The following article was recently posted by 'Singapore Matters' on its Facebook page, and is republished with permission.
THE SINGAPORE GOVERNMENT has accumulated vast reserves and Singaporeans think we are rich and some politicians have called for spending some of our reserves.
Presidential candidate (2011), Tan Jee Say, for example, once said that $60 billion was 'small change'. He said he was prepared to spend $10 billion to give away to any young Singaporean who wanted to start a business.
Here's what he said:"PMETs like yourselves, (if) you want to start a new industry, ask the government to give you one million dollars each and you do it for the next few years."
And his mathematics is really very simple. It goes like this:"With S$10 billion, divided by S$1m, then you could have how much ... 10,000 firms. 10,000 you multiply by three or five staff per company, (and for a) small company, you could have 50,000 jobs".
That easy huh? $1m and 'hey presto!' Jobs are created. What if the business fails? But of course it is not Mr Tan's money.
Singapore may have accumulated large reserves, but are we very rich?
Singapore's national reserves, or net assets (i.e. total assets minus liabilities of the Government and other entities specified in the Fifth Schedule under the Constitution), are a vital strategic resource for the country and strictly protected by the Constitution.
Specifically, the portion of reserves protected by the Constitution are the past reserves, that is, reserves accumulated by previous terms of governments. Any draw down on past reserves requires the President's approval.
As ex-Minister George Yeo said at the LKY School of Public Policy 10th year anniversary lecture, "But in fact, we have nothing. We are only a small island. We have no natural endowments. And what we have – I don’t know how many hundred billion dollars we have, even if you double it, what is that, compared to what others have, in the ground, in land, underwater? And in a crisis, if we have nothing, how do you sustain a diaspora?"
Many of us will remember the Asian Financial Crisis when currencies came under speculative attacks. The crisis hit Thailand first in 1997 and then spread to many other countries including Malaysia, Indonesia, the Philippines, S Korea, Hong Kong and China and subsequently to Russia and Brazil as well. For a timeline of the crisis, you can read it here.
Singapore's official foreign reserves (OFR) has helped to maintain confidence in the Singapore dollar in times of such crisis, and defend the currency against speculative attacks.