"Three can keep a secret, only if two of them are dead" ... Benjamin Franklin
I wonder how many Singaporeans are privy to the best kept secret on the island. When even the president has no idea, the vault is seriously sealed. Only a select few in the Ministry of Finance, Monetary Authority of Singapore, and the Prime Minister's Office, is in the know. It is a small circle, but definitely more than 3. To keep the numbers down, the same players must circulate in the inner echelon of the corridor of power. A fact not lost to the most observant.
Like all secrets, everybody tries to unravel it. Like all secrets, gossips are in abundance. I am of course referring to the quantum of national reserves of Singapore. All sorts of figures have been suggested by one and sundry. Economist Leong Tse Han, politician Kenneth Jeyaratnam and Prof Chris Balding, have one time or another, suggested trillions of dollars.
Back in 2012. Prof Chris Balding wrote several articles trying to outguess the reserves figure. It seemed baffling why an American academic, working in a communist university in HK, had such a keen interest in the subject. In 2015 he wrote a research paper.
Kenneth Jeyaratnam, chair of the Reform Party, an economist and ex-hedge fund manager, had separately been pursuing the same research on missing national reserves long before Prof Balding. He too had made suggestions of huge reserves figures. The two actually met up in HK to go through their different figures. Jeyaratnam walked away from that meeting saying they both agreed reserves numbers are huge, but disagreed on the estimates and the way they computed.
At some point, I think Jeyaratnam arrived at S$3 trillion. Both worked on the basis of tracking budget surpluses from IMF reports and the Statistics office, estimated land sales, and imputing Temasek and GIC profits, compounded over the years. Jeyaratnam, in addition, assessed the Assets & Liabilities Statement (ALS) that the government publishes with each Budget. I understand accounting, but government accounting is fund-based, adjusted for cash basis and long term cashflows. An outsider looking at the ALS cannot make any sense of it, at least to me. I am curious what insight Jeyaratnam gleaned from the ALS.
If I were to offer an opinion on what the national reserves should be, I will say Prof Balding and Jeyaratnam, and any guy who has ever offered any estimate in social media, are way off the mark. Our national reserves are way way much higher. When the late President Ong Teng Cheong asked for the numbers and was told it will take a hundred years to list down the national assets, the government was not being sarcastic. It was a fact. However, national reserves, by definition, is the sum total of the equity in the balance sheets of all the ministries, statutory boards and Fifth Schedule companies. It is possible to compute easily. But don't try to take on this task, because some of the entities are very transparent, some are not, and GIC is off limits. Outsiders can't undertake this. However, it is not necessary because it would have served no purpose. What is the point of knowing what this figure is. Off hand, I'm certain the Ministry of Defence will have the biggest numbers. Factor in the bases, the F-15s, the battleships, submarines, aircraft carrier (I'm kidding, we don't have this). You get the picture. For all intents and purposes, the national reserves is just a huge number, for which we have no purpose in knowing.
What we really want to know is the money that the government has set aside and invested. This is the sum total of previous investments, operating surpluses and proceeds from land sales. In short, our eyes are on the investment portfolios managed by GIC and Temasek. These 2 Sovereign Wealth Funds generate the returns that help to fund the budget, and their assets technically provide Singaporeans the 后山 Hòu shān, or back mountain. It is our pillar of economic strength.
We focus then on investments. In this respect, almost everyone that gets into a conversation on this subject makes 2 similar mistakes. Apart from Temasek, they included GIC and forex reserves held by MAS. I lay claim to be the first making these clarification here. I may stand corrected, but I have never seen anyone mention these before. In my exchanges with writer Critical Spectator recently, I highlighted to him my first point below, which he has since used it.
Point 1 is this : GIC invests the funds received from the government. The government transfers operating surpluses, proceeds of land sales and proceeds from government securities (SGS and SSGS). GIC investment portfolio is from co-mingled funds of national reserves (surpluses and land sales) CPF pension money (SSGS) and government obligations (SGS). Thus only a portion of GIC portfolio is considered national reserves, ie belonging to Singaporeans collectively.
Point 2 is this : The foreign exchange reserves managed by MAS has nothing to do with national reserves. It is MAS operating funds invested in liquid foreign exchange currencies for the purpose of maintaining stability of our exchange rate.
So what do we know about our national reserves now? Temasek portfolio was valued at S$381 billion as at 31 Mar 2021. GIC we have absolutely no idea, much less talk about what portion of it is national reserves.
Some time ago, Leong made the same 2 mistakes when he said the national reserves was about S$1.4 trillion, taking into consideration Temasek portfolio, MAS forex reserves and estimated GIC portfolio. Unfortunately, Leong, Jeyeratnam and Balding, with their S$ trillion estimates, are the stuff netizens jump on. The good news is, nobody will be hauled to the courts for any wild guesses. Have no fear of POFMA. And the reason is, the national reserves is a number the government does not want anyone to know, not the world, not even to many within the cabinet, nay not even the president. The more the obfuscation, the better.
The government's defence of opacity of national reserves is, like open poker, it does not want market participants to know how much reserves Singapore has and so avoid the possibility of an all out attack on the SGD. That said, there are many small economies with very low central bank forex reserves, let alone national reserves, and none has been speculated to death in world history. An all out speculative attack happens mostly with fixed rate regimes, or where a country has a serious structural currency mis-match.
A caveat, though. A wild claim of numbers is different from wild claims of misfeasance. Prof Balding has claimed fraud and leakages (siphoning out money), but he lives in America (The HK university released him in 2018). Jeyaratnam has written politely to MOF for clarification but received no replies. He too has implied fraud in government figures and asked where are the missing billions. But he has been left untouched, for reasons I personally believe is the late Lee Kuan Yew's instructions. LKY destroyed Kenneth's father the late JBJ, but he did not want to touch the children of his political enemy. In fact, Kenneth's brother attorney Phillip, works closely with the establishment. Leong opined his estimate of the reserves but never claimed wrong doing by anyone. Roy Ngerng, social activist, claimed wrong doing and was rightly sued.
I am not the fourth monkey banging away on the keyboard to provide the answer. There is no answer.
Like all secrets, everybody tries to unravel it. Like all secrets, gossips are in abundance. I am of course referring to the quantum of national reserves of Singapore. All sorts of figures have been suggested by one and sundry. Economist Leong Tse Han, politician Kenneth Jeyaratnam and Prof Chris Balding, have one time or another, suggested trillions of dollars.
Back in 2012. Prof Chris Balding wrote several articles trying to outguess the reserves figure. It seemed baffling why an American academic, working in a communist university in HK, had such a keen interest in the subject. In 2015 he wrote a research paper.
"A Brief Research Note on the Government Investment Corporation of Singapore, Temasek Holdings, and Singapore Public Finances".... Prof Chris BaldingIt is extremely difficulty to understand how he did his computation and what his end figures were. He seemed to indicate the actual reserves ought to be about S$1.6 trillion at the time and he could not reconcile about S$800 billion. On that basis he made bold suggestions the figures were (1) GIC and Temasek ROI were overstated, or (2) there is a secret entity holding the unreported assets, or (3) there were leakages. (2) and (3) are preposterous because it is impossible to move such vast sums of money around, or invest and divest, without the world knowing about it.
Kenneth Jeyaratnam, chair of the Reform Party, an economist and ex-hedge fund manager, had separately been pursuing the same research on missing national reserves long before Prof Balding. He too had made suggestions of huge reserves figures. The two actually met up in HK to go through their different figures. Jeyaratnam walked away from that meeting saying they both agreed reserves numbers are huge, but disagreed on the estimates and the way they computed.
At some point, I think Jeyaratnam arrived at S$3 trillion. Both worked on the basis of tracking budget surpluses from IMF reports and the Statistics office, estimated land sales, and imputing Temasek and GIC profits, compounded over the years. Jeyaratnam, in addition, assessed the Assets & Liabilities Statement (ALS) that the government publishes with each Budget. I understand accounting, but government accounting is fund-based, adjusted for cash basis and long term cashflows. An outsider looking at the ALS cannot make any sense of it, at least to me. I am curious what insight Jeyaratnam gleaned from the ALS.
If I were to offer an opinion on what the national reserves should be, I will say Prof Balding and Jeyaratnam, and any guy who has ever offered any estimate in social media, are way off the mark. Our national reserves are way way much higher. When the late President Ong Teng Cheong asked for the numbers and was told it will take a hundred years to list down the national assets, the government was not being sarcastic. It was a fact. However, national reserves, by definition, is the sum total of the equity in the balance sheets of all the ministries, statutory boards and Fifth Schedule companies. It is possible to compute easily. But don't try to take on this task, because some of the entities are very transparent, some are not, and GIC is off limits. Outsiders can't undertake this. However, it is not necessary because it would have served no purpose. What is the point of knowing what this figure is. Off hand, I'm certain the Ministry of Defence will have the biggest numbers. Factor in the bases, the F-15s, the battleships, submarines, aircraft carrier (I'm kidding, we don't have this). You get the picture. For all intents and purposes, the national reserves is just a huge number, for which we have no purpose in knowing.
What we really want to know is the money that the government has set aside and invested. This is the sum total of previous investments, operating surpluses and proceeds from land sales. In short, our eyes are on the investment portfolios managed by GIC and Temasek. These 2 Sovereign Wealth Funds generate the returns that help to fund the budget, and their assets technically provide Singaporeans the 后山 Hòu shān, or back mountain. It is our pillar of economic strength.
We focus then on investments. In this respect, almost everyone that gets into a conversation on this subject makes 2 similar mistakes. Apart from Temasek, they included GIC and forex reserves held by MAS. I lay claim to be the first making these clarification here. I may stand corrected, but I have never seen anyone mention these before. In my exchanges with writer Critical Spectator recently, I highlighted to him my first point below, which he has since used it.
Point 1 is this : GIC invests the funds received from the government. The government transfers operating surpluses, proceeds of land sales and proceeds from government securities (SGS and SSGS). GIC investment portfolio is from co-mingled funds of national reserves (surpluses and land sales) CPF pension money (SSGS) and government obligations (SGS). Thus only a portion of GIC portfolio is considered national reserves, ie belonging to Singaporeans collectively.
Point 2 is this : The foreign exchange reserves managed by MAS has nothing to do with national reserves. It is MAS operating funds invested in liquid foreign exchange currencies for the purpose of maintaining stability of our exchange rate.
So what do we know about our national reserves now? Temasek portfolio was valued at S$381 billion as at 31 Mar 2021. GIC we have absolutely no idea, much less talk about what portion of it is national reserves.
Some time ago, Leong made the same 2 mistakes when he said the national reserves was about S$1.4 trillion, taking into consideration Temasek portfolio, MAS forex reserves and estimated GIC portfolio. Unfortunately, Leong, Jeyeratnam and Balding, with their S$ trillion estimates, are the stuff netizens jump on. The good news is, nobody will be hauled to the courts for any wild guesses. Have no fear of POFMA. And the reason is, the national reserves is a number the government does not want anyone to know, not the world, not even to many within the cabinet, nay not even the president. The more the obfuscation, the better.
The government's defence of opacity of national reserves is, like open poker, it does not want market participants to know how much reserves Singapore has and so avoid the possibility of an all out attack on the SGD. That said, there are many small economies with very low central bank forex reserves, let alone national reserves, and none has been speculated to death in world history. An all out speculative attack happens mostly with fixed rate regimes, or where a country has a serious structural currency mis-match.
A caveat, though. A wild claim of numbers is different from wild claims of misfeasance. Prof Balding has claimed fraud and leakages (siphoning out money), but he lives in America (The HK university released him in 2018). Jeyaratnam has written politely to MOF for clarification but received no replies. He too has implied fraud in government figures and asked where are the missing billions. But he has been left untouched, for reasons I personally believe is the late Lee Kuan Yew's instructions. LKY destroyed Kenneth's father the late JBJ, but he did not want to touch the children of his political enemy. In fact, Kenneth's brother attorney Phillip, works closely with the establishment. Leong opined his estimate of the reserves but never claimed wrong doing by anyone. Roy Ngerng, social activist, claimed wrong doing and was rightly sued.
I am not the fourth monkey banging away on the keyboard to provide the answer. There is no answer.