Mr Speaker Sir, the Progress Singapore Party (PSP) has repeatedly stressed the need to rein in public expenditures before we increase taxes like the GST.
Our Budget has been increasing at an a fast pace over the last 20 years, and this is not only because of increases in healthcare and social welfare spending.
In recent months, two significant outlays of taxpayers’ money have reminded us of the urgency of ensuring better oversight of public expenditures. The first one is the $900 million for funding the SPH Media Trust over the next 5 years, and the second is the $1.5 billion to terminate the public-private partnership operating the Sports Hub. This is a total of $2.4 billion of taxpayers’ money.
Based on my 30 years of experience in business and financial management, I question the financial reasoning behind these expenditures. The Government and this House must ensure that every tax dollar is properly spent. The Government should respond in full to my analyses, or Singaporeans can take it that taxpayers’ monies have been wasted.
SPH Media Trust
The first significant outlay of taxpayers’ money is the Government’s provision of up to $900 million to fund the media operations of SPH Media Trust over the next 5 years.
I believe that the deal to restructure Singapore Press Holdings Ltd (SPH) that the Government has approved, is questionable, because SPH shareholders should have left behind a larger share of SPH’s property assets to support the print media business under the SPH Media Trust.
In the past, SPH used the monopoly profit of the print media business to accumulate numerous property assets, such as the Paragon and Clementi Mall. These assets were sold for $3.9 billion after the restructuring. But only $110 million of cash and shares were left behind to SPH Media Trust to fund the loss-making media business, and taxpayers will be footing the rest of the bill moving forward.
It makes no business sense for the Government to have agreed to this proposal. Since the property assets were accumulated over the years with media profits, it is reasonable to expect that more than $110 million should have been left behind to continue to fund the loss-making media operations.
Even then-Chairman of SPH, Dr Lee Boon Yang, said during SPH’s Extraordinary General Meeting in 2021 that it is not unreasonable for SPH shareholders to make a contribution to the SPH Media Trust to sustain the media business.
It would have been a fairer arrangement if SPH shareholders had left behind $900 million to capitalise SPH Media Trust, instead of the Government footing this bill using taxpayers’ money. The shareholders of SPH would still have $3 billion of property assets to distribute after that.
When the Government announced the establishment of SPH Media Trust, then Minister for Communications and Information, Mr Iswaran did not mention the potential cost to the taxpayer.
When I questioned the new Minister, Mrs Josephine Teo during the Committee of Supply 2022, she replied that there might be no deal if the Government had insisted that SPH bore the $900 million bill.
But as stated in the reply to my PQ on 4th April 2022, the Ministry has the power to withhold in-principle regulatory approval for the SPH’s restructuring deal.
The Government should not have agreed to SPH’s proposal unless more assets were left behind for the media business.
So now, the Government should explain why it chose not to do so to this House and Singaporeans.
The second significant expense incurred by taxpayers is the $1.5 billion contract termination cost to be paid to Sports Hub Pte Ltd (SHPL), which is said to comprise $300 million for the open market value of the Sports Hub, and $1.2 billion for taking over the outstanding loans taken up by SHPL for the construction of the Sports Hub.
I support the Government’s takeover of the Sports Hub and I am fully aware of the developmental and financial benefits. However, I believe that the Government has been overly generous in estimating the “fair open market value” and the remaining financial liabilities of the Sports Hub.
If this is so, it will unfairly benefit SHPL which is a private consortium at the expense of taxpayers.
Open Market Value of the Sports Hub
Firstly, I believe that the Government should not be compensating SHPL for the market value of the Sports Hub, if this market value is based on the Sports Hub’s name value.
The name value has primarily come from the Sports Hub being a national icon, carrying the branding of the “National Stadium” and occupying the site of many of our national memories like the Kallang Roar.
When SHPL constructed the Sports Hub, it did not pay the Government for the value of the “National Stadium” brand. Therefore, there is no need for the Government to compensate SHPL for this name value now.
As SHPL has failed to transform the Sports Hub into a leading venue for local and international events, it is also not justifiable to say SHPL has increased the value of the Sports Hub since its completion.
Outstanding financial liabilities
Secondly, I believe that the cost of the $1.2 billion outstanding financial liabilities disclosed by the Government was too high.
In 2010, then-Minister for Community Development, Youth and Sports Dr Vivian Balakrishnan told Parliament that financing for the Sports Hub was being raised via a funding competition among the banks, so we would expect the construction loan for the Sports Hub to carry a competitive interest rate.
However, Minister Edwin Tong shared recently, in response to mine and Ms Hazel Poa’s queries, that 65% of the Government’s annual fee payments to SHPL goes towards debt servicing.
As the annual fee is $193.7 million, the debt repayment works out to $125 million per year according to the Minister. If we assume that the construction cost of $1.33 billion was fully financed, and that debt repayment is constant over 22 years from 2014 to 2035, the $125 million debt repayment implies a loan interest rate of more than 8.0% a year, which is way too high based on the market conditions in 2010.
In contrast, a 4% interest is more in line with the market conditions in 2010. At 4%, I estimated that the annual financing payments should only be about $90 million from 2014 to 2035. This is much lower than the $125 million quoted by the Minister.
After 9 years of repayments from 2014 to 2022, the outstanding loan principal should have reduced to about $920 million by end 2022. This is also much lower than the $1.2 billion quoted by the Minister.
In addition, if the debt servicing is indeed $90 million a year, then SHPL may have accumulated surpluses or reserves from the annual fee payments in the past 9 years of operations.
As Minister has also shared that operating cost is $68 million per year, SHPL should have accumulated reserves of about $36 million per year, which is derived from subtracting the debt servicing and operating costs from the annual fee. Thus, the total accumulated reserves after 9 years should be about $320 million. The new holding company set up by Sport Singapore to own and manage the Sports Hub should take over this $320 million from SHPL.
To sum up, I have estimated an outstanding loan of $920 million and total accumulated reserves of $320 million. Hence, the Government should only be paying the difference between the two amounts which is $600 million, as outstanding financial liabilities to SHPL. This $600 million figure is much lower than the $1.2 billion agreed by the Government to pay SHPL.
I would like to seek clarifications from the Minister to justify the $1.5 billion termination cost to be paid to SHPL:
- What is the detailed debt repayment schedule since 2014?
- What is the loan’s interest rate and the outstanding loan amount as of today?
- Has SHPL accumulated reserves from the annual fee payments that should be taken over by the new Sports Hub holding company?
- What is the justification for paying SHPL a market value of $300M for the Sports Hub?
- If the Government needs to pay more because it is contractually committed to honour such a generous financial deal for SHPL, would Minister Vivian Balakrishnan, the Minister who signed the original contract, come forward and explain why this was necessary?
Mr Speaker, I am worried that the Government’s behaviour in commercial deals can potentially lead to a waste of taxpayers’ money. SPH Media Trust and Sports Hub are good examples of this. Together they cost the taxpayers $2.4 billion.
This may be small relative to the national reserves and the $130 billion annual revenues at the disposal of the Government. But $2.4 billion can go a long way in helping Singaporeans who are struggling financially.
For example, it is enough to exempt average Singaporeans from two years of additional 2% GST or to fund ten years of ComCare cash payouts for the poor Singaporeans.
We could also apply the $2.4 billion to help young Singaporeans experiencing great difficulties in buying a HDB flat or reducing inflation pressure on all Singaporeans.
From a professional point of view, I believe the Government should have spent far less than $2.4 billion on these two matters. The Government owes Singaporeans a more detailed explanation, and should be proactive in exploring ways of reducing the cost to the taxpayer.
This House can do a lot more to tighten oversight of public expenditures. We must not turn a blind eye to these two expenditures. I urge Ministers to address my concerns in clarifications to this House. I also hope that this House will refer these two expenditures to the Public Accounts Committee for follow ups after this Adjournment Motion.