Hoon Hian Teck
Singapore
“How can we identify potential applications of AI to our local landscape to boost worker productivity? Mr Chairman, the arrival of robots produces threats when they simply replace human workers in a set of tasks and thus depresses workers wage earnings.”
“A talented individual who could potentially become a major contributor to creating new ideas that will lead to new products that can be marketed, might be born into a financially constrained family. What can be done to reach such individuals to help them achieve their potential to contribute to indigenous innovation?”
“Thank you. Living through the rapid economic transformation of Singapore leaves one with a deep sense of gratitude. The journey ahead, however, is likely to be more challenging as citizens' aspirations are now higher and the room for growth spurts diminishes in a mature economy.”
“So, painting with a broad brush, we have three economic objectives: maintaining medium-term price stability, achieving an underlying economy wide productivity growth and facilitating economic inclusion with an assignment of three policy instruments: an exchange rate centred monetary policy, structural policy and fiscal policy respectively…”
“Even as it now faces the challenges of a growth transition, a demographic transition, technological disruptions and higher worker aspirations, it will be the ability to develop political consensus and supporting social and economic institutions to continue to embrace economic openness, not only to goods and capital but also to people, tha…”
“Allow me, Mdm Deputy Speaker, to end with this quote, which ends Dr Goh Keng Swee's Budget speech. I quote: “When the British military withdrawal is completed in 1971, a new era will dawn on us. This event is likely to be no less significant than our departure in 1965 from the Federation of Malaysia.”
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Every one of 94 lines we hold for Hoon Hian Teck, in date order, each linked to its source. Free to read, in full, without an account. Page 2 of 2.
“Mr Speaker, Sir, I would like to speak on the Retirement and Re-employment (Amendment) Bill. This Bill empowers the Minister to specify the prescribed minimum retirement age applicable to any class of employees who must be at least 62 years but not more than 65. Employers cannot dismiss the employees on the ground of age before they reach the prescribed minimum retirement age. Similar provisions are made for the re-employment age. The need to make such legislative provisions arises from the fact that life expectancy has vastly increased and, along with it, people can make choices on how to divide the gains in the number of years between work and retirement. The Tripartite Workgroup on Older Workers recommended that the retirement age and re-employment age be raised to 65 and 70 respectively by 2030, with the first increases to 62 and 68 in 2022. Evidence from several developed economies shows that an increasing fraction of people in their 60s have chosen to remain active in the labour force since the mid-1990s. Data from the Singapore Yearbook of Manpower Statistics 2021 show that for those in the age group 60 to 64 years, the male labour force participation rate increased by more than 10 percentage points from 2010 to 2020. For the age group 65 to 69 years, the male labour force participation rate increased by more than 15 percentage points. Corresponding figures for the female labour force participation rate for these corresponding age groups showed even bigger percentage point increases, although they remained below the male labour force participation rate. For the age group 55 to 59 years, there was also a significant increase in the female labour force participation rate.”
“Paul had, for some years before he won the Nobel, been very interested to visit various countries to talk about policy. He was in Singapore. He was in the International Advisory Panel with the University at that time. He came to me and said, at Prof Phelps' suggestion, "Would you like to take a trip with me to South Africa?" It was a one-day conference, where they were going to bring together their business leaders and their trade union leaders to talk about the fact that the unemployment rate among the young people was close to 50%. I had a chance to tell them about the Singapore story, with trade union members all in the room, about how we were able to convince labour to accept the 15-percentage-point cut and, of course, with the understanding that the CPF rate will be restored. The challenge ahead for Singapore is understanding that the lump of labour fallacy still does not apply over the long term. The challenge for Singapore, really, is to recognise that the sources of growth going forward have to come with a continued integration into the global economy. I think Minister Lawrence Wong has demonstrated and illustrated that very well. It is a view that I share. The challenge for Singapore is, in the next stage, to demonstrate this. Because we have had five decades of being able to find a new way to reinvent ourselves, I think there is a great reason to have great optimism to show that the lump of labour fallacy will not apply. At the heart of it, I believe it is, indeed, right in that point in the Motion by Minister Lawrence Wong, which I have a deep sympathy for: that Singapore's growth must continue with economic openness. That includes openness to trade, capital and people in the right way. [Applause.] 12.27 am”
“Thank you, Mr Speaker. A reference was made to the lump of labour fallacy. I think we all agree that, in essence, that is not a good description of labour markets. And I will just conclude by applying that to two settings. I think, first, with reference to what Member Desmond Choo illustrated, the understanding that the lump of labour fallacy – which is that there are only 100 jobs and, so, if you have more people than that, some other people take the jobs, the others would not have it. In fact, that does not apply, first, in a setting when the economy is itself subject to adverse shocks, recessions. Mr Desmond Choo pointed very well to the episode in 1984 to 1985. In the face of a sharp recession, in fact, the number of jobs substantially decreased. Unemployment sharply went up. There were major retrenchments. Job destruction was very high. I think the remarkable thing about Singapore when you look at how it faced its challenges over the decades is the ability to demonstrate the lump of labour fallacy does not apply even in an adverse situation. In 1984, I was an Honours year student graduating from NUS. Prime Minister Lee was then actually directing the economic committee that came out with the report. The remarkable thing that came out of that episode – really remarkable, because it was the sharpest recession since 1965 – was the ability to bring together union leaders, employers and the Government to convince the people that you will accept a 15-percentage-point cut in your CPF. That amounts to 12% of your wages, really. I had the opportunity in 2010 when Prof Paul Romer, who won the Nobel Prize in 2018, to meet him through my association with Prof Edmund Phelps who was my teacher at the University of Columbia.”
“Even as it now faces the challenges of a growth transition, a demographic transition, technological disruptions and higher worker aspirations, it will be the ability to develop political consensus and supporting social and economic institutions to continue to embrace economic openness, not only to goods and capital but also to people, that will assure it of a future with a supply of good jobs and wages. Therefore, I support Minister Lawrence Wong's Motion to secure Singaporean jobs and livelihoods while staying open and connected to the world, in order to grow and prosper, even as we focus on the other points made in the Motion. [Applause.]”
“Working in an MNC might be a prelude to stepping out to launch a new business venture since moving between departments in an MNC exposes a worker to different facets of running a business. A shift in our own education system towards preparing students to cope with novelties and picking themselves up after failures will also help to increase the supply of entrepreneurs to boost the SME sector. However, as an empirical matter, SMEs exit their respective industries more frequently than large firms. Many new business ventures end up in failure but, among the ones that survive, their growth is higher than the average growth rate. Given the high probability of failure in any innovative activity, having a large supply of workers who turn into entrepreneurs is necessary to ensure a sufficiently high aggregate rate of innovation that would need to drive the productivity growth, to allow us to attain trend growth as a mature economy. The demographic transition, however, to a declining citizen workforce carries the implication that it will be difficult to sustain the pace of indigenous innovation necessary to maintain the trend growth. Since it is people who create ideas, a declining workforce ultimately leads to slower productivity growth. It would appear then, just to maintain the trend growth, keeping the size of the labour force from declining is of paramount importance. In conclusion, Mr Speaker, Sir, Singapore overcame the odds against it when it attained Independence by developing the right mindset and economic institutions capable of riding on the opportunities provided by the world.”
“So, two persons who graduated from the same university, the one who works at the MNC, holding everything constant, tends to be paid more than at a smaller firm. That is empirical fact widely acknowledged now in the labour economics literature. It is true that in the early stages of recovery from a recession, small firms provide a more rapid pace of job creation than large firms in the early stage of an economic recovery. However, in the later stages of economic recovery, the pace of job creation tends to be more rapid at large firms and workers enjoy pay rises when they join these large firms. So, that is a huge advantage that we have got, that even as we have expanded our labour force, the number showed that the increase in the stock of FDI really has been huge. And that has been a great help in both creating good jobs and overall providing better wages. My final point – the Mozart effect in the face of a declining citizen workforce because of the below replacement total fertility rate. In the next phase of Singapore’s economic development, it is not enough to rely on technologies developed abroad. We must move from imitation to innovation just to maintain trend growth. Much of the catch-up phase in the technological diffusion is probably nearly over. So, in the next stage, innovation will have to drive productivity growth. While MNCs still play an important part in creating new technologies, we need them both for the jobs with better pay and also their part in creating new technology because they also do R&D. A bigger share of the source of growth would have to come from productivity gains achieved by SMEs that are successful in their innovations.”
“So, from 1978 to 2013, the year when I was looking at the trend, total labour force increased three times but total FDI stock increased by more than 10 times. So, the stock of Foreign Direct Investment per worker more than increased. Then, from 2013 to 2017, just to check the more recent data, 2017 is the latest year that I have found publicly available data on the stock of FDI. That is in the Singapore Yearbook of Statistics 2019. The latest year of the data on the stock of FDI is for 2017. You would find that the growth of the FDI stock just over this period, 2013 to 2017, again far exceeded the growth rate of the foreign workforce in Singapore. Overall then, total FDI has grown much faster than total labour force. Moreover, you would find that the services sector share of the total FDI stock – because we have data as well of FDI stock divided across industry, manufacturing, services, and broken down – has been increasing over the years. In 2017, more than 50% of the total FDI stock went to financial and insurance services, one of the industries in there. So, manufacturing has been shrinking in terms of its command of the total share of FDI, even as total FDI has gone up, which means disproportionately more of it has gone into the services sector and, in particular, the financial and insurance services, where many of our PMEs find their employment. A direct benefit of the strong presence of multinational corporations (MNCs) that undertake the FDI in the Singapore economy comes from what is known as the employer-size wage effect. Large firms, which many MNCs tend to be, are more productive and they pay more for observationally identical workers.”
“In the 1960s to the 1980s, as factories were built, the expanding manufacturing sector provided jobs to Singapore citizens even as the size of the foreign workforce expanded. In the 1990s to the present decade, the financial sector expanded and also created new job vacancies. Moreover, real wages were, on the whole, rising even though the economy faced adverse economic shocks that caused recessions in successive decades since 1965. It should be acknowledged that the Global Financial Crisis that started in 2008 most likely had lingering effects on pulling down the wage growth in the years 2009 and 2010. But other than that, over the decade as a whole, it is the case that as standard of living has risen, real wages, by and large, have gone up. Certainly, from the year 2000 onwards, there came to be some divergence. The better-skilled workers continued to see rising wages whereas in the 10 years since 2000, the low-wage workers have seen their wages somewhat decline. But the country has dealt with that and our focus today is on foreign talent policy. So, overall, with technological diffusion, because we have stayed connected to the global economy, we have been able to catch up with the US standard of living, starting from less than a third of the level of US purchasing-power-parity-adjusted GDP per capita in 1965. Second, the role of foreign direct investment in job creation. I find it useful, in my own effort to understand the Singapore Story, to note that even as our total labour force increased by more than three times from less than a million in 1978 to over three million in 2013, the stock of Foreign Direct Investment (FDI) per worker in real terms, adjusted for inflation, increased by more than 10 times.”
“Mr Speaker, Sir, a debate on the impact of Singapore's foreign talent policy on jobs and livelihoods needs to confront three realities: the "lump of labour" fallacy, the role of foreign direct investment in job creation and the Mozart effect in the face of a declining citizen workforce due to a total fertility rate that is below replacement level. The lump of labour fallacy is the mistaken idea that there is always a fixed number of jobs. Instead, the number of jobs in an economy is variable and determined by the interactions between the pace of job creation and the pace of job destruction. The role of foreign direct investment recognises that in a small open economy like Singapore, with the right institutions and business-friendly policies, an increase in the size of the labour force boosts the return to capital and thus attracts multinational corporations to set up shop and create new job vacancies. The Mozart effect recognises that if talent is randomly distributed across a given population, then the bigger the size of the population, the greater the absolute number of talented people. As an organising framework, to think about the Motion before us, it is useful to characterise the Singapore economy as a country that is linked to the global economy via technological diffusion: a process that is facilitated by strong cross-border exchanges of goods, capital and people. First, the lump of labour fallacy. It is a fact that even as the size of Singapore's labour force has expanded over the decades since Independence so that there are more people looking for jobs, the number of job vacancies to be filled has increased. The pace of job creation over the decades reflects the changing comparative advantage of the economy.”
“For example, newer firms might more readily take advantage of clean technology not available to older firms when the latter made their investment decisions. A policy question is whether older firms should be given more time and help in resources to make the transition to adopting clean technology so that there might be differential standards across firms temporarily. In an environment with uncertainty about the cost of compliance due to new technological development, setting the same regulatory standard for all firms runs the risk of two possible types of error. If the actual cost of compliance turns out to be less than initially expected, then regulation would, in retrospect, have turned out to be too stringent. On the other hand, if the actual cost of compliance turns out to be higher than initially expected, then regulation would, in retrospect, have turned out to be too lax. It might be preferable under uncertainty to set a tax on greenhouse gas emissions and then allow firms to choose the extent to which they wish to control the amount of emissions so it gives firms some buffer time to transit. Mr Deputy Speaker, Sir, the emission of greenhouse gases from the manufacture and import of certain goods and carrying out of certain works by firms creates negative externalities on the rest of society. There is, therefore, a basis for government intervention to limit the amount of greenhouse gas emissions. The set of optimal policy tools most likely includes both the setting of regulatory standards as well as the use of carbon taxes, which Singapore introduced in 2019. In combination with subsidies for research and development in clean technology, this set of policy tools can steer Singapore in the direction of being a leader in sustainable living.”
“Mr Deputy Speaker, Sir, when an activity such as a firm's production of a good imposes a cost on the rest of society, which it does not pay for, for example, when it emits greenhouse gases such as carbon dioxide, methane and nitrous oxide, the marginal social cost exceeds the marginal private cost. In other words, the cost to society of producing an additional unit of the good includes not only the cost of factor inputs like labour and capital but also the harm the firm causes to the environment. The result is that in the absence of government intervention, there is an overproduction of such a good and its concomitant emission of greenhouse gases. The amendment to the Bill under consideration provides the Government the legal powers to set regulatory standards on the manufacture and import of certain goods as well as the carrying out of certain works in order to limit the amount of carbon emissions. As policy tools to fight climate change, the setting of regulatory standards, which is a command-and-control measure, works to complement the introduction of carbon taxes, which is a price mechanism measure. When is it optimal to use the setting of regulatory standards, which target quantities directly and when is it optimal to use prices to achieve the aim of limiting greenhouse gas emissions? When the compliance costs of limiting greenhouse gas emissions are fairly uniform across firms in the economy and the harm imposed on the rest of society rises sharply when the amount of greenhouse gas emissions crosses a certain threshold, it is optimal to set regulatory standards. In practice, however, compliance costs might differ across industries and even across firms in the same industry.”
“Allow me, Mdm Deputy Speaker, to end with this quote, which ends Dr Goh Keng Swee's Budget speech. I quote: “When the British military withdrawal is completed in 1971, a new era will dawn on us. This event is likely to be no less significant than our departure in 1965 from the Federation of Malaysia. Since 1965, we have proved that as a separate economic entity, Singapore has a far greater survival potential than many people, here and elsewhere, had believed possible. After 1971, we have to go through another test, perhaps a more exacting and rigorous test, and that is our survival potential as a separate political entity in a difficult and turbulent part of the world. If in the intervening years we have put to good account our resources in money, manpower, skills and organisation, I believe we shall pass the test of political survival as adequately as we now are passing the test of economic survival.” Let us all take heart from how we, as a nation, tackled that earlier challenge! Mdm Deputy Speaker, I support these Support Measures under Heightened Alert. [Applause.]”
“In the 1970s, the economy faced the challenge of stagflation, that is, stagnation combined with high inflation brought about by the oil crises; in the 1980s, around about 1984 and 1985, Singapore faced its sharpest recession; in the 1990s, Singapore faced the challenge of the Asian financial crisis; and in the "noughties", the economy faced the Global Financial Crisis. Yet, over this span of a few decades, despite the negative economic shocks, we were able to create new jobs. It is true that when it sharply hit, the unemployment went up. But because we focused our policy on the trend growth, therefore creating new job vacancies, the unemployment rate then came down again. When we face a supply shock to our GDP, such as the decline of the GDP last year, when the economy rebounded, it rebounded with that experience we had in the past and we shaped the trend path of the economy, that would allow us to move and continue on a higher trend growth path. There is, therefore, reason to believe it is important that fiscal policy not only responds to short-term needs but it also sets the parameters to raise the economy’s trend growth path. And we have those few decades to look back to, to have encouragement from. We also exercised fiscal prudence through the decades so that we were able to save and build resources to meet emergency needs. We were able to draw down on these reserves when the storm was most severe, notably during the Global Financial Crisis and last year, when it was necessary to implement the circuit breaker, a lockdown of business activity, when the storm was at its most severe strength. Looking back, it is inspiring to read how Dr Goh Keng Swee ended his 1968 Budget speech. He had no idea at that time how the future decades would look like.”
“So, even though there are immediate needs and we have to cater to the short-term challenges many Members have talked about for businesses, especially the ones that are domestically oriented, there is still a need in thinking about our policy that we keep our eye on how the trend growth would be like when the economy recovers. Third, even as we confront directly the challenges posed by COVID-19, there is still the need to recognise other fundamental spending needs of the country and to find the tax revenues to pay for the expected increased spending. Dr Goh Keng Swee was upfront about the need to increase tax rates and introduce new taxes to meet the significant increase in defence expenditures, having said at the beginning of his speech that it was neither possible nor desirable to conceal increases of such magnitude. Today, we will need to confront the reality, even under the challenges of COVID-19, that an ageing population resulting from increased life expectancy as well as reduced fertility rate and, therefore, consequently, the higher spending on health, that this will require additional fiscal resources. Mdm Deputy Speaker, even as we face head-on the challenge posed by COVID-19, it is helpful to recall how we have tackled the challenge posed by the British withdrawal as a newly independent nation. With the benefit of hindsight, we can see how we overcame that earlier challenge of British withdrawal as well as later challenges that arrived in each decade.”
“This included providing redundant workers liquidity during the period of their job search through the Central Provident Fund scheme, into which all gratuities were deposited and from which regular amounts could be drawn. In addition, the Government introduced a training scheme to equip them with skills for new occupations in industries. Today, we are very fortunate that the Government has the fiscal resources through JSS to directly help businesses to retain resident workers. Second, there is the need to identify new sources of growth even in the midst of this COVID-19 shock to steepen the trend growth path of the economy. In his speech, Dr Goh Keng Swee noted that the best guarantee that the adjustment to the economic shock brought about by the British withdrawal would be relatively prompt and painless was to ensure a sufficiently fast growth of the economy. Rapid economic growth, he argued, would lead to a rising demand for all categories of workers and, with this, there would be more job opportunities for retrenched workers. The support measures for Phase Two (Heightened Alert) being debated here under the Supplementary Bill should be seen in the context of Budget 2021 that was presented in Parliament in February this year. That Budget includes measures to structurally transform the economy to enable innovation to drive productivity growth. Notably, the Jobs Growth Incentive (JGI), by subsidising the new hires of resident workers, acts to complement the JSS.”
“Mdm Deputy Speaker, as the country implements yet again another round of restrictions under Phase Two (Heightened Alert) with measures to support businesses and workers, we can look at historical parallels since our Independence to see if we can draw some lessons. The COVID-19 economic shock has the characteristics of a supply-induced contraction of gross national product. The withdrawal of British forces from Singapore not long after our Independence similarly resulted in the supply-side contraction of our national output. In the Budget Day speech given in Parliament on 3 December 1968, the then Minister for Finance, Dr Goh Keng Swee, addressed two fiscal implications of the accelerated withdrawal of British military forces. One, there was the need to tackle the consequent decline in our gross national product and the loss of employment of large numbers of locally employed civilians, as well as enlisted personnel, due to layoffs, retrenchments. Two, the nation would have to address the need to increase taxes to finance a forecasted defence expenditure reaching some 10% of gross national product as the country assumes full responsibility to build up its own defence force. Then, as now, I believe that there are three main thrusts in a comprehensive fiscal response that pays attention both to the short-term as well as to the long-term needs of our economy. First, there is the need to provide immediate fiscal resources to keep businesses afloat and to save jobs. In the 1968 Budget, it was announced that a number of measures had been undertaken to help redundant base workers.”
“Mr Speaker, Sir, to conclude, in the absence of a vibrant international trading system that can conclude new agreements to further liberalise trade in goods and services, I believe that the signing of FTAs overall provides the Singapore economy a means for its firms to expand their market despite the job churning and the creative destruction. That, ultimately, I believe, has a positive net impact on our labour market.”
“So, from the point of view of increased human capital, as well as the investment in SkillsFuture to allow learning on the job, I think there is every reason to have confidence that our local workforce will both have a higher level of human capital as well as have the ability to acquire new skills to function in an age of digital transformation. If we succeed in doing that, then our resident workers will have the comparative advantage to fill these new job slots, the sort of thing that Mr Patrick Tay talked about. Going back to Mr Ong Ye Kung's "Analogy A" of more jobs slots but more competition; and on the other hand, less competition and future jobs lost, he talked about being somewhere in between. Given our history, the ability to ultimately compete in the world market says that there is something positive of a tilting towards the direction of increased competition. But we make investment in our local workforce, starting from the Primary school level. And there is every good reason to believe that even as we transit to a phase of the country's development where you are not going to have the 5% growth per year, because that was catch-up growth, we are now at the stage where the potential for growth has to come from innovation driving productivity. I believe that there is every good reason to think that, ultimately, many of these jobs that our locals take, they graduate from a university, they perhaps start off with an MNC at a lower managerial position, but with the sort of human capital, with the sort of ability to adjust and compete, there is every good reason to believe that many of them, on their own merits, have the potential to fill in these new job slots because there is local advantage.”
“Nevertheless, the creative destruction resulting from FTAs is likely to leave the economy overall with more productive firms that are able to pay better wages So, with stiffer competition, some will not survive and they have to try again, but, overall, for the economy, the level of productivity is higher as we seek to generate indigenous innovation as a source of our productivity growth. So, FTAs are helpful both from the point of view of continuing to attract MNCs to base their production here, but it is also important as a way of giving a lift to our more productive local firms, SMEs, to break into potentially neighbouring markets and further overseas. The derived demand for workers resulting from the need to meet this external demand for our goods and services, like foreign firms and consumers in the partner countries who are signatories of the FTAs, will translate into the creation of new job slots, in particular, tasks. Because, what is a job? A job is a combination of tasks that we create. So, the allocation of workers with the right skillset to fill these job slots with these particular set of tasks is necessary in order to maximise these Singapore-based firms' profit. Only then will the productivity of the firm be boosted and the salaries correspondingly increased. As the local workforce raises its human capital because of the huge investments we have made from the beginning in education, the proportion of the cohort leaving Primary school that goes to University has gone up.”
“A shrinking workforce will put downward pressure on GDP growth because productivity growth is unlikely to fully compensate for the labour force shrinkage. Singapore's rise in living standards over the past decades has been facilitated by a steady inflow of foreign direct investments, which brought technology and good jobs. So, continuing to attract MNCs to base their production here, even as we become more service-oriented, with manufacturing hiring a smaller share of labour force, yet, doing this is likely to require a complementary set of skills that can be offered only by a combination of local and foreign workers, given the low fertility rate. At this stage of our development, where indigenous innovation must contribute to productivity growth, FTAs also allow new start-ups as well as both Large Local Enterprises (LLEs) and SMEs, to face lower trade barriers when selling into particular overseas markets. So, we continue to need to rely on MNCs because they are large, they pay better wages, but we are also at a stage where we need to stimulate indigenous innovation. And they will start small. Many will fail. But they need to have the capacity to be able to sell abroad. Therefore, establishing FTAs that allow the partner signatories to the agreement to lower their tariff rates enlarge the market for our new start-ups as well as SMEs and LLEs. To be clear, the increased international competition faced by our local firms also means there will be some job destruction because, with increased competition, some of our SMEs may fail.”
“Mr Speaker, Sir, an issue that has surfaced in the debate on Free Trade Agreements (FTAs), such as the Comprehensive Economic Cooperation Agreement (CECA), is that of their impact on jobs. It is important to state at the outset that the number of jobs in an economy is not an immutable datum. Rather, it is variable and it is the result of the net effect of the pace of job creation, which adds to the number of job vacancies and the pace of job destruction, which reduces the number of job vacancies. In the first few decades, after gaining Independence, the World Trading System under the General Agreement on Tariffs and Trade (GATT) steadily reduced every race and lowered trade barriers. The World Trade Organization (WTO) was established in 1995 as a multilateral institution that facilitated the signing of agreements in areas such as services, investment and Intellectual Property. This enabled the Singapore economy to attract MNCs to base production in Singapore, thus creating jobs and sell into the world market. With increased protectionist sentiments expressed in many advanced countries in recent years, the WTO has had difficulty in reaching new agreements. It has been necessary for Singapore to turn to FTAs to provide a means to enlarge markets for Singapore-based firms. By negotiating and signing FTAs that enable our firms to export to destination markets with lower or zero tariff rates, Singapore can attract foreign capital to work in Singapore to employ Singapore-based workers and pull up their wages. With Singapore's total fertility rate consistently below the replacement rate of 2.1 since the mid-1970s, the size of the citizen labour force will begin to shrink, with more people retiring than the number of new entrants into the workforce.”
“Source countries might also impose travel restrictions on their own citizens travelling to Singapore, which require Singapore-based firms to look elsewhere for workers. So, turning to alternative sources of foreign workers has business consequences as wage costs might increase, which this Bill seeks to address. Mdm Deputy Speaker, we need to recognise that as an outward-oriented economy, even while there is effort suggested by Members of the House to raise the productivity of the construction sector and make it less labour-intensive, that is something that will take time. So, there are inevitable costs that will have to be borne with the spike of new cases in several parts of the world even as we seek to achieve what we regard as an optimal trade-off. The enactment of this Bill reflects our effort to adapt to unforeseen circumstances that this evolving pandemic will continue to present to us. In view of this, I support the Bill. 8.42 pm”
“However, even then, the economy will not benefit fully from international economic integration as it did during the pre-COVID-19 days. Instead of thinking about binary choices, like whether to keep borders closed or open, our policy has to adapt to unforeseen circumstances that the evolving pandemic presents to us by improving trade-offs. The COVID-19 pandemic has presented Singapore with two important trade-offs. The first trade-off is between the saving of jobs and protection from the virus. The circuit breaker introduced last year shut down non-essential businesses in order to limit the spread of the virus. The adoption of measures like safe distancing and the mandatory wearing of masks helped to reduce the crucial parameter known as the reproduction rate – the parameter that gives the number of people an infectious person will infect over the whole course of their disease in a fully susceptible population. Those measures help to improve the trade-off so that, for a given level of protection of health, more business activity could resume. The second trade-off is between international economic integration and national control of the pandemic. When the number of community cases is successfully brought down, opening up our borders risks importing cases of infected persons. While testing and imposing quarantine orders on foreigners help to reduce the risk of community spread caused by imported cases, implementing travel bubbles requires both countries to have effective national control of the pandemic. Restricting entry of foreign workers from countries with a high incidence of COVID-19 infections and turning to alternative sources with lower infection rates seek to undo the adverse shift in trade-off to some degree.”
“Mdm Deputy Speaker, I wish to make a broader point that goes beyond the focus on the construction industry that is covered by this Bill. In confronting the new challenges facing our country with the new clusters of community cases in recent weeks, it is important that we and members of the public avoid false dichotomies. In particular, we must avoid the false dichotomy that in formulating policy, we have to choose between one of only two options: either close borders to save lives or open borders to save the economy. The presumption is that we should prioritise human well-being at some cost to the economy, so that keeping the borders open is tantamount to choosing to place the economy above human lives. In reality, closing the borders also imposes costs on human well-being, a point I think that has been made by several people, but let us think about that. Stricter border controls that make it more difficult to obtain the help of foreign domestic workers to take care of our elderly citizens, for example, reduce our senior citizens' well-being. Restricting the entry of foreign workers from certain countries with high incidence of COVID-19 infections would delay the completion of many construction projects, including BTO flats. This would have an impact on plans for starting a family for many people. Companies that have a high reliance on foreign workers might go out of business which would cause citizen workers their jobs as well. The loss of jobs means not only a loss of income but also imposes costs on the well-being of the retrenched workers and their family members. Increasing the quarantine period from 14 days to 21 days for international travellers except for those from a few countries with lower infection rates, provides some degree of safety for our citizens.”
“In this context, I support the Bill. 5.25 pm”
“The Government has announced in Budget 2021 that it plans to raise the GST rate from 7% to 9% any time from 2020 to 2025. From the perspective of the analysis just provided, one benefit to the country of raising tax revenue in anticipation of higher social spending is that the credit risk or risk premium can be kept low. In other words, whatever the safe interest rate is, the borrowing costs incurred to service the loan undertaken in this Act can be kept relatively low by maintaining good credit worthiness. Returning to the analogy, suppose that in the course of your working life, the interest rate unexpectedly rises. Then, in order for you not to default, you would have to tighten your belt and cut spending unless you discover that your income is also going to increase. While the safe interest rate is currently low and expected to be low for some time, unexpected events that raise the safe interest rate can affect fiscal sustainability. Data showed that in the early 1980s – the first half of the decade of the 1980s – the safe interest rate experienced a sharp spike that caused a fiscal crisis in many emerging economies and posed budgetary challenges for some advanced economies as well since the cost of servicing public debt sharply increased. In order to re-establish fiscal sustainability in the event that the safe interest rate rises, it is necessary to either raise taxes or to cut spending. Mr Deputy Speaker, Sir, there is indeed justification for the Government to issue new bonds to finance significant infrastructure projects that would raise national productivity or mitigate the adverse effects of climate change. We must maintain the reputation that we have built up over the years for good financial management of our fiscal affairs.”
“Unlike unfunded social security systems, a pay-as-you-go system where current taxes on the working young are used to pay for the benefits of retirees, Singapore's fully funded social security system, the Central Provident Fund, also added to national saving. These factors altogether contributed to Singapore's good credit rating. That was how we achieved our low credit risk. Looking to the future, what factors might affect Singapore's credit rating? With health expenditure rising as a share of gross domestic product (GDP) in tandem with an ageing population, having the capacity to raise tax revenue to fund such spending will become important. The concept of fiscal sustainability is useful as a way to think about how to maintain a low credit risk. The Government Budget at any point in time is fiscally sustainable if the expected present value of primary surpluses, which do not include interest payments, is at least as large as the size of the public debt. Although a country can still run into Budget deficits – when it is hit by a recession, for example – it must ultimately plan to generate tax revenue that is in excess of current spending in other years if it is to be able to service an outstanding stock of public debt. To use an analogy, suppose that at the start of your career, you take out a loan. Then, although in future periods, you might still occasionally borrow, there must be sufficiently many periods during which you spend less than your income for you to be credit worthy. In anticipation of increased social spending, in particular on health, with an ageing population, it would be necessary to raise taxes in order to remain fiscally sustainable.”
“As I read it, there are two dimensions to the infrastructural investment. The first is public investment, such as in roads and major highways, which serves to raise the productivity of firms. There is evidence that the stock of public capital – highways, roads and so on – complements private capital so that the public capital raises the returns to private business investments. Consequently, workers' productivity is also raised. The second is infrastructural investment which serves to mitigate the adverse effects of climate change, such as seawalls and dykes. In the absence of this second type of investment, not only would national productivity fall, lives could be at risk with coastal hazards. Since the benefits derived can be enjoyed by as yet unborn generations, the Government of the day must act on their behalf. They are not around to vote. It is also justifiable to issue new bonds to finance such infrastructural investments so that future generations can share in bearing the tax burden. This is intergenerational distributive justice. To the question of what factors led to the currently low credit risk. No doubt, Singapore's remarkable economic catch-ups since Independence effectively expanded the tax base at given tax rates. With economic growth, real income steadily increased decade after decade. Income inequality was not a serious problem in the first couple of decades after Independence as industrialisation increased the demand for relatively unskilled to semi-skilled workers, thus pulling up their wage earnings. With a relatively young population then, healthcare spending was a smaller share of the Budget. Thus, the demand for fiscal resources to support social spending was less pressing. Budgetary surpluses added to our national reserves.”
“Mr Deputy Speaker, Sir, although the Singapore Government has borrowed from international lenders previously to fund public infrastructure projects, such as the loans it took in the 1980s to build the first MRT lines, this Bill is significant in the scale of borrowing and the types of infrastructure that qualify. It has been remarked that it is efficient to issue new bonds under the proposed Significant Infrastructure Government Loan Act (SINGA) as it allows the country to benefit from the current low interest rate environment. To place this remark in perspective, it is helpful to recognise that for a small, open economy like Singapore that is well integrated with the international capital market, the interest rate charged on a sovereign loan is roughly speaking the sum of a safe rate of interest such as the interest on the US Treasury Bill and a credit risk. While the Singapore economy largely takes a safe rate of interest as given, the currently low credit risk is the result of past fiscal prudence. Our capacity in the future to generate tax revenue to meet our future spending needs will be necessary to enable the country to maintain this low credit risk. In other words, the credit risk can move up or down even when the safe interest rate stays constant. What factors led to the creation of fiscal space in the past and what factors might affect Singapore's credit rating in the future? Before answering these two questions, it is good to quickly review the justification for SINGA Bill that we are talking about in Parliament. The purpose of the Act is to enable the Government to borrow and to finance nationally significant infrastructure to support or improve national productivity or Singapore's economic, environmental or social sustainability.”
“As Singapore aims to nurture a steady flow of innovators in its next phase of growth, perhaps MND can be intentional in supporting greater interconnectivity and close proximity of innovators in its urban redesign, in a post-COVID world. To sum up, COVID-19, with its attendant lockdowns, quite unexpectedly enabled the business sector and public sector to conduct a natural experiment. Can work be productively done when most employees are working from home? There is some evidence that work productivity does indeed improve when employees work from home. Even post COVID-19, there is a real possibility that work-from-home arrangements in some form may become a permanent feature of working life. There are then serious implications for urban design, both of the business district as well as the HDB heartlands. We can undertake the task of urban design with technology to enable workers to achieve work-life balance and to support an innovation-driven economy.”
“First, with more people working from home, there might be a need for bigger digital infrastructure investment to strengthen broadband services for people working from home. With WFH becoming a permanent fixture of working arrangement for many employees, HDB estates can be organised to support two additional important roles of workers who have children or elderly parents: providing childcare and providing eldercare. To be sure, working from home can lead to overwork. It is hard to stop answering work-related emails, for example. Nevertheless, the flexibility afforded by WFH may allow, say, both husband and wife to work and fulfil the need to provide childcare and eldercare. To work effectively from home, it helps to have an office within the house. For those without this, having access to specially design office space akin to a business centre in the HDB block might rise job satisfaction and worker productivity. Future designs of HDB blocks may seek to cater to these needs. Second, with fewer workers travelling into the business district, there may be implication for rents as well as use of office space. It is too early to predict with any certainty the evolution of demand and supply conditions for office spaces in a post-COVID world. Nevertheless, there is likely to be some scope for urban redesign. An argument made by some urban economists about why cities exist: because a lot of people in big countries concentrate together in a small geographical area. And why workers in cities earn higher wages is that there are positive externalities when innovative people are in close proximity to each other. By exchanging ideas with each other, the average productivity level is raised.”
“Mr Chairman, it is not new that Singapore's urban form has, in part, been shaped by a stage of economic development. In the 1960s when the manufacturer of labour intensive goods, such as textile, garments and simple electronics were produced by MNCs for sale into the world market, factories were built in industrial sites. Some of the earliest HDB flats were built in Jurong to house many of the workers who were employed in the nearby factories. The COVID-19 pandemic, occurring at the stage of Singapore's economic development where indigenous innovation must drive productivity growth has the potential to also reshape our urban landscape. There is a network effect in achieving overall productivity improvement when most employees are to work-from-home (WFH). Before COVID-19, the norm was for most employees to travel to the office and to work from there. If most employees are already in the office, it is inconvenient to have a few employees join in meetings remotely. However, during the circuit breaker period with employees in non-essential services being required to work from home, many have found that work could actually be performed reasonably well. Investments have already been made in equipment to support work-from-home. For MND, the issue to be raised here concerns the design of use of space in the business district, not just the central business district, and possible physical infrastructural support in housing estates to take account of the likelihood that even after COVID-19, as well as during a possibly long-drawn pandemic, WFH arrangements in some form might become a permanent fixture of working life. An idea is to design space use to support work-life balance for employees and to support an innovation-driven economy.”
“Holding a job confers benefits that go beyond the pay. It provides also non-monetary rewards, non-pecuniary benefits of a job. In contrast, being unemployed produces not only personal costs, but also has important social costs. Family members are also badly affected when a breadwinner loses a job. The JGI could go some way towards encouraging firms in the growing sectors to hire recent graduates. The SGUnited Traineeship programme is also valuable in helping to link graduates from the Institutes of Higher Learning to potential employers. During a buoyant market, a graduate holding an undergraduate degree might defer post graduate training. Let me declare here that I am an academic at one of the Autonomous Universities. In the current labour market conditions, the opportunity cost of doing a full-time postgraduate degree is lower, lower than during the pre-pandemic era. The Government might consider sharing in the cost of postgraduate education with firms in the potential growth sectors who might be willing to make contractual arrangements to partially fund the workers to acquire advanced skills. After obtaining the postgraduate degree, the worker is then employed by the sponsoring firm. To sum up, the COVID-19 shock might turn out to be prolonged in this climate. It is vital to minimise the scarring effect on a resident Workforce.”
“Firms employing workers in the tourism related industry working in tandem with their trade association and chambers can potentially take advantage of a home market effect to cater to demand from residents who are unable to travel overseas for their family holidays due to the pandemic. They can also encourage their workers to build upon common digital platforms to reach overseas customers. Second, workers were employed in the rest of the economy. The JSS provides support to achieve the stabilisation function of the Government, avoiding a cyclical rise in unemployment, while the Jobs Growth Incentive, the JGI package, seeks to create new hires in the potential growth sectors through a hiring subsidy. The JGI is a very important policy measure as it helps to create a good supply of new job vacancies in growing sectors of the economy. In the aftermath of the Global Financial Crisis (GFC), it has been observed that even though the measured rate of unemployment in the advanced economies decline, the employment to working-age population ratio had actually fallen below pre-GFC levels. So the unemployment rate was low, but the employment to working age population was actually low as well. What is the explanation? That is because even after several years subsequent to the Global Financial Crisis, there was an inadequate supply of good jobs offering good pay so that discouraged workers withdrew from the labour force. Pursuing structural transformation as a major pillar of Budget 2021, even while help is extended to save jobs in the contact-intensive sector has a virtue of enabling the Singapore economy to create a good supply of new job vacancies when the economy returns to its potential trend growth path. Third, new graduates entering the workforce during COVID-19.”
“A feature of the COVID-19 economic health shock is that it is uneven across sectors. While firms in a contact-intensive sectors suffers a contraction in output and will lay off workers in the absence of policy measures like the Job Support Scheme (JSS), some other firms such as those offering products via an electronic platform do well. The issue to be raised here concerns the nature of help that might be offered to facilitate reallocation of workers out of the contact-intensive sector such as aviation/aerospace and tourism related activity into other sectors should restrictions on international travel make it unlikely for normal business to resume soon. More broadly, how do we prepare workers to minimise the scarring effects of a prolonged slump? It is useful to think about three groups of workers. Those currently employed in the contact-intensive sector, those employed in the rest of the economy and new graduates who are entering the workforce. First, workers who are currently employed in the contact-intensive sector. The JSS keeps these workers on the firms' payroll because the ultimate recovery of the affected sector avoids the need to incur investment costs to retrain a new group of workers with the necessary industry specific skills. Workers in the aviation/aerospace industry will no doubt use the lull period to undergo training to deepen their skills. Perhaps new developments in artificial intelligence and the technology embodied in Industry 4.0 can be mastered to position the industry to ride the wave of opportunities when more normal international travel resumes.”
“Local firms can also build upon the digital platform to establish a business presence as part of the global value chain to supply intermediate products to foreign customers. In this regard, let me acknowledge the advantages that Digital Economy Agreements, already established with Australia, New Zealand and Chile, confer to our local firms an advantage in their internationalisation efforts. Third, our investment in urban design to make Singapore environmentally-friendly with a low carbon footprint can facilitate research and development (R&D) in clean technology. Innovative firms engaged in R&D in clean technology will find it more profitable to undertake risky investments if it can find a sufficiently large market for its products. As Singapore makes a commitment to adopt a whole-of-society approach to create an environmentally sustainable place to live, work and play in, this creates a larger demand for capital goods that embody this clean technology. Having tested their products in the local Singapore market, these innovative firms can then potentially export such capital goods to the rest of the world. In sum, there are still potential opportunities, despite the circumstances, to ride on global opportunities to grow. In conclusion, despite fractured globalisation, spurring innovative activities to ultimately reach overseas markets can enable the Singapore economy to achieve the required productivity growth to support good jobs with good pay. 12.45 pm Calibrating Incentives to MNCs and SMEs”
“A key factor here is the degree of substitution between the goods produced by the affected sector and the goods produced by the non-contact-intensive sector. Because of COVID-19, Singapore residents are unable to travel overseas for holidays. In normal times, our local businesses would find it difficult to capture a large portion of the spending of Singapore residents because they would prefer to travel overseas for their holidays. Now that it is difficult to travel overseas. There is, therefore, a natural advantage presented to our local entrepreneurs. This potentially means a larger domestic demand for the goods and services of our local businesses. If the trade association and chambers representing these local businesses can facilitate the organisation and marketing to reach these residents, we can lower the average cost of supplying the goods from the non-contact-intensive sector. These businesses can then charge a lower price as the whole industry enjoys economies of scale. Even when COVID-19 is over, the experience of offering products to suit local customers’ tastes could well enable our innovators running these local firms to reach foreign customers as well. Second, our large human capital base and investment in digital infrastructure can enable our entrepreneurs to reach overseas markets. Although there are fewer tourists walking down the streets to purchase from local firms, digitalisation might enable them to find an online platform to reach overseas customers who would have taken their holidays in Singapore in the absence of the pandemic. An example is to create a virtual experience for these foreign customers.”
“Chairman, Singapore's economic transformation since independence has relied on integration into the global economy. That reliance came at a time when trade barriers that were set up during the Great Depression in the 1930s – a period of prolonged slump – were being dismantled. Hence, Singapore’s economic growth from the 1960s onwards rode on growing world trade. Now, COVID-19, which has adversely affected both the advanced and emerging economies, can tend to cause countries to adopt inward-looking protectionist policies. The question: how do we navigate a world of potentially more fractured globalisation? MTI, no doubt, must have devoted much time and energy to think about how the Singapore economy can still take advantage of economic openness to generate good jobs for our residents. Nevertheless, let me share some thoughts. The answer, to answer this question, I believe, is that we should create dynamic comparative advantage as a small open innovation-driven economy. Despite the challenges we face, this is the way to achieve the required productivity growth to support an economy that creates good jobs with good pay. There are three, to my mind, potential sources of comparative advantage in the current circumstances. First, this comparative advantage could come through a so-called “home market” effect. Let me explain. The demand for Singapore’s goods comes from both domestic sources as well as external sources. A feature of the COVID-19 shock is that, broadly speaking, it affects two sectors unevenly – an affected sector, which includes aviation, aerospace and tourism, and a non-contact-intensive sector. There is a decline in demand for goods produced by the affected sector. How do we boost domestic demand for goods produced by the non-contact-intensive sector?”
“Whether or not to have a national unemployment insurance scheme is not an easy question to answer because it involves trading off the benefits of providing liquidity on one hand and you have to match that against the cost of higher unemployment. Mr Speaker, Sir, COVID-19 is unprecedented in being a recessionary shock that comes with much uncertainty about its length. It poses a challenge to find a balance between the Government's stabilisation and allocation functions. In the near term, fiscal resources should still be directed to keep businesses afloat and save jobs in the affected sector. If the slump is prolonged, efficiency considerations dictate that fiscal resources should be directed more towards facilitating structural transformation to raise the productive capacity of the economy. There may also be a need to study whether a national unemployment insurance scheme is warranted to provide workers with liquidity in the event of future, future long and deep recessions. With attention given in this Budget to short-term needs, but also investing and steepening the trend growth path, while being open to policy ideas, I support this Budget. 2.00 pm”
“The Contingencies Fund, which Deputy Prime Minister Heng referred to in last year's Fortitude Budget, sets aside an extra $13 billion, and that, goes some way to address the concern that I just mentioned. Hopefully, this provides sufficient resources to meet emergency needs arising either from health or economic considerations. Nevertheless, in general, how do we think about this problem? Self insurance and a national unemployment insurance scheme are alternatives for providing the needed cash should a resident be out of work after JSS ceases. Faced with the prospect of being laid off, workers might increase their savings to insure against a drop in consumption, that is self insurance. Self insurance, however, is not possible for hand-to-mouth workers. We, therefore, I believe, need to examine the costs and benefits of providing social insurance to cover the risk of unemployment. To be very clear, this is not something to implement in the midst of the pandemic, but it is an option to be studied when this storm is past. Let me just end with a couple of comments about the tension in putting in place something like a national unemployment insurance scheme. It obviously involves a trade-off. As extending unemployment benefits tends – other things being equal – to increase the duration of unemployment as workers are able to hold out longer before taking on a job, there is the prospect that introducing a national unemployment insurance scheme can raise the overall rate of unemployment. On the other hand, having such an insurance scheme enables workers and their dependants to have access to cash to finance consumption when breadwinners lose their jobs for an extended period.”
“It has been observed by many that onslaught of COVID-19 has led to a rapid adoption of digital technology and more generally of digital transformation that can position Singapore well as it seeks to raise the firm's productivity. Building a common digital platform with other countries will enable start-ups as well as SMEs to sell overseas and enlarge their market. As new business processes as well as new products and services are created to cater to a COVID-19 and post-COVID-19 world, there will be demand for workers with new skills. An increasing share of fiscal resources should, therefore, on this principle that I have argued, be directed at supporting workers, including those previously employed in the affected sector, to reskill to fill these new job positions. I am gratified that Budget 2021 keeps a focus on facilitating structural transformation, even as it meets the short-term needs I mentioned, to enable the economy to return to a strong trend path that will deliver good jobs with good pay over the longer term. Third, and my final point, given the uncertainty surrounding the length of the COVID-19 slump, there is a question of fiscal sustainability. Would a government that is required to maintain budget balance over its term of government have the required fiscal resources to achieve its stabilisation function in a prolonged slump? How do we prevent workers and their dependents, from suffering a sharp drop in consumption when fiscal stimulus is removed because the recession drags on for several years. It is not an easy problem, we have never quite had to encounter this problem, because past recessions were deep and sharp but recovery was rapid, possibly not this one.”
“Should normal conditions return to the affected sector, firms – if the workers had been retrenched earlier – would have to incur costs once again to make new investment, to orientate new employees. Therefore, there remains a need to provide wage subsidies through the Jobs Support Scheme to enable firms in the affected sector to keep their workers. I think Budget 2021 recognises the uneven nature of the COVID-19 shock, quite different from other shocks that tend to be aggregate in nature, affecting many sectors in the economy. Second, my second point about what we can recognise as we try to establish good fiscal principles with the dilemma of this shock that I mentioned. Despite the occurrence of prolonged slums, such as the Great Depression in the 1930s. In the US, it began in 1929, recovery began only in 1933, but it took much of the 1930s for the slum to end. Nevertheless, the study of today's advanced economies over the whole of 20th century suggest that economies do return to their trend growth path. Despite a prolonged slump like the Great Depression, nearly a decade in length, the economy resumed to grow at roughly 2% per annum over the 20th century. What does that mean for us? Should the pandemic turn out to be prolonged, then, despite the argument I have just made, that fiscal resources be expended to keep businesses in the affected sector afloat and to avoid retrenchment, the consideration of efficiency dictates that fiscal stimulus be gradually scaled down. This is so as to allow a process of creative destruction to enable entrepreneurs with good ideas to launch new businesses, even as other firms exit.”
“If the slum is prolonged and becomes a multi-year affair, how does the Government balance between using its fiscal resources to fulfil its stabilisation function on one hand, and allocation function on the other hand? Mr Speaker, Sir, I would like to suggest three principles that might guide us in finding this right balance in the face of uncertainty. First, in crafting the Budget, we should make optimal use of the best information we currently have. There are some aspects of the nature of the slum caused by COVID-19 that are now reasonably well understood: a negative supply shock in a contact-intensive and travel-related sector – let us call it the affected sector – produces a negative demand shock which affects the whole economy. The affected sector contracted output most obviously during the circuit breaker period, but even post-circuit-breaker, the non-arrival of international tourists means that businesses in the affected sector must cut back output and would have to lay off workers in the absence of wage subsidies given under the Jobs Support Scheme or JSS. Massive loss of jobs in the affected sector will be socially costly for several reasons. As workers, especially low-wage workers, typically phase credit constraints so that they are unable to borrow against future incomes, they and their family members would face severe economic hardship. With a loss of income, there is also a contraction of demand for all goods, not just goods produced by the affected sector. Job retrenchments in the affected sector will also imply that there is a loss of firm-specific capital that workers would have built up over time during their employment with their current employers.”
“Mr Speaker, Sir, preparing the Government's Budget in the middle of a pandemic has presented challenges not faced to the same extent in the preparation of past Budgets. The new element added is that of great uncertainty about the length of the adverse economic-health shock that is hitting the economy. The emphasis in my last sentence is on the words "uncertainty about the length". Singapore's recession in 1985 was deep and sharp, but its recovery was rapid. In the face of the shock from the 1997 Asian Financial Crisis, the recovery was also rapid. The Budgets could therefore be strongly expansionary in the short term to save jobs and businesses, and thus, fulfil the stabilisation function of the Government. Once out of the recession, subsequent Budgets could focus on structural transformation of the economy, gearing the economy to expand is productive capacity to create good jobs with good pay for its residents. This fulfils the allocation function of the Government. In contrast, in our current environment – even though the big storm that ravaged our economy and the rest of the world started more than a year ago – there is much uncertainty about when normal economic conditions will return. Budget 2021 therefore, has to find a balance between using fiscal resources which are finite, to close the output gap; that is, to fight recession on one hand and providing fiscal incentives to spur structural transformation to achieve a medium to long-term productivity growth of say, 2% per annum, on the other hand. The 2% growth rate is the rate at which advanced economies have been able to grow over the 20th century. At that rate, you double your standard of living every 35 years.”