Cities ready for the future

When governments diversify their income sources beyond taxes, they reduce fiscal risk and increase economic resilience

- By Dag Datter

INFRASTRUCTURE is often hailed as the engine of productivity and economic growth.

Yet in many countries, roads crumble, railways stall, and essential services like water and electricity remain inadequate. The common excuse? A lack of funding—or the political will to raise taxes and cut spending.

But governments have two sources of revenue: taxes and non-tax income. The latter comes from managing public assets and liabilities—essentially, the government's balance sheet. While resource-rich countries often generate income from oil, gas, or minerals, even countries without such endowments can tap into overlooked assets by managing them more professionally.

Take Singapore, for example. Despite having no natural resources, around one-fifth of its government spending is funded by non-tax revenues. These come from investment returns on public assets, generating about 7% of GDP annually—a figure nearly equal to its corporate tax receipts.

Singapore's success stems from decades of fiscal discipline and long-term strategy. It has built one of the world’s largest sovereign wealth portfolios, despite its resource scarcity. This includes Temasek Holdings (which manages corporate assets and real estate), the Government of Singapore Investment Corporation (GIC), and the Monetary Authority of Singapore, which holds foreign reserves. Collectively, these entities manage assets valued at three to four times the country’s GDP—surpassing even the sovereign wealth funds of Norway and Saudi Arabia.