# Dipped into past reserves only once? 1.9% real NIR?

I refer to the article “Reserves: ‘No’ to dipping into coffers” (Straits Times, Apr 19).

Dipped into the past reserves only once?

It states that “The Government has dipped into the past reserves only once. In 2009, it obtained the President’s approval to draw down \$4.9 billion from past reserves to fund special schemes in the light of Singapore’s worse recession since independence. In 2011, it put back all the money – \$4 billion – it used into the reserves.”

Used more than 27 times, but nobody knows?

Contrary to the above, “President Nathan revealed recently (August, 2011) that the past reserves have been used more than 27 times since 2002, for projects like land reclamation and the Selective En-bloc Redevelopment Scheme (Sers)”. (“President guards Reserves: Really?“, Aug 24, 2011; “How much of the Reserves has been really used?“, Aug 10, 2011)

Alas – a clue?

The amount of our reserves has never been revealed. But we may now have a clue, because of the remarks – “Under the NIR (Net Investment Returns), the Government can draw up to 50 per cent of the long-term expected real rate of return on the reserves invested as well as dividends.

For instance, if the reserves generate a “reasonable” 4 per cent in returns, the Government can take up to 2 per cent of these returns”.

NIRC \$7.7b?

As I understand that the historical long-term rate of inflation is about 2 per cent, and the NIRC (Net Investment Returns Contribution) was \$7.7 billion for the last year (estimated FY2013), it means that the real NIR was \$15.4 billion (\$7.7 billion times 2).

Nominal NIR \$23.1b?

So, if \$15.4 billion is 4 per cent, does it mean that the nominal return (plus 2 per cent inflation) is about \$23.1 billion.

Only \$385b reserves?

This works out to a total reserves of about \$385 billion (\$23.1 billion divided by 6 per cent).

Temasek & OFR already over \$503b?

Surely our reserves can’t be so little as the combined assets of Temasek and the Official Foreign Reserves,  which  is public information, is already over \$500 billion (\$503 billion as at 31 March, 2012).

GIC is secret?

It is only the GIC’s amount which is not public information.

Estimated \$800b reserves?

Even the last estimated total reserves as reported in the Straits Times was \$800 billion.

1.9% real NIR?

Using this \$800 billion estimate, it seems that the “long-term expected real rate of return on the reserves invested as well as dividends”, used to calculate the NIR may only be about 1.9 per cent (NIR \$15.4 billion divided by \$800 billion).

Isn’t this a very low rate of return?T

Temasek 17%, GIC 6.8% returns?

In this connection, Temasek has reported 17 per cent average annualised (Total Shareholder Return (TSR) since inception, and GIC has reported 20-year annualised nominal returns in USD terms of 6.8 per cent

“Mystery” of the reserves?

So, perhaps the figures seem to be best described as – “do not compute”?

To solve the “mystery of the reserves”, we really need to know what is the “long-term expected real rate of return on the reserves invested as well as dividends”, used to calculate the NIR.

Like a “Sherlock Holmes” mystery – there are clues, but the case remains unsolved, until such time that we have transparency on the reserves!

Leong Sze Hian