Mr Speaker

Honourable Members

This is my first message to Parliament as custodian of the Government’s past reserves. Shortly after this message, Deputy Prime Minister Heng Swee Keat will be announcing the Government’s proposed measures under the second assistance package in response to the COVID-19 pandemic. The package, which is before this House for debate, is a substantial one. The Government has tabled a Supplementary Supply Bill to support the package, which is likely to result in a draw on past reserves, and I have given my in-principle support for the draw.

Since we established the reserves protection framework in 1991, we have had to draw on past reserves just once, during the Global Financial Crisis in 2009, when we used them to fund part of the Resilience Package. Then-President S R Nathan approved a draw of $4.9 billion to fund two temporary and extraordinary measures. Apart from helping to avert an even sharper downturn and prevent a permanent damage to our economy, that draw was an instructive one on how we could operationalise the reserves protection framework. During that period, the Government also sought the President’s concurrence to use $150 billion of past reserves to back the Deposit Guarantee Scheme. The guarantee was not triggered, and there was no draw on past reserves.

But every situation is unique. Our current crisis is unparalleled in modern history. Governments around the world have had to think hard and make unprecedented moves over the past few weeks, such as locking down an entire country. Similarly, my in-principle support for the Government’s present proposal was given after careful deliberations, considering the grave circumstances and highly uncertain outlook. I have therefore agreed with the Prime Minister that I should send this message to Parliament to state my views on the Government’s proposed draw on its past reserves. In particular, I want to share my considerations on whether the proposed draw is necessary, whether the measures will be effective and whether the process by which the Government has engaged me was a reasonable one. However, let me be clear upfront: my message is not meant to influence the Parliamentary discussion that follows. I urge Honourable Members of this House to debate the package rigorously and help sharpen the proposed measures, because ultimately we are all trying our best for Singapore and Singaporeans.

Under the Constitution, my custodial duty as the President is clear – I have the responsibility and discretion to withhold my assent to budgets and expenditures that are likely to lead to a drawing on past reserves. The question is, are we now faced with such exceptional circumstances that I should allow the draw on past reserves?

We ended 2019 on a cautiously optimistic note. It seemed then that the global economy was finally poised for recovery following a year of subdued growth caused by US-China trade tensions.

The COVID-19 outbreak totally changed that outlook. By mid-February, the situation was already rather gloomy. MTI had already had to downgrade the GDP forecast by one full percentage-point at that time. When the Government came to brief me about Budget 2020, we discussed the option of drawing on past reserves if the situation worsens, but did not do it immediately as current reserves were still sufficient for the scale of the package envisaged then.

However, since then, we have had successive waves of bad news. Just when the COVID-19 situation in China seemed to be stabilising, a new wave of cases started in the rest of the world. Europe has become a new epicentre. Cases in the US are growing quickly too. WHO has declared the outbreak as a pandemic. The drastic measures taken by countries to protect borders and lock down societies have had serious repercussions. Already overdue for a market correction, share markets worldwide have fallen sharply. We are faced with a double whammy of a worldwide public health emergency and a deepening economic crisis. This downturn is likely to be deeper and last longer than SARS and the 2009 Global Financial Crisis.

This economic shock is totally different from an ordinary business cycle downturn. From talking to Singaporeans and unions, it is clear to me that companies and workers are suffering badly. For example, the hotel occupancy rate is only 20% currently. Many airlines, including SIA, have grounded almost all their planes due to massive flight cancellations. Many self-employed workers in the gig economy are not getting jobs. Production lines in factories are stalling due to supply chain disruptions, exacerbating their already tight cash-flow situation.

We need to do our utmost to help our businesses and people quickly. It is a matter of survival. With the unprecedented and rapidly worsening of the global situation, the Government has assessed that we need to implement a substantial second support package swiftly to stabilise our economy, keep as many workers as possible employed and help viable enterprises to survive. Deputy Prime Minister Heng will share the details of this second package later, but based on what he has briefed me, it is a substantial one – beyond the current reserves accumulated in this term of government. Our reserves were built up over the years through prudent spending, and were set aside precisely to cater for rainy days. The situation we are heading into looks more like a thunderstorm than a drizzle.

In this crisis, it is the Government’s responsibility to come up with relevant and impactful measures. Over the next few days, Honourable Members of this House will debate these measures. I urge you to debate robustly the merits of what are being proposed.

To arrive at my in-principle decision, I reviewed the Government’s proposal with my Council of Presidential Advisers (CPA). We agreed that we need to help companies with their costs and cash-flow, to keep them afloat in the meantime. This is especially so for aviation, travel and tourism, and related industries, which are especially badly hit. We also agree that our priority should be to help workers keep their jobs.

Let me also mention that I am satisfied with the process by which the Government has proactively reached out to me and the CPA in proposing this draw on past reserves. Already a month ago, I have discussed this possibility with the Prime Minister and Deputy Prime Minister Heng. Two weeks ago, the Prime Minister sounded me out on the need for the second assistance package, which the Government was proposing to fund from a combination of current and past reserves. Thereafter, the various agencies including MOF, AGD, MTI, MAS, MOH, MOT and MOM briefed me and the CPA, and comprehensively answered our queries.

After the briefing, the CPA deliberated on the proposal to draw on past reserves to support the package. The CPA unanimously recommended that I give my in-principle support given the circumstances, and noted that the proposed measures are temporary in nature. I have independently come to the same conclusion. I have therefore given my in-principle support for the Government’s proposal to draw on its past reserves.

The due process following this is that the Supplementary Estimates and Supplementary Supply (FY2020) Bill should first pass through this Parliament. If the Estimates and Bill pass the vote in this House, the Bill will be presented to me for the Presidential assent. At that stage, I will scrutinise it further, before giving my assent to the Bill.

Mr Speaker and Honourable Members, we are facing an unprecedented crisis. The closest historical precedent was the Spanish Flu in 1918. But with globalisation and more interconnected economies and people, we can expect the economic impact to be far worse this time.

COVID-19 cause deaths and suffering, so an economic cure though necessary is not sufficient. We also need a medical solution, as well as psychological and social ones.

Understandably, we are uncertain about what lies ahead of us. But we should not be fearful. We have done well as a nation. Internationally, our response to COVID-19 has been viewed as being systematic and effective. I am also glad that Singapore has banded together in fighting this disease. Singaporeans are responding calmly and responsibly. The Government has been open and transparent. And the community has stepped up to help those who may be more vulnerable. In these worst of times, I am heartened to see the best of Singaporeans.

I am confident that we will be able to get through this crisis together. It is not anybody’s wish for a crisis to befall us, but from time to time, it is inevitable. When it happens, how we respond will define us as a nation. So let us work together as one people and support one another on this journey. Let us overcome the crisis and emerge stronger and more cohesive as a nation.