Lawrence Wong
Singapore
“Sir, we will provide more information. I see the value of getting Ministries to put out more information, to share more about how their resources are being used and what outcomes they have achieved.”
“Sir, I agree fully with Mr Azhar that human capacity, human capital is critical. In fact, I would say the long-term potential of Singapore, how far we go really depends on us being able to maximise our human potential. That is key and that is why we have long invested in education. And it is not just about the investments.”
“Sir, we have been maintaining that commitment of 1% for some time now. I do not think it is about saying that we just have to do more and spend more. As many have highlighted, we want to ensure good outcomes from our R&D spending as well. So, we will continue if the outcomes are good.”
“This has never been the case. Temasek, when it started, was always very clear about its mandate from the very beginning – commercial, not doing national service, focused on commercial outcomes.”
“Sir, the MOF economists when they look at fiscal projections use Government's forecast of the economy, which is also published. We would typically use the mid-point of the range and then, of course, because these are in nominal terms, you have to factor for that. And the projections are done on those basis.”
“Sir, I was relieved that Mr Loh said he only has one question, but he asked the most difficult question. To answer the question, we will continue to monitor cost of living across all segments of society.”
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“A procurement contract will be classified as Information Communications Technology (ICT) contract if the majority of the contract value is for this purpose. On that basis, over the last three years, the Singapore Government awarded an average of about $2 billion and $24 billion per year for ICT and non-ICT contracts respectively.”
“We continue to fine-tune them, make sure that they are designed well, so that we are providing all the support and assurance we need while also upholding our key ethos of individual responsibility and self-reliance, and avoiding dependency and entitlement – something which Mr Leong himself cautioned against.”
“More demand for domestic services, wage pressures – that contributes to inflation. But if you look at the big picture and where the big drivers of global inflation are, I think I have set them up quite clearly. It is not self-inflicted at all. On minimum income, whether we have a target, our aim is to continue to push up, uplift lower-wage workers, but do so in a way that is sustainable and in a way where the increase in income is matched with increase in skills and productivity. And that is the basis of our progressive wage approach. It has worked. It has shown results. And we will continue moving in this direction. There have been suggestions from Labour MPs and Members to expand the progressive wage to new sectors. We will study all these suggestions and we will continue to work on this. Finally, on permanent schemes and the preference for permanent schemes versus handouts. Mr Leong seems to suggest that handouts breed dependencies, but permanent schemes do not breed dependencies. But a poorly designed permanent scheme will breed dependencies permanently, forever. Is that not worse? So, we do not look at this or that, either one or the other. We do both. We have temporary relief measures where necessary, particularly, when inflation was higher in the last two years and in this Budget we are doing a little bit more as well. That is temporary for good reason. I think Singaporeans understand why that is needed. We also have structural schemes and in the structural schemes, these are not temporary at all.”
“Sir, let me take the CPF questions first. I do not have the specifics on the additional amount that the Government is paying. I think these can be addressed at the Ministry of Manpower Committee of Supply (COS) later on. But on the closure of the SA, we have made very clear why we do think it is necessary – because after 55, Singaporeans also have a Retirement Account (RA). The RA also enjoys and benefits from the same interest rate as the SA. So, almost everyone can transfer their monies from the SA to the RA, get the same interest rate because they can transfer up to the Enhanced Retirement Sum (ERS) because we have raised the ERS and they can get the same interest rate. And eventually, when they retire, they will benefit from higher retirement payouts through CPF LIFE. Many commentators out there recognise that CPF LIFE is the best annuity product that anyone in Singapore can get today. On the cost-of-living crisis, whether it is self-inflicted – I thought I addressed that. The whole point of me going through some charts and addressing that, is to show this. If it were indeed self-inflicted and because of unique Singapore moves, then we would be standing out. But it is not the case. Look at everywhere around the world. We are not the only country facing inflation, higher prices. In fact, we have been managing it better than many other places. And on top of that, as inflation has been coming down now, our inflation trends are also coming down. So, I think we should take it in that context to understand what are the key drivers of inflation. Of course, domestic moves can contribute to inflation too. I accept that. For example, raising wages for lower-wage workers. That will contribute to inflation too.”
“Sir, I explained just now that we are looking at the support for the involuntarily unemployed for lower- and middle-income workers. What is the definition of middle? How far we go? I think, as I said, the parameters, the details will be released in due course. On supporting Singaporeans in leadership positions, I gave Finance only as an example. We are certainly planning to grow the leadership pipeline across all fields, which I also stated in my speech, and not just in Finance.”
“Sir, as I clarified just now, there are Endowment Funds and there are drawdown Funds. Endowment Funds are not drawn down. So, we should look at Endowment Funds separately. Endowment Funds are created for a specific purpose so that whether good year or bad year, surplus or deficits, we do not have to worry. There will always be a continued flow that will allow spending for that particular purpose, whether it is Edusave or other types of endowments. But for the most part, and certainly many of the Funds we have created more recently, are largely drawdown Funds and they are not limited to economic purposes. The GST Voucher Fund is a very clear-cut case. It is for the permanent GST Voucher Scheme and that is drawn down very quickly and topped up repeatedly, so that we can continue to fund the GST vouchers. And there will be other examples too. So, all of these drawdown Funds are drawn down, as Mr Leong himself highlighted, well within a reasonable period. So, the monies are all given back to Singaporeans in different ways.”
“Sir, we do have the Smart Nation Office, which does look at many AI-related initiatives. The Ministry of Communications and Information also drives our national AI strategy. So, again, I just want to appeal to Members, there is a desire for many things to be centralised. I am not sure, in fact, that more centralisation is always the best answer. Over time, if we have a bigger and bigger portfolio, all residing within one Ministry, there will definitely be bandwidth issues. Basically, the Government must work as a team, the Ministries must all work together. There are clear goals we want to achieve and we will work together as a team to achieve them.”
“Sir, monies raised from RMGS are encumbered and do not add to our net asset base.”
“Yes, whether there will be a need for GST increases up to 2030. Sir, we have published our forecast up to 2030. We have closed the funding gap up to 2030. The GST increase that we announced was intended for this, so we are okay up to 2030. We do not need further GST increases, up to 2030. This was made clear in our Occasional Paper too, but as I said, this is up to 2030. We will continue to update this on a rolling basis, not just at every year's Budget, but from time to time, we will update the projections of our medium-term fiscal needs. So, post-2030, we will have to see what the picture is. And beyond that, we will have to see if, indeed, there is a funding gap, if there are increased expenditures and whether or not, additional revenues or tax changes are needed to close those funding gaps. But as of now, up to 2030, we are in a sound position. On income and whether the figures I showed just now included investment income, I have to confirm it. I do not think it is all inclusive, particularly, capital appreciation, wealth-generated income. Not likely to. It was also a point that Ms He mentioned just now in the debate regarding the Gini coefficient and the measure of Gini coefficient looks at income from work and does not include all sources of income. The Department of Statistics (DOS) is aware of this, and DOS is working on getting better income statistics, so that we can update our figures.”
“Sir, on the three points. First, Ms Hazel Poa clarified that the PSP has not advocated using Past Reserves. But the PSP has talked about using land proceeds. So, when we talk about Past Reserves, you may have a different definition, but the Constitution defines what Past Reserves is; and clearly, some of your proposals will require constitutional change and will require changes in our framework and using of Past Reserves as it is currently defined. Number two, what was the second question again?”
“The Ministries will be tasked to do this important work and we will continue to make sure we achieve good outcomes and, in the end, we will track and monitor these outcomes and publish them.”
“Sir, our immediate instincts naturally, when you look at what we had drawn from our Reserves for COVID-19, would be to say, "Look, we would also like to put it back into the Reserves as we had done in the last round". So, hypothetically speaking, if there is indeed such a bumper year, maybe it will happen, we will consider it. But in reality, if you look at the facts and if you look at what is going to happen, this will not happen. I mean, I cannot imagine that we will be able to produce surpluses that we used to have like in the past. That was what I was trying to say. Where will the surplus come from? Even if GDP grows, revenue will likely grow at the same rate of GDP; so will NIRC. So, always think in terms of a share of GDP, do not just think in absolute terms. Is expenditure maintaining as a share of GDP? Hardly so. So many programmes are being spent on all the things that we think are important. So, how do we then generate surpluses, as we used to in the 1980s or 1990s? It is not going to be the same. So, I think we just have to be realistic. Those days of structural surpluses are over. We are in a different environment and we will do well just to be able to maintain balanced Budgets on our current settings. On the SG Togetherness office, there have been various proposals from Members – whether it was mental health, whether it is SG Togetherness – to keep on setting up offices in PMO, I think if we do that more and more, we will have many many offices in PMO and I am not sure that PMO will be equipped to handle all of these different functions. So, I think the point is, they do not all need to be centralised within PMO. There are many things we want to achieve: mental health and well-being, togetherness, social mixing.”
“So, I think our approach is, let us do it correctly. Let us do it in good time, put in place, make sure that our fiscal system remains sound and always ensure that we have sufficient revenues to cover our spending. That is what we have done. On BEPS, the RIC is compliant with BEPS. This is something that was discussed as part of the BEPS conversations. These sorts of refundable tax credits are allowed under BEPS rules. That is why we are doing it. And that is why we need to understand the realities of the world. Governments all are doing it.”
“Sir, on GST, does it impact on inflation? Yes, it does impact on prices, but the impact is once-off. It is not permanent. We have made that point clear. MAS has made that point clear. If you look at the overall impact on inflation, actually, we have seen the impact on that monthly inflation when GST went up. But if you look at the subsequent trends down the rest of the month, inflation continues to moderate as it has in other advanced economies. You can look at the situation last year and we are quite clear that it is very likely to continue this year as well. So, the impact of GST is not the key driver behind our inflation spike. I have explained what the key drivers were and neither will it cause us to have inflation remaining high because disinflation trend is happening globally, we are seeing similar trends in Singapore and our inflation rates are also coming down. So, that is on the first point. And to be very clear, even with the GST in place, we have deferred the impact of GST on the lower-income groups with the Assurance Package by more than five years for the vast majority of Singaporeans, and it is not even a temporary relief because, for the lower-income groups, we have enhanced the permanent GST Vouchers so that GST does not hurt the poor in Singapore. We have gone through these debates extensively and I think we are in a good position to explain why the GST was needed and why, in fact, the additional revenues are needed because we can already see the rising expenditure trends very rapidly. It will happen in the next few years. If we had not done it at the time we did, when will be a good time to do it? And if we were to do it this year or next year, will the Opposition therefore support it? I seriously doubt so.”
“Sir, the scheme is not being rolled out this year. It does not impact FY2024 Budget. We will put up, provide details of the scheme, including the detailed fiscal impact and, at that time, there will be a full debate on the parameters and the fiscal requirements and whether it is sustainable.”
“Sir, the returns may be risk-free from the CPF members' perspective, but they are certainly not risk-free rates at all. I mean, if you want risk-free rates, then they will be much lower. The reason why we are able to provide such higher rates, compared to market risk-free rates, is because there is Government support behind the CPF system and we are providing additional interests up to 6% for those with lower balances. We are designing a system that will ensure that all Singaporeans who work consistently, contribute to their CPF, will be able to have their basic retirement needs met. That is our objective. Going beyond that, can we improve it? As I said, we will continue to study. There are complexities in this and it includes the LRIS that was highlighted. It is not so straightforward because once you introduce a new element of risk in the hope of getting better returns, you have the issue of what happens when seniors retire in a bad year. Then how do you smoothen that out? Once you smoothen that out – Mr Louis Chua is from finance – insurance does not come free, who pays for the insurance? It has to come through the returns. Then, are you able to provide a better product than what is the current CPF rate? Those are the considerations and we will continue to study. We are not saying never but we will continue to work on making the system better.”
“Sir, yes, corporate income tax revenue has exceeded NIRC. It is not clear-cut to us whether this will continue. It also depends on the revenue impact from BEPS – which as I said just now, is so uncertain. There was a boost to corporate income tax revenue in these recent times, because we have seen a strong rebound among some companies; particularly in a post-COVID-19 environment – tourism, hospitality – some companies really just rebounded very strongly and that is why it has caused the revenue upsides and brought about the revenue upsides in corporate income tax revenue. It is too early to tell whether this can be sustained, so we will continue to monitor.”
“So, we do not think there will be an issue with any undrawn amounts. Endowment Funds are different. Endowment Funds are set up not to be drawn down but only to use the returns and they are set up with a very specific purpose, which is that whether in good times or bad times, whether the Government has money or no money, we want to ensure that through an endowment, we are able to generate the resources for specific groups of people. And that is why Edusave is set up as an Endowment Fund rather than a drawdown fund. So, it is not contingent on whether there are Government resources or whether there are surpluses or whether there are additional monies. But students can be assured, in good years or bad years, that Edusave monies will always flow. So, these are the considerations behind the different types of Funds. On volatility, actually before COVID-19, our fiscal marksmanship was not too bad. It was within a range of within 4% to 5% of accuracy and that is comparable with many jurisdictions that we compare against. The COVID-19 years, threw many of our assumptions off, but it is not just in Singapore. I mean, name me a forecaster who can predict turning points and get the timings right of these turning points. It is inherently difficult. We are not making excuses. We know that this has happened. The recent years of COVID-19 our forecast accuracy was not as good as we would like it to be but there is a reason for it. It is because of the discontinuities, the disruptions, the sudden changes brought about by COVID-19 and we are determined to keep on doing better.”
“Sir, let me take the questions in turn. On the rate of drawdown: well, first of all, I should explain. There are Endowment Funds. There are a few of them but the bulk of our Funds are drawdown Funds. That means we are actually drawing down on the Funds for specific spending needs. On the rate of drawdown for these Funds, well, it will vary from Fund to Fund. For example, GST Voucher Fund, almost two or three years we will need a top-up, because it is being drawn down and we are using it every year to fund the Permanent GST Vouchers. Majulah Package Fund will be different because it is really meant to support the Majulah Package. It will be drawn down in the first instance, but then it will continue for some time because there will be people who are young seniors who will continue to benefit from such a Fund. The Future Energy Fund is a different Fund because, there, it is not something we will draw immediately but it is not also something that we will need only 20 or 30 years from now. We envisaged spending this, say, within a five- to 10-year time frame. That is why we are setting aside resources now and massive resources are needed. We have resources today – we set aside now to cover the spending. So, the rate of drawdown will differ but the point is, all of the Fund information are published. Members can look at them and see the rate of drawdown – what happens to the Funds, how they are used and if there are any undrawn amounts left behind, they will be co-mingled back with Government funds. I mean, that is the rest of Government Funds. So, there is no issue there. I mean, this is how we will — But for most of the drawdown Funds, I would say, by and large, we expect almost all of them to be fully drawn down.”
“It provides us a good stable source of revenue – it is stable as a share of GDP – we should appreciate it, but we cannot on current settings, assume or presume that this will rise as a share of GDP because it would not.”
“Sir, on the first question, the short answer is yes. We take into consideration many factors when formulating the Budget. The fiscal impulse is just one of the many factors. But in thinking about the fiscal impulse, we do not look at the fund top-ups because these do not, as Mr Liang said, contribute to injections to the economy. When we calculate the fiscal impulse, we specifically look at injections into the economy; we look at the state of the economy and we assess what would an appropriate fiscal impulse be for the Budget. But aside from the fiscal impulse, there are many other factors that we need to take into consideration too – how much fiscal space we have, what kind of fiscal commitments do we have to make, what are the needs of businesses and households during this period and then how do we allocate our resources to build a Singapore that we all desire? So, these different considerations come together and we have to balance them in order to put together the Budget. On NIRC, I have explained just now how this is calculated. The broad strokes are: there is an expected long-term return, it is assessed and then we apply it on the net asset base. In order to get a figure, we take half of it for the NIRC. Generally, the NIRC flow is stable but there will be fluctuations from time to time, because we have to update the expected long-term returns every year. And obviously, markets will move up and down then there will be impact on the net asset base. But what is important – rather than look at the year-to-year fluctuations – I think, is the recognition that the NIRC flow is not going to rise as a share of GDP as we have been trying to explain.”
“Mr Speaker, as I mentioned just now, MOF will certainly continue to provide more information, where it is necessary, where we are able to. We have been putting out more information already and we will continue to do so. If there is specific information that Members would like, we will be happy to reveal. If there is no security or difficulties, we will certainly want to put them up. That is our commitment. But the basic point I was getting at is whether or not there is a difference in our fundamental fiscal philosophy. I think that is important because there was a time when there was alignment in this House between the PAP and the WP. There was a time under Mr Low Thia Khiang where it was very clear the ethos of fiscal responsibility was the same, across both sides of the House. It seemed to me that this had changed under Mr Pritam Singh, that the position had changed under Mr Pritam Singh. The WP, of course, is free to change its position, but I think it should be clear if this is so. As far as the PAP is concerned, our position is quite clear. It does not mean that policies cannot change. Of course, we review, when circumstances change, we update our policies. But when it comes to certain fundamental principles and values like fiscal responsibility, a basic orientation, not just to look at today but for the future. This must never be compromised; this must never change. These principles were put in place by our founding leaders. They have continued under successive leaders of the PAP, and they will certainly continue under my watch. [Applause.]”
“And would you then also say that the proposals to use more of the reserves by a higher share of NIRC are therefore no longer relevant and the WP is fully consistent with the PAP when it comes to our framework and rules for the use of the reserves?”
“Mr Speaker, on the second point, I fully agree with Mr Pritam Singh that we are all about sustainable growth. There were instances in the past where, perhaps, infrastructure was not ready, for example. And that is why we have put in place processes, updated our planning processes, made sure that we plan our infrastructure well. That is why as I highlighted just now, I went through some pains to explain where the increase in foreign workers were coming from, the large part of it are Work Permit holders, especially in construction. And there is a good reason for this. We are ramping up our building programme for public housing. We are undertaking major infrastructure projects. We need these workers to build our infrastructure and homes. These workers certainly do not compete with Singaporeans for jobs and the issue there really is about planning for infrastructure. And that is why I said just now that we are making sure that we get the dormitories ready, making sure that we build more, making sure that we build better recreational centres for them, so that they are housed well and we can take care of their well-being. So, yes, we want sustainable growth, and we will pursue sustainable growth. On Mr Singh's earlier points, I thank him for his clarification. Perhaps he could also clarify: because the WP had previously objected to GST and eventually now accepted the GST at 7%, but the debate we had earlier was about the two-percentage points increase in GST, and the options, the alternatives that the WP advocated were: use the reserves, increase the NIR, do this instead of GST. Now that we have implemented GST, as the WP said, with the 7%, now that it is done, we have accepted it. Perhaps Mr Singh might clarify, you too, perhaps the WP would accept the 9% as a reality.”
“If the Opposition parties have a different view on this, I invite them to take up the challenge that the Prime Minister issued in this House a few weeks ago: make drawing more from the reserves an election issue. Let us go to the people, ask them for a mandate to change the Constitution – you can ask them to do so; compel the President to let you spend 60%, 75% or even 100% of the NIR. The PAP will join issue with you. We will present our case to Singaporeans, and ultimately, Singaporeans can decide what is the best fiscal approach to take Singapore forward. Mr Speaker, Sir, Singapore is at a critical moment of change. We are entering a different world, one that is messier, more dangerous and more unpredictable. There will be more forces that threaten to pull us apart. This year's Budget is the first step in advancing our Forward Singapore agenda. We want to refresh our social compact to keep our society strong and united in this troubled world. We want to build a better Singapore – not just for a few, but for all Singaporeans. We want to refresh the Singapore Dream and build a Singapore that is vibrant and inclusive, fair and thriving, resilient and united. The road ahead to this better Singapore will not be easy. But we are all in this together and we all have a part to play. The Government will do more to provide opportunities and assurances at every stage of life and everyone in society should contribute towards our shared goals and aspirations in our own ways. I take heart from the nation-building journey we have had so far. As one united people, we have consistently turned our challenges into opportunities and our constraints into strengths. We have done it before, and I am confident we will do it again. Sir, let us build our shared future together. [Applause.]”
“Their debts are rising; their deficits are rising; and their fiscal systems are at risk of breaking. Many of them have some version of an independent budget office, but it has not helped at all. Basically, no political party in these countries are prepared to dish out the hard truths. So, their policy debates are dominated by what some commentators call "fiscal fantasies". What are some of these fantasies? They include far-too-optimistic forecasting assumptions. The idea that all the funds can be raised from the rich, with close to zero consequences for the rest of the population. Or they can kick the fiscal can down the road indefinitely – just continue to spend and leave it to their children or to those not yet born to solve the problems. Let us not indulge in fantasy thinking – not in this House, not in Singapore. Having the resources to pursue a strong economy and a strong society, and to achieve good outcomes, is not a fairy tale. This is very much our Singapore reality, but it requires us to focus on prudence, fairness and sustainability. What we have is a unique and, certainly, a privileged position of strength. Many economies pay about 2% of their GDP in debt servicing for debts that have been accumulated. We are so different. We enjoy the benefits from savings from the past. To continue on a sustainable path, we must maintain our commitment to set aside enough, not just for ourselves, but also for the future. So, I call on everyone in this House. Let us commit to upholding these values – fiscal responsibility, discipline, ensure that our fiscal system meets the needs and aspirations of both current and future generations of Singaporeans.”
“The Forward Singapore report has already outlined the broad range of policy areas we are reviewing and studying. Some have been announced – details have been given out in this Budget. Others will be fleshed out in due course, as will the detailed fiscal requirements of these subsequent moves. We will also update our medium-term expenditure and revenue projections. The Occasional Paper that we had published last year may not be so occasional after all. We will keep on updating it from time to time, so that everyone will have a sense of how our fiscal trends are unfolding, not just on a year-to-year basis, but over a five- to 10-year horizon. We must continue to plan ahead, do our sums carefully and be upfront with Singaporeans on the costs of various proposals. This approach of looking and planning ahead is a hallmark of our fiscal policy. It ensures that we are able to meet our collective aspirations and seize every opportunity that comes our way. Perhaps, the Opposition takes a different view of fiscal management. Certainly, they want the Government to use more of the reserves for current spending. They suggest different ways of doing so – using revenue from land sales, waiving land cost for HDB flats, increasing the percentage of Net Investment Returns (NIR) that can be spent and so on – but in the end, they all come down to the same thing, which is to use more of the reserves today. What will this mean? Basically, we will end up with less for ourselves in the future and we will also leave less behind for our children and the next generation. Eventually, NIRC will shrink as a percentage of GDP, the funding gap will increase and our children will have to pay more in taxes. In fact, this is what many governments in the advanced economies are faced with.”
“In the US they call this "unfunded mandates" – pass laws for all sorts of provisions but find the money later, "Let us not worry about money now." That is not how we do things in Singapore. If this Government makes a commitment, we make sure it is properly funded. We make sure we deliver on our promises. But let us also be clear: the days of structural fiscal surpluses in Singapore are over. If you look at our economic and fiscal situation, growth will come down. We hope to achieve 2 to 3%. Operating revenues will barely keep up with GDP growth and Net Investment Returns Contribution (NIRC) will also broadly maintain as a share of GDP over the medium-term. Our expected long-term returns are about 4%. This is updated every year. We go through a rigorous process to do so with the Council of Presidential Advisers and the President but we do not expect this to increase given the more challenging investment environment. So, the expected long-term returns are applied on the reserves – or the net asset base – and we take half of that to generate the NIRC. If we really had so much surpluses somehow streaming into the reserves, then the net asset base must be growing and the NIRC would be rising significantly as a share of GDP – but it has not and we do not expect it to do so in the coming years as well. So, operating revenues and NIRC maintaining as a share of GDP, which only means we must manage our expenditures well because only then can we continue running balanced budgets till the end of this decade. This is also why we do not look at the Budget simply as a one-year plan, but also a multi-year commitment. It is in this spirit that we have provided a preliminary high-level estimate of $40 billion to resource the upcoming Forward Singapore policy moves.”
“But with the tax measures announced in the last two Budgets – including the Goods and Services Tax (GST) rate increase – we project that we would close the funding gap, provided we manage the pace of spending growth. All that was in the Occasional Paper and, indeed, this is what we have done. The tax changes have come into effect, although we have not yet experienced the full revenue impact because we have been giving out some rebates. We had also enjoyed some revenue upsides, some of it was due to sentiment-driven revenues, like Stamp Duty and Vehicle Quota Premiums; some of it due to stronger than expected Corporate Income Tax Revenues last year from a strong rebound amongst some companies post-COVID-19. So overall, we are currently in a sound fiscal position. And we are putting our resources to good use to address immediate concerns and also upcoming needs. I mean, this is no different from how one would manage your own personal finances. Imagine if you are a homeowner planning for a major renovation in five years' time. What do you do? You start setting aside resources now for the major expenditure that has to be incurred. You do not wait until renovation starts then look for money and hope that it is there somehow. In the same way, we have set up Funds to meet real commitments and real spending needs. Some of it are for recurring commitments, like the permanent GST Voucher, which we draw on year after year; for new commitments, like the Majulah Package; and for major spending needs that are coming up, like the Future Energy Fund – which will help to decarbonise our energy system. Some other countries operate differently. There are countries that make major commitments without assurance of funding.”
“We are not in the same league, but we have to play a smart game so as not to lose ground and to anchor important investments here. That is why we have introduced the Refundable Investment Credit in the Budget to update our investment promotion toolkit and committed to spending more to support new investments, research and innovation activities. These moves are absolutely necessary – so that we remain in the race for quality investments and create good jobs for Singaporeans. This is not an academic exercise. This is about the lives and livelihoods of Singaporeans and we will do whatever is necessary to safeguard this, especially in a world where competition will only get tougher. So let us not be so naïve to think that the putative gains from BEPS will simply materialise in our favour. This is why, as I said in my Budget Statement, after taking into account the additional expenditures that we are likely to have to incur, I do not expect the Pillar Two move to generate significant additional net revenues on a sustained basis. I should also add that the above estimates do not take into account the impact of Pillar One, because all we have been talking about is Pillar Two. But Pillar One has been delayed and if it is implemented, it will clearly be revenue-negative for Singapore. After taking into account all this, what is our fiscal position? Last year, Ministry of Finance (MOF) published an Occasional Paper on our medium-term fiscal outlook, up to FY2030. We showed in the Paper that our spending needs would grow as a percentage of GDP – to support our ageing population, to expand and strengthen our social system and there would be a funding gap of more than 1% of GDP if we did nothing.”
“No one can be sure what the actual impact will be. What we are doing is to engage the MNEs better to understand how they are likely to respond, especially taking into account some of the moves we have made in this Budget and we will certainly provide our own revenue estimates in due course. In any case, any revenue impact from the Pillar Two moves will only materialise from FY2027. So, this is not something for this financial year. We have some time. We are making the assessments. We are doing the detailed projections and we will come back with detailed revenue updates. Of course, the actual amount of revenue gain and how long it will last will depend on how the competitive landscape evolves and also how much we have to re-invest into the economy. Several Members said that the whole point of BEPS is to tilt the playing field in favour of governments and make MNEs pay more taxes. I think Mr Louis Chua and Mr Jamus Lim highlighted that. I agree. That is the intent of BEPS. But there is theory and there is reality. What is the reality? The reality is that MNEs have bargaining power and governments around the world are all finding ways to favour them and getting them to invest. And you can read this. They are not even doing this quietly. They are publicly doing it. You can read this for yourself in the media – just a few days ago, Japan said that it would give Taiwan Semiconductor Manufacturing Company (TSMC) up to $6.5 billion more in subsidies for a second plant and that will bring the total subsidies to TSMC to over $9 billion. Earlier this month, the US also announced a $2 billion grant to GlobalFoundries – the largest grant from the CHIPS Act to date. These are very generous subsidies that the major economies are giving to MNEs.”
“So, we have decided to withdraw the concession so as to ensure parity in the treatment of royalty income with other sectors. But at the same time, we are putting in much more resources to provide additional broad-based support for the arts sector. So, we are not withdrawing resources from the arts sector, we are putting in more resources for the arts sector. There were also other tax-related suggestions from Ms Usha and other Members of Parliament, including Mr Don Wee, Mr Edward Chia, Ms Denise Phua and others. I thank all of you for your suggestions. We will continue to review them, taking into consideration their relevance for our tax regime, costs and benefits and of course consistency with international standards. Some Members, Mr Liang Eng Hwa, Mr Louis Chua and Mr Pritam Singh, had sought clarifications on the potential revenue impact of the BEPS Pillar Two moves. The OECD's estimates imply that investment hubs could see a Corporate Income Tax revenue gain ranging from about 17% to 38%. This translates to a revenue gain of $5 to $11 billion per year for Singapore. That is based on OECD's estimates. But these estimates have not taken into account how MNEs may respond and the possibility of their activities moving out of Singapore, thereby reducing our tax base. Possibly for this reason, Hong Kong and Switzerland, which are also investment hubs, have estimated their revenue gains at $1.7 billion to $2.4 billion respectively; much lower than what the OECD has put out. So, these data points are suggestive of what the range for Singapore could be, anywhere from around $2 billion to $11 billion. But we are really not sure where we will end up because there are so many unknowns. I think no one is sure, to be clear. The OECD has also made very clear these are estimates.”
“This is how we provide and take care of our people. Of course, a progressive system must mean that the better-off contribute more and this includes paying more in Property Tax for those with higher-value homes. With the Annual Value (AV) band changes that we have announced in the Budget, the higher owner-occupied Property Tax rates will apply to those living in homes with AVs above S$40,000 – or the top 7% of properties in Singapore. Top 7% of properties. Of course, within this group, there is also a range and those who pay a lot more in Property Taxes generally have homes with much higher value – we are talking about higher-end condominiums, semi-detached houses, bungalows and Good Class Bungalows. That is what the Property Tax is designed to do – it is a wealth tax for those with more assets. But we do recognise that there are some groups – especially seniors and retirees – who may need some support to cushion the impact of the Property Tax increase; and this was highlighted by several Members including Ms Joan Pereira, Mr Lim Biow Chuan and Mr Yip Hon Weng. So, beyond the 24-month interest-free instalment plan – which I have announced in the Budget – those who face difficulties in paying, especially retirees and seniors, can approach IRAS for assistance. Next, I should also deal with some specific questions on tax changes. Ms Usha Chandradas asked about the withdrawal of the tax concession on royalty income accorded to authors, composers and choreographers. The concession was introduced in 1983 as she highlighted, at the time when Personal Income Tax rates were much higher. Since then, tax rates have come down and the concession now benefits only a very small group of taxpayers.”
“They test students' ability to apply what they have learnt to unfamiliar settings and real-world contexts and our students do well in these tests – and we have achieved all this while keeping education expenditure at about 2% of GDP, which is less than half the Organisation for Economic Co-operation and Development (OECD) average of about 5% of GDP. Our long-term and prudent approach has enabled us to keep Government expenditure at less than one-fifth of GDP – 20% of GDP. This has in turn allowed us to keep our tax burden low. In fact, 40% of all workers do not pay personal income tax. The effective tax burden for middle-income households – at around 10% of household income – is significantly lower than other advanced economies. UK and Finland, for example, have middle-income tax burdens that exceed 30%. Our fiscal system is also fair and progressive: where those with greater needs receive more help than what they pay in taxes. The lowest 20% of households receive about $4 for every dollar of tax paid – $4 in benefits for every dollar of tax paid; middle 20% of households receive about $2 for every dollar of taxes; and the top 20% of households receives about 30 cents for every dollar they pay in taxes. Members are familiar with these statistics. We shared them before. They have not changed. But how does this compare with other countries? There are some inherent limitations in comparing across countries but we have done some computations. Singapore, in fact, does better than advanced economies, like the UK and Finland, especially for lower and middle-income households. And the statistics that I mentioned just now also do not include other intangible benefits – like access to quality education, healthcare, housing or having safe streets in Singapore.”
“We adapt to our own needs, we discuss with key stakeholders, especially our tripartite partners to get buy-in and then, we develop something that applies to our context. That is how we have innovated massively on the social front as we have on the economic and financial fronts. We have Workfare rather than welfare. We have progressive wages instead of minimum wage. SkillsFuture, instead of preserving obsolete jobs. And soon, support for jobseekers instead of unemployment insurance. This is not just about changing the words. This reflects our policy emphases and priorities and how we go about effecting change for the betterment of Singapore and Singaporeans. We recognise that we may not always get it right, but we will always improve and keep on doing better. We will continue to evolve and improve our system of social support. We will maintain the right incentives, actively enable self-reliance and make sure we are able to fund these schemes. This is how we sustain a social trampoline that promotes rather than dulls economic progress that ensures the fruit of progress is shared by all. This is how a strong economy and a strong society coexist and reinforce each other. Sir, our approach to investing in our people and building our social support system has yielded very good outcomes – even while we spend only a fraction of what other governments spend. Take education for example – we provide quality education that produces results. We have one of the highest mean scores in reading, mathematics and science in the Programme for International Student Assessment (PISA). Members are aware. These results give us confidence – because PISA does not test rote learning.”
“The Government has and will continue to provide more information to facilitate informed discussions of policies, something which several Members spoke about. We are committed to doing so. For example, the Ministry of Finance (MOF) publishes the Singapore Public Sector Outcomes Report every two years. This covers a broad range of outcome indicators. Not just input, but outcome indicators. We continue to finetune and improve this report. So, let us have you feedback and suggestions on what additional indicators we should track and we should incorporate. Looking ahead, there will be even more opportunities for ground-up and civic engagements, something which Ms He Ting Ru, Dr Tan Wu Meng and Ms Denise Phua spoke about. We will provide more platforms for individuals and groups to contribute meaningfully, not just through feedback sessions, but also youth panels, citizens’ panels where participants play active roles to co-create and update policies. And in the end, the real work is about translating ideas into effective policies that work for Singapore. That is our test. Is it effective? We all want better wages, better assurance, better security for our people. But what is the effective way to achieve these goals? How do you pay for them? How do you guard against inadvertent consequences? Many things start from good intentions, but they do not all achieve what is intended. These are the careful deliberations that have to be made. If we look at the many policies the Government has introduced over the years, it is clear that we are different from what other countries do. That is because we do not just blindly copy. We learn from others. We are not ashamed to say that we do so.”
“We catch Singaporeans when they fall and make sure they do not fall behind. We invest in them and provide them the support to bounce back from life’s setbacks and do even better for themselves. In the end, this is about ensuring that families and individuals enjoy better incomes and better living standards. If you look over the past decade, the lower-income groups in Singapore have, in fact, progressed faster than the rest. Real incomes of the bottom 20% increased slightly faster than the middle income, and twice as fast as the top 20%. This is based on incomes alone, it has not taken in consideration our progressive system of taxes and benefits which favours the lower-income. So, if you were to add all of that together, the overall picture is in fact, better for the lower-income. But we will not stop here. We will continue to work hard to keep on improving. We learn from other countries, and we are open to all ideas – from Members of Parliament, researchers, and community advocates. That is the spirit of Forward Singapore. We will consult widely and make bold and effective changes to take Singapore and Singaporeans forward. During this debate, many Members – Opposition MPs, PAP MPs, Labour MPs – all of you have laid claim to the policy shifts announced in the Budget. Well, I am glad everyone wants to be associated with the Budget. As the saying goes, failure is an orphan, but success has many fathers, and mothers too, I should add! [Applause.] Basically, we welcome all who wish to associate themselves with these forward-thinking initiatives, because in truth, no one has a monopoly on ideas. There are many stakeholders also outside this House who have claimed credit and in fact, who have shared with us many ideas too.”
“It will add to the business costs which small and medium enterprises (SMEs) and lower-income workers are already concerned about. That is why we have decided to fund the scheme using taxes instead. In other words, all of us as taxpayers and the Government will help you bounce back if you face unemployment setbacks. I thank Members who have spoken on this, especially our tripartite partners, as well as the Labour MPs like Mr Patrick Tay, who have given us suggestions and ideas for this scheme. We are working out the parameters and will share more details later this year. Sir, what I have just described are all structural moves. They are not temporary or short-term measures. We have been strengthening them year after year, and we will continue to do so. And that is why over the last 20 years, social spending by the Government has quadrupled. As a share of the Budget, we are also spending more on social support. In this Budget, half of total ministry expenditure is committed to social spending, which is a lot. A substantial portion of this is spent on structural schemes, not temporary measures. Some Members would like the Government to do even more. But other members have reminded us that the Government should proceed carefully, so as not to breed a sense of entitlement, dependency or undermine individual responsibility and self-reliance. Indeed, we are very careful about getting this balance right. We have not changed our ethos of social support – it is not about giving handouts, but giving people a leg-up. ComLink+ and the SkillsFuture Level-Up Programme have been designed so as not to erode personal and family responsibility. Likewise, the upcoming scheme providing temporary support for those who are involuntarily unemployed will also abide by these principles.”
“Through ComCare we provide financial assistance, short- and medium-term as well as long-term assistance to those in need. But we have gone beyond just providing financial support. We lean forward to take a more family-centric approach – bringing together different agencies and community partners, and customising support for lower-income families, especially those with young children, through ComLink, and now, ComLink+. We have also provided more support for vulnerable groups, such as children with special needs, ex-offenders and persons with disabilities, something which several Members spoke passionately about, including Mr Eric Chua, Miss Rachel Ong, Mr Ong Hua Han. The latest addition to our system is SkillsFuture. Something we started about a decade ago. We have made good progress, but we still need to do more, and that is why we have made significant enhancements to SkillsFuture in this Budget. We are also working on the new support scheme for those who are involuntarily unemployed as part of our enhancements to SkillsFuture. This will be targeted at involuntarily unemployed workers in the lower and middle-income groups. We will provide them with temporary financial support and encourage these individuals to go for training if needed, or to get matched to new jobs. In other words, this is really more of a jobseeker support scheme than an unemployment benefit. We considered whether or not to make this an insurance scheme, but for an insurance scheme to work, it will require universal enrolment, otherwise, the insurers will be cherry picking. There will be what economists call "adverse selection". The scheme will not be viable. If we make it mandatory, or require universal enrolment, this will require contributions from employers and employees.”
“We have CareShield Life for long-term care. Recently, we have launched Healthier SG and Age Well SG. In work, we have strived to create good jobs for all Singaporeans, not only to provide a good living, but also because work gives dignity and purpose in life. To uplift our lower-wage workers, we have added Workfare and Progressive Wages, as noted by Mr Raj Joshua Thomas and many others. These moves are delivering results. In retirement, we have the Central Provident Fund (CPF), which we have been enhancing over the years. We pay additional interest to help those with lower balances. We introduced CPF LIFE because Singaporeans are living longer, and we want to provide them with a retirement payout for life. We provide Silver Support for seniors who had low incomes during their working years. And now, we have the Majulah Package to help seniors accumulate more retirement savings, especially our young seniors. We will not stop here. We are continuously studying how we can do better. But let us also understand this. For those who ask for higher CPF returns, you will surely know that higher returns must come with higher risks. To what extent can retirees bear this volatility, especially when they may need to withdraw their funds in a period of negative investment returns in the markets? These are some of the complex issues that the Government has to weigh and consider carefully. But in the end, we will ensure that the CPF system provides for the basic retirement needs of all Singaporeans so long as they work and contribute to their CPF consistently. Around these five pillars, which I have just described, we have ComCare – to ensure that no family and no individual falls through the cracks.”
“In fact, we have been working hard over the years to progressively enhance our social safety nets. We started in a more deliberate manner around the Asian Financial Crisis in 1997 when we first saw income trends diverging. We have continued to fine-tune and improve over the years. In this Budget, we are taking further steps to strengthen our system of risk pooling and social support. The traditional pillars in any social support system are education, housing, healthcare, work and retirement. You find this in all countries. In education, we have invested heavily in a first-class school system. We have also significantly increased our investments in preschool education, and expanded tertiary education options for our youths, including increases to the university cohort participation rates. In housing, we have public housing and the Housing and Development Board (HDB). We celebrate 60 years of the Home Ownership Scheme this year. It is a significant milestone because there is no other institution like the HDB in the world, which has provided comprehensively for the housing needs of its people. Indeed, it may even be misleading to call it “public housing”, because when you look around the world, public housing elsewhere often develops into slums or even ghettos. Our public housing is really a national housing scheme. And our housing policies are not static – we continue to review and update them and remain fully committed to keeping our national housing affordable and accessible for Singaporeans, including those from lower-income households. In healthcare, we have Government subsidies and the 3Ms – MediSave, MediShield, and MediFund. We have continued to improve on this. We made MediShield universal and lifelong through MediShield Life.”
“This idea of a refreshed Singapore Dream was expressed by the vast majority of Singaporeans, especially our youths, during our Forward Singapore engagements. To be clear, it does not mean that Singaporeans have given up on material goals. But they want to avoid getting trapped in an endless rat race of hyper-competition. They want to find meaning and fulfilment in what they do, beyond material success. I think these are noble aspirations. There are undoubtedly some generational shifts because these aspirations are perhaps more commonly expressed amongst those born after Independence than before. My colleagues and I in the 4G leadership, almost all of us were born after Independence too. So, perhaps, we instinctively empathise with these aspirations, and as part of Forward Singapore and as a first step in this Budget, we are doing more to help our fellow Singaporeans realise these shared aspirations – by providing more opportunities and diverse pathways for everyone to excel, to develop to their fullest potential and to be the best possible version of themselves. Singapore must be defined not just by how far our talents can go, but also by how well we support one other. In this new environment, we recognise that there will be more stresses and strains on our people. With rapid technological advances and more intense competition, we can expect more churn at workplaces. Some jobs will become obsolete while new jobs with better pay will be created. All this will be very unsettling for those who are affected. This brings me to the third issue we have to address: is our system of social support sufficient to assure Singaporeans through every life stage? Again, many Members spoke passionately about this – Mr Dennis Tan, Ms Ng Ling Ling and Dr Wan Rizal, just to name a few.”
“This means that Singaporeans who would like to be considered for these positions must be prepared to be posted overseas, not just in your early 20s, when many young people like to be posted overseas, but also in your 30s and 40s when you are taking on managerial responsibilities and also when you have settled down and have families. Understandably, at that season in life, relocating overseas is not going to be easy. There are many considerations. The spouse may have to stop work for some time. The children will have to adjust to an international school, and then come back to re-adjust to the Singapore system. So, we are reviewing this, we are considering how we can support or provide more support for Singaporeans under these circumstances so that we can help support them when they go overseas, when they come back and put them in a better position to be considered for leadership appointments in their respective companies. Over time, I am confident we can develop and nurture more Singaporean experts and leaders across all fields. We have been doing this systematically in Finance for some time already and we can see the results. We now have around 4,000 Singaporeans holding senior roles in the financial sector, up from fewer than 2,000 in 2016. We now have a network of Singaporean finance leaders who come together regularly, they meet up and they support one another in their leadership journeys. We will redouble our efforts in finance and also in other key sectors of the economy. These are our plans to secure better growth and better opportunities for all Singaporeans. This is also how we take concrete steps towards helping everyone realise their Singapore Dream.”
“For mid-career workers, the new SkillsFuture Level-Up Programme will support them with a substantial injection of skills to improve their employability. Many Members, including Leader of the Opposition Mr Pritam Singh, Assoc Prof Jamus Lim, Mr Christopher de Souza, Mr Gerald Giam, Mr Desmond Choo and Mr Syed Harun, all spoke about this. There were many suggestions, such as to expand the scope of the SkillsFuture Credit, to reduce the qualifying age or to provide additional incentives and support. I appreciate the strong support and interest. The Level-Up programme is a significant new addition to our SkillsFuture system. Let us make this move first. We have not even talked about the details yet, which will be announced by the Minister for Education at COS. So, we will make this first move, we will consider all your feedback and suggestions, and how to further finetune and enhance the scheme, as we gain more experience over time. There is another segment we are paying close attention to, that is, Singaporeans with the potential to take on leadership positions in MNEs. Over time, more Singaporeans have taken on such regional and global leadership roles, and we want to nurture and grow this pipeline of Singaporean leaders. Naturally, there is intense competition for these highly sought-after jobs. The MNEs will and should rightfully select and appoint their leaders by merit. But when companies look for or consider people for such roles, they will typically look for those who have already spent substantial time managing an overseas operation, because remember, they are looking for regional and global leaders. So, you must have spent time overseas, running, managing overseas operations.”
“This, combined with productivity growth at about 1% to 2%, is how we can achieve 2% to 3% growth for the overall economy. Why are we doing all this? It is not to chase after a target. It is not to grow for the sake of growth. It is to secure better outcomes for Singapore and Singaporeans. That is why, in tandem, we are making several other major moves. We are introducing new Workplace Fairness Legislation. This reflects the Government’s commitment to push against discrimination in the workforce and ensure fair employment opportunities for all workers. We are investing more heavily in Singaporeans, something which many Members spoke passionately about. This is how we give our people the extra advantage to compete and excel in the global marketplace. In particular, in this Budget, we are making significant enhancements to SkillsFuture and introducing new schemes to help our workers realise their full potential, regardless of their start points or stage of career. And we have focused on the segments that face more challenges. For young ITE graduates, we introduced the ITE Progression Award to encourage and support their upskilling journey. Mr Xie Yao Quan and Miss Cheryl Chan spoke about this. With this award, they will be better supported and they will have many opportunities to get an MOE-funded diploma, not just in the polytechnics, but also at other institutions like ITE, where they offer work-study programmes, as well as technical diplomas. We want our ITE students to do well, deepen their skills and go further. Get on a better career and wage trajectory in life. This Progression Award will encourage and support them in this journey.”
“At the middle-income levels, we have Singaporeans doing the jobs, but there are not enough of us, and that is why we top up with S Pass holders and they include people doing important jobs like nurses and technicians. So far, S Pass numbers have been stable. We will continue to make sure that S Pass holders have the right skillsets and are in areas where we need them the most. At the higher end of the income spectrum, we have Employment Pass (EP) holders. These are professionals with the skills and abilities to contribute at the upper end of the workforce. This is especially so for new growth areas like AI and the digital economy, where there is currently a shortage of skilled talent, not just in Singapore but also globally. We apply salary cut-offs to ensure that the EP holders we bring in are of the right calibre. In particular, we have stated previously that we aim for EP holders to be comparable in quality to the top one-third of our local PMET workforce. To keep pace with changes in wages, we will raise the minimum qualifying salary for EP applicants. The Minister for Manpower will share more details of the changes at its Committee of Supply. This is not a new policy setting because the policy intent to ensure that the salary cutoffs are comparable in quality to the top one-third of our local PMET workforce has already been stated. That remains the policy intent, but because local wages have gone up, we will have to adjust accordingly, and the changes will be announced by MOM at COS. So, when you look at all of these different factors over the coming decade, we expect our workforce to grow at about 1% per annum, in line with the needs of the economy.”
“They just cannot find enough workers, and they tell us all the time. Some of the increase in the workforce will come from growing our resident workforce. But we know that the increase in our own resident workforce has been slowing and will not be sufficient to meet the demands of our economy. So, it will have to be complemented by a continued inflow of foreign work pass holders. We already have in place a comprehensive system of controls to regulate the quality and the number of incoming work pass holders. This applies across every level of the workforce. At the lower end of the income spectrum, we have Work Permit holders. They comprise about two-thirds of our total foreign workforce and mostly take up roles that Singaporeans do not want to do, for example, in construction. We have not loosened our Work Permit controls. We have no intention to do so. But even at present settings, firms are able to bring in more workers, because of the demand. We are building more public housing, more residential housing projects. We are ramping up or going ahead with major infrastructure projects like the MRT, Changi T5, Tuas Port. Workers are needed to build these projects, and so the firms are bringing in more of them. At the same time, we will ensure, as Mr Louis Ng said just now very eloquently, we must make sure that we take care of these workers. So, we will ensure we have the necessary infrastructure to accommodate these workers well, including building more dormitories – dormitories with the revised standards that we have put in place based on our COVID-19 experience and more recreational centres for their well-being. That is something we owe to these workers who help to build our country.”
“The remaining 25% of our economy comprises mainly domestic-oriented sectors like F&B, retail and construction. These are more labour-intensive. There are, of course, also domestic services which are high touch in nature, like childcare and elderly care, and they require workers. So, these domestic oriented sectors tend to be less productive than the outward-oriented sectors. That is not unique to Singapore. It is the same for all other economies. But the productivity of some of our domestic-oriented sectors lags behind similar sectors in other advanced economies. For example, take the construction sector. The productivity of our construction sector is about one quarter that of Switzerland. Of course, within our domestic-oriented sectors, there is a range of firms. Some are embracing change and restructuring themselves to be more productive, others are less ready to do so. That is why we can and we must do more to encourage and support companies, especially SMEs, in this restructuring journey. Several Members spoke about this, including Mr Chong Kee Hiong, Mr Keith Chua, Mr Neil Parekh, Mr Derrick Goh, and Mr Mark Lee, and we will consider all of your suggestions. But we also have to be careful that Government support does not inadvertently prop up outdated or unviable business models and hinder restructuring. That is why our support schemes are geared towards supporting business owners who are themselves prepared to embrace change and to adopt new and more productive solutions. This is what we have done and will continue to do. While we push hard on productivity growth, we also need our workforce to grow. This is one issue that comes up repeatedly in all our engagements with businesses, especially SMEs.”
“That is why we are making the top-up to RIE2025 in this Budget, which will sustain Government investments in R&D at about 1% of GDP. This will yield dividends over time. Some have voiced concerns about whether we will become a two-track economy – one track for MNEs and another for SMEs. I can understand these concerns, but it is not so helpful to think of the economy in terms of larger foreign and smaller local companies. A better way is to consider the two broad segments of the economy: one that is outward-oriented and another that is domestic-oriented. Every economy, including Singapore, has these two segments. And each faces challenges and business conditions. The outward-oriented segment of the economy comprises MNEs, but it also has many local enterprises, big and small. Collectively, they make up about 60% of the firms in Singapore: six zero. And there are many supplier and partnership arrangements between MNEs and local firms. We want to encourage more of these partnerships and we have enhanced the PACT scheme in this Budget to do so. Companies in this outward-oriented segment are generally more productive and also have some scale. They have to be; they compete in the global marketplace. They must continuously innovate and up their game. Otherwise, they will fall behind and they will lose their share of the global market. Not surprisingly, these companies have high take-up of Government schemes that help them invest in R&D, automation and productivity improvements. They do not need to be persuaded to do so. Everything is at stake for them. Given their higher productivity, this outward-oriented segment accounts for about 75% of our economy in terms of nominal value added. Three-quarters of our economy, outward facing.”
“Since 2010, even when our cost base has gone up, our share of the world’s total goods exports has been maintained at about 2%. Our share of global services exports has increased from 2.5% to 4.1%. So, we are able to hold our own, maintain competitiveness and add value, make a living for ourselves, and for our workers. The question is, how do we continue to maintain or even increase our share of global exports in the years to come? The only way is through productivity improvements, something which Deputy Prime Minister Heng emphasised yesterday. We aim for 2% to 3% economic growth per annum over the next decade on average. Of this, about one- to 2-percentage points should be from productivity improvements. To be clear, this is a very ambitious goal. Only a few countries at our stage of development have been able to sustain such high productivity growth. It requires a continual transformation of our economy. Firms need to learn new ways to do business, workers need to learn new skills to contribute differently and to embrace new technologies, and new firms in new sectors must start up and grow and more than replace the firms in declining industries. As Ms Mariam Jaafar and several Members have noted, this is a massive undertaking. But we are aiming high and we are determined to do our best to achieve this. One key strategy is to attract more high-quality investments into Singapore because these investments typically involve cutting-edge and innovative activities. They help to push the productivity frontier. That is why we need new investment promotion toolkits like the Refundable Investment Credit. Another strategy is to maintain consistent and steady investments in R&D.”