SINGAPORE: Not only are four Presidential hopefuls contesting their ability to safeguard Singapore’s reserves, but Prime Minister Lee Hsien Loong also expressed his concerns about the ongoing efforts to build and maintain these reserves during a recent interview.

During an exclusive interview with Singapore media outlet CNA, PM Lee highlighted that Singapore currently possesses reserves deemed sufficient for “most circumstances.”

However, he emphasized that it would be a “significant misconception” to assume this state will persist, given that the nation’s spending requirements are already surpassing the rate of revenue growth.

PM Lee stressed that the fourth-generation (4G) political leadership of the People’s Action Party (PAP) acknowledges the escalating spending demands and the necessity for Singapore to address them in a sustainable manner.

He characterized these reserves as a “great source of comfort and reassurance,” affording Singapore an additional strategy should challenging situations arise.

Yet, when asked about specific figures pertaining to Singapore’s reserves, PM Lee declined to provide a direct response.

Mr Lee said: “I can’t answer that question. It’s enough for most circumstances. It’s enough to give us a substantial support in the Budget every year contributing to the government’s revenues.”

With the People’s Action Party (PAP) governing the city-state for more than half a century, the disclosure of the reserves’ complete size has been reserved, citing reasons such as safeguarding national interests and averting speculative pressures on the Singapore dollar.

In 2009, Singapore initially accessed its reserves, withdrawing S$4.9 billion (equivalent to US$3.6 billion) to support the economy during the global financial crisis. Subsequently, during the COVID-19 pandemic between 2020 and 2022, the nation tapped into its reserves on three separate occasions, utilizing a total of S$40 billion.

PM Lee: Elected President established as ‘second key’ to look after our reserves

Interestingly, in the interview, PM Lee shed light on Singapore’s unique approach to the Elected President role, likening it to a “second key,” an innovation born from the nation’s historical journey of reserve accumulation and the strategic evolution of its political framework.

He expounded on the intricacies of this concept, explaining that this distinctive development, which he noted “can’t be replicated elsewhere,” emerged due to the specific circumstances of Singapore’s history.

The deliberate creation of an Elected President, dedicated to safeguarding reserves, was a response to the establishment of Temasek in 1974 and the subsequent formation of GIC in 1981.

In the 1980s, as the nation’s reserves swelled, discussions surrounding the elected presidency and its role as the “second key” gained traction, culminating in its implementation around 1990.

PM Lee recalled that the concept of the Elected President as a “second key” was initially introduced by late Lee Kuan Yew during his 1984 National Day rally.

Over the subsequent years, intensive efforts were undertaken by the government, leading to the publication of a pivotal White Paper in 1988 and the subsequent legislative amendments that laid the foundation for the elected presidency.

PM Lee emphasized his active involvement in the process, collaborating closely with Professor Jayakumar, “he made the drafts, I gave him inputs, I helped redraft, clarify, present differently come up with ideas, try to understand what the problem was, and how to pin down so that you protect the reserves but you don’t paralyze the government of the day.”

“because it’s very easy to lock it all up then you’re not allowed to do anything with it. well you can do that but then it becomes useless to you so what is the mechanism by which you can protect it lock it And yet when you need to unlock it and without the risk that all of it will disappear.”

“I think that was the key turning point, because it crystallized people’s focus, they knew that there’s such a thing called the reserves, that there’s quite a lot of money, and that it needs to be protected.”

PM Lee said since then the Singapore government made many adjustments refinements modifications to the arrangements for the elected president for the second key, but that fundamental turning point was the decision to crystallize the idea and to implement such a system.

“Any other country can just click their fingers and do (tap on their reserves), but we’ve got it (the ‘second key’), and I’m glad we are here, ” he said.

PM Lee has no idea “how much is enough” for the country’s reserves

Reflecting on the past, Mr. Lee shared, “Fortunately, we had the resources and we could do it, It’s a great blessing.”

However, he underscored a significant misconception that can arise among Singaporeans regarding the reserves – the belief in a definitive notion of “enough.”

“How much is enough? If I have more than that, I can spend it. If I have less than that, well, maybe I hope we get there,” he said. “I don’t know how much is enough.”

“Before the global financial crisis, we didn’t think we will need anything. When (it) came, it turned out we needed S$4, S$5 billion. When the COVID-19 crisis came, in the end we needed S$40 plus billion. So you have no idea how much you will need.”

Expressing caution, he cautioned that COVID-19 is not the most severe adversity Singapore could face. As such, he advocated a different perspective regarding the reserves – envisioning them as a form of “rainy day money,” designed to address unforeseen challenges more effectively.

PM Lee on NRIC, Temasek and GIC

Prime Minister Lee highlighted that the Net Investment Returns Contribution (NIRC) is the largest revenue source for the government, constituting around 20% of annual revenue.

The NIRC, allowing up to 50% spending of net investment returns from key entities like GIC and Temasek, contributes about 3.5% of GDP, surpassing other taxes.

This sustainable and balanced approach aligns with the government’s reinvestment strategy for future generations.

“It’s an important contribution. I think it’s a sustainable contribution and it’s also a fair contribution because the way we make the formula – half of the investment returns can be spent, the other half goes back and it is reinvested for the future,” said the Prime Minister.

“I think that we are pursuing the right policy and getting the right results. So when people say why don’t we use the reserves in order to benefit the current generation? The answer is we are to a very big degree, but you may not realise because we’ve gotten used to it.”

Prime Minister Lee discussed the roles of the three entities responsible for managing Singapore’s reserves.

The Monetary Authority of Singapore (MAS) handles official foreign reserves, while Temasek Holdings, established in 1974, manages national companies commercially, including Singapore Airlines and DBS Bank.

GIC, founded in 1981, focuses on longer-term investments for higher returns.

Duty of political leaders to  “shield” the reserve managers from political and public pressures

Due to the substantial reserves, discussions about the possibility of establishing two competing GICs have arisen periodically.

Despite this, PM Lee noted that the complexity of establishing a single successful team is challenging enough, prompting a focus on enhancing its performance.

He also reaffirmed that the government maintains its non-interference stance in investment decisions by these entities.

He stressed the duty of political leaders to  “shield” and insulate the reserve managers from political and public pressures, ensuring their effective performance in their roles.

DBS CEO urged the Singapore government to deploy its massive reserves to bolster regional presence

In a contrasting perspective, Piyush Gupta, CEO of DBS Group Holdings Ltd., presented an alternative stance on Singapore’s reserves to the PAP government on Monday (14 Aug).

Historically, the PAP government has been cautious about utilizing these extensive reserves, especially concerning welfare disbursements.

However, Piyush Gupta emphasized the need for Singapore to utilize its vast reserves and enhance its regional investments.

He indicated that Singapore has not entirely recognized its standing as a prosperous country. He highlighted the importance of tapping into the city-state’s significant capital resources to gain a competitive advantage.

Gupta proposed that the administration should contemplate deploying these reserves to address societal issues, expand Singapore’s foothold in new sectors, and cultivate stronger relationships with neighboring nations.

Drawing a parallel with Japan’s sustained investment strategy in regional countries, Gupta suggested that Singapore could adopt a similar approach to reshape current perceptions. “Our neighbors perceive us as a self-centered nation,” he remarked.

Mr Gupta made the above remark at the “Reinventing Destiny” conference on Monday which commemorated the 100th birth anniversary of the late founding prime minister, Lee Kuan Yew.

Having led DBS for over ten years, Gupta is no stranger to expressing opinions on pressing economic issues. He has, in the past, touched upon the possibility of increasing taxes on Singapore’s affluent segment and has praised China’s drive towards shared prosperity.

Despite PM Lee’s insistence that the reserves cannot be revealed, the Singapore Government had previously disclosed a total of S$1.4 trillion in financial assets in the Government Financial Statements Report for the financial year ending 31 March 2021.

This report, published by the Ministry of Finance. The reserve, over a trillion, was referenced by Gupta in his address.

When questioned in Parliament by Mr Leong Mun Wai, a Non-Constituency Member from the Progress Singapore Party over whether the data released is correct, the Second Minister for Finance, Ms Indranee Rajah, refrained from directly confirming the figure.

She instead inquired about the source of the data, saying, “if the data is already available to the public, then I don’t need to confirm it.”