I was sent a couple of emails by people asking me to clarify some issues about various issues. I have tried to directly address these issues and answer bigger questions from the Singapore government website “Factually”. If there are other questions, I am more than happy to try and respond as I release information.
- What are “operational surpluses”?
Operational surplus are primarily tax and fee revenue minus operational expenditures like paying for civil servants and operational investments like buying computers. Another way to think of an operational surplus would be revenue made from working at your job minus what you pay on rent and food. Operational surplus accounts for the year to year operational revenue from economic activity minus the costs of running the government.
- Does “operational surpluses” include investment contributions or revenue?
Absolutely not. There is no investment revenue included in the operational surplus. Using the analogy of the household again, you may have income from a stock portfolio but that is counted as investment income and not operational income from working at your job.
- How do land sales count in operational surpluses?
The International Monetary Fund counts land sales as operational revenue while Singapore counts land sales as reserve/capital revenue. As a matter of accounting for our purposes, it is better to count land sales revenue as operational revenue. This is true because it does not come from historical savings but rather acts as additional revenue separate from financial asset investment income.
- Are GIC and Temasek counted on the public balance sheet?
GIC and Temasek are both Fifth Schedule corporations legally owned by the government and incorporated on the Singaporean balance sheet. GIC and Temasek hold the same legal distinction. This means that GIC and Temasek should be accounted for by Singapore the exact same way. This means that if one is on the balance sheet, they both should be on the balance sheet. If Temasek and GIC are not on the official Singaporean balance sheet, this means that there is another investment institution with $800 billion SGD in assets under management making it one of the worlds largest institutional investors.
- If there were a problem with Singaporean financial statements, would the IMF would correct this problem?
No. The IMF collects data from its member countries and provides general guidelines but it does not act as an auditor to verify the data. In fact, in IMF databases, most data is credited to the domestic statistical agency prepared in accordance with IMF accounting policies. Consequently, Singaporean operational surpluses with the IMF are different than domestically reported numbers due to differences in accounting policies. The primary issue being how land sales are credited. Nor does the IMF review institutions like Temasek and GIC or audit their financial statements and returns. In short, the IMF does not act as an auditor to correct financial accounting errors or discrepancies.
- Are debt servicing costs included in your estimates?
Absolutely. I have built a database going back to 1974 of the cost of government debt. Though the government of Singapore may claim otherwise, debt servicing costs are included in my estimates here and in previous estimates.
- What return assumptions are you making on the operational surplus and borrowing?
I assume that what the government of Singapore and its related entities are declaring is true. For instance, GIC claims for all periods we know that it earned a 7% USD rate of return over 20 years. That is the assumed rate of return on invested capital. Furthermore, the government of Singapore declares large cash holdings with the Monetary Authority of Singapore. Even if we match the cash holdings they publically declare with cash holdings earning a 0% rate of return, a conservative estimate, and all other funds were invested by GIC this would still leave a shortfall of $670 billion SGD even after debt servicing and currency losses. In short, I am not assuming anything that the government of Singapore or its related entities have not already declared.
- What about the debt incurred by Singapore?
Most debt owed by Singapore is owed to CPF holders with the approximately other 40% in the public debt security market. The important question about the debt owed by Singapore is where it has gone. The government of Singapore outlines the two types of government debt, but more importantly is where this money has gone. A review of their finances indicates that operational revenue covers operational and development expenditures. Given this information, where is the cash flow raised from debt sales going?