atans1

Property sales also fund our SWFs

In Economy, GIC, Property, S'pore Inc, Temasek on 19/11/2010 at 5:13 am

Did you know that when the government sells state land to property developers, the money flows into the reserves (which are managed by our SWFs)  and not into the Consolidated Fund like other government income?  This is uniquely S’porean. Other countries credit land sales to income.  The government’s rationale is that as state land is an asset, sale proceeds should not be credited to income but to capital (reserves). Makes sense, but that’s not how other governments account for land sales: even HK, and no-one can say that HK is badly run or profligate.

So when HDB “buys” land from the government it is adding to the reserves. As it and government claim that the price an apartment is sold does not reflect this price, they claim HDB makes a loss. But whatever it is (I leave it to others to dispute this claim), the reserves are increased.

So in addition to the surpluses (generated by thriftiness or meanness according to who is talking) and (indirectly via a circuitous route) our CPF monies http://atans1.wordpress.com/2010/11/02/how-we-fund-our-swfs/, sales of state land also contribute to the reserves that GIC, Temasek and the central bank manage.

There was one financial year ending March 2008 ( I think), where the government injected abt S$10 billion into Temasek. This sum was more or less equal to the amount that the government took in property sales for that year. Easy come, easy go as in the following yr Temasek could have lost as much as US$4.6bn (in 2009 March this would have been S$7bn) on Merrill Lynch. And there was the much smaller loss on Barclays (800m sterling?, then worth abt 1.7bn S$). Err not much change left over from injection: only S$1.3bn, “peanuts” as Mrs GCT might have put it, except she didn’t.

So this combination of surpluses, CPF money (indirectly via a circuitous route), and state land sale proceeds, have resulted in our SWFs having 179.5% more in assets than S’pore’s 2009 estimated GDP.

The Norwegian’s much larger fund (US$471bn) is only 23% more than Norway’s GDP. Abu Dhabi’s fund (at US$627bn) is 627% of its GDP. For those interested, I used FT’s US$248bn for GIC and US$133bn for Temasek. As to GDP numbers, I used CIA Fact Book as reference. (BTW, I’ve not taken into account the amt of foreign reserves that MAS manages because I could be double counting if I do. For the record, MAS says its reserves as at end 2009 are US$188bn).

So we got plenty of $ to make housing more affordable*. And there is no need to change constitution, or cut other expenditure.  Juz change the accounting rules on land sales.

BTW, I am working with an illustrator so that it is easier to visualise the connections between CPF, surpluses, Consolidated Fund  etc http://atans1.wordpress.com/2010/11/02/how-we-fund-our-swfs/ . Hope to post something one of these days. [Update on 4 December, the cartoon]

*Even after taking away our public debts; 8th in the world at 113.10% of GDP. [Update at 10.30 am]

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  1. [...] having 179.5% more in assets than S’pore’s 2009 estimated GDP. For more details on our assets: http://atans1.wordpress.com/2010/11/19/property-sales-also-fund-our-swfs/ and follow the links in the [...]

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