Tharman Shanmugaratnam
Singapore
“EDB conducts regular reviews to GIP to ensure its effectiveness in attracting only top-tier business leaders who are interested to drive the growth of their businesses and investments from Singapore.”
“MAS may vary the size of the additional capital requirement imposed on the bank and take other regulatory actions depending on the outcome of ongoing reviews. MAS requires all retail banks in Singapore to ensure that their mission critical systems supporting digital banking are resilient.”
“This question will be answered in the reply to Dr Tan Wu Meng's Parliamentary Question filed for tomorrow's Sitting. [Please refer to "Probe into Recent Disruptions of DBS' Digital Bank and Physical ATM Services and Preventive Measures Implemented", Official Report, 5 July 2023, Vol 95, Issue 107, Written Answers to Questions for Oral Ans…”
“Borrowing from the banks is one of the ways in which MAS carries out MMOs to soak up such excess liquidity. Like other central banks, MAS does this daily through an auction system, enabling MAS to withdraw liquidity through the Primary Dealers that submit the most competitive prices.”
“To mitigate consumer over-indebtedness, the Monetary Authority of Singapore (MAS) requires financial institutions (FIs) to implement a range of safeguards when extending mortgage loans and unsecured credit.”
“The Monetary Authority of Singapore imposes on external asset managers the same stringent regulatory standards for anti-money laundering and countering the financing of terrorism that it imposes on banks.”
The complete record
Every one of 2,416 lines we hold for Tharman Shanmugaratnam, in date order, each linked to its source. Free to read, in full, without an account. Page 27 of 49.
“Mr Speaker, Sir, may I take Question Nos. 1 to 3 together?”
“More than 90% of the loans approved were granted to SMEs, and these loans accounted for about 70% of the total loan quantum approved. General sentiments from SMEs indicate that the enhancements have been timely, with the increased Government risk-sharing playing a significant role in helping SMEs secure loans in this economic climate. The deterioration of the broader commercial lending market has also moderated alongside the stabilisation in global market conditions, with a 0.1 percent decline in business lending in May 2009 over April, compared to a 2.2 percent contraction in November. The Government will continue to review the effectiveness of these schemes. PUBLIC SERVICE FOR THE 21ST CENTURY 25. Dr Fatimah Lateef asked the Prime Minister how and what are the steps to be undertaken to re-energise and inject greater collaboration amongst civil servants in various Government departments under the Public Service for the 21st Century (PS21) initiative.”
“The two schemes that have been funded from past reserves are the Jobs Credit scheme and the Special Risk-sharing Initiative (SRI). To date, the Government has provided more than $1.8 billion of Jobs Credits to employers in March and June this year, and will provide another two tranches of Jobs Credits in September and December. Feedback to date from employers and the unions on the impact of the Jobs Credit scheme suggests that the scheme has helped reduce job losses among Singaporeans. While it is not possible to determine the precise impact of the scheme, the feedback indicates that the combination of the Jobs Credit Scheme and the SPUR programme has encouraged employers to keep jobs, and to redeploy them when necessary and send them for training. The Jobs Credit scheme is also part of a significantly expansionary fiscal policy this year, which would have macroeconomic effects. In other words, besides its direct impact on jobs, the funds injected through Jobs Credits are expected to have a multiplier effect on the economy. Again, it is not possible to estimate this effect with precision. As for the SRI, it has helped to stimulate bank lending to SMEs and ensured that a broader segment of companies have access to credit to sustain their operations. Since its introduction, we have seen a surge in loans provided to enterprises under the various SME financing schemes. Within the first five months (from February to June 2009), Participating Financial Institutions (PFIs) have registered over 6,600 loans worth about $3.3 billion. This is about eight times the value of loans approved in the same period last year. SMEs have especially benefited from the SRI.”
“Actually, that is not necessarily the case. Let me repeat first that I do not know how Temasek voted at the meeting. Had it voted for the merger, it is not necessary the case because it intended to hold on to the investment for the long term. That does not necessarily follow.”
“I am sorry, Mr Speaker, Sir, I have not answered Ms Lim's second question. Again, on matters of timing, my response is the same. These are matters for the boards to decide. In retrospect, we will always be able find investments which were sold too early and if they could have been sold in phases, might have yielded more. For that matter, investments which may have been sold too late. So, it will not be possible for us as a Government, and I really urge Members also not to try, to be in the habit of looking at each investment in retrospect and seeing what we could have made more of a gain or less of a loss. Let us look at the overall performance of the portfolio. I can assure though that Temasek and, for that matter, GIC do look at each individual loss very carefully and try to learn lessons from it. It is not possible to time the markets perfectly in these things and when you are having to make a major risk decision, you have to go about it in a highly disciplined fashion and not hope to time week by week, day by day, every move.”
“On the first question, I am not aware of how Temasek voted at the shareholders' meeting in December in relation to BoA's acquisition of Merrill. I have not asked and I have not found it important to ask. These are matters on individual investments that are left to the boards of the respective investment agencies. And that is a very important discipline we have to maintain. It is not that each investment is unimportant. Every investment counts and, all of us, when we read about the loss in the papers, we are always concerned. I hope we also take equal note of gains that are being made. The discipline is that of looking at an overall portfolio, studying its returns over relevant periods of time not short periods of time. That is a discipline we have to maintain. That is the way we look at it within Government and we try to ensure that the boards know that we are not peering over each of their decisions on individual investments because it will cramp them. They have got to diversify as best as they can, make their risk decisions as best as they can and they are accountable for overall returns over time.”
“But I can assure Mr Inderjit Singh that this is not an auto-pilot system where you have three separate entities doing their own thing and the Government does not know how it is added up, or what risks are accumulating. There is a sense in which we have three agencies at different parts of the investment spectrum, engaging in different degrees of risks, different areas of global exposure. It has performed well so far. If you look at the whole-of-Government assets, it has performed well so far. And the individual entities – in particular, we are talking today about Temasek – has performed much better than the average investor, the average large institutional investor, and even compared to some of the most reputable names. So we will keep reviewing this. It is not something that is being done on auto-pilot within Government. We will keep reviewing it from time to time. We have a governance structure for looking at our whole-of-Government assets within the system. And I can assure Mr Inderjit Singh that where we need to review, we will review.”
“I appreciate where Mr Inderjit Singh is coming from in this question and he had also made a similar comment earlier in the course of this week's debate. There is a distinction between Temasek, GIC and, for the matter, the Monetary Authority of Singapore (MAS), which is also part of our whole-of-Government assets. The MAS is, at one end of the spectrum, the most conservative because it is a central bank, with very significant holdings in fixed income instruments and liquid instruments. GIC has a globally diversified portfolio spread across asset classes, chiefly in the public markets and a very much smaller component in private equity and alternative investments. So, a fairly conservative, large, globally diversified investor. Temasek is at the other end of the spectrum – very largely an equity investor, a value-investor aiming at long-term returns; significantly higher risk than GIC or MAS but, not unexpectedly, has delivered higher returns over time. The high-risk end of the spectrum will be a more volatile end of the investment performance spectrum as well but we expect it to deliver higher returns over the long term. The low-risk end of the spectrum will be more stable but with lower returns over time. So within Government, we look at it as one whole portfolio. Each board makes its own decisions on asset allocation but we do add things up and review the matter regularly. What is the overall profile of risk on our whole-of-Government assets? Are there significant concentration risks that require us to go back to the boards and inform them about? Are there adjustments that need to be made?”
“But while Temasek has performed better than many other large investors over this six-year market cycle, it is not realistic to expect it to outperform in every cycle. It is also not realistic to expect it to avoid losses on every individual investment, or losses on its overall portfolio when the markets go through sharp corrections. Temasek, like GIC, takes very seriously every decline in the value of its portfolio, or in the value of its individual investments. But it will have to keep to its discipline – of being prepared to take calculated risks on individual investments, maintaining a diversified portfolio, rebalancing its investments when necessary to optimise the risk-return profile of the portfolio and keeping its sights on achieving long-term returns. That is how Temasek has operated successfully over the last six-year cycle, making good gains in its portfolio, and it is how it will seek to deliver good returns over the long term.”
“The net gain, therefore, was S$56 billion over the course of the cycle as a whole – boom plus bust. Temasek has been transparent about its overall portfolio performance, which it publishes each year in the Temasek Review. The full year accounts to end March 2009 have not been audited, but the picture should not be fundamentally different from what I have described as equity markets globally showed no major change as at end March 2009 compared to end November 2008. The sale of the Merrill/BoA investment would not have aggravated the results either, as the position I have described up to November 2008 takes in all unrealised losses, including the mark-to-market losses on the Merrill investment. Compared to any relevant market indices, or to other reputable institutional investors, Temasek has performed respectably. Temasek has achieved total shareholder returns by market value of slightly over 15% per year on average in US dollar terms over the cycle. This is the cycle – again to repeat – that started in March 2003 until November 2008. Fifteen percent per year average returns. This compares with a 6% annualised gain in the global equity market indices, if you take MSCI World, for example. Or if you take a weighted index of global, Asian and Singapore equity market indices – since Temasek has a significant investment in Singapore and Asia, not just the world – if you take a weighted index of the three market indices together, it would have delivered more than 6% but still significantly less than Temasek’s gains of 15% per year. Temasek’s annualised returns are also higher than what several other well-regarded investors have earned over the cycle.”
“Temasek’s portfolio value declined by S$58 billion over the period, or by 31%. I would add that a large part of this arose from the decline in value of Temasek’s investments in Singapore. Of the S$58 billion decline, S$32 billion was attributable to the drop in market value of just the 10 largest publicly listed Temasek-linked companies (TLCs) in Singapore. So just those top 10 TLCs accounted for S$32 billion of the total S$58 billion lost between end March 2008 and end November 2008. The share prices of these 10 TLCs – this is not the total Temasek portfolio in Singapore but just the 10 alone – declined by about 41% on average over the period, in line with the movement of the Singapore market as a whole. What matters, however, is not how Temasek did in this last year when the markets were in collapse, but how it has done over the cycle as a whole. The S$58 billion decline in value between March and November 2008 came after a much greater gain in Temasek’s investment portfolio of S$114 billion over the preceding five years, from the time the market cycle began in 2003. This means that even after taking into account the recent sharp decline, Temasek’s portfolio had still grown by S$56 billion over the course of the cycle. This is after netting off all capital injections into Temasek – from Government to Temasek – as well as dividend payments to the Government. The S$56 billion gain, therefore, reflects only the returns on Temasek's investments. So, I will repeat the figures – the S$58 billion decline that we saw between March and November last year at the time of the sharpest market correction came after a much greater gain of S$114 billion from the time the cycle commenced in 2003 up until March 2008.”
“This means that Temasek may divest an investment, even at a loss, to get a better mix of risks for its overall portfolio or to position itself to take advantage of opportunities elsewhere. Such rebalancing is a standard practice and discipline amongst long-term investors. The real difference is that the calculation behind any rebalancing of the portfolio is not aimed at short-term returns, but the long-term value of the portfolio. If Temasek had indeed been motivated by short term results, it would surely not have decided to sell BoA at this stage and realise a loss. The premise behind the questions being asked, and the comments by some other members in the course of this week’s debate, is that Temasek has been on a losing path, and Singapore is poorer for it. This is simply not the case. Temasek has made losses on some investments, including its investment in Merrill/BoA. It has made gains on others. The only reasonable way of evaluating Temasek's performance, therefore, like that of any large investor, is to look at how the losses and gains add up, and how its overall portfolio performs over time. The facts are that Temasek has produced strong returns on its overall portfolio over time – taking the investments that have done well with those that have turned bad; and taking the boom years with the subsequent years when markets went bust. Temasek has, in fact, made large investment gains over the course of the market cycle that began in 2003, including the boom that lasted till 2007 as well as the subsequent bust. Second Minister Mrs Lim Hwee Hua had earlier provided Parliament with information on Temasek’s losses between the end of March 2008 and November 2008, when global markets went down sharply over that period.”
“Mr Speaker, Sir, Mr Inderjit Singh and Ms Sylvia Lim had filed questions about Temasek’s rationale for the sale of its shares in Bank of America (BoA). Temasek has since explained why it did so in its letter to the press last week. I will summarise Temasek’s reasons. Temasek invested in Merrill Lynch in December 2007. Following the completion of BoA’s offer to buy Merrill in January 2009, Temasek’s investment was converted into BoA shares. Temasek reassessed the case for holding on to the investment for two reasons. First, the acquisition of Merrill by BoA meant a different investment proposition for Temasek, with different implications for the risk profile of its overall portfolio. The investment thesis had changed, from the original focus on Merrill’s specific businesses to BoA’s linkage to the broader US economy. Second, Temasek also assessed the risk-return environment to have changed substantially. It decided to divest the BoA stake after considering all relevant factors. The sale of its BoA stake does not signify a shift in Temasek’s investment orientation from long-term to short-term. Temasek is a long-term investor, not a short-term trader of assets. It generally goes into investments expecting to hold them for some time – and this was indeed Temasek’s intention when it invested in Merrill. But being a long-term investor does not mean being locked into every individual investment, regardless of major changes in the environment or a new investment proposition. Rather, Temasek regularly reassesses the risks and potential returns on its investments, and rebalances its holdings when it considers necessary to enhance the long-term value of its overall portfolio.”
“Ms Sylvia Lim also asked about accountability for GIC's fund managers based on their performance. Each GIC investment manager and the fund management team, as a whole, are accountable for their performance. GIC evaluates its investment managers regularly on the basis of several factors – the performance of GIC's overall investment portfolio, how the team managing each asset class performs against specific market benchmarks or absolute return targets as well as how the individual investment professional has himself or herself contributed to the team's performance. Consistent with GIC's orientation as a long-term investor, the fund managers are evaluated not just on the performance of their portfolio within a single year, but on a continuing basis and measured against appropriate benchmarks. Overall, the compensation framework supports a culture of responsibility and ensures that GIC is able to attract and retain the necessary talent to support its long-term performance. TRAINING FOR NOT-FOR-PROFIT ORGANISATIONS 17. Miss Penny Low asked the Minister for Community Development, Youth and Sports in light of the economic downturn and various efforts by agencies like MAS, MOE and SPRING to help defray salaries and training costs of attachments for fresh graduates and professionals in their respective fields, whether the Ministry has any similar schemes and plans to help not-for-profit organisations acquire and train professional workers to run these organisations.”
“In other words, GIC consciously accepts the risk that individual investments and asset classes may underperform, especially over the short term, because only by accepting these risks and diversifying its portfolio can GIC achieve better longer-term performance returns. Hence, during severe market cycles, we must expect to see significant fluctuations in GIC's portfolio value like we have seen today. This also happened in 2001, when the equity markets collapsed. However, GIC's returns over the long term have been creditable by international standards. I fully understand why people are concerned about losses in the value of GIC's portfolio during this current crisis. But the recent 25% decline in GIC's portfolio value has to be viewed against the much larger investment returns that it has gained over the last 10 years – besides the more significant gains over a longer period. In other words, despite seeing two major declines in portfolio value, in 2001 and in the current crisis, GIC's portfolio has grown significantly in value over the last 10 years. The 25% decline comes out of a much larger cumulative investment return gained in the preceding years – the preceding five, 10 years. GIC takes very seriously every decline in the value of its portfolio, including declines in the value of its individual investments, in its tactical reviews. But it will have to keep to its fundamental strategy of diversifying across asset classes, accepting the risks of investing in riskier assets like equities and real estate, and investing for the longer term, investing for long-term gain in other words. That is how it can make the most of its strategic advantage as a long-term endowment fund and continue to deliver good returns over the longer term horizon.”
“But if Ms Sylvia Lim's question has to do with how GIC's portfolio has been affected by its equity investments, including its high profile investments, the answer is that GIC's overall equity portfolio has moved broadly in line with the relevant global equity market indices during the period – in fact, it suffered a slightly smaller decline than the market indices. Fundamentally, however, it is not appropriate to assess the performance of endowment funds like the GIC or Norway's NBIM over the short-term, or on the basis of individual asset classes or investments. We have to take the portfolio as a whole, and assess its performance over the long term. In other words, not over a year or two, nor from the peak to the trough of a single cycle, but across the market cycles. That is the mandate which the Government has given GIC – to secure good long-term returns on the overall portfolio. In accordance with this mandate, GIC's strategy is to allocate funds across a broad range of asset classes, including higher risk assets such as equities and real estate, with the aim of achieving good long-term returns. It invests in a diversified portfolio that takes into account the risk and return characteristics of each asset class, so as to achieve better returns for the combined portfolio over the long term. This strategy accepts that individual asset classes and investments may not always do well, but that taken together, and over a longer period, they must contribute to the good overall performance of the portfolio.”
“Mr Speaker, Sir, Ms Sylvia Lim's question has to do with the 25% fall in GIC's overall portfolio value since the peak that Chairman of GIC recently referred to. 25% is approximately the fall in value of GIC's portfolio (in US$ terms) from the time global markets peaked in October 2007 until December 2008. The fall in value has reflected major declines in the global markets. Global equity markets have fallen by about 45%, using the MSCI World Index or any other leading global indices. Global real estate markets have fallen by 55%, again, based on the commonly used indices. One of the few asset classes with positive returns over the period has been bonds – global bonds have gained in value by about 6%, using the Barclays Aggregate Bond Index. Almost all institutional investors have therefore seen large falls in their portfolio values over the period. Norway's NBIM (Norges Bank Investment Management), which is Norway's equivalent of GIC, has lost around 27% (in US$ terms) from October 2007 to December 2008. The US university endowments reported average losses of 26% from July 2007 to December 2008. The periods do not exactly match, but this is the available data and you can see the trends are very similar. Ms Sylvia Lim had also asked about GIC's performance over the different asset classes during this period. GIC has, on the whole, performed on par with market portfolios based on a similar mix of asset classes since the peak in October 2007.”
“This includes more than 20,000 jobs at the two Integrated Resorts; 18,000 jobs in the public sector; and some 6,000 from the pipeline of new investments, including 1,200 in clean technology and 900 in biomedical sciences. Many of these jobs are PMET jobs. There will also be new jobs in the retail, F&B and hospitality industries with the opening of new malls and hotels; as well as in the construction, security, childcare and interactive digital media industries. While we work with our tripartite partners to save jobs and help the unemployed find jobs, it is also important for us to continue to bring in new jobs. Therefore, we have to ensure that Singapore remains an attractive place for business and investments and our workforce remains competitive and flexible. This way, we can continue to create more opportunities for Singaporeans.”
“MOM and WDA have been working closely with the Community Development Councils (CDCs) and the Employment and Employability Institute or e2i on a range of measures to help retrenched workers and the unemployed find jobs. Both e2i and WDA work with companies conducting retrenchment exercises to render assistance to retrenched workers to find new jobs. The Career Centres at the CDCs and NTUC's e2i provide a comprehensive suite of services, ranging from training and counselling to job matching for the job seekers. They cater to both rank and file as well as PMET job seekers under SPUR and the Professional Skills Programme announced recently. As at end of February 2009, over 43,000 workers have been committed for SPUR training, including about 17,000 individuals who have signed up for SPUR courses at CET centres, ITEs and the five polytechnics. About one-third of these individuals are PMETs who signed up for training for jobs in the creative industries, community and social services, finance, landscape, process and manufacturing, tourism and educational services. In 2008, an estimated 13,300 unemployed locals found jobs through the assistance of the CDC Career Centres. This year will be more challenging but our Career Centres are gearing up to do more for the unemployed Singaporeans. Sir, while we can expect job losses in the externally-orientated sectors, there are still opportunities in other sectors, such as construction, pharmaceuticals, health care, education, public administration, tourism, and so on, which are still hiring. There will be at least 45,000 new jobs available over the next two years.”
“Ms Irene Ng Phek Hoong asked the Acting Minister for Manpower if he will provide an update on (i) the unemployment situation, in particular the profile of workers affected; (ii) efforts to assist the unemployed and the retrenched to find jobs; and (iii) the availability of jobs. The Acting Minister for Manpower (Mr Gan Kim Yong): Sir, with the economy falling into recession, the seasonally adjusted overall unemployment rate rose to 2.5% in December 2008 from 2.2% in September 2008 and 1.7% a year ago. The resident unemployment rate increased for the fourth consecutive quarter to 3.7% in December 2008, from 3.3% in September 2008 and 2.4% in December 2007. An estimated 69,900 residents were unemployed in December 2008. The seasonally adjusted figure was 73,200, up from 65,500 in September 2008 and 46,200 in December 2007. The impact of the slowdown was felt across all groups of workers. In December 2008, those with below secondary education formed the largest group, totalling 21,300 and constituting 31% amongst the unemployed. Sixteen thousand-two hundred or 23% of the unemployed had secondary education. Six thousand-four hundred or 9% were diploma holders while 14,800 or 21% were degree holders. On age profile, workers aged 40 and above continued to form the largest group totalling 30,300 or 43% among the unemployed. Fifteen thousand-seven hundred or 23% were aged between 30 and 39 while 23,900 or 34% were aged below 30. There are increasingly more PMETs affected by this recession, partly due to their increasing proportion in our workforce. For the whole of 2008, 6,200 PMETs were made redundant, forming 37% of the workers displaced, up from 31% in the year before.”
“Sir, first, of course, I can assure Mr Banerjee and Members that the process is a robust one. We spend a lot of time on this. First and foremost, within the GIC and the MAS – professional staff and the boards. The Ministry of Finance gets into a fair level of detail in assessing the methodology – we are not professional experts but we have got to make sure that the methodologies are sound and are comparable with the best practices in the investment world. The President, advised by the Council of Presidential Advisers, does an independent check on the methodologies so as to assure himself that the final proposals are sound. This is not a science. It involves judgment, and this is judgment principally on the part of seasoned investment professionals. The best way of ensuring that the system is robust is to ensure these internal processes of governance, first, of putting professional expertise into play; second, internal governance within the GIC and MAS; third, the Ministry of Finance doing its own due diligence on the methodologies used; fourth, the Council of Presidential Advisers taking an independent look and advising the President; and, finally, the President deciding on whether to approve the Government's proposals. That is really the basis of our system. But I am sure the GIC will, in its annual reports in future, give a flavour of its thinking on the investment environment going forward. It has done so in its last annual report and I am sure, going forward, it will also provide a feel for its thinking on how the investment environment is likely to shape up. UNEMPLOYMENT SITUATION (Update) 6.”
“The expected rates of return – to repeat what I mentioned earlier, which are estimates of the average returns expected over the next 20 years – reflected the GIC and MAS Boards' assessment that the future investment environment is likely to be less benign than that over the last 20 years. The expected rates of return for the individual asset classes over the next 20 years are, in fact, generally lower than the historical rates. However, the expected rates on GIC's overall portfolio also reflect the fact that it is now considerably more diversified across a range of risk assets than it was 20 years ago.”
“The rates, which refer to the expected real returns over the next 20 years, were proposed by the Boards of GIC and MAS respectively, based on detailed study and assessments by investment professionals in the two agencies. The GIC and MAS teams first projected the expected returns on each individual asset class, such as bonds or real estate. This was followed by aggregating the expected rates of return on the individual asset classes into the overall rates of return on the GIC and MAS portfolios, which take into account their respective asset allocation strategies. The GIC and MAS took into account both historical trends and a forward-looking analysis of the investment outlook, before reaching their best judgments. The methodology did not in any instance involve a mechanical extrapolation of past trends. In making their assessments, they also took into account projections of future returns on each asset class by their peers amongst institutional investors. The Ministry of Finance undertook a thorough review of the methodologies used by the GIC and MAS, and was satisfied that their approach was sound and the estimated long-term rates of return were reasonable. As Minister for Finance, I therefore proposed these rates to the President for the purpose of Budget 2009. The President obtained the advice of the Council of Presidential Advisers, as required under the Constitution, before concurring with the Government's proposals. Mr Banerjee asked how the expected long-term real rate of return compared with the actual historical long-term real rate of return.”
“Sir, Mr Gautam Banerjee asked about the additional amounts available for Government spending for year ended 31st March 2009 and year ending 31st March 2010 under the new Constitutional framework for spending from investment returns. The new framework for spending will take effect from 1st April 2009. It, hence, does not affect the amount of investment income taken into the Budget for spending for the fiscal year ending 31st March 2009, which continues to be based on the earlier framework of actual interest and dividend income alone. For this fiscal year which is ending soon, the Government took in a Net Investment Income Contribution of $3.7 billion. For the coming fiscal year ending 31st March 2010, the Net Investment Returns Contribution (NIRC) was estimated in the Budget to amount to $7.7 billion. The figure was reflected in the Budget Statement in January 2009. Compared to the Net Investment Income Contribution taken in last year under the old framework, the NIRC of $7.7 billion is an increase of about $4 billion, or about 1.6% of GDP. Members would know that this Net Investment Returns Contribution starting with the coming fiscal year is based on the new framework of spending out of long-term expected real returns, not limited to interest and dividends. The framework applies to expected returns on the reserves managed by GIC and MAS. There is no change in rules for spending out of Temasek's returns, which continue to be based on actual dividends. The process for determining the long-term expected real rates of return of the reserves invested by GIC and MAS has been rigorous.”
“Mr Speaker, Sir, with your permission, I would like to take Question Nos. 3, 4 and 5 together.”
“Sir, I beg to move, "That the Bill be now read a Third time." Question put, and agreed to. Bill accordingly read a Third time and passed. CRIMINAL LAW (TEMPORARY PROVISIONS) (AMENDMENT) BILL Order for Second Reading read. 4.34 pm”
“Mr Speaker, Sir, I beg to move, "That the Bill be now read a Second time." The purpose of this Bill is to make provision in accordance with Article 148(2) and 148C(2) of the Constitution for additional expenditure in excess of the provisions authorised by the Supply Act 2008. The additional sums have been presented as Supplementary Estimates, which have been considered and approved by the House as Paper Command No. 2 of 2009. Sir, I beg to move. Question put, and agreed to. Bill accordingly read a Second time. Third Reading”
“Sir, I beg to move, "That the Bill be now read a Third time." Question put, and agreed to. Bill accordingly read a Third time and passed. SUPPLEMENTARY SUPPLY (FY 2008) BILL Order for Second and Third Readings read.”
“Mr Speaker, Sir, I beg to move, "That the Bill be now read a Second time." In accordance with Article 148(1) of the Constitution, Heads of Expenditure to be met from the Consolidated Fund and Development Fund, other than statutory expenditure, have to be included in a Bill to be known as the Supply Bill. The purpose of the Supply Bill before Members is therefore to give legislative approval for the appropriations from the Consolidated Fund and Development Fund to meet the expenditures in the Financial Year, 1st April, 2009 to 31st March, 2010. The Heads of Expenditure and the sums that may be incurred in respect of each Head are shown in the Schedule to the Bill. These have been approved by the House in the Main and Development Estimates of Expenditure for the Financial Year, 1st April, 2009 to 31st March, 2010, as amended, and contained in Command Paper No. 1 of 2009. The Supply Bill, when approved, will empower me to issue warrants authorising expenditure up to the amount for each Head as shown in the Bill to be paid out from the Consolidated Fund and Development Fund. Sir, I beg to move. Question put, and agreed to. Bill accordingly read a Second time. Third Reading”
“Mr Speaker, Sir, I beg to move, "That Parliament doth agree with the Committee on the said resolutions." Question put, and agreed to. Resolutions accordingly agreed to. SUPPLY BILL Order for Second and Third Readings read.”
“Mr Speaker, Sir, I beg to report that the Committee of Supply have come to certain resolutions. First Resolution reported – "That the sum of $46,314,054,900 shall be supplied to the Government under the Heads of Expenditure for the Public Services shown in the Main Estimates for the financial year 1st April, 2009 to 31st March, 2010, as amended, contained in Paper Cmd. 1 of 2009." Second Resolution reported – "That the sum of $21,567,483,000 shall be supplied to the Government under the Heads of Expenditure for the Public Services shown in the Development Estimates for the financial year 1st April, 2009 to 31st March, 2010, contained in Paper Cmd. 1 of 2009."”
“Sir, I beg to move, That the total sum to be allocated for Head Z of the Estimates be increased by $4,611,607,000. Sir, the increase is for the Special Transfers announced in the Budget Statement on 22nd January 2009. Of the increase, $3.91 billion is the FY 2009 Budget provision for the Budget 2009 Resilience Package. This includes $3.38 billion in Jobs Credit to be paid out in FY 2009; $388 million as provision for the Government's share of loans lost under the Special Risk Sharing Initiative for bank credit; $100 million is the Workfare Income Supplement special payment to low-income workers; $24 million as additional rebates for HDB Rental and Service and Conservancy Charges; $7 million top up to the Public Transport Fund for low-income Singaporeans; and $80 million as additional assistance to needy families. The remaining provision of $0.7 billion is for Transfers to the National Research Fund $400 million; Life-long Learning Endowment Fund $100 million; Eldercare Fund $100 million; and Medical Endowment Fund $100 million. That the total sum to be allocated for Head Z of the Estimates be increased by $4,611,607,000. That the increased sum of $14,181,655,000 for Head Z ordered to stand part of the Main Estimates. Head M – Ministry of Finance”
“Mr Speaker, Sir, I beg to move, "That Parliament doth agree with the Committee on the said resolutions." Question put, and agreed to. Resolutions accordingly agreed to. ESTIMATES OF EXPENDITURE FOR THE FINANCIAL YEAR 1ST APRIL 2009 TO 31ST MARCH 2010 (Paper Cmd. 1 of 2009) Order read for consideration in Committee of Supply [2nd Allotted Day]. [Mr Speaker in the Chair] Head N - Ministry of Foreign Affairs”
“Mr Speaker, Sir, I beg to report that the Committee of Supply have come to certain resolutions. First Resolution reported – "That the sum of $1,578,946,200 shall be supplied to the Government under the Heads of Expenditure for the public services shown in the First Supplementary Main Estimates of Expenditure for the financial year 1st April 2008 to 31st March 2009, contained in Paper Cmd. 2 of 2009". Second Resolution reported – "That the sum of $1,311,399,200 shall be supplied to the Government under the Heads of Expenditure for the public services shown in the First Supplementary Development Estimates of Expenditure for the financial year 1st April 2008 to 31st March 2009, contained in Paper Cmd. 2 of 2009".”
“I am not sure why it is relevant. At the end of the day, as I have emphasised, and indeed as we debated at some length in October when we passed the Constitutional amendments, this is a system that is different from Norway and Australia, where as much detail as possible is provided, including details of asset allocation decisions, and it has to be approved by Parliament. This is not the nature of our system. Our system relies on trust in the individuals who are in charge, including those appointed to the CPA and the Elected President. Do we trust them? Have they made decisions wisely? Has the Government been acting responsibly? That is ultimately what has been and will be the strength of our system. And in the countries that have gone instead for systems based on transparency of figures and procedures, as distinct from trust in the individuals at hand, we have seen what has happened – a shift towards wanting to spend more reserves for less and less meritorious purposes over time. The Prime Minister had quoted a few cases in the debate in October. I had mentioned some others. It is almost in the natural workings of society that this happens. This is what we want to resist. We have put in place a system of Constitutional checks and balances and a system where the right people, hopefully, will continue to be in place, so that the reserves are safeguarded and protected. Question put, and agreed to. Resolved, That Parliament approves the financial policy of the Government for the financial year 1st April, 2009 to 31st March, 2010.”
“Sir, that is not the case. In fact, quite frankly, the Prime Minister met the President informally, before Cabinet had decided, to give him a sense of the Government's thinking and the measures that we were going to take. Even then, there was a fairly clear sense of the scale of the measures. When we briefed the President in detail on the measures and what the total budget would look like and, in particular, what these two measures would comprise, it came with figures. We wanted to scrub it in detail before we submitted our final proposal. If we are talking about whether it was $4.8 or $5.1 billion, it was $4.9 billion. But these are things that we go through very carefully, and the final formal submission to the President came after detailed checking of each of the schemes and each of the details. And they are still estimates. It may be more or less than $4.9 billion, but that is our best estimate. So, to clarify, specifically, we did provide the President and the CPA with estimated costs of the two initiatives – the Jobs Credit Scheme and the Special Risk-Sharing Initiative – and put it in the context of the total package that the Government was going to have to implement to help Singapore through the crisis.”
“I would say, frankly, that we take the perspective of the family as a whole. When an unemployed person goes to the CDC to get benefits, they look at all his problems. That is why in the case of Mr Tay that I highlighted, the youngest child was placed on CFAC – $200 a month. He got utility vouchers as well, things for the family. If a person goes for training, we provide him support. It is not just for his own daily meals and so on, we also help to support the family. So what we provide the individual takes into consideration the needs of the family, and that is a very important part of discretionary assistance. Because if the family is able to support the unemployed family member, then their needs are less and our whole emphasis on relying on the family, including the extended family, to support each other would be undermined if we provide automatic support to an individual in that circumstance. So there is a difference. It is providing the same or more benefits compared to the proposal that the Nominated Member had envisaged – $500 a month. We are providing effectively the same or more benefits but on a discretionary basis, so that we do not undermine the fundamentals of our system of providing assistance, and we do not decalcify as a society.”
“On Ms Sylvia Lim's first question about how much accumulated savings we have, as I mentioned in the Budget, we have enough accumulated savings to meet the deficits we are incurring, which are the FY2008 and FY2009 deficits. If we add those two together, it comes to a total deficit of $10.8 billion. So that was the size of the bill – $10.8 billion deficit. And I have stated that we have adequate accumulated savings to meet that $10.8 billion deficit. Why is this the case? In FY2007, we made a surplus, as Members know, and the revised estimate was $7.7 billion. In addition to that, over the last three years, FY2006-2008, we have obtained capital receipts of $3.7 billion from our statutory boards. These are the accumulated savings of our statutory boards. If we add $7.7 billion plus $3.7 billion, the total is $11.4 billion, enough to meet the $10.7 billion combined deficit of FY2008 and FY2009. The estimates which Ms Sylvia Lim mentioned for land receipts puzzled me. I think she might have looked at some private sector reports. And there were some figures which I saw in one of the newspapers recently which were really quite puzzling. We certainly do not have $18 billion of land sales receipts in current reserves. The only thing that the Government takes into revenues for its current term are land sales less than ten years, which is a very small amount. The bulk of our land revenues goes to past reserves, as we had, in fact, explained in the House last year. So those numbers are not accurate. They are not in the current reserves. On the Member's second set of questions on unemployment benefits, she was concerned about what the individual himself gets under the scheme, leaving aside what the family gets.”
“From time to time, we will be wrong on specific items, and hence the Supplementary Supply Bill.”
“But regardless of what he said on the Jobs Credit, it does not change his position on the GST cut and the merits of the Government's approach to the GST. Neither does it change the fact that the vast majority of businesses, as we have heard in this House related especially by the labour MPs and unionists, feel that the Jobs Credit is going to make a difference to the pace and scale of retrenchment in what is going to be a very difficult year. I am sure we will find individual businesses who have a different opinion, but the weight of opinion in the last two weeks has been very encouraging. This is a scheme that will make a difference. The difference in cost arising from this mis-estimate of budget for political appointees is not very large. But I would say that all the estimates in our Budget Book are exactly what they are – they are all estimates. We got stamp duties completely wrong two years ago because no one expected the property and the stock markets to boom the way they did so suddenly. And that was an error which was repeated by one or two MPs in this debate. That was a large error, but there are lots of smaller errors we make each year because it is not possible to forecast precisely in advance how each item of revenues would turn out, which depends on what is happening in the economy, what is happening in the markets. It depends on lots of factors. So the Budget Book is our best estimates for the year in advance. In this particular instance, it was a case of not having updated the relevant estimates in each of the Ministry's budgets, as distinct from coming out with a wrong forecast. But there are other instances, I am sure, where we will get it wrong. So the Supply Bill contains our best estimates for the year.”
“It is a matter of agreeing because the President and the CPA had assessed the arguments – are they the right arguments, are they based on facts, are they based on what is in the interest of Singapore – and they come to their decision. That is all there is to it. The rationale for drawing on reserves for Jobs Credit and the SRI have been set out. I think Mr Low Thia Khiang has asked a very good question – what if we have to continue the same measures next year? We do not yet know if we have to continue the same measures next year, and if we do, whether it will be on the same scale or be of the same scope. If we do have to do so, I would envisage that we will have to go back to the President to make a case for a further draw. It is too early to commit to this now, and certainly too early to say whether the President and the CPA will agree. But this is what we envisage at present, and indeed in our briefing to the President and the CPA, we had highlighted this possibility. This is a crisis that may be long drawn out. We are making these moves now and we may have to make more moves in future. The President and the CPA understood and appreciated that. They are not approving a future draw at this point, but they understood that in approving the draw now, there was also a possibility that the Government may have to go back to the President and the CPA in a year's time to seek a further draw. I am raising this not because we know we are going to do it or because we are committed to doing it, but this is realistically what the assessment is, and the President and the CPA understood that. I have not studied everything that Mr Terry Connor has said. It is a matter of record as to what he actually said of the Jobs Credit.”
“Sir, I thank Mr Low Thia Khiang for his questions. His questions on the reserves are, I think, perfunctory. They do not actually take into account what I have just presented to the House, which has explained quite systematically the process by which we obtained the President's approval for this draw on reserves. I would, nevertheless, go through each of his questions. First, was this somehow a simultaneous turning of the keys – when the first key turns, the second key automatically turns. He used the term "automatic". No, it is not. I have explained in detail. I have even explained the chronology of how we went about it, but the chronology is not of the essence. The point is that the President, advised by the CPA, makes an independent and careful judgment on the Government's case. It is independent. At the end of the day, our system has to rely on trust in the individuals who are appointed to their positions – the individual members of the CPA, the Chairman, Mr J Y Pillay and all the other members – Mr Yong Pung How, Mr Lim Chee Onn – , the President and the people in Government themselves. This is not a wayang. This is about a Government that, in the exigencies of the circumstances, had to craft, within a short period of time, major measures that were in Singapore's interest. We had to then approach the President and the CPA, provide full information and arguments for why we felt that it was necessary to do this now, what the alternatives were, and what could be the consequences of not acting as boldly and decisively in this crisis. And the CPA had to make their evaluation. How does the President come to agree with the Government? It is not a matter of agreeing because it is the Government's case.”
“The size of that is not something we can predetermine but it is a bulwark which we can fall back on. I can assure the Member that it is not the intention to lock up our reserves permanently but it should be used with discretion and care".”
“In fact, most MPs – Mr Ong Kian Min, Mr Matthias Yao, Mrs Josephine Teo, Miss Penny Low, who spoke just before me – have provided strong support for the move to draw on past reserves to fund the two extraordinary measures within the Resilience Package. Ms Irene Ng had asked for assurance that the decision to draw from the reserves was made carefully and was not an over-reaction. Several others, Mr Liang Eng Hwa, Dr Amy Khor, Ms Denise Phua, Dr Lim Wee Kiak and Mr Zainul Abidin Rasheed, have asked what benchmark is being set by this move for future governments by drawing on past reserves in this fashion now, and whether there are clear criteria as to when Government should be allowed to draw on the past reserves. Mr Low Thia Khiang and Mdm Halimah Yacob asked why we had sought the President's agreement to use the past reserves now, rather than exhaust our savings accumulated in the current term. Several Members – Mr Heng Chee How, Mr Low Thia Khiang and Mr Lim Biow Chuan – also asked for clarifications on the process by which the President's approval was sought to draw on past reserves, and the reasons why the President, in consultation with the CPA, agreed to the Government's proposal. Let me address each of these questions. Tapping on our strategic asset Many MPs appreciated that the current global crisis and its impact on Singapore is precisely the type of situation that our past reserves had been accumulated for. This is the sort of thing that we have anticipated many years ago. As then-Finance Minister Dr Richard Hu explained in Parliament in September 2001, "the reserves would be available for use if there should be a major economic dislocation in the world affecting us.”
“The real cost comes in a few years' time when the full impact of the 1% corporate tax rate cut is felt. We estimate about $400 to $500 million per year over the medium term. But that is also when we start deriving the long-term benefits for Singapore, arising from this enhanced competitiveness. Dr Ahmad Magad and Ms Lee Bee Wah asked if we could apply the Corporate Income Tax (CIT) cut for Year of Assessment (YA) 2009, in other words – not for YA 2010 but applied for YA 2009 – which effectively means a retrospective application of the CIT cut for income earned last year. A retrospectively applied CIT cut is in fact equivalent to a tax rebate. To put things in perspective, we are already providing substantial benefits to companies this year. As I mentioned earlier, the Jobs Credit alone is equivalent to a 50% CIT rebate. But, unlike a CIT rebate, the Jobs Credit has a better chance, is designed to have a better chance, of preserving Singaporean jobs. So, large benefits to companies, both through tax measures and Jobs Credit and other measures all making an impact this year. A Resilience Package for maximum impact The Resilience Package, therefore, delivers immediate impact but keeps our focus on measures that build up Singapore for the long term. It enables us to: (i) Do things decisively to provide the economy with quick support; (ii) Do things that at the same time, build up our infrastructure and competitive capabilities; and (iii) Do things which will see us through the current downturn, but also pay off for Singaporeans over the long term. Drawing on reserves: A robust process Let me now turn to the third key theme in the debate which has to do with the draw on past reserves. Many MPs have commented on this.”
“Let me explain this with respect to the two main types of measures that we have undertaken for the long term: Government spending on infrastructure and capabilities; and the tax measures that we are implementing to encourage investment in the downturn and to enhance long-term competitiveness. Government spending We are spending wisely in the short term, to build up long-term infrastructure and capabilities. I agree with Mr Inderjit Singh's point about the need to diversify Government spending, and can assure him that this will, in fact, be the case. Our spending is across the whole range of sectors – transport, housing, education, healthcare and security. We are also continuing with IT projects, eg, MOH's electronic records project, MOE's IT Masterplan, the National Broadband, and so on. The Test Bedding Fund will also seed projects in a whole range of areas, eg, transport systems, etc. Tax measures for long-term competitiveness The corporate tax cut that we have introduced, plus the substantially enhanced reliefs for investments over the next two years, will provide strong encouragement for companies that seek prospects for growth. It is important to do it now, as companies are reconsidering where to base their operations for their next cycle of growth. It will also help in the short term by encouraging companies to keep their operations here and not downsize. I can assure Mr Inderjit Singh, because he was concerned about whether this is taking up a significant part of this year's Budget at the expense of other measures, that the short-term revenue impact of the corporate tax rate cut is not significant. It will be about $70 million in this fiscal year, before building up over the long term.”
“It shows the individual tax liability for a typical upper-middle income family; married man, non-working wife and two children. And as you can see, the effective tax rate for this family is significantly lower than for most other Asia-Pacific countries, and also lower than Hong Kong. It is only at the very top end that the effective tax rates in Hong Kong are still lower than in Singapore. The Government will continue to assess the competitive landscape for talent and see whether we need to make changes down the road in our top PIT rates, while ensuring our overall fiscal position remains sustainable. Immediate impact, lasting benefits The third theme is about making sure that we are building confidence for the future. We want to achieve immediate impact for this Budget but we also want lasting benefits. I appreciate the comments made by several MPs – Mdm Halimah Yacob, Ms Jessica Tan, Mr Zaqy Mohamad and Mr Michael Palmer and others – that we should not lose our focus on Singapore's long-term future, even as we grapple with the problems of the short term. We have to set our sights on the recovery and the years beyond, and start preparing now for recovery and the next phase of growth. The Resilience Package cannot merely be about survival. But our focus on preparing for recovery and the long term does not come at the expense of the short term. What we are in fact doing is to spend more and cut taxes now, not just to meet short-term needs, but also to strengthen the chances of recovery and strengthen Singapore for the long term. This is a key point in how we have designed the Budget – make an impact in the short term with measures that prepare Singapore for the long term. It is a key point in the design of this Budget.”
“5 billion, it would have meant reducing the PIT rebate percentage from 20% to 8% for all taxpayers. This would have meant less for the middle and upper-middle income groups in order to give more to the top most brackets. So that is the first reason – it would have benefited the very small proportion of taxpayers and have had a significant impact on revenues, and something would have had to give. The second reason is that a larger PIT rebate would not give us as much bang-for-the-buck as a measure to boost demand. Unlike the lower and middle-income groups, the top income groups tend to save most of the benefits they receive. This is one of the least contested economic facts all over the world. The marginal propensity to consume amongst the rich is low, and conversely, it is very high amongst the lower-income groups. The lower-income groups tend to be cash constrained and they spend most of the additional benefits that we hand out. In fact in the US, last year's PIT rebates were an important fiscal initiative. They were hoping to stimulate the economy in the third quarter and they were hoping that the PIT rebate they gave would lead to a "kick" in consumption in the third quarter. They eventually found that only 15% of the rebates were eventually spent by consumers, and amongst the higher income groups, this percentage was even lower. Some MPs such as Ms Lee Bee Wah also felt that we should have cut PIT rates this year. With our current PIT rate and schedule, our personal income tax regime is already very competitive and highly progressive. Compared to Hong Kong, the vast majority of Singaporean taxpayers pay lower taxes. This chart was put together by PWC, published in the Business Times on 23rd January.”
“The bottom 60% of households will receive benefits worth 6% of their incomes on average. We have calibrated our measures. We have calibrated each of the direct measures we are taking to help households so as to provide meaningful support in a difficult year. But we are also mindful of the need to avoid entrenching a system of providing significant benefits to households every year. As Mr Chiam See Tong rightly warned yesterday, we must avoid an inadvertent drift towards a welfare society. Personal income tax Personal income tax came up at many points of the debate. Several Members, including Ms Lee Bee Wah and Senior Minister of State Zainul Abidin Rasheed, have asked for a larger Personal Income Tax (PIT) rebate, through an increase in the cap from the current $2,000. Those who argued for this felt that it would help to boost demand. There are two reasons why we capped the 20% PIT rebate at $2,000. First, increasing the cap would only benefit a small proportion of the population but at a high cost to revenues. Only the top 5% of our resident labour force is affected by the cap on the PIT rebate of $2,000. The middle class, in fact even the upper-middle class, is not affected by this cap. Removing the cap would be costly to revenues. Even just raising it from $2,000 to $3,000 would have cost us an additional $100 million. And if we had no cap, as Mr Inderjit Singh proposed, it would have more than doubled the cost from about $500 million to $1.1 billion. That means we would have had to either significantly reduce some of the other measures in the Budget package, or we would have to reduce the income tax rebate percentage. If we lifted the cap completely and wanted to stay within the budget of about $0.”
“The proposal that the new US Administration had raised involved a tax credit for businesses for each new job that was created and it was dropped because it would have been extremely difficult to implement. There was no way of telling which was a new job, as distinct from a job created after retrenching someone and getting rid of an old job. Second, if the US were to do something as broad-based as our Jobs Credit, which applies not just to new jobs but to all existing jobs, it would also have cost them a whole lot more. In fact, it would have taken up a very significant share of the package that they are planning. Direct help to households Next, the second objective – direct help to households. Some Members, including Mdm Cynthia Phua, Mr Zainul Abidin Rasheed and Mr Lim Biow Chuan, asked if we could provide more direct support to households. Mdm Ho Geok Choo further suggested that the doubling the amount of the GST Credits is too timid and proposed quadrupling the amount. The main support that we are really providing to Singaporeans this year is in the broader measures in the Resilience Package that will support the economy, help them secure their jobs and wages, and keep their full CPF contributions. The direct support we are providing to households is also necessary, because this will be a difficult year for most. But this is only a complementary strategy; a strategy that is complementary to the Jobs Credit and other broader measures we are taking to support the economy. Nevertheless, we are providing a sizeable $2.6 billion package of relief for households in the Resilience Package. We have also weighted the transfers within this $2.6 billion, in favour of the middle and lower-income groups. They have less to fall back on in difficult times.”