Tharman Shanmugaratnam
Singapore
“EDB conducts regular reviews to GIP to ensure its effectiveness in attracting only top-tier business leaders who are interested to drive the growth of their businesses and investments from Singapore.”
“MAS may vary the size of the additional capital requirement imposed on the bank and take other regulatory actions depending on the outcome of ongoing reviews. MAS requires all retail banks in Singapore to ensure that their mission critical systems supporting digital banking are resilient.”
“This question will be answered in the reply to Dr Tan Wu Meng's Parliamentary Question filed for tomorrow's Sitting. [Please refer to "Probe into Recent Disruptions of DBS' Digital Bank and Physical ATM Services and Preventive Measures Implemented", Official Report, 5 July 2023, Vol 95, Issue 107, Written Answers to Questions for Oral Ans…”
“Borrowing from the banks is one of the ways in which MAS carries out MMOs to soak up such excess liquidity. Like other central banks, MAS does this daily through an auction system, enabling MAS to withdraw liquidity through the Primary Dealers that submit the most competitive prices.”
“To mitigate consumer over-indebtedness, the Monetary Authority of Singapore (MAS) requires financial institutions (FIs) to implement a range of safeguards when extending mortgage loans and unsecured credit.”
“The Monetary Authority of Singapore imposes on external asset managers the same stringent regulatory standards for anti-money laundering and countering the financing of terrorism that it imposes on banks.”
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“So, every Budget must be focused on our future: investing in our young, opening up opportunities and helping them to create a better Singapore. Mdm Speaker, thank you. [Applause.] [(proc text) Question put, and agreed to. (proc text)] [(proc text) Resolved, "That Parliament approves the financial policy of the Government for the financial year 1 April 2014 to 31 March 2015." (proc text)]”
“I think the Member used a familiar Chinese saying for this, "We have the heart as well as the strength". There are many other countries where they have the heart but they are waiting for a future government to deliver the strength. We have the strength. We are able to do things with a heart, provide quality care, provide services in a humane way and sustain what we do because we have prudent fiscal policies that make sure we can afford it. We must stick to that system, of having the heart and having the strength. So, let me conclude very briefly, Mdm Speaker. We have had a very good debate. As I mentioned, very strong support for the restructuring of our economy and raising of our productivity, including transforming our SMEs, jobs and social culture. Strong support for the steps we are taking to build a fair and equitable society and strong support for prudent fiscal policy which has allowed us to set aside a package to honour our Pioneer Generation, to set aside the funds today for the full life of that package. It is worth emphasising a point which Miss Penny Low made, which has to remain our key focus for the future. She made a very good point, which is: what matters most to the Pioneer Generation? What has mattered most to them is that the next generation does better than them. And we all know it. We know it from every mealtime. We know it from every conversation we have in the Page: 55 community. That is what they are like. They want their children, they want the next generation to do better than them. They are like that. And because they are like that, Singapore is like that. We are like that. We want our children to do better.”
“And even if we include all other taxes, for instance, foreign maid levies, taxes on cars, we still remain a relatively low-cost country, with low taxes for the middle-income group. This chart compares the tax burden in Singapore with the UK and it looks at what is called the middle quintile, that is, those from the 40th to the 60th percentile. [Please refer to Annex 6.] This is real data. This is what all the taxes amount to. Data show that the effective tax rate, which is the total amount of taxes as a percentage of their incomes, is about 10%. For those who Page: 54 own a car, it would be somewhat higher. Those who do not own a car, it is lower, at about 7%. That is our system. We have to keep the tax burden on the middle-income low so that they get to keep as much as they earn. That is our principle. Help their incomes go up and help them to keep as much as they earn so that it is principally the higher-income group that pays significant net taxes into the system which we use to help the lower-income group so that they can get significantly more benefits than the taxes they pay. So, we have to keep these approaches in mind in future years. We have a strong revenue position for now, but in the decade ahead and beyond, we are going to need more revenues to meet our infrastructural and social needs. Keep our economy vibrant, keep a fair and progressive tax system, keep a low tax burden on the middle-income group, and that is how we will keep Singapore a nation of opportunities with assurance for all and a country that is fair and equitable to its citizens. As Mr Seng Han Thong has said, it is a very unusual situation. We have a system where we have the heart as well as the strength.”
“In this year's Budget, we spoke about KiFAS, we spoke about the increased subsidies for pre-school education and the increased subsidies in the tertiary level. And I just want to mention one fact which did not feature in the Budget but which is a continuing story in the education system, which is how we are doing more in the school system to help children who have difficulties in basic skills – literacy, numeracy and other areas. We are already spending 20% more for a child who is weak in literacy and numeracy throughout the course of their Primary education, compared to the average pupil. And over the next few years, by 2017, this will increase to 40%. We will be spending 40% more because of MOE's strategies on children who are weak, compared to the average being spent on all pupils – an important initiative. To summarise, whatever we do to raise revenues in future, we have to retain this fair and progressive system of taxes and transfers. Third priority: keep the tax burden on the middle-income low. It is an important objective of our system and Singaporeans want it to remain that way. This chart which I show will show average tax paid by the median worker in Singapore. [Please refer to Annex 5.] Average tax paid by the median worker – this is just income tax and GST – is significantly lower than in other countries. In fact, it is lower even than Hong Kong because, in Hong Kong, income tax starts from the first dollar. It is like the UK system. In our system, most people do not pay income tax, but they pay GST. So, the average tax on the median worker is very low by international standards.”
“] As you can see, the bottom 50% in the income ladder receive significantly more transfers than the taxes they pay and those at the higher end are paying more taxes compared to the transfers they receive. This is expressed as a percentage of household income. If I express it in dollar terms, of course those at the higher end would be paying a very large amount of dollars in net taxes. But as a percentage of income, it is lower. I should mention also that the following is important because it comes into interpreting many of our other statistics. I have left out the first decile here, which is the bottom 10%, because we have to understand that two-thirds of the bottom 10% are, in fact, retiree households who do not have incomes, but many of them are, in fact, not poor. Sixteen percent of those in the bottom 10% live in private properties; another 13% live in HDB 5-room and executive flats; and a fair number own cars and hire maids. The bottom 10% includes basically anyone who is not earning an income from work, although some of them are quite well-off. So, I have left the bottom 10% off from there. In any event, because they do not have income from work, if I were to add them in, the benefits cannot be expressed on the chart because, as a percentage of income, it would be infinity. But the basic point is, if you look, for instance, at those in the second decile, which is our low-income households, they get significantly more amount of Page: 53 dollars in benefits compared to the taxes they pay. And compared to 10 years ago, it has shifted – because the red bars reflect the situation in 2013, even before this year's enhancements, and the blue bars reflect the situation in 2003 – a significant shift towards progressivity in our fiscal system. And we are doing more.”
“When we increased the GST, we also made major changes in our other social policies – Workfare, housing grants, education subsidies – many other changes that far more than offset the impact of a higher GST on the lower income group. It is not just a matter of the GST voucher. The GST voucher is one part of the permanent offset for the GST. It is a whole system of means-tested benefits that ensures our lower-income group gets back far more benefits than the taxes they pay. In fact, for every dollar of tax they pay, they get at least five dollars back through benefits at each stage of life – from childcare all the way to retirement needs. Page: 52 In my Budget Speech, I have given the example of a low-income couple, the amount of benefits they get over a lifetime. I would not go through the details again but it is a very progressive system of taxes and subsidies. If you look at the tax system alone, it is more progressive than in several advanced countries. If we take the UK, for instance, despite very high top marginal tax rates, the top 20% is paying 44% of all taxes, if you add the VAT, income tax and other taxes together, they are paying 44% of all taxes. In Singapore, the top 20% pays more than 50% of all taxes. It is about 52%, a highly progressive system. Next, I will show you how things add up across the system – taxes and transfers together – how do they add up and how we have a system where those who are better-off pay more taxes than the benefits they receive and those who are less well-off get more benefits than the taxes they pay. I should first explain that this chart shows the net benefits, net transfers – after you pay your taxes, what is the net amount you get in transfers. [A chart was shown to hon Members. Please refer to Annex 4.”
“And with technological advances, they are being done everywhere in the world – sliced and distributed around the world and then brought together when it reaches the consumer. We have to remain competitive so that we continue to attract investments and grow talents. And that also involves retaining our own talents – Singaporeans who are well-qualified, well-educated and mobile. However, it does not mean that we keep taxes unchanged. For example, we made property taxes more progressive last year and there is further room over time to enhance our asset taxes. We have to keep all options open. Second principle: a fair and equitable system of taxes and benefits. That is a very important second principle. And it means, firstly, that everyone has to pay some tax. I think that is a good society where everyone is contributing. The majority of Singaporeans do not pay income tax but they pay GST. Everyone pays something for a better Singapore. But those who have done better, those who are better-off, should contribute more to society. And the lower-income and those in need should receive the bulk of the benefits. Taxes and transfers have to enable us to level up society. That is our system. Everyone contributes something but those who are better-off contribute far more, and those in need receive more benefits than the taxes they pay. They are paying something in tax but they receive more benefits back. And the GST is a good example. Not every tax in a progressive system needs to be a progressive tax. In fact, that is not an efficient system. Not every single tax or benefit needs to be progressive, but the system as a whole must be progressive. And the GST is a good example because the GST, in its own right, is a regressive tax.”
“Mr Alvin Yeo and Dr Janil Puthucheary spoke about it. We have to keep our economy vibrant. That is central to our social strategies because an inclusive society is a hollow concept if we do not have fruits to redistribute and share. We have to keep the economy vibrant. And that is how Singaporeans' lives have improved. Economic competition is intensifying. It is not lessening. It is intensifying globally. The UK is bringing down corporate income taxes to 20% by next year. Taiwan has reduced its corporate income taxes to 17%, which is the same as Singapore. Importantly, quite apart from taxes, the world of technology and globalisation is reshaping the way business is being done. "Re-shoring" back to the advanced economies is happening, particularly in the United States, driven partly by cheaper energy cost because of the shale oil and gas revolution. Advances in robotics and additive manufacturing are allowing for cost-effective manufacturing to be done much nearer to their customer base, allowing for rapid proto-typing and mass customisation catering to their markets. It used to be too expensive to do it in the United States. It is becoming increasingly possible because of advances in technology. To be sure, our economic competitiveness package is not just about taxes. It is about a quality workforce, excellent infrastructure, rule of law and our whole system of governance. It is about how, as Singaporeans, we make the system work well. Taxes are not the only factor. But the reality is we are a small nation without a natural hinterland and businesses do not need to be here. Ms Page: 51 Jessica Tan made this point that even knowledge-based and creative businesses do not need to be here. They can be done anywhere in the world.”
“So, revenues are not going to increase as a percentage of GDP but spending will go up as a percentage of GDP. We will not have the current fiscal advantage that we have in the future. And at some point, our revenues will fall short of expenditures. This is a challenge which many economies faced. Hong Kong, which is a very similar society to us in terms of its demographics, faces the same challenge. They do not have to spend on defence and foreign relations but, in fact, they have the same ageing workforce. And they have projected that within the next seven to 10 years, they are likely to face structural deficits where revenues will fall short of expenditure structurally. Their Finance Secretary, Mr John Tsang, has acknowledged this, in fact, in last year's budget as well as this year's budget. Last year, he acknowledged that "the growth of government Page: 50 revenue will drop substantially if the tax regime remains unchanged". So, they know they need to change. Like them, we will run into structural deficits if we do not raise revenues in the next decade. So, we must be prepared for the years ahead and build up our revenues for the spending needs of the next decade and beyond. How do we do it? Our approach has to be based on three principles. First, whatever our tax and revenue strategies, we have to sustain a vibrant economy. Second, we have to maintain a progressive fiscal system – a fair and equitable system of taxes and transfers; and third, keep the tax burden on the average Singaporean, the average household, the middle-income low. Three principles: keep the economy vibrant, ensure we have a fair and equitable system of taxes and transfers and, third, keep the burden on the middle income low. The first principle is very important.”
“To illustrate how significant it is, just think of the many other countries which are in exactly the reverse situation. Instead of bringing on to their budget, 2% of GDP each year in Net Investment Returns, they have to do the opposite. They have to find tax revenues to service debts, with 2% of GDP being the lower end of the scale, because, in fact, if we look at most of the advanced economies, for example, UK, Japan and many other countries, we are really talking about 3% to 4% of GDP each year that has to be found in revenues to service their debt – exactly the reverse situation. So, this is a real strength that we have in Singapore and it comes about because we have maintained prudent fiscal policies over the years. We have built up our Reserves and we are now able to use the investment returns on our Reserves to fund current expenditures. So, our strong fiscal position has allowed us, in the current term, to set aside resources to meet future priority needs. And this is a prudent way of managing the Budget. While we have the strength, set some aside because we know there are needs in the future. We have set aside money for the Community Silver Trust, for R&D and, most significantly, we are setting aside monies for our Pioneer Generation. But what do we expect going forward? Beyond this term of Government, it is going to be different. Our revenues are not expected to increase as a percentage of GDP. In fact, revenue growth may moderate. The asset market is likely to moderate. We are not going to get the same amount of asset market-based taxes as we had done in the last few years. Our foreign worker levy collections will also taper off as the foreign workforce growth slows down.”
“In particular, for our young, we have to keep investing in them – more investment per student, per Singaporean. So, how do we manage this increase in spending and stick to prudent fiscal planning? First, as our spending goes up, we have to ensure that all spending is judicious. We have to achieve value-for-money in every programme and be obsessed with achieving value-for-money in every programme. Second, we have to target social subsidies at those who need them most. And for most of our schemes, this means more for the lower-income group, but also some support for our middle-income group. Avoid universal subsidies, as Mr Ang Wei Neng just said. The Pioneer Generation is the exception because we are honouring a whole generation for what they have done for Singapore. But, in general, avoid universal subsidies, stick to targeted subsidies that give more to those who need them the most and also help the middle-income group. That is our first strategy to do with spending. Second, we need to raise revenues over time to ensure that we can meet our future needs without the risk of persistent deficits. We are starting from a position of strength. We have a healthy fiscal position today, and this is because we made timely changes over the years to strengthen our revenue base and to develop a resilient revenue base. We increased the GST in 2007 while providing a significant package of offset to help the lower- and middle-income groups. The GST Voucher for the Page: 49 lower-income group is now permanent. We also put in place the Net Investment Returns framework in 2008 which has been a major addition to our revenues and created better resilience in our revenues as well. Net Investment Returns Contribution provides 2% of GDP each year in our Budget or about $8 billion.”
“We are increasing public hospital capacity by 50% – Ng Teng Fong General Hospital, Sengkang General Hospital, Woodlands General Hospital. We are increasing intermediate and long-term care facilities by 80% by 2020 – nursing homes, community hospitals – an 80% increase in capacity by 2020. And we are increasing our subsidies, as I have spoken about. So, in Budget 2012, two years ago, we had projected yearly total healthcare spending to double from $4 billion to $8 billion by 2016. We are, in fact, likely to reach the $8 billion figure, which is close to 2% of GDP, a year earlier in 2015. We are going to get there earlier – $8 billion of healthcare spending in 2015. Beyond that, healthcare spending will continue to grow. We expect it to reach about $12 billion by 2020. So, from $4 billion in 2011 before we announced a Page: 48 change in 2012, to $12 billion by 2020, a three-time increase. Beyond 2020, as our baby-boomer generation enters into retirement, gets older, the bill will grow. So, we have to spend more as our society gets older. But we are not spending less in other areas. In fact, if we just look at it demographically, we would think, as our society gets older, we spend more on healthcare and we spend less on the young because the younger cohorts are smaller. In fact, despite smaller cohorts, we are not spending less on education because we are spending a lot more per student. Smaller cohorts but a lot more spending per student at every level – preschool, through our schools and, importantly, in the tertiary sector because we are expanding opportunities in the tertiary sector, including university enrolment going up to 40% of each cohort. So, we are spending a lot more on healthcare and for older Singaporeans, but other spending is not coming down.”
“For infrastructure, I would not go through all the details but, basically, we have a lot more investment to do in our infrastructure. We are investing heavily in our rail lines. Over the next 10 years alone, we are going to expand our rail network by about 100 kilometres, which is more than any other 10-year period in our history. Then, by 2030, we will be doubling our entire rail capacity to 360 kilometres, which is a massive investment. The expansion of Changi Airport will be another very important infrastructural investment – Terminal 5 – in order to cater to many more passengers. It is not just an infrastructural facility. This is a key industry in its own right – staying relevant and competitive in the aviation space is an important economic strategy for us. And it is an important strategy to help the rest of our economy because Changi Airport also supports our wider economy. So, another very important investment and an expensive one. Third, housing. Quite apart from the fact that we are building a lot more HDB flats – 100,000 new flats over the next few years – by 2020, about two-thirds of our HDB flats, which is about more than 630,000 units, will be 30 years or older. So, estate renewal and rejuvenation will be a very important priority as we go forward and, particularly in the next decade, we will have to steadily upgrade and renew our HDB estates. So, that, too, will be a source of increased spending. Social spending will increase and I have explained the challenge in healthcare expenditure. Quite apart from what I was talking about with regard to subsidies and the need for increased spending at point of treatment, there is an immediate infrastructural challenge.”
“Khoo Teck Puat Hospital, for instance, has a tele-health system that involves nursing homes where the patients and nurses of the nursing homes can communicate directly with the geriatricians at the hospital. It saves on time, is convenient and it allows the patient to stay in the nursing home and not to be warded in the hospital. Finally, we all have to take responsibility for maintaining healthy lifestyles and many Members spoke about this – Mr Gan Thiam Poh, Dr Intan Mokhtar – the importance of healthy lifestyles, and the Government will spare no effort, especially through HPB, in promoting healthy lifestyles and early screening for all Singaporeans. I have spoken about healthcare spending at some length because this is, in fact, a key fiscal challenge for our future – controlling total healthcare spending and finding a fair balance in terms of who pays for that total bill. A fair balance between the individual, the Government and the employer. It is a very important challenge for our future, and both MOH and MOF will be quite seized with this issue over the next few years. Let me move on now to the third theme for this round up, which is the need to balance our Budget as spending goes up in the future. We have to plan for our higher infrastructural and social spending. First, expenditures will go up. We expect our expenditures to increase by another two percentage points of GDP by 2020. And beyond 2020, it will Page: 47 increase by at least another 1% of GDP in a decade. So, the increase is likely to be 3% of GDP in total by 2030. It will be driven by two key components: first, infrastructural spending; and secondly, social spending, especially in healthcare.”
“This is a very important shift for the future and Minister Gan Kim Yong will talk more about this at the Committee of Supply. So, that is about the structure. But incentives are very important as well – incentives for the healthcare professionals and incentives for Singaporeans, ourselves. We have to first make sure that we avoid this problem of over-prescription that we have seen in so many countries. The US is an extreme example, but there are many others that we can point to, including Japan, as I spoke about. We have to ensure that treatments which are subsidised are clinically necessary based on evidence and are cost-effective. Page: 46 There are some interesting lessons we can learn from elsewhere in this regard. In fact, in the UK, France and Germany, they have set up institutions that look at evidence-based research on effective treatments and technologies for various illnesses. When should a specialist referral be made? We can learn from some of these experiments and develop our own systems. Second, we have to promote more team-based care, in particular, one that allows our nurses and allied health professionals to play larger roles alongside our doctors. Here, too, there are very good examples in Australia and elsewhere, where nurses play a larger role. Dr Lam has also spoken about this. Third, we have to ensure that our healthcare clusters are encouraged to play a key role in managing the overall quality of care in and outside of hospital. The clusters are not just the hospitals but they involve primary care and step-down care. And our clusters have to take responsibility for overall care of the patient, both in and outside hospital. The Government will support new initiatives, new alternative approaches, such as tele-health.”
“As our society ages, as medical treatments that improve the quality of life become available, we will have to spend more. But we will have to do it in a cost-effective way and prevent the total healthcare bill from spiralling upwards because everyone will have to pay for that. We have to prevent the total healthcare bill from spiralling upwards. And to do this, we have two key strategies: first, to rebalance the structure of our healthcare system; and second, to ensure that we have the right incentives for everyone – doctor, patient and insurer. The first strategy of rebalancing the structure of our healthcare system has been spoken about. Dr Lam Pin Min has been talking about this for some time. He has spoken about it again in the debate and several other Members have spoken about this – the need for us to place much greater emphasis on primary care and on community care: primary care through our GPs especially; community care through our rehabilitative centres, home-based care, nursing homes and other community facilities. It is very important in our next phase. In the near to medium term, we will still have to expand our acute hospital capacity and we are going to invest significantly in acute hospitals. But in the longer term, it is really the expansion of capacity in primary care and community care that will ensure that we deliver quality care while preventing the total bill from spiralling out of control. We have to invest in primary care and community care and rebalance our system away from an over-concentration on the acute hospitals over the long term. That is why we have CHAS and stepped up, in fact, our subsidies for intermediate and long-term care to encourage people to get treatment and care nearer to home or at home.”
“The costs that Members saw in that chart are not the end of it. In the next 10 to 20 years, the costs are going to go up very considerably in these societies because of the incentives towards over-utilisation and over-prescription. It is a very fundamental issue. So, that is the first point. More spending does not mean better healthcare outcomes. The second key point I want to make is that there is, in fact, no free or cheap healthcare anywhere in the world. It can look cheap or free at the point of obtaining the service because your insurance pays for it or the Government has subsidised it. But the public is ultimately paying for it, either through taxes or hefty insurance premiums. It is not as if someone else is paying for it. The public is, ultimately, paying for it. Take Germany, where co-payments at point of treatment are very low, extremely low when you go to hospital or even in an outpatient setting. The reason why it is very low is because of very substantial contributions through payroll tax to what they call a "sickness fund". The employer and the employee contribute 15.5% in payroll tax that goes into a "sickness fund". And when you think of an employer paying, it is actually out of wages, as what would have gone into wages goes into the payroll fund to pay for the sickness fund. Then, when you finally go to the hospital or clinic, you think it is very cheap. But actually you have paid for it. It is actually pre-paid healthcare, with very few limits on how you use it. This is a fundamental point we have to understand. In fact, there is no cheap or free healthcare although it sometimes looks like that. Page: 45 It is being paid for. So, we will have to spend more on healthcare in future.”
“It is an issue in countries where you have a fee-for-service model where as long as the doctors are prescribing new services and treatments, their fees go up, their incomes go up. And in the United States, in particular, their incomes can increase very significantly for prescribing additional services. That is the second reason, that there is such a thing as over-prescription and over-utilisation which does not lead to better healthcare outcomes. The third reason is also very important. It is that many healthcare systems provide universal subsidies for everyone across-the-board – the poor, the Page: 44 middle-income and even the rich. In fact, many advanced countries do that. They provide universal subsidies across-the-board at much higher cost. It may make healthcare look very cheap for everyone at the point of consumption, but it leads to much higher usage because it looks cheap and people do not realise that they are actually paying for it in another way, through higher taxes. So, it is a system where everyone benefits from universal subsidies, leading to high utilisation of the healthcare system, but the cost is, in fact, being paid through higher taxes, insurance premiums and other means. And it is not just cases like the US. Japan is actually a very good example. In Japan, health insurance covers a very wide range of services with very little control over access to treatment. The Japanese sees physicians three times more often than in other developed countries and they stay in hospitals two or three times longer than in other developed countries because the system incentivises it. And it has got nothing to do with demographics or physiology. It has nothing to do with their medical condition. It is all a matter of incentives.”
“The first thing that Members will notice, of course, is that Singapore is not doing badly on health grade. In fact, we were rated the best in the world. I do not know whether it is true, but we are certainly doing quite well in healthcare outcomes. And we are doing it with relatively lower expenditure compared to other countries. Part of this is because we are a little younger as a society compared to the maturing European societies. But even if we adjust for that, we spend less on healthcare, but we achieve good healthcare outcomes. Members will also see at the other end of the spectrum, the United States. People often refer to it in articles and wonder why we are not spending as much. They spend a lot of money but they get very weak healthcare outcomes, in fact, much weaker than most other advanced countries. And if we look at the countries in the middle, there is very little correlation between how much you spend and your healthcare outcomes. Why is it that some countries are spending far more and yet not getting better outcomes? There are basically three reasons. First, particularly in the United States, prices are just much higher. The costs are much higher for any particular treatment we talk about. If we talk about a knee replacement, it is about four times the cost in Singapore. Prices are just far higher in the United States than in other advanced countries. This is the first reason. The second reason is very important because it applies to many countries, which is that incentives have led to over-prescription and over-utilisation of healthcare services. So, they end up just spending a lot more without commensurate improvements in healthcare outcomes. And this is, in fact, a very serious issue.”
“Beyond these shifts that we are making, we have to look to the future and address the larger challenge of healthcare costs. To put the scale of things in perspective, the Pioneer Generation is 450,000 Singaporeans. The next generation, now aged 45 to 64, totals 1 million Singaporeans, and they will be entering into retirement 10 to 20 years from now. That was why they were called the "Baby Boom", and they will be entering into retirement 10 to 20 years from now. That is a very important challenge that we have to meet: how we can provide quality care in an affordable way. It first involves appreciating very fundamentally two key points that we have to bear in mind. The first is that it is a misconception that countries that spend more are doing a better job in providing healthcare. Spending more does not mean better healthcare. The evidence is very clear on this internationally, that it is a misconception that merely spending more means better healthcare. Some countries have very high spending but, in fact, have much weaker healthcare outcomes than others. I will show Members a chart to illustrate this. [Please refer to Annex 3.] This is a set of mainly advanced countries, plus Asian countries like Hong Kong, Korea, Singapore and Japan. I will have to explain that the horizontal axis represents "Total Healthcare Expenditure per Capita", that is, national expenditure, whether it is the Government, insurers or individuals who are paying for it, this is total expenditure per capita. The vertical axis is for "Health Grade" that comes from Bloomberg's Rankings of the World's Healthiest Page: 43 Countries which looks at life expectancy, percentage of underweight children, proportion of people with high cholesterol and various other indicators.”
“I will give you the example of a couple in their early 60s – I am not talking about the low-income group which, in fact, receives very significant assistance – a middle-income couple, early 60s. The median household income per capita is about $1,700 per month, so I have chosen the median household, about $1,700 per capita household income. This is a case where the husband receives day rehabilitative care two to three times a week. The wife also visits the polyclinic twice a year and SOC three times a year. Not an uncommon example. Over the past decade, the policy shifts that we have made to increase subsidies for the middle-income group, particularly outside hospitals, have meant that this couple would receive a quadrupling of the benefits that were in Page: 42 place a decade ago, that is, four times more than was the case a decade ago. In addition, as we expand home-based care in future, if the husband, for instance, stays at home and receives care, the household would see a 7.5 times increase in support compared to what we had in place a decade ago. So, it is a very significant increase in support that we are providing for all Singaporeans. And as the couple grows older, they will be getting Medisave top-ups through the GST Voucher, which is not an insignificant sum. Each of them will get GSTV – Medisave of $250 each a year. By the time they get to their 70s, it is $350 each a year, plus enhanced benefits of MediShield Life which cuts down on the risk of large bills in hospitals and which will come with subsidies from the Government for the middle-income group. So, I just want to say that we have been making significant shifts not just for the Pioneer Generation but for all Singaporeans as they get older especially. But we have a larger challenge in future.”
“Second, we are increasing the Government's share of healthcare spending across healthcare settings, that is, in hospitals as well as outside hospitals. The increased subsidies in this year's Budget for SOCs, and the increased subsidies in recent years' Budgets for intermediate and long-term care services, are an important shift. It is an increase in the Government's share of spending. We have also introduced CHAS for primary care at our GPs. Medifund has also been strengthened and we will keep it strong as part of the system. So, that is the second part – the Government is taking on an increasing role in the financing of healthcare. The third part is important, which is that we have to preserve the role of individual savings, through Medisave, as a key pillar of the system. Individual responsibility for health, and to save for healthcare needs, must remain a key pillar of our healthcare system. And we are going to provide additional flexibility for older Singaporeans in the use of Medisave – Minister Gan Kim Yong will talk about it more at the COS – that will help in reducing out-of-pocket payments in polyclinic and other outpatient settings. This will be implemented in the first half of next year. But the sum of these changes that we have made in the last few years is quite significant. We are providing much greater support in healthcare, not just for the low-income group but also the middle-income group, and particularly in the outpatient primary and step-down care sector. It is quite an important shift. I will just give Members an example. And this is not a Pioneer Generation example.”
“Beyond the Pioneer Generation Package that the Government is providing, what are the other ways in which the community and businesses can recognise our seniors, besides our pioneers, amongst our Singaporeans. This will be a collective effort. As we approach Singapore's 50th birthday, special attention has to be paid by everyone to the role of all our seniors. The Ministerial Committee on Ageing has called for a special SG50 – Seniors Programme to appreciate the role of our seniors in contributing to our nation. The Committee will engage businesses and organisations as part of our SG50 effort to offer special privileges to our seniors, whether it is discounts to places of recreation and leisure or other benefits. They will also find ways to engage our seniors actively, to help them to lead active and engaged lives. So, this is an important initiative and as part of SG50, we want to involve our businesses and the broader community in recognising and honouring the roles of our seniors. Mdm Speaker, I move on now to a broader challenge, which is that of healthcare financing. This is, in fact, a key fiscal challenge for the future in Singapore, as it is, too, for many maturing societies. It is a key fiscal challenge that we face. I want to spend a bit of time talking about the nature of this challenge and how we should address the challenge. Good quality, affordable healthcare has to be our priority. We are making a few shifts in that direction – in the last few years and in this year's Budget. First, we are increasing the role of risk-pooling through MediShield Life to provide all Singaporeans, including those with pre-existing illnesses, with Page: 41 protection against large hospitalisation bills. Greater risk-pooling.”
“It involves personal contacts; it involves radio; it involves TV; and it involves languages that are most familiar to the Pioneer Generation. It will not be just a top-down outreach effort. We work with everyone on the ground – our grassroots leaders, all the staff in our healthcare settings – our GPs, polyclinics, outpatient clinics – where people come for treatment. And we will work with our VWOs as well because they too have a lot of contact in the community care sector, especially with the Pioneer Generation. The online facility allows younger family members who are very familiar with looking up details online to assist the elderly. But as I mentioned, the benefits will be provided automatically and there is nothing to worry about. If someone really needs to talk to a volunteer or officer to find out more, we already have today 26 CitizenConnect Centres across the island, where advice Page: 40 can be sought on the Pioneer Generation Package. Eligibility is the next issue. Mr Baey Yam Keng and Mr Lim Biow Chuan, for example, had highlighted the case of individuals who have been living in Singapore and contributing since independence but were not able to get citizenship for various reasons, until later. The appeals panel that we are setting up will be able to look into such cases. That is why we are setting up an appeals panel. It will have diverse representation, comprising Singaporeans from a range of backgrounds. This panel will be set up by the end of April and we will provide more details on this later. If I can move now to the issue of broader recognition of the Pioneer Generation, which many Members spoke about.”
“The pioneers do not need to worry even if they are unsure of their exact benefits. It is going to be provided automatically. The Pioneer Generation cards will enable them to easily identify themselves at the clinics to get additional subsidies. Even if they forget to bring Page: 39 their cards, it is there in the computer system. They will get their Medisave accounts automatically topped up, and they do not need to be CPF members, that is, having worked earlier and have CPF accounts. As long as they have signed up for Government schemes in the past, which almost all had – such as the GST Vouchers, Growth Dividends – the CPF Board would have opened a Medisave account for them. In fact, over 430,000 of our Pioneer Generation already have Medisave accounts because of these schemes. I think the bottom line is this – as Ms Irene Ng put it – "do not worry". Whenever the Pioneer Generation expressed some anxieties as to whether they are going to get benefits, tell them, "Don't worry. You'll get it automatically. There is nothing to worry about." There is a very small group, less than 3%, who do not have Medisave accounts because we have been unable to contact them over the years despite considerable efforts by grassroots leaders and many people making the effort to contact them. Some have passed away overseas without their next-of-kin informing us. The NRIC addresses for some were also not valid. We will continue to work hard to find them and reach out to them. It is a small group, but we will have to keep working at this. The outreach effort will have to involve many different approaches, many different media, many different languages. Members have all emphasised this, and this point is well taken. It is not just about printed brochures arriving in your letterbox.”
“So, from September, the Pioneer Generation will be able to get their enhanced subsidies across the outpatient sector – polyclinics, SOCs and GPs. Before September, every member of the Pioneer Generation will get a Pioneer Generation card, which can be used at the GPs, dental clinics, SOCs and the polyclinics. The card will be mailed to them by September. Even earlier, however, we will make the first round of Medisave top-ups for the Pioneer Generation. We will do this in early July. This means that although MediShield Life is going to be implemented at the end of next year, 2015, we have two years of Medisave top-ups that the Pioneer Generation is going to enjoy. It can help them to pay for a significant part of their current MediShield premiums – two years worth of assistance to pay for the MediShield premiums, using the Medisave top-ups. Ms Sylvia Lim had asked whether the MediShield Life premium subsidies for our Pioneer Generation will cover not just MediShield Life but the Medisave-approved private plans. The answer is yes. The Medisave-approved plans are Integrated Shield Plans and they include MediShield as a basic component. In future, the plans will include MediShield Life as a basic component. So, those who are on Integrated Shield Plans will receive the same dollar amount of subsidies as those on MediShield Life. Next, the whole issue of outreach which many Members spoke about. This is a massive exercise that involves reaching out to 450,000 Singaporeans. Thus, it involves IT systems, many agencies and many points of contact, and we want to do this as well as we can. The first thing that we have to assure members of the Pioneer Generation about is that the benefits will be provided automatically.”
“These three priorities go together – transforming our enterprises, especially our SMEs; transforming our jobs and developing every talent; and transforming our culture. And we will not succeed unless we do all three. Let me now move on to the issue of social spending and especially finding the right balance in our social spending. I will start with the Pioneer Generation Package, which as I mentioned earlier, there has been very strong support for it uniformly in the House. Strong support for the fact that it is focused on healthcare needs, strong support for the fact that it is being given to all pioneers regardless of income, and strong support for the fact that we are setting aside fully now the funding required for the entire life of the Package, and that it is fortunate that we have the means to do so because of our prudent fiscal policies. I think those were the three features of the Pioneer Generation Package which were very important defining features and which have received strong support in the House. Some important questions were raised about the implementation of the Package. The first issue has to do with when the Package will be implemented and how quickly we are going to implement the Package. Dr Teo Ho Pin in particular Page: 38 has asked whether we can bring forward the Community Health Assist Scheme (CHAS) benefits, so that the Pioneer Generation can benefit earlier from the extra subsidies in our GPs. We have, in fact, studied this very carefully and we have decided to bring forward the Pioneer Generation CHAS benefits from January 2015 to September this year, so that it will come into place at the same time as the enhanced subsidies in our Specialist Outpatient Clinics (SOCs).”
“ATMs and Internet banking are, in fact, the default option. Not long ago, everyone wanted to go to a bank branch, speak to the officer across the counter, see the passbook being updated in front of your eyes and make sure it is updated. How many people still do that? Some of our older folks still want to do it, but for most Singaporeans, the ATM is the default option now. For many, in fact, Internet banking is the default option. And we are going to go further because in June this year, we will be introducing what is called the FAST (Fast and Secure Transfers) system, which Page: 37 allows consumers and businesses to use their electronic devices to transfer funds between banks almost immediately. Today, it takes two or three days to transfer funds between banks. It will be almost immediate. These are the changes that we have to make in every industry. Make self-service the default. I will give another example – Real Estate. In Australia, the majority of Real Estate transactions are exclusive agency arrangements. Because they are exclusive, it is a sole agent system. The agents are happy to put all the information about a property online or in newspaper ads. They leverage on ICT. When you, in fact, go and look at the house or property, the prospective buyer can look at the floor plans, the different rooms, take a virtual tour of the entire property through online property ads. As a result, basically the prospective buyers do a lot of self-service before contacting the agent. This is another example I am giving, but it applies to many other industries. In every industry, we can think of how self-service can, in fact, provide good service but it also saves on manpower and takes us to a new and higher level.”
“The reason why companies have to do this is not just because of the tight labour market and they have no choice but to employ older workers. And it is not just because we are trying to help older workers build up retirement savings and therefore, we want them to work for longer. Those are the economic and financial reasons. It is also because, as Mr David Ong said, it is ultimately about self-worth, dignity and productive ageing. It is a social objective. When we think about this issue, therefore, it is not just about the financial strategies. It is really about changing the way we think about every Singaporean – maximising the worth of our older workers, finding ways in which they can add value as part of a team, and this involves transforming mindsets. This is why I want to emphasise this particular point that came up very usefully in the debate. The Government will play its role and support this in every way we can. We have the Special Employment Credit, and the public sector is playing its role. For instance, MOE, again, if I just use an example, is drawing on many retired teachers, retired educationists, involving them in a very meaningful way as we upgrade our education system. The business community has to treat this as a strategic priority and a responsibility because we can only create an inclusive society, in the true sense, if, as Mr Yeo Guat Kwang said, we give everyone a chance to have a job and a meaningful opportunity to contribute. Next aspect of social norms which I want to mention briefly is the importance of moving to a system where self-service becomes the default option, and something which customers even prefer. If you look at what has happened in the financial industry, for instance, it is quite interesting. We now treat ATMs as the default.”
“We have to redefine education and invest in this next lap in education, where we complement a world-class school system with a world-class system of lifelong learning. The third challenge: transforming culture and social norms. Many Members spoke passionately about this – Ms Foo Mee Har, Miss Penny Low, Mr Patrick Tay – and I do not want to cover the same ground which I have stated in the Budget speech and which Members have very eloquently and thoughtfully spoken about. It is a softer area, less tangible, but we all know it underpins everything else we want to do. If we want to achieve the first two objectives of transforming our SME sector, and transforming jobs, we also have to transform the workplace culture and our social culture. We know that. The National Productivity and Continuing Education Council (NPCEC) will give this great attention in the next few years. It is something that is going to take time, but we are going to pay special emphasis on this. Not just the hard skills and technologies of involving upgrading, but helping companies upgrade management practices and helping them to reshape the workplace culture with employees. This requires much more emphasis. We will be working together with companies, and working with everyone to get ground-up ideas as to how best we can do this and support this. So, it is a very important priority as we go forward. I do not want to mention this or go through the specifics again, as it has been very well discussed. I just want to highlight a point which Dr Lam Pin Min, Page: 36 Mr David Ong and Mr Ang Wei Neng a short while ago emphasised – that is, one dimension of this we have to think very hard about is the way in which we include older workers in the workplace and our economy.”
“You invest in your employees, some of them may not be with you five or 10 years from now, but everyone has been raised to a different level and it is constantly moving up. That is really what we have to see. Everyone has to be invested in, every Singaporean has to be invested in with constant skills upgrading and everyone will benefit, including our businesses. The Government will help. Second, we will also help Singaporeans themselves to take charge of their learning and development. This is a very important strategy, going forward – strengthen career guidance, strengthen knowledge of careers from early on. There are some suggestions in the debate about starting in Secondary school. In fact, MOE is starting this – internships and work attachments even when the boys and girls are in Secondary school. At the tertiary level, the ASPIRE Page: 35 Committee is developing a plan for meaningful work engagements for students, in particular our ITEs and Polytechnics. Beyond the early internships and the attachments, it really has to be a continuous process where we have to conceive lifelong learning as one that involves regular infusions of education and learning at different times in our lives. We have to think ahead about the challenge, put the resources and plan a whole new framework for CET that enables us to do this. There are examples. MOE, for instance, started a decade ago a system where every teacher and principal, after a period of years, can take time-off to learn. Some go on work attachments; some go abroad; some do something in another field of education before coming back – it is constant infusion of skills and knowledge. There are many possibilities and we have to study this. It will require resources, but this will be resources well spent.”
“It is not about two distinct phases of education and learning in a person's life where most education is over by the time you finish school, ITE, Polytechnic or University, and you get your certificate, and then you have a little bit of training after that as you go through working life. It has to be a continuum, a continuum that involves regular refreshing of knowledge and skills throughout our lives – that has to be the new concept of education. If you want to develop every talent, and keep adapting to this new world, including the new jobs that will come along, it has to be a continuum. We have a world-class school system – we know that – and our challenge now is to complement that world-class school system by having one of the best systems of lifelong learning as part of that continuum. We must invest in this. We are studying the whole CET framework. We are developing a whole new CET Master Plan, which we will announce later in the year. It will require resources and these will be resources well spent. But I want to emphasise two points. First, that quite apart from Government putting in resources, the business community plays a very important role and it plays a role in a somewhat different way from what has been the case before. It is not just about investing in your own employees. If you are worried about whether they are still going to be with you three or four years from now, you do not invest as much. As the economists would put it, you have to invest in the commons. Every business has to invest in its employees and if everyone does so, we raise the human capital of Singapore's society. Everyone moves up, and everyone benefits, because in a small society like Singapore, what goes around comes around.”
“Jobs in engineering, systems and product design, systems management, people who can troubleshoot problems, solve complex problems, jobs in programming and data analysis, in ICT, and jobs in the creative industry, which Ms Janice Koh had spoken about. There will also be many jobs that involve personalised service – in the hospitality industry, healthcare and social services, including education. The social sector is going to be a major area of job creation in the future. But no one knows for sure what jobs are going to be around 20 or 30 years from now. We know what the broad sectors are. We know that there will be jobs, but you cannot say exactly what jobs there will be, and that is why several Members have highlighted that we have to also focus on developing obsolescence-proof skills. As Ms Irene Ng put it – the skills that will apply, regardless of the job. We know roughly what they are, but we have to keep sensing the skills that are needed in the market. Being inquisitive, thinking in original ways, being in the habit of continuous learning and, very importantly, the ability to interact with others and to respect everyone. These are skills that MOE is focusing on, from the early years, all the way through the school system. Page: 34 Secondly, very importantly, we have to redefine education, and we are redefining education. So, that is not simply a matter of what we do in schools and tertiary institutions, and then you have a separate phase altogether, which is what we do in the workplace.”
“We know what the existing jobs are and how we have to make them better. But we also have to prepare for jobs of the future, many of which do not exist today, as several speakers pointed out, including Ms Irene Ng. Many do not exist today. The experts say that if you take people who are young, those from our primary schools, by the time they enter the workforce, computers will be a Page: 33 hundred times cheaper and a hundred times smarter. Based on current trends, it will mean a very different workplace, whether in Services or Manufacturing. Every area of economic activity will be different, because the digitalisation of economy is proceeding apace in every major economy and every economy that is globalised. It is proceeding apace, and it transforms not just businesses but it transforms jobs. Several Members, including Ms Tan Su Shan, spoke about the challenge this poses to middle-level jobs – middle income, middle-skilled jobs. You are already seeing it in the United States. They call it job polarisation where the middle-level jobs are disappearing while that at the top-end is growing, and the middle-end is shifting to bottom-end. Lots of bottom-end jobs are being created. You are seeing it in the United Kingdom. We face that challenge here too, albeit in future. So far, we have been able to have near full employment, but this will be a challenge as technology proceeds apace. We have to prepare for that new world. It will not be a jobless world, particularly for Singapore, a small country with the world as its market. If we stay competitive, and if we get our fundamentals right, we can create jobs. There will be many jobs that involve working with technology and using technology to gain competitive advantage.”
“Because, frankly, the level of support we are providing is unmatched internationally, in whatever aspects you can think of – automation, technology, R&D, design, training of employees – we are providing very substantial support. We have got to give our SMEs time, keep a steady pace of restructuring and every time we see innovations arising, try to spread those innovations from early adopters to others. One important approach is a sector-wide approach, which is an emphasis in this year's Budget and which we will take forward. Going for sector-wide solutions, I will just give one example, which is in the wholesale sector. We have an e-Procurement Hub for SME wholesalers. It has enabled about 200 SME wholesalers to transact electronically with their large customers and large retailers, thereby improving inventory management. It also provides a shared platform for accounting and business intelligence functions. So, it saves them costs and manpower, and the interesting thing is that this was a solution developed by an SME itself, which IDA then went in to lend support to, and many other firms hopped onto this platform. We want our SMEs to be a vibrant part of the future Singapore economy and we will provide as much support as it takes to help them to get there. The second focus is to transform jobs and to develop every talent, as Ms Jessica Tan had emphasised. It involves every job. As Mr Lim Swee Say said, every job has to be professionalised. He cited the gardener in Japan, the cleaner in Germany, the waiter in the US. Every job can and has to be professionalised. It is not about preserving jobs the way they were in the past, but it is about making every job better for the worker, and thereby helping every worker to contribute to upgrading. That is one challenge.”
“Ms Denise Phua, for instance, spoke about this. We have to make sure that our traditional businesses remain a unique part of Singapore society. As Mr Teo Siong Seng said, there is no reason why traditional businesses, including our many family-owned businesses, cannot be dynamic players in the future Singapore economy. By applying new management concepts, by going for strategies that are seen amongst other firms, including the larger firms, our traditional businesses do have a role to play in the future Singapore economy. Our SMEs have come a long way in the last 10 years alone. If you just look at two things – and I am just picking two things – broadband access, for instance. Ten years ago, 40% of SMEs had broadband access, now it is 80%. In this year's Budget, we are going to help them move to high-speed broadband. Second, they are far more internationalised than they were before. The Singapore Chinese Chamber of Commerce and Industry did a survey on SMEs, and they found that 60% of those surveyed were now venturing abroad. Thirdly, many more Singapore brands are now known abroad. It used to be SIA, Creative and SingTel. Now there are many other brands – Hyflux, Ezra Holdings in the Offshore and Marine sector, SC Auto in the Manufacturing sector, Charles and Keith in the Retail sector, Eu Yan Sang in the Healthcare sector and many other names that you can think of, which are well known in Page: 32 Asia especially. The SME sector has made progress. We have got to redouble our efforts in this next decade, and I do not think it is just a matter of Government support.”
“But for the PIC cash scheme, we did have to put in the requirement because it is easy to abuse. These are some of the practical challenges we face when devising Government support. How fast do we move; second, do we have a system which allows liberal use of funds with no questions asked; or do we place requirements that have to be met before assistance is provided? We try to find the right balance and we will improve as we go along. Let me now move on to the next phase of restructuring. What are our priorities? And what are the priorities that have been expressed in this debate, which I think has been a useful debate. First, we must transform our SMEs. Second, we must transform jobs and develop every talent. Third, we must transform our culture – social norms at the Page: 31 workplace and, in some regard, in our society. In short, we have to transform our economy and we have to transform our society, if we want to succeed in this restructuring journey and achieve a high-productivity and high-income society. It is unrealistic to expect to achieve this in a few years. It is going to take some time, but we have to have a determined approach to the problems, put resources into it and make sure we move at a continuing and steady clip. A decade from now, if we move at this clip, we will be in a different place where firms will be able to survive with good profit margins, and workers will have higher incomes. And the reason why you can achieve both – higher incomes and good profit margins – is because productivity would have been transformed. The first priority is transforming our SMEs, and helping them overcome constraints of a tight labour market and high business costs. Our SMEs remain at the core of our economy, as many Members spoke about.”
“Ms Jessica Tan, Er Dr Lee Bee Wah and others talked about the need to make it easier for firms to Page: 30 qualify and take advantage of our schemes. Or, as Er Dr Lee Bee Wah said, "Provide assistance faster!". Another view, which Assoc Prof Eugene Tan, Mrs Lina Chiam and others expressed, was a more cautious one, which is that we must require firms to demonstrate productivity improvements first. Show proof before you get assistance. Mandate certain improvements as the requirement before we give assistance. These are both meaningful views. Through the range of our schemes, first, we have broad-based support that is easy to qualify for; but we also have a second level of support that is more customised where we work with the firms to ensure improvements in productivity within a space of time. We need both approaches. It cannot be only one approach of having companies show proof before they get assistance; neither can it be an approach where the money is just being handed out liberally, upfront, no questions asked. Because, then, you get what is called "deadweight funding". You are just going to fund what the companies would have done anyway without assistance. So, we need both approaches and that is, indeed, what we have done. The PIC, in fact, leans a little more towards a liberal approach, but it is not "no questions asked". Companies know that they qualify as long as they meet the criteria. But when it comes to the PIC cash payout scheme where the money is paid much earlier and in cash rather than through tax savings later, we have to put in a check into the system, which is the "three-employee rule". It is only for the PIC cash payout scheme, not for the PIC scheme at large, which is a major scheme.”
“Companies do not give up their business simply because they are doing poorly in one year. It takes time for the market to sort itself out. The better businesses do move ahead at the expense of the rest. How we pace our restructuring journey is quite important. There are two views in the Debate on this. Mrs Lina Chiam had wanted us to accelerate the shake-up of firms and accelerate the consolidation of small firms. That is one view. Mr Inderjit Singh, Mr R Dhinakaran and several others felt that we had been moving too quickly in restructuring and that we need to pause a little more. That is another view. We have taken the middle path. First, we have avoided shock therapy because we know it actually takes time for market forces to work. If we go with the shock therapy, good firms, those with a good future can be shaken out. Good jobs, too, can be shaken out. So we have avoided shock therapy but we got to have a steady clip in our restructuring effort. Be very clear about direction and keep a steady clip, so that there is pressure on firms to upgrade. All the changes that we have done had been phased in – they are not sudden. The most significant of the changes are the Dependency Ratio Ceilings (DRCs). They were all announced two years in advance, which is why this year and next year, you will see the full effects of the DRC cuts in the services sector that were announced last year. We phase in all our measures. Second, we try to avoid a cookie cutter approach where there is only one formula for all firms or one scheme for all firms. Here again, there are two contrasting views as to how we should go about Government assistance. On the one hand, we have some views which have some merit.”
“8 billion, which is a very substantial amount of assistance. As I explained in the Budget Statement, it is not lathered equally across the whole system; not everyone is getting the same. Some SMEs are getting a lot more than others, because they are taking the initiative to put their own money in the game, to invest, to innovate, to upgrade the skills of their people. It is substantial assistance that we are providing. That is what we are doing – tightening labour market policies and providing strong support for businesses to upgrade. But productivity cannot just be summoned up. You can tighten the labour market, you can provide assistance, but you cannot summon up productivity. That requires entrepreneurial energies and business leadership; that requires everyone striving to do better at their jobs. On the Government's part, every time we see an innovation, we see someone who is an early adopter doing something new, we will try to spread that innovation, help other firms in the sector adopt it; and hence scale up improvements. That is our approach. This is a fairly fundamental point. The Government can tighten labour supply, give companies an incentive to upgrade; we can provide strong support, Page: 29 but really, businesses have to respond, and management has to respond. And the Government will then find every way to spread innovation and improvements throughout that sector, and throughout the economy. That is our approach. We have to let market forces do their work. That is the third dimension about it. It is about individual firms upgrading; it is about Government supporting; but market forces have to work. Market forces will reward those who are upgrading, those that are more efficient and those that are more innovative. The market needs time to work.”
“The easy way to raise productivity is to go through some shock treatment, shed firms, shed jobs, but the ones who will suffer, in our case, are the lower-skilled and especially our older workers. We have taken a more inclusive approach. We should retain this inclusive approach as we go forward which makes it a special challenge. Do not do it the way that some countries have done – take a segment of your workforce out and you get higher productivity almost automatically. We want to keep everyone in the workforce, and as Mr Lim Swee Say said, make every job better. It is a Page: 28 difficult challenge but one which we can achieve. I wanted to highlight this fact that it is about productivity in a full employment economy. That is our particular challenge. That is what we have set about. How do we go about it? No one is satisfied with the rate of our productivity growth in the last few years. It has been dismal. How do we go about it? What has the Government's approach been? First, we have tightened foreign worker policies. Second, we have provided very substantial assistance for our businesses to upgrade. That means, principally, providing our SMEs with assistance because all our schemes, whether it is the PIC or the Transition Support Package, have been tilted in favour of SMEs because we know they are the ones who need the most help. The large firms are able to adapt to the market much more easily. They have got the resources upfront to invest and it pays back over time. It is the SMEs who need more help. So, most of our schemes are tailored to the SMEs. If you look at the Transition Support Package, this is the second year, and it is a three-year package, estimated at $7.3 billion, and about 80% of that goes to the SMEs. That is about $5.”
“As Mr Yeo Guat Kwang emphasised, it is about raising productivity while maintaining full employment because that too is extremely important. One of the unique things about what we have been able to achieve is that we have increased our employment rates, giving everyone an opportunity to have a job. In the last decade, if you look at Singapore, I will have to explain this chart. [Please refer to Annex 2.] If you just focus on it one step at a time. It looks at the employment rate on the horizontal axis; and on the vertical axis, it looks at the level of productivity. Ten years ago, our employment rate was around 65%. Since then, our employment rate has increased. If you look at Singapore last year, our employment rate has increased significantly to over 70%. It is not the highest in the world, but it has caught up with some of the advanced countries. It is a little lower than where UK was 10 years ago, but we have caught up in employment rates. It is a very important challenge: for us to be able to raise productivity while providing jobs and opportunities for all our citizens. It is a much bigger challenge than raising productivity by shedding jobs. That is what has happened in many countries. If you look for instance at the US over the last 10 years, employment rate has come down significantly. Productivity has risen but employment rate has come down significantly, same thing as the UK. When they talk about employment rate coming down, it is the lowest-skilled workers who are put out of the workforce. We have found a way in which we can have an economy where everyone has a role to play.”
“We summarise it with a measure called productivity, but it is actually about those things. It is about skills; it is about workplace culture; it is about automation; it is about innovation. That is the only fundamental solution. We have got to raise productivity. This brings me now to the first main theme of the Budget as we look to the future: how can we achieve this higher productivity, a higher income economy. First, it is useful to take a step back. It is not as if we are a failing economy when it comes to productivity. It is useful to see where we have come from. I will show Members a chart on the journey we have traversed over the last 30 years. [Please refer to Annex 1.] In 1980, this is the level of productivity compared to the US. I am using the US here for simplicity as it is a major advanced country and, in many aspects, a leader in productivity. If we take the US as 100, Singapore was about 40% of US' productivity level in 1980, or 30 years ago. We were very much a developing country then and recorded 40% of the US' productivity levels and well below most developed countries. Fast forward 30 years, where are we now? We are basically at about 70% of the level of the US; so, quite a major shift in 30 years, from 40% of the US, to 70% of the US. We are almost at the level that the UK is at now; and in fact, because of low service sector productivity in Japan, overall, we have the same level of productivity, or slightly higher, compared to Japan. Page: 27 It is not a bad achievement that Singapore has taken this journey – our SMEs, our people, everyone. We have come a far way in 30 years. There is a second challenge, however, as we go forward, that is not just about productivity.”
“Miss Penny Low spoke about having more clusters for start-ups like Block 71. She wanted more of those. That is also a good idea. Mr Zaqy Mohamad spoke about retail malls, helping retail SMEs to share services. These are useful ways in which we can mitigate the rise in cost and help companies to have more efficient business models and more efficient ways of using their manpower and getting more value out of the space they occupy. Transport, again, an important business cost issue. That is why we had not just given road tax rebates last year but we allowed for further five-year COE extension for vehicles that already had COEs renewed once. It is really to help our smaller businesses. This year, we enhanced the Early Turnover Scheme to Page: 26 lower the replacement cost for old commercial diesel vehicles. These are important ways in which we can mitigate the cycle, mitigate business cost increases and we are open to any other suggestions, any other practical and effective ways in which we can help. Mr Inderjit Singh had asked for a permanent solution. The permanent solution to address rising business costs is to raise productivity. That is the only permanent solution. We have got to upgrade our economy fundamentally. As long as we remain vibrant as an economy, our costs will basically approach that of an advanced country. A little higher in some areas and a little lower in some areas, but basically, we will have costs similar to that of an advanced economy. The only way for our businesses to survive in that environment is to have advanced country capabilities: in innovation, in the commercialisation of R&D, in managerial skills and in investing in employees so that they develop deep skills. That is the only way.”
“Those are two quite different approaches and I think we should avoid either extremes. Do not just leave it to the market but neither can we fix rents and keep prices low and expect that the standard of living goes up at the same time. It does not work like that anywhere in the world. What we have done is to try to mitigate the property cycle. When you look at industrial land, and at retail space, like the residential market, that is our approach. Supply is catching up quickly. In the next three years, as I mentioned in the Budget Statement, just for multiple-user factory space, the amount of new supply coming on-stream is going to be double the demand that we saw in the last few years. Demand is not going to suddenly double, but supply is going to double. So, I expect that that will have a moderating influence on rentals. Indeed, we have already seen industrial rentals fall by 1.4% in the fourth quarter of last year. Likewise, for shop space, we are expecting a very substantial increase in supply that is going to be coming on to the market. That is our strategy. We do not have perfect foresight, but when we see the market heating up, we take action to boost supply and find other ways to help businesses to mitigate costs. One of the ways is what Ms Jessica Tan, Dr Teo Ho Pin and some other Members spoke about – which is to help companies to save costs through the sharing of services. We are doing it through JTC's cluster industrial spaces like the Food Hub and Tuas Biomedical Park. There will be more such cluster concepts which enable companies and especially SMEs to share services. This means reducing upfront investment costs that they would incur otherwise if they do it on their own. It also means lower maintenance cost over time.”
“That is our strategy, except that we are not going be a cheap location for businesses. How then do we address the challenge of business costs? If I can use a contrast that was in Mr Yeo Guat Kwang's speech between two countries. A very interesting contrast. Mr Yeo spoke about the difference between Hong Kong and Japan. In Hong Kong, retail rentals have gone up very sharply. The cost of land and the cost of all properties, including homes, have gone up very sharply. Prime retail rentals in Hong Kong today are more than seven times higher than the prices in Singapore. Their property cycles are sharper than ours. They have on a trend basis, gone up much more than we have in terms of the cost of space. In Hong Kong, they leave it to the market to restructure. As rentals go up, business costs go up, businesses have to restructure. They leave things much more to the market than we do. And as a consequence, businesses have been restructuring. The example that Mr Yeo gave was of how retail rents are now so high, businesses have shifted away from traditional clientele and traditional services towards catering to the high-end Chinese. Some Hong Kong residents are not very happy about this loss of services, but that has been how their businesses adjust. This was contrasted to Japan, where rents are cheaper. In Japan, strict rules on redevelopment and land uses have enabled lots of little very charming ramen shops, crafts shops, mom-and-pop shops, to survive. That is a strategy quite different from Hong Kong in another regards. It is not just that rents are Page: 25 cheap, but wages are stagnant, and opportunities for the young are very limited, as we all know. Japan's economic growth has stagnated.”
“There is thus significant improvement. We keep our eyes focused on that, on how the average Singaporean and the low-income Singaporean is doing with regard to their incomes relative to the cost of living. Let me move on now to the issue of business costs and competitiveness. Expatriate costs are part of that equation. We should keep our eye on expatriate costs as well, because it is part of the overall business cost equation. The key challenges we face were raised by Mr Inderjit Singh, Mr Dhinakaran, Mr Teo Siong Seng, Mr Yeo Guat Kwang, Mr Ang Wei Neng and several Members. Ms Jessica Tan had highlighted this as a challenge in her opening speech. There is the challenge of business costs. It has gone up. It has gone up fundamentally because we have not been doing poorly as an economy. Wages Page: 24 have therefore gone up. Rentals have gone up because the demand for industrial, retail and office space has been very strong. Demand has been very strong from businesses. And because supply was short of demand, rentals have gone up. Wages will go up as long as there is a tight labour market and there is a demand for labour. Demand in the economy is strong; demand for resources, and especially, labour and space. That is why costs have picked up, fundamentally. The wrong strategy will be to weaken our economy or make ours a less vibrant economy. And we can think of many cities not so far from where we are which are less vibrant and the cost of living is significantly lower, because you do not have wage pressures and rentals are cheap. But that is not what our business community wants and that is not what Singaporeans want. We have to keep this a vibrant place; keep a check on costs to make sure they do not rise persistently faster than business profits or wages.”
“They specifically distinguished the cost of living for expatriates and cost of living for a typical resident household. They looked at all sources of data, including the EIU study, World Bank's International Comparisons Programme, and they constructed consumption baskets for expatriates and for ordinary residents. They found that Singapore was indeed quite expensive for expatriates compared to other cities. At the time of their study, Singapore was ranked fifth out of 109 cities in the index in terms of costs for expatriates. But costs for Singapore residents were very different. We were ranked 61st out of 109 cities when they compared the cost of living for residents. Quite similar to other Asian cities like Hong Kong, which was ranked 58th or Seoul, which was ranked 60th. That is the basic difference. From time to time, these surveys will come up. I know some people will give it a spin, but they are measuring something quite different from the cost of living for our residents. What is important for us is that Singaporeans, and particularly, low- and middle-income Singaporeans, have incomes that grow faster than the cost of living. That is what is important and, in fact, that is what we have fortunately been able to achieve. In the last five years alone, if you take our middle-income households, our median households, their incomes have gone up faster than the cost of living as measured by the CPI index. In fact, income has gone up by about 10% in real terms; similar rate of growth for the low-income households. For the low-income households, if you exclude from the CPI index the imputed rentals for those who own their homes – they do not have to pay rent – then the increase in real incomes of the 20th percentile household was 19% over the last five years.”
“And it is quite different from the goods and services consumed by ordinary Singaporeans which our CPI basket, for instance, measures. For example, the EIU basket includes imported cheese, filet mignon, Burberry-type raincoats – not very common in Singapore – and the four best seats in a theatre, three-course dinners at high-end restaurants for four people. These are the items in their cost of living basket. I do not think they are irrelevant to an expatriate's cost of living basket but it is quite different from the cost of living basket for Singaporeans. Indeed, for some of these items, Singapore is expensive. Transport is also part of the cost of living basket for these expatriate indices, but no mass public transport. It is just cars and taxis. Our public transport, as Members know, is significantly cheaper than most other cities – New York, London and Tokyo. We are comparable to Hong Kong but significantly cheaper than most other cities. Even our taxi fares are cheaper. But our cars are expensive because we are a small place. So, for an expatriate, if you want to own a car, it is expensive in Singapore. But if you are talking about an average Singaporean taking public transport, it is, in fact, much cheaper than many other cities. I highlight this just to point out the differences. It is not that these surveys are wrong. It is not that they are misguided. But they are measuring something quite different from the cost of living for an ordinary local in different cities around the world. Page: 23 Unfortunately, there are, in fact, not very many surveys that truly try to measure the cost of living for ordinary residents. We have a good study that was done by the Asian Competitiveness Institute in 2012, which compared purchasing power in different cities.”
“These are basically aimed at comparing cost of living for expatriates in different cities or different countries in the world. What this means, therefore, is two things make an important difference in these surveys; and two things in these surveys are quite different from factors that affect the cost of living for locals or Singaporeans. Quite different. First, exchange rates. An important reason why, in fact, we have become an expensive place for expatriates is that the Singapore dollar has strengthened. Indeed, the EIU report pointed this out. The Singapore dollar has strengthened over the years. And it means this is an expensive place for someone who is paid in a foreign currency or for a corporate HQ abroad whose earnings are in a foreign currency. As the Singapore dollar strengthens, it becomes more Page: 22 expensive. The reverse is true for Singaporeans. A stronger Singapore dollar improves purchasing power both in Singapore – because imported goods become cheaper, and for us, food and everyday items are all largely imported – and when Singaporeans go abroad. You can see that from the latest travel fair last week. So, a stronger Singapore dollar – not a sudden sharp appreciation but a steady appreciation – has been good for Singaporeans, but it does mean it becomes a more expensive place for expatriates on foreign currency earnings. The second important difference has to do with what goods and services are being measured as part of the cost of living basket in these surveys. The EIU consumption basket – I would not knock it; it would have to be subjective, but they are trying to put together a basket of what they think are expatriate costs, perhaps a little on the high end, but expatriate costs.”