Big monies generated from Gov't land sales but what does it mean to average SG Joe?

By: 永久浪客/Forever Vagabond
The Minister for National Development Lawrence Wong wrote on MND’s blog (https://mndsingapore.wordpress.com/2016/06/08/finding-the-right-balance) that the government will be increasing the supply of new private homes in the second half of this year. In the next 6 months, 4 sites on the Confirmed List, which are expected to yield around 2,170 private homes, will be sold.
“All this will help to meet the current demand for new housing sites from developers, and add to private housing supply over the medium term,” he said.
“Over the coming years, MND will continue to provide a steady supply of land for private housing,” he added. “We are mindful that excessive supply in a weak market can exacerbate a decline in prices. At the same time, insufficient supply can result in a future shortage and an unwarranted spike in housing prices when demand picks up.”
Selling land actually helps to increase the budget surplus for the government, which of course, goes into the reserves.
Singaporean heartlanders work whole life to contribute to reserves too
On the public housing side, it is noted that HDB heartlanders are also contributing to the reserves through the purchase of their HDB flats. In turn, they will have to work hard for the next 20-30 years to pay for their flats.
HDB flats are not directly subsidized. The government is giving a “market subsidy” for every HDB flat sold, that is, a “market discount”.
After giving such discounts, HDB may be losing money (because it needs to buy lands at market rates from the SLA, the authority in charge of land) but overall, on the government side, it is still making money. These “profits” made from HDB hearlanders, of course, will also be channeled into the reserves.
Tharman confirms surplus include monies from land sales
For years, the government has been accused of being not transparent in its reporting of its budget accounting. In particular, it was accused of not following the IMF accounting standard in its presentation of budget statements in Parliament. IMF considers land sales as part of the government’s operational revenue but the PAP government does not. It considers as part of the reserves.
As such, the government has been accused of selling lands and “squirrelling away” the money into the reserves, and denying citizens of the benefits. Some opposition members have mentioned this in a number of occasions, and in particular during last year’s GE campaigning.
Finally, DPM Tharman addressed the issue head-on during GE last year (http://www.businesstimes.com.sg/government-economy/singapore-general-election/tharman-debunks-myths-on-the-surplus-reserves-and-cpf).
Speaking at a GE rally, Mr Tharman said, “I didn’t intend to talk about this under the East Coast skies, but I notice that there have been several speeches in the last week about how there’s this wonderful money available from reserves which can be used to expand our social spending … I thought I’d better just address the points quite squarely.”
He confirmed that statistics showing a surplus include the monies that the government gets from selling land – monies which it is barred from using directly by the Constitution. These funds must be put into the reserves, where it can earn an income, he clarified.
“This is simply prudent, long-term budgeting. It doesn’t mean we’re hiding money in reserves; it means that we will draw continually on the reserves, every year, by using the income on reserves,” he said.
“This way, you will never have a government that will go and sell land quickly, particularly when there’s a property boom, in order to get money and spend more.”
He said that last year, Singapore had a net investment returns contribution of $9 billion – $4 billion of which came from reserves attributable to land sales.
Spending investment returns from reserves
Indeed, the investment returns from reserves have been able to supplement the government budget by $7 billion to $8 billion annually over the last few years (http://www.mof.gov.sg/news-reader/articleid/583/parentId/59/year/2014?category=Parliamentary%20Replies).
MOF proudly said (http://www.mof.gov.sg/Policies/Our-Nations-Reserves/Section-III-How-do-Singaporeans-benefit-from-our-Reserves), “The ability to tap our reserves in a sustainable manner is a significant financial advantage for Singapore. Our situation is quite unlike that in many countries which have to service their debts and other liabilities from their budgets on an annual basis, and hence either raise taxes for the purpose or engage in further borrowings so as to service current borrowings.”
“In Singapore, the Government is instead able to take in money from the investment returns of our reserves to supplement our Budget on a sustained basis… The few other countries where Governments are able to derive net investment income for public spending are typically those with substantial reserves of natural resources such as oil,” it added.
So, in other words, the annual returns from the reserves of close to $10 billion is used to supplement the “overall budget” of the government, which can include the purchase of expensive military toys like the F35s, millions of dollars of Ministers’ and senior civil servants’ salaries and what not.
It’s still unclear how these returns can benefit the average Singaporean Joe in the street tangibly, especially when he has to work his life off just to pay for the “market subsidized” HDB flat, which contributes to the reserves.