The Importance of Economic Capture and Government Surpluses

In my last couple of posts, we covered the concepts of economic capture, the size, and duration of the government budget surpluses. In short, the government of Singapore is capturing an enormous piece of economic activity rather than allowing its people to enjoy the fruits of their labors.  While this economic capture of financial resources by the government manifests itself in the lowest rates of spending on health and education it also matters for a much more obvious reason, which I will cover today.

Temasek was formed in 1974 and claims that to date it has earned an averaged annualized rate of return of 17%.  Given that it manages $193 billion SGD as of its last annual report ending March 31, 2011, this would imply that it began operation with a one time investment of approximately $550 million SGD.  Temasek has stated that it began operation with $375 million SGD which given measurement error, is a very plausible number.  So far, the numbers come close to matching up.

We then need to ask, where Temasek got this $375-550 million SGD to begin its investment portfolio.  Well according to the Singapore Ministry of Finance and the IMF, from 1969 to 1973, the government managed a total accumulated surplus of….(wait for it), $551 million SGD.  These are numbers I like to see as they match up quite closely.

However, if we add in GIC numbers, everything begins to fall apart.  As I have already covered in previous posts, we actually know pretty closely how much GIC manages.  In March 2011, with Temasek declaring its holding at $193 billion SGD and the government holding cash of $125 billion SGD, the balance sheet reveals a GIC upper bound estimate of $387 billion SGD, pretty close to outside estimates.

So if GIC earned is 7% annually as it claims since 1981, this would imply that GIC began operation with a one time investment of approximately $50 billion SGD.  Well according to the Singaporean MOF, from 1974 to 1981, Singapore ran accumulated budget surpluses of $2.5 billion SGD.  This tells us that Singapore must have been adding to GIC’s capital base kind of like normal people put money in a savings account or in their CPF and earn interest.

So since we know that Singapore must have been adding to GIC capital through the years, lets consider how much of the budget surplus would need to be placed into GIC to arrive at $387 billion SGD.  If the government of Singapore did nothing more than place its operational surpluses into GIC and earn the 7% it claims, it could have stopped saving from its operational surpluses in 1998.  Let me put that another way, if all the Singapore government did was place its operational surpluses in GIC and earn 7%, then it should have only need to invest through 1998.  The more than $150 billion SGD that is recorded as operational surplus from 1999 onwards cannot be accounted for if GIC is earning the rate of return it claims.

What makes this even more concerning is that not only was the government running enormous surpluses that do not appear to have earned the rate of return claimed by GIC, but it was also borrowing enormous sums of money.  Singapore now has a debt to GDP ratio of approximately 100% or $331 billion SGD.  If this money was being invested as it was borrowed, then the sums under management at GIC should be staggering.  From previous posts, it should be in the trillions.

So let me explain why economic capture, government surpluses, and low spending levels matter.  The only plausible conclusion is that large amounts of money are unaccounted for in some manner.  The most likely explanation is that investment returns are not equal to GIC and Temasek claims.  In other words, the economic capture through structural surpluses via the lowest levels of spending in the world, were being used to cover up investment losses.

If GIC was earning what it claimed, then Singapore debt levels should be much smaller and operational surpluses would have been much smaller. The numbers simply cannot be reconciled.

If GIC and Temasek returns are what they claim, then the government should have no problem presenting financial data to support their claims including yearly transfers.  If they refuse to provide this data, this should concern Singaporeans and financial markets who depend on the transparency and reliability of the data provided by the government.

The government has captured the financial resources of its people to cover financial mismanagement. By running surpluses at the expense of its health and education budget, it has been able to hide its own financial failures.

The Importance of Economic Capture and Government Surpluses

In my last couple of posts, we covered the concepts of economic capture, the size, and duration of the government budget surpluses.  In short, the government of Singapore is capturing an enormous piece of economic activity rather than allowing its people to enjoy the fruits of their labors.  While this economic capture of financial resources by the government manifests itself in the lowest rates of spending on health and education it also matters for a much more obvious reason, which I will cover today.

Temasek was formed in 1974 and claims that to date it has earned an averaged annualized rate of return of 17%.  Given that it manages $193 billion SGD as of its last annual report ending March 31, 2011, this would imply that it began operation with a one time investment of approximately $550 million SGD.  Temasek has stated that it began operation with $375 million SGD which given measurement error, is a very plausible number.  So far, the numbers come close to matching up.

We then need to ask, where Temasek got this $375-550 million SGD to begin its investment portfolio.  Well according to the Singapore Ministry of Finance and the IMF, from 1969 to 1973, the government managed a total accumulated surplus of….(wait for it), $551 million SGD.  These are numbers I like to see as they match up quite closely.

However, if we add in GIC numbers, everything begins to fall apart.  As I have already covered in previous posts, we actually know pretty closely how much GIC manages.  In March 2011, with Temasek declaring its holding at $193 billion SGD and the government holding cash of $125 billion SGD, the balance sheet reveals a GIC upper bound estimate of $387 billion SGD, pretty close to outside estimates.

So if GIC earned is 7% annually as it claims since 1981, this would imply that GIC began operation with a one time investment of approximately $50 billion SGD.  Well according to the Singaporean MOF, from 1974 to 1981, Singapore ran accumulated budget surpluses of $2.5 billion SGD.  This tells us that Singapore must have been adding to GIC’s capital base kind of like normal people put money in a savings account or in their CPF and earn interest.

So since we know that Singapore must have been adding to GIC capital through the years, lets consider how much of the budget surplus would need to be placed into GIC to arrive at $387 billion SGD.  If the government of Singapore did nothing more than place its operational surpluses into GIC and earn the 7% it claims, it could have stopped saving from its operational surpluses in 1998.  Let me put that another way, if all the Singapore government did was place its operational surpluses in GIC and earn 7%, then it should have only need to invest through 1998.  The more than $150 billion SGD that is recorded as operational surplus from 1999 onwards cannot be accounted for if GIC is earning the rate of return it claims.

What makes this even more concerning is that not only was the government running enormous surpluses that do not appear to have earned the rate of return claimed by GIC, but it was also borrowing enormous sums of money.  Singapore now has a debt to GDP ratio of approximately 100% or $331 billion SGD.  If this money was being invested as it was borrowed, then the sums under management at GIC should be staggering.  From previous posts, it should be in the trillions.

So let me explain why economic capture, government surpluses, and low spending levels matter.  The only plausible conclusion is that large amounts of money are un accounted for in some manner.  The most likely explanation is that investment returns are not equal to GIC and Temasek claims.  In other words, the economic capture through structural surpluses via the lowest levels of spending in the world, were being used to cover up investment losses.

If GIC was earning what it claimed, then Singapore debt levels should be much smaller and operational surpluses would have been much smaller.  The numbers simply cannot be reconciled.

If GIC and Temasek returns are what they claim, then the government should have no problem presenting financial data to support their claims including yearly transfers.  If they refuse to provide this data, this should concern Singaporeans  and financial markets who depend on the transparency and reliability of the data provided by the government.

The government has captured the financial resources of its people to cover financial mismanagement.   By running surpluses at the expense of its health and education budget, it has been able to hide its own financial failures.

A List of Why I am Concerned About the Chinese Economy

If you aren’t worried about the Chinese economy, you aren’t paying attention.  Official government numbers show a significant decline in the Chinese economy and the official numbers are even worse.

Patrick Chovanec an economics and finance professor at Tsinghua University in Beijing has compiled a great list of recent news stories detailing the bubbling problems.

I have two favorite stories.  First, is the Chinese bank regulator that says the non-preforming loan figures published by Chinese banks “don’t add up”.  If the Chinese bank regulator is saying Chinese bank data does add up, you know its bad.  Second, the equipment manufacturer that sells machines on complete credit to people and companies who then use the machine as collateral to go secure additional loans.  Both these stories have all the hallmarks of an economy in trouble.

Singapore isn’t the only country in Asia with economic and financial figures that don’t add up.

Singaporeans deserve better than people of Myanmar and Bangladesh

Singapore, SWFs, and Other Countries: Part I

A common question is: how does Singapore compare to other countries with regards to its finances both other sovereign wealth fund countries and other countries.  Let’s examine that question as they do nothing but further demonstrate fallacies about Singaporean public finances.

From 1992 to 2012, Singapore ran the third highest average government budget surplus as a percentage of GDP.  The top ten countries by average budget surplus from 1992 to 2012 are below.

There are two things that make Singapore’s appearance in this table so interesting. First, Singapore is the only non-oil exporter on this table. The other countries in the table are the major oil exporters like Norway, Saudi Arabia, Kuwait, and the United Arab Emirates but also lesser known oil countries like Angola and East Timor.  These countries run government surpluses because they receive oil royalties from the extraction of oil not extraction of revenue from its people.

The second reason Singaporeans appearance on this is so interesting is how it has decided to spend the revenue it does raise.  If we look at the third column average government expenditure as a percentage of GDP, Singapore ranks last on the table.  In other words, of the countries with large structural budget surplus, Singapore spends the least amount of money on its citizen of these countries.

However, I can already hear the complaints that I am making an unfair comparison because these countries have so much oil money to spend on their citizens. This is a reasonable concern about whether I am biasing the data so let’s expand our comparison to all other countries in the world.  Below is a Table of Singaporean and other countries with similar levels of government expenditure as a percentage of GDP.

Singapore ranks second to last in the world of government expenditure as a percentage of GDP.  In terms of public expenditure as a percentage of GDP, Singapore ranks ahead ofonly Myanmar and  behind such caring socialist paradises as Haiti, Sudan, and Bangladesh.

I am personally a strong believer in the free market with healthy competition but what we witness with Singapore is not limited government.  Instead, Singaporean public finances betray a modern day developed economy extraction of wealth from its people.  Singapore has built its sovereign wealth funds by refusing to deliver public goods and services to its citizens.

Oil dependent countries run large budget surpluses because of the enormous ongoing royalties they receive from resource extraction. The government of Singapore is running public surpluses not because the tax burden is incredibly high but because the spending on its people is incredibly low.  Singapore runs large budget deficits because it over taxes and under delivers public goods and services.  Singapore is treating its people as sources of wealth extraction. Rather, people should be considered resources.

The people of Singapore deserve better than Myanmar and Bangladesh.

Singapore, SWFs, and Other Countries: Part I

A common question is: how does Singapore compare to other countries with regards to its finances both other sovereign wealth fund countries and other countries.  Let’s examine that question as they do nothing but further demonstrate fallacies about Singaporean public finances.

From 1992 to 2012, Singapore ran the third highest average government budget surplus as a percentage of GDP.  The top ten countries by average budget surplus from 1992 to 2012 are below.

There are two things that make Singapore’s appearance in this table so interesting.  First, Singapore is the only non-oil exporter on this table.  The other countries in the table are the major oil exporters like Norway, Saudi Arabia, Kuwait, and the United Arab Emirates but also lesser known oil countries like Angola and East Timor.  These countries run government surpluses because they receive oil royalties from the extraction of oil not extraction of revenue from its people.

The second reason Singaporeans appearance on this is so interesting is how it has decided to spend the revenue it does raise.  If we look at the third column average government expenditure as a percentage of GDP, Singapore ranks last on the table.  In other words, of the countries with large structural budget surplus, Singapore spends the least amount of money on its citizen of these countries.

However, I can already hear the complaints that I am making an unfair comparison because these countries have so much oil money to spend on their citizens.  This is a reasonable concern about whether I am biasing the data so let’s expand our comparison to all other countries in the world.  Below is a Table of Singaporean and other countries with similar levels of government expenditure as a percentage of GDP.

Singapore ranks second to last in the world of government expenditure as a percentage of GDP.  In terms of public expenditure as a percentage of GDP, Singapore ranks ahead of only Myanmar and  behind such caring socialist paradises as Haiti, Sudan, and Bangladesh.

I am personally a strong believer in the free market with healthy competition but what we witness with Singapore is not limited government.  Instead, Singaporean public finances betray a modern day developed economy extraction of wealth from its people.  Singapore has built its sovereign wealthf funds by refusing to deliver public goods and services to its citizens.

Oil dependent countries run large budget surpluses because of the enormous ongoing royalties they receive from resource extraction.  The government of Singapore is running public surpluses not because the tax burden is incredibly high but because the spending on its people is incredibly low.  Singapore runs large budget deficits because it over taxes and under delivers public goods and services.  Singapore is treating its people as sources of wealth extraction.  Rather, people should be considered resources.

The people of Singapore deserve better than Myanmar and Bangladesh.

Singapore builds its SWF not through shrewd investments

People in around the world, though especially in Asia, talk about sovereign wealth funds as if they are the same the world over.  However, there is one very significant dividing line in the type of sovereign wealth funds and it has profound implications for both economic policy and political theory.

The first sovereign wealth funds were created by oil rich Gulf states to invest their structural surplus in European and North American financial markets. By taking their long term structural current account surplus and investing foreign markets, the oil exporting Gulf states were limiting inflationary pressures and currency appreciation. So far, export focused Asian countries with sovereign wealth funds like China and Singapore have been following the same policies.

There is however one major difference between the oil rich Gulf states that first created sovereign wealth funds and the manufacturing focused east Asian states that followed in their foot steps.  When an oil exporting country takes oil out of the ground, sells it, and deposits the proceeds in their sovereign wealth fund, there is no net change in wealth. Just because the oil is in the ground rather than sold with money in the bank to show for it, does not make that country any more or less wealthy.  In fact, they would probably become more wealthy by keeping oil in the ground rather than selling it now.

The financial term used is that the country is “monetizing” (turning oil into money) their existing national wealth. Everyone focuses on the size of Abu Dhabi’s sovereign wealth fund, but Abu Dhabi is not any wealthier because their sovereign wealth fund has money in the bank rather than oil in the ground. A good comparison would be Bill Gates. If Bill Gates sells some of Microsoft shares turning them into cash, he is no more wealthy with cash rather than shares of Microsoft. His portfolio allocation has changed but his wealth is unchanged.

Countries like Singapore however do not have pre-existing national wealth in the form of assets like oil to turn into money.  So where does Singapore get its “national wealth”?  From the financial capture of the economic productivity of its population.  As I have covered at length in the previous postings, Singapore has run a long term structural budget surplus but the relative enormity needs to be put into some perspective.  Let me give you a a couple of ways to think about how much the government of Singapore has been “capturing” from its own population to use for its own wealth purposes.

1.  From 1990 to 2012, the average government revenue to government expenditure ratio according to the IMF averaged 2.2.  In words, that means that for every $1 SGD it was taking in from its people, it was only spending 45 cents!  Less than half of all government revenue was actually spent on the people.

2.  Consider the concept of “financial capture” or how much of the economy the government uses for its own purposes.  If we add net government borrowing, government revenue, and the increase in foreign exchange reserves, the government since 1990 has on average captured 44% of GDP.  This average 44% of GDP has been saved in vehicles like foreign exchange reserves, GIC, and Temasek.  In other words, the government was capturing for its use and control 44% of the Singaporean economy every year since 1990.

3.  It then becomes reasonable to ask how well did the Singaporean government did with that 44% of GDP the captured every year.  To answer this question, let’s use a narrower definition of economic capture.  Instead of using total government revenue which may include dividends and the like from Temasek or GIC, let’s use the operational government surplus representing only ongoing revenue from taxes and fees minus expenditures for government operations.  From 1990 to 2010 alone, the government of Singapore captured in the form of operational government budget surpluses, foreign exchange increases, and borrowing $980 billion SGD. According to public Singapore records detailing their balance sheet and MAS reserves, Singapore controls assets of……$993 billion SGD.  Given the Singapore governments 21 years of economic capture from 1990 to 2010 and their resulting assets under management, that would give them an annualized rate of return of .0007%.  In other words, Singapore has returned less than 1/10th of 1% annually since 1990.

4.  The enormous difference reveals itself in very real ways.  While there are very real problems with excessive redistribution and a lack of entrepreneurial spirit in oil rich countries, the political philosophy of economic capture versus monetizing natural resource wealth reveals itself in how the state treats its own people.  Here is a figure that illustrates the difference of how economic capture treats its people.

Comparing SWF State Spending on Health and Education.

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According to the World Development Indicators from the World Bank, when we compare Singapore to other major SWF countries with more than a few years in existence, the differences are stark.  Singapore ranks last in education spending and last in public health expenditure. The government of Singapore is capturing the financial benefits of its citizens productivity and not providing the public goods and services its people have every right to expect.

Whereas oil rich states have enormous sovereign wealth funds because they won the geographic lottery, Singapore created enormous sovereign wealth funds by capturing the economic productivity of its people.

The government of Singapore has built sovereign wealth funds not through natural resource wealth or shrewd investments, but capturing the financial wealth of the people of Singapore. The people of Singapore work for the government.

The Different Sovereign Wealth Funds and Their Implications

People around the world, though especially in Asia, talk about sovereign wealth funds as if they are the same the world over.  However, there is one very significant dividing line in the type of sovereign wealth funds and it has profound implications for both economic policy and political theory.

The first sovereign wealth funds were created by oil rich Gulf states to invest their structural surplus in European and North American financial markets.  By taking their long term structural current account surplus and investing foreign markets, the oil exporting Gulf states were limiting inflationary pressures and currency appreciation.  So far, export focused Asian countries with sovereign wealth funds like China and Singapore have been following the same policies.

There is however one major difference between the oil rich Gulf states that first created sovereign wealth funds and the manufacturing focused east Asian states that followed in their foot steps.  When an oil exporting country takes oil out of the ground, sells it, and deposits the proceeds in their sovereign wealth fund, there is no net change in wealth. Just because the oil is in the ground rather than sold with money in the bank to show for it, does not make that country any more or less wealthy.  In fact, they would probably become more wealthy by keeping oil in the ground rather than selling it now.

The financial term used is that the country is “monetizing” (turning oil into money) their existing national wealth.  Everyone focuses on the size of Abu Dhabi’s sovereign wealth fund, but Abu Dhabi is not any wealthier because their sovereign wealth fund has money in the bank rather than oil in the ground.  A good comparison would be Bill Gates.  If Bill Gates sells some of Microsoft shares turning them into cash, he is no more wealthy with cash rather than shares of Microsoft.  His portfolio allocation has changed but his wealth is unchanged.

Countries like Singapore however do not have pre-existing national wealth in the form of assets like oil to turn into money.  So where does Singapore get its “national wealth”?  From the financial capture of the economic productivity of its population.  As I have covered at length in the previous postings, Singapore has run a long term structural budget surplus but the relative enormity needs to be put into some perspective.  Let me give you a a couple of ways to think about how much the government of Singapore has been “capturing” from its own population to use for its own wealth purposes.

1.  From 1990 to 2012, the average government revenue to government expenditure ratio according to the IMF averaged 2.2.  In words, that means that for every $1 SGD it was taking in from its people, it was only spending 45 cents!  Less than half of all government revenue was actually spent on the people.

2.  Consider the concept of “financial capture” or how much of the economy the government uses for its own purposes.  If we add net government borrowing, government revenue, and the increase in foreign exchange reserves, the government since 1990 has on average captured 44% of GDP.  This average 44% of GDP has been saved in vehicles like foreign exchange reserves, GIC, and Temasek.  In other words, the government was capturing for its use and control 44% of the Singaporean economy every year since 1990.

3.  It then becomes reasonable to ask how well did the Singaporean government did with that 44% of GDP the captured every year.  To answer this question, let’s use a narrower definition of economic capture.  Instead of using total government revenue which may include dividends and the like from Temasek or GIC, let’s use the operational government surplus representing only ongoing revenue from taxes and fees minus expenditures for government operations.  From 1990 to 2010 alone, the government of Singapore captured in the form of operational government budget surpluses, foreign exchange increases, and borrowing $980 billion SGD.  According to public Singapore records detailing their balance sheet and MAS reserves, Singapore controls assets of……$993 billion SGD.  Given the Singapore governments 21 years of economic capture from 1990 to 2010 and their resulting assets under management, that would give them an annualized rate of return of .0007%.  In other words, Singapore has returned less than 1/10th of 1% annually since 1990.

4.  The enormous difference reveals itself in very real ways.  While there are very real problems with excessive redistribution and a lack of entrepreneurial spirit in oil rich countries, the political philosophy of economic capture versus monetizing natural resource wealth reveals itself in how the state treats its own people.  Here is a figure that illustrates the difference of how economic capture treats its people.

Comparing SWF State Spending on Health and Education

According to the World Development Indicators from the World Bank, when we compare Singapore to other major SWF countries with more than a few years in existence, the differences are stark.  Singapore ranks last in education spending and last in public health expenditure.  The government of Singapore is capturing the financial benefits of its citizens productivity and not providing the public goods and services its people have every right to expect.

Whereas oil rich states have enormous sovereign wealth funds because they won the geographic lottery, Singapore created enormous sovereign wealth funds by capturing the economic productivity of its people.

The government of Singapore has built sovereign wealth funds not through natural resource wealth or shrewd investments, but capturing the financial wealth of the people of Singapore.  The people of Singapore work for the government.

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My Only Vested Interest is I like Singapore

I write this not because I have to but because I want to.  I have received emails and seen posts on my articles that question what is my vested interest in writing my articles about Singapore, GIC, and Temasek.  I want to respond to this.

I have absolutely no vested interest in Singapore.

I have no financial holdings, investments, or monetary interest in anyway related to Singapore.  My personal investments are in straight, plain, and boring, vanilla index style funds.

I do not work for, advise, or consult for any government, political party, company, financial institution, or person about Singapore. I have received no compensation of any kind for my work on Singapore, monetary or otherwise.

I am not affiliated with any person, organization, political party, or government.  Let me be as universal as possible in my declaration:  I have no vested interest in Singapore.

I have read that because I am an American I must seek to impose American style cowboy capitalism and financial carnage on Singapore.  I have read that because I work in China for Peking University that I am probably a communist agent seeking to destabilize Singapore. Do not worry, I have found these charges comical more than concerning.  (I wonder if I can sue for defamation?)

I have visited Singapore a couple of times and always found it a beautiful city.  I actually had to turn down a fellowship at the National University of Singapore to accept my current position. Ironically, if I had accepted the fellowship at NUS, I would have been writing the book that has essentially now banned me from visiting Singapore. I say all this because I like Singapore.

Unfortunately, I have this crazy idea that governments should be responsible to the people. Whether it is the United States, Chinese, or Singaporean government, I believe leaders should be accountable and transparent to the people of their country. Governments do not have unlimited powers. I believe that the government of Singapore should be accountable and transparent with the people of Singapore. I believe that the people of Singapore have a right to demand answers from their government.

The government works for the people. The people do not work for the government.

Singapore, Inc.: Just When You Thought it Couldn’t Get Any Worse

This past weekend, I had the pleasure of meeting with Kenneth Jeyaretnam, the Secretary General of the Reform Party, who wanted to better understand exactly what I was claiming about Singaporean public finances and the factual basis for such claims.

A former banker and hedge fund manager, he has spent his professional life analyzing finances and numbers. Skeptical of my analysis about the perilous nature of Singaporean public finances and the blatant misrepresentation with regards to Temasek and GIC, he quizzed me about the numbers and whether I had considered different scenarios that might explain the discrepancy. Near the end of our time together having exhausted the numbers and possibilities, he simply sits up in his chair and says “well, this is a problem.”

However, since this meeting, I have come to realize that the problems are significantly bigger than even I initially believed. One of the main questions from people is whether the “surpluses” reported by Singapore are actually surpluses. Thanks to my own additional searches and data provided by Kenneth Jeyaretnam, the data looks even worse than expected. Let me explain why.

We now have three sources that report Singaporean public surpluses. First, we have IMF data from the International Financial Statistics database on the operational revenue, expenditures, and surpluses. This data goes back to 1963. Second, we have budget revenue, expenditure, and surplus data from the Statistics Singapore dating back to 1980. Third, we have the IMF general government revenue, expenditure, and surpluses dating back to 1990. These numbers provide us a good basis for comparison.

I need to make a brief detour to explain an important point about these numbers. The first set of numbers from the IMF records “operational” revenue, expenditure, and surpluses. The second set of numbers from the IMF records “general” revenue, expenditure, and surpluses. Think of the difference between these two numbers like this. ”Operational” revenue records how much money you make at your job (revenue), how much you spend (rent, car, food as expenditure), and how much you save from your job (surplus). ”General” revenue also records income from your past savings.

So for instance, if you have $200,000 in an investment fund which makes you 10% for the year or $20,000 and you made $50,000 at your job, your “operational” revenue would be $50,000 and your “general” revenue would be $70,000 ($50,000+$20,000). Understanding the difference will help understand Singaporean public finances.

When we compare Singaporean budget numbers to IMF operational and general budget numbers, the differences become very important. According to Statistics Singapore, from 1980 to 2010, the government ran a total surplus of $282 billion SGD. According to the IMF operational budget numbers, Singapore ran a total surplus of $270 billion SGD. Those two numbers are pretty close and in line with the previous data I have used. So far, so good.

However, according to the IMF general government numbers which is given to the IMF by the Singaporean Ministry of Finance, from 1990 to 2010, the Singaporean accumulated surplus totaled $429 billion SGD. That general number which includes revenues from historical reserves (Temasek and GIC) is more than 50% larger than the operational budget surplus!!

There are a couple of points that need to be mentioned. First, from 2003 to 2010 the differences between the three different surplus numbers is quite small. However, from 1990 to 2002, the differences between the IMF general government surplus and the other budget numbers are enormous. From 1990 to 2002, the Singaporean government claimed to have an accumulated surplus of $151 billion SGD while the IMF general surplus totaled $311 billion SGD!!

So what accounts for the enormous difference? A simple accounting policy change. To avoid publicizing its revenue from historical reserves (Temasek and GIC), the Singaporean government only published domestically its operational surplus which explains why it so closely matches the IMF operational surplus. However, it shifted to the IMF standard for reporting government revenue in 2003 which covers all government revenue including revenue from such factors as Temasek and GIC. This means that the Singaporean government from 1990 to 2002 was deliberately and systematically under reporting its revenue to its citizens in its domestic accounts.

Second, this drastically, DRASTICALLY, changes the estimate for how much money Singapore, Inc. should have sitting in the bank. If we only change our estimates to use the IMF numbers which cover general revenue back to 1990, the Singapore budget numbers from 1980 to 1989, and the increases in borrowing from 1980 to 2010, then use the GIC reported earnings of 7% over this time frame, Singapore, Inc. should be sitting on $2.1 trillion SGD. Let me repeat that in case you are not absolutely shocked.

Using Singaporean provided numbers on budget surpluses, borrowing, and returns: Singapore, Inc. should have more than $2.1 trillion SGD in the bank right now. TRILLION. RIGHT NOW!! It currently reports only about $700 billion SGD.

This represents either the largest single example of financial mismanagement, fraud, government obfuscation, or graft in human history. Whether this money is not publicly reported, gone to money heaven, or is sitting in a Swiss bank account, the discrepancies are enormous and appalling.

Hopefully, Kenneth Jeyaretnam and the people of Singapore will find answers from their so-called democratic leaders. This level of financial obfuscation cannot be allowed to continue in a supposed democratic and transparent country.

Rather than continuing to ignore the discrepancies in their own data, we can only hope that the Singaporean government will move to address these concerns.

Disclaimer: Kenneth Jeyaretnam requested a meeting to better understand my research and supporting data.  I do not speak for or represent the Reform Party.  I am not affiliated with any Singaporean political party or stakeholder but will gladly assist any group, party, or individual seeking to better understand the issues.