Reserves used 55 times: But how much?

theonlinecitizen July 16, 2013

By Leong Sze Hian

Reserves used 27 times!
Reserves used 27 times!
Actually how many times?
Used 55 times!
Er actually 55 times since 2002!
So before 2002 never use is it?
How much leh?
How much was used leh?

Reserves used 55 times?

Short write up in Straits Times

Short write up in Straits Times

I refer to the article “Reserves drawn on 55 times since 2002″ (Straits Times, Jul 10).

It states that “Past reserves have been drawn on 55 times since 2002 for land acquisition and development purposes …

Out of this, 23 projects were to create new land by reclamation from the sea or underground excavation.

The remaining 32 occasions were for land acquisition costs, like the Selective En Bloc Redevelopment Scheme (SERS), in which the Government redevelops existing HDB estates into housing that uses the land more intensively.”

Not drawdown because from financial assets to state land?

Mr Tharman said that tapping past reserves in this way is “in essence a conversion of past reserves from one form (financial assets) to another (state land), rather than a drawdown of reserves”.

He was responding to a question from Non-Constituency MP Lina Chiam.”

In this connection, I would like to 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 just before he left the presidency (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)

So now, if not for NCMP Mrs Lina Chiam’s question, no one would have known that the Reserves have been used 55 times, instead of the 27 times disclosed by our former President.

President also don’t know it was 55 times?

Why did our past President reveal that the Reserves has been used 27 times, when it was actually used 55 times?

Before 2002, never use is it?

Since the reply in Parliament now says “Past reserves have been drawn on 55 times since 2002″ – does it mean that the Reserves were never used before 2002?

If this is indeed the case, then why say “since 2002″?

As to “tapping past reserves in this way is “in essence a conversion of past reserves from one form (financial assets) to another (state land), rather than a drawdown of reserves”” – the issue may be not what the drawdown in essence means, but why it was never disclosed?

Rainy day only?

Singaporeans have been told that the Reserves would only by used for a rainy day, and until our former President’s disclosure just before he left office, all of us were given the impression that the Reserves was only used once for the Job Credit scheme during the 2009 recession.

Pecuniary interest?

Also, allow me to use an analogy to illustrate a possible issue – Let’s say my bonus depends on GDP growth. I use the Reserves to reclaim land and SERS. So, in essence I may be pumping money into the economy (kind of like “Quantitative Easing” (QE) (For further reading: 2009-13 QE bubble)). In so doing, am I not in a way increasing GDP and thus indirectly my bonus too?

Under reporting Budget expenditure?

Let’s try to explore the use of the Reserves further. When land is reclaimed, we may be increasing GDP, and under reporting on the Budget expenditure, because if not for the use of the Reserves, the land reclamation expenditure may reduce the Budget surplus or even result in a Budget deficit.

After the land is reclaimed and sold to perhaps the highest bidder (including the HDB?), the land sales proceeds are not reported as Budget revenue, but would be considered as Budget revenue under IMF reporting standards.

In other words, we may then be under reporting the Budget surplus.

Impact on NIRC?

Also, the use of the Reserves in this manner may impact the Net Investment Returns Contribution (NIRC) (reduce it?), as I understand that “financial assets’” returns are included in the calculation of the NIRC, but not “state land”. Therefore, this may also have a direct bearing on how much money the Government can spend every year, which affects Singaporeans as well.

The NIRC added “almost $8 billion to the FY2013 Budget”.

Under reporting Budget surplus?

As  to SERS, it may be rather puzzling. Since as I understand it, no actual compensation is paid to the HDB owners affected, until their new alternative HDB flats are available to vacate them from their existing flats to their new flats. Also, the price of the new exchanged flats are generally the same if not higher than the compensation of the existing flats. The number that do not opt for an exchanged flat may be very small – thus, the actual sum of compensation paid may be a very small sum.

All that we know from the subject Parliamentary reply is that the Reserves were used “for land acquisition costs”, which I suppose refers to the costs of acquisition of private land.  In this connection, what proportion of HDB flats built with the intended purpose of exchanging the new flats built for the old en-bloc ones, were acquired private land?

Also, what percentage of en-bloc flat owners eventually select “balance flats” from the HDB’s stock of flats? Such “balance flats” may not require any “land acquisition costs” at all?

Unless, the Reserves were used to pay for the construction costs too? Or to pay the SLA for the land costs? (kind of like using your own money to pay for your own land?) So many questions – quite confusing right?

Also, since the HDB says that they lose money on every flat that is sold – does it mean that the HDB’s $1 or $2 billion deficit a year may be akin to an under reporting of the Budget surplus?

The real biggie?

But you now what! The real biggie is that the most important piece of information is missing. How much of the Reserves were used!

Imagine I tell you I took money from the bank 55 times, but never tell you how much I took. If you don’t ask – are you not stupid! Or rather if I didn’t tell you in the first place – Maybe I think that you are stupid enough not to ask?

You go figure what’s “right” – after all there has been a great deal of debate recently about the “right” politics or reading the “right” things!

Uniquely Singapore!





*29. Mrs Lina Chiam: To ask the Deputy Prime Minister and Minister for Finance in light of a 2011 media report that past reserves have been used 27 times for Selective En-bloc Redevelopment Scheme (SERS) projectssince 2002, how many times have the past reserves been used for all purposes since 2002.


Mr Tharman Shanmugaratnam:

 I thank Mrs Lina Chiam for her question in which she referred to a Straits Times interview with former President S R Nathan in August 2011. The article mentioned that Past Reserves had been used to fund land reclamation projects and land acquisition for the Selective En-Bloc Redevelopment Scheme (SERS) since 2001 and 2002 respectively. She has asked how many times the Past Reserves have been used for all purposes since 2002.

Past Reserves refer to the reserves accumulated during previous terms of Government. There are several ways that Past Reserves are used.

First, the Constitution provides for the Net Investment Returns Contribution (NIRC) spending framework. This enables the Government to tap the investment returns on Past Reserves in a disciplined and sustainable manner. The NIRC benefits Singaporeans substantially each year. It contributes almost $8 billion to the FY2013 Budget.

Second, Past Reserves have been used to fund land-related projects such as reclamation, the creation of underground space, and land acquisition projects like SERS. This is in essence a conversion of Past Reserves from one form (financial assets) to another (State land), rather than a drawdown of Past Reserves. The land and space that is created or acquired forms part of our State land holdings and is hence protected as Past Reserves. The use of Past Reserves to fund these land-related projects follows principles agreed to between the Government and the President. Further, when such land or space is subsequently sold, the proceeds accrue fully to Past Reserves.

Since 2002, Past Reserves have funded 23 projects that create new land by reclamation from the sea or new usable space underground like the Jurong Rock cavern. The land and space that is created forms part of our land holdings and hence part of the Past Reserves.

Past Reserves have also been used to fund the land acquisition costs of projects like SERS which seek to enhance the value of the existing land. To reiterate, the acquired land forms part of Past Reserves, and the land value is enhanced with the more intensive re-development. Since 2002, the Past Reserves have funded 32 such projects.

There is a third use of Past Reserves, reserved for exceptional circumstances. With the approval of Parliament and the President, Past Reserves may be drawn down to deal with extraordinary crises. Members would recall that the Government had obtained the President’s approval to draw up to S$4.9 billion from Past Reserves to fund the Jobs Credit Scheme and the Special Risk-Sharing Initiative in January 2009, at a critical time in the global economic crisis.

The use of Past Reserves for spending in such exceptional circumstances may result in an actual drawdown of Past Reserves, unlike its use for land projects as I have described. However, Members would also recall that in this recent episode, the Government decided in February 2011 to put back the full amount that it had drawn down from the Past Reserves, after the economy had recovered from the recession.

In conclusion, Mdm Speaker, our Past Reserves form a critical part of our nation’s resources. Any usage of Past Reserves is done in a disciplined and sustainable manner. An actual draw on Past Reserves, as was done in 2009, can only be contemplated in extraordinary circumstances and with the approval of Parliament and the President.

About the Author

Leong Sze Hian has served as the president of 4 professional bodies, honorary consul of 2 countries, an alumnus of Harvard University, authored 4 books, quoted over 1500 times in the media , has been a radio talkshow host, a newspaper daily columnist, Wharton Fellow, SEACeM Fellow, columnist for theonlinecitizen and Malaysiakini, executive producer of Ilo Ilo (40 international awards), Hotel Mumbai (associate producer), invited to speak more than 200 times in about 40 countries, CIFA advisory board member, founding advisor to the Financial Planning Associations of 2 countries. He has 3 Masters, 2 Bachelors degrees and 13 professional  qualifications.