"Capital Reserves" in PUB's Accounts

Parliamentary Question by Mr Liang Eng Hwa:

To ask the Minister for Finance if he will clarify the $5.3 billion of "Capital Reserves" in PUB's accounts and whether this represents surplus funds that are at the disposal of the Government or PUB.

Parliamentary Reply by 2nd Minister for Finance, Mr Lawrence Wong: 

I would like to thank the member for raising this question. There has been some confusion about what the “Capital Reserve” in PUB’s accounts represent. Mr Pritam Singh referred to it in his speech during the Debate on the President’s Address, and I note that the Workers’ Party subsequently posted a video clip on its Facebook page questioning why the water price increases were necessary when the PUB’s Capital Reserve has increased from $3 billion to $5.3 billion over the last decade.

The Workers’ Party and Mr Singh have interpreted the PUB’s Capital Reserve as a hoard of cash surplus that the Government is keeping in PUB’s accounts. But this is completely inaccurate, and demonstrates a basic misunderstanding of accounting fundamentals.

The Capital Reserve does not represent surplus funds that PUB has at its disposal.  Rather most of the funds are already invested in PUB’s Property, Plant and Equipment, in accounting terms, PPE, and that includes the upgrading of waterworks, water reclamation plant expansions and investment in water treatment process. These are important investments to ensure a secure and sustainable water supply for Singapore.

Therefore, the increase in PUB’s Capital Reserve from $3 billion to $5.3 billion over the last decade must be seen in conjunction with PUB’s growing asset base, specifically it’s PPE, Property, Plant and Equipment, which has grown from $3.9 billion to $7.1 billion over the same period.

In fact, the Capital Reserve alone has not been sufficient to fully cover PUB’s investments in water infrastructure. That is why in the COS debate earlier this year, I explained that PUB has had to borrow from the capital markets for its investments and it will continue to do so going forward. 

In short, there is no surplus cash in PUB. It either ignorant or disingenuous to link the water price increase with the PUB’s Capital Reserve, and there is absolutely no basis to do so.  I hope this clarification will set the record straight, and I also hope the Workers’ Party will refrain from distorting the facts to mislead the public.