Seeking presidential approval to draw on Singapore's reserves to fund part of this year's Budget is not a wayang ('show', in Malay), Finance Minister Tharman Shanmugaratnam said yesterday.
Revealing the steps taken to inform and consult President SR Nathan and the Council of Presidential Advisers (CPA), he said the government has followed 'full due process' to obtain in-principle approval to draw $4.9 billion from past reserves.
This is to fund two new programmes: a Jobs Credit scheme to subsidise part of the wage bill of employers, and a Special Risk-sharing Initiative (SRI) to encourage banks to lend more freely to viable businesses.
Some Members of Parliament wanted to know the reasons behind the President's decision and said these had to be explained clearly to the people.
As he wrapped up a three-day debate on the Budget statement yesterday, Mr Tharman said the shape of the Budget - in particular, the Jobs Credit scheme and SRI - was finalised two weeks before Budget Day on Jan 22.
'The proposal to draw on past reserves . . . had first to be agreed by Cabinet before it could be formally put to the President, and Cabinet did so the week before the Budget,' he said.
But before Cabinet made its decision, Prime Minister Lee Hsien Loong met Mr Nathan informally to share the government's rationale with him and to give him time to mull over the proposal, Mr Tharman said.
The Trade and Industry Ministry and the Monetary Authority of Singapore (MAS) then briefed Mr Nathan and the CPA in detail on the global economic and financial situation and its implications for Singapore.
The Finance Ministry then conducted a 'comprehensive briefing' on the Jobs Credit scheme and SRI, and the reasons for drawing on the reserves to fund them.
'We addressed the President's and the CPA's questions and clarifications on all relevant matters,' Mr Tharman said. 'We also briefed (them) on the possible scenarios that might require our accumulative savings of past reserves in the next few years, and the contingency measures that might be necessary.'
He said President Nathan accepted the government's explanation that the current crisis is of an 'exceptional nature' and the measures, being extraordinary and temporary, 'can be justifiably funded' from the reserves.
Once Parliament approves the Supply Bill, the government will seek the President's formal approval to draw on the reserves. And once this is done, the decision will be gazetted as required under the Constitution, Mr Tharman said.
'This is not a wayang,' he said. 'This is about the government, with the urgency of the situation, having to craft within a short time, major measures that were in Singapore's interest, and then approaching the President and CPA to provide full information, arguments on why it was necessary to do this now, what the concerns were and what could be the consequences of not acting boldly and decisively.'
Some MPs had also asked what the benchmark should be for drawing on the closely guarded reserves.
Mr Tharman quoted Senior Minister Goh Chok Tong, who said recently he is in favour of putting up three 'No' signs:
# No drawing on the reserves to support social assistance programmes;
# No drawing to fund permanent programmes, no matter how meritorious; and
# No drawing except in dire circumstances that require one-off extraordinary measures to ward off catastrophe or prevent irreparable damage to the economy.
Acknowledging that the amount to be drawn is 'significant', Mr Tharman said it is not large compared with the amount of annual investment income that Singapore can earn.
'It is also smaller than the total return, including capital gains and losses, that we expect to make each year on average over the long term,' he said. 'The NIR (net investment returns) contribution for FY2009, based on the long-term, total expected returns, is $7.7 billion.'
But what message does drawing on the reserves send?
Mr Tharman said the move will reinforce Singapore's ability to deal with the current crisis resolutely. It will also let investors and citizens know that Singapore can weather the storm and emerge stronger. And markets, too, will know that Singapore will do what it takes without having to borrow.
'We are not killing the goose that lays the golden eggs. Our reserves are substantial, with assets far in excess of our liabilities. The reserves are well diversified,' Mr Tharman said.
'The government is confident that the prudent management of our reserves - as long-term investments in global markets - will continue to grow these reserves and yield us a steady stream of NIR contributions over time. We will continue to exercise fiscal prudence and accumulate our reserves in good times.'
