Speech on Reserves — Speech by LO Pritam Singh


Mr Speaker, I will make three points concerning Singapore’s reserves and then I will set out the Workers’ Party’s (WP) five principles on the reserves.

My first point is that the Government should be more open about our reserves and reveal figures not for their own sake, but so as to facilitate mature conversations on the reserves to take place.

My second point is that the Government should not rule out using more than the current 50% of the Net Income Returns Contribution (NIRC) or what is known as the investment returns from the reserves to lessen the taxation burden on Singaporeans. I note that with regard to any prospective change in the 50/50 ratio, DPM Lawrence Wong is on record in this House as saying I quote, “never say never”, although these remarks have since been qualified to the extent that the Government does not intend to do so in the immediate term.

My third point is that there is significant public belief that the reserves are likely to be very healthy, and will continue to grow through land sales, since land sales are not used to finance the government’s budget, the proceeds of which go straight into the reserves.

First Point – Debating the Reserves

Mr Speaker, my first point is that the Government should be more open about our reserves. In 2022, the WP proposed alternatives to raising the GST by considering the extent to which we can rely on the investment returns on the reserves to fund spending needs such as healthcare. Discussions on the reserves are also gaining traction outside this House.

Shortly before the Presidential elections last year, Channel News Asia (CNA) broadcast a documentary which sought to shed more light on our reserves. There were interviews with senior management of the Ministry of Finance (MOF), the Prime Minister and former President Halimah Yacob.  The Prime Minister said in the documentary that people do not appreciate the importance of the NIRC, partly because, and I quote, “it is very hard for people to appreciate the degree to which we are benefiting from the Reserves”.

Politically however, the conversation on utilising more of the investment returns from the reserves as an alternative to taxation by the WP has been cast by the PAP in extremely narrow terms. Almost any enquiry by the WP into the use of the NIRC for social purposes, such as for inter-generational equity or as alternative levers of expenditure, is met with accusations of irresponsibility and snipes of the opposition wanting to raid the reserves.

More recently, when the WP has made requests for details about the reserves, the PAP has characterised the reserves as a “secret weapon” – one so secret that even duly elected Members of Parliament (MP) cannot be expected to ask questions about it. In fact, MPs have to vote on drawdowns of past reserves even if they do not have any idea how much we will have left after a drawdown.

These realities close off mature and civil conversations on the reserves. But despite this, the public has not refrained from discussing or reimagining the use of our reserves.

For example, in my 2019 Budget speech, I referred to a Business Times article which spoke of Singaporeans calling for a carving out of some part of the reserves to deal with the potential danger of speculative attacks and for another part to be made public. Singaporeans rightly wish to discuss the reserves and have information about them.

In my 2020 Budget Speech, I said that calls for greater transparency on the reserves were not out of place and they will continue in years to come. They run in parallel with Singaporeans taking ownership to explore fiscal solutions with a view to  co-create not just today’s Singapore but a sustainable and equitable tomorrow that future generations of Singaporeans will inherit.

Second point – use of NIRC

My second point is that the Government should not close off the prospect of reviewing the NIRC formula to lessen the financial burden on Singaporeans, and to explore policies that can improve social outcomes for Singaporeans.

The 50% figure is not a sacrosanct number.

In the 1990s, the Government was free to spend upto 100% of the interest and dividends it earned on past reserves within a current term of Government. When our first elected President Ong Teng Cheong was moved to speak on this, the late President’s concern was whether the interest and dividends generated by past reserves ought to be left fully in the hands of a current Government.

He called on the PAP to stop using up to 100% of the Net Investment Income (NII) and instead proposed a 50/50 formula where 50% could be spent and 50% of the investment returns would be added to the principal reserves. At that time, in the 1990s, the PAP was not sold on a 50/50 ratio, notwithstanding its psychological resonance today. Then Finance Minister, Dr Richard Hu, noted that while a 50/50 split of the NII had merit, he added that, and I quote, “a fixed proportion like 50/50 may not be appropriate for all circumstances.”

It would be useful to ask why the PAP was cautious about limiting itself to spending the dividends and income of past reserves. When the Constitution was eventually amended to lock up and return 50% of the investment returns in 2001, Dr Hu pointed to two reasons.

The first concerned the possibility of having to finance higher future expenditures. The second sought to reduce the prospect of repeatedly returning to the President for regular draws should drawing on more than 50% of the investment returns become necessary. But more than the PAP of the early 1990s, there are other Singaporeans today who can conceive of greater flexibility in increasing the spendable amount of the NIRC.

In August last year, the Institute of Policy Studies (IPS) released a Working Paper titled Public Deliberation on Singapore’s Fiscal Policies and National Reserves [1]. It aimed, amongst other things, to deepen the discussion on fiscal policy and inter-generational equity in Singapore. As part of the research for the paper, a survey was conducted, with respondents being asked about the NIRC formula. There was also a table-top budget exercise where participants could decide how they would fund Government expenditures. They could tap expenditure from five categories: First, taxes and fees; Second, the NIRC; Third, NIRR – an unofficial term for the other 50% of the NIRC that is not used for the Budget; Fourth, our principal Reserves which cannot be drawn upon without the expression approval of the Council of Presidential Advisers and the President; and lastly, debt.

The IPS working paper observed that while survey respondents chose to maintain the 50-50 NIR framework, the participants in the budget game were, I quote “more open to consider using more of the investment returns (i.e. more than 50% of the NIRC) if these were spent in ways that would generate clear and measurable returns, whether financial or social.” More critically, participants understood that using more of the NIRC meant slowing the growth rate of the reserves, but they thought the NIRC should be a complementary tool which could alleviate the burden of taxation.

These are important observations. There are Singaporeans who can conceive of using, for example, 60% of the NIRC for social expenditure. In fact, in a hypothetical scenario involving the topping up of the Pioneer and Merdeka generation package, the IPS participants even considered increasing spending even to the point of tapping the principal reserves because of concerns for the current “sandwiched generation” of Singaporeans, which refers to the tax-paying working generation that cares both for their elderly parents as well as their young children. A key concern of the IPS participants was wanting to avoid further burdening this group through taxes and charges.

Mr Speaker, if ordinary Singaporeans and even those in our think-tanks can move beyond PAP narratives on the reserves and find it to be a meaningful civic duty to deliberate the use of the investment returns from our reserves, it should be no surprise to find politicians both inside and outside this House thinking along similar lines. However, an important point to note is that while the IPS participants explored the drawing down on the principal sum in our reserves to pay for current expenditures, the WP has not called for the use of the principal reserves or our rainy day fund.

What the WP has called for is an increase in the utilisation of the NIRC beyond 50% when needed. Such a move would not jeopardise the growth of the reserves.

Third point – healthy reserves growth through land sales

Mr Speaker, that brings me to my third point. Even if 100% of the NIRC could be spent, which the WP has not called for, the reserves would continue to grow steadily, since proceeds from the sale of land, which hit billions of dollars a year, are added to the reserves.

With the overwhelming majority of land in Singapore being leasehold, when the leasehold expires and the land is returned to the State, subject to the prevailing land use parameters, another cycle of the sale of that same land will take place. In the HDB context, HDB households are required by law to return their flats to the State for free at the end of 99-years while the State will continue to recycle the land and collect monies from future generations of Singaporeans over and over again. The situation is the same for industrial properties where land is sold for 30 or 60 years.

Perhaps the knowledge of this intuitive fact by the public may explain why there is significant interest in conversations about a more equitable use of the NIRC for current and future generations of Singaporeans.

The depth of our reserves was effectively demonstrated in this House by Sengkang GRC MP Louis Chua who remembered what the DPM Heng Swee Keat had said about the use of the reserves during COVID-19 – that the equivalent of over 20 years of past Budget surpluses had been used to fight COVID-19 and that a generation’s worth of savings had been deployed to combat the crisis of a generation.

The use of this language suggested that the reserves were significantly depleted and utilised to fight COVID-19. In 2022, to critically examine these statements in the absence of specific information from the Government, WP MP Louis Chua asked DPM Lawrence Wong whether the principal reserves had become larger or smaller after the drawdown in 2020 in response to COVID-19.

DPM Wong did not answer this question directly, but said that as of 2022, the reserves continue to grow. The reply confirms the depth of our reserves, and the scale of the actual dent that the $40b COVID-19 drawdown made. If Mr Leong is right and the total value of our reserves stands at $1.2t, COVID-19, the crisis of a generation, led to the consumption of about $40b or 3.3% of our reserves. Extrapolating from DPM Wong’s reply in this House, the $40b amount used for, I quote, “the crisis of a generation” was recovered in two years or less through the sale of land and NIRC contributions.

WP – Five Points of Principle on Reserves

I move on to my next section. Sir, the Workers’ Party certainly does not see the depth of our reserves as a licence for the Government to spend beyond its means or to stop the growth of our principal reserves. But the same way the PAP of the 1990s did not see it fiscally imprudent or irresponsible to use up to 100% of the investment returns on the principal reserves if required, the WP does not see it imprudent for example, to use 60% of the NIRC if there are justifiable reasons to do so.

I will make five related points of principle.

First, our principal reserves, which continue to grow with the proceeds from land sales, should not be used to finance our budget expenditure except in emergencies such as COVID-19 or the Global Financial Crisis.

Second, our economic growth is dependent on a Singapore that is open to the world and nimble enough to acquire a first-mover advantage, in addition to being open to foreign talent. Ensuring we have a vibrant economy that generates wealth not just for the few at the top but across all levels of society should represent one of the first revenue bases from which we fund our expenditure. That said, we should not close off conversations that encompass the use of investment returns and their impact as long-term social investments in our children which could impact positively on outcomes for future generations of Singaporeans.

To that end, and thirdly, inter-generational changes and new realities, such as our transition to a hyper-aged society should prompt us to consider whether more of our investment returns should be used to fund social needs, especially when we think of an older generation of Singaporeans who contributed relatively more in taxes and sacrificed for the greater good for example, by seeing lower rates of employer CPF contributions so as to make Singapore more competitive. The words of the late Richard Hu are not only true of the NII framework of the 1990s. They ring true today – that returning 50% of investment returns may not be appropriate in all circumstances going forward, particularly in view of our rapidly aging population.

Fourth, differences in political points of view in this House between the Government and opposition on our reserves, should not spill over into political meddling and interference in the investment decisions of GIC and Temasek. While questions will be asked in this House by the WP where necessary, directly questioning individual investment decisions for the sole purpose or a political purpose of pressuring the investment teams is not in this House’s interest.

Fifth and finally, significant public interest on our expenditure needs requires our public institutions to play a greater role in advancing understanding of our fiscal policy. The IPS working paper I referred to earlier in my speech revealed relatively low levels of trust in journalists and the media in Singapore on the topic of reserves policy. For this House’s information, opposition politicians scored higher in this regard.

To take advantage of Parliament’s sovereign status and its privileged role as an institution of public record, this House should set up a Standing Select Committee that looks into the health of our reserves. The committee should also consider specific funding needs and threat events that Singapore must prepare for and to be briefed on how these are to be funded. And MPs should not be precluded from asking questions about the reserves in this Committee. The Select Committee’s deliberations or reports have the potential of taking the political sting out of unjustifiable demands to use more investment returns for expenditure programs. The role of a permanent select committee of Parliament is also a recommendation of the IPS Working Paper, and one that the Workers’ Party supports.


In conclusion Mr Speaker, as long as the PAP takes the position that the reserves must be kept a secret, reasonable members of the public will query whether this is not simply a cover for an overly-conservative treatment of reserves to fob off political demands for social policies that can benefit Singaporeans. Such views would be completely understandable and expected of a discerning and mature population. The IPS working paper reported that one exercise was conducted among participants from higher socio-economic backgrounds, who in the IPS’ view are “better informed citizens” and are, I quote, “more sceptical of the government’s management of the reserves.” Unquote. I would suggest that such views are not only held by those from higher socio-economic groups.

There are Singaporeans who wonder whether all our reserves including the principal reserves must be sequestered for speculative attacks against the Singapore dollar – the main reason the Government has offered for not revealing the size of our reserves. In 2019, Singapore held the eleventh highest stock of official foreign reserves in the world. As a percentage of GDP and on a per capita basis, it was the third highest in the world.

In parallel, even in the context of inchoate or unknown threats, it makes sense to speak of realistic threat perceptions and limits that can be set on what it takes to deter adversaries who wish to attack the Singapore dollar. For example, the Air Force stops after procuring a finite number of the latest military assets. Why not acquire more since we have the capability and capacity to do so, to make Singapore even more safe? For military planners, these questions are answered by assessing the type of conflict one trains for, by weighing the likelihood of the threats becoming reality, the level of deterrence required and ultimately, by using judgment.

There may well be considered and not overly-conservative reasons for the current position on how much of our investment returns ought to be utilised for our expenditure needs. However, the current position of absolute secrecy about the total reserves when there are national institutions like Parliament-in-committee to discuss and deliberate these matters, leads me to think that there will be more differences of opinion from the current official orthodoxy on the transparency of the reserves in future.

This will become even more acute as the social compact changes in the years and decades to come. Issues of concern will not just come from a growing senior population or healthcare needs, but possibly also from a further slowing down of social mobility and a low Total Fertility Rate that require more immigrants to our population inevitably leading to questions about a more equitable use of the investment returns. To this end, it would be important for the Government to leave itself the option of reviewing its position open, in particular on the usage of the investment returns from our reserves.

The WP supports the motion.

Thank you, Mr Speaker.

[1] https://lkyspp.nus.edu.sg/docs/default-source/ips/ips-working-paper-no-51_public-deliberation-on-singapores-fiscal-policies-and-national-reserves.pdf