Yawning Bread. 19 February 2009

Nathan fluffs his reserves explanation




Singapore President S R Nathan finally gave a press interview to explain how he decided to give in-principle approval for the government to draw on past reserves in the 2009 budget.

For the first time in the ten years since 1999 when we (had not) elected him to be President, we now have a glimpse of the calibre of the man. And I have to say I am disappointed.

I read Straits Times' edited transcript [1] twice, to give him as much benefit of the doubt as I can, but I am still left with the impression that firstly, he had no clue what was really on people's minds and therefore failed to address the key questions in his interview, and secondly, faced with even the slightest difficulty of a question, he gave a most unconvincing reply.

It's hard to have full confidence that he is up to his constitutional job of protecting the reserves.

Of course, I am also disappointed with our journalists in pulling its punches, but then, that's not news, is it?

Who came to the party

In his long preamble, Nathan dwelled mainly on how many meetings he had with ministers and officials. He said,

Well, since mid-2008, the [Council of Presidential Advisors (CPA)] and I have been seized with concern about economic trends and at our request, we were given periodic briefings on prevailing world economic trends and what impact they were having on Singapore.

I thought it was interesting that his starting point was mid 2008. Weren't Singaporeans already raising eyebrows in late 2007 when Temasek Holdings and the Government of Singapore Investment Corporation bought into UBS, Citicorp and Merrill Lynch, and things started going awry almost the day after? Wasn't the money involved our reserves?

Anyway, Nathan then noted the continually revised economic growth figures and what he heard from the prime minister:

[The Prime Minister] touched on the dire economic circumstances, he shared his concerns. He revealed the nature of economic news from the US and the West which was unrelentingly bad. He also pointed out the confidence in the US banking system was worsening and global financial systems were in jeopardy, and the need to go for extraordinary measures to give confidence locally, and to address the impact it would have on our people, particularly the low-income.

Even as Nathan listed out the many meetings he had with government officials, not once did he suggest that he sought outside opinion. Did it not occur to him that if he was to form an independent opinion, he might need outside advice?

He did however, say that the CPA 

has its own Secretariat and the Secretariat reviewed the details of the proposal with the CPA. 

I think Singaporeans would need to understand what is this animal called the CPA's Secretariat? Are they fulltime staffers with the necessary expertise? Are they more government officials doubling up as the Secretariat?

It was a pity that the journalists didn't pull at this dangling thread.

Nathan ended his preamble with even more details about who met whom when. Almost like reading from a diary.

Readers are left with the impression that quantity-wise, there was plenty of communication. But that's secondary to what thinking Singaporeans would want to know. The questions that are uppermost in people's minds are: What were the features of the economic situation that, in his mind, justified unlocking the reserves? What were the features of the budget proposals that in his opinion merited his consent? 

In other words, we wanted to be satisfied about the quality of the decision, the pivot points that make for a Yes or a No. He should have described it in terms of principles, so that the case would be useful as a constitutional precedent for the future.

He should have been speaking like a judge, going through the evidence and justifying what tipped the decision to "guilty" or "not guilty", rather than merely reciting a list of who appeared in the witness box and when.


After that unenlightening introduction, the Straits Times (or some other newspaper?) decided to help him out. Spoonfeeding him with Goh Chok Tong's suggested dealbreakers, the first question was:

Q: Mr President, Senior Minister Goh mentioned three 'Nos' to using the reserves. One is for social programmes, social assistance, Number 2 permanent programmes, and Number 3 only in dire circumstances. Your views on SM's pointers?

And then he still hashed it up, with a waffling reply.

As you know, it's not easy to say 'Yes' insofar as withdrawal of the reserves. So there must be compelling reasons why we have to resort to withdrawing from past reserves.

SM remarked about 'No' to (social assistance, permanent programmes).

Well, that comes during the normal Budget and one shouldn't resort to this -- to make use of the reserves for that purpose. I think everybody would accept that.

As you know, our reserves are our only strategic asset. We import everything we need. We have to pay for the fuel, we have to pay for so many other things in a slump situation and our only fallback is that we have the resources to meet them.

We can't use it for each and every reason without considering its longer-term implications because if we exhaust it where do we go to?

So, is that agree or don't agree? And if he agreed, why did he think the situation met Goh's third condition -Ė a dire state of affairs?

It's that bad: You're left with the feeling that he and the CPA had no pivot points to guide them in arriving at a decision.

Don't ask this question!

The next question showed a different side of him. A reporter asked:

Q: When you made the decision, did you have the information on like how big our reserves, how much of a draw this would be on the reserves...

The trailing ellipsis suggests that Nathan cut the reporter off, jumping in with a curt, dismissive reply:

Of course I have. Of course I have.

Naturally, the reporter(s) was too polite to mention that his predecessor Ong Teng Cheong had a hard time obtaining a valuation of the reserves.

From an archived copy of an interview Ong gave after leaving office (published in Asiaweek, March 2000), this was the situation as he described it:

Q: It was this issue that caused the dispute between you and the government?

... The thing is that the elected president is supposed to protect the reserves, but he was not told what these are until five years later. From the day the Constitution was amended in 1991 to provide for an elected president, he was supposed to fulfill that role. My predecessor, Wee Kim Wee, although he was not elected, was supposed to play that role during the last two years of his term. But he did not actively check. So, when I came in in 1993, I asked for all this information about the reserves. It took them three years to give it to me.

Q: The holdup was for administrative reasons?

Either that or they did not think there was any urgency. You see, if you ask me to protect the reserves, then youíve got to tell me what Iím supposed to protect. So I had to ask.

Q: Why did they not want to tell you?

I do not know. Donít ask me, because I donít have the answer. Iíve been asking them. In fact, in 1996, exactly halfway through my term, I wrote prime minister Goh a letter. At that time, everybody was expecting a general election in December or January. After the election, a new government would be sworn in. When that happens, all the reserves, whether past or current, become past reserves and are locked up on the changeover date. As president, I have to safeguard them and they can only be drawn upon with my permission. So I said to Mr Goh: Itís already halfway through my term, but until today I still donít know all these figures about the reserves.

Q: So the government had been stonewalling you, the president, for three years?

Yes. What happened actually was, as you know, in accounting, when you talk about reserves, itís either cash reserves or assets reserves. The cash side is straightforward: investment, how many million dollars here and there, how much comes from the investment boards and so on. That was straightforward ≠ but still we had to ask for it. For the assets, like properties and so on, normally you say itís worth $30 million or $100 million or whatever. But they said it would take 56-man years to produce a dollar-and-cents value of the immovable assets. So I discussed this with the accountant-general and the auditor-general and we came to a compromise. The government would not need to give me the dollar-and-cents value, just give me a listing of all the properties that the government owns.

Q: They agreed?

Well, yes, they agreed, but they said thereís not the time for it. It took them a few months to produce the list. But even when they gave me the list, it was not complete.

Q: It seems the Singapore government does not know its own assets?

Yes. Itís complicated. Itís never been done before. And for the assets of land, I can understand why. Every piece of land, even a stretch of road, is probably subdivided into many lots. There are 50,000 to 60,000 lots and every one has a number. If you want to value them all, it would take a long time. In the past, they have just locked everything up and assumed it is all there. But if I am to protect it, at least I want to know the list. 

-- Asiaweek, 10 March 2000, via The Online Citizen.



Back to the Nathan interview, there was a glimmer of hope when a reporter very gently came back to the key question, by asking,

Q: Under what circumstances would you have said no to unlocking the reserves?

Nathan's reply was that 

If they came with scatterbrained proposals I would have said no.

This begs the question: How was he satisfied that the proposals to be funded by the drawdown of the reserves were not scatterbrained?

For example, one of the proposals is to underwrite up to 80 percent of new bank lending. The government has said they do not intend to supervise how banks will assess loan applications. Does that lay the ground for highly risky bank loans? Is there moral hazard for banks -Ė to be able to earn all the interest on these loans, while bearing only a fraction of the cost should borrowers default?

But, as you can see from the transcript, that too was a road not travelled. The question was not pursued. And we are left none the wiser how the green light was decided upon. 

© Yawning Bread 



In the government's 2009 budget, a S$20.5 billion "Resilience Package" was announced. It has a number of components, including:

S$5.1 billion to help preserve jobs -- this includes the "Jobs Credit" cash grant scheme, training schemes, special payouts to low-income workers, and expanded government hiring;

S$5.8 billion to support bank lending through a Special Risk-Sharing Initiative wherein the government will bear 80 percent of the risk of bridging loans and 75% of the risk of trade financing, given out by banks;

S$2.6 billion to ease corporate cash flow through lowering the corporate tax rate to 17 percent, and additional tax concessions, etc;

S$2.6 billion war-chest for community aid to support needy households, topping up medical care funds, enhanced grants for first-time home buyers, etc

S$1.3 billion infrastructure projects.

Not all the Resilience Package is to be funded from past reserves; only the "temporary and extraordinary" Jobs Credit Scheme and the Special Risk-Sharing Initiative. These portions add up to S$4.9 billion, it is reported (although you can't arrive at that figure from the above numbers).

It is this S$4.9 billion drawdown from the reserves that the president was asked to approve.

Source: Straits Times Breaking News, 22 Jan 2009, $20.5 billion Resilience Package. Link



  1. Straits Times' edited transcript is archived in President Nathan's press conference re reserves 
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