GOVERNMENT-MANAGED ASSETS (Greater disclosure of returns)

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GOVERNMENT-MANAGED ASSETS:

(Greater disclosure of returns): 12.

Dr Amy Khor Lean Suan asked the Prime Minister and Minister for Finance whether there are any plans for greater disclosure of the returns on Government-managed assets to enable the public and the market to have a better picture of the performance of such investments.

The Acting Second Minister for Finance (Mr Raymond Lim Siang Keat) (for: Column: 841

the Prime Minister and Minister for Finance): Mr Speaker, Sir, disclosure of the exact size of, or the returns on, Singapore's financial reserves will not be in Singapore's national interest. The reserves managed by the GIC exceed US$100 billion. Reserves are important for maintaining confidence in, and discouraging speculation on the Singapore dollar. While market players do not doubt that Singapore has substantial resources to defend the Singapore dollar, they do not know the exact amounts nor full details of the asset allocation nor the investment criteria. Publishing this information would make it easier for speculators to plan their attacks on the Singapore dollar.

Mdm Ho Geok Choo: Two supplementary questions for the Minister. How can the Government actually strike a balance between transparency and the need to protect our currency from speculative attack? In an era of liberalisation and transparency, how strong and relevant are Minister Mentor's two previous observations on this subject? One is about the unflinching integrity that stands at the core of our GIC, and two is that there is a system of checks and balances within the Government to keep the GIC in line.

Mr Raymond Lim Siang Keat: The two questions are actually one question because the Member posed the first question and she has answered it with the second question with what Minister Mentor had said in the past. What he said remains relevant. The key issue here, like she has correctly pointed out, is how do you ensure accountability. Accountability here is ensured by having the GIC's management directly accountable to the GIC board. And this board comprises prominent public and private sector individuals and has to be approved by the President. So, within the system itself,

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there is an institutionalised mechanism to ensure the integrity of the process.

Dr Amy Khor Lean Suan: I would like to ask the Minister whether we are the only country that adopts such an accounting approach where capital receipts are excluded from our budget balances, and whether we could, by pursuing this approach, be more tightfisted than we ought to be when providing a stimulus package to help individuals and businesses during an economic downturn.

Mr Raymond Lim Siang Keat: The reason why we have adopted this particular definition of how we account for our operating budget, which we take basically the operating revenue and the operating expenditure and we take out the capital receipts, is because the capital receipts are non-recurring. So it is not a stable source for us to rely upon. The other question that she asked is whether we could have done more to cushion an economic downturn. We have done so. In the past few years, during the economic slowdown, the Government had been willing and quick to respond with assistance packages, run budget deficits in order to help Singaporeans, households, businesses, to tide over the economic downturn. And these packages are quite substantial. If you look at 2001, it was close to $13.5 billion, two off-budget packages. In 2003, SARS, $1.2 billion. And, recently, when we had Avian flu and we banned the import of poultry from Malaysia, Government agencies were quick, as Members are aware, to provide relief to egg sellers, poultry sellers and slaughterhouses.

But what is really more important and the fundamental question here is: why is it that Singapore is in a position to run budget deficits when there is an economic slowdown, not just for one year but a few years, without, unlike some other countries, undermining the general market

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confidence in Singapore's macro economic stability, without negative knock-on effects on inflation or interest rates in the economy? The reason why we have been able to do this is that we have consistently and strictly adhered to a policy of fiscal prudence and fiscal discipline. And this means running a balanced budget over the business cycle and accumulating surpluses in good years so that you are in a position to spend in difficult times. And it is this policy of a sizeable reserve and a reputation for fiscal discipline that allow us room to help Singaporeans, as individuals and households, during difficult times.

Mr Sin Boon Ann (Tampines): Sir, will the Minister please enlighten this House as to how the selection of prominent members to the board itself give the public the assurance that the Government will ensure maximum return on its investments when it is managing the public funds?

Mr Speaker: One minute left.

Mr Raymond Lim Siang Keat: As I said, these individuals are prominent individuals in the public and private sectors. They are on the board of GIC. They are given full access to the information on the performance of the funds, and the funds are benchmarked against the investment mandate. It is important to set out what is the investment mandate, and the principal mandate of GIC is to maintain and enhance the value of our reserves over the long-term, because this underpins confidence in the Singapore dollar. Against that benchmark, GIC has given us good returns over the long-term and performed creditably against international benchmarks like the MSCI equity indices, the Lehman Bond Index and against major international fund houses.

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3.00 pm

Mr Speaker: Order. End of Question Time.

[Pursuant to Standing Order No. 21(3), Written Answers to Question Nos. 16-18, 20 and 21 on the Order Paper are reproduced in the Appendix*. Question Nos. 13-15, 19 and 22 have been postponed to the next available sitting of Parliament.]

*Cols.971-978

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