A Deep Dive into Singapore’s Reserves with Prime Minister Lee: A Must-Watch Series

A few days ago (Aug 2023), CNA published a series about Singapore reserves on Youtube, featuring Prime Minister Lee Hsien Loong. It is a three-part series and I highly recommend it, even if you are not a Singaporean or Permanent resident (like myself).

The links to all of the parts are below:

• PM Lee shares inside story of the reserves – Part 1/3
• PM Lee on reserves as a secret weapon – Part 2/3
• PM Lee reveals inner workings of Temasek, GIC – Part 3/3

Let me share a few reasons why I love the series so much.

1. It has many facts that are surprising to me

Net Investment Returns Contribution (NIRC) contributes to 20% of the government budget

• Basically, while we don’t know the total size of the Singapore Reserve, PM Lee confirmed that the investment return contributes to about 20% of the government budget (or 3.5% of GDP). Singapore Ministry of Finance shares more about this fact here.
• It is more than all personal income tax revenue, roughly equal to the total Corporate income tax

While you may think that 3.5% of GDP is small, it is actually more than what the Singapore government spends on any other ministries, more than defence, education, or health

Singapore President as the “second key” to “unlock” the reserve if/when needed.

Honestly, I didn’t know much about the Singapore president role. I thought that the role is mainly for ceremonial purposes and the president doesn’t have any real power.

However, through the series, I learned that the Singapore president plays a critical role in protecting the Reserve. If/when the Singapore government wants to use the money from the Reserve, they need to get that approval from the President. And the president has their own Council of Presidential Advisers (CPA) on the matter, as stated in the law/legislation. From this perspective, the president has a lot of real power.

Why it is not simple or easy for other countries to emulate the Singapore Reserve “system”

It has been a long journey to build the Singapore Reserve “system” from inception to where it is today. This explains why it is not at all simple or easy for other countries to replicate the same system/institution around their country reserve.

From a legal/political perspective:

• The idea was floated by Mr. Lee Kuan Yew in 1984
• The white paper was published in 1988.
• Continued to work on the legislation to amend the Constitution
• Elected presidency legislated: 1991.
• Since then many adjustments/refinements have been made.

From an economic/build-up perspective:

• Singapore Reserve was able to grow a lot faster in the past due to the much faster economic growth and government surplus.

50-50% benefit split between Now and the Future

Net Investment Income from the Reserve is split 50-50%. 50% of the annual income is spent to benefit the current generation and 50% is reinvested for future generations.

While in a way, that decision was an arbitrary decision but as PM Lee said, it has a certain “psychological resonance to it.”

2. PM Lee explains complex topics in such an easy-to-understand and follow

I won’t spoil the pleasure of experiencing this yourself by watching the series. All I want to say is Mr. Lee is such a great leader and there is so much depth in what he is saying.

With that, the videos are all below too. Enjoy!

Part 2

Part 3