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Ministerial Statement By Minister For Finance Dr Richard Hu To Parliament On 17 August 1999 On Protection Of Reserves Issues Raised By The President At His Press Conference On 16 Jul 1999

16 Jul 1999

4-point Summary of the speech

1. "52 man years" - the President's recollection of the chronology was mistaken. The Accountant General provided the data he asked within two months, and not only after "two, three years", nor only after his insistence.

2. "unpleasant" episode of vetoing a statutory board's budget - the statutory board was the CPF Board. The budget was in order, prepared using accrual accounting. But the President and CPA wanted to subtract the full capital expenditure for the year from the accrual accounting surplus, which had already subtracted out depreciation. The government disagreed. The President eventually accepted the accrual accounts unchanged.

3. NII - it has always been current income and not past reserves, both under the Constitution and GAAP. The President and CPA have never challenged this. The Government has never changed this, although it has studied at length the possibility of doing so.

4. Changing the NII definition so as not to have to ask the President - this is neither the Constitutional nor the fiscal position. Constitutionally, the NII definition has never changed. Fiscally, we have sufficient budget surpluses to last beyond the term of the current President, without using NII at all, whatever the definition.


1. On 16 Jul 99, President Ong Teng Cheong held a press conference announcing that he would not stand for re-election as President. At this press conference, the President spoke of what he described as a "long list" of problems he had encountered in trying to protect past reserves. In particular, the President raised four issues:

a. It would take the Accountant-General "52 man-years" to produce the list of physical assets of the Government.

b. One "unpleasant" encounter where he had to withhold approval of a statutory board budget because it would have caused a draw on its past reserves.

c. Whether Net Investment Income (NII) should be treated as current reserves or past reserves.

d. His "disappointment" that the Government did not need him to unlock the past reserves to finance its package of cost cutting measures, because it had changed its treatment of NII.

2. These issues concern the working of the Presidential safeguards to protect past reserves. The Constitution had been amended in 1991 to provide for a directly elected President who would have discretionary powers to veto the use of past reserves and the appointment of key officials in the public service. Such a move was without precedent in any country. It was a novel experience for both President Ong Teng Cheong, the first person directly elected by the electorate to this new office, and the Government.

3. The past six years have therefore been a mutual learning experience for the Government and the President. Many problems were encountered and resolved. Both sides have worked together to interpret the constitutional provisions, and to develop working procedures for carrying them out. The agreed understanding is contained in the set of Principles for determining and safeguarding the accumulated reserves, which was published as a White Paper. "The Principles for Determining and Safeguarding the Accumulated Reserves of the Govern-ment and the Fifth Schedule Statutory Boards and Govern-ment Companies", paper Cmd. 5 of 1999.

4. I will give the House a full account of the four issues raised by President Ong, to clarify what had actually transpired. In the Government's view, these problems were neither fundamental nor intractable. They arose mainly because of differences of opinion on the accounting of Government's physical assets, and difficulties that arose in operating the new system. They were inevitable consequences of the two-way learning process.

Obtaining an Inventory of Government's Assets

5. The President said it had taken the Accountant-General "more than two, three years" to inform him what the Government's reserves consisted of. He said that when he asked for an inventory of the physical assets, the Accountant-General had responded that it would take "52 man-years" to produce. He had replied "Never mind. Go ahead", and finally he received the list plus diskettes a few months before the 1997 elections.

6. Members of this House must wonder why it would take "52 man years" to produce a listing.

7. The President's office had requested a listing of physical assets from the Accountant-General, Mr Goh Khee Kuan, on 18 Jun 96. At a meeting with the President on 14 Aug 96, i.e. less than 2 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.

8. At the meeting, the President remarked that to protect past reserves, the reserves should ideally be denominated in dollar value. In response the Accountant-General conceded that following accounting principles, one should take the value of what was protected at that point in time, but it would take 56 man-years (not 52) just to value the existing properties. He added that for the purposes of protection of the reserves, it did not matter when the valuation was actually made, and it could be at point of sale. This was recorded in the minutes.

9. "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. It means that it takes 56 men working for 1 year, or 28 men working for 2 years, or 1 man working for 56 years. It is not unreasonable for a team of 56 men to take 1 year to value the entire stock of land and buildings owned by Government. The land was in some 50,000 parcels, including miscellaneous parcels like roads, drains and even some reservoirs. Some land parcels had to be verified through actual surveys.

10. Thus, the President's recollection of what the Accountant-General had said was mistaken. The Accountant-General did not say that 52 man-years were needed to produce the listing of physical assets. He actually said that it would take 56 man-years to conduct a complete valuation of the physical assets. Furthermore, at the time he said this, he had already produced the listing that the President had requested. He did not produce it only after another two or three years, or only after the President insisted upon it.

11. It is therefore clear that the Accountant-General and the Government departments have cooperated fully with the President, and have not in any way sought to hinder the President in his job of protecting the reserves.

12. The question whether to revalue all State properties at each changeover of Government had arisen earlier. On 15 Jul 96, the Auditor General had written to inform the Ministry of Finance and the key statutory boards and government companies Those liBut with a changeover of government scheduled to take place soon, all of the Board's accumulated surpluses would become past reserves. Therefore, the CPA wanted the Chairman and the General Manager of the CPF Board to clarify the basis on which they mhave auditors whose duty is to ensure that what are declared as capital expenditures have in fact been properly spent on capital items. Furthermore, under the Constitution, the CEO and Chairman must declare whether the budget is likely to draw on past res