SINGAPORE - 2009 NARRATIVE ON BUDGET TRANSPARENCY

UNCLAS SINGAPORE 000301

SENSITIVE
SIPDIS

EEB/IFD/OMA - JJACOBY
EAP/MTS - MCOPPOLA

E.O. 12958: N/A
TAGS: EAID ECON EFIN PREL SN
SUBJECT: SINGAPORE - 2009 NARRATIVE ON BUDGET TRANSPARENCY

REF: A.) STATE 28885
B.) 08 SINGAPORE 252


1. (SBU) In response to ref A request for information regarding the
transparency of Singapore's budget, we provide the draft narrative
below. The narrative is an update of the text from last year's
congressionally-mandated report on fiscal transparency in countries
receiving USG assistance (Ref B). Foreign assistance to Singapore
is limited to funding for training programs under the Export Control
and Related Border Security (EXBS) assistance program. For FY2009,
the request amount is US$500,000.


2. (SBU) Begin text of the 2009 report on Singapore:

Singapore 2009

USG's aid to Singapore is limited to export control training
programs. In FY2008, the amount received was $725,000. For FY2009,
the request amount is $500,000.

The Government of Singapore (GOS) states its commitment to fiscal
responsibility though in practice it is not fully transparent.

The GOS makes its annual budget public using print media, television
and radio. It also posts the current year's budget on the Internet
at a site devoted to the budget (www.singaporebudget.gov.sg).
Previous years' budgets are archived on the Ministry of Finance
website (www.mof.gov.sg). Budget figures made public are considered
accurate and reliable, but omit significant off-budget revenues.


The GOS applies accounting practices that minimize revenues recorded
on-budget. For example, except for very short-term lease revenue,
proceeds from government land sale programs are not included as
on-budget revenue, though they are disclosed in the budget
appendices. These proceeds are instead transferred to Singapore's
fiscal reserves, estimated at $200 billion by the IMF and managed
principally by the Government of Singapore Investment Corporation
(GIC) and Temasek Holdings, Singapore's sovereign wealth funds
(SWF).

According to the constitution, only a portion of the income received
from investing Singapore's fiscal reserves can be brought on budget.
The GOS altered the rules for exactly how much can come onto the
budget in 2008. The constitution now allows for capital gains and
losses, in addition to interest and dividends income from investing
Singapore's fiscal reserves in a given year, to be brought on budget
without Presidential approval. Up to 50 percent of the annual
average expected returns for the next 20 years may be included in
the budget. These new rules apply to returns from GIC and the
Monetary Authority of Singapore (MAS) only. Temasek will continue
to follow the old arrangement, where capital gains and losses are
not included in the budget and only up to 50 percent of interest and
dividend income from fiscal reserves managed by Temasek may be
included.

Capital gains of GIC and Temasek are still not disclosed publicly.
Although up to 50 percent of expected returns/interest and dividend
income from fiscal reserves managed by GIC and Temasek may be
included in the budget, the government does not disclose the actual
percentage of these earnings that are used in the budget year to
year, nor will it publicly disclose how it calculates the 20-year
average annual return forecast that will be the basis of transfers
from GIC and MAS. Thus, there is little transparency regarding the
substantial earnings from Singapore's presumably large stock of
fiscal reserves.

There are no USG or other multilateral programs aimed at
strengthening Singapore's capacity to develop fiscal policies to
support transparency and good governance.

Singapore has not yet done a Fiscal Transparency Report on the
Observance of Standards and Codes (ROSC). A 2007 IMF Article IV
staff report indicated that the Singapore authorities agreed to
undertake a fiscal ROSC in 2008. However, the ROSC was postponed,
initially as a result of IMF budget limitations, and now due to more
pressing priorities for IMF staff.

SHIELDS