Singapore, Inc.: Just When You Thought it Couldn’t Get Any Worse

Balding's World

This past weekend, I had the pleasure of meeting with Kenneth Jeyaretnam, the Secretary General of the Reform Party, who wanted to better understand exactly what I was claiming about Singaporean public finances and the factual basis for such claims.

A former banker and hedge fund manager, he has spent his professional life analyzing finances and numbers. Skeptical of my analysis about the perilous nature of Singaporean public finances and the blatant misrepresentation with regards to Temasek and GIC, he quizzed me about the numbers and whether I had considered different scenarios that might explain the discrepancy. Near the end of our time together having exhausted the numbers and possibilities, he simply sits up in his chair and says “well, this is a problem.”

However, since this meeting, I have come to realize that the problems are significantly bigger than even I initially believed. One of the main questions from people is whether the “surpluses” reported by Singapore are actually surpluses. Thanks to my own additional searches and data provided by Kenneth Jeyaretnam, the data looks even worse than expected. Let me explain why.

We now have three sources that report Singaporean public surpluses. First, we have IMF data from the International Financial Statistics database on the operational revenue, expenditures, and surpluses. This data goes back to 1963. Second, we have budget revenue, expenditure, and surplus data from the Statistics Singapore dating back to 1980. Third, we have the IMF general government revenue, expenditure, and surpluses dating back to 1990. These numbers provide us a good basis for comparison.

I need to make a brief detour to explain an important point about these numbers. The first set of numbers from the IMF records “operational” revenue, expenditure, and surpluses. The second set of numbers from the IMF records “general” revenue, expenditure, and surpluses. Think of the difference between these two numbers like this. ”Operational” revenue records how much money you make at your job (revenue), how much you spend (rent, car, food as expenditure), and how much you save from your job (surplus). ”General” revenue also records income from your past savings.

So for instance, if you have $200,000 in an investment fund which makes you 10% for the year or $20,000 and you made $50,000 at your job, your “operational” revenue would be $50,000 and your “general” revenue would be $70,000 ($50,000+$20,000). Understanding the difference will help understand Singaporean public finances.

When we compare Singaporean budget numbers to IMF operational and general budget numbers, the differences become very important. According to Statistics Singapore, from 1980 to 2010, the government ran a total surplus of $282 billion SGD. According to the IMF operational budget numbers, Singapore ran a total surplus of $270 billion SGD. Those two numbers are pretty close and in line with the previous data I have used. So far, so good.

However, according to the IMF general government numbers which is given to the IMF by the Singaporean Ministry of Finance, from 1990 to 2010, the Singaporean accumulated surplus totaled $429 billion SGD. That general number which includes revenues from historical reserves (Temasek and GIC) is more than 50% larger than the operational budget surplus!!

There are a couple of points that need to be mentioned. First, from 2003 to 2010 the differences between the three different surplus numbers is quite small. However, from 1990 to 2002, the differences between the IMF general government surplus and the other budget numbers are enormous. From 1990 to 2002, the Singaporean government claimed to have an accumulated surplus of $151 billion SGD while the IMF general surplus totaled $311 billion SGD!!

So what accounts for the enormous difference? A simple accounting policy change. To avoid publicizing its revenue from historical reserves (Temasek and GIC), the Singaporean government only published domestically its operational surplus which explains why it so closely matches the IMF operational surplus. However, it shifted to the IMF standard for reporting government revenue in 2003 which covers all government revenue including revenue from such factors as Temasek and GIC. This means that the Singaporean government from 1990 to 2002 was deliberately and systematically under reporting its revenue to its citizens in its domestic accounts.

Second, this drastically, DRASTICALLY, changes the estimate for how much money Singapore, Inc. should have sitting in the bank. If we only change our estimates to use the IMF numbers which cover general revenue back to 1990, the Singapore budget numbers from 1980 to 1989, and the increases in borrowing from 1980 to 2010, then use the GIC reported earnings of 7% over this time frame, Singapore, Inc. should be sitting on $2.1 trillion SGD. Let me repeat that in case you are not absolutely shocked.

Using Singaporean provided numbers on budget surpluses, borrowing, and returns: Singapore, Inc. should have more than $2.1 trillion SGD in the bank right now. TRILLION. RIGHT NOW!! It currently reports only about $700 billion SGD.

This represents either the largest single example of financial mismanagement, fraud, government obfuscation, or graft in human history. Whether this money is not publicly reported, gone to money heaven, or is sitting in a Swiss bank account, the discrepancies are enormous and appalling.

Hopefully, Kenneth Jeyaretnam and the people of Singapore will find answers from their so-called democratic leaders. This level of financial obfuscation cannot be allowed to continue in a supposed democratic and transparent country.

Rather than continuing to ignore the discrepancies in their own data, we can only hope that the Singaporean government will move to address these concerns.

Disclaimer: Kenneth Jeyaretnam requested a meeting to better understand my research and supporting data.  I do not speak for or represent the Reform Party.  I am not affiliated with any Singaporean political party or stakeholder but will gladly assist any group, party, or individual seeking to better understand the issues.