Lawrence Wong
Singapore
“Sir, we will provide more information. I see the value of getting Ministries to put out more information, to share more about how their resources are being used and what outcomes they have achieved.”
“Sir, I agree fully with Mr Azhar that human capacity, human capital is critical. In fact, I would say the long-term potential of Singapore, how far we go really depends on us being able to maximise our human potential. That is key and that is why we have long invested in education. And it is not just about the investments.”
“Sir, we have been maintaining that commitment of 1% for some time now. I do not think it is about saying that we just have to do more and spend more. As many have highlighted, we want to ensure good outcomes from our R&D spending as well. So, we will continue if the outcomes are good.”
“This has never been the case. Temasek, when it started, was always very clear about its mandate from the very beginning – commercial, not doing national service, focused on commercial outcomes.”
“Sir, the MOF economists when they look at fiscal projections use Government's forecast of the economy, which is also published. We would typically use the mid-point of the range and then, of course, because these are in nominal terms, you have to factor for that. And the projections are done on those basis.”
“Sir, I was relieved that Mr Loh said he only has one question, but he asked the most difficult question. To answer the question, we will continue to monitor cost of living across all segments of society.”
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“The Government does not direct the individual investment actions of GIC and Temasek. GIC and Temasek make investment decisions that are oriented towards generating long-term returns on a sustainable basis. These decisions are the responsibility of their Boards and managements, and are independent of the Government. The Government monitors the long-term performances of GIC’s and Temasek’s overall portfolios. Both GIC and Temasek believe that companies with good sustainability practices can have better returns over the long term, and have integrated Environmental, Social, and Governance (ESG) considerations into their investment processes. For instance, Temasek monitors relevant ESG-related developments in its investee companies and shares its perspectives on ESG with the investees’ Boards and management teams where appropriate. GIC’s investment teams incorporate climate change risks in its investment process, and actively engage its investee companies in their transition towards sustainability.”
“This question has been addressed in MTI and MOF’s combined reply at the 11 January 2022 Parliament Sitting to Question Nos 82 and 83 for oral answer on the Order Paper for 10 January 2022, Question Nos 4 to 7 for oral answer on the Order Paper for 11 January 2022, and Question Nos 9 and 20 for written answer on the Order Paper for 11 January 2022. [Please refer to "Reasons for Recent Rise in Costs and Measures to Help Singaporeans Cope ", Official Report, 11 January 2022, Vol 95, Issue 45, Oral Answers to Questions section.] [Please refer to "Measures to Help Singaporeans Cope with Rising Inflation and Impact of Government's Fiscal Support for Businesses and Households on Inflation", Official Report, 11 January 2022, Vol 95, Issue 45, Oral Answers to Questions section.] [Please refer to "Emergence of Second-round Effect of Inflation and Main Drivers Contributing to Wage and Services Inflation Outlook in 2022", Official Report, 11 January 2022, Vol 95, Issue 45, Written Answers to Questions section.] [Please refer to "Assessment of Second-round Inflation Effects in 2022 and Additional Fiscal Policy Related Measures to Offset Impact of Non-demand Driven Inflation Effects", Official Report, 11 January 2022, Vol 95, Issue 45, Written Answers to Questions section.]”
“The Government last made changes to the Seller’s Stamp Duty, or SSD, in 2017, when the holding period for which SSD applies was reduced from four years to three years. Last month, the Government announced a package of measures to cool the private residential and HDB resale markets. As the situation on short-term holding has remained stable, we decided not to make any changes to the SSD regime then. We will continue to monitor closely the residential property market, and consider the appropriate adjustments needed to promote a stable and sustainable property market.”
“This has been addressed in MTI and MOF's combined oral reply to Question Nos 4 to 7 on the Order Paper for 11 January 2022. [Please refer to "Measures to Help Singaporeans Cope with Rising Inflation and Impact of Government's Fiscal Support for Businesses and Households on Inflation", Official Report, 11 January 2022, Vol 95, Issue 45, Oral Answers to Questions section.]”
“We are unable to provide such a long time series of data. But over the last five years from 2017 to 2021, Singapore Citizens (SC) contributed about 78% of Buyer’s Stamp Duty (BSD) and about 71% of Additional Buyer’s Stamp Duty (ABSD); Permanent Residents (PR) contributed about 1% of BSD and about 3% of ABSD; foreigners contributed about 2% of BSD and about 17% of ABSD; and entities (including housing developers) contributed about 18% of BSD and about 10% of ABSD. [These numbers have been updated. Please refer to "Annual Breakdown Amounts of Additional Buyer's Stamp Duty Collected from Singaporeans Buying Second, Third and Subsequent Residential Properties Respectively over Last Five Years", Official Reports, 14 February 2022, Vol 95, Issue No 45, Written Answers for Questions section.] For purchases where the parties are of mixed citizenship statuses (for example, SC and PR joint purchasers), the transfer is categorised under the profile with the highest ABSD rate (that is, SC-PR joint purchasers are categorised under PR).”
“Mr Chua had asked a similar question at the Committee of Supply in March 2021. MOF had provided a response then and it remains valid. Just to briefly recap, a concession is provided to Singapore married couples to allow them to claim a refund of the Additional Buyer’s Stamp Duty (ABSD) paid on their second property, provided they sell their first property within six months after the purchase of a completed property, or the Temporary Occupation Permit date of an uncompleted property. This is to support couples that need to change homes due to changing family needs, such as when they have children, when their children are growing up, or when they need to right-size in their senior years. Singaporean married couples purchasing a HDB flat or a new EC unit are granted an upfront ABSD remission. The key reason for this is because they are subjected to HDB regulations which require them to not own other residential property, or to dispose of their existing residential property within HDB’s stipulated timeframe. As there are no such regulations for private residential properties, ABSD remission is only granted upon the sale of the first property within the required timeline.”
“Mr Speaker, I am happy to have other independent views because somehow Mr Leong does not believe me. I do not know how I can convince him otherwise that he is, indeed, mistaken. But he would have heard Prof Hoon explaining the mechanism quite clearly. There is no creation of new money in this process. MAS is using its excess OFR to subscribe to RMGS. It is not printing new monies. It is very clear. I have said it repeatedly: the safeguards are in legislation. I do not know how else I can persuade Mr Leong otherwise and if he prefers for a third party to express views, so be it. I am happy to have other voices share their opinions as well.”
“Mr Speaker, I do not intend to engage in a very technical discourse here. I will just repeat my point. In both instances, MAS uses its excess foreign reserves, excess OFR. Like I said, in the first instance, it is done through a transfer of excess OFR and corresponding reduction in Government deposits; but in the second instance, we are proposing for MAS to use its excess OFR to subscribe to the RMGS. There is no creation of new money in this process.”
“In the first instance, through a transfer of Government deposits; in the second instance, through RMGS, which we are proposing. The mechanism may be new, but the transfer of excess OFR is not new at all. It is something that we have been doing since 1981. And in that sense, is not a departure from our underlying philosophy and principles of reserve management.”
“Mr Speaker, I think Mr Leong is mistaken. The excess OFR that MAS accumulates or the OFR that is accumulated by MAS is primarily the result of MAS' intervention operations, particularly to manage the appreciation pressures on the Singapore dollar because of capital inflows. And when this happens, it accumulates foreign exchange. Under present circumstances, without RMGS, MAS will transfer its excess OFR to the Government and there will be a corresponding reduction in Government deposits. That is today's mechanism. The excess OFR is MAS' excess OFR. But because the pace in which the Government deposits is accumulating has been quite slow because we are running smaller fiscal surpluses, they will not be able to do the corresponding reduction in Government deposits and that is why this new mechanism allows MAS to use its excess OFR to subscribe to RMGS. In either case, it is MAS initiating the action. It is not Government initiating the action. It is MAS that initiates this action, this transfer of excess OFR. And in both cases, it is the excess OFR that MAS has accumulated through its intervention operations, that is transferred to the Government. In the first case, through a deposit transfer; in the second case through an RMGS instrument. But in both cases, it is a transfer of excess OFR to the Government, which will then be put to GIC for investment management over the long term. That is why I said this process of transfer is not new. If you read the book that GIC recently published, you will see Dr Goh referring to monetary reserves and non-monetary reserves. Non-monetary reserves are the excess OFR that we are talking about which MAS has and then it transfers to the Government.”
“In fact, as I mentioned just now there were some calls from Assoc Prof Lim and Mr Louis Ng to say no limit is needed at all, because they understood the reasons why we are making this transfer, they know that it is sensible and they also appreciate that there are already sufficient safeguards in legislation that would not allow MAS or the Government to engage in monetary financing. So, from that point of view, you might not even need a limit, but we talked through this and felt that it would be prudent to do so to provide an additional layer of check and that is why we have that figure in the Bill.”
“Mr Speaker, on the first question, MOF will put out all relevant information pertaining to the Budget and to the Government's financial position. I think it is for the media to decide what they want to report. And it is for analysts to also dive deeper into the statistics and to see if they want to produce analytical pieces around them. But where the Government is concerned, we already put out a lot of information, as I mentioned, every year during the Budget, after the Budget. And we will continue to review what additional information we might put out that will be useful. On the second point, we have set the limit, as I mentioned earlier, for the issuance of RMGS on two counts, looking at the amount that would have to be transferred over a period of time to get the present OFR to the optimal level and also, bearing in mind that there will be future accumulation in future years. No one can predict what rate this future accumulation will be, it will depend on so many conditions, for example, conditions in the financial markets. So, it can go either way because you may have appreciating pressures, you may have depreciating pressures, and MAS will have to intervene accordingly in order to maintain price stability. But we have put in our best estimates and we think that $580 billion is a sensible figure for the next few years. Should that threshold be reached, then, as I mentioned, we will come back to Parliament to explain why we might need more, why we might have to raise the limit and it is for the Government to justify the case and for Parliament and President to approve. And so, this provides that additional check.”
“I would like to assure Members of the House that with the introduction of RMGS, MAS will continue to have access to sufficient OFR to meet its needs and that the Government's approach to borrowing has not changed and will remain prudent and disciplined. With this, I beg to move, Sir.”
“On transparency, a point that Mr Leong Mun Wai mentioned, in fact, a lot of information has already been put out in the public domain about how we manage reserves, about the different entities that look after our reserves – Temasek, GIC, MAS – their investment approaches. A lot of information is out there for serious analysts to understand how reserve management is done in Singapore and we will review and continue to see how we can put out more useful information to inform the public. But we do maintain the view that it is not in Singapore's interest to put out the full information on how much reserves we have. The reserves are ultimately a strategic asset against a whole range of emergency contingency scenarios. We can never predict what these scenarios will be. It is not just about an economic or financial crisis. It could be a natural calamity. It could be a pandemic, as we have experienced. It could be war. It could be actions taken by a hostile external actor. A whole range of contingency scenarios and emergencies for which we will not know how much resources we need to respond. So, we believe that it is still in our national interest to maintain this strategic asset, not to have to disclose everything fully, but to have some discretion on our part and to be able to use these resources decisively and effectively when such an emergency arises. In summary, Sir, this Bill creates a more sustainable mechanism to facilitate MAS' transfer of OFR above what it requires to the Government for longer-term management by GIC. As I have repeatedly highlighted, safeguards will be put in place to circumscribe tightly the issuance and subscription of RMGS by the Government and MAS respectively, so that RMGS is used only for its intended purpose.”
“Under the Net Investment Returns Framework, or NIR Framework, changes in the net asset base are smoothed over time. Any longer-term returns would also take time to materialise. Our medium- to long-term fiscal projections have already built in this practice of continuous transfers to get back to the optimal range and have accounted for the higher expected return from OFR being invested by GIC. That said, it is also possible that we will face a structurally lower rate of return on our investments over the long term. This is due to the significant headwinds in the external environment, including elevated debt, moderation in growth, ageing populations and low productivity in many countries. We have explained this in this House on several occasions and it is consistent with reports by well managed long-term global funds. Furthermore, investments come with risk and there will be volatility from time to time. There is no guarantee that NIRC will always be increasing every year. At the same time, on the spending side, on the expenditure side, we do expect expenditures to go up. Just as a comparison from 2006 to 2010, our spending was about 15% of GDP. That is 2006 to 2010. A decade later, from 2016 to 2020, we are looking at 18% of GDP; 3% of GDP increase, which is about $15 billion. And we do expect that to increase further in the coming years. So, we will have to continue to rely on both NIRC and other revenue measures to meet our growing fiscal needs. Having diverse sources of revenues will also give us the confidence to plan ahead for the long-term growth of Singapore. And I will elaborate on these issues in the coming Budget. This is not the occasion to talk about fiscal projections. I just wanted to give an explanation in response to the questions that were raised.”
“Because I had set out very clearly in my opening speech that there are all these various safeguards and provisions which ensure that there is no room for monetary financing with this new RMGS mechanism. This is not a major departure at all. This is simply a new mechanism to facilitate the transfer of excess OFR from MAS to the Government for long-term investments by GIC. Such transfers have been happening since 1981 when GIC was formed and continue till today except with a new mechanism called "RMGS". I thank Prof Hoon for explaining this very clearly and I would urge Mr Leong to listen to Prof Hoon's explanations of why our OFR had increased in recent years due to MAS' intervention operations to dampen appreciation pressures on the Singapore dollar and why this is not at all monetary financing in the way he had imagined. We do not intend to do any form of monetary financing and there are safeguards in the Bill to ensure this does not take place. So, the hypothetical scenarios that Mr Leong had set out in his speech about hyperinflation, monetary financing, these will not arise. Finally, let me talk about what all this means also for fiscal policy because there were various questions about this, including what Mr Liang Eng Hwa asked on whether the returns from the transferred OFR would contribute to Net Investment Returns Contribution (NIRC). The transfers of OFR not needed by MAS to the Government, as enabled by RMGS, should have a slight positive impact on the NIRC over the long term. This is to be expected because GIC has a higher return-seeking portfolio than MAS. Having said that, this increase is not expected to be significant, at least in the short term.”
“The existing arrangement between MAS and the Government already ensures that foreign reserves held by the Government are available to support MAS’ operations if the need arises. The Government has in place processes to withdraw assets from GIC for various needs. Therefore, liquidity needs pertaining to RMGS are already catered for. Even in the unlikely case where the redemption exceeds what had been catered for, the Government can still repay MAS with assets which qualify as OFR. So, there is no need for GIC to liquidate assets prematurely just to raise cash to repay MAS, in the event of early redemption. Next, there was a question by Assoc Prof Lim on whether or not MAS deliberately keeps the exchange rate low for competitiveness reasons. Let me state quite categorically, MAS does not do that. MAS' aim is price stability over the medium term. We are quite clear that keeping the Singapore dollar artificially weak is unsustainable and not in Singapore's interest. The real exchange rate, not the nominal but the real exchange rate, is the outcome of price adjustments in Singapore's economy relative to that in other partner economies. So long as monetary policy here is set pre-emptively with the objective of medium-term price stability, then the real exchange rate will in time be in line and appropriate to economic fundamentals. And we fully intend for that to be the case. Mr Leong Mun Wai, besides some of the points which I had addressed, set out quite a number of points which I found quite puzzling. It is almost as though he had not read the full text of the Bill or listened to what I had said earlier.”
“As I explained earlier, the terms for issuance of RMGS, including its conditions as to repayment and redemption, will need to be mutually agreed between MAS and the Government. Operationally, MAS and the Government will set the conditions to give MAS the right to redeem RMGS at par before maturity, meaning it can exercise this right at its discretion. The Government may choose to redeem RMGS before maturity if it has excess Singapore dollar liquidity. Allowing the Government to do so does not compromise MAS. MAS will not be worse off because the amount of OFR held remains unchanged. Several Members asked how RMGS will affect GIC’s investment and liquidity management, including the implications if RMGS is redeemed before maturity at par to meet MAS’ OFR needs and how the foreign reserves managed by GIC could be made available to MAS in such a scenario. I would like to assure Members that the introduction of RMGS and its early redemption provision will have minimal impact on how GIC invests and manages its liquidity. The introduction of RMGS facilitates the transfer of OFR not needed by MAS to the Government for longer-term investment by GIC. As I said, the mechanism may be new but the transfers of such OFR is not new. In short, how GIC will invest the transferred OFR is not expected to deviate from existing practice because such transfers have been happening since the formation of GIC. GIC manages the transferred OFR and other Government assets in accordance with its mandate given by the Government. As a long-term investor, GIC will look at long-term opportunities including sustainability opportunities and green investment opportunities, which several Members talked about.”
“To date, there has not been a crisis where MAS' OFR has fallen below this threshold. So, MAS’ OFR will only need to be topped up in a highly unlikely crisis of unprecedented scale, or what we call a "tail-risk event". Should such a situation arise, MAS will have the right to redeem the RMGS before maturity at par – meaning at full face value of the RMGS regardless of market conditions – to meet its OFR needs. When MAS redeems the RMGS, the Government will transfer an equivalent amount of foreign assets to MAS, supplementing the OFR on MAS’ balance sheet. With the Government standing fully behind all the RMGS, we do not envisage that MAS will need to transfer its RMGS holdings to other entities to raise funds from the market. That is why clause 15B(2)(a) of the Bill, which Mr Saktiandi referred to, prohibits MAS’ transfers of RMGS holdings to other entities without consent from the Minister for Finance. This upholds the intent of the RMGS by restricting MAS’ transfers of RMGS holdings to other entities to very exceptional and extreme situations, as determined by the Minister. To be clear, even if such a transfer were to take place, the effectiveness of the proposed legislative safeguards including those to prevent monetary financing, would not be diminished, irrespective of the entities owning the RMGS. I think there was also a question whether a future government can introduce conditions that compromise MAS’ ability to redeem RMGS and why the Bill does not provide for MAS with the sole discretion on redeeming the RMGS prematurely and why allow the Government to do so. I think Mr Louis Ng asked this. The Government will not be able to compromise MAS’ ability to redeem RMGS.”
“On the other hand, Mr Leong Mun Wai suggested to tighten and have an annual limit. As I explained in my earlier speech, the $580 billion limit is sized based on two factors: one, the amount of OFR that MAS currently needs to transfer to the Government to bring the level of OFR in MAS back to its optimal amount; and two, the expected pace of OFR accumulation in future years. We have set this limit so that the Government can administer and monitor the size of the RMGS issuance. Having such a limit will provide transparency to Parliament, which serves as an additional layer of check. Yes, indeed, we could have done away with it completely but we thought that it would be prudent and will provide an additional layer of check for the Government to come back to Parliament to raise the limit should the need arise. Any such further increase to this limit will have to be justified by the Government and approved by Parliament and President. Mr Saktiandi also asked about the maturity period for RMGS issuances. The purpose of issuing RMGS is to facilitate the transfer of OFR for longer-term investment. As such, all RMGS will be issued by the Government with a 20-year tenor, which is aligned with GIC's long-term investment horizon. Mr Saktiandi noted that there may be periods where the OFR falls below the optimal range and may need to be topped up. He asked how RMGS could be liquidated to meet MAS’ needs and whether there may be circumstances under which MAS might transfer its RMGS holdings to other entities, with the consent of the Minister for Finance. The answer to this is that the optimal amount of OFR which is, as I said, sized at 65% to 75% of GDP, is not an insignificant amount and is expected to meet MAS' needs comfortably under most circumstances.”
“Mr Saktiandi also asked if the accumulation of RMGS on MAS' balance sheet over time will affect the level of liquidity in the banking system and consequently, MAS' monetary operations. Basically, MAS' accumulation of RMGS on its balance sheet will not impact Sing dollar liquidity and by extension, MAS' sterilisation activities. This is because MAS uses only foreign assets to subscribe for RMGS and does not create or use Sing dollar in the process. On the frequency of published data, MAS will publish its RMGS holdings on a monthly basis. This is aligned with the frequency for the publication of OFR data, which is in line with international standards. I would like to assure Mr Saktiandi that the publication of RMGS data does not undermine the effectiveness of MAS' foreign exchange intervention operations. Changes in the OFR are influenced by other factors besides intervention operations and transfers to the Government. These include changes in the stock of Foreign Exchange swaps as part of MAS’ money market operations to manage liquidity in the banking system, investment gains or losses on the OFR and currency translation effects on the OFR. In addition, data on Singapore's foreign exchange intervention operations is already separately disclosed. MAS publishes its net purchases of foreign exchange from intervention operations on a six-month aggregated basis, with a three-month lag from the end of the period. So, this addresses questions relating to risks to the MAS. The third set of questions is on the characteristics of RMGS, such as its maturity and early redemption features. Mr Louis Ng and Assoc Prof Jamus Lim queried about the basis and purpose of the $580 billion issuance limit. In fact, they thought that there might not be a need for such a limit.”
“Mr Derrick Goh asked how MAS' autonomy can be ensured when subscribing for RMGS. Let me state very clearly. MAS has always been operating independently within the Government. MAS' principal objective of maintaining price stability is stipulated in the MAS Act. Under the law, MAS' Board of Directors is responsible for the policy and general administration of MAS' affairs and business, and in upholding the MAS Act, ensures that MAS conducts monetary policy to meet its price stability mandate. With the introduction of RMGS, MAS continues to retain autonomy over monetary policy because it is MAS, not the Government, that initiates the subscription of RMGS. Furthermore, MAS can only subscribe for RMGS to facilitate the transfer of OFR beyond what it requires to conduct monetary policy and ensure financial stability. MAS would also have the right to redeem RMGS before maturity at par, to meet its OFR needs and carry out its mandate. So, these safeguards are all set out very clearly in the Act. Mr Saktiandi asked about foreign exchange risks. RMGS transactions are between entities within the Government. At the whole-of-Government level, there is no change in our total foreign reserves and no additional exposure to foreign exchange risk. For MAS, its subscription for RMGS will result in a change in assets from OFR denominated in foreign currency to RMGS denominated in Sing dollar. This reduces the exchange rate risk for MAS by lowering its foreign exchange exposure. Correspondingly, the exposure to currency fluctuations, along with the returns on investments, are in turn borne by the Government, inherently as part of its larger portfolio of investment placed with GIC.”
“The point about transferring excess OFR to GIC for long-term management is not new at all. It is the very reason why GIC was set up in 1981. So, when Mr Leong Mun Wai talked about a departure from the principles that Dr Goh Keng Swee had set up – there is no departure. This is completely in line and consistent with the founding principles upon which we do reserves management. There is also the question on the framework under which MAS manages the OFR. MAS manages the OFR with the primary objectives of maintaining confidence in Singapore's exchange rate-based monetary policy framework and securing macroeconomic and financial stability. The key elements underpinning this OFR management framework are robust risk management, including an appropriate liquidity profile and a well-diversified asset allocation across geographies, asset classes and currencies. These elements serve to produce a resilient portfolio and safeguard the OFR's availability to support MAS' conduct of monetary policy. Subject to these elements, MAS seeks to achieve good long-term returns on its OFR and that would include taking steps to manage longer-term risk like the impact of climate change. In that regard, MAS would look at a range of instruments including green instruments which Mr Don Wee had mentioned. Both the risk management approach and asset allocation are approved by the MAS Board and reviewed regularly. Mr Don Wee also asked if MAS values the OFR at cost or market price. MAS publishes OFR data on a monthly basis and the published OFR is valued at cost. This reflects our conservative accounting approach as a central bank. The next set of questions pertains to risks that RMGS may pose to MAS' operations and balance sheet.”
“Mr Speaker, Sir, I thank the Members of the House who have shared their views on the Bill and who have supported it. Members' comments and queries can be categorised into a bucket of different issues and I will address them in turn. First, on MAS' management of the OFR. Mr Liang Eng Hwa, Mr Louis Ng, Mr Saktiandi Supaat and Mr Don Wee have all asked questions about how the optimal amount of OFR is determined and how MAS reviews this. MAS regularly reviews and updates the optimal amount of OFR for its needs. In its reviews, MAS uses a range of internationally used reserves adequacy measures within a general cost-benefit framework to assess the required amount of OFR. From a benefits perspective, the OFR provides MAS with the means to protect the functioning and stability of the economy against shocks. So, MAS takes reference from historical episodes of such significant domestic and international disruptions to compute the OFR that is necessary to safeguard stability and confidence. From the cost perspective, MAS recognises the opportunity cost of holding reserves in liquid financial instruments on its balance sheet in terms of the higher returns forgone, if these assets had not been invested in longer-term assets by GIC. As Singapore's economic and financial linkages with global markets continue to expand and deepen, the OFR required should broadly keep in line with GDP and complement the structural factors underpinning Singapore's macroeconomic and financial soundness. Based on these considerations, MAS has, therefore, assessed that the OFR of 65% to 75% of GDP is adequate to meet its needs and OFR above this amount will then be transferred to the Government to be managed separately. As we have repeatedly said, this is not a new idea.”
“In conclusion, Sir, this Bill will allow MAS to subscribe for RMGS issued by the Government for the sole purpose of facilitating continued transfers of MAS' OFR to the Government for longer-term investment by GIC. RMGS will enable such transfers to be sustained over the longer term. While the Government will take on more debt as a result of RMGS, borrowing is not revenue and the introduction of RMGS does not increase what the Government can spend. The Government's approach towards borrowing remains unchanged – the Government's borrowings is for non-spending purposes with the exception of the recently introduced SINGA to finance spending on nationally significant infrastructure. This Bill will also put in place safeguards to ensure that RMGS will not and cannot be used for Government spending, and that MAS will continue to have ready access to the transferred OFR to support MAS’ ability to fulfil its mandate as necessary. Further, the nominal increase in Government debt through RMGS will be matched by an increase in assets, with no change in the Government’s net asset position. The Government continues to have a strong balance sheet with no net debt. RMGS does not change this, as all RMGS issuances are only used to facilitate transfers of assets for longer-term investments. Mr Speaker, Sir, I beg to move. [(proc text) Question proposed. (proc text)]”
“A second set of safeguards will preserve MAS' access to sufficient OFR to fulfil its mandate of conducting monetary policy and ensuring financial stability. The Bill sets out in the MAS Act that any subscription for RMGS can only be made for the purposes of transfer of OFR in excess of the amount MAS considers necessary for the conduct of monetary policy. MAS alone determines the amount of OFR required to meet its mandate and consequently, the amount of OFR which can be transferred to the Government. The Government plays no role in this decision. Consequently, MAS also determines the amount and timing of its RMGS subscriptions to effect transfers of OFR, and the Government cannot independently effect a transfer of OFR from MAS. The Bill also sets out in the GSA that RMGS will be issued subject to such conditions as to repayment and redemption as may be agreed between MAS and the Government. These conditions will safeguard MAS' access to sufficient OFR to implement monetary policy and support financial stability. For example, MAS will have the right to redeem RMGS before maturity at par, to meet its OFR needs in support of the conduct of monetary policy and financial stability. We expect that the optimal amount of OFR held by MAS will comfortably meet its needs under most circumstances. Hence, MAS' redemption of RMGS before maturity will likely be needed to supplement OFR only in a tail risk event. When MAS redeems RMGS at or before maturity, MAS will be repaid in foreign assets. These conditions will ensure that the RMGS on MAS' balance sheet can readily support MAS' ability to fulfil its mandate if necessary.”
“Second, the Bill will require MAS to use only foreign assets to subscribe for RMGS; and correspondingly, the Government to accept only foreign assets in exchange, to be accounted for in the Government Securities Fund. This draws a clear and direct link between MAS’ RMGS subscription and the transfer of MAS’ OFR to the Government and eliminates the possibility that MAS as a central bank creates Singapore dollars to finance Government spending. The Bill will introduce within the GSA a separate net issuance limit for RMGS, which will be S$580 billion. Of this amount, about S$185 billion represents the amount which MAS will have to transfer to the Government in phases to bring the level of OFR back to the optimal range. The bulk of the remainder is estimated based on the expected pace of OFR accumulation in future years. The separate net issuance limit differentiates RMGS from other types of Government borrowings. Transfer amounts and hence RMGS issuance depends on the accumulation of OFR which is driven mainly by MAS' conduct of monetary policy. This, in turn, is affected by financial market factors that can be uncertain. Having a separate limit for RMGS will ensure that the planned issuances of other Government securities and Treasury Bills are not affected should the issuance of RMGS be higher than projected. Conversely, it will also avoid creating additional unintended borrowing space for other Government securities and Treasury Bills, should RMGS issuance be lower than expected. For transparency, MAS will publish the outstanding RMGS amounts each month. The Government Financial Statements will also state the total gross issuance and total gross redemption of RMGS, in addition to the outstanding RMGS amount. So, that is the first set of safeguards.”
“The amendments will allow MAS to subscribe for RMGS issued by the Government under the Government Securities Act (GSA), as consideration for OFR that is transferred to the Government for longer-term investment management by GIC. In introducing this Bill, MAS and the Government have sought to ensure that MAS' ability to fulfil its mandate is not affected. Two sets of safeguards have therefore been proposed in both the MAS Act and the GSA to tightly circumscribe the conditions for MAS’ subscription of RMGS and the Government’s issuance of RMGS. I will provide further details about each set of safeguards. The first set of safeguards seeks to robustly address potential misperceptions of monetary financing, in other words, MAS financing the Government's spending. Currently, MAS is already prohibited under the MAS Act from lending to the Government or subscribing for Government securities, apart from limited exceptions, such as to conduct monetary policy or to develop the bond market in Singapore. Similarly, there are existing safeguards under the GSA today, where the Government’s proceeds from borrowing are accounted for in the Government Securities Fund and can only be used for investments. Thus, borrowings by the Government in the form of RMGS, will not increase the amount available for spending by the Government. The Bill will add safeguards in the MAS Act and the GSA to avoid any misperception that RMGS will constitute monetary financing of Government spending. First, the Bill will empower MAS to subscribe for RMGS for the sole purpose of facilitating the transfer of OFR to the Government and MAS can do so only if the subscription does not compromise its objective of ensuring medium-term price stability.”
“The transfer of OFR from MAS to the Government for management by GIC has therefore been a long-standing practice. For example, in 2019, MAS announced a transfer to the Government of S$45 billion of OFR after reviewing the optimal amount of OFR needed. To date, transfers of MAS' OFR to the Government have been facilitated through a corresponding reduction in the Government's Singapore dollar cash deposits with MAS. In other words, there is a reduction of assets on MAS' balance sheet, which is matched by a reduction of liabilities. However, this transfer mechanism is increasingly facing constraints. This is mainly because MAS' accumulation of OFR has in recent years persistently outpaced the growth of Government's deposits with MAS, which are not growing as quickly due to smaller fiscal balances. For example, if we want to bring the current level of OFR to the upper end of the optimal range, or 75% of GDP, about S$185 billion of OFR will have to be eventually transferred to the Government. This is far in excess of the Government’s current deposits with MAS. So, we need a new instrument to effect the transfer of assets from MAS to the Government for long-term investment management. To be clear, this transfer of assets does not increase the total size of the Government’s reserves. It is about shifting assets from MAS to the Government as part of long-term investment management by the GIC. The Bill sets out legislative amendments that will introduce powers in the MAS Act for MAS to subscribe for a new type of non-marketable security issued by the Government solely to facilitate such transfers of OFR that is not needed for MAS' mandate. This new security is called Reserves Management Government Securities (RMGS).”
“Singapore's excess of domestic savings over investments and persistent capital inflows – in part, reflecting Singapore's triple-A credit rating and the abundant liquidity in global financial markets – have meant strong appreciating pressures on the Singapore dollar. If left unchecked, the S$NEER will strengthen much more than necessary to keep inflation low and stable. As MAS intervened in the foreign exchange market to dampen appreciation pressures on the S$NEER, it has been steadily accumulating OFR beyond that which it estimates is required to fulfil its monetary policy and financial stability mandate. The optimal amount of OFR that MAS estimates it needs is currently around 65% to 75% of GDP. There is no strict formula to determine this range, but it takes reference from a range of internationally used measures of reserve adequacy that recognise the foreign currency needs of our small open economy that is heavily dependent on trade and financial transactions with the rest of the world. MAS has assessed that this amount of OFR should be able to provide a sufficient buffer against severe crises in the global economy and financial markets. Today, the stock of OFR has grown to S$566 billion, or about 111% of GDP as at the third quarter of 2021. It is significantly above the range which I just mentioned. It would be inefficient for MAS to hold on to OFR beyond its needs, because returns on the OFR will be limited by MAS' relatively safer and more liquid investment posture as a central bank. Indeed, it is for this reason that GIC was set up in 1981 to invest OFR that was not needed by MAS in longer-term, high-yielding assets rather than in liquid but low-yielding assets.”
“Mr Speaker, I am taking this Bill on behalf of the Senior Minister and Minister-in-charge of the Monetary Authority of Singapore (MAS) and I beg to move, "That the Bill be now read a Second time." As Singapore’s central bank, MAS conducts monetary policy to maintain medium-term price stability which is necessary for sustained growth of the economy. MAS conducts monetary policy by managing the nominal effective exchange rate of the Singapore dollar, the S$NEER, within a policy band. When global financial or economic conditions cause the S$NEER to be subject to significant strengthening or weakening pressures that are inconsistent with domestic price stability, MAS may intervene in the foreign exchange market to sell or buy Singapore dollars, to keep the S$NEER within the policy band. The Official Foreign Reserves (OFR) plays an important role in the MAS’ conduct of monetary policy and support of financial stability. It gives confidence in Singapore's exchange rate-centred monetary policy framework, particularly during periods of speculative pressure or financial crises, when MAS will need to use its OFR to purchase Singapore dollar to defend the exchange rate. Conversely, in periods of appreciation pressures on the Singapore dollar, MAS can also sell Singapore dollar in exchange for foreign currency to keep the S$NEER within the policy band. When this happens, MAS accumulates foreign assets and its OFR grows. MAS invests the OFR mainly in safe and liquid assets, so as to ensure that the OFR is available at short notice when needed – for example, to fend off a speculative attack on the Singapore dollar which could potentially undermine confidence in the Singapore economy.”
“The Government’s overarching priority is to enable our people and businesses to grow and thrive, and our policies are designed to benefit Singapore and Singaporeans. This is reflected in our spending, including the various transfers and expenditures from endowment and trust funds. For example, the Government provides transfers, such as service and conservancy charges (S&CC) rebates for Singaporean households to support families in managing their household expenses, and the Workfare Income Supplement to uplift lower-wage Singaporeans. Another example is the Edusave Grant that is provided to every school to enhance the quality of teaching and learning, whose benefits are enjoyed by the entire school community, the vast majority of whom are Singaporeans. In some instances, in order to benefit Singaporeans, we may have to disburse the funds to Singapore-registered foreign companies. In the case of the Jobs Support Scheme, for example, payouts were made to employers in FY2020, including foreign-owned companies located in Singapore, to encourage retention of local workers amid economic uncertainty from the COVID-19 pandemic. As we do not track the beneficiaries of all our schemes, we do not have the detailed breakdown requested.”
“The requested information spans three decades and we are unable to provide such a long time series of data. But for the Year of Assessment (YA) 2021, Singapore Citizens accounted for about 61% of total assessable income (AI) and contributed about 51% of total Personal Income Tax (PIT). Permanent Residents accounted for about 15% of total AI and contributed about 17% of total PIT. Foreigners accounted for about 24% of AI and contributed about 32% of PIT.”
“Our agencies have been consulting the public on the carbon tax review over the past six months, as part of engagements under the Singapore Green Plan 2030. The conversations have touched on the need for a higher carbon tax and the trade-offs involved in our green transition. In the lead-up to Budget 2022, the public can also provide their feedback through platforms, such as REACH and the People’s Association (PA). The Government is engaging businesses on the potential impact of a higher carbon tax and how we can support them in the shift towards lower-carbon operations and the pursuit of green growth opportunities. We are also speaking to other stakeholders, such as environment groups, on the green transition. Feedback received from these consultations will be taken into consideration in the carbon tax review. The Government will announce the revised post-2023 carbon tax level at Budget 2022.”
“Mr Derrick Goh asked about mitigating the impact of higher expected borrowing costs on households and businesses. Mortgages form the bulk of most households’ liabilities. Measures put in place before the recent rise in inflation had ensured that household balance sheets were in a relatively healthy position. Credit measures, including the total debt servicing ratio, or TDSR, which was tightened recently, ensure that households borrow prudently and can continue to service their mortgages over the medium term. For businesses, the Temporary Bridging Loan Programme (TBLP) and MAS’ Singapore Dollar (SGD) Facility for Enterprise Singapore loans will be available till March 2022. This combination of support measures has helped eligible SMEs to borrow at lower interest costs than even pre-pandemic levels. TBLP loans are offered at fixed interest rates, capped at 5% per annum. The Government will monitor the situation closely to ensure businesses continue to have access to credit.”
“Mr Deputy Speaker, in response to the query from Ms Denise Phua on online gambling, indeed, the trend is moving more towards online gambling. However, our concern is not about the regulated space but over the illegal space. And if technology continues to make it easier for people to gamble anywhere and everywhere, then such illegal online gambling may continue to grow. I think Mr Louis Chua also highlighted this in his speech. I think a fuller exposition on all the safeguards that the relevant authorities have put into this is probably worth a separate airing, not related to this Bill, because this comes under various agencies, including MHA. But I would assure the Member that the Government pays close attention to this and we continue to keep a close watch to monitor the issue of problem gambling, including problem gambling online. [(proc text) Question put, and agreed to. (proc text)] [(proc text) Bill accordingly read a Second time and committed to a Committee of the whole House. (proc text)] [(proc text) The House immediately resolved itself into a Committee on the Bill. – [Mr Lawrence Wong]. (proc text)] [(proc text) Bill considered in Committee; reported without amendment; read a Third time and passed. (proc text)]”
“We have, on multiple occasions, articulated our approach towards problem gambling and this position remains unchanged. Mr Louis Chua also asked about resources to address this and I would like to assure him that the Government will ensure that sufficient resources are set aside to deal with problem gambling. Mr Deputy Speaker, I believe I have addressed Members' concerns and questions and I beg to move.”
“I turn now to Mr Yip Hon Weng and Mr Gan Thiam Poh's questions on the revenue collection associated with the changes in this Bill. On the casino tax, Mr Gan Thiam Poh asked about the gaming revenue from local and foreign visitors for premium and mass gaming. We do not collect data on the proportion of casino tax from local and foreign visitors. This is because casino tax does not differentiate between whether the individual concerned is a local or a foreigner. I am unable, unfortunately, to share the details of casino tax collections. As there are only two casinos in Singapore, the Government is unable to disclose the amount of casino tax revenue or the breakdown between premium and mass gaming. Casino tax revenue is included under a broader classification of betting taxes which also includes taxes from lotteries, horse and sports betting and fruit machines. The total revenue from all betting taxes was $2.6 billion in FY2019 and $1.8 billion in FY2020. The numbers are still being finalised for FY2021 but we do not expect them to recover to pre-COVID-19 levels in the short term. As for Mr Gan Thiam Poh's question on the projected increase in revenue with the expansion and increase in economic contribution, I believe this has been covered by Minister of State Alvin Tan when he talked about the expected economic benefits of IRs in his speech. The increase in tax revenue would depend on how well the IRs do after their additional investments. Finally, in response to Mr Louis Ng's query, this Bill consolidates the existing laws on the levy and collection of taxes on lawful betting and lotteries but it does not impact what Singapore's public policy position on gambling is.”
“Mr Louis Ng asked about the remission of gambling duties. This pertains to clause 12(1) of the Bill which provides for remission when the gambling duties are incompatible with the purposes of the Act. This Ministerial power to remit taxes is a provision that is present in other existing tax Acts like the GST Act, the Income Tax Act, the Property Tax Act and the Stamp Duties Act. So, it is a generic provision that we have in our tax Acts. While it is unlikely that such remission power will be invoked for gambling duties, we have, nevertheless, provided for this remission power for gambling duties in the remote event that such an unforeseen situation should arise. Now, let me touch on the broader impact of the Bill. Mr Yip Hon Weng asked whether small-scale vendors and franchisees, especially those who sell Big Sweep and lottery tickets in the heartlands, will be affected. The changes only affect the betting operator or the private lottery promoter, rather than retailers. For the individual retailers, the amendments do not require any additional action on their part and, because there is no change in the rates of duty, the amendments will also not impact their earnings. Mr Louis Chua asked if the Government would consider a raising of betting taxes, particularly with regard to sweepstakes and private lotteries. These are not being contemplated as part of this Bill. There is no change that we are proposing for now, but we will continue to review the betting tax regime, as we do for other taxes on a regular basis. Our objective is to ensure that betting taxes are high enough to manage gambling demand and, at the same time, that operators and promoters can compete effectively against illegal gambling operators.”
“He also asked what softer measures are available for an indebted individual to meet his tax obligations. The taxpayers for the three types of betting taxes – casino tax, private lotteries duty and betting and sweepstake duties – are business providers of gaming and, generally, not individuals acting in their individual capacity. So far, these taxpayers have been compliant. If the need arises to recover unpaid betting taxes, the tools available for IRAS include suing the taxpayer or appointing someone who holds money for the taxpayer, such as a bank, to pay the sum to the Commissioner. If an individual is indebted, IRAS will explore a payment arrangement with the indebted individual to meet his or her debts. As to Mr Yip Hon Weng's suggestion to require an appellant to pay costs to prevent frivolous applications for assessment, reassessment of liability and appeals, such frivolous applications are not an issue, currently, for betting taxes. So, we do not charge taxpayers who apply to IRAS for revising their tax assessments. Mr Yip Hon Weng asked how we protect taxpayer data. Clause 43 of the Bill ensures that all taxpayer data collected by IRAS for the gambling duties will be regarded as secret and confidential. A corresponding provision already exists in most other tax Acts. It is an offence to share confidential information except in certain specified circumstances. Authorised persons who are granted access to taxpayer data are required to make and subscribe to a declaration of secrecy. Even without a specific confidentiality provision, taxpayer income information is protected by the common law duty of confidentiality, the Official Secrets Act and the data protection regime under the Public Sector (Governance) Act.”
“Mr Deputy Speaker, I thank Members Mr Gan Thiam Poh, Mr Yip Hon Weng, Mr Louis Chua and Mr Louis Ng for their support for the Bill. Let me address their comments and queries in turn. Mr Yip Hon Weng asked whether the Bill will create significant additional resourcing needs for IRAS. It will not. First, the Bill consolidates and streamlines laws that are, currently, contained within the BSDA and PLA. So, many of these functions are already performed by IRAS today. Second, where there are new functions like electronic serving of notices, or the ability to enter and search premises for the enforcement of betting and sweepstake duties, these functions are not new to IRAS. IRAS, currently, performs these functions for the other taxes that it administers and has the requisite capabilities. Mr Yip Hong Weng also asked if IRAS has plans to use smart technology to support its operations. IRAS already does this and will continue to do so. The consequential amendment to the IRAS Act in this Bill to provide for an electronic service system paves the way for e-services for betting and casino operators and private lottery promoters. More generally, IRAS is developing new artificial intelligence applications to enhance and automate key processes for the taxes that it administers. IRAS will continue to improve on its administration and enforcement to keep it efficient and effective. In fact, fiscal year 2020, across all taxes, IRAS has kept its cost of collection low, at less than one cent for every dollar of tax revenue collected. Mr Louis Ng asked what enforcement tools are available to IRAS for the recovery of unpaid gambling duties and where the maximum penalties have already been reached.”
“I will explain the amendments for the casino tax, and Minister of State Alvin Tan will speak later on the revisions to the exclusivity period and divestment restrictions. Currently, gross gaming revenue is subject to casino tax rates of 5% for premium gaming and 15% for mass gaming. These rates are not to be changed until after 28 February 2022. In April 2019, the Government announced the introduction of a tiered casino tax structure from 1 March 2022 with higher tax rates than today and a new 10-year moratorium, subject to the casino operator meeting certain development targets. For premium gaming, the first $2.4 billion of gross gaming revenue per year will be taxed at 8% and the rest at 12%. For mass gaming, the first $3.1 billion of gross gaming revenue per year will be taxed at 18% and the rest at 22%. If the casino operator fails to satisfactorily meet its development targets, a flat rate of 12% for premium gaming and 22% for mass gaming will apply instead. So, clause 46 of the Bill provides for these amendments. Finally, we will make consequential amendments to the Inland Revenue Authority of Singapore Act for IRAS to establish a system providing for the electronic service of notices and documents by IRAS on taxpayers, or by taxpayers on IRAS, in connection with the administration of tax legislation administered by IRAS. This will facilitate digitalisation of tax administration. These amendments are found in clause 48 of the Bill. Mr Deputy Speaker, I beg to move. [(proc text) Question proposed. (proc text)]”
“The Bill also harmonises, for gambling duties, what constitutes an offence; and raises the fines and penalties for the gambling duties which have remained unchanged since the 1950s. Again, let me illustrate with some examples. Today, for betting and sweepstake duties, it is not a specific offence for a taxpayer to file an incorrect statement. If any prosecution is to take place for false filing of returns for betting and sweepstake duties, we rely on general criminal law, as in the Penal Code, which has a penalty designed to apply generally. On the other hand, the filing of incorrect returns for private lotteries duty and casino tax has each been made a specific offence. Likewise, for the filing of incorrect returns in connection with other taxes, like income tax or GST. So, this Bill proposes that the filing of an incorrect statement for betting and sweepstake duties will be a specific offence with a penalty that is consistent with similar specific offences in the other tax laws. For example, the fines in BSDA and PLA are, currently, not aligned for the same offences. For failing to file a return, a betting operator could face a fine of up to $500 and a private lottery promoter could face a fine of $1,000. The same offence in the Income Tax Act and GST Act attracts a fine of up to $5,000. This Bill proposes that, for gambling duties, the fine for non-filing of returns will be up to $5,000, aligned with the Income Tax Act and GST Act. Clauses 27, 28, 29 and 30 of the Bill ensure similar penalty structures across gambling taxes and that the quanta of penalties and fines are commensurate with similar offences in other tax Acts administered by IRAS. As a related amendment, clause 46 of the Bill makes amendments to the Casino Control Act.”
“Mr Speaker, I beg to move, "That the Bill be now read a Second time." The Gambling Duties Bill will consolidate the laws on the levy and collection of duties on lawful betting and lotteries. These laws are currently contained within the Betting and Sweepstake Duties Act, or BSDA, and the Private Lotteries Act, or PLA. The consolidated Act will provide for common tax administration, enforcement powers and penalties across the duties on betting and sweepstakes and private lotteries. The BSDA was enacted in 1950. Since then, we have made improvements in our tax administration and enforcement. The last significant BSDA amendments made were in 2005 but relating to duties and not enforcement or administration. So, this Bill harmonises the tax administration and enforcement provisions between the BSDA and the PLA and aligns the tax administration and enforcement for the gambling duties, with other tax Acts administered by IRAS. [Deputy Speaker (Mr Christopher de Souza) in the Chair] Let me illustrate with two examples. For tax administration, the Commissioner of Betting Duties, currently, does not have the power to refund overpaid betting and sweepstake duties, even though that is provided for overpaid private lotteries duty and other taxes administered by IRAS. Clause 19 of the Bill will now provide for the Commissioner of Gambling Duties to do so. For enforcement of the betting and sweepstake duties, the Commissioner of Betting Duties, currently, may not enter or search premises. However, he may do so for private lotteries duty and all other taxes administered by IRAS. So, clause 25 of the Bill provides for the Commissioner of Gambling Duties to similarly enter and search premises for the enforcement of betting and sweepstake duties.”
“Clause 20 does not hinder us from effective monetary policy at all today. Clause 24 on the reserving the right to refuse a sale of debt to any entities, yes, that is in place in legislation. But should such a scenario were to arise, the Government will make clear its reasons for refusal. But in any case, we will continue to review and update all aspects of legislations and should there be new developments in the marketplace or new requirements, we will periodically update legislation where necessary. In summary, Sir, this Bill seeks to provide clarity on the Government’s debt profile, and reflect that the majority of the Government borrowings will continue to be issued under the renamed GSA for non-spending purposes. I assure Members of this House that our fiscal position remains strong with borrowings. We will review our debt limits regularly to ensure that we continue to borrow within our means and remain in a net asset position. With this, Sir, I beg to move.”
“In fact, the Government reviews the borrowing limits periodically and we will come back to the Parliament to raise the limits through Parliamentary resolutions where required. The most recent was in January this year. For example, as demand for SSGS grows due to rising CPF balances, then, we will start to reach the limit. Likewise, demand for SGS and Treasury Bills will change, depending on regulatory and investment needs and market conditions. What is important to understand is that the key safeguard, the key legislative safeguard in the Government Securities Act is that none of these borrowings can be spent. Like I said, it is differentiated from SINGA borrowings. Under the GSA, all of the borrowing proceeds are invested. Therefore, such borrowings do not lead to additional debt burdens. Given that we already such a legislative safeguard under the GSA, some may ask why then is there still a need for a borrowing limit? Our view is that this borrowing limit, while it is not a permanent hard cap, serve as an additional layer of checks and safeguards. It is useful for monitoring and each time we get close to the limit and we need to raise the limit, the Government would then have to come back to Parliament and get the agreement to raise this through Parliamentary resolution. Thereafter, the President will act independently in her discretion to concur with this resolution. With the merger of the LTBA into the GSA, there will not be any change to the existing safeguards and processes that we have in place today. Finally, Assoc Prof Jamus Lim also asked about two clauses of the Bill, clause 20 on the acceptance of advance deposits by MAS and whether this unnecessarily ties the hands of MAS. We do not believe so.”
“Indeed, it will not be in the Government's interest to issue debt of certain tenors beyond what the market can reasonably absorb as it would skew the interest rate curve used to price Singapore dollar denominated financial instruments and result in capital misallocations. So, to reiterate again, we are combining all the borrowings that are for non-spending purposes – CPF, market development – pooling them together under this renamed GSA. We believe it is prudent and, from a financial point of view, provides better control – to have this differentiated from borrowing for SINGA projects, which is borrowing which will be used for financing of actual projects. That will be governed separately under SINGA and with a separate limit. On Mr Liang Eng Hwa's suggestion for a separate borrowing limit for SSGS, I think he highlighted the need to provide clarity to market participants and analysts. Here, we do not believe there is a need for a separate limit – to carve out SSGS – because if the purpose is to provide clarity and transparency, indeed, the composition of borrowing, be it SSGS, SGS or Treasury Bills, this will be published and will be subject to public and parliamentary scrutiny. MAS will continue to publish monthly the breakdown of outstanding SGS and Treasury Bills that are issued. Next, Mr Louis Ng asked about the purpose of this borrowing limit and if the governance over increases in borrowing limits could be further strengthened to reflect the sanctity of the borrowing limit and the severity of increasing or bypassing it. I think Assoc Prof Jamus Lim also alluded to this in his response. Let me clarify. There is really nothing sacrosanct about the borrowing limits. These are not permanent hard caps.”
“Between GSA and LTBA, both are borrowing for non-spending reasons – one for short-term securities, another for longer-term securities. And we felt that there is no need to distinguish so much between the two. Furthermore, over time, the processes for treatment of LTBA and Treasury Bills and Government securities have become harmonised over the years. Therefore, we see scope for pooling them together. Second, a combined limit under this renamed GSA will also provide MAS greater flexibility to calibrate the issuances and tenors of debt issuances based on market conditions. In fact, other countries such as the US and Germany similarly manage their short and long-tenor securities under a single limit. With this combined borrowing limit, we do not expect the proportion of short- and long-term securities under the renamed GSA to be significantly different from today. This is because a large proportion will continue to be used to issue Special Singapore Government Securities (SSGS), which is mainly driven by CPF balances and its investment needs. As Mr Liang Eng Hwa has correctly highlighted, the amount of SSGS issuances is expected to increase over time due to growth in our resident labour force and wages. The remaining borrowing limit will mostly be utilised by the issuance of Treasury Bills and Singapore Government Securities (SGS) to support market development and it is market demand and conditions that will influence the amount and the tenor of such debt to be issued. In particular, MAS will calibrate the amount and tenor of such issuances to meet the regulatory needs of financial institutions for high quality liquid assets and to establish a robust sovereign yield curve to support the development of the Singapore dollar corporate bond market.”
“Mr Speaker, I thank the Members of the House who have shared their views on this Bill. Let me first reiterate that this is largely an administrative exercise. As Mr Liang Eng Hwa said, it is housekeeping. There is no change to the substance of our borrowing legislation, the overall borrowing limit and the safeguards to raising the current limit. But let me clarify some of the questions and points that Members have raised. Mr Liang Eng Hwa asked about the outstanding amount of securities under the Local Treasury Bills Act (LTBA) and the Government Securities Act (GSA). As at 30 September, we have $65 billion under the LTBA and $699 billion under the GSA. Both Mr Liang Eng Hwa and Mr Louis Ng also asked about the rationale for merging the LTBA and GSA borrowing limits. Let me explain. First, with the introduction of SINGA, we thought that it would be timely to consolidate legislation of Government borrowings for non-spending purposes so as to distinguish these from borrowing for spending purposes under SINGA. By pooling the LTBA and the GSA together under the renamed GSA, this will emphasise that the borrowings issued under this Act are entirely for non-spending purposes. This would also address what Assoc Prof Jamus Lim was saying. He had suggested to pool it together as one combined limit, together with SINGA. But from the Government's point of view, for better governance and for better control of processes, we want to distinguish between borrowing for non-spending, which is done under LTBA and GSA, and borrowing under SINGA, which is borrowing for infrastructure, which we spend. I think it is prudent and advisable to have different limits for both.”
“We have consulted the President on both this Bill and the amendments to the Constitution, as they provide for the raising of loans by the Government and a single borrowing limit for Government securities and Treasury Bills. The President is supportive of the Bills. Mr Speaker, let me conclude. This Bill consolidates various pieces of legislation on Government borrowings for specific non-spending purposes into a single legislation under the renamed GSA. Going forward, the Government will rely on the renamed GSA to borrow for specific non-spending purposes and the SINGA to borrow for spending on nationally significant infrastructure. We will ensure that the borrowings for spending and non-spending purposes are transparent and clearly differentiated in the processes for the issuances of securities, reporting and public communications. For example, the new SGS issued for infrastructure financing has been named as SGS(Infrastructure) bonds and the existing SGS bonds renamed as SGS(Market Development) bonds to reflect the different purposes of borrowing. And again, I would like to emphasise that the Singapore Government has a strong balance sheet with no net debt. Borrowings for non-spending purposes, which will be consolidated under the renamed GSA in this Bill, will continue to make up the majority of Singapore Government's borrowings. Through this Bill, we will provide greater clarity on the Government's debt profile. Sir, I beg to move. [(proc text) Question proposed. (proc text)]”