Govt to ensure growth becomes more inclusive: Heng Swee Keat

But trust between Govt and citizens is critical ingredient, says Heng

By Rachel Chang, The Straits Times, 7 Aug 2013

EDUCATION Minister Heng Swee Keat yesterday signalled impending policy changes on several fronts including housing, as he sketched out how the Government intends to ensure that growth becomes even more inclusive.

Underpinning the way forward, however, must be the "critical ingredient" of trust between the Government and citizens, he said in a speech at an Economic Society of Singapore function.

Speaking ahead of the Prime Minister's National Day Rally speech on Aug 18 - widely expected to contain policy shifts informed by the Our Singapore Conversation (OSC) exercise which Mr Heng heads - he sketched out elements of a "fairer and more just society".

These include giving lower-income Singaporeans substantial benefits to own a home, something that would be a "tangible way to share the fruits of success".

Another way: taking "special care" of the health-care needs of the pioneer generation of Singaporeans, which Deputy Prime Minister Tharman Shanmugaratnam also mentioned on Sunday.

There must also be targeted assistance for the needy and a progressive tax system to avoid excessive inequality, Mr Heng said, noting that the Government intends to build on the current progressive system where the wealthy pay the bulk of taxes.

Turning to education, he said that his ministry is "looking at various ways to let off some of the pressure that has built up (in the education system) over the years".

But he added that it would not swing to the other extreme, and that "it must still be part of the Singaporean psyche to want to pursue excellence".

In the 35-minute speech that preceded a question-and-answer session at the event at Mandarin Orchard hotel, Mr Heng also summed up the main aim for the OSC exercise, which will release its final report this week.

This is to build "adaptive capacity" - which enables systems to survive and thrive when the environment they exist in changes.

The way Singaporeans have sat down in diverse groups to discuss their aspirations allows them to empathise with others, see how the perfect solution may not suit someone else, and learn to compromise, he said.

The OSC process is hence critical in building trust among Singaporeans and between the people and the Government, he added.

Referring to terms from the work of Harvard professor Ronald Heifetz, Mr Heng noted that Singapore is in a good position to solve its "technical problems", which require good analysis and the right resources.

But adaptive problems require the distillation of common values, the presence of "implicit mutual trust" between the public and its leaders, and the inclination to make personal sacrifices for the mutual good, he said.

Singapore's success, he said, requires building up the latter.

Mr Heng, a former Monetary Authority of Singapore managing director, also touched on how the global financial crisis has shown that the Government must play a multi-faceted role of "enabling, regulating and stabilising markets".

It must work proactively with businesses to restructure the economy before major weaknesses manifest; it must intervene in housing and health care to achieve socially desirable outcomes; and it must actively build and maintain strong macro-economic fundamentals, he said.

On the last point, he emphasised that Singapore is a price- taker in a tumultuous world buffered only by its reserves.

Trust holds everything together

In a speech to the Economic Society of Singapore last night that surveyed the global economic scene from the 1990s Asian financial crisis to the 2008 global financial crisis and the more recent upheavals, Education Minister Heng Swee Keat outlined what he called Singapore's "3-2-1 approach" to these challenges - three policy thrusts, the Government and people as two important stakeholders, and one key ingredient, trust. This excerpt focuses on the issues of inclusive growth and trust.

The Straits Times, 7 Aug 2013

THE debate about economic growth versus equity - the nature of the trade-off involved, or indeed if we could pursue both - is not new. Events in recent years have reignited the debate in the guise of an apparent tension between growth and equity.

Secondly, rather than growth versus equity, growth and social equity are but two sides of the same coin when it comes to governance. Growth needs equity; and equity needs growth. Left on its own, unfettered growth in a market economy can exact harsh penalties on so-called losers and can produce excessive inequality leading eventually to social breakdown. On the other hand, a lack of growth can result in under- funded social infrastructure, which again can lead to social breakdown.

In Singapore, we have been sharing the fruits of progress over the years, and have invested heavily in planting the seeds for the next season. We have been fortunate that this has taken place alongside a fairly strong economic performance.

An economy that works

OUR concurrent investment in our housing, education and health care has improved the well-being of Singaporeans, and contributed to supporting economic activities. In the debate between growth and equity, we have in fact historically come down on the side of both. I might remind all of you that none other than Dr Goh Keng Swee, the first architect of Singapore's economy, once said that we had a "socialist economy that works" - that is, an economy that was at once communitarian as well as market-driven, socialist as well as capitalist.

Take housing, for instance. At the take-off stage of any developing economy, property appreciates rapidly in value, as optimism about the future grows. We are one of the few, if not the only country in the world where the wealth of a growing economy was widely shared among citizens from the beginning. Growth fed into equity, and equity laid the basis for further growth.

But we need to recognise that the tumultuous changes in the global economy in the last 15 years alone also mean increasing stresses and strains on individuals and families. Singaporeans are a responsible people, and forward- looking. So they worry about rising health-care costs, about their old age and about the future of their children, and the rising competition. I appreciate these challenges, which came out often in Our Singapore Conversation (OSC).

Our next phase

INDEED, our next phase will be different. As we ascend further up the mountain, the air will get thinner, the winds gustier and more unpredictable. The magnitude of change will be greater. Yet our population is ageing rapidly - among the fastest in the world.

We are in a new environment. To stay together as Singaporeans, and to leave no one behind, we will need to have an even more inclusive-growth mindset, one that stresses the importance of opportunities for all and leverages on our diverse skills and interests. We must forge a new way forward, and build a fairer and more just society.

I believe our inclusive growth will comprise a few elements. At its core will be creating quality jobs. This is the only sustainable way to grow the middle class. It is only through the pursuit of growth that we can create a Singapore that is sufficiently vibrant to be able to fulfil the dreams and aspirations of our children and the generations to come. Without quality growth, we cannot expect Singaporeans to get higher wages. We need to anchor good jobs that offer good wages, and make sure that Singaporeans have the right skills for these jobs.

What our children want to be in the future is very different from what we aspired to be when we were younger. As we constantly reinvent Singapore to make ourselves relevant to the global marketplace, we should create diverse career options for Singaporeans. In other words, our best social policy is a sound economic policy that creates opportunities in the labour market and in our education system.

Keep to fundamentals

WE HAVE to continue to work on the fundamentals - such as education and lifelong learning - and ensure a good starting point for our children, which will enhance the prospects for income and social mobility. Our education system has to stay open and inclusive, develop each child to the fullest and focus on the competencies of the future.

A second area is to provide affordable housing as a tangible way of sharing the fruits of success. An example of the disproportionate benefits that low-income Singaporeans receive can be found in housing, where some can get grants of up to $60,000, on top of the existing housing subsidies, so as to be able to get a flat that they can call their home. We also need to take special care of the pioneer generation and make sure that our health-care systems are ready to meet the needs of an older population. We will have to continue to explore how we can keep housing and health care affordable.

The third area is to have targeted assistance for the vulnerable, through a progressive tax system, and to avoid excessive inequality. We will build on the current progressive system - in fact, our income taxes currently range from minus 30 per cent to 20 per cent, when we consider the Workfare Income Supplement scheme. Today, the bulk of taxes are paid by the people in the top two deciles, and the bulk of benefits are received by those with lower incomes. This year's Budget further affirmed this philosophy. Households in the lower- to middle-income strata will receive up to $1.7 billion in short-term direct assistance this financial year. To continue with such policies, we need growth to create the fiscal space for meaningful and appropriate redistribution.

One key ingredient: trust

THE one key ingredient that holds everything together is trust. One of our OSC findings is that Singaporeans want to contribute towards building our common future. This is heartening. The next step is how we strengthen trust and accountability between the Government and fellow Singaporeans, and how we promote mutual understanding in an increasingly diverse Singapore.

This foundation of trust is critical. Professor Ronald Heifetz at the Kennedy School makes a useful distinction between technical and adaptive problems. Technical problems can be solved by good analysis and having the right resources. But adaptive problems require us to change the way we think and interact with others.

There must be implicit mutual trust between the public and its leaders and Government, and the inclination for the public to support each other as a community and make personal sacrifices for the mutual good.

Building adaptive capacity

I BELIEVE we have our fair share of good economists in our public sector, academia and private sector to come up with good technical solutions. But whether we succeed depends critically on building the adaptive capacity in our society. The OSC is part of the process of building adaptive capacity, allowing Singaporeans to engage one another on issues close to our hearts, see how the perfect solution may not suit another, and learn to compromise so as to shape the Singapore they hope to see in the future. The OSC process is critical in building trust.

We have reinvented ourselves continuously over the past 40 years, and have weathered numerous ups and downs. Today, our fundamentals are stronger, and we stand in a position of strength. It is at this point that we need to have the perseverance to push through restructuring, and to maintain faith and trust not just between the Government and the public, but also across different segments of an increasingly diverse public. Externally, we stand at the heart of a dynamic Asia that offers many opportunities that we can seize and ride on.

I am optimistic about our path ahead as we work hand in hand to make Singapore a better home for us.