanged, and hence the President’s approval need not be obtained for such transfers.
This explanation clears up little as our reserves can still be transferred to GLCs without the President’s knowledge. This point will be elaborated in a subsequent analysis.
For now we want to highlight the MOF’s responses to our other concerns. We also raised the question about whether our reserves were used to buffer the losses that our SWFs incur particularly in the 2008 financial meltdown. The MOF replied:
No. As the shareholder of Temasek, the Government injects capital into Temasek from time-to-time as part of the Government’s allocation of fresh flows of funds…Such capital injections cannot buffer or hide Temasek’s investment losses, nor are they meant to.
What about the GIC? The fund, then under the charge of Mr Lee Kuan Yew, had also suffered huge losses of about $70 billion. Were our reserves drawn to make up for the losses?
This leads us to our next concern which is the subject of the secretive manner in which the GIC operates. The GIC, now taken over by PM Lee Hsien Loong after Mr Lee Kuan Yew stepped down from the cabinet, is an entity unto itself despite handling hundreds of billions of dollars of the public’s money. The MOF defended the GIC’s strategy, claiming that
It is not in our national interest to publish the full size of our reserves. Singapore is a small country with an open economy and no natural resources. Our reserves are a critical resource that provides a key defence for Singapore in times of crisis and serve as an important safeguard for our future.
We will have much more to say about this matter. Non-transparency means non-accountability and this cannot be a good way to handle our reserves.
We also raised the subject of the alarming level of public debt incurred by the PAP Government and questioned the wisdom of such a strategy. The MOF responded that:
Unlike many countries which have to take money from their budgets to service their debts and other liabilities on an annual basis, we are able to take in money from the investment returns of our Reserves to supplement our Budget. The amounts are substantial ? about $7?8 billion each year. (sic)
This doesn’t go half-way enough to answer the question of why the Government borrows so extensively against our CPF savings and uses this to invest in risky businesses only to use the returns to “supplement our Budget”. Again this will be the subject of further inquiry by the SDP.
In our series we also brought up the subject of the late president Mr Ong Teng Cheong who had expressed his anguish at the way he was treated by the cabinet when he insisted on checking on the reserves. The MOF says that
A misperception is that the late President Ong had not been provided with sufficient information for him to effectively protect the Past Reserves. In fact, he was given full access to the information of the reserves during his term of office.
The SDP welcomes the Government’s attempt to engage on the issue of the management of our reserves. This is a topic that should be openly and nationally discussed but unfortunately remains buried. We urge Singaporeans to pay more attention to this matter and scrutinise the explanations provided by the PAP Government.
The role, indeed duty, of a country’s opposition is to ask the hard questions in order to get governments to account to the people its policies and actions. The Singapore Democrats recognise this and the latest explanations by the MOF is an example of how an opposition should work.
The SDP will continue our efforts to pry open the closed fist of the PAP when it comes to the governing of our reserves even though we are not in Parliament. To do otherwise would be to neglect our duty.