Singapore public finances contain the largest unexplained financial discrepancies in human history. That may sound like a grandiose rhetorical bombast, but it is completely and entirely accurate description of existing data. Using nothing more complex that addition, subtraction, compounding interest, and official Singaporean public financial records, anyone can easily see that enormous discrepancies exist.
The financial irregularities in Singaporean financials are easy to spot when attempting to simply accept all their claims as true and valid. It is a straightforward mathematical impossibility that all their claims about their finances are true. Let us present the fundamentals of what Singapore is claiming.
- From 1974 to 2014, Singapore enjoyed operational surpluses totaling $369 billion SGD.
- From 1974 to 2014, Singapore increased public indebtedness from $5 billion SGD to approximately $388 billion SGD. Singapore claims that this was for investment purposes and given the operational surpluses, it had no need to be consumed via public expenditure.
- From 1974 to 2014, Singapore enjoyed total free cash flow from operational surplus and net liability incurrence, totaling $822 billion SGD.
- From 1974 to 2014, Temasek Holdings claimed an annualized 16% return beginning with a $374 million SGD portfolio value at inception.
- For most of its existence, the Government Investment Corporation of Singapore has claimed a long term annualized return of 7% in USD terms.
- The Singapore government lists financial assets of $834 billion SGD on its public balance sheet.
Those are the facts that the Singaporean government claims to be true. Without knowing anything about finance or conducting in depth analysis everyone should find two claims by Singapore completely contradictory: if Singapore enjoyed such free cash flow of $822 billion SGD for 41 years, how can its claims to produce stellar to world beating investment returns be reconciled with their declaration of only $834 billion in financial assets?
Using conservative estimates that account for debt servicing costs, currency losses from USD returns, and matching existing declared government cash holdings with the assumption that cash earns no return, if we accept Temasek and GIC claims about their returns along with the declared financial assets on the public balance sheet there remains a $670 billion SGD or $499 billion USD discrepancy. Using a slightly less conservative assumption on cash holdings produces a discrepancy, while still using the claims of the Singaporean government, of $848 billion SGD or $631 billion USD.
It must be strongly emphasized that these estimates are produced using official Singapore financial data and assuming that the claims of the Singapore government, Temasek, and GIC are true and accurate. If the claims by the Singapore government and its related entities are to be believed, then enormous discrepancies exist what their declared assets are and what they should have. It belies common sense that $822 billion SGD can be invested over 41 years and produce only $834 bilion SGD even after accounting for debt service and currency losses.
In the days and weeks ahead, I will be writing extensively on Singaporean public finances taking different parts of the data, entities, and key official involved to provide clear evidence of the discrepancy. This will include a large amount of collected data which will be released for anyone to review. This will include evidence of how key Singaporeans have benefited enormously from this flow of money, historical examples of financial impropriety, and raise serious questions about ongoing financial transfers.
Based upon all available evidence, while it may seem rhetorical flourish, all existing evidence indicates that Singapore is sitting on the largest unexplained discrepancies ever.
any other information on the quality of assets?
Prof Balding, Please take a look of the comments to your piece which is posted in TREmeritus.com:
http://www.tremeritus.com/2015/06/25/the-largest-financial-discrepancies-in-spore-ever/
In particular, there is one comment which you may like to look into, which I repeated here for your convenience:
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Chris K:
June 25, 2015 at 4:36 pm (Quote)
Oh boy, here we go again with Dr. Balding whose analysis even diehard anti-PAP poster @ Oxygen (I agreed with u, Oxy) had problems with.
Dr. Balding may have misread the official financial data. The number 834b came from the Statement of Assets and Liabilities and it pertains only to deposits, quoted and unquoted securities, i.e. the assets on the government balance sheet managed by GIC. It DOES NOT INCLUDE the assets of Fifth Schedule Companies, i.e. MAS and Temasek. That reported 834b is not all the reserves of the nation.
Dr. Balding did not disclose the rates he used in calculating the alleged discrepancy. But the sum of Temasek’s balance sheet of 223b and MAS’ OFR of 340b explains most if not all of the discrepancy. Any residual discrepancies will be due to the Net Investment Return Contribution, the constitution rule governing the spending of returns and, undisclosed, past draw down of reserves for land acquisition and development which Mr. Tharman said is “investment in non-financial assets” not actual spending of reserves.
Besides, if Dr. Balding took the trouble to analyse the NIRC – he should realize that the dividends of 2.7b from Temasek and the 5.8b from 50% of the long term real returns of the NET ASSETS of GIC and MAS which adds up to 8.5b of NIRC in the budget, could not possibly be derived from only $834b which included $388b of debt-funded (CPF and SGS) assets which are excluded from the NIRC.
I totally agree that the issue is transparency but it is not as if it is completely non-transparent. One has to know where to look for the data, how to analyse it with a level head and most of all avoid over-reaching a pre-conceived conclusion. The real trouble with the reserves is not that “they are gone”, “CPF is bankrupt” etc etc ad nauseam but that the reserves are actually so huge that it allowed the govt to follow the path of least resistance in its policy choices rather than face the Hard Truths which is that the huge reserves are a reflection of the depletion of household balance sheet through high real estate prices, low rates of return on CPF and low social spending.
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One more comment from TREmeritus worth some consideration:
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Chris K:
June 25, 2015 at 5:22 pm (Quote)
” Comment by ‘sure or not’: If our government finances had any discrepancy, the IMF and World Bank would have pointed it out much earlier. The fact that they did not means our government finances are completely accurate. We are not like Greece who fudge their data.”
You are not wrong to say that because the IMF and World Bank (they share the same database) know our government finances better than what the government lets Singaporeans know. The discrepancy lies in how the govt presents its budget to the public. On the revenue side it excludes what they regard as returns on reserves – by this is meant the returns earned on financial assets and the realization of value when the government sells land to build HDB, private condos, factories, offices, shopping malls etc. But these numbers are disclosed to the IMF – that is why when Mr. Tharman announced a budget deficit of 5b in 2013 that is only the operating financial position. The real aggregate government position is a surplus of over 25b
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Here is another comment found in TREmeritus:
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Chris K:
June 26, 2015 at 3:57 am (Quote)
” Comment by Independent_View: All the rest of his points may be debatable as the accounting numbers could be attributed to some losses or transfers.Only point no. 4, is the indisputable smoking gun: From 1974 to 2014, Temasek Holdings claimed an annualized 16% return beginning with a $374 million SGD portfolio value at inception.If this statement is true with 16% annualized returns every year from 1974 to 2014; then this is an obvious red flag amounting to high possibility of fraud!Even Bernie Madoff promised his investors a consistent return of only around 10% every year; and he was running a Ponzi for more than 40 years, which incidentally is about the same duration as 1974 to 2014. Lol”
There is no fraud. It simply means that the GLCs were transferred from the government’s balance sheet to Temasek at book value, that is at cost to the government and well below the enterprise value of the GLCs at the time of transfer. Then after holding the GLCs for a number of years, the GLCs went IPO. The difference between the market price and the book value explains that 16% yoy historical returns. In other words, we can be certain that Temasek benefitted from that 16% yoy return but we are also equally certain that most of that 16% yoy return is unearned, i.e. handed on a silver plate by the government.
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Thanks for these comments. Honestly, I rarely read comments about anything I write. I am more than happy however to respond to specific questions or technical debates or try to clarify specific points. I will post something probably Monday responding to these specific issues. I can assure you in the strongest possible terms that these points are either inaccurate or flat wrong.
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