The core of Singapore’s economic success lies in its strategic reserve management. The country’s leadership, including both its government and the president, bears the heavy responsibility of ensuring these reserves are managed efficiently, with a forward-thinking perspective.
People’s Action Party (PAP) Secretary-General and Prime Minister Lee Hsien Loong said in a recent interview with Channel News Asia shed light on Singapore’s unique approach to the Elected President role, likening it to a “second key,” an innovation born from the nation’s historical journey of reserve accumulation and the strategic evolution of its political framework.
He expounded on the intricacies of this concept, explaining that this distinctive development, which he noted “can’t be replicated elsewhere,” emerged due to the specific circumstances of Singapore’s history.
The deliberate creation of an Elected President, dedicated to safeguarding reserves, was a response to the establishment of Temasek in 1974 and the subsequent formation of GIC in 1981.
PM Lee recalled that the concept of the Elected President as a “second key” was initially introduced by the late Lee Kuan Yew during his 1984 National Day rally.
Over the subsequent years, intensive efforts were undertaken by the government, leading to the publication of a pivotal White Paper in 1988 and the subsequent legislative amendments that laid the foundation for the elected presidency.
PM Lee emphasized his active involvement in the process, collaborating closely with Professor Jayakumar, “he made the drafts, I gave him inputs, I helped redraft, clarify, present differently come up with ideas, try to understand what the problem was, and how to pin down so that you protect the reserves but you don’t paralyze the government of the day.”
“because it’s very easy to lock it all up then you’re not allowed to do anything with it. well you can do that but then it becomes useless to you so what is the mechanism by which you can protect it lock it And yet when you need to unlock it and without the risk that all of it will disappear.”
“I think that was the key turning point, because it crystallized people’s focus, they knew that there’s such a thing called the reserves, that there’s quite a lot of money, and that it needs to be protected.”
PM Lee said since then the Singapore government made many adjustments refinements modifications to the arrangements for the elected president for the second key, but that fundamental turning point was the decision to crystallize the idea and to implement such a system.
“Any other country can just click their fingers and do (tap on their reserves), but we’ve got it (the ‘second key’), and I’m glad we are here, ” he said.
Have PAP-backed presidents ever said no to draw-down?
PM Lee’s assertion that the Singapore President serves as the “second key” is underscored by candidates perceived to be backed by the establishment.
Former GIC chief investment officer and presidential hopeful, Ng Kok Song, recently emphasized the intricacy of safeguarding Singapore’s reserves.
Ng believes that anyone vying for the presidential position must demonstrate not just competence but also trustworthiness.
His remarks arise from an ongoing discussion about how the reserves should be used, particularly in times of crisis.
Presidential candidate and former Senior Minister Tharman Shanmugaratnam, who has been involved in two major drawdowns from the reserves, made a significant point about understanding the nuances involved in reserve management.
In an interview with the Straits Times, he argued that safeguarding reserves isn’t a straightforward affair – it demands deep involvement in economic and social policies. Tharman’s experience, as detailed in the Straits Times interview, certainly qualifies him on that front.
However, there is a lingering question: How frequently have Singapore’s presidents, backed by PAP, opposed the government’s proposals to withdraw from the reserves?
In a Straits Times report in 2011, the late President S R Nathan who served as the sixth president of Singapore between 1999 and 2011 happily revealed that the past reserves have been used more than 27 times since 2002, for projects like land reclamation and the Selective En-bloc Redevelopment Scheme (Sers).
We don’t know how many times former PAP minister Tony Tan who served as the seventh president approved the drawdown of reserves, but publicly, there is no information indicating that he rejected any such requests.
As for the eighth president, the Government obtained President Halimah Yacob’s approval to draw from Past Reserves up to $52 billion in FY2020, $11 billion in FY2021, and $6 billion in FY2022 in light of the COVID-19 pandemic.
According to the Singapore government, the total draw on Past Reserves from FY2020 to FY2022 is up to $42.9 billion.
Mdm Halimah, who was also a former PAP politician, was fully supportive of the draw, with no questions asked, as she made Facebook posts over the approvals.
As the record indicates, the late Ong Teng Cheong is the only elected president known to have openly challenged the PAP government on the issue of reserves and supposedly paid the price for his confrontation and dedication to his job.
This spurred former Non-Constituency Member of Parliament, Mrs Lina Chiam to question Tharman in 2013 about the number of times the past reserves were used since 2002.
In response to her question, Tharman detailed the various ways Past Reserves were utilized, from funding land-related projects to facing extraordinary crises.
“First, the Constitution provides for the Net Investment Returns Contribution (NIRC) spending framework. This enables the Government to tap the investment returns on Past Reserves in a disciplined and sustainable manner. The NIRC benefits Singaporeans substantially each year. It contributes almost S$8 billion to the FY2013 Budget.
“Second, Past Reserves have been used to fund land-related projects such as reclamation, the creation of underground space, and land acquisition projects like SERS. This is in essence a conversion of Past Reserves from one form (financial assets) to another (State land), rather than a drawdown of Past Reserves. The land and space that is created or acquired forms part of our State land holdings and is hence protected as Past Reserves. The use of Past Reserves to fund these land-related projects follows principles agreed to between the Government and the President. Further, when such land or space is subsequently sold, the proceeds accrue fully to Past Reserves.”
“Since 2002, Past Reserves have funded 23 projects that create new land by reclamation from the sea or new usable space underground like the Jurong Rock cavern. The land and space that is created forms part of our land holdings and hence part of the Past Reserves.”
“Past Reserves have also been used to fund the land acquisition costs of projects like SERS which seek to enhance the value of the existing land. To reiterate, the acquired land forms part of Past Reserves, and the land value is enhanced with the more intensive re-development. Since 2002, the Past Reserves have funded 32 such projects.”
“There is a third use of Past Reserves, reserved for exceptional circumstances. With the approval of Parliament and the President, Past Reserves may be drawn down to deal with extraordinary crises.”
Tharman’s explanation seemed rooted in practicality and the need for sustainable growth.
Now, with Tharman contending for the presidency, one might wonder: Would he take the same stance he did in response to Mrs. Chiam’s question? Given his history of advocating for strategic, reasoned draws from the reserves, it’s unlikely he would reflexively oppose a “reasonable” and “justifiable” draw.
This leads to a larger question: Is the ongoing debate about preserving reserves truly about the competency and understanding of the intricacies involved, or is it a deeper political game?
If safeguarding the reserves is tied intrinsically to political allegiance, there’s a risk that the country’s economic health might be at the mercy of political strategy. The constant emphasis from the PAP-aligned candidates on the importance of preserving the reserves might hint at a potential concern: the challenge of a non-PAP government possibly altering the way the reserves are managed in the future.
Furthermore, following the amendments to the Singapore Constitution in 2016, wherein the Parliament may overrule a Presidential veto that is exercised contrary to the Council of Presidential Advisors’ recommendation—members of which are predominantly appointed by the establishment—the idea of a second key appears moot.
In conclusion, while competence and a deep understanding of reserve management are crucial, it’s equally important to ensure that Singapore’s economic stability isn’t overshadowed by political strategy.
After all, the reserves should serve the benefit of Singapore and its people, both today and for future generations, not just PAP’s interests.