Lawrence Wong on Monday set the record straight about Workers’ Party’s allegations about PUB’s capital reserve. Wong, who is the Second Finance Minister said WP showed a “basic misunderstanding of accounting fundamentals” and that the national water agency’s capital reserve does not represent surplus funds at its disposal.
Wong pointed to a video the opposition party had posted on its Facebook page asking what was the necessity for the water price hike when the PUB’s capital reserve had gone up from $3 billion in 2007, to $5.3 billion in 2016.
The Minister explained that PUB invests most of its capital reserve in property, plant and equipment (PPE) — such as the upgrading of waterworks, expanding water reclamation plants and investments in water treatment and that the increase in capital reserve must be seen in conjunction with the agency’s growing asset base.
Pointing to how its PPE account had grown from $3.9 billion to $7.1 billion over the same time period, Wong said the “Capital reserve” on a firm’s balance sheet refers to funds reserved for long-term capital investment projects, or other large and anticipated expenses that will be incurred in the future.
“The Workers’ Party and Mr Singh have interpreted the PUB’s Capital Reserve as a hoard of cash surplus that the Government is keeping in PUB’s accounts,” Wong said. Adding: “But this is completely inaccurate, and demonstrates a basic misunderstanding of accounting fundamentals.”
New WP chief, Pritam Singh, in May had questioned the “future capital investments in water supply and transmission cohere with the large capital reserves” of PUB. The Minister explained that the capital reserve had not been sufficient to cover PUB’s investments, and the agency has had to borrow from the capital markets.
Wong then whacked the WP saying: “In short, there is no surplus cash in PUB. It is completely disingenuous to link the water price increase with the PUB’s Capital Reserve, and there is absolutely no basis to do so.
He added: “I hope this clarification will set the record straight, and the Workers’ Party will refrain from distorting the facts to mislead the public.”
WP and its chief responded to the Minister’s charge on their Facebook and explained why they decided to take down the said video.
Pritam Singh an the WP said:
During my speech at the President’s Address in May this year, I said that the quantum of the surpluses and the prospect of alternate revenue streams and future surpluses of many Government-Linked Companies and statutory boards to better cushion price hikes on Singaporeans needs to be looked at very closely and debated before prices go up. On the 30% water hike specifically, I asked how future capital investments in water supply and transmission cohere with the large capital reserves of PUB which increased consistently from around $3b in 2007 to more than $5b in 2016. This point was not addressed at the debate.
On 25th June, MP for Holland-Bukit Timah, Mr Liang Eng Hwa filed a Parliamentary Question seeking clarification on the $5.3 billion of “Capital Reserves” in PUB’s accounts and whether this represents surplus funds that are at the disposal of the Government or PUB.
In Parliament today, Minister Wong clarified that the capital reserves does not represent surplus funds that the PUB has at its disposal, because the capital reserves were already invested in PUB’s property, plant and equipment.
On the 4th of June this year, the Workers’ Party put up an online video on rising cost of living in Singapore. The text on the video where PUB’s capital reserves were mentioned read: “…But PUB’s capital reserves increased from $3b in 2007 to more than $5b in 2016.” The video and the text creates the impression that the PUB hosts a $5.3b surplus. Minister Lawrence Wong has clarified this is not the case. I have instructed that the video be taken down in view of Minister Wong’s clarification. The full parliamentary video exchange is appended below.