Singapore Budget 2018: $5 billion rail fund, borrowing by statutory boards to tackle infrastructure investment challenges

Construction work taking place at the site of Changi Airport's new Terminal 5 on Nov 22, 2017.
Construction work taking place at the site of Changi Airport's new Terminal 5 on Nov 22, 2017. ST PHOTO: LIM YAOHUI

SINGAPORE - To tackle the challenges of infrastructure investments in the coming years, the Government will look at two key tenets: saving and borrowing.

This includes the setting up of a new $5 billion fund to save up for major rail lines and exploring borrowing by statutory boards and government-owned companies, said Finance Minister Heng Swee Keat said on Monday (Feb 19).

This comes as certain expenditures can be lumpy with hefty upfront investments, yet their benefits can only be enjoyed many years down the road, he said.

He announced the setting up of a new Rail Infrastructure Fund for major rail lines, which will receive an injection of $5 billion this year.

Saving ahead for these lumpy investments through such funds will help to reduce the burden in the coming years, he said.

The fund can be topped up in the future when Singapore's fiscal position allows, he said.

This is similar to the Changi Airport Development Fund, which was started in 2015 to save up for Changi Airport's Terminal 5. The fund now has $4 billion.

 
 
 

In addition, the Government will also explore borrowing by statutory boards and government-owned companies to finance upcoming infrastructure projects.

Explaining the move, he said that infrastructure projects generate economic returns over many years after they are completed.

Thus, the borrowing arrangements for these projects will help distribute the share of funding more equitably across generations.

Already, several statutory boards are looking at this option.

The National Environment Agency will look at borrowing to finance the upcoming Integrated Waste Management Facility, while the Land Transport Authority will also look at borrowing for projects, such as the Kuala Lumpur- Singapore High Speed Rail and the Johor Baru-Singapore Rapid Transit System Link.

Meanwhile, Changi Airport Group will also look at borrowing for Changi Airport's Terminal 5.

Mr Heng said such long-term borrowings will also help develop Singapore's bond market.

 

To help lower the financing cost, the Government will also consider providing guarantees for some of these long-term borrowings for critical national infrastructure.

A government guarantee will not only enhance the confidence of creditors, but also tap the strengths of Singapore's reserves to back infrastructure projects, without directly drawing on the reserves, he said.

He added that the reserves can then remain invested to generate returns.

He said the Government is studying this carefully and discussing it with President Halimah Yacob and the Council of Presidential Advisers.