Challenge of keeping Singapore together amid crisis: DPM Heng
Key issue is how to stay together as one people, as major challenges as well as opportunities lie ahead, he says
By Lim Yan Liang, Assistant Political Editor, The Straits Times, 9 Jun 2020
The coming general election will chart the course Singapore takes not just for the next few months, but for at least the next five to 10 years, Deputy Prime Minister Heng Swee Keat said yesterday.
"The election is really about direction setting," he said in an interview, noting that there are significant challenges Singapore has to overcome, and significant opportunities it has to seize, in the coming decade.
"If COVID-19 is a test of a generation, the next five to 10 years will be a test of how our generation overcomes this test... and emerges stronger," he added in an interview with The Straits Times and The Business Times.
"Beyond party politics and elections, I hope that Singaporeans will focus on this one issue: How do we stay together as one people?"
Mr Heng, who is also the Finance Minister, was responding to a question on how the global flight to leadership - a phrase he had used in Parliament last week - amid the pandemic might translate in terms of a mandate for the People's Action Party (PAP) at the election, expected to be called within weeks.
"We will have to let Singaporeans decide," he told Straits Times associate editor Vikram Khanna.
"But I think beyond the election, the really critical issue for all of us is: How do we bring our society together to cope with this period of massive changes?"
COVID-19 has been a "sudden shock" to the system on many fronts, and how Singapore deals with the challenges that have arisen will define the country in the long term, he added.
At home, restarting an economy battered by the virus is a challenge, alongside the need to find new ways to protect lives.
Abroad, COVID-19 has not reduced but instead sharpened geopolitical tensions, and the lack of global leadership to deal with the pandemic is concerning, said Mr Heng.
Multilateral and regional institutions, such as the World Health Organisation and the Asian Development Bank, must rethink their roles and see what they can do to bring parties together, even as like-minded countries are banding together to pursue their own agendas.
"We have to deal with a global front, we have to deal with our economic front, we have to deal with our social front," said Mr Heng.
"It's not just this one election, but I see significant changes that we need to make, significant challenges that we need to overcome, and significant opportunities (to seize), not in the next three to six months, but in the next five to 10 years.
"These are changes that will define Singapore in the future," he added, as he underlined the need for Singaporeans to stay together as one people.
In this regard, Mr Heng commended Workers' Party chief Pritam Singh for having said in Parliament that partisan politics should take a backseat and that there should be a unity of purpose in battling COVID-19.
Mr Singh had said last week that the WP took this position so that Singapore could single-mindedly overcome the challenge, adding: "The Workers' Party has not come in to publicly criticise the Government on its handling of an unprecedented crisis in ways that would undermine the national effort."
Said Mr Heng: "That is good, for a party to be responsible and take that view. Unfortunately, it's not the case for all parties because there are parties that are (saying) 'Well, look, this thing was not well done, that thing was not well done' and so on."
Mr Heng said there is a time and place to review policy decisions.
But right now, Singapore is "in the midst of a major battle on many fronts".
"All our people and all our leaders in every segment of our society must first and foremost look forward," he said.
"What is ahead of us? What are the dangers in front of us? What are the opportunities in front of us? Let us focus our minds on the coming days and months, and the future."
There is value, he acknowledges, in looking back to see if there is something that can be done better as Singapore goes forward in this fight, but calling for an accounting and fault-finding at this stage is a distraction from what needs to be done, he added.
"I welcome any good suggestions about how we might do better in this battle. I'm very open to good ideas. You know my style," said Mr Heng, who initiated the Our Singapore Conversation after the 2011 General Election and launched the Singapore Together movement last year to generate citizen participation and involvement in shaping policies and programmes.
"COVID-19 is an important occasion for us to reinforce Singapore Together," he added. "How does Singapore come together to build the future of Singapore and to rebuild structures which have been damaged by this gale force wind?"
Key issue is how to stay together as one people, as major challenges as well as opportunities lie ahead, he says
By Lim Yan Liang, Assistant Political Editor, The Straits Times, 9 Jun 2020
"The election is really about direction setting," he said in an interview, noting that there are significant challenges Singapore has to overcome, and significant opportunities it has to seize, in the coming decade.
"If COVID-19 is a test of a generation, the next five to 10 years will be a test of how our generation overcomes this test... and emerges stronger," he added in an interview with The Straits Times and The Business Times.
"Beyond party politics and elections, I hope that Singaporeans will focus on this one issue: How do we stay together as one people?"
Mr Heng, who is also the Finance Minister, was responding to a question on how the global flight to leadership - a phrase he had used in Parliament last week - amid the pandemic might translate in terms of a mandate for the People's Action Party (PAP) at the election, expected to be called within weeks.
"We will have to let Singaporeans decide," he told Straits Times associate editor Vikram Khanna.
"But I think beyond the election, the really critical issue for all of us is: How do we bring our society together to cope with this period of massive changes?"
COVID-19 has been a "sudden shock" to the system on many fronts, and how Singapore deals with the challenges that have arisen will define the country in the long term, he added.
At home, restarting an economy battered by the virus is a challenge, alongside the need to find new ways to protect lives.
Abroad, COVID-19 has not reduced but instead sharpened geopolitical tensions, and the lack of global leadership to deal with the pandemic is concerning, said Mr Heng.
Multilateral and regional institutions, such as the World Health Organisation and the Asian Development Bank, must rethink their roles and see what they can do to bring parties together, even as like-minded countries are banding together to pursue their own agendas.
"We have to deal with a global front, we have to deal with our economic front, we have to deal with our social front," said Mr Heng.
"It's not just this one election, but I see significant changes that we need to make, significant challenges that we need to overcome, and significant opportunities (to seize), not in the next three to six months, but in the next five to 10 years.
"These are changes that will define Singapore in the future," he added, as he underlined the need for Singaporeans to stay together as one people.
In this regard, Mr Heng commended Workers' Party chief Pritam Singh for having said in Parliament that partisan politics should take a backseat and that there should be a unity of purpose in battling COVID-19.
Mr Singh had said last week that the WP took this position so that Singapore could single-mindedly overcome the challenge, adding: "The Workers' Party has not come in to publicly criticise the Government on its handling of an unprecedented crisis in ways that would undermine the national effort."
Said Mr Heng: "That is good, for a party to be responsible and take that view. Unfortunately, it's not the case for all parties because there are parties that are (saying) 'Well, look, this thing was not well done, that thing was not well done' and so on."
Mr Heng said there is a time and place to review policy decisions.
But right now, Singapore is "in the midst of a major battle on many fronts".
"All our people and all our leaders in every segment of our society must first and foremost look forward," he said.
"What is ahead of us? What are the dangers in front of us? What are the opportunities in front of us? Let us focus our minds on the coming days and months, and the future."
There is value, he acknowledges, in looking back to see if there is something that can be done better as Singapore goes forward in this fight, but calling for an accounting and fault-finding at this stage is a distraction from what needs to be done, he added.
"I welcome any good suggestions about how we might do better in this battle. I'm very open to good ideas. You know my style," said Mr Heng, who initiated the Our Singapore Conversation after the 2011 General Election and launched the Singapore Together movement last year to generate citizen participation and involvement in shaping policies and programmes.
"COVID-19 is an important occasion for us to reinforce Singapore Together," he added. "How does Singapore come together to build the future of Singapore and to rebuild structures which have been damaged by this gale force wind?"
COVID-19 'stress test' reveals social capital is strong in Singapore, says DPM Heng
By Lim Yan Liang, The Straits Times, 9 Jun 2020
Singaporeans' willingness to adapt and respond to new advice as fresh medical evidence surfaces on COVID-19 shows the country has the social capital to emerge stronger from the pandemic and deal with future crises, said Deputy Prime Minister Heng Swee Keat.
Another key aspect is how Singaporeans of various backgrounds have rallied to help the less well-off and showed a civic-mindedness worth commending, he said in an interview with The Straits Times and The Business Times yesterday.
Mr Heng, who is also the Finance Minister, was asked what role social capital has played in Singapore's handling of the COVID-19 crisis, following his call in Parliament last week for Singaporeans to strengthen social reserves across all levels of society for the country to emerge stronger from the pandemic.
Singaporeans' willingness to carefully observe precautionary measures, such as social distancing, shows "a certain discipline in our people, and also a certain trust - that when our health authorities say this, it is advice to be taken seriously", he said.
"At the same time, what I'm also very encouraged by is that people are responding to changes - even changes in the advice that has been given - rather well."
He noted that at the start of the pandemic, the idea that asymptomatic patients could transmit the virus was not known, even in the medical community, and was established only "after lots of work had been done".
With new evidence, the Ministry of Health and the multi-ministry task force on COVID-19 changed their advice on the wearing of masks, and people's willingness to adapt has been invaluable in the fight against COVID-19, he said.
Last Friday, the World Health Organisation (WHO) updated its guidance to recommend that governments ask everyone to wear fabric face masks in public areas, where there is a risk of transmission of COVID-19, to help reduce the virus' spread.
The new advice supports countries like Singapore which require face coverings in public settings.
Mr Heng said: "I would say that the willingness of our people to change as conditions change is a very important quality for us to be able to manage this fast-moving situation."
There is no evidence so far that the virus is mutating, but should this happen, "I am quite certain that the way we deal with it and the advice on how to deal with it will also change", he said.
Singapore's social reserves have also been evident in the different ways people have shown their mettle and solidarity with their fellow men in recent months, he added, citing the Silver Generation Ambassadors he spoke to who have been reaching out to seniors staying at home.
"Many of them (seniors) felt very lonely because you are confined at home during the circuit breaker, and so they ended up speaking for a fairly long period with them," he said. "So I said: 'Thank you very much for doing that'."
Many business leaders in Singapore have also been appreciative of the wage support being provided by the Government and have made an effort to keep their workers, while union leaders and the National Trades Union Congress have been very focused on helping workers, he said.
Others who deserve kudos include volunteers manning the National Care Hotline and counsellors with social service agencies who are finding new ways to look after people with disabilities and people with special needs, he added.
This is a strength of Singapore's society that should be recognised and nurtured, Mr Heng said.
"They are all adapting, and I'm very glad that we have so many volunteers who are working hard at this and I really want to thank all of them," he said. "This is the social reserves I talked about."
He added: "We have gone through a very big stress test, and I hope that this stress test makes us even stronger."
By Lim Yan Liang, The Straits Times, 9 Jun 2020
Singaporeans' willingness to adapt and respond to new advice as fresh medical evidence surfaces on COVID-19 shows the country has the social capital to emerge stronger from the pandemic and deal with future crises, said Deputy Prime Minister Heng Swee Keat.
Another key aspect is how Singaporeans of various backgrounds have rallied to help the less well-off and showed a civic-mindedness worth commending, he said in an interview with The Straits Times and The Business Times yesterday.
Mr Heng, who is also the Finance Minister, was asked what role social capital has played in Singapore's handling of the COVID-19 crisis, following his call in Parliament last week for Singaporeans to strengthen social reserves across all levels of society for the country to emerge stronger from the pandemic.
Singaporeans' willingness to carefully observe precautionary measures, such as social distancing, shows "a certain discipline in our people, and also a certain trust - that when our health authorities say this, it is advice to be taken seriously", he said.
"At the same time, what I'm also very encouraged by is that people are responding to changes - even changes in the advice that has been given - rather well."
He noted that at the start of the pandemic, the idea that asymptomatic patients could transmit the virus was not known, even in the medical community, and was established only "after lots of work had been done".
With new evidence, the Ministry of Health and the multi-ministry task force on COVID-19 changed their advice on the wearing of masks, and people's willingness to adapt has been invaluable in the fight against COVID-19, he said.
Last Friday, the World Health Organisation (WHO) updated its guidance to recommend that governments ask everyone to wear fabric face masks in public areas, where there is a risk of transmission of COVID-19, to help reduce the virus' spread.
The new advice supports countries like Singapore which require face coverings in public settings.
Mr Heng said: "I would say that the willingness of our people to change as conditions change is a very important quality for us to be able to manage this fast-moving situation."
There is no evidence so far that the virus is mutating, but should this happen, "I am quite certain that the way we deal with it and the advice on how to deal with it will also change", he said.
Singapore's social reserves have also been evident in the different ways people have shown their mettle and solidarity with their fellow men in recent months, he added, citing the Silver Generation Ambassadors he spoke to who have been reaching out to seniors staying at home.
"Many of them (seniors) felt very lonely because you are confined at home during the circuit breaker, and so they ended up speaking for a fairly long period with them," he said. "So I said: 'Thank you very much for doing that'."
Many business leaders in Singapore have also been appreciative of the wage support being provided by the Government and have made an effort to keep their workers, while union leaders and the National Trades Union Congress have been very focused on helping workers, he said.
Others who deserve kudos include volunteers manning the National Care Hotline and counsellors with social service agencies who are finding new ways to look after people with disabilities and people with special needs, he added.
This is a strength of Singapore's society that should be recognised and nurtured, Mr Heng said.
"They are all adapting, and I'm very glad that we have so many volunteers who are working hard at this and I really want to thank all of them," he said. "This is the social reserves I talked about."
He added: "We have gone through a very big stress test, and I hope that this stress test makes us even stronger."
Businesses and workers should seize opportunity to accelerate change, says DPM Heng
By Grace Ho, Senior Political Correspondent, The Straits Times, 9 Jun 2020
The COVID-19 pandemic will accelerate major structural changes to industries and job losses in vulnerable sectors, said Deputy Prime Minister Heng Swee Keat.
But the Government will support workers to upskill and companies to rethink their business models so that Singapore can overcome the crisis and emerge stronger.
In an interview with The Straits Times and The Business Times yesterday, Mr Heng, who is also Finance Minister, said the world is facing an unprecedented level of uncertainty, beyond what was seen during the global and Asian financial crises.
Because of the "very deep" cyclical shocks to global demand and supply, it is unclear what the shape of economic recovery will look like, he told ST associate editor Vikram Khanna, adding that it depends on how countries cope with significant and accelerated structural changes in three areas.
The first is innovation, as the pandemic forces companies to embark on telecommuting and e-commerce. It has also sparked developments in healthcare such as the development of vaccines and telemedicine, he said.
The second is globalisation. The Ricardian model of comparative advantage - where countries specialise in goods and services in which they are relatively more productive - may be less relevant in today's digital economy, he said, adding that the new pattern of globalisation will place a premium on not just efficiency and productivity, but also resilience and equity.
"You cannot have a globalisation process where big segments of the population feel that they have been left out, that their lives have not become better. And the politics that you're seeing in many of the advanced economies is a warning to all of us on how those changes are going to fracture society and fracture support for better specialisation of labour globally," he said.
The third major change is the future of work. With artificial intelligence and robots able to crunch algorithms and take over jobs done by humans, both high-touch services - such as retail store assistants - as well as managerial and professional jobs will be greatly impacted, Mr Heng said.
"We are going to see a significant reconfiguration of the labour market globally, the rise of the gig economy and freelancers - and this will cause significant stresses in many societies."
Mr Heng had said last month that the Government expects 100,000 jobs to be lost this year due to COVID-19.
Countries that prepare their people for change will be better positioned to seize new opportunities, he said. "There are some business models that will be broken. So if we don't pivot quickly to new growth areas, many businesses will be in trouble."
This is why the four Budgets to date focus not just on saving jobs, but also traineeships and skills upgrading, he added.
Under the Fortitude Budget announced on May 26, the Government will set aside about $2 billion under the SGUnited Jobs and Skills Package, which will create 40,000 jobs, 25,000 traineeships and 30,000 training opportunities - about 100,000 positions in total.
Mr Heng said that while change is difficult, Singapore had a head start with its industry transformation in 2016.
"When we started, there were some businesses who were in denial and said, 'Why do we change, what is this big thing that you are seeing?' But I'm glad that more and more are coming on board. During my last meeting with the Singapore Business Federation and Future Economy Council members, it was most encouraging to hear how business leaders are leading the charge for change."
Industry transformation maps (ITMs), which aim to raise productivity and develop skills, drive innovation and promote internationalisation, were launched across 23 sectors and six industry clusters from 2016.
The Future Economy Council, which includes representatives from the Government, unions, trade associations and industry, oversees the implementation of the ITMs, among other things.
Mr Heng stressed that business leaders play an important role in lifelong learning.
"It is no longer just about that buzzword, it has to be embraced deeply by everyone. And I want to make an appeal to the leaders in our companies. As leaders, they play the most critical role in any big change.
"The only way people can learn something and put it to good use is when this is aligned with the company's transformation - so that both workers and businesses see that they are aligned in the same direction, and achieving that synergy."
Could this crisis have a silver lining for Singapore - by accelerating transformation that was happening a bit too slowly?
"That has to be our mental attitude. When something hits us, we should not just sit and moan and groan," Mr Heng said.
"Rather, we should spring up and say: This is now a time for us to accelerate change. This is a time for us to spring up and embrace the change which can serve both the immediate needs of tackling COVID-19, and our longer-term needs."
By Grace Ho, Senior Political Correspondent, The Straits Times, 9 Jun 2020
The COVID-19 pandemic will accelerate major structural changes to industries and job losses in vulnerable sectors, said Deputy Prime Minister Heng Swee Keat.
But the Government will support workers to upskill and companies to rethink their business models so that Singapore can overcome the crisis and emerge stronger.
In an interview with The Straits Times and The Business Times yesterday, Mr Heng, who is also Finance Minister, said the world is facing an unprecedented level of uncertainty, beyond what was seen during the global and Asian financial crises.
Because of the "very deep" cyclical shocks to global demand and supply, it is unclear what the shape of economic recovery will look like, he told ST associate editor Vikram Khanna, adding that it depends on how countries cope with significant and accelerated structural changes in three areas.
The first is innovation, as the pandemic forces companies to embark on telecommuting and e-commerce. It has also sparked developments in healthcare such as the development of vaccines and telemedicine, he said.
The second is globalisation. The Ricardian model of comparative advantage - where countries specialise in goods and services in which they are relatively more productive - may be less relevant in today's digital economy, he said, adding that the new pattern of globalisation will place a premium on not just efficiency and productivity, but also resilience and equity.
"You cannot have a globalisation process where big segments of the population feel that they have been left out, that their lives have not become better. And the politics that you're seeing in many of the advanced economies is a warning to all of us on how those changes are going to fracture society and fracture support for better specialisation of labour globally," he said.
The third major change is the future of work. With artificial intelligence and robots able to crunch algorithms and take over jobs done by humans, both high-touch services - such as retail store assistants - as well as managerial and professional jobs will be greatly impacted, Mr Heng said.
"We are going to see a significant reconfiguration of the labour market globally, the rise of the gig economy and freelancers - and this will cause significant stresses in many societies."
Mr Heng had said last month that the Government expects 100,000 jobs to be lost this year due to COVID-19.
Countries that prepare their people for change will be better positioned to seize new opportunities, he said. "There are some business models that will be broken. So if we don't pivot quickly to new growth areas, many businesses will be in trouble."
This is why the four Budgets to date focus not just on saving jobs, but also traineeships and skills upgrading, he added.
Under the Fortitude Budget announced on May 26, the Government will set aside about $2 billion under the SGUnited Jobs and Skills Package, which will create 40,000 jobs, 25,000 traineeships and 30,000 training opportunities - about 100,000 positions in total.
Mr Heng said that while change is difficult, Singapore had a head start with its industry transformation in 2016.
"When we started, there were some businesses who were in denial and said, 'Why do we change, what is this big thing that you are seeing?' But I'm glad that more and more are coming on board. During my last meeting with the Singapore Business Federation and Future Economy Council members, it was most encouraging to hear how business leaders are leading the charge for change."
Industry transformation maps (ITMs), which aim to raise productivity and develop skills, drive innovation and promote internationalisation, were launched across 23 sectors and six industry clusters from 2016.
The Future Economy Council, which includes representatives from the Government, unions, trade associations and industry, oversees the implementation of the ITMs, among other things.
Mr Heng stressed that business leaders play an important role in lifelong learning.
"It is no longer just about that buzzword, it has to be embraced deeply by everyone. And I want to make an appeal to the leaders in our companies. As leaders, they play the most critical role in any big change.
"The only way people can learn something and put it to good use is when this is aligned with the company's transformation - so that both workers and businesses see that they are aligned in the same direction, and achieving that synergy."
Could this crisis have a silver lining for Singapore - by accelerating transformation that was happening a bit too slowly?
"That has to be our mental attitude. When something hits us, we should not just sit and moan and groan," Mr Heng said.
"Rather, we should spring up and say: This is now a time for us to accelerate change. This is a time for us to spring up and embrace the change which can serve both the immediate needs of tackling COVID-19, and our longer-term needs."
GST, stamp duty takings hit by COVID-19; Singapore plans to rebuild fiscal position by strengthening economy: DPM Heng Swee Keat
By Grace Ho, Senior Correspondent, The Straits Times, 9 Jun 2020
Singapore's tax revenues have fallen owing to the COVID-19 pandemic, and to rebuild its fiscal position, the Government will look to strengthen the economy and make future revenue streams more resilient, said Deputy Prime Minister Heng Swee Keat.
In an interview with The Straits Times and The Business Times yesterday, Mr Heng, who is also Finance Minister, said contributions to government coffers from goods and services tax (GST) and stamp duties have dipped since the outbreak started, as people spend less and buy fewer properties.
But revenue from these sources will recover when the economy bounces back. For now, the key focus is on strengthening the economy, he said.
"If our economy bounces back faster and stronger, then revenue will grow, whether it's corporate income tax, the GST, personal income tax or stamp duty."
The Government announced a $21 billion draw on the reserves in April, when more measures were announced to help companies and people during the circuit breaker period.
The Fortitude Budget rolled out last month requires a further $31 billion draw, bringing to $52 billion the sum that may need to be drawn from past reserves this financial year.
More importantly, Mr Heng said, Singapore's investment entities such as GIC and Temasek are "fully focused", have a clear mandate and have been accelerating their review of investment strategies in the last few years.
The setting up of GIC in 1981 to manage the country's reserves for long-term returns, he said, was a major policy move that allowed Singapore to build sizeable reserves that it can tap during crises.
"The Government does not interfere in what (GIC or Temasek) buys or sells specifically, but there is a process of governance that allows us to ensure proper accountability. So that has been helpful."
The Government is also looking at ways to make future revenue streams more resilient, especially given recent developments, he said.
The first is global competition for the tax dollar owing to the base erosion and profit-shifting initiative, or BEPS 2.0, which aims to stop large companies from shifting profits to low-tax places.
Mooted by the Organisation for Economic Cooperation and Development, measures discussed under BEPS 2.0, such as taxing foreign profits, could significantly impact how countries compete for investments and how corporate profits are allocated and taxed.
"There is very intense discussion on tax rules, particularly for cross-border activities," said Mr Heng.
Second, Singapore's ageing population means expenditure, such as on healthcare, will go up over time, while revenue will go down as more people retire.
The Government needs to also speed up work on long-term infrastructure projects, which will boost the country's productive capacity and improve the quality of life for Singaporeans, he said.
While the Government is considering borrowing to fund long-term infrastructure, it will not borrow to fund recurrent expenditure despite low global interest rates, he added.
"Even as we borrow, we want to make sure that the project is economically justifiable and brings economic and social returns. We have to be very clear-headed about that - it's not just because there is cheap money, then we build."
Citing how some countries had tried to spend their way out of the 2008-09 global financial crisis by building roads and airports to nowhere, he said: "Those (projects) will eventually have to be paid for by future generations of taxpayers, and that will not be fair."
Responding to a question on whether the Government would consider raising the 50 per cent cap on the Net Investment Returns Contribution (NIRC), he said the Government will have to study this carefully.
"My approach is never to say never, but for now, I don't see a need because the formula has been quite robust, in that we are not looking at year-to-year returns," he said.
The NIRC comprises 50 per cent of the net investment returns on net assets invested by GIC, the Monetary Authority of Singapore and Temasek - the three entities tasked with managing and investing the reserves - and 50 per cent of the net investment income derived from past reserves from the remaining assets.
The NIRC is the top contributor to government coffers.
Under the Net Investment Returns (NIR) framework, the Government can spend up to 50 per cent of the long-term expected real returns, including capital gains, on the relevant assets.
Expected, instead of actual, rates of return are used to provide some smoothness over the years in the amount of NIR that can be spent.
Mr Heng concluded by observing that the financial markets have turned positive as investors scramble for yield.
But "markets cannot defy gravity", especially if the real economy will be in the doldrums for some time. And how the real economy performs depends on the trajectory of the pandemic, he said.
"Which is why global cooperation, whether to find a vaccine or to find new therapeutics to combat COVID-19, is probably the most important thing that people and governments can do, in order for us to then fight on all the other fronts."
By Grace Ho, Senior Correspondent, The Straits Times, 9 Jun 2020
Singapore's tax revenues have fallen owing to the COVID-19 pandemic, and to rebuild its fiscal position, the Government will look to strengthen the economy and make future revenue streams more resilient, said Deputy Prime Minister Heng Swee Keat.
In an interview with The Straits Times and The Business Times yesterday, Mr Heng, who is also Finance Minister, said contributions to government coffers from goods and services tax (GST) and stamp duties have dipped since the outbreak started, as people spend less and buy fewer properties.
But revenue from these sources will recover when the economy bounces back. For now, the key focus is on strengthening the economy, he said.
"If our economy bounces back faster and stronger, then revenue will grow, whether it's corporate income tax, the GST, personal income tax or stamp duty."
The Government announced a $21 billion draw on the reserves in April, when more measures were announced to help companies and people during the circuit breaker period.
The Fortitude Budget rolled out last month requires a further $31 billion draw, bringing to $52 billion the sum that may need to be drawn from past reserves this financial year.
More importantly, Mr Heng said, Singapore's investment entities such as GIC and Temasek are "fully focused", have a clear mandate and have been accelerating their review of investment strategies in the last few years.
The setting up of GIC in 1981 to manage the country's reserves for long-term returns, he said, was a major policy move that allowed Singapore to build sizeable reserves that it can tap during crises.
"The Government does not interfere in what (GIC or Temasek) buys or sells specifically, but there is a process of governance that allows us to ensure proper accountability. So that has been helpful."
The Government is also looking at ways to make future revenue streams more resilient, especially given recent developments, he said.
The first is global competition for the tax dollar owing to the base erosion and profit-shifting initiative, or BEPS 2.0, which aims to stop large companies from shifting profits to low-tax places.
Mooted by the Organisation for Economic Cooperation and Development, measures discussed under BEPS 2.0, such as taxing foreign profits, could significantly impact how countries compete for investments and how corporate profits are allocated and taxed.
"There is very intense discussion on tax rules, particularly for cross-border activities," said Mr Heng.
Second, Singapore's ageing population means expenditure, such as on healthcare, will go up over time, while revenue will go down as more people retire.
The Government needs to also speed up work on long-term infrastructure projects, which will boost the country's productive capacity and improve the quality of life for Singaporeans, he said.
While the Government is considering borrowing to fund long-term infrastructure, it will not borrow to fund recurrent expenditure despite low global interest rates, he added.
"Even as we borrow, we want to make sure that the project is economically justifiable and brings economic and social returns. We have to be very clear-headed about that - it's not just because there is cheap money, then we build."
Citing how some countries had tried to spend their way out of the 2008-09 global financial crisis by building roads and airports to nowhere, he said: "Those (projects) will eventually have to be paid for by future generations of taxpayers, and that will not be fair."
Responding to a question on whether the Government would consider raising the 50 per cent cap on the Net Investment Returns Contribution (NIRC), he said the Government will have to study this carefully.
"My approach is never to say never, but for now, I don't see a need because the formula has been quite robust, in that we are not looking at year-to-year returns," he said.
The NIRC comprises 50 per cent of the net investment returns on net assets invested by GIC, the Monetary Authority of Singapore and Temasek - the three entities tasked with managing and investing the reserves - and 50 per cent of the net investment income derived from past reserves from the remaining assets.
The NIRC is the top contributor to government coffers.
Under the Net Investment Returns (NIR) framework, the Government can spend up to 50 per cent of the long-term expected real returns, including capital gains, on the relevant assets.
Expected, instead of actual, rates of return are used to provide some smoothness over the years in the amount of NIR that can be spent.
Mr Heng concluded by observing that the financial markets have turned positive as investors scramble for yield.
But "markets cannot defy gravity", especially if the real economy will be in the doldrums for some time. And how the real economy performs depends on the trajectory of the pandemic, he said.
"Which is why global cooperation, whether to find a vaccine or to find new therapeutics to combat COVID-19, is probably the most important thing that people and governments can do, in order for us to then fight on all the other fronts."
Uncertainty, pain and silver linings
By Vikram Khanna, Associate Editor, The Straits Times, 9 Jun 2020
It's unlikely to be a "V", but whether it will be a "U", "W, or "L" is anybody's guess, said Deputy Prime Minister and Finance Minister Heng Swee Keat about the possible shape of the economic recovery from the COVID-19 crisis.
This is because the level of uncertainty is unprecedented, he pointed out in an interview with The Straits Times and The Business Times yesterday - far more so than during the global financial crisis of 2008-09. The world is facing multiple shocks - a twin demand-and-supply shock across several industries, as well as a cyclical and structural shock.
Global supply chains - already under disruption from the United States-China trade war - are being further reconfigured as countries try to become more self-sufficient and bring some production lines closer to home. The nature of globalisation is changing, with more emphasis on resilience and reliability, and less on efficiency and productivity.
Also under way is a shake-up of the global workforce. More digitalisation and the rise of remote work means more jobs will be reshored as well as offshored, including to developing countries. These will include low-touch, white-collar service jobs.
The gig economy will expand its reach into new areas and become more global, with millions of newly empowered workers joining the global labour market.
Some of these changes will create new stresses, said Mr Heng. In his Budget round-up speech last Friday, he had talked about some of the pain to come. Some jobs will disappear and not come back. The economic fallout of COVID-19 will go beyond unemployment numbers; even many of those who keep their jobs may suffer underemployment and income loss. And many companies' business models will be broken, rendered obsolete almost overnight, especially in "high-touch" parts of the economy such as retail, food and beverage, and tourism, and even beyond.
Mr Heng believes Singapore's business community gets it. Corporate leaders realise they will need to digitalise, automate and pivot to new areas. They also accept that the Government can't keep forever shoring up companies with subsidies. Repositioning businesses will, for some, be difficult, but the task has begun.
Fortunately, Singapore has a head start with transformation, which the Government has been pushing for since 2016 when the first industry transformation maps were launched. Mr Heng recalled that at that time, some business leaders were in denial about the need to transform. "Why do we need to change?" they said. "What is this big thing that you are seeing?"
Nobody is saying those things now. The "big thing" has arrived.
As well, investments over recent years in skill development and retraining, including through the SkillsFuture programme, appear all the more relevant today.
In hindsight, Singapore was also prescient in stepping up its investments in research and development and bio-sciences, the returns from which were, for a long time, uncertain. Now, they are showing up in med-tech, biologics and vaccine development, which are among the new growth areas.
And so, despite all the uncertainty and painful changes that the COVID-19 crisis will bring, it also has some silver linings, according to Mr Heng.
One is that it will accelerate the digitalisation and automation that Singapore, as a labour-scarce economy, has long needed. Now, just about every small and medium-sized enterprise and every establishment, down to retail stores and even hawkers, is going digital. At the micro level, there is evidence that this has already started to pay dividends. Mr Heng discovered, to his surprise, that his favourite Peranakan restaurant in Bukit Timah was doing "okay", despite being closed, because it suddenly found it could cater to customers as far away as Changi. There will hopefully be more cases like this as the adoption of e-commerce spreads and more companies embrace the changes forced upon them.
Another silver lining lies in the fact that of all the regions in the world, Asia is likely to be among the earliest to open up. China is already doing so; South Korea, Japan, Taiwan, as well as Australia and New Zealand - which have largely brought COVID-19 under control - are also opening up earlier than other countries. So, even though the climb back may be long and hard, Singapore is in the right place for the post-COVID-19 world.
Telecommuting is also being accepted as the new normal. This is good for sustainable development, said Mr Heng, as it cuts our carbon footprint without disrupting the economy or our lives too much.
So, sometimes, crises can trigger constructive change, he pointed out.
He recalled that the stress test of the 2008 global financial crisis forced banks and other financial institutions to become more resilient through recapitalisations and tighter regulations. Had banks been operating now as they did before the global financial crisis, they would have been decimated by the COVID-19 crisis - and the world would have had another global banking crisis on its hands.
So, one of the big lessons we have learnt from crises, he said, is that what doesn't kill you makes you stronger.
By Vikram Khanna, Associate Editor, The Straits Times, 9 Jun 2020
It's unlikely to be a "V", but whether it will be a "U", "W, or "L" is anybody's guess, said Deputy Prime Minister and Finance Minister Heng Swee Keat about the possible shape of the economic recovery from the COVID-19 crisis.
This is because the level of uncertainty is unprecedented, he pointed out in an interview with The Straits Times and The Business Times yesterday - far more so than during the global financial crisis of 2008-09. The world is facing multiple shocks - a twin demand-and-supply shock across several industries, as well as a cyclical and structural shock.
Global supply chains - already under disruption from the United States-China trade war - are being further reconfigured as countries try to become more self-sufficient and bring some production lines closer to home. The nature of globalisation is changing, with more emphasis on resilience and reliability, and less on efficiency and productivity.
Also under way is a shake-up of the global workforce. More digitalisation and the rise of remote work means more jobs will be reshored as well as offshored, including to developing countries. These will include low-touch, white-collar service jobs.
The gig economy will expand its reach into new areas and become more global, with millions of newly empowered workers joining the global labour market.
Some of these changes will create new stresses, said Mr Heng. In his Budget round-up speech last Friday, he had talked about some of the pain to come. Some jobs will disappear and not come back. The economic fallout of COVID-19 will go beyond unemployment numbers; even many of those who keep their jobs may suffer underemployment and income loss. And many companies' business models will be broken, rendered obsolete almost overnight, especially in "high-touch" parts of the economy such as retail, food and beverage, and tourism, and even beyond.
Mr Heng believes Singapore's business community gets it. Corporate leaders realise they will need to digitalise, automate and pivot to new areas. They also accept that the Government can't keep forever shoring up companies with subsidies. Repositioning businesses will, for some, be difficult, but the task has begun.
Fortunately, Singapore has a head start with transformation, which the Government has been pushing for since 2016 when the first industry transformation maps were launched. Mr Heng recalled that at that time, some business leaders were in denial about the need to transform. "Why do we need to change?" they said. "What is this big thing that you are seeing?"
Nobody is saying those things now. The "big thing" has arrived.
As well, investments over recent years in skill development and retraining, including through the SkillsFuture programme, appear all the more relevant today.
In hindsight, Singapore was also prescient in stepping up its investments in research and development and bio-sciences, the returns from which were, for a long time, uncertain. Now, they are showing up in med-tech, biologics and vaccine development, which are among the new growth areas.
And so, despite all the uncertainty and painful changes that the COVID-19 crisis will bring, it also has some silver linings, according to Mr Heng.
One is that it will accelerate the digitalisation and automation that Singapore, as a labour-scarce economy, has long needed. Now, just about every small and medium-sized enterprise and every establishment, down to retail stores and even hawkers, is going digital. At the micro level, there is evidence that this has already started to pay dividends. Mr Heng discovered, to his surprise, that his favourite Peranakan restaurant in Bukit Timah was doing "okay", despite being closed, because it suddenly found it could cater to customers as far away as Changi. There will hopefully be more cases like this as the adoption of e-commerce spreads and more companies embrace the changes forced upon them.
Another silver lining lies in the fact that of all the regions in the world, Asia is likely to be among the earliest to open up. China is already doing so; South Korea, Japan, Taiwan, as well as Australia and New Zealand - which have largely brought COVID-19 under control - are also opening up earlier than other countries. So, even though the climb back may be long and hard, Singapore is in the right place for the post-COVID-19 world.
Telecommuting is also being accepted as the new normal. This is good for sustainable development, said Mr Heng, as it cuts our carbon footprint without disrupting the economy or our lives too much.
So, sometimes, crises can trigger constructive change, he pointed out.
He recalled that the stress test of the 2008 global financial crisis forced banks and other financial institutions to become more resilient through recapitalisations and tighter regulations. Had banks been operating now as they did before the global financial crisis, they would have been decimated by the COVID-19 crisis - and the world would have had another global banking crisis on its hands.
So, one of the big lessons we have learnt from crises, he said, is that what doesn't kill you makes you stronger.
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