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Singapore Close your eyes to S $ 90 billion in infrastructure bonds – The Diplomat


Money Pacific | Should be economical | Southeast Asia

For the first time in 40 years, the state is looking to borrow money to finance infrastructure improvements in the long term.

The Singapore government is about to do what it has not yet done since Father Lee Kuan Yew remains in solid leadership – borrowing money to finance major public infrastructure projects. As reported on The Straits Times, one New invoice has been introduced in Congress in April known as the Government Significant Infrastructure Lending Act (SINGA). If passed, the bill will allow the state to mobilize up to S $ 90 billion (US $ 67.3 billion) in the capital market, especially for public infrastructure with a limited shelf life. 50 years at most. The main spending priorities are the expansion of public transport systems and coastal protection measures.

The last time the Singapore government borrowed to finance major infrastructure expenditures was in the 1970s and 80s, when the country needed capital to build Changi Airport and its nascent subway system. it. In the 1990s, strong economic growth, investment and export capital flows created a comfortable surplus in the balance of payments and the state budget. Notably, this means government has chosen not to issue any more bonds for public infrastructure – everything can be paid out in addition to sales, reserves and surpluses.

Well, that’s partly true anyway. In fact, statutory government agencies such as the Road Traffic Authority (LTA) issue bonds in the capital market With a certain frequency, use the proceeds to invest in infrastructure and improve long-term capital. The fundamental difference is that these are often not guaranteed by the state and they do not count towards the national debt because the management, in theory at least, has accepted all the risks.

This gives us a glimpse of the fascinating complexity of Singapore’s mixed state capitalist system. The novelty of the SINGA law is that for the first time in decades, the state will undertake capital market enhancement on its own to finance major infrastructure projects. Instead of fundraising through councils under its own autonomous law, the government is putting all its sovereign power behind these bonds.

This is interesting because if you visit the Monetary Authority of Singapore website, you will see the following Technical flexibility is of low key: “The Singapore government operates a balanced budget policy and often enjoys a budget surplus. It doesn’t need to finance its spending by issuing bonds to borrow money ”. But if it doesn’t, why does it choose to do so now? There are several reasons.

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The state is forecasting the need for large-scale investment in public infrastructure, especially climate mitigation efforts. If the government issues these bonds, instead of the LTA, it is likely to receive better financial terms, and the return on long-term government debt will decrease. The average output on the security of the Singapore government for 15 years in 2020 is 1.11 percent, compared to 2.9 percent in 2015, so if they are going to issue a government bond then need to be financially cautious. right now.

There is also one basic beliefs in Parliament, making these large one-off expenses spread the burdens and benefits evenly over time for Singaporean citizens. That is to say, management is very cautious about avoiding large cost chasing for immediate profitable projects while incurring large debts for the next generation. They want to be fair in how the costs and benefits are distributed across society over time, and spend massive amounts every 30 years on public projects spanning 50 years.

But it also reflects a kind of philosophical change going on in the way governments, investors and citizens think about global systems of capital, sovereign debt and the role of the state. For a long time, mainstream economic policy from places like the IMF and the US Treasury has been advising against fiscal deficits and debt. Current account surpluses and balanced budgets have long been seen as the gold standard for responsible growth, especially in emerging economies.

But if you look at the United States today, where a battle is raging fiercely about whether Washington should borrow trillions of dollars Investing in public infrastructure, you may find that the terms of this debate are changing. Some countries are becoming more open to the idea of ​​reducing deficits to finance investments in long-term growth and government debt, at least in some circles, that are perceived to be less like seagulls than before. here. Singapore, a country that has avoided government borrowing to finance infrastructure for most of my life, is now looking to do that to give us some idea of ​​how mobile Kim.

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