By Chia Yan Min, Economics Correspondent, The Straits Times, 4 Apr 2016
This year's Budget was a relatively quiet affair - no blockbuster handout packages or radical policy announcements - but its low-key nature belied a weighty message.
In his maiden Budget speech on March 24, Finance Minister Heng Swee Keat made it clear that the push for economic transformation and restructuring is becoming an increasingly urgent priority.
This means not just helping firms and industries ride out slow economic growth but - more importantly - transforming them through innovation and beefing up collaboration within and across industries.
The minister unveiled a package of measures to provide some relief to smaller firms hit by the ongoing slowdown, such as raising the corporate income tax rebate from 30 to 50 per cent and a new scheme to help small and medium-sized enterprises (SMEs) borrow working capital more easily.
In his maiden Budget speech on March 24, Finance Minister Heng Swee Keat made it clear that the push for economic transformation and restructuring is becoming an increasingly urgent priority.
This means not just helping firms and industries ride out slow economic growth but - more importantly - transforming them through innovation and beefing up collaboration within and across industries.
The minister unveiled a package of measures to provide some relief to smaller firms hit by the ongoing slowdown, such as raising the corporate income tax rebate from 30 to 50 per cent and a new scheme to help small and medium-sized enterprises (SMEs) borrow working capital more easily.
But the heaviest emphasis was on targeted aid to give firms and workers a lift in an increasingly uncertain and competitive world.
"Even as we provide immediate relief and support amid the current cyclical slowdown, we must press on with economic transformation," Mr Heng said.
"Even as we provide immediate relief and support amid the current cyclical slowdown, we must press on with economic transformation," Mr Heng said.
"The global economic landscape is changing, and our challenges are pressing. We have a narrow window. We must find every opportunity to transform, to emerge stronger in the coming years."
The Budget contained a $4.5 billion Industry Transformation Package aimed at helping firms - SMEs in particular - automate, scale up and go overseas.
A significant portion of this is the new Automation Support Package, which will cost more than $400 million over three years and is aimed at getting companies to ramp up the use of automation.
At the same time, the popular Productivity and Innovation Credit (PIC) scheme will expire in the 2018 year of assessment, as scheduled, and cash rebates under the scheme will be cut from this tax year of assessment onwards.
At the same time, the popular Productivity and Innovation Credit (PIC) scheme will expire in the 2018 year of assessment, as scheduled, and cash rebates under the scheme will be cut from this tax year of assessment onwards.
The PIC scheme encourages SMEs to spur investment in productivity by offering them cash and tax deductions for costs like worker training, automation and research.
However, it has been criticised for being too broad, and the ease of application has made it subject to abuse by a minority of firms making facetious claims.
Mr Heng is now taking a more targeted, industry-specific approach to helping firms lift productivity - for instance, providing more support to industry trade associations and chambers, and encouraging companies to work together so entire industries can benefit from cost savings and improved efficiency.
The shift towards a more targeted approach is being seen as an effort to move into the next phase of economic restructuring.
In comments made after the Budget, Mr Heng said teams are being set up to develop road maps for more than 20 economic sectors. These will chart the path for industries covering 80 per cent of the country's economic output.
It is hoped that this targeted approach will have bigger impact in the long term than using broad- based measures.
The Budget also contained a $450 million expansion to the National Robotics Programme to boost development and adoption of the technology, as well as other moves to help smaller firms streamline operations, such as the introduction of a $100 million National Trade Platform.
This is a one-stop trade information management system which will help SMEs cut costs and streamline processes to save over $600 million worth of man-hours a year.
These moves come as Singapore's labour productivity remains stuck in the doldrums despite efforts to restructure the economy.
Mr Heng acknowledged in his Budget speech that productivity growth has "not been as strong as we would like".
"While productivity has grown by an average of 2.7 per cent per year over 2009 to 2015, most of this increase was due to the cyclical rebound in 2010 and 2011. Productivity growth has remained relatively flat over the past three years," he said.
Workers are also a vital part of the equation. Some, including many professionals, managers and executives (PMEs), have already lost their jobs amid ongoing restructuring and many others can expect drastic changes in their workplaces in the coming years with the advent of automation and technological change.
The Budget contained wage support schemes to encourage firms to hire retrenched workers, and professional conversion programmes to help displaced PMEs learn new skills and switch to jobs in growth sectors.
However, Mr Heng did not address the issue of unemployment protection. In the run-up to the Budget, government feedback unit REACH found that Singaporeans were worried about the slowdown in the economy and whether that would mean poorer job prospects for them.
Some economists have also pointed out that the world is changing more quickly than ever, with jobs and skills evolving or becoming irrelevant at a faster rate. This could mean having to cope with a higher rate of unemployment here in the long term, and there have been calls for Singapore to introduce unemployment insurance, where every worker pays into a fund and can draw from it for a certain period when they are out of work.
HELP FOR THE VULNERABLE
While there was a strong emphasis on the economy in this year's Budget compared with previous Budgets which had more of a social slant, the needy and vulnerable were not forgotten.
A new grant will give parents $3,000 upfront for their children's Child Development Account, with the main aim of helping lower-income parents who find it hard to save for their children.
The Government is also piloting an initiative called KidStart, targeting children in their first six years. The pilot, which will cost more than $20 million, is expected to help 1,000 children receive learning, developmental and health support.
Families with children in rental housing will also get a grant of up to $35,000 to help them own a two-room flat, with a shorter lease. Called the Fresh Start Housing Scheme, it is meant to help families who owned a flat but sold it and moved into a public rental flat. As they would have received a housing subsidy before, they are no longer eligible for first-timer housing grants.
There were also enhancements to the Workfare Income Supplement for low-wage workers and the Public Assistance scheme for the elderly and sick who are unable to work.
The Budget also fleshed out in greater detail the specifics of the Silver Support scheme. In July, three in 10 elderly citizens will get the first payouts under the programme.
Mr Heng also announced plans for a community network to provide seniors with greater support for their health and social needs.
These moves always raise the practical question of how the Government intends to finance its rising expenditure, especially as the population ages and sectors like healthcare demand more attention.
Despite higher spending, the Government expects an overall budget surplus of $3.45 billion for this year, not least because of the inclusion of Singapore investment company Temasek Holdings in the net investment returns (NIR) framework for the first time.
The NIR framework allows the Government to spend up to half of the long-term expected real returns generated from the assets managed by GIC and the Monetary Authority of Singapore. From this year, Temasek will be added to the pool.
The jump in the NIR contribution - a striking 48.6 per cent this year to $14.7 billion, from $9.9 billion last year - surprised analysts and helped push the Budget into the black.
It is unlikely that the entire increase can be attributed solely to the inclusion of Temasek, but it clearly provided a big boost.
However, even with the increase in the NIR contribution, expenditures are still likely to grow faster than revenues in the long term.
HELP FOR THE VULNERABLE
While there was a strong emphasis on the economy in this year's Budget compared with previous Budgets which had more of a social slant, the needy and vulnerable were not forgotten.
A new grant will give parents $3,000 upfront for their children's Child Development Account, with the main aim of helping lower-income parents who find it hard to save for their children.
The Government is also piloting an initiative called KidStart, targeting children in their first six years. The pilot, which will cost more than $20 million, is expected to help 1,000 children receive learning, developmental and health support.
Families with children in rental housing will also get a grant of up to $35,000 to help them own a two-room flat, with a shorter lease. Called the Fresh Start Housing Scheme, it is meant to help families who owned a flat but sold it and moved into a public rental flat. As they would have received a housing subsidy before, they are no longer eligible for first-timer housing grants.
There were also enhancements to the Workfare Income Supplement for low-wage workers and the Public Assistance scheme for the elderly and sick who are unable to work.
The Budget also fleshed out in greater detail the specifics of the Silver Support scheme. In July, three in 10 elderly citizens will get the first payouts under the programme.
Mr Heng also announced plans for a community network to provide seniors with greater support for their health and social needs.
These moves always raise the practical question of how the Government intends to finance its rising expenditure, especially as the population ages and sectors like healthcare demand more attention.
Despite higher spending, the Government expects an overall budget surplus of $3.45 billion for this year, not least because of the inclusion of Singapore investment company Temasek Holdings in the net investment returns (NIR) framework for the first time.
The NIR framework allows the Government to spend up to half of the long-term expected real returns generated from the assets managed by GIC and the Monetary Authority of Singapore. From this year, Temasek will be added to the pool.
The jump in the NIR contribution - a striking 48.6 per cent this year to $14.7 billion, from $9.9 billion last year - surprised analysts and helped push the Budget into the black.
It is unlikely that the entire increase can be attributed solely to the inclusion of Temasek, but it clearly provided a big boost.
However, even with the increase in the NIR contribution, expenditures are still likely to grow faster than revenues in the long term.
This means Singapore will find itself in a "more challenging" and tighter fiscal position, Mr Heng said.
All in all, this year's Budget lays the groundwork for significant transformation of the Singapore economy in the coming years.
But many challenges lie ahead and it will not be an easy journey.
"We can't always know the future, and we won't always have ready answers," Mr Heng said in his Budget speech.
"But we must have the imagination to forge new paths, the courage to try new ways, and the tenacity to persevere if we don't succeed on the first try."
What do you stand to gain from Budget 2016? Check it out here.
Posted by The Straits Times on Thursday, March 24, 2016
The Singapore Perspective
Key Budget measures
By Chia Yan Min, The Straits Times, 4 Apr 2016
SHORT-TERM RELIEF FOR FIRMS
Companies looking for help to cope with the slowing economy got a boost in the Budget.
Finance Minister Heng Swee Keat rolled out an enhanced corporate income tax rebate which will rise from 30 per cent to 50 per cent of tax payable, up to a cap of $20,000.
In addition, the SME Working Capital Loan scheme aims to improve access to finance for viable firms that have cash-flow concerns or want to expand their business.
ENCOURAGING COMPANIES TO TRANSFORM AND INNOVATE
The $4.5 billion Industry Transformation Programme is aimed at fostering innovation, boosting smaller firms and helping companies use automation.
As part of this, the Government is setting up teams to develop road maps for more than 20 economic sectors as part of efforts to get companies future-ready.
SKILLS UPGRADING FOR WORKERS
Following on from the SkillsFuture programme announced last year, the Government intends to continue investing heavily in boosting workers' skills.
For those affected by retrenchments, support will come in the form of expanded wage credit schemes through the Adapt and Grow initiative. Firms hiring older or disabled workers will also get enhanced Special Employment Credit wage subsidies.
A new TechSkills Accelerator will train people for the fast-growing information and communications technology sector.
SILVER SUPPORT PAYOUTS FOR SENIORS
This July, three in 10 elderly citizens will get the first payouts under the Silver Support Scheme.
About 140,000 Singaporeans aged 65 and above will get $300 to $750 every three months.
There is no need to apply for the scheme as eligible seniors will be automatically included.
INDUSTRIAL PARK OF THE FUTURE IN JURONG
The new Jurong Innovation District will bring together facilities for learning, research, innovation and production to form an "industrial park of the future".
Comprising Nanyang Technological University, CleanTech Park and the surrounding region, the district could host over 100,000 people across student and private residences, learning spaces, and start-up and research facilities.
The first phase is expected to be completed in 2022.
This is the third of 12 primers on various current affairs issues, published as part of the outreach programme for The Straits Times-Ministry of Education National Current Affairs Quiz.
Key Budget measures
By Chia Yan Min, The Straits Times, 4 Apr 2016
SHORT-TERM RELIEF FOR FIRMS
Companies looking for help to cope with the slowing economy got a boost in the Budget.
Finance Minister Heng Swee Keat rolled out an enhanced corporate income tax rebate which will rise from 30 per cent to 50 per cent of tax payable, up to a cap of $20,000.
In addition, the SME Working Capital Loan scheme aims to improve access to finance for viable firms that have cash-flow concerns or want to expand their business.
ENCOURAGING COMPANIES TO TRANSFORM AND INNOVATE
The $4.5 billion Industry Transformation Programme is aimed at fostering innovation, boosting smaller firms and helping companies use automation.
As part of this, the Government is setting up teams to develop road maps for more than 20 economic sectors as part of efforts to get companies future-ready.
SKILLS UPGRADING FOR WORKERS
Following on from the SkillsFuture programme announced last year, the Government intends to continue investing heavily in boosting workers' skills.
For those affected by retrenchments, support will come in the form of expanded wage credit schemes through the Adapt and Grow initiative. Firms hiring older or disabled workers will also get enhanced Special Employment Credit wage subsidies.
A new TechSkills Accelerator will train people for the fast-growing information and communications technology sector.
SILVER SUPPORT PAYOUTS FOR SENIORS
This July, three in 10 elderly citizens will get the first payouts under the Silver Support Scheme.
About 140,000 Singaporeans aged 65 and above will get $300 to $750 every three months.
There is no need to apply for the scheme as eligible seniors will be automatically included.
INDUSTRIAL PARK OF THE FUTURE IN JURONG
The new Jurong Innovation District will bring together facilities for learning, research, innovation and production to form an "industrial park of the future".
Comprising Nanyang Technological University, CleanTech Park and the surrounding region, the district could host over 100,000 people across student and private residences, learning spaces, and start-up and research facilities.
The first phase is expected to be completed in 2022.
This is the third of 12 primers on various current affairs issues, published as part of the outreach programme for The Straits Times-Ministry of Education National Current Affairs Quiz.
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