Parliament: Bill introduced to include more of Temasek's contributions in Govt revenue

A man walks pass the Temasek Holdings office on Feb 16, 2015. A constitutional change was sought on Monday to make Temasek Holdings a bigger contributor to the Government's coffers, as Singapore prepares for more social and infrastructure spendi
A man walks pass the Temasek Holdings office on Feb 16, 2015. A constitutional change was sought on Monday to make Temasek Holdings a bigger contributor to the Government's coffers, as Singapore prepares for more social and infrastructure spending. -- ST PHOTO: MARK CHEONG

SINGAPORE - A constitutional change was sought on Monday to make Temasek Holdings a bigger contributor to the Government's coffers, as Singapore prepares for more social and infrastructure spending.

The Constitution of the Republic of Singapore (Amendment) Bill, introduced in Parliament by Senior Minister of State for Finance Josephine Teo, will allow the Government to include Temasek as a contributor to its Net Investment Returns (NIR) framework.

The framework, set up in 2009, allows the Government to spend up to half of the long-term investment returns on the net assets managed by the Monetary Authority of Singapore (MAS) and GIC.

The amendment to Singapore's constitution will allow the Government to apply the framework to Temasek as well.

This means the Government can spend based on Temasek's realised and unrealised capital gains, and not just the investment company's actual dividends.

The move was first announced by Deputy Prime Minister and Finance Minister Tharman Shanmugaratnam in February, when he set out the national Budget for this year.

Unveiling initiatives such as the SkillsFuture programme to encourage lifelong learning in Singapore, he had said that Government spending is projected to reach about 19 per cent to 19.5 per cent of gross domestic product on average over the next five years, about 1 per cent of GDP higher than today's government revenues.

The Government is projecting a deficit of $6.7 billion for this year.

Mr Tharman had also said that the inclusion of Temasek in the NIR framework had been deferred when the framework was set up, as there had been no established methodology to project the long-term expected real return on Temasek's portfolio. Its investment strategy was also still evolving then.

But over the years, the Ministry of Finance (MOF) has worked with Temasek to develop an approach to project its expected long-term returns.

This takes into account the fact that Temasek's equity-only portfolio will be more volatile and subject to more pronounced investment cycles than the MAS and GIC portfolios, said MOF.