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A Physicist Looks at the Financial Governance 1

November 24th, 2012 | Author: Steve Wu

Part 1 C Prologue

As knowledgeable citizens, we are keenly aware that the level of transparency and accountability of the financial governance in Singapore is much lower than what is expected of an advanced democracy. If it were not the case, the Accountant-General (http://www.agd.gov.sg/) ought to provide an accurate balance sheet for the country’s finances, at least up to the past financial year. Similarly, the Auditor-General (http://www.ago.gov.sg/) ought to furnish a certified report as to the precise and accurate representation of the state of accounts.

In practice, many items are either insufficiently or opaquely accounted or even unaccounted for. We are told that we cannot have the balance sheet for GIC as its public disclosure may lead to an attack on the Singapore Dollar and other malice. It is a preposterous claim since other advanced democracies face the same issues which are managed without problems. For example, Norway’s Government Pension Fund C Global publishes its market value (http://www.nbim.no/en/Investments/Market-Value/), exact to the quarterly reports.

Many public entities, including the ministries, statutory boards, government-owned companies are either infrequently audited or have never been audited by the Auditor-General. When the public entities do receive the audit, the accounting errors are glaring, in the nature, amounts and the frequency of repeated errors. The situation is inconceivable since the rounds of internal and external audits are conducted on a yearly basis, even if those public entities are not audited by the Auditor-General.

Yet we are assured everything is well-administered because it is led by a group of trustworthy individuals. Of course trust cannot be legislated; we shall not have to trust anyone. In the absence of a Freedom of Information Act, we are unable to compel the government to release the relevant information except for the sporadic, incomplete and sometimes irrelevant answers arising from parliamentary questions. The crucial elements are always under the hood and out of sight. We demand that the answers be provided even without request. A transparent and accountable system remains the most reliable approach to financial governance.

In this sense, I have to be more diligent to be able to construct an accurate representation of the finances from competent sources through this series on the financial governance in Singapore. I endeavour to be as careful as possible with the issues and I shall clearly state any assumption which I use in the process.

My starting point is Article 2 of the Constitution which defines the reserves:

Article 2, Constitution C Definitions
“reserves”, in relation to the Government, a statutory board or Government company, means the excess of assets over liabilities of the Government, statutory board or Government company, as the case may be; Act 5/1991 30.11.1991

It is a well-defined problem with three quantities of interest: assets, liabilities and reserves and they are related (Article 2). Next the ministries, statutory boards and the government owned companies are thrown into the mix; the most important ones are listed in the Fifth Schedule of the Constitution.

Fifth Schedule (Articles 22A and 22C), Constitution Act 5/1991 30.11.1991
KEY STATUTORY BOARDS AND GOVERNMENT COMPANIES
PART I
1. Board of Commissioners of Currency, Singapore. [Deleted Act 24/2002 01.10.2002]
2. Central Provident Fund Board.
3. Housing and Development Board.
4. Jurong Town Corporation.
5. Monetary Authority of Singapore.
6. Post Office Savings Bank of Singapore. [Deleted Act 36/1998 21.05.1999]

PART II
1. Government of Singapore Investment Corporation Pte. Ltd.
2. MND Holdings Pte. Ltd.
3. Singapore Technologies Holdings Pte. Ltd. [Deleted Act 17/1994 01.10.1994]
4. Temasek Holdings Pte. Ltd.

This exercise is a familiar problem in physics in several ways. A zero-sum game in economics is similar to a conservation law in physics, e.g. conservation of energy. If one takes proper account of the parts, the whole shall take care of itself. Hence, I propose to bring all relevant instruments to bear on the present problem to assemble a concordance model for Singapore’s finances. It shall be an interesting challenge due to the many missing and obfuscated pieces in the puzzle.

Lee Hsien Loong, on releasing more data on the GNP, 15 Jan 2010.
The figures are all released, it is just a question of whether you dig it out and publish it. But we will study how to present it, so that it tallies with the objectives we have.

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Steve Wu

* Steve Wu is a physicist; he enjoys logical and critical analysis. Occasionally, he takes on issues which affect a little red dot on a tiny pale blue planet in an otherwise nondescript corner of an average galaxy in a vast universe.