Photo by Jason Leung on Unsplash
Recently, Singaporeans got a glimpse into what the reserves are all about in an exclusive interview done by Channel NewsAsia with Prime Minister Lee Hsien Loong. The two part web series has certainly uncovered much about the reserves such as the composition of the reserves, the importance of the role of the president in safeguarding the reserves and the importance of preserving these reserves. This essay seeks to discuss the takeaways from this 2 part web series on Singapore’s reserves.
First, the composition of Singapore’s reserves. Many have thought that the reserves just comprise of a vault with probably immense amounts of cash or gold (myself included). However, the web series clearly details the extensive variety of financial assets and assets that comes under the Fifth Schedule entities, an important part of our national reserves. For starters, Singapore houses assets of many forms other than cash, including bonds, equities, land, buildings, and real estate in Singapore and foreign countries alike. What's interesting is also the involvement of many entities in the reserves. For example, in terms of financial assets and investments, it is mostly handled by the Government of Singapore Investment Corporation (GIC), the Monetary Authority of Singapore (MAS). As for land assets, Jurong Town Corporation (JTC) and Housing Development Board (HDB) are involved as they handle land in many industrial estates in Singapore and housing estates respectively. Even the National Museum is involved, with a collection of paintings being part of assets in the reserves. Singapore’s ability to diversify is important, as evidenced by the $157 million loss that Singapore incurred when they kept British pounds in the reserves and the British devalued their currency. As such, it was an event that justified Singapore’s decision to buy a variety of foreign currencies and also invest in other types of financial assets. Hence, the web series has certainly debunked many myths about the composition of the reserves and certainly enlightened many Singaporeans about how diverse the assets are in our reserves.
Next, the role of the elected presidency in Singapore. Many Singaporeans might not understand the significance of having an elected president, since most would probably think the appointment of Prime Minister is a more important role. However, when it comes to Singapore’s reserves, an elected president certainly plays a crucial role. To unlock or draw upon the reserves, the president in a way holds the second key. In addition to that, the inclusion of the council of presidential advisers helps to ensure that the president makes prudent decisions on the reserves. Also, the introduction of the elected president serves as an additional safeguard, knowing that the reserves is such a sacred asset. Having an extra guardian would ensure that it is used prudently. Thus, the elected president can help to safeguard the reserves from a ‘rogue’ government that would want to use it unnecessarily. Now, with such description of the role of an elected president, it ties in nicely with the upcoming presidential election. Certainly it is important that Singaporeans choose wisely and choose a leader that can safeguard the reserves well. Thus, the web series sheds light into the role of a president and the significance of such a role.
Most importantly, the usefulness of preserving the reserves for Singapore’s growth of development is another key takeaway. The webseries pointed out 2 examples where the reserves have helped Singapore tide through crises. One such crisis was the 2008 financial crisis. With banks collapsing in many countries like in the US and in Europe, public confidence in banks was declining. As governments around the world started to guarantee their banks, especially nearby countries like Hong Kong, it became important for Singapore to do the same. Hence, Singapore’s reserves came into good use as it gave Singapore the ability to guarantee deposits, preventing deposits in Singapore from diverting to other countries hence salvaging Singapore banks. Additionally, another crisis would be one that many would be familiar with, the COVID-19 pandemic. During the pandemic, the government had to make requests to draw from the past reserves multiple times. Once the Pfizer-Biontech vaccines were made available, many countries rushed to purchase these vaccines, to help limit the brutal impact of COVID-19. Again, if Singapore did not have reserves, Singapore could not have swiftly committed to the purchase of vaccines and vaccinated Singaporeans early from the virus. In addition, $6 billion worth of reserves was used for COVID testing, contact tracing and safe distance management. Apart from that, funds were even necessary for supporting works and businesses affected by the pandemic. Clearly, the reserves serve a very great purpose in Singapore’s response to the pandemic and a much lower mortality rate. Furthermore, Singapore’s economy would have suffered greatly during the pandemic, with a slower and limited response if there was insufficient funds from the reserves. As such, reserves have visibly aided Singapore’s survival in the world, and it shows again how important it is to protect these delicate assets. Such examples are significant for those who believed that the government has been ‘oversaving’ and those that have pushed for reserves to be drawn out for the current generation to replace the increase in goods and services tax. Furthermore, given information about the rate of returns from reserves being only at 4.6%, it reinforces the minimal amount that Singapore saves in a year. Following the 50-50 rule towards returns, that would mean Singapore only saves 2% back to the reserves. In a volatile world where the only constant is change, challenges could lie ahead for Singapore, and it is important for Singaporeans to know that the reserves must be protected to save for a rainy day. Thus, a very important message from the web series is the importance of protecting the reserves.
In conclusion, the web series has definitely enlightened many Singaporeans on the reserves as a whole. Now, Singaporeans like myself know how diverse the assets in the reserves are. It is pertinent that Singaporeans always remember that the reserves are an important asset for Singapore’s national security, something that must be maintained and preserved for future crises.
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