Heng Swee Keat
Singapore
“In a world heading towards greater contest and fragmentation, amid rapid advances in science, technology and innovation, Singaporeans can play a valuable part as bridge-builders and connectors, and Singapore can be a trusted and neutral Global-Asia node of technology, innovation and enterprise.”
“The National Quantum Office has identified specific goals under the National Quantum Strategy (NQS), with resources and efforts directed towards specific quantum areas and technologies accordingly.”
“Mr Speaker, Sir, I would like to thank Member Ms Denise Phua for her comments because her comments reminded me of the tagline that I always said when I was in MOE – that you can learn from anyone, anytime, anywhere. In fact, peer learning is a very important aspect of that learning.”
“But I have laid out the strong basis for my optimism that a small and open economy like Singapore can continue to thrive and secure our next bound of growth. By serving as a trusted node and connector, we can create value by facilitating connections and building new linkages in today's fractured global landscape.”
“Secondly, one other very important thing the Member must bear in mind is that AI is a very rapidly developing field and it is something which our researchers are working hard on, to look at the different techniques of AI – it is not just GenAI, but the whole range of different AI systems that are being used – and how that can be used in c…”
“Assoc Prof Jamus Lim, you do not need an invitation. You are free to provide your suggestion. After all, are you not from WP? And by the way, let me make it clear that I have heard MPs on both aisles speaking about workers, and we have a very strong presence of our union MPs here and they will be speaking even more on this.”
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“Mr Speaker, Sir, let me set on record what I said. I hope that you were not insinuating that I was non-professional in my approach. Because, if that were so, then I am completely speechless. When you asked whether I could provide projections for the next 20 years, I warned that it is not possible to project over such a long term because there will always be contingent events like COVID-19. We had gone through the Global Financial Crisis, the Asian Financial Crisis and SARS. So, crises are a recurrent feature of our life today and for us to pretend that we have the foresight to see clearly what will happen in the future is just not right. What we can do, to the best of our ability, is to look at structural drivers that will drive certain expenditures, such as healthcare. As I said, even then, in my many meetings with Minister Gan Kim Yong, our Health Minister, we had gone through our projections over and over again, and the numbers keep changing because of the factors that I mentioned in my speech earlier. So, I hope that the Member listens carefully and not just look at the phone, please. I am speaking and the Member is just looking at the phone. I hope the Member has the courtesy to at least listen when I am trying so hard to address the points, even though I am not obliged to stand up and answer.”
“What we do not know is what new treatments will come out, how lifespan will continue to grow, what kind of new drugs, new treatments, approaches will come and therefore, how healthcare expenditure will rise. So, even whatever numbers that Minister Gan Kim Yong and I have been working on, we are always conscious that this represents, in a way, a lower limit, we have to provide at least for that amount. Which is why I have argued that we need to raise GST from 7% to 9%. So, please think about it carefully. And for you to argue that we have 7% to 8% of GDP, equals NIRC, equals to land sales – your numbers are just completely off. So, I hope that you take your parliamentary duties seriously and that you do your homework before you come and debates with us on the numbers. [Applause.]”
“Well, the statements are prepared and are correct when we publish it, but whether this can be spent is a separate matter. The third question is, to ask me to go to my constituents and make the claim that the more taxes you pay, the more benefit you get. I do not know your logic because I did not, in any way, say that the more taxes you pay, the more benefits you get. You also asked specifically about indirect taxes. Again, since you entered Parliament, in the various Budget debates, you have been raising this. I have been answering as patiently as I can. I hope that this will be the last time that I have to answer this. You cannot see GST in isolation. You have to see GST in the context of the entire expenditure of our households; and on what taxes they pay and what rebates they get. And again, all my numbers, I stand by all the numbers I have used in my past parliamentary speeches. So, please do your homework and check it out. And finally, you asked me: am I prepared to prepare 20-year expenditure forecast of all that is to come? I am not. Because just two years ago, I would not have predicted that we would have faced such a generational crisis that I had to go to the President to touch our past reserves, to unlock our past reserves for them to be used, and $53.7 billion is not a small sum. So any projection, if anybody claims to have the foresight to project 20 years, I would say, better not trust that person. Even five years, I cannot tell you what exactly will happen. But for recurrent expenditure, we can project. We can project how much our healthcare costs will be going up because it is our responsibility to provide for that. We know globally what is the trend of how ageing affects healthcare costs.”
“First, I thank Mr Leong Mun Wai for the questions. Let me ask that the Member do not put words into my mouth. I did not say that you are not contributing to this Parliament. I said, "Please be rigorous when you come to Parliament and justify your position". You asked four specific questions so you should not be perturbed nor should you take umbrage. First, you quoted the figure of $128 billion and quoted $38 billion of NIRC and $12 billion of land sales. Again, I said in this Parliament, over and over again, please, read the Hansard, that land sale proceeds are not be used for recurrent spending. We have a Reserve Protection Framework, where land sales go into past reserves. Past reserves are then invested, and we have the elected Presidency to ensure that the Reserve Protection Framework is working as it should, working properly. And as for NIRC, again, and I have said it before, that we only take up to 50% of the NIRC and we are already doing that. It now constitutes 3% of GDP of our expenditure – huge amount! More than any single category of taxes, whether it is GST, personal income tax or corporate income taxes. And we are only using 50% because it is our responsibility to put back that 50% for future generations as our needs grow. If our parliamentarians have taken the approach that you have advocated, we will not even be debating this because we will just be talking about how much debt to issue in order to fund. And my numbers which I have quoted, on many of the OECD countries, that the average is 80% of the debt to GDP and how that has increased further. So, please look at your figures carefully. And second, you have asked me to confirm whether reserves in the gross financial statements are correct.”
“So, if we borrow for one third of our recurrent spending, no matter how cost-effective they are, this would, over time, create a high debt burden for future generations. I would also like to thank Prof Hoon Hian Teck for pointing out very clearly that we need to have the capacity to raise revenue, and this is critical for fiscal sustainability. Indeed, the credit worthiness of Singapore, the extent of credit that people are willing to recognise for Singapore and grade Singapore, depends critically on whether they think that we have a sustainable fiscal policy. That, again, depends on how willing the Government is to maintain financial discipline and to raise taxes where it is necessary. If we do not do that, what is likely to happen is that your credit ratings will fall, the risk premium will rise. And this is going to have an effect on the entire economy – on not just Government borrowing but on corporate borrowing, and in turn, this is going to affect the jobs of our people. Because if we make ourselves a less desirable place for investments, it will come back and haunt us.”
“So, both Assoc Prof Jamus and Mr Louis Chua's comments point to the risk, in fact, a very major risk, that if you do not draw clear lines every time expenditure items come up for debate, you would then blur the lines and the lines will keep getting blurrer. And you can argue that everything that a country needs to get itself working, to get working, would qualify. Just coin it by some nice names and call it "soft infrastructure". Is defence not soft infrastructure? Is security not soft infrastructure? Is guarding against cybersecurity not soft infrastructure? What about healthcare, education, social spending, spending to maintain social cohesion? Are those not so-called soft infrastructure too? So, I think, please be rigorous. Let us stick to what are factors rather than to keep blurring the arguments. If you want to have higher spending on healthcare, on education, say so, and we can debate whether are we spending enough or not enough. There is one other very significant point which I would like everyone to bear in mind. In talking about all the spending, neither Assoc Prof Jamus Lim nor Mr Louis Chua addressed the question of who is going to pay for this borrowing. As I have said, borrowing helps you to finance but debt has to be repaid. Somebody has to repay debt. The argument is that borrowing for recurrent expenditure will pay for itself because you will get higher returns on human capital versus infrastructure. But this has not been borne out anywhere in the world. Most developed countries that go into debt financing just end up with more debt. The hole is just getting bigger. I want to remind Members that we spend more than 30% of our expenditure each year on MOE and MOH, and that share is expected to rise. In fact, I will talk more about this later.”
“Let me sound a word of caution about the suggestions made by Members to borrow for other non-infrastructure needs, such as education or healthcare. And I thank Mr Derrick Goh, who has just spoken, for his warning that we should not dress all types of spending as "soft infrastructure". In terms of spending on education, healthcare, the Government recognises the importance of spending on these needs but we should always focus on how well we spend, not how much we spend. And we should always focus on the outcome and effectiveness of our spending, not on how big a sum of money we spend. So, we have made significant investments and ensured good outcomes. I have shown our effectiveness spending in education and health in this House before and I hope that Members will refer back to the Hansard and the charts that I have shown. This has been internationally recognised such as the World Bank Human Capital Index. The second point is that Assoc Prof Jamus has also cited several studies, macro studies, and may not apply to Singapore. Singapore has already achieved high levels of schooling especially for our younger cohorts. Our university cohort participation rate is already at 42%, comparable to the advanced economies. More importantly, we have high employment and good outcomes. Mr Louis Chua cited the recent US stimulus package and said it included a whole range of spending on social infrastructure. He then compared with what we are spending and suggested that actually we should be spending more. When we are looking at spending, we should be asking ourselves what do we have to spend on, what has been achieved and what other problems are we trying to fix?”
“As Mr Don Wee pointed out, the Sports Hub itself, and whether it is Sports Hub or KPE, are all over a billion dollars. It is not our intent that all types of infrastructure will be funded by borrowing. Let me emphasise. It is not our intent to fund all types of infrastructure by borrowing. Why? Because borrowing is not revenue. It must eventually be repaid by future taxpayers. If we borrow for all infrastructure projects, even the smaller ones, we will leave our children to shoulder a bigger stream of debt repayments. This would not be prudent, especially in view of our maturing economy and slower growth rates. So, the Government will continue to plan for and build a range of infrastructure to meet the needs of our people. Such development expenditure will remain a part of our annual Budget, to be funded by the recurrent revenues that the Government has to collect. The $4 billion threshold captures major, lumpy development needs that form the upcoming "hump" above our baseline development expenditure, and are important to our national interests, as I have explained earlier on. We are mindful that our infrastructure needs will evolve as our economy grows. Infrastructure costs may also grow with inflation. Hence, we are open to reviewing the $4 billion threshold in the future if necessary. As to what should count as infrastructure, Assoc Prof Jamus Lim and Mr Louis Chua mentioned a few points and I want to thank Mr Murali Pillai for his thoughtful comments to these suggestions. Assoc Prof Jamus explained his proposal to expand the scope of borrowing. So, I take it that he is in full support of SINGA to fund large-scale infrastructure. But what he wants is an additional bit to further expand the scope of borrowing to include non-infrastructure spending.”
“Several Members, including Mr Liang, have also asked about what is the impact on our AAA credit rating and several Members have pointed that this is the first time that we are borrowing for spending since the 1990s and it is not for a small sum; it is $90 billion. MOF and MAS have in fact engaged the three major credit rating agencies – S&P, Moody's and Fitch – to explain our approach on these borrowings. They too recognised that our approach is underpinned by key principles of prudence and sustainability. Even with the planned introduction of new borrowings to finance long-term major infrastructure, the credit rating agencies acknowledged that Singapore’s fiscal position and credit rating remain strong. This is because they understand that the Government is committed to a balanced Budget framework and to fund recurrent spending with recurrent revenue. Having sound macro-policies – fiscal, monetary and structural – is paramount. As Ms Foo Mee Har reminded us, we cannot take our AAA rating for granted. We must be prudent in how much we borrow and what we use our borrowings for. So, let me elaborate. One way we are exercising prudence is by limiting borrowing to infrastructure projects that have a total qualifying cost of at least $4 billion. Mr Edward Chia, Mr Don Wee and Mr Xie Yao Quan asked about the Government's considerations in setting the project cost threshold at $4 billion and if the Government would review it in future. As explained earlier, the Government is starting off more prudently by limiting the scope of SINGA to larger projects that tend to have greater intergenerational benefits. Infrastructure projects are in most instances intended to provide a stream of services over many years, and a diverse set is needed for Singapore and many other countries.”
“By contrast, Singapore does not have any net debt. This strong fiscal position puts us in a good position to emerge stronger from the COVID-19 crisis. So, let me address why do we limit it to nationally significant infrastructure. This Bill is a continuation of our careful and calibrated approach towards borrowing. As mentioned in my earlier speech, we are anticipating a hump of development expenditure as we embark on a generational upgrade of nationally significant infrastructure to improve the lives of Singaporeans. Borrowing and capitalisation of nationally significant infrastructure will help us spread out its lumpy costs, to better match the timing of the benefits to the timing of the spending. This is a fair and efficient approach. This is the result of long-term planning. We have been anticipating this need for quite some time now. I first announced that we were studying the option of borrowing for nationally significant infrastructure about two years ago in 2019. I had also at the outset of my speech showed you this infrastructure hump that we are facing. Several Members have made comments relating about why $90 billion, why not lower it, why not increase it, why the criteria, and so on. Let me remind all Members that we are not talking about from tomorrow, we are going to fund all development expenditure through borrowing. In fact, we are borrowing this $90 billion or we are going to borrow this $90 billion, in order to smooth out the funding needs because of this hump. Over and above that, our development expenditure will continue.”
“Today, we borrow under the Local Treasury Bills Act or LTBA and the Government Securities Act or GSA only for specific policy purposes such as for market development, meeting the investment needs of CPF, and liquidity. In fact, the majority of our borrowings, about 71%, is made up of the Special Singapore Government Securities (SSGS), which are issued primarily to support the retirement needs of Singaporeans. All these borrowings are invested and are not spent, and the returns on our investments are able to cover the borrowing costs over the long term. This includes the higher interest rates that we give to CPF members for the monies in their CPF accounts. We manage our borrowings carefully to ensure that we have the financial resources to repay our debts. While we used to borrow for spending in our development years, there has not been a need for us to do so since the 1990s because of strong growth and healthy revenues. Prudent management of our finances during these good years also helped us to build up our reserves. As Mr Liang pointed out, we could therefore now count on our rainy-day fund to mount a quick and decisive response to protect the lives and livelihoods of Singaporeans when the COVID-19 crisis hit last year. We did not have to incur a single cent of debt to fund our COVID-19 response. Our approach is different from other countries as our circumstances are different. As Ms Foo Mee Har reminded us, even during the COVID-19 crisis, some countries already had high levels of net government debt as they borrowed to fund recurrent needs. Some of these countries had to borrow even more to fund their COVID-19 response. For instance, the average net government debt amongst OECD countries rose from 65% of GDP in 2019 to 80% in 2020.”
“Mr Speaker, Sir, I thank, in fact, all Members who have spoken for supporting the SINGA Bill. They have also raised many suggestions. Even though Leader has just extended our time for my speech, I think if I were to go on to every single one of your suggestion, we will be here way past midnight. So, let me just cluster your suggestions around three broad questions. First, why is the Government borrowing for nationally significant infrastructure? Second, is borrowing under SINGA a prudent approach? And third, how would the Government manage the debt issuance under SINGA? Before I address these questions, I would first like to thank Mr Liang Eng Hwa for laying out the principles and considerations clearly. Indeed, as Mr Liang has rightfully pointed out, borrowing should be anchored by our overarching guiding values of prudence, discipline and equity. In fact, the key reason, as he pointed out, for borrowing is about intergenerational equity, a point which Prof Hoon Hian Teck also made about intergenerational equity or re-distributive justice. In fact, Prof Hoon mentioned that, for example, on climate change, the building of dykes and polders and other structures for keeping our island safe, is also a responsibility to unborn generations for which the Government is acting on their behalf. What we are doing builds on what we have been doing in managing our reserves to make sure that while we draw on our NIRC for our recurrent spending, we are also leaving aside sums for the future generation, so that they too can manage the long term. So, this has been, in fact, the Government's approach which has been a very carefully calibrated one. So, let me now go into some details.”
“It adheres to our prudent fiscal approach by ensuring that we do not risk borrowing beyond our means. After all, all debt has to be paid for. If we do not borrow responsibly and sustainably, we would risk being unable to meet our debt obligations. This would jeopardise our credit rating as well as investor confidence and this will hurt us and our children in the future. This Bill ensures that we borrow to spend only on nationally significant infrastructure investments which will benefit many generations of Singaporeans to come – in line with our values of taking a long-term view and staying prudent and responsible. We are not borrowing to spend on expenditures that will be consumed quickly. Current generations should continue to pay for their own recurrent needs like healthcare expenditure through recurrent revenues such as taxes. This is the right and responsible thing to do. Let us share the effort to build our nation together. Most importantly, let us never stop thinking about our future. In the long journey of nation-building, each generation of Singaporeans are relay runners. Let us always take good care of what we have inherited, run our best race and pass on a better Singapore to those who come after us. This Significant Infrastructure Government Loan Bill is but one step in this long journey. It seeks to do right by Singaporeans, both present and future, through the financial plans and provisions that we make today. Sir, I beg to move. [(proc text) Question proposed. (proc text)]”
“Since Independence, infrastructure has played a major role in Singapore's remarkable physical transformation from mudflat to metropolis. We built a world-class airport that has made us the open, globally connected city we are today. We created our first reservoir in the city and the largest reservoir in Singapore, the Marina Reservoir, by building a dam to keep out seawater. This innovative method provides us with an additional source of water supply and helps alleviate flooding in low-lying areas of the city. The Downtown Line, which opened in end 2015, reaches out to residential areas such as Bukit Panjang, MacPherson and Bedok Reservoir that were previously not served by the MRT, cutting travel times for Singaporeans living in these areas and connecting people to the city centre. Moving forward, infrastructure will remain important as our country enters into its next phase of development. We will turn our metropolis into a green, global city that is robust in addressing future challenges. We are building a sewerage system that helps us recycle every drop of water in a never-ending loop. We will bring green and efficient transport options closer to more Singaporeans. We will build coastal protection infrastructure to protect our coasts from rising sea levels caused by climate change. And in so doing, we will build a Singapore where we and our children can live our best lives in a safe, green and liveable environment, for all time and seasons to come. This Bill will allow the Government to borrow so that we can make bold and necessary infrastructure investments that are critical to Singapore's long-term development – just as our forefathers did. It provides an additional fiscal tool to continue to build Singapore for the future.”
“This is distinct from existing borrowings under the Local Treasury Bills Act or LTBA and Government Securities Act or GSA, which are for specific non-spending purposes, such as for market development, meeting the investment needs of CPF and liquidity. All borrowing under the LTBA and GSA are invested and cannot be spent. Even if we were to borrow up to the $90 billion limit under SINGA to finance nationally significant infrastructure, the majority of our borrowings will continue to be under the LTBA and GSA, which are for non-spending purposes. Some commentators have incorrectly interpreted our high gross debt-to-GDP ratio as a sign of fiscal imprudence, when in fact, our assets are well in excess of our liabilities. To address these misperceptions, we intend to clearly delineate the two types of borrowing in legislation. First, borrowings to finance spending on nationally significant infrastructure under the SINGA; and two, borrowings which are invested and cannot be spent under the LTBA and GSA. We intend to merge the LTBA and GSA into a single Act, as both are for non-spending purposes. The merger Bill will be tabled in Parliament in the coming months. In addition, this Bill repeals the Development Loan Acts (DLAs) which previously allowed the Government to borrow for development expenditure in the 1960s to 1980s. This makes it clear that borrowing for developmental purposes going forward, can only take place under the new safeguards that are imposed under SINGA. Mr Deputy Speaker, Sir, let me now conclude. In 1965, shortly after Singapore became an independent nation, Mr Lee Kuan Yew said, and I quote, "Over 100 years ago, this was a mudflat, swamp. Today, this is a modern city. Ten years from now, this will be a metropolis. Never fear".”
“Clause 29 of the Bill will amend the Financial Procedure Act to allow for nationally significant infrastructure financed by borrowings to be capitalised as assets and depreciated over the useful life of the infrastructure. The Reserves Protection Framework will continue to apply as well. If the Government runs a deficit, including depreciation and borrowing cost of SINGA assets, and do not have sufficient Current Reserves, there will be a draw on Past Reserves. Each term of Government will need to run a balanced Budget over its term, maintaining the fiscal discipline to ensure that we do not spend beyond our means. This fundamental principle remains unchanged with SINGA. We had sought the President's in-principle support in February this year for the Government to borrow for and capitalise nationally significant infrastructure under SINGA. And as with the case for all Bills to become law, we will also seek the President's assent to this Bill. Under Article 144 of our Constitution, the President has the discretion to withhold assent to any Bill providing for the borrowing of money by the Government, if she is of the opinion that the Bill is likely to draw on Past Reserves. Only after Parliament has passed and the President assented to the Bill, will the Government be able to borrow for nationally significant infrastructure, up to a gross limit of $90 billion. Mr Deputy Speaker, Sir, I would like to make it clear that this Bill introduces a new form of Government borrowing to finance spending on nationally significant infrastructure.”
“As such, development expenditure financed by SINGA will affect the Current Reserves differently, compared to regular development expenditure. The Budget presentation will reflect this treatment. This better matches the timing of benefits with the timing of spending. Present and future generations of Singaporeans will both contribute to and benefit from such infrastructure. Put together, this approach will smoothen the upcoming hump in development expenditure and lower our average development expenditure over the next decade from around 5% of GDP to 4.2% of GDP, after taking into account depreciation and borrowing costs. Let me explain using an example. Assume an MRT line that costs $14 billion and has a useful life of 70 years. Currently, we would expense the full $14 billion upfront, which reduce our annual Budget balance by the full $14 billion over the construction period, which may be over a period of say, 10 years. Assuming equal progress in every year, this would mean expenditure of $1.4 billion per year. Under SINGA, the $1.4 billion cash payment for each year will still form part of the development estimates in our annual Budget, which are subject to Parliament's approval and President's assent. However, we will add back this $1.4 billion in computing our annual Budget balance as this $1.4 billion will be capitalised as an asset. Upon completion of the construction, we will spread the total development costs of $14 billion over the MRT line's useful life of 70 years, by expensing annual depreciation costs of about $200 million instead. This means that our annual Budget balance will be reduced by $200 million over 70 years, before borrowing costs.”
“The last time when 10-year borrowing costs exceeded this level was in 1998. With all its fiscal expenditure, the Government will be transparent in reporting the use of borrowings to finance nationally significant infrastructure. When borrowings are used to meet progress payments for nationally significant infrastructure, such spending will be reported in the annual Budget Statement and the Government Financial Statements (GFS), together with annual depreciation expenses and interest costs. Additionally, we will submit a statement of assets financed under SINGA to the President annually to ensure accountability. Sir, let me now explain how this Bill will impact our Current Reserves and annual Budget balance. Presently, the development costs of infrastructure are financed using revenues accruing to the Current Reserves and fully expensed upfront in the annual Budget. In other words, Government's annual Budget balance is reduced by the full development costs of any infrastructure that is paid in that year. With borrowing, the Government will be able to raise cash to meet the outlays for these major, long-term infrastructure projects. But borrowing is not revenue and does not increase the Current Reserves that we can allocate in the annual Budget. This is why the Bill also provides for the capitalisation of infrastructure projects that are financed under SINGA. In other words, the development cost of major, long-term infrastructure will be financed using borrowings raised under SINGA, capitalised as assets and depreciated over the useful life of the infrastructure. Depreciation of SINGA assets, as well as borrowing costs, will be expensed against the annual Budget balance and will reduce Current Reserves of each term of Government over the assets' useful life.”
“93% as recently as July 2020, and to a high of 5.87% in 1998 when global interest rates were higher. The $5 billion threshold thus provides some buffer for us to cater to such scenarios. We will, however, limit the maximum amount that can be borrowed if interest rates are overly high and the interest cost threshold achieves this objective. For example, if interest rates averaged around 10%, then the interest cost threshold will constrain the amount of borrowings under SINGA to $50 billion, notwithstanding the gross borrowing limit of $90 billion. Setting the threshold at $5 billion therefore helps us to balance between fiscal sustainability and flexibility to accommodate market fluctuations. A $5 billion threshold caps the interest costs at around 1% of our GDP in 2020 at current market prices. This is a fiscally sustainable level and would not excessively impinge on future Government's ability to fund other priorities of the day. It also provides a buffer to account for interest rates rising and falling through the cycle, as the Government borrows at different points in time to finance infrastructure as and when we need to build them. Let me elaborate. The cost of borrowing is fixed at the prevailing yield during each bond issuance. As the Government issues bonds over several years, it will lock in interest rates at different points in the interest rate cycle. This means that even if some borrowings needed to be made during periods of high interest rates, there would have been borrowings that were made, or will be made, during periods of low interest rates, so the costs of borrowing will be averaged out over time. Further, the $5 billion threshold translates to borrowing cost of 5.5%, for $90 billion borrowing, which is high relative to historical borrowing rates.”
“For instance, the Government may issue bonds across a range of tenors and refinance when the bonds mature. Hence, the Bill provides for borrowings for the purpose of refinancing, even after the $90 billion borrowing limit is reached. The second restriction is an effective interest cost threshold of $5 billion per annum. Five billion dollars interest against the $90 billion cap works out to be an effective interest rate of about 5.5%. This threshold ensures we limit our borrowings when interest rates are very high, as interest costs will have to be borne by future generations. The annual effective interest cost will be calculated based on the effective interest costs paid in the preceding financial year. If the effective interest paid exceeds $5 billon, the Government will not be allowed to borrow more in the next financial year. Allow me to illustrate how the threshold will work. The recent 30-year SGS that was auctioned in January 2021 had a cut-off yield of 1.4%. If we borrow the full $90 billion based on this rate, the annual interest costs will be $1.3 billion, which is below the $5 billion threshold. But we cannot expect interest rates to remain at low levels forever. Historically, the longest period where SGS yields remained low did not last for more than two years, and this was in the aftermath of the Global Financial Crisis from 2011 to 2012. So, interest rates may continue to stay low or may increase in the future and we have to be prepared for that. In fact, the cut-off yield of a 30-year SGS went up to 2.94% in February 2018, which is not too long ago. We have also examined the interest rate trends for SGS over the past 25 years. Cut-off yields of SGS with tenors of more than 10 years have ranged from a low of 0.”
“Ninety billion dollars is approximately 20% of today's annual GDP at current market prices. This is lower than the borrowing limits of Development Loan Acts which previously allowed the Government to borrow for development expenditure in the 1960s to 1980s. Previous borrowing limits averaged 40% of GDP in the year the Acts were introduced. It is thus a reasonable figure given our more mature economy. I should emphasise that the borrowing limit is a gross limit and not a rolling limit. Once the Government has raised a borrowing under SINGA, that amount will be counted towards the total borrowing limit, even after the loan has been repaid. After the $90 billion limit is reached, the Government will have to amend the borrowing limit by passing a new Bill in Parliament in order to borrow further sums under SINGA. In doing so, it will need to justify such further borrowings to finance infrastructure projects that are of national importance. In other words, this Bill that we are legislating is limited to enable the Government of the day to borrow to meet the significant infrastructure needs in the coming years up to a maximum of $90 billion, as we undertake this generational upgrade. If there are further needs beyond the $90 billion, future terms of Parliament will have to debate and approve further measures to meet these needs. As set out in clause 5(2), refinanced borrowings will not count towards this $90 billion limit. This is because there is no corresponding spending on and capitalisation of nationally significant infrastructure. Allowing for refinancing, gives the Government of-the-day the flexibility to manage borrowing costs efficiently across interest rate cycles.”
“We will use the useful life of the infrastructure to determine the depreciation period of the capitalised assets. This is fair as it ensures that depreciation costs are spread only across generations who will benefit from the infrastructure. Lastly, all nationally significant infrastructure financed by borrowings must be legally owned by the Government. This ensures that the qualifying infrastructure assets can be capitalised on the Government's accounts. In addition, the asset must be controlled either by the Government or another entity on behalf of the Government. This ensures that the Government retains ultimate oversight over the infrastructure assets, to incentivise proper upkeep and maintenance, so generations of Singaporeans can benefit. To give an example, the North-South Corridor will qualify under SINGA, because it is an asset owned by the Government and is controlled by another entity, namely LTA, on behalf of the Government. The four qualifying requirements that I have touched on set out the projects that can qualify as nationally significant infrastructure. In addition, the Bill sets out limits to ensure that the amount the Government borrow is equitable and sustainable. This is to ensure that future generations are not saddled with a high debt burden. Clause 5 imposes two restrictions: a gross borrowing limit and an annual effective interest cost threshold. Together, these restrictions ensure that future Governments will be able to afford the principal and interest costs, while having sufficient fiscal space to fund their priorities of the day. The gross borrowing limit is set at $90 billion under the Bill. This sum reflects the projected pipeline of nationally significant infrastructure over the next 15 years, after adjusting for inflation.”
“This is set out in clause 2, under the definition of "nationally significant infrastructure", as being one that is "likely to materially improve national productivity or Singapore's economic, social or environmental sustainability" and in clause 2 as being "intended principally for use by or for the benefit of the present and future generations of the general public". New MRT lines will qualify, because these enhance liveability, promote economic activity by improving connectivity and are the greenest mode of transport in the long run. The Bill provides a list of examples that meet these objectives, such as transport infrastructure, climate change-related infrastructure, as well as utility network infrastructure. This list is non-exhaustive. This is because we can never know today, what we may need in the future. What is important is that we are targeting those projects with benefits that accrue widely to Singapore as a whole, or to a large majority of our people. In order to adhere to the spirit of this thinking without trying to predict too far into the future, we have safeguards that I have mentioned earlier, to ensure that the Government will use this carefully. The third requirement, as set out in clause 11(2), is for the resulting nationally significant infrastructure to have a useful life of at least 50 years. This ensures that the infrastructure project will benefit more than one generation of citizens. To be clear, the useful life of an infrastructure is not necessarily the same as its physical life. The physical life can be shorter, if we expect that the infrastructure may no longer serve its intended function sometime in the future, for example, if it is likely to be rendered obsolete by technological advances after a period of time.”
“For example, the cost of the entire Cross Island Line will count towards the same project value threshold because all its stations and rail tracks are physically connected to each other. The entire Cross Island Line is also expected to operate in its entirety, interchanging with all other MRT lines, existing and planned. In the case of the different infrastructure components that are required to protect us against rising sea levels, they are linked operationally but not physically. They may not be physically connected to each other because they may be triggered at certain locations. However, the costs of these components will also count towards the same project value threshold because the components need to work in tandem to protect our coastlines. For separate infrastructure projects that are not linked physically and can operate independently, the SINGA does not permit these projects to be bundled together in order to meet the $4 billion threshold. For example, the costs of individual hospitals will not count towards the same project value threshold, as each hospital can function as a standalone. When one hospital is down, other hospitals can continue to run and they may even pick up some of the slack in providing healthcare capacity. In contrast, if a component of an MRT line or coastal protection infrastructure is not built, the whole system would not be able to function as intended. I turn to the second requirement, which requires the infrastructure project to be important to our national interests and benefit the general public in Singapore.”
“In addition, under the SINGA Bill, nationally significant infrastructure projects must satisfy four requirements. One, it must be major in size. Two, it must be important to Singapore's national interests and benefit the general public. Three, it must last multiple generations. And four, it must be owned by the Government. First, nationally significant projects will have to cost at least $4 billion. This is set out in clause 11(5a). Nationally significant infrastructure projects tend to be big-ticket items as they are major and complex in nature. The $4 billion threshold will capture major, lumpy development needs that form the upcoming "hump" above our baseline development expenditure. It will also exclude smaller-scale infrastructure, such as schools and polyclinics. Such smaller scale infrastructure makes up the base of our annual development expenditure and should continue to be funded from taxes and other revenues. Clause 11 of the Bill sets out the criteria for determining the costs of the project. First, recurrent expenditure related to the nationally significant infrastructure, such as costs of repair and maintenance and purchase of vehicles, is excluded. Second, the cost of acquiring land is excluded as well. Third, the Bill permits projects to be built in phases, such as our MRT lines. Where these phases have been planned for right from the start, the costs of all phases of the infrastructure project can count towards the $4 billion threshold, if the different phases or components of the project are linked either physically or operationally. In short, we can view such a project as one system of integrated and inter-connected components.”
“Second, we must ensure that we do not overly burden future governments with high debt servicing costs, which will reduce the resources available for spending on worthwhile services and subsidies for our people. Hence, we will impose both strict borrowing and interest limits. We have benefited from the prudence of previous generations, who set aside surpluses then, when our economy was growing rapidly. This is why we have our reserves and a Reserves Protection Framework. Let us not forget that the opposite of reserves is debt. Today, the NIRC adds about 3% of our GDP to our total revenue. For most advanced economies, 1%-3% of GDP is spent on debt servicing costs. We must be careful not to slide from a position of having net assets to one of having net debt. Otherwise, instead of having assets that earn a stream of earnings to add to our revenue for future spending, we will be committing resources to servicing debts incurred by earlier generations. Mr Deputy Speaker, I will now explain how we have included these safeguards in the Bill, which will apply in addition to the Reserves Protection Framework. The earlier Development Loan Acts in the 1960s to 1980s that permitted Government borrowing for spending on development did not set out criteria for the type of development that qualifies. However, given that our economy is maturing and we are no longer expecting the same high growth and high fiscal surpluses as before, we have set out a prudent and disciplined approach. Today, all Government development projects go through a rigorous multi-stage evaluation process to ensure project worthiness and cost effectiveness. All infrastructure projects will also need to obtain Ministers' approval before they can be built. SINGA projects will undergo the same scrutiny.”
“As a fledgling state with no natural resources, we had borrowed to finance large infrastructure investments to help build Singapore in the past. Singapore launched our first Development Plan in 1961, an ambitious $871 million plan to kickstart industrialisation and economic development. We borrowed from the World Bank and the Asian Development Bank, and paid these debts back steadily and on time. In the 1980s, we borrowed to finance a wave of major infrastructure projects that we continue to benefit from today. These projects include Changi Airport Terminals 1 and 2, and our first MRT lines, the North-South and East-West lines. By the early 1990s, our economy was growing rapidly, aided by our young demographic. This led to buoyant revenues, which allowed the Government to meet all its expenditure needs and pay down the earlier debts. In addition, with prudent management of our finances, we were able to run healthy Budget surpluses and build up our reserves. There was no need for us to borrow to pay for major infrastructure expenditure. While we must continue to build for our future, including significant infrastructure, such as MRT lines and coastal protection infrastructure, our economy and demographic are now more mature. Given our ageing demographic and less scope for catch-up productivity growth, we cannot expect our economy to grow rapidly in the future. Hence, we will not have the same buoyant revenues as before to pay for large infrastructure expenditure upfront. Instead, we will reactivate Government borrowing. Our approach on borrowing should remain prudent and disciplined. First, we will not borrow for just any kind of development expenditure. We will set a high bar for qualifying projects that can be financed by borrowing.”
“Other examples of major, long-term infrastructure that we are building or expecting to build include major highways, such as the North-South Corridor which will alleviate congestion on the CTE, as well as coastal protection infrastructure to protect us against rising sea levels caused by climate change. Agencies are already embarking on site-specific studies at our coastlines, to examine potential measures like sea walls and polders. We expect more expenditure on climate change beyond 2030. This Bill before the House today will permit the Government to borrow for these major, long-term infrastructures, subject to strict safeguards, under the new Significant Infrastructure Government Loan Act, or SINGA for short. Given this upcoming hump in development expenditure that I just described, borrowing is a fair approach, because it allows each generation that benefits from the infrastructure to pay for its share. Otherwise, taxpayers in the next decade will need to finance much of this lumpy infrastructure that has a useful life of 50 years or more. Borrowing in this context is also efficient. First, with Singapore's AAA rating, we are likely able to tap the debt market at favourable interest rates. Second, by borrowing instead of drawing on investments, our reserves can remain invested to earn returns. We can tap on these returns to supplement our Budget through the Net Investment Returns Contribution, or NIRC. Other alternatives to borrowing include raising taxes temporarily, diverting resources from other spending needs such as social spending, or delaying significant infrastructure investments; however, all these options would be less efficient and more costly to the nation. Borrowing for infrastructure is not new.”
“Members may also access this handout through the SG PARL MP mobile app. Mr Deputy Speaker, over the next 15 years, Singapore will be making bold investments in major infrastructure that will benefit both the current and future generations. This generational upgrade in our infrastructure will greatly enhance the connectivity, liveability and sustainability of our home. Taken together, we expect an upcoming hump in development expenditure of around 5% of GDP annually, higher than our baseline or average development expenditure of 3.7%. This expenditure is over and above other infrastructural investments that we will continue to make, in areas like building more healthcare and education facilities. We plan to build new MRT lines such as the Cross Island Line and Jurong Region Line. MRT is the most efficient and greenest mode of transport. We want to raise the mass public transport modal share during peak hours from 64% now to 75% by 2030. New MRT lines will move us closer to the vision of a 45-minute city with 20-minute towns by 2040 and bring greener transport options closer to more Singaporeans. Another example is the Deep Tunnel Sewerage System, or DTSS. The DTSS will meet our long-term needs for used water collection, treatment, reclamation and disposal. As part of the second phase of DTSS, the Tuas Water Reclamation Plant will be able to treat up to 800,000 cubic metres of used water per day. This is equivalent to 320 Olympic-sized swimming pools. This will enhance our water resilience, in the face of larger fluctuations in rainfall.”
“Mr Deputy Speaker, Sir, I beg to move, "That the Bill be now read a Second time". Sir, first, let me set the context behind this Bill. To do so, may I ask the Clerk to distribute the handout, please?”
“Government tenders are conducted online via the GeBIZ procurement system, which has been accepting electronic submissions since 2003. We have progressively enhanced the bandwidth and file size limit of GeBIZ to allow larger files and drawings to be submitted. Almost all tender proposals, including those for design and construction tenders, are submitted online today. For regulatory clearance, the Government has also required all submissions for construction projects to be done electronically through the Construction and Real Estate Network (CORENET) since 2001. As construction projects often involve the review of very large technical drawings, some agencies may request hardcopies to facilitate tender evaluation and onsite discussion. This is done only if necessary when there is no alternative. These requirements are stated upfront so that consultants and contractors can price them into their bids. The Government has been working towards full digitalisation of our workflows and processes. MOF has been conducting service journeys to make procurement more seamless for both agencies and suppliers. BCA is developing a one-stop digital shopfront for regulatory approval, where project stakeholders just need to submit a single building information model online for collective review by regulatory agencies. We will continue to drive digitalisation to improve productivity and environmental sustainability.”
“If you can work from home, anybody in the world can also work from home. And I have seen, for example, videos of how workers in very, very depressed areas being able to access jobs in very advanced economies because all they needed was a knowledge of English, a knowledge of basic skills in doing what they were good at doing, a laptop and an Internet connection. And I have seen companies that have actually chopped up a very complex project into different bits and different parts for which they put it online for bidding and then you have workers all over the world bidding for those projects. And in one of the reports I saw, the worker was extremely happy because he had never earned that amount in his whole life. The company was extremely happy because the the cost to him was a fraction of what he had to pay in an advanced economy with very strong laws regarding employment and so on. So, it is a major, major opportunity but also a major challenge. That is why in all of last year's Budgets and this year's Budget, we have placed a very, very strong emphasis on upgrading the skills of our workers and I look forward to our Labour Movement working closely together with us on the Company Training Committee and a Job Security Council so that we can help our workers access good jobs, better jobs and to be able to ride on this digitalisation trend. And I hope that the work that we are going to embark on in a refreshed way, linking our R&D efforts with the economic sectors and pulling together these different strengths of efforts will enable us to make even better progress. 3.00 pm”
“I thank Mr Sharael Taha for his questions. Indeed, not only can we work from home, we can work from anywhere and you get calls any time as well. Mr Sharael Taha mentioned about whether we should take into account the lessons learnt from the pandemic as well as the lessons from these few years of implementation. Indeed, we should do that. And to the Member's specific question, for example, on manufacturing, what are the new opportunities for production of vaccines, for example, or even some way in which we can play a role in the vaccine, the economic agencies have been working very hard on this and I would leave the economic agencies to provide the announcement. All I can say is that I have provided sufficient budgetary support for us to secure some of these projects. On the Member's question about the skills, for example, healthcare and for us to move towards digitalisation, indeed, that should be the way. And as I have said, digitalisation has been accelerated and we must take this opportunity to look at how we can not only digitalise as much of our companies' processes as possible but also help our workers to build the new skills to be able to access those opportunities. And, in fact, beyond that, I have seen in many of our community centres, for example, that many seniors are being taught how to use digital tools – and I just did one over the weekend – as well as the projects to help our hawkers go digital, help our stallholders go digital and these are achieving good progress. So, I will say, certainly, we must take into account the changes. As to the Member's second question about work from home and work from anywhere and that this is a game-changer, I fully agree with him that this is a game-changer. But let me add that this is a game-changer that cuts both ways.”
“I think this tripartism where our Labour Movement is not there to just oppose change but, in fact, to facilitate change so that, at the end of the day, whatever changes that are made can be sustainable in that you have the full support of our workers and our workers can have a better life. So, this is really the crux of this. And I want to thank Mr Patrick Tay and his team for their very hard work in the Labour Movement in doing this. Mr Patrick Tay asked whether there would be sharing of good practices. Indeed, in fact, I have just made some changes in the way we organise our ITM work to link it to our work on R&D so that as technology and innovation play a more critical role in our economic future, we can work on both simultaneously. How can we help companies to transform to be more technologically savvy? And, in turn, I mentioned about the jobs transformation programme. How do we design programmes to enable our workers to have better skills in order to access those better jobs so that not only do the companies have higher productivity but our workers can look forward to higher wages and better employment prospects? On Mr Patrick Tay's point on the sectoral tripartite committee, I fully agree with him. These are important work in which we bring all our stakeholders together so that we put our efforts together to achieve a greater impact. So, I would like to thank Mr Patrick Tay and Mr Sharael Taha for their questions.”
“There are another part which is about the Attachments programme so that workers can get attached to get a sense of the nature of the job and companies can have a chance to evaluate the workers. For workers in newer areas, they can also go for training. These are the different ways in which we are preparing our workers and to grow our Singaporean Core, to move Singaporeans into areas with growth opportunities. On Mr Patrick Tay's second question about the varying success of the ITMs. In fact, whether you do ITM or you do not do ITM, the nature of economic growth cannot be predicted in advance. You cannot say that in five years, these sectors will grow; in five years, these sectors will shrink. There are sectors which will face more challenging conditions for which we are helping them to stay resilient. I mentioned that air transport and tourism are the most obvious areas from this COVID-19 crisis. But at the same time, even in normal times, you will find that some sectors will grow faster than others. Therefore, the way that we are helping our workers is to ensure that we provide as much training as possible – and that is where I want to commend our Labour Movement for the very good work that they are doing – both in starting the company training committee so that when companies are looking at how they will change and transform, at the same time, the union is working together with them to look at how the workers can be retrained for that. And this is not something to be taken for granted.”
“I thank Mr Patrick Tay for his supplementary questions. To his first question on looking for new growth opportunities, I fully agree with him. In fact, as I have mentioned in my reply earlier, a post-COVID-19 world will be a very different world. We are already seeing many of these changes. Changes have been accelerated and, in particular, technological trends have also been accelerated, especially digitalisation. As I have said in my Budget speeches before, COVID-19 has accelerated digitalisation in a way which very few CTOs have been able to do. There have been significant changes in the nature of work and even in the nature of the way businesses conduct themselves. And I must say that our agencies are already responding to that quite well. If you take, for example, the whole digitalisation trend, we are not waiting for the update of these ITMs before we act. We have increased the number of digital leaders and performers, especially among SMEs, from 9% to 12% from 2019 to 2020, and the share of digital starters also fell from 68% to 62%. Some of our MNCs and large local enterprises are on par with our global peers in this digitalisation. What this digitalisation trend means is that the nature of the job and the nature of skills will be very different, which is why it is critical that we develop those skills of our workers in this respect. To meet this job growth, the answer is not just in the Government deciding which are the sectors that will grow and which are the sectors that will not. And the significance of the Jobs Growth Incentive is exactly that when companies decide that they are going to grow, we incentivise them to draw in more workers and that is what the whole SGUnited Jobs and Skills package is all about.”
“One example is the Jobs Growth Incentive, to which we have allocated another $5.2 billion during the recent Budget to extend the hiring window by seven months. A higher level of support is provided to employers who hire mature local workers, persons with disabilities and ex-offenders. To help our senior workers, the Senior Employment Credit provides wage offsets for businesses that employ Singaporean workers aged 55 and above. We have also introduced the Enabling Employment Credit, which provides employers with wage offsets for every Singaporean person with disabilities earning below $4,000 per month that they employ. We will continue to build on these schemes to ensure that no one is left behind as we work with our tripartite partners to emerge stronger from the pandemic.”
“Our ITM refresh is complemented by the work of the Emerging Stronger Taskforce and the Singapore Together Alliances for Action, which have served as pathfinders to help us seize immediate opportunities, even amidst COVID-19. Ultimately, we transform our economy for the benefit of our people. Our ITMs chart the path forward for each sector to be competitive, so that our people can access good jobs and opportunities which improve their lives. Jobs and Skills are therefore key pillars of each ITM, supported through initiatives such as the next bound of SkillsFuture. We pay specific attention to mid-career workers, to help them stay employable and access good jobs. Our tripartite partners have also been working closely together to ensure that business transformation is tied to workplace and workforce transformation. For example, Workforce Singapore has worked with Government agencies and industry to develop Jobs Transformation Maps to provide detailed insights on the impact of technology and innovation on the industry and workforce. The Labour Movement has also been working with businesses to establish Company Training Committees, to help our workers upgrade while supporting their companies' transformation. More immediately, the Labour Movement's Job Security Council is working hard to match and place workers, minimise retrenchments and shorten unemployment periods for our workers. This way, we achieve inclusive growth which uplifts our workers. The Government is acutely aware of the plight of vulnerable workers who have been hardest hit by the pandemic. We have, therefore, been providing additional support for these workers who require more time and effort to reskill, upskill and re-join the workforce.”
“We have seen encouraging progress since embarking on our Industry Transformation Map (ITM) journey in 2016. Singapore's overall labour productivity, as measured by real value-added per actual hours worked, rose by 2.7% per annum from 2016 to 2019, up from 2.2% in the preceding three years. Real median income from work of full-time Singaporeans, including employer CPF contributions, rose by 3.7% per annum from 2016 to 2019, higher than the 3.2% per annum growth in the preceding three years. Up to 2019, our ITMs have been progressing well, with most of them on track to meet their targets. Unfortunately, COVID-19 disrupted this progress. Some of our ITM sectors, such as Air Transport, Hotels and Retail were badly hit, and will take time to recover. That is why as part of the series of Budget measures, we provided special support for the harder hit sectors, to help them stay resilient. Beyond the immediate impact, COVID-19 has also accelerated long-term structural trends such as digital transformation, a review of globalisation and a focus on sustainability. We must therefore build on the head-start and progress that we have made in the last five years, and refresh our ITMs to meet the accelerated changes brought about by COVID-19. For each of the 23 ITM sectors, we will update our sectoral strategies to create and seize opportunities through digitalisation, innovation, internationalisation, upskilling of workers and job redesign, with the aim of lifting the productivity and wages of our workers, and creating good jobs for Singaporeans. We target to complete this by next year.”
“Mr Speaker, can I have your permission to take Question Nos 18 and 19 together?”
“We provide tax relief to those who make voluntary cash top-ups to their own MediSave Account (MA), up to the annual CPF contribution cap (which takes into account mandatory CPF contributions) and the overall personal income tax relief cap. Taxpayers can also top up the MA of their family members on their behalf, with the tax relief accorded to the recipients. The tax relief is subject to caps so that the most well-off do not disproportionately benefit from it. Besides cash top-ups, members can also use their own MediSave monies to support their family members' medical expenses, subject to the applicable MediSave withdrawal limits. The Government will continue to review our policies to ensure they remain relevant and to encourage family support.”
“The Jobs Support Scheme (JSS) is intended to provide wage support to help employers retain their local employees. Arising from feedback received, the JSS was extended in May 2020 to shareholder-directors who draw a salary from their companies, with corresponding CPF contributions. This is in recognition of their dual capacities as both a shareholder-director and an employee of the company. Non-executive directors, on the other hand, generally do not engage in the day-to-day running of the company and are not regarded as employees. They are usually paid director’s fees for their directorial services, and do not draw a salary from the company. CPF contributions, both employer's and employee’s shares, are not payable on the director’s fees. Since these are not employee wages, the director’s fees received do not attract JSS support. As of 31 January 2021, we have received 1,634 JSS appeals relating to shareholder-directors. These include appeals from those who exceeded the assessable income threshold, companies that were late in making CPF contributions, as well as appeals for director’s fees to be included for JSS support. About 22% of these appeals were approved. None of the approved appeals are for directors who were paid director’s fees. This is in line with the policy intent of the JSS.”
“On the technical question that Mr Louis Chua asked about, what constitute the other big part, well, one bit which, as the Member has pointed out, is the land sales; and the other part, a big chunk of it, is the Investment and Interest Income. It is already being used.”
“On the technical question that Mr Louis Chua asked about, what constitute the other big part, well, one bit which, as the Member has pointed out, is the land sales; and the other part, a big chunk of it, is the NIRC. The NIRC is already being used. [Please refer to “Debate on Annual Budget Statement”, Official Report, 26 February 2021, Volume 95, Issue No 21.] [(proc text) Written statement by Mr Heng Swee Keat circulated with leave of the Speaker in accordance with Standing Order No 29(5): (proc text)] I wish to make the following factual correction to the reply given during the Budget Debate Round-up Speech at the Sitting of 26 February 2021. My reply should read as follows:”
“One, that it is fair for inter-generational equity, because you spread out the cost of borrowing, because various generations are going to benefit from that. Second, at this point, it is efficient because interest rates are very low and ultra-low. And to your observation as to whether, therefore, we should not touch our reserves and liquidate our assets to borrow, you are a good investor.”
“I thank Mr Sitoh Yih Pin for his question and for sharing the story. Why are we borrowing at this point? There are several reasons and the Member touched on two of them. One is that for our SINGA Bonds, which is about borrowing for our infrastructure, the significant national infrastructure, we are borrowing because we are now coming to another hump in our development expenditure. In the early years, did we borrow? Yes, we did borrow when we were building the first MRT and our airports. And, again, that was another big hump. So, the nature of infrastructure project is such that you need to build it over the next two, three years, but the benefits of that project should last us several generations. So, therefore, how do we spread out the borrowing? First, do we build or do we not build? Just because we do not have the resources to build it now, do we forego it? We must build it only if it gives you economic or social return. The projects that we did for our MRT lines, for our airport, give us both the economic and social returns, and therefore we can justify why we are doing it. But at the same time, I mentioned that, in the coming years of, first of all, even if our fiscal situation was good, it may not even be enough for us to fund that lumpy investment. So, lumpy investments need to be spread out over time. Then, the next question is how do I fund it? There are several ways. One is, could you go and use the past reserve for that? It is not because the reserves are used for extraordinary and temporary situation. It is spelt out in our Constitution. So, why are we borrowing? Well, I mentioned before that there are several reasons.”
“So, the question about our exchange rate regime, I am glad that the Member is not saying that we should reveal our exchange rate regime, that is good. As to your question about why the secrecy, I do not wish to hold up this whole forum. I devoted more than two pages of my reply to you on that, about the size of currency trading, about my experience in MAS during the Global Financial Crisis, about my experience when I was accompanying Mr Lee Kuan Yew to the countries which were so badly hit by the Asian Financial Crisis. So, please, have a care that policy-making cannot be theoretical musings.”
“So, President Jim Yong Kim told me, "I hope that Singapore is open to sharing this so that others can learn because there are countries who will need to raise this, and they are very concerned that they will not have the resources to educate their people better". So, it is how we use it. Now, the second question on the exchange rate. Let me again state, for the benefit of our currency stability and for the benefit of all of these debates around the world about manipulating exchange rate, Singapore does not manipulate our exchange rate. Singapore does not manipulate our exchange rate. We do not manipulate it to secure a competitive advantage because that is not sustainable. As an economics professor, I think he will fully understand that, that long-term sustainability for economic competitiveness must come from productivity growth and labour force growth. Our labour force growth is turning towards zero. And so we have to rely on productivity growth –which is why in the next phase of our transformation, we need to focus on technology and innovation-driven growth. So, we do not manipulate our exchange rate. So, what do we do? What is our exchange rate policy centred on? It is not different from other central banks, which is maintain medium term price stability, so that economic agents, economic players can make decisions on the basis that these are the relative prices that they can make decisions on, that you do not have runaway inflations. Even then, I will say that, right now, because of COVID-19, there is, again, new thinking about whether this inflation targeting is the right approach, and so on. But as far as Singapore is concerned, we have been maintaining price stability and that has allowed our economy to have the macro economic framework to stay competitive.”
“And when I was walking with President Jim Yong Kim to the venue site, I asked him: "Personally, I am not terribly comfortable talking about Singapore being ranked well because it is not our approach to talk about our ranking. So, what is your purpose?" And he said something which has never left me. He said, "Well, actually, my interest in Singapore is not how much you spend, but how well you spent." And the reason he could say that was that he had done comparisons, the World Bank team had done comparisons, of the educational expenditure and the outcomes of the student. We ranked well not because we spent the most money, but because we actually achieved outcomes. Having been Education Minister for five years and visiting so many of our schools, I am convinced that our schools and our teachers have put in the greatest amount of effort, and the fact that we have parents who are so supportive of our kids' education is what allowed our students to do so well. There is no one magic formula. You can have a number and say, "I would like to know whether it is 5% or 10% of GDP" and so on. It does not. I have also said in this Budget debate and even in the previous round, about our healthcare outcome. It is the same – it is not what you spend; it is how you spend it and the dedication of the staff. So, I am extremely grateful to our frontline officers, to our teachers and our educators in their various roles in our schools, and which is why, as Education Minister, I talked about every school being a good school, because I am deeply convinced that that is the case. It is not something that a Budget and a theoretical number can give you the result.”
“Mr Speaker, Sir, first, let me let me say that in Parliamentary debates, please do not put words into my mouth. I did not dismiss soft capital. You said that I was dismissive of soft capital. I was not. I said that we have to be careful. I said, I sound a word of caution about soft capital. Precisely because it is soft, it can morph into various shapes. I had mentioned how many good schemes started with very good intentions, with very good people, but precisely because it is soft, the shape changes, and over time, everything becomes capital investment. So, that is the first point. Second, I think there is a role for building all this soft capital. If you want to talk about whether my notion of partnership, working together, is soft capital, well, you can say that and say: should we invest a lot of money in that? We have been very careful to say how we can build our society. In fact, if you want to use academic terminologies like these, there is a lot of soft capital in our neighbourhood because people are supporting one another, and we did see soft capital coming up. But that is not the issue. The key issue is this. We have to be very careful with recurrent spending and the outcome focus, which was a point that Mr Pritam Singh mentioned right at the outset. So, let me share my experience as Education Minister. I said in my speech, and in fact, I have shown this slide many times. Perhaps I should show it again and again until the message gets through. I have shown it many times how Singapore has been ranked so well in the international ranking of students. I have also shared that in 2018, when the IMF/World Bank meeting was held in Bali, President Jim Yong Kim of the World Bank invited the Prime Minister to talk about the Human Capital Index.”