SINGA, green bonds to finance infrastructure, sustainability projects

Singapore

IN a first since the 1980s, the government will borrow to finance its infrastructure projects. This will primarily be done through the new Significant Infrastructure Government Loan Act (SINGA) bonds, which will finance major, long-term infrastructure developments.

The government will also issue green bonds for sustainability projects, including green public infrastructure.

The government has, in the past, borrowed to finance infrastructure such the first Mass Rapid Transit (MRT) lines and Changi Airport's Terminals 1 and 2.

Now, SINGA bonds will spread out large, lumpy development costs over longer periods of time.

Before this, major infrastructure projects were financed using government revenues and current reserves. In Budget 2018, Finance Minister Heng Swee Keat said the government was looking into financing such infrastructure through borrowing, as Singapore's infrastructure spending needs are set to spike.

SINGA will enable the government to do this. The costs of major infrastructures will then be recorded as assets in the government balance sheet, and expensed off annually - in other words, depreciated - in the annual Budget over the useful life of the infrastructure. Borrowing costs under SINGA will also be charged to the annual Budget.

New legislation governing the SINGA bonds will be proposed in Parliament later this year; they will set a borrowing limit of S$90 billion as a safeguard against unsustainable debt levels.

The legislation will join the existing Government Securities Act and the Local Treasury Bills Act, which also govern government-issued bonds. The securities and treasury bills governed by these Acts are aimed at developing the domestic debt market and meeting the investment needs of the Central Provident Fund for retirement adequacy.

Mr Heng also announced on Tuesday that the government will issue green bonds as part of larger efforts to finance sustainability efforts. These will mainly comprise borrowings issued under SINGA.

For a start, the government has identified up to S$19 billion in public-sector green projects to be financed by green bonds, including the waste and water treatment facility Tuas Nexus.

Mr Heng said: "As an international financial centre, Singapore can catalyse the flow of capital towards sustainable development, not just in Singapore, but in Asia.

"The Monetary Authority of Singapore has been driving Singapore's Green Finance Action Plan to develop green finance solutions and markets for a sustainable economy.

"The issuance of green bonds by the government builds on these efforts by deepening market liquidity for green bonds, attracting green issuers, capital and investors, and anchoring Singapore as a green finance hub."

Industry observers were supportive of the news. "Labelling the bond green takes things a step further as it ensures funds go towards financing green projects only," said Clifford Lee, DBS Bank's global head of fixed income. "(This) is well aligned with the Singapore Green Plan 2030 to help the nation transition towards a more sustainable future."

Corrado Forcellati, KPMG Singapore's director of sustainability services, said: "Capital, in particular, is required to sustain present and future business growth. Singapore is leading the way."

KEY POINTS

• SINGA bonds to finance major, long-term infrastructure (S$90b limit).
• Green bonds to finance sustainability projects.
• SINGA legislation to be tabled in Parliament this year.