Is protecting the reserves your job too?

The Government wants Singapore to treat the protection of its reserves as a core value that cuts across the system. Just as fighting corruption is not just the job of the Corrupt Practices Investigation Bureau, protecting the reserves is not only the President's business, Second Minister for Finance Lim Hng Kiang said last week. But how deeply and widely held is this attitude? JASON LEOW finds out.

This story was originally published in The Straits Times print edition on July 10, 1999.

FOR THOSE who found the White Paper on safeguarding Singapore's reserves too technical to absorb, the Government has crystallised its thinking in simpler - and more provocative - terms.

Think of protecting the country's past reserves like you think of the stand against corruption, Second Minister for Finance Lim Hng Kiang declared at a briefing on the document last week.

This was one of the key ingredients that went into the Government's thinking, he said.

"Over time, we want this value ingrained in our system - that we will lock away past reserves and police and supervise their use," he argued.

But is it overstating things to compare touching the reserves to graft?


AT ONE level, the comparison is a valid one.

As Mr Lim pointed out, just as fighting corruption is not the job of the Corrupt Practices Investigation Bureau alone, protecting the reserves should not be only the President's business.

For either system to work, the principles must be understood, embraced and acted on by everyone from the politician to the production worker.

Singapore's status as one of the most corruption-free countries in the world is maintained not by an army of CPIB policemen, but a state-wide commitment to the cause.

That commitment extends to the ordinary citizen, who today has zero tolerance for corrupt officials, unlike Singapore in the past or many other countries in the present, where bribes and kickbacks are taken for granted, from the pettiest level to the very top.

Similarly, the Constitutional safeguards against frittering away the reserves can only work if the whole nation is behind it.

In addition to the President and the six-man Council of Presidential Advisers, the White Paper on the Principles for Determining and Safeguarding the Accumulated Reserves identifies clearly specific officials who shoulder a special responsibility.

They include the Accountant-General, the Auditor-General and the Chief Valuer - who now have to look at the numbers not only to ensure that they all tally, but also to check their impact on past reserves.

For instance, to protect against unreasonable giveaways in the form of developmental loans, the Accountant-General and Auditor-General must report to the President any non-performing loans that they think will draw on past reserves.

Also critical are the role of the chairmen and chief executive officers of the key statutory boards and government companies, such as the Housing Board, the Central Provident Fund Board and Temasek Holdings. Now, they have to submit their accounts quarterly and half- yearly, on top of the annual reports required by the Constitution.

But even the ordinary citizen's resolve can be tested. According to the Constitution, if there is a deadlock, the Government may put the issue to the people for it to be settled by a national referendum.


THE Government must therefore convince Singaporeans of the state's need to save for a rainy day and to guard those savings jealously.

That should not be too difficult, say most political observers, since Singapore's success story is a story about fiscal prudence and maintaining strong reserves.

Since Independence, the Government has ingrained in Singaporeans a sense of the vulnerability of a small city-state.

As cabby Chua Ming Tat says in Mandarin: "How can a country not have savings?

"We must save to prepare for the worst."

It is as Deputy Prime Minister Lee Hsien Loong said last November, that Singapore should be "husbanding" its reserves for an uncertain future, and not run them down to create a false sense of security, leaving the country with no safety net.

Indeed, building up the reserves has become a habit.

Between 1988 and 1997, Singapore enjoyed Budget surpluses - which are channelled into the national coffers as reserves - ranging from $232 million to a high of $8.6 billion.

"It has been one of the hallmarks of the Government," notes Mr Arun Mahizhnan, deputy director of the Institute of Policy Studies (IPS).

At end-March this year, Singapore's foreign reserves alone totalled $124.33 billion - equivalent to about nine months of imports at current prices.

The portion of the reserves not accumulated within a Government's current term is locked away as past reserves and can only be used if the President agrees to use his "second key".

This fundamental policy of high savings may have seemed tight-fisted in the years of double-digit growth, but last year's recession has convinced many of its wisdom.

The Government could go into deficit comfortably to finance massive cost-cutting measures.

And it can afford to do it again.

Prime Minister Goh Chok Tong said in March this year that the Government had enough funds, accumulated since January 1997 when it began its current term of office, to finance possible Budget deficits for the next two years without dipping into its past reserves.

Mr Arun notes: "When the crunch came, the Government was able to prime the pump because of the extra cash."


THE Government's reluctance to spend past reserves even in a recession begs the question: If it is saving for a rainy day, just how torrential must the storm be before such spending is justified?

And just how much savings are enough?

In Parliament, opposition MPs have long questioned the need for Singapore to keep on saving with no consideration of a threshold, and have wondered aloud about what the Government intends - if ever - to do with the billions stashed in the piggy bank accumulating interest.

Conversely, the PAP MPs, with few exceptions, have always supported the seemingly endless stocking up on the reserves.

The challenge for the Government is clear: While no one doubts and will accept readily the wisdom of saving for a rainy day, it will have to convince the public that Singapore is, ironically, in a wonderful fix to be sloshed with money and not know what to do with it.

As Mr R. Sinnakaruppan, MP for Kreta Ayer-Tanglin GRC, puts it: "That would be a very good problem to have. Few countries are in this privileged position."

As DPM Lee reminded Singaporeans earlier this year: "We must never shift from a mindset of saving for our children, to one of spending what our parents earned, or worse, mortgaging our children's future through chronic Budget deficits and external borrowing."

Hence the perceived need in Singapore for a second key to the reserves, in the hands of an President.


CAN protecting reserves be compared to preventing corruption?

The analogy has its limits, say most observers.

After all, corruption has no moral ambiguity - it is clearly a crime.

Reserves, however, are there to be used whenever justified.

While the country should be very reluctant to use them, doing so is not wrong.

Opposition MP Low Thia Khiang from the Workers' Party says: "Corruption is used for personal gain, while tapping into the reserves can be for the public good.

"How can the two be seen on the same level?"

Opposition MP Chiam See Tong, chief of the Singapore People's Party, adds a twist to the analysis by labelling Mr Lim's remark a "political strategy".

Mr Lim's statement is intended to tell Singaporeans that "the PAP is keeping the money for you, and that not one cent is being taken away".

Mr Chiam adds: "Politically, it's a good image to link anti-corruption with protecting the reserves."

But at least one of those interviewed finds the comparison between protecting the reserves and the will to fight corruption spot-on.

General practitioner Patrick Kee argues that since reserves normally disappear because of corruption, "taking a stand against corruption is protecting our reserves".

Of course, experience elsewhere shows that even a clean and honest government can be pressured by democratic demands to promise the people more and more - and therefore spend more and more.

Since reserves are generated through the people's hard work, citizens are entitled to think that the money belongs to them.

The problem is how to decide what is in the people's narrow interest versus their national interest.

An individual may insist on the right to spend "his" money as he deems fit.

Tell him those savings are for tackling crises, and he might quote a dozen examples of what count as emergencies.

No money for the Housing Board's Main Upgrading Programme? Use the reserves.

Too many retrenched and unemployed Singaporeans? Also tap into reserves.

As lawyer Ellen Lee notes: "No one will think alike when it comes to how to use his savings."

For this reason, several commentators interviewed agreed, the decision rightly rests with their elected Government and President.

Economist Raymond Lim sums it up this way: "The assumption is that the people we have elected are informed enough to make a decision for us."

Lawyer Doreen Tan thinks the layman can hardly make an "informed decision" on such Constitutional matters.

"I think the modern government has become so sophisticated that the man-in-the street can't make sense of it," she argues.

Even more sceptical is production supervisor Francis Steven, who believes the layman is likely to offer merely knee-jerk reactions in a crisis.

"The man-in-the-street won't care so long as he gets help from the Government to quickly cut his losses," he says.

Therefore, the Government may be disappointed if it expects people to treat the reserves with the same instinctive sense of untouchability as corruption.

It will have to continue arguing its case and educating the people that it still needs to generate surpluses, and that the past reserves should be stashed away.

But Singaporeans also expect the Government to know when the time is ripe to use the funds, and then ask the President to use his second key to unlock the reserves in the nation's interest.

Unlike corruption, the question of protecting the reserves is not a cut-and-dried one.

For both the Government and the people, the wisdom to be exercised over it would require a long learning process, but hopefully, not a painful one.