Thursday 17 October 2013

The stewardship mentality Singapore needs

By Josephine Teo, Published TODAY, 14 Oct 2013

Singapore has been disciplined in ensuring a balanced budget and the accumulated surpluses in good years have built up our reserves. Today, we have the opportunity and fiscal resources to put in place programmes that will strengthen Singapore for the future.

To prepare for an ageing population, we will need to invest in new healthcare infrastructure such as hospitals, nursing homes, day care centres, and healthcare manpower. To maintain social mobility, we have to intervene earlier and give children of less-advantaged backgrounds every opportunity to do well in school. To enhance liveability, we are investing heavily in our public transport system.

As much as we should pursue opportunities to better the lives of Singaporeans, we must also be mindful of potential pitfalls — for example, committing to expensive programmes that are difficult to unwind when they are found to be ineffective.

As decision-makers, we are deciding on behalf of a lot of people and organisations who are stakeholders, and we are, in that sense, “stewards”. How should we behave as stewards?


First, a stewardship mindset requires us to give careful consideration to the long-term implications of our actions. We need to consider what they mean for Singaporeans 10, 20 and 30 years down the road. Take, for example, the design of MediShield Life, which aims to provide hospitalisation coverage to all Singaporeans for as long as we live.

Premiums for hospitalisation insurance typically increase with age along with increased incidence of hospitalisation. An insurance programme that has no pre-funding at all would offer very attractive premiums to a person in his 20s or 30s, because very few in his age group are hospitalised.

But 30, 40 or even 50 years down the road, the premiums will escalate as the odds of a hospitalisation episode increase. This is often a strain on retired persons and some drop out of insurance cover at a time when they most need it.

Pre-funding allows for higher premiums to be paid when a person is younger and likely to be working, so that the benefits he expects to receive in his senior years will have been paid for to some extent. As a result, his premiums can level-off in his senior years and be kept more affordable. This helps him to stay covered.

In contrast, while the lower premiums of a programme with little or no pre-funding are attractive, we will effectively store up troubles for the future. Although the benefits of pre-funding are not realised until many years later, a stewardship mindset requires that we consider its benefits in the design of MediShield Life, and not avoid the challenge of explaining the need for higher premiums during our working years.


A second feature of a stewardship mindset is the willingness to tilt the balance in favour of those who are disadvantaged. Most people will not disagree that the vulnerable groups in society need more help. Yet, not everyone accepts that they themselves should be outside the coverage of schemes that target the less well-off. This includes schemes to provide healthcare subsidies or education bursaries.

Most MPs have encountered residents who can be quite upset that they fall outside a particular scheme’s coverage. Sometimes, even very wealthy people can get upset, such as when they feel that their children “lost out” to those who got into a special programme at school, or when they have to pay higher property taxes.

While we should refine our schemes to address feedback, a stewardship mindset requires that we have the courage to keep tilting the balance in favour of those who have less, even in the face of some unhappiness.

We should, at the same time, recognise those who are generous in spirit and provide more opportunities for them to step forward to help the community, so that we are collectively a better and more gracious society.


A third feature of a stewardship mindset is to favour holistic solutions over stop-gap quick fixes.

One ongoing challenge is helping citizens cope with the costs of living. Relief measures, such as the GST Voucher, are always helpful; in its various forms, it reaches about 80 per cent of all households. However, the more lasting solution lies not in increasing relief, but in helping Singaporeans stay in employment and improving their ability to earn higher incomes.

This is why the Government has made major moves to restructure the economy and shift towards productivity-driven growth, to ensure that the economy is able to continue generating better-paying jobs. At the same time, we are building significant capacity in continuing education and training to help Singaporeans stay relevant. In Budget 2013, we introduced the Wage Credit Scheme to encourage employers to share productivity gains through wage increases.

To provide support for low-wage workers and boost their CPF savings, the Workfare Income Supplement is reviewed regularly and has been enhanced several times since inception. To boost the employment prospects of seniors, the Government enacted re-employment legislation and introduced the Seniors Employment Credit.

A stewardship mindset compels us to do not only what is expedient but to focus squarely on addressing fundamental issues. It also emboldens us to pursue deep transformations that a stop-gap quick-fix mindset is not interested to attempt.


The stewardship mindset came quite naturally to the pioneer generation of Singaporeans. Aversion to wasteful spending and the willingness to save for a rainy day provided strong support for the Government’s prudent approach to fiscal management. This has helped us to avoid the problem of public debt which beset many Governments today.

Fiscal prudence has also enabled us to build up a healthy pool of reserves. The net investment returns from our reserves now funds around 16 per cent of our annual expenditure, and gives more latitude to invest in a range of social and economic programmes that will keep Singaporeans plugged into the world of opportunity.

As we contemplate major policy moves and programmes for the future, I’m hopeful that we can gain Singaporean’s understanding and support to keep to the discipline of fiscal prudence. In doing so, we have the opportunity to further embed the stewardship mindset in our national DNA, and build up our country in ways that, hopefully, younger and even yet-to-born Singaporeans will be grateful for.

Josephine Teo is Senior Minister of State (Finance and Transport). This article is based on edited excerpts of her speech at the CPA Congress on Oct 9.

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