Lawrence Wong chides WP, says PUB's S$5.3 billion capital reserve not 'hoard of cash surplus'

SINGAPORE — Second Finance Minister Lawrence Wong on Monday (July 9) criticised the Workers' Party (WP) for showing a "basic misunderstanding of accounting fundamentals", as he explained that national water agency PUB's capital reserve does not represent surplus funds at its disposal.

Replying to a parliamentary question on the S$5.3 billion in PUB's capital reserve account, Mr Wong noted that the opposition party had posted a video on its Facebook page questioning why water price hikes were necessary when the PUB's capital reserve had gone up from S$3 billion in 2007, to S$5.3 billion in 2016.

Water prices were raised by 30 per cent over two phases between June 2017 and early this month.

In May, Mr Pritam Singh had asked in his maiden speech as WP chief during the debate on the President's Address about how "future capital investments in water supply and transmission cohere with the large capital reserves" of PUB.

PUB invests most of its capital reserve in property, plant and equipment (PPE) — such as the upgrading of waterworks, expanding water reclamation plants and investments in water treatment, said Mr Wong.

The increase in capital reserve must be seen in conjunction with the agency's growing asset base, said the minister, pointing to how its PPE account had grown from S$3.9 billion to S$7.1 billion over the same time period.

"Capital reserve" on a firm's balance sheet refers to funds reserved for long-term capital investment projects, or other large and anticipated expenses that will be incurred in the future.

Mr Wong said: "The Workers' Party and Mr Singh have interpreted the PUB's Capital Reserve as a hoard of cash surplus that the Government is keeping in PUB's accounts.

"But this is completely inaccurate, and demonstrates a basic misunderstanding of accounting fundamentals."

In fact, the capital reserve had not been sufficient to cover PUB's investments, and the agency has had to borrow from the capital markets, the minister said.

Criticising the WP for linking water price hikes with the PUB's capital reserve, Mr Wong said: "In short, there is no surplus cash in PUB. It is completely disingenuous to link the water price increase with the PUB's Capital Reserve, and there is absolutely no basis to do so.

"I hope this clarification will set the record straight, and the Workers' Party will refrain from distorting the facts to mislead the public."