Singapore sovereign wealth fund GIC and state investor Temasek Holdings have "made money over the long term" as their portfolios grew, said Second Minister for Finance Indranee Rajah.
Replying to Mr Henry Kwek (Nee Soon GRC) in Parliament, she cited how GIC achieved an annualised real return of 3.7 per cent for the 20 years that ended on March 31, 2017. This is over and above inflation.
Meanwhile, Temasek's investments delivered an annualised nominal shareholder return of 6 per cent in Singdollar terms over the same period, said Ms Indranee.
Temasek reports its returns in nominal terms, without taking into account inflation.
Its net portfolio value was $275 billion last year, compared to $164 billion in 2007, she added.
Temasek's net portfolio value rose to $308 billion for the financial year ended March 31, 2018 - the first time it has passed the $300 billion mark.
Buoyant stock markets had lifted Temasek's portfolio to a 12.19 per cent one-year return, according to its annual report released yesterday afternoon.
Ms Indranee emphasised yesterday that Temasek and GIC's investments benefit Singaporeans through the Net Investment Return Contribution (NIRC) to the annual Budget.
The NIRC framework allows the Government to spend up to 50 per cent of the long-term expected returns from the reserves.
The NIRC has become an increasingly important fiscal resource, added Ms Indranee, noting that in FY2018, it is estimated to be about $15.85 billion, or about 18 per cent of overall revenues.
This makes it the single largest source of government revenues.
"There are very few countries in the world who have national savings that they can tap to fund their budgets, and this is especially rare for a country like Singapore which has no natural resources," said Ms Indranee.
The NIRC has enabled Singapore to keep taxes low, and keep goods and services tax (GST) increases at bay for many years, she added.
"If we did not have the NIRC, then we would have had to either double the amount of personal income tax or our GST collection to fund the same amount of expenditure over the years," she said.
Mr Kwek also asked whether the planned GST hike from 7 per cent to 9 per cent - due some time between 2021 and 2025 - was linked to past investment losses.
It is not, replied Ms Indranee.
She added that investment outcomes have not had a significant impact on revenues as the Net Investment Returns framework is "designed to smooth out the highs and the lows of investment returns and to give stability to our fiscal planning".
"The only way to avoid any investment loss is just to sit tight and not invest our reserves," she said.
"But that won't help either because even if we just leave the reserves as they are and don't invest them, not only will those reserves not grow but they will be eroded over time by inflation. So we invest and that means taking some risks and accepting some losses."
