Besides the power to veto key public appointments proposed by the Executive, the President holds what is known as the second key to the nation’s past reserves. The other key is of course held by Parliament and the executive. The word “reserves’’ has been bandied about frequently, usually in the context of whether more should be used or what they comprise. So let’s get some of the details out of the way.

Q: All I know about the reserves is that it is a huge sum of money that no one is supposed to touch. Is that correct?
You’re right that it’s huge, although no one outside maybe a small circle of leaders knows just how huge. Think of the reserves as savings accumulated by generations of Singaporeans over the years. Whenever the term of a government ends (when Parliament is dissolved and general elections are called), the government of the day must transfer whatever it has saved during its term of office into the reserves. This becomes what what is called ‘past reserves’. The next elected government cannot touch the past reserves without the President’s concurrence.

Q: But why is it so complicated? We can’t trust the government?
It’s not about trust. In the Westminster parliamentary system of government, the elected government of the day has almost unlimited powers, not only in implementing policies, but in budgetary matters. Technically, an elected government can spend as much as it likes – so long as it has a parliamentary majority – and bankrupt the country. So we need a system of checks and balances. With the President holding the second key, the government of the day cannot unlock the safe and spend at will. It can, for example, use the money to provide people with free water and electricity to win votes, or spend them on vanity projects with no public utility or worse still, give out contracts to enrich their own circle. While the general election is a check on the Government, the country can be ruined even before a government’s five-year term is up. Once the money is spent or squandered, it will take generations to recover.

Q. You haven’t told me what the reserves comprise…
Two things. Moveable or financial assets like cash, including foreign currencies, securities and bonds and physical assets like land and buildings. Our assets are held by the Government as well as by the Fifth Schedule entities and companies. These include the Monetary Authority of Singapore, the HDB, Jurong Town Corporation and CPF Board as well as government companies Temasek Holdings and GIC.

When the Government wants to withdraw past reserves, it must prepare a law to provide for it and present it to the President for his or her concurrence. This has happened five times in the past, once in 2009 during the office of the late President SR Nathan and four times during President Halimah Yacob’s term to help Singaporeans tide over the Covid-19 crisis.

A Fifth Schedule entity must declare to the president that its proposed budget would not affect its reserves before the president says yes to the budget. In 1996, the late President Ong Teng Cheong queried the CPF Board’s proposed budget for the next year, as it looked like it would have to draw on its reserves. Ultimately, the issue was over the method of accounting. CPF had used the accrual method. After Mr Ong’s query, the Government made it explicit that accrual accounting would be used for drawing up budgets. One more interesting story. POSB used to be a statutory board that was also in the Fifth Schedule list. But it got acquired by DBS Bank and turned private in 1998. Mr Ong said in an interview in 2000 after he left office that he had not been told about this although the banks reserves are constitutionally protect. The deal went through in November 1998 and POSB was taken off the list.

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Q. But you still haven’t told me how much….?
Hm. We don’t know exactly how much. What we know are figures about how much money MAS and Temasek manage. According to MAS, the official foreign reserves managed by MAS was S$438 billion as of this month (June). As of March 2023, Temasek’s net portfolio was S$382 billion. The value of GIC’s portfolio has never been made public, except that it invests well over US$100 billion globally. The Government argues that publishing the total amount will make it easier for markets to mount speculative attacks on the Singapore dollar during periods of vulnerability. This refers to a situation where individuals or groups trade in massive volumes of a currency to force it down, so they can profit from its subsequent depreciation or collapse. The reserves are also Singapore’s “strategic’’ asset. Revealing details would let others know how strong or how weak the country is. Better to leave them guessing so that they do not know enough about Singapore’s ability to defend its currency.

Q. What about buildings and land? How are they calculated in money terms?
Okay, buildings and land are part of our past reserves. If we need the money, they can be sold off as well. This is why the Government argues that land sold, for example, to the HDB, must be paid back into past reserves. Some people have a problem with this, but that’s the policy now. As for how much they are worth, as far as we know, nobody has put a figure to it because we have so many plots and pieces of infrastructure. The late Mr Ong Teng Cheong, who wanted information about government properties and value of State land, got into a tangle with the executive over this before his term of office ended. The result was a White Paper (Cmd 5 of 1999) entitled ‘Principles for Determining and Safeguarding the Accumulated Reserves of the Government and the Fifth Schedule Statutory Boards and Government Companies’ which sets out what constitutes reserves and what constitutes a draw down on the reserves. It is a very long document and is extremely complicated. You need to be an accountant to understand it fully.

Q. Come on! Is it really that easy for the President to say no if the Government wants to use the reserves?
It’s more likely that the President and the executive will discuss any disagreement informally. The president is also empowered by the Constitution to ask for information to be made available to him or her. The 2016 amendments to the Constitution did make the President’s work a bit more difficult because he or she is now legally required to consult the Council of President Advisors whenever there is a need to exercises any discretionary powers. And if the CPA disagrees with the President, Parliament can override the President’s decision.

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Lights on Istana

Through ‘Lights on Istana’ we hope to bring clarity to the facts and foster constructive discourse on the key themes of the upcoming Presidential Election.