I was speaking at the Asia Chinese Media Conference on Oct 2, organised by Malaysiakini, about press freedom.

I asked some of the Malaysian delegates whether they know how much foreign reserves Malaysia has?

Almost everyone I spoke to said yes, or indicated they could easily get the information from Bank Negara’s web site.

So, I visited Bank Negara’s web site, and discovered a world of difference between Bank Negara and Singapore’s Government Investment Corporation (GIC).

Ask any Singaporean about Singapore’s foreign reserves, and the answer may be nobody knows, because Singapore’s foreign reserves is secret.

In contrast, one could easily obtain the amount of foreign reserves and the increase or decrease in reserves on a year-to-year basis historically, on Bank Negara’s web site.

For example, Malaysia’s foreign reserves as of  December 31 last year, was RM363 billion.

State secret

Singapore’s foreign reserves is secret. Some of the reasons given as to why Singapore’s foreign reserves cannot be transparent (like Malaysia’s) were:

• Singapore’s Minister of State for Finance: “You asked how much reserves we have. I’m sorry – I am not able to give you that answer. There are many, many people who are interested in how much we have. It has nothing to do with not wanting Singaporeans to know. It’s only if we go public with you, a lot of other people will know”.  (March 15, 2008)

• Singapore’s finance minister: “People do want to know, there is curiosity, it is a matter of public interest. That is not sufficient reason that there is curiosity and interest that you want to disclose information” ( August 18, 2009).

In contrast, Bank Negara’s annual report has various financial statements, such as the Balance Sheet, Income Statement, etc.

Singapore’s Minister Mentor said that being too transparent may allow others to anticipate the GIC’s moves (May 1, 2008).

Whilst this is a very good point, I would like to suggest a balance to satisfy the call for more transparency and the need to forestall others anticipating GIC’s moves – why not disclose on a delayed two-year basis ?

Historical information which is more than two years old, are of no use to others, and will also improve Singapore’s international standing and reputation for disclosure and transparency. In this regard, why is it that other central banks like Bank Negara can be transparent?

No data is available

According to the book “Banking, Finance & Monetary Policy in Singapore”, by Luckett, Schulze and Wong, “Unfortunately, GIC operates in extreme secrecy and does not circulate its annual reports to outsiders.

No data is available to assess its financial position or to analyse the breakdown of investment types and their returns”.

GIC said in its latest annual report published last month, that it has significantly recovered its losses from the previous year.

No figures were given, but the comment came in its report for the year ended March.

Imagine you ask your stockbroker,”how much money did I make last year?” – and his reply is “You have ‘significantly’ recovered your losses from the previous year, but I can’t give you any figures”!

What would be your reaction? How would you feel?

I find it somewhat puzzling and perhaps rather strange that the custodian of Singapore’s reserves tells Singaporeans that we did “significantly” well, but sorry no exact figures for you.

Since its “significant”, why not give the figure?

By the way, since we also don’t know what exactly were the previous year’s losses, how do we figure out how “significant” it was?

Improved format

May I suggest that the GIC’s annual report be re-written or highlighted with parentheses (my emphasis) as follows:

“In September last year, GIC said it had recovered more than half (how much exactly) of its losses (how much) then (when – for what period (s) precisely). GIC’s portfolio lost 20 per cent in Singapore dollar terms (how come losses are in S$, whereas returns are in US$?) in the financial year to March 2009, compared to the previous year”.

Since the S$ has been strengthening against the US$ over the last 20 years or so, giving “its 20-year nominal average annual rate of return increased to 7.1 per cent in US dollar terms, compared to 5.7 per cent the previous year”, may be akin to “making the picture look brighter”.

So, what was the return in S$ terms?

Has the GIC always reported its returns in the past in US$ terms only?

Can you imagine Bank Negara or the Bank of England reporting its returns in US$, without any mention in RM or sterling terms respectively?

Fund managers, sovereign wealth funds, etc, typically always report returns in annualised rates of return.

Whilst there is nothing wrong with reporting returns in “nominal average annual rate of return” or “adjusted for inflation”, the annualised rate of return should not be omitted altogether.

As to “This is the third year that GIC with investments valued at over US$100 billion or about S$132 billion (RM313 billion) is releasing its annual report”, what does “over US$100 billion” mean? – US$101 (RM 313), 110 (RM 341), 150 (RM 465), 190 (RM 589) billion?

With regards to “The sovereign wealth fund said its real rate of return, adjusted for inflation, was 3.8 per cent, up from 2.6 per cent a year ago”, global equities (MSCI World Index) increased by about 60 per cent from around March 2009 to around March this year (GIC’s report end date is 31 March this year).

Global equities

Global equities increased by about 80 percent from the  March 9 2009 low point of that year to the high point of this year in April.

Whilst I do not have the exact numbers for an exact time period comparison, it is customary for fund managers to report returns against a benchmark.

In fact, both GIC and Singapore’s Temasek had compared its losses during the recent financial crisis to global equity indexes.

In other words, if we compare ourselves to global equity indexes when we suffer losses, we should also do the same when we make gains, so that there is some consistency in benchmarking returns and performance.

So, what benchmark is GIC using to report its returns now?

In respect to “So its “portfolio is in good shape” now” – compared to what? (benchmark?), to whom (other sovereign wealth funds? Bank Negara?), by exactly how much?

Whilst almost all fund managers report their annualised rates of return from inception, and for various time periods like 1, 3, 5, 10 and 20 years, I am unable to find these information in the GIC annual report.

The financial regulations in many countries also require such similar reporting standards.

I am also unable to find any detailed financial statements in the 53-page GIC annual report, unlike Bank Negara’s report.

By the way, did the Singapore Government make any injections of funds into GIC last year, or in previous years?

If there were injections of capital in the past, is there a need to adjust the reported rates of return, or are they (if any) already reflected in the reported returns?

By the way, I am also unable to find the rates of return for various time periods, other than for the last two years, in Bank Negara’s annual report.