Yesterday (22 Nov 2022), TOC wrote that Singapore achieves an average surplus of S$28.5b annually from 2010 to 2019 if one were to calculate based on the International Monetary Fund (IMF) accounting standard.
Even Mr Lee Hsien Yang, former CEO of Singtel in a Facebook post back in March this year, stated that Singapore runs a massive budget surplus every year and the way it is calculated does not conform to the accounting standards of the IMF.
That is, in Singapore, the government considers cash receipts from particularly the sales of state land as “Past Reserves”.
Indeed, the government issued a statement last April in response to online comments that queried the need to raise the Goods & Services Tax (GST), alleging that the government had more money at its disposal than what it had said.
The government wrote, “Under our budgeting rules, there is a distinction between (a) cash receipts and (b) revenue that is available for spending. Cash receipts reflect all the cash that comes in, but not all the cash that comes in constitutes revenue for expenditure.”
It also acknowledged that the largest of such cash receipts is the monies from the sale of state land.
“Land is a scarce and finite asset in Singapore and forms part of our reserves. Selling land does not increase revenue. Instead, land sales convert physical assets into financial assets. The Government then invests these financial assets to generate a sustainable stream of investment returns over the long term, or use it for other land-related expenditure,” it said.
It further clarified that land sales proceeds which are not considered revenue and are not made available for direct government spending, are instead channelled to Singapore’s “Past Reserves” and invested.
As an illustration, the government gave an example of a family selling their house and using the proceeds for day-to-day expenditure. It will soon have nothing left, the government said.
But if the family invests the proceeds of the sale wisely, it will still have the original sale proceeds, plus a constant stream of income from those proceeds, the government explained.
“This income can then be used partially for expenditure and partially reinvested to help sustain both present and future members of the family.”
“Tapping on monies from land sales directly for spending today will change Singapore’s sound orientation of saving and building for the future, to one of living for today and wishing that tomorrow would look after itself,” it said.
With regard to the IMF’s guidelines, the government said that such guidelines do not capture the different budgeting rules and policy choices that countries and societies make.
“Using IMF’s guidelines to calculate the resources available for spending is inaccurate, as these do not accurately reflect Singapore’s fiscal position as defined by our own policy choices and context,” the government defended itself.
Singapore’s public state lands sold as leasehold
In January this year at a conference organized by the Institute of Policy Studies (IPS), Professor Cheong Koon Hean, who is also chairman for the Ministry of National Development’s (MND) Centre for Liveable Cities, deputy secretary at MND from 2001 to 2016 and CEO of the Housing Board from 2010 to 2020, explained why Singapore’s public lands are sold on leasehold basis.
Selling land on limited leases is necessary for a small country like Singapore as it allows for the land to be recycled for future generations, she said.
Leasehold land allows for this virtuous recycling of land for future generations, as well as economic dynamism, she added. She noted that besides the 99-year lease on HDB flats, land and property for commercial and industrial uses are typically sold on a 30-year lease.
Prof Cheong also said that land acquisitions are forms of redistribution of wealth. The Land Acquisition Act in Singapore has also allowed the Government to procure land, mostly in the 1960s and 1970s, to build social facilities and infrastructure, such as public housing.
“In a way, acquisition of land is a form of redistribution of wealth,” she said. If “everything is owned by a few people” instead, it would be more difficult for the government to find land to build affordable housing and provide essential infrastructure, she added.
Indeed, in the late 70s, the 131ha of cemetery land at Bishan was compulsorily acquired by the government for 30 cents per square ft.
The land originally belonged to the Kwong Wai Siew Peck San Theng temple. The lawyer representing the temple to negotiate with the government was Lim Chin Joo, brother of Lim Chin Siong who was a prominent Singapore politician in the 50-60s and was arrested during Operation Coldstore.
In the end, the clansmen at the temple had to accept whatever terms the government demanded. Mr Lim recalled, “After due consideration, the clansmen accepted the acquisition for the sake of nation-building. Bishan estate was the result. It was a decision that benefited Singapore.”
The Singapore Land Authority (SLA) website also stated that, in general, the government’s policy is to allow leases to expire without extension. “In land scarce Singapore, we need to recover land upon lease expiry to re-allocate it to meet fast changing socio-economic needs,” SLA clarified.
State Land Not A Finite Asset In Singapore
Hence, given that state land in Singapore is sold by leasehold, such assets should not be considered as a “finite asset”, since they can be recycled “virtuously” to be leased again by future generations.
In the example given by the government about a family selling their house and not being able to use the proceeds for their day-to-day expenditure, the truth is that a number of years later, the family does get their house back for free to be sold again at prevailing market rates, just like the government can recover those state land at little or no cost upon the expiry of their lease and sell them again for revenue.