Friday, October 12, 2012

A Singaporean Mystery (Partially) Explained

Three months back, I highlighted some issues raised by Prof Christopher Balding regarding Singapore’s public finances. Somewhat unusually, the Singapore government has deigned to publish a public rebuttal (excerpt):

Is there something wrong with our Reserves?

From time to time, there are claims that the Singapore Government is covering up losses in our reserves, or that Singaporean CPF monies are not safe. Some recent online postings have even claimed that GIC and/or Temasek are reporting false returns to cover up losses, or that the Government siphons monies from its Budget or from Government borrowings so as to pad up GIC and Temasek’s books.

The Government does not publish the size of assets managed by GIC, although the asset size of MAS and Temasek are published. On the basis of the information that the Government has published, as well as the full system of checks and balances, these recent claims are baseless. Indeed, they are fantastical, but let’s look at some basic facts…

The article is written as a FAQ, and presents some useful information on the structure of public wealth management in Singapore. As far as the basic facts are concerned, I’m inclined to accept it as written. I don’t think the Singapore government would be willing to risk their credibility by publishing mis-truths.

The explanation regarding debt issuance for instance fits in with I’ve been told privately, and given the numbers that are publicly available, I’ve never been concerned that CPF member funds were ever at risk.

Having said that, going beyond the bare account for how the money is raised, who manages it, and where it goes to, some questions still need to be answered:

  1. Given the published rates of returns gained by Temasek and GIC, why aren’t ordinary Singaporeans benefiting more through their CPF membership?
  2. While I understand the need to issue public debt to help develop the capital markets, why the accelerated rate of issuance? Singapore government debt issuance is outpacing nominal GDP growth.
  3. One partial explanation I can think of is that SGS and Singapore T-Bills – the publicly traded portion of Singapore’s government debt – is effectively being used to manage domestic liquidity in lieu of MAS issuing its own debt (this reason would also explain the large government cash balances at MAS). This hypothesis was confirmed by a read through of the latest MAS annual report, as MAS was only authorised to issue short-term MAS bills in 2010 although the outstanding amount remains small relative to SGS and T-Bills (I have to say that the info on MAS’ balance sheet was singularly unhelpful). But that implies responsibility for monetary policy is effectively segregated, and made unnecessarily complicated.
  4. On the macro side, while I can acknowledge the legal strictures under which Singapore’s government operates (balanced budgets over each parliamentary term), that doesn’t mean that it makes any economic sense to me. Given high private savings, tacking on public savings on top of that simply means either deficient domestic demand (not true), or capital being exported (definitely true), or someone (read: households) taking on loads of debt to maintain consumption (wanna guess?). Here’s a good case of unintended consequences, and puts the whole load of macro-stabilisation on the shoulders of monetary policy, which is already institutionally schizophrenic.
  5. And there’s still no good explanation, or any explanation for that matter, regarding the poor level of per capita spending on public services.

So on the whole, while I don’t seriously believe there’s a “hole” in the public accounts, there still remain some tough questions that haven’t been answered.


  1. Partial explanations or nonsensical gobbledygook notwithstanding, you have apparently fallen hook, line and sinker for eruditely spun tall-tales couched as informative FAQs fashioned on the looms of spinmeisters honed in the ancient Chingkpig art of esoteric cocktalk.

    You need not have bothered or even taken the trouble at all:

    For it took a good half year or so for moneylaundering central to pony up a response ..and a pathetically laughable one at that.

    and this coming from the same bastard pigs who kept eerily silent about Andy Xie (when they could have torn him to bits!!)...:

    and this for dessert:

    not pipsqueak, mind you and yeah...I hate Singapork viscerally so and Chingkies gutturally (that I link Andy Xie who happens to a Paki Taliban mullah.!!). Oh yeah..and i need to jump into bonfire to cure my racist self...hahahahahahahahahahaha...humbugs!

    Warrior 231

    1. Warrior,

      It was actually that post on baldingsworld that led me to look up the SG government site. I've read enough government-written faqs to read between the lines, and see what's not being said.

      For instance, the excuse for why the reserve numbers are not published is laughable. What we know of SG reserves is already so huge that the idea that SG might be vulnerable to speculative currency attacks is silly.


      I worked with a fund management company for years, and the returns claimed for Temasek and GIC are plausible for the periods in question. Moreover, Prof Balding is treating SWF returns on a net basis, but they're more likely to be gross portfolio returns - that's the way we do things here in Malaysia. That's why actual returns from unit trusts, for example, don't seem to quite match up to the published returns.

      For SG's debt, the numbers actually match up pretty closely with CPF holdings and the SG government account at MAS - I checked. The latter is something Prof Balding did not take into account.

      That leaves the "surplus" generated every year from the government budget. Again, what's been written is factually correct - it appears that SG does not include debt service as part of operating expenditure i.e. the surplus is not an overall budget surplus, but only a primary budget surplus (I've got a breakdown of the official revenue and opex data).

      I need to work out the maturity structure of SG public traded debt to see if there actually is an overall surplus or deficit, but my gut feeling is that it'll work out to be a small deficit.

      So, as far as there being a hole in the SG government accounts, I would tend to discount it. That still leaves the other questions though.

      BTW read the first comment in the last link you gave. Singapore is even more highly exposed to global trade than Malaysia is. More importantly, the surge in Singapore's growth post-2009 has to be put into context - the contraction before that was even deeper than Malaysia's.

  2. Interesting reference by warrior. One of the write says the GDP Per capita was high because it did not factor around 1/4 of the workforce comprising of migrant labours. Do you have a take on this Hisham?

    1. Sorry for the late reply Ellese.

      Yes, there's certainly some truth in that. Per capita calculations tend to take into account the resident population based on census data (whenever the census happens to be taken), and estimated based on birth/death rates in non-census years. If there's a significant portion of the workforce that's not resident, they won't be included.

      On the other hand, if any of the income is repatriated to Malaysia (which is likely), it would be subtracted from GNI (though not GDP). However, even GNI won't totally reflect incomes attributable to foreign nationals.

      One other issue of course is that because GDP/GNI per capita are averages, they won't tell you anything about income distribution, which is among the most unequal in East Asia (beating even us).