Section II: What is the President’s role in safeguarding the reserves

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Under the Constitution, the President safeguards the Past Reserves of the Government and Fifth Schedule entities in the following ways:

(A) Approval of the Annual Budget of the Government and Fifth Schedule Entities

The Government can only draw on Past Reserves with the approval of the President. For each year’s budget, the President may veto the budgets of the Government and Fifth Schedule entities if he is of the opinion that their budgets are likely to draw upon Past Reserves. (An example of this is a profligate Government spending more than its revenue and using up the reserves it has accumulated during its term.) The President’s assent to each year’s Budget is an important safeguard that ensures that, on an ongoing basis, there is no draw on Past Reserves without his agreement.

(B) Approval of appointment and removal of key Government officials and board members of the Fifth Schedule Entities

The President also has veto power over the appointment and removal of: (i) Board members or directors in the Fifth Schedule entities; and, (ii) appointments of key public officers such as the Accountant-General, Auditor-General and Chief Valuer.

(C) Rules governing how investment returns from Past Reserves can be taken into each year’s Budget for spending

Spending from Investment Returns

The revisions to the Constitution that were passed by Parliament in October 2008 introduced a new framework for Government spending from investment returns. This framework allows the Government to take into the Budget, up to 50% of the long-term expected real returns on net assets invested by our investment entities, after deducting Government liabilities.   

The expected long-term real rate of return refers to the investment rate of return that can be expected to be earned over the long term, after netting off inflation.

Expected (as opposed to actual realised) rates of return are used to provide some stability to the amount that can be spent. The expected rates are based on the judgment of experienced investment professionals at our investment entities and are the forward-looking expected rates of return over the long term. The expected rates of return have to be approved by the President each year. In the event that the Government and President do not agree to any of the expected rates of return, the 20-year historical average rate of return will be used to compute how much the Government can spend.

This spending framework ensures that the investment returns on Past Reserves are tapped for spending in a disciplined and prudent way. It achieves this in the following ways:

·         The Government can only spend up to 50% of the long-term expected real returns;

·         The framework uses real rates of return, viz. after netting off inflation, to protect the real value of our reserves;

·         The framework allows the Government to spend only from returns on the net assets, i.e. the excess of assets over liabilities invested by our investment entities, minus the liabilities of the Government. This ensures that we set aside returns to cover the costs of servicing our liabilities.  

The ability to tap our reserves in a sustainable manner is a significant financial advantage for Singapore. Unlike many countries that have to service their debts and other liabilities from their budgets on an annual basis, we are able to take in money from the investment returns of our reserves to supplement our Budget.   More importantly, tapping the investment returns of Past Reserves in a disciplined manner also ensures that our reserves can grow with the economy. This should provide future Governments with a steady stream of returns to support the Budget.

Other than the normal operation of the spending rule framework, the Government can make use of Past Reserves only with the President’s approval.

Click here for more information on the role of the President.


Q15. What kind of information does the President have access to?

The President is entitled to all information that the Cabinet and the boards of the Fifth Schedule entities are entitled to.

The President is entitled to ask Ministers, Permanent Secretaries and senior public officers and any of the board members, directors or CEOs of the Fifth Schedule entities for such information. When asked, all these persons are duty bound to supply the information requested.

The President has full information about the size of the reserves (including a listing of physical assets like land) and the performance of the investment entities. Each year, the Accountant-General prepares and submits the Government’s financial statements to the President. These statements are independently audited by the Auditor-General.


Q16. Has the President’s approval ever been sought to draw on Past Reserves?

In October 2008, President S R Nathan gave his approval for a S$150 billion guarantee on all bank deposits in Singapore to be backed by Past Reserves. This was against the backdrop of the Global Financial Crisis where other jurisdictions were guaranteeing bank deposits as well. If Singapore had not provided a guarantee, we would have run the risk of funds flowing out of Singapore to other jurisdictions that had guarantees, even though our financial system was sound. The guarantee lapsed on 31 December 2010, without being triggered. In this case, Past Reserves were not drawn on, although it could potentially have been.

In January 2009, the Government obtained the President’s approval to draw down S$4.9 billion from the Past Reserves for the first time to fund special schemes in light of Singapore’s worst recession since Independence. The two measures were the Jobs Credit Scheme which subsidised employers' wage bills and the Special Risk-Sharing Initiative which helped viable companies gain access to credit. The actual amount drawn for these two measures was S$4.0 billion, less than expected. This was the first and only time that Past Reserves have been drawn on.

In February 2011, the Government decided to put back the S$4.0 billion that it had drawn down from the Past Reserves. This is because the economy had recovered well from the recession, putting our fiscal position on a stronger footing. While there is no legal or constitutional obligation for the Government to return to Past Reserves any amount drawn, it is the responsible and prudent thing to do, once a Government has secured a stable fiscal position within its term. This is the way to uphold the philosophy that has enabled us to build up and maintain our reserves, and derive from it income each year to meet our strategic needs.


Q17. Can the President direct the investment strategies of our investment entities?

The President does not direct the operations of Fifth Schedule entities. In particular, the President is not empowered to direct the investment strategies of GIC and Temasek.

The investment strategies of GIC and Temasek are the responsibility of their respective Boards and managements. The Government’s role is to appoint suitable and qualified individuals to the two Boards.

The President, after consulting the Council of Presidential Advisers, has discretion to decide whether or not to approve the Board appointments proposed by the Government. The President also receives the audited annual accounts of GIC and Temasek, and has access to any of the information that is available to their Boards.

Click here to read the statement by the Minister for Law.


Q18. Did the Government fail to provide former President Ong Teng Cheong with sufficient information to protect the Past Reserves?

A misperception that crops up from time to time is that former President Ong had been denied the information needed for him to perform an effective role in protecting the Past Reserves. In fact, President Ong was given all the information required for the purpose. This information included the value of all the Government’s financial assets, as well as a listing of physical assets, such as buildings and land.

At his 16 July 1999 press conference, President Ong spoke of how he had been informed by the Accountant-General that it would take "52 man-years" to produce the value of the full list of physical assets of the Government.

The facts of the case were explained by former Prime Minister Goh Chok Tong in Parliament on 17 August 1999, as summarised below:

  • The President's Office had requested a listing of physical assets from the Accountant-General on 18 Jun 1996. At a meeting with the President on 14 Aug 1996 (i.e. less than two months later), the Accountant-General provided a listing of State buildings, while the Commissioner of Lands provided a listing of State lands. Updates were subsequently sent to the President's Office.
  • It was at this meeting that the President remarked that to protect the Past Reserves, the reserves should ideally be denominated in dollar value. To this, the Accountant-General said that it would take 56 man-years6 to conduct a complete valuation of the physical assets, even though he had already produced the listing (without valuation figures).
  • The Attorney-General’s Chambers subsequently advised that there was no need to revalue all State properties at each changeover of the term of Government, as the question of whether Past Reserves were being drawn did not arise unless a piece of land was actually about to be sold off or alienated. At the point of sale, land is valued, and the Reserves protection framework requires only that the land be sold at fair market value.
  • Furthermore, the proposed revaluation would be a waste of resources. First, the reality was that much of State land would remain as State land, i.e. unsold. Second, the value of each piece of land depended on planning and zoning restrictions, which the Government could change.

Click here for the Parliamentary speeches by former Prime Minister and former Minister for Finance Dr Richard Hu (17 August 1999)

Click here for the subsequent Parliamentary Q&As (17 August 1999)



6. "56 man-years" does not mean it takes 56 years to complete the task. A man-year is a measure of the amount of work to be done, and not of the time it will take to do it.


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