INVESTMENTS OF GOVERNMENT-LINKED COMPANIES

INVESTMENTS OF GOVERNMENT-LINKED COMPANIES:

(Update of contingent liabilities to MOF):

* 3. *Dr Loo Choon Yong asked the Minister for Finance (a) whether he is kept informed of the real or potential contingent liabilities of all Government agencies, Government-linked companies and investment entities; and (b) whether his Ministry keeps a register of all such contingent liabilities.

Mrs Lim Hwee Hua (for the Minister for Finance): The Ministry of Finance (MOF) monitors the financial position, including any contingent liabilities, of all Ministries and Organs of State, statutory boards, as well as holding companies which are owned directly by the Government.

MOF compiles annual returns from all Ministries and Organs of State on any guarantees they have provided, promissory notes issued, outstanding contributions to international organisations, as well as statutory obligations under the Acts. Any guarantees provided by the Government must be approved by the President.

MOF also requires all statutory boards to submit their annual audited financial statements. Any contingent liabilities of the statutory boards would either be

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provided for in these financial statements or disclosed within the notes to the financial statements. These financial statements are presented to Parliament.

As for the holding companies which are owned directly by the Government, they are managed independently by their respective boards. As with the private sector, these companies submit to its shareholder, in this case the Ministry of Finance, regular reports on its financial position and performance, including contingent liabilities, if any. MOF does not micro-manage the liabilities or contingent liabilities of the companies.

Dr Loo Choon Yong (Nominated Member): Is the Senior Minister of State aware that there are known-unknown and unknown-unknown, meaning that there are contingent liabilities or options given by Government agencies or Government-linked companies that they themselves may not be aware that there is a contingent liability. How do the external auditors, auditing based on letter of representation, make sure that the known contingent liabilities and the unknown contingent liabilities are surfaced and be provided for?

Mrs Lim Hwee Hua: Mr Speaker, Sir, I do not know specifically what the Member is referring to but I would give him the assurance that this is done on an annual basis and in full compliance with the accounting standards, which are established against international benchmarks. The accounting profession keeps pace and reviews the assessment of the different contingent liabilities. Any new revisions would be watched carefully by us and adopted, where appropriate. So where there are new developments, which have been accounted for or adopted by other jurisdictions, we in Singapore would, likewise, follow very carefully whilst at the same time, we would do our own assessment as well.

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Dr Loo Choon Yong: Will the Senior Minister of State please look deeper into this because there are situations that she mentioned – guarantees and all that – which are known liabilities? But very often, when people hedge with the intention of protecting their positions they actually end up with open positions. Big companies' operations, seasoned investors in the region, have gone into these sorts of situations and got their fingers burned, where they lost more than the principal. They are indebted because of the position that they have taken and these are open positions. For example, products like –

Mr Speaker: Dr Loo, no speeches, please.

Dr Loo Choon Yong: Yes, thank you.

Mrs Lim Hwee Hua: Sir, I understand what the Member might be concerned with. Ultimately, the Government would track all the entities that are directly accountable to it. As for the companies that are the subsidiaries of the holding companies, then the boards and the management teams would be held accountable and the Government would expect them to do the appropriate due diligence, have the understanding and the risk assessments, before they take on these investments.