Parliamentary debate on the use of reserves – The Opposition says: “Spend more!” But at what cost for Singapore?

Another day in Parliament, another rousing speech from the PSP’s Leong Mun Wai. This time round, he filed a motion on the use of the reserves. His position? Essentially, that Singapore has too much money in our reserves, and hence we should spend more right now to uplift the lives of the current generation of Singaporeans. It would also warm the cockles of some hearts to see the WP MPs supporting the PSP in a rare display of opposition solidarity.

The problem? This is the same old argument that has been made ad nauseum by opposition leaders – such as the late JBJ – decades ago. The PSP and the WP are merely repeating what past opposition leaders have said. Spend, they have said repeatedly. There is no need for our reserves to accumulate at its current pace, they have argued. They were wrong in 1980. They were wrong in 2000. And they are still wrong today.

It was Lee Kuan Yew and the PAP Government who have been consistently right on the reserves. Lee Kuan Yew warned Singaporeans – be careful of “Don’t Worry, Be Happy” politicians who will “fritter away” our reserves; that is why he put in place safeguards – such as an elected president that will have the power and authority to safeguard the reserves. Thank goodness for his foresight. What Singapore has achieved with our reserves is an amazing feat that few countries in the world can replicate. The ability to embark on large-scale public projects without funding issues. The ability to draw down on our reserves during times of hardship – such as the 2007-2008 Global Financial Crisis and COVID-19 – without incurring external debt. We would not be able to arrive at such a healthy situation with our reserves if previous administrations had followed the opposition’s mantra of increased spending. Also note that both the WP and the PSP are urging the government to spend more of the reserves in a period of great geopolitical uncertainty – an escalating conflict in the Middle East, an ongoing war in Ukraine, rising US-China tensions, a very possible Trump presidency and a faltering Chinese economy. It is precisely because we are unsure of what lies ahead that we need to even more prudent with our spending, so that we will have adequate resources to tide through difficult times.

Both the PSP and the WP made some false arguments during the debate. For instance, they said that our reserves are bound to continue growing, even if we draw down more. So don’t worry. But consider this – if our reserves are growing relentlessly every year, then the Net Investment Returns Contribution (NIRC) should also grow by leaps and bounds every year. However, the NIRC has remained stable at around 3.5% of GDP and is likely to remain so for the foreseeable future. This means the reserves are growing as fast as the GDP, and not more.

Also note that the 50-50 spending rule for the NIRC first came about during the 1990s from our late former President Ong Teng Cheong, who suggested that we split it half – 50-50. Half for now, and half for the future. A prudent approach. The Opposition suggested: Why not spend more and increase the percentage when our investment returns are high? The problem is – no one has a crystal ball to predict what the future holds. What about periods when there is a prolonged economic downturn? Do we spend less then? Surely Leong Mun Wai and Jamus Lim know that it is difficult to time the market, and hence going with a reasonable average estimate of spending 50% would be the wise thing to do? Investment 101.

The PSP says that there is no need to save so much, since our fertility rate is low. I think Mr Leong Mun Wai should remember that even if we have fewer babies, our adults are also living longer. PSP’s stance is that there is no need to provide savings for Today’s Young who will become Tomorrow’s Old. But we should remember that in 50 years’ time, when Mr Leong is no longer around to suffer the consequences of what he preaches, the 20-year-old Singaporean today will be 70. Drawing more NIRC now – as suggested by the WP – would mean leaving less for younger Singaporeans, who are likely to end up paying more taxes to fund their needs. And the young Singaporeans of today will pay the price if we adopt the PSP’s and the WP’s positions. If we can accumulate a large reserve in 50 years, we can easily spend it in an even shorter period.

At the end of the day, Singaporeans will have to ask themselves – would we have been better off today if we have not been consistently preparing for the worse possible situation? And remember – there is no one to bail us out when things go south. When Iceland, Portugal and Greece ran into severe economy problems, they had the EU to bail them out financially. When the US needs more money, they simply need to increase their debt ceiling given that the US dollar’s status as the world currency. We must rely on ourselves completely.

Both the PSP and WP are not stupid. Surely, they can see the merits of the government’s argument when it comes to the handling of our reserves. But why are they still advancing the positions that they have been making? Hopefully, more Singaporeans will see through their agenda – that advancing populist rhetoric for short term electoral gain is bad politics, and Singaporeans – present and future – will be ones who will pay the price.

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