Speech by Mr. Louis Ng Kok Kwang, MP for Nee Soon GRC, at the Second Reading of the Significant Infrastructure Government Loan Bill (Bill No. 6/2021)
Sir, the Significant Infrastructure Government Loan Act (SINGA) will allow the Government to better finance large, nationally significant infrastructure projects. This will materially improve national productivity, and benefit the society and environment.
Additionally, given the substantial drawing of national reserves to finance the costs from the COVID-19 pandemic, SINGA will create extra fiscal space and allow for debt to be paid back in a manner that is equitable across generations.
That said, this is the first time in 40 years that the Government will be borrowing very large sums of money. It’s important to have strict and robust safeguards in place to ensure that the borrowing is sustainable and prudent.
I have two areas of clarification on the Bill.
Safeguards for proper use of loans
My first area of clarification is on safeguarding the proper use of loans.
Minister has provided assurances that the Bill includes “strict safeguards on the projects that can qualify for borrowing, and the amounts that can be borrowed”.
Key safeguards include the $90 billion gross limit on borrowing and an annual interest threshold of $5 billion. Future changes to the gross borrowing limit and annual interest threshold can only be made by introducing a new Bill in Parliament.
However, the definition of “nationally significant infrastructure” laid out in the new section 2(1) can be broadly construed.
First, can Minister share what checks and balances will be put in place to assess if the loan is raised for infrastructure projects that are indeed nationally significant?
For instance, while the new section 9 provides the Minister’s power to raise a loan is non-delegable, can a committee be formed to deliberate and recommend if a loan should be raised for an infrastructure project?
Secondly, the $90 billion gross borrowing limit is not an insignificant amount. It is equivalent to around ⅔ of total outstanding Singapore Government Securities (SGS).
Can Minister share what checks are in place to ensure that the loan is used in a manner that is responsible, prudent and sustainable by the party the loan is issued to?
Thirdly, the Government trusts that Singapore would likely benefit from favorable interest rates given Singapore’s AAA credit rating and the current market environment. Low interest rates would keep the inter-generational costs of public debt low.
However, in the off-chance that interest rates rise substantially, what contingency plans does the Ministry have in place to finance the debt in a way that does not impose a huge burden on future generations?
Financing green projects
My second area of clarification is around financing green infrastructure projects.
With SINGA, the Government will issue a new category of government infrastructure bond, termed SGS (Infrastructure). Green bonds will form a subset of SGS.
Firstly, will the SGS (Infrastructure) green bonds take reference from credible international bond standards? Examples of these standards include the International Capital Market Association’s (ICMA) Green Bond Principles, EU Green Bond Standard, and ASEAN Green Bond Standards?
Taking reference from these “green” standards can be important in giving lenders and financiers assurance and confidence that green financing is true to it’s label.
Secondly, can Minister clarify if there are plans to designate a set proportion of SGS (Infrastructure) bonds as green bonds for climate mitigation and adaptation efforts?
If not, can Minister, together with the Ministry of Sustainability and the Environment, consider doing so? For example, these green bonds could be used to fund some of the $19 billion of public sector green projects identified in Singapore’s Green Plan 2030.
Thirdly, I understand that there are plans for SINGA to finance the building of climate adaptation structures such as sea walls, dykes, floodgates, barrages, and coastal pumping stations to mitigate the risks of rising sea levels.
Can Minister share if there are plans for climate mitigation projects? It is not only important that we adapt to climate change, but that we work to minimise its impact in the first place.
Notwithstanding these clarifications, I stand in support of the Bill.
Watch the speech here.