Friday, 3 March 2017

2017 Budget Statement debate in Parliament


Government studying all options to meet future revenue needs: Heng Swee Keat
Heng Swee Keat urges workers, businesses to embrace a spirit of enterprise and partnership
By Yasmine Yahya, Assistant Business Editor, The Straits Times, 3 Mar 2017

The maturing Singapore economy is entering a phase where its revenues will grow slowly while an ageing population and the demands of infrastructure will heighten the need to spend.

The Government has already started tightening its belt, with budget caps for ministries over the medium term, Finance Minister Heng Swee Keat said as he wrapped up three days of parliamentary debate on Budget 2017. This year, the caps are being adjusted downward by 2 per cent.



As he reiterated the call for Singapore to embrace a spirit of enterprise and partnership in its journey of transformation, Mr Heng also stressed the need for its finances to remain sustainable in the long run.

"Besides spending prudently and effectively, we will have to grow our revenues through new taxes, or raising taxes over time," he said.

He assured members that Singapore's tax system will continue to be fair and sustainable.

It must be progressive across income groups, he said. "What this means is that those who are better off must contribute more."

He stressed that the system must reward efforts by individuals and enterprise by companies to remain sustainable. "We will study all options carefully," said Mr Heng.

Elaborating on Budget 2017, he said it builds on the strategies put forth by the Committee on the Future Economy, which calls for Singaporeans to work together "for economic development, and in all areas", said Mr Heng.

That need for partnership is perhaps most apparent in the Industry Transformation Maps (ITMs), which chart out how companies can work together with agencies, unions, trade associations and others to restructure and transform themselves.

The Government cannot, on its own, design plans for thousands of companies across different industries, but it can catalyse and bring stakeholders together, which is what it seeks to do with ITMs, he added. "The quality of the ITMs will depend on the quality of inputs from industries and partners, and how well we work together for the larger good."

Workers, meanwhile, can do their part by going beyond the familiar, Mr Heng said. Businesses must have the courage to adopt and try new ideas.

On its part, the Government will support the needs of Singapore's people and businesses so that they can achieve their full potential, by creating a regulatory environment that both supports innovation and manages risks.

The spirit of partnership is just as important in securing a better living environment for Singapore, he added.

While the Government has steadily increased its spending on social needs such as healthcare, education and housing over the past decade, from $12.7 billion in 2006 to $34 billion in 2016, people have their part to play too.

"Even the strongest social safety nets are no substitute for the caring hearts and helpful hands of neighbours," Mr Heng said.

Budget 2017, he noted, focuses on efforts to empower the community and forge partnerships.

"This is a movement towards the future, where we nurture a culture of caring for one another, of many helping hands, to meet a significant increase in societal needs."

This is important, he said, as Singapore's ageing population and smaller families will likely lead to higher healthcare spending.

Mr Heng noted that several MPs had raised concerns about how the hike in water prices, the introduction of a carbon tax and the restructuring of diesel taxes will lead to higher costs for households and businesses. "We are taking decisive steps in this area because we want a cleaner and healthier environment for ourselves and our children," he said.















Government will ensure taxes remain fair, sustainable
Heng: Spending needs will keep growing but decision to raise taxes won't be taken lightly
By Chia Yan Min, Economics Correspondent, The Straits Times, 3 Mar 2017

Singapore's spending needs will keep growing in the years ahead, even as it becomes tougher to raise revenue in a maturing economy, Finance Minister Heng Swee Keat said yesterday.

The population is ageing, and infrastructure needs are rising too.

This means that besides spending prudently and effectively, the Government will have to grow revenue through new taxes or raising tax rates over time, he told Parliament in his speech rounding up the three-day Budget debate.

He said that any decision to raise taxes "will not be taken lightly". "We will study all options carefully," he added.

Mr Saktiandi Supaat (Bishan-Toa Payoh GRC) and Mr Yee Chia Hsing (Chua Chu Kang GRC) had asked how the Government intends to review its tax system.

Mr Heng assured members: "We will ensure that our tax system continues to be fair and sustainable."

He outlined three principles.

One, the tax system must be fair and progressive, with the better-off contributing more.

Two, a sustainable tax system is also one that rewards effort by individuals and enterprise by companies. He noted that Britain has lowered the corporate tax rate from 30 per cent to 20 per cent over the past 10 years, and plans to further lower it to 17 per cent by 2020. The new United States administration has indicated plans to cut corporate tax rates too.

"We must ensure that Singapore continues to be an attractive place to work and do business, so we have a thriving and vibrant economy."

Three, sustainability entails striking the right balance between current and future generations.

Addressing a suggestion by Ms Sylvia Lim (Aljunied GRC) to use proceeds from land sales, he said such proceeds go to past reserves.

"It is because of this prudence that we are able to build up our reserves, and we can use part of these returns for our expenditure.

"We must remain disciplined and prudent in spending the returns of our reserves, so that they remain a stable and sustainable source of revenue over the long term," he said.

Singapore must ensure it has the capacity to invest in critical programmes and infrastructure for the long term, in a way that is equitable to current and future generations.

Mr Heng said the challenge of raising revenues for growing needs is not unique to Singapore.

He cited, for example, how Hong Kong announced in its recent budget that it would be setting up a tax policy unit to review its tax system.

He noted that Singapore's Budget spending has been higher than operating revenues since FY2015.

The Government anticipated this and raised revenues ahead of spending needs - by increasing the goods and services tax in 2007 and introducing the net investment returns framework, which allows it to spend up to half the long-term expected real returns of GIC, the Monetary Authority of Singapore and Temasek Holdings, in 2008. Other moves included raising duties for betting, liquor and tobacco, and raising top marginal rates for personal income tax.

"But beyond this decade, we can expect the fiscal situation to become more challenging as our expenditures exceed revenues in the longer term," Mr Heng said.

"With higher spending needs, it is ever more critical for us to ensure that we spend within our means to get the outcomes we want."

Funding policies for ministries have been designed to get agencies to operate efficiently and effectively, and this was further reinforced by a 2 per cent downward adjustment to ministries' budget caps.

He said scrutiny of major infrastructure projects is also being tightened, and subsidies are targeted at the right groups - those in need.






Budget aims to balance short-term relief with help for challenges ahead
By Chia Yan Min, Economics Correspondent, The Straits Times, 3 Mar 2017

Budget 2017 seeks to strike a balance between short-term concerns and gearing up Singapore for the future, Finance Minister Heng Swee Keat said yesterday.

Responding to MPs who said during a two-day debate that companies hit by the slowing economy are not receiving enough help, Mr Heng said the Budget focus is on targeted help for the worst-hit sectors while encouraging companies to build deep capabilities for the long term.

"A painkiller may work for a while to dull the pain, but it masks the underlying problem and delays needed action," he told Parliament.

In his speech rounding up the 2017 Budget debate, Mr Heng said companies and workers are facing an increasingly volatile and complex world where economic growth is slowing and new, disruptive technologies have become par for the course.

He also acknowledged that companies in some segments of the economy have been hit hard by the slowdown, even as they face mounting operating costs.

But, he said, "unlike the 2009 global financial crisis or the 1985 recession, we are not in a crisis".

While some sectors are facing a cyclical downturn, others are doing well and cannot find enough workers to fill vacancies, he noted.

The worst-hit industries have received targeted help, he said, pointing out that the near-term support measures for businesses in Budget 2017 added up to $1.4 billion.

These include enhancements to corporate income tax rebates as well as extensions to existing measures like the Wage Credit Scheme.

Noting that $1.4 billion "is not a trivial amount", Mr Heng added: "These are on top of the substantial stimulus measures introduced in the last three to four years, of which their cumulative effects are still working through the economy."

While businesses are facing cost pressures, "we must also recognise that, in a functioning economy, cost pressures serve as price signals, so that resources can be channelled into the most productive use."

He added: "We must be careful not to hamper this process. An across-the-board stimulus would not be effective as it may further push up cost pressures. So we monitor the situation closely and calibrate the fiscal stance accordingly."

Beyond short-term relief, the Budget also builds on ongoing efforts to prepare companies for the challenges ahead, the minister said.

"We want to help our businesses build deep capabilities that will enable them to adapt to a fast-changing world, and seize new opportunities where they arise.

"This is the key to continued success," Mr Heng said.










Social safety nets 'no substitute for caring hearts, helpful hands'
By Rachel Au-Yong, The Straits Times, 3 Mar 2017

For years, retiree Lee Ah Keow shut herself up in her Jurong West flat, preferring not to venture out to meet friends or take a walk.

The 70-year-old had weak knees and having fallen before, was afraid of getting injured if she fell again.

But Pioneer Generation ambassadors who visited her last August saw that she was at risk of social isolation, and flagged her case.

An entire network of community-based groups was activated to help - case managers from NTUC Health's Cluster Support checked in on her, the Housing Board installed subsidised grab bars in her home, and befrienders from the Reach Community Services Society began visiting her and taking her to the nearby fitness corner.

Finance Minister Heng Swee Keat recounted Madam Lee's case in Parliament yesterday to emphasise the importance of community involvement.

He said: "There are functions that the Government is best placed to perform - such as legislation and the provision of public goods and services. And there are areas where we can achieve more, much more when we all work together."

Community action is particularly critical when it comes to "providing last-mile social service delivery" and customising assistance for vulnerable groups, he said.

"Even the strongest social safety nets are no substitute for the caring hearts and helpful hands of neighbours," he added. "We want a close partnership among individuals, communities and Government, because this is an end in itself... a society where Singaporeans help fellow citizens in each way we can."

The Government will play its part, by doing more to foster stronger partnerships between groups.

Mr Heng noted that the Community Network for Seniors, a pilot project in three neighbourhoods which he announced in last year's Budget, has helped 380 seniors with multiple needs, engaged 5,000 seniors in active ageing and recruited more than 180 volunteers.

"It is a small start, but at the same time it is rewarding to see how community and Government work together to touch lives," he said, adding that the Government will review suggestions on how to better help the elderly.

Mr Heng also said he was heartened by a growing spirit of enterprise in the social sector, and encouraged groups to keep on building capabilities to serve their communities.

This year's Budget provides additional funding, through the VWOs-Charities Capability Fund, to support their efforts, he added.






Water fees 'cover only PUB ops and asset depreciation'Finance Minister Heng Swee Keat
Agency's annual surpluses channelled to reserves to finance plants and equipment
By Chong Zi Liang, The Straits Times, 3 Mar 2017

The money that people pay for using water is enough to cover only the operations of national water agency PUB and the depreciation of its water works, pipelines and water reclamation plants, Finance Minister Heng Swee Keat said yesterday.

The annual surpluses PUB gets are transferred to its reserves to finance its plants and equipment, he told the House, addressing the issue of the water price hike that surfaced throughout the Budget debate.

"The Government pays for part of the total cost of securing a safe and clean supply of water for our people and businesses," he added, as he underlined the strategic value of water and updated members on plans for investments in the water system.

PUB intends to invest $4 billion on additional water infrastructure in the next five years.

The sewerage network will be improved as well. A deep tunnel sewerage system, costing more than $4 billion, will be completed in 2025.

Another $3 billion will be spent on other sewerage network projects, and to strengthen the resilience of the water supply, in the next five years. These expenses exceed the revenue from the water conservation tax, which is expected to be about $1.6 billion in the five-year period, he added.

Over the past three days, MPs had voiced residents' concerns that business and living costs were expected to go up with the 30 per cent hike in water price, which will take effect in two phases, starting in July this year.

Others, however, stressed that water is a precious resource as Singapore's existence hinges on it, and that the price of water should reflect its value.



"Water sufficiency is a matter of national survival," Mr Heng said, as he noted how founding Prime Minister Lee Kuan Yew "obsessed over water since the Separation Agreement".

"Securing a sustainable water supply for Singapore has been an all-consuming pursuit of the Government since Independence. We lodged our water agreements with the United Nations, invested in a strong defence force and developed strong capabilities in water technologies," he added.

"Singaporeans have enjoyed uninterrupted and high-quality drinking water through rainy weather and droughts alike. This is not mere good fortune or our birthright. Rather, it is the result of long-term planning, a can-do attitude, innovation and sound policy," he said.

Mr Heng reiterated a point Environment and Water Resources Minister Masagos Zulkifli made on Tuesday, that the cornerstone of Singapore's policy on water is pricing it on sound economic principles to reflect its "long-run marginal cost" - that is, the cost of supplying the next available drop of water, which is likely to come from Newater and desalination plants.

"This ensures that users will conserve water, and we can make timely investments in the water system," he said.

Yesterday, Ms Sylvia Lim (Aljunied GRC) of the Workers' Party asked why a proposed carbon tax will be implemented only in 2019, but Singaporeans were not given a similar two-year notice for the increase in water price.

Mr Heng said the carbon tax is new and it will take time to study carefully the details before rolling it out. "A more fundamental point is whether Ms Lim agrees that water is of strategic significance and that we should each do our part," he added.





See water price hike in perspective, says PM Lee
The Straits Times, 3 Mar 2017

Prime Minister Lee Hsien Loong joined the discussion on the water price hike with a Facebook post yesterday, saying he hoped the debate in Parliament on the issue will remind Singaporeans of the value of water:

"The water price increase has triggered sharp reactions from Singaporeans. Two ministers - Chan Chun Sing and Masagos Zulkifli - spoke about this in Parliament yesterday(Wednesday). They explained why water is an existential issue for Singapore, and why this price increase is unavoidable.

Singapore is an island, yet we are one of the most water-stressed countries in the world. We have enough water today only because of our unremitting efforts since independence. For us, water will always be a strategic resource, and a matter of national security. The Pioneer Generation knew this. So do the generations of servicemen and women who have defended Singapore.



In this situation, we have to price water properly. Then every time we turn on the tap, we are conscious of how precious each drop is. We last revised water prices in 1997 - a long time ago. Since then, we have developed Newater. We have also invested in desalination, which is cheaper than before but still expensive. We need to build more Newater and desalination plants. That is why the cost of producing water has gone up, and tariffs must rise.

We should see the 30 per cent increase in perspective. Many households will get additional U-Save rebates. So one- and two-room HDB households will not see any nett increase at all. For most other HDB flats, the nett increase will only be between $2 and $11 per month. For three-quarters of businesses, water bills will go up by less than a $1 per day ($25 per month). Minister Masagos shared these in his speech.

I hope this public debate reminds us how important and valuable water is, and how we can all help to conserve water, so that we always have enough water in Singapore."





Budget debate: 5 key questions on water
The Straits Times, 3 Mar 2017

Over the past two days, ministers Masagos Zulkifli, Chan Chun Sing and Heng Swee Keat answered key questions MPs had on the water price hike. Here is a summary of their responses.

1. WHY MUST THE PRICE OF WATER RISE?

The price of water has to reflect what is called the long-run marginal cost (LRMC) - that is, the cost of supplying the next available drop of water.

This is likely to come from Newater and desalination plants.

As there is a limit to recycling used water in Newater plants, three desalination plants are being built within the next three years.

As more used water is reclaimed for Newater, the liquid waste is more difficult and costly to treat.

Building pipes to deliver water has also become pricier, as Singapore becomes more built up.

Pricing water right will ensure users conserve it, and enable investments in water infrastructure.


2. WHY HIKE THE PRICE NOW?

The price of water has not gone up in 17 years, since 2000. There is never a good time to raise prices, noted Finance Minister Heng Swee Keat.

But the costs of producing water are rising. PUB plans to invest $4 billion in additional water infrastructure over the next five years.

The Government is also making investments in the sewerage network. This includes the Deep Tunnel Sewerage System, which will be ready in 2025 and will cost more than $4 billion. Another $3 billion will also be spent on other sewerage network projects, and to strengthen the resilience of the island's water supply.

Also, water levels in Johor's Linggiu Reservoir, from which Singapore draws its water, have been falling in recent years, and climate change could worsen matters.


3. HOW DID 30 PER CENT FIGURE COME ABOUT?

The Government still needs to build more desalination plants and Newater plants. So details on the costs involved in aspects of water production are commercially sensitive, and revealing specifics could prejudice future bids. But Environment and Water Resources Minister Masagos Zulkifli told MPs that even with the 30 per cent hike, the price of water would be below cost.


4. HASN'T TECHNOLOGY HELPED?

Technologically, Singapore has squeezed everything it can from the current water processing technology. It will take several more years to achieve the next breakthrough and bring it to a deployable scale.


5. WOULDN'T THERE BE A KNOCK-ON EFFECT ON OTHER COSTS?

The price hike translates into 75 per cent of businesses seeing an increase of less than $25 per month in water bills - or less than $1 a day.

Some businesses have said they will not increase prices.

Extra U-Save rebates for households means those in one- and two-room HDB flats will not see any increase on average.

For other HDB flat types, monthly water bills will go up by between $2 and $11 per month.

Overall, spending on water will remain at about 1 per cent of household income for most families.





Heng Swee Keat: Ensuring fiscal sustainability for the future
The Straits Times, 3 Mar 2017

In his round-up speech at the end of the Budget debate yesterday, Finance Minister Heng Swee Keat set out the challenge Singapore faces in ensuring its finances are sustainable for the long term. Here is an extract of his speech.

Just as we seek to protect our home and environment for our future generations, we must ensure that our finances are sustainable for the long term.

As Ms Sun Xueling pointed out, our expenditures have started to exceed our operating revenues since FY2015.

The Government had in fact anticipated this and prepared early, by raising revenues ahead of our spending needs. Indeed, this is the approach this Government has always taken.

We had therefore raised the goods and services tax in 2007 and introduced the Net Investment Returns (NIR) framework in 2008.

In the last term of Government, we had also undertaken measures such as making our property tax rates more progressive and increasing the duties for betting, liquor and tobacco over time.

In Budget 2015, we announced increases in top marginal rates for personal income tax and revisions to the NIR framework. These measures now serve us well to meet our spending needs through to the end of this decade.

But beyond this decade, we can expect the fiscal situation to become more challenging as expenditures exceed revenues in the longer term.

• First, our economy is maturing. With slowing economic growth, our revenues will also grow more slowly.

• Second, our population is ageing rapidly and we can expect rising expenditure needs, especially for healthcare.

• Third, our infrastructure needs are rising, as we seek to build new infrastructure and renew old ones to enhance our quality of life and Singapore's economic competitiveness.



Going forward, we must continue to prepare for our greater needs in the long term by working on two fronts:

• Spending prudently and effectively; and

• Growing our revenues fairly and sustainably.

SPENDING PRUDENTLY AND EFFECTIVELY

With higher spending needs, it is ever more critical to ensure that we spend within our means to get the outcomes we want, as Mr Vikram Nair noted.

At the ministry level, we have designed our funding policies to drive agencies to operate efficiently and effectively. Today, we budget for ongoing functions using a Block Budget framework, where ministries are provided with budget caps for a medium-term period. Within the cap, each ministry decides how best to allocate its budget. This approach encourages ministries to strive for cost-effectiveness, because every dollar optimised means more resources available for worthwhile programmes.

This year, we sought to further reinforce the importance of spending prudently and effectively, by applying a permanent 2 per cent downward adjustment to the budget caps of all ministries and organs of state.

• This will free up resources that the Ministry of Finance can redeploy towards higher-priority requirements and projects that deliver value to citizens and businesses, such as initiatives by the Municipal Services Office.

• Within their adjusted budget caps, agencies will decide how to prioritise their programmes and projects and review how they can achieve greater efficiency.

• Fundamentally, we want to imbue these values of prudence and innovation in all officers in the public service: to always seek value for money, and constantly strive to improve and innovate, so that we can do more - and do better - with less.

At the project level, we are tightening scrutiny of major infrastructure projects to ensure robustness of their business case and value for money.

• We have a process today that puts large infrastructure projects (more than $500 million), or those that are highly complex in nature, through a series of reviews before funding is approved.

• This process taps a panel of senior public officers and industry practitioners, those with deep technical expertise and experience in major infrastructure development, with the aim of optimising the project's overall design, use of space and cost-effectiveness.

At the programme level, we are designing our schemes so that subsidies are targeted at the right groups. As a general principle, we price services to recover full cost and discourage over-consumption. We then target subsidies appropriately at those in need, such as through GST vouchers, service and conservancy charge rebates and public transport vouchers. This is more progressive than underpricing services, which implicitly subsidises all groups, including the rich.

GROWING REVENUES FAIRLY AND SUSTAINABLY

Ms Sylvia Lim asked whether we evaluate programmes and I think on the economic programmes, Minister Iswaran gave a detailed explanation of how agencies evaluate those programmes and have to adapt and change when necessary. Then, she raised the issue of the Productivity and Innovation Credit (PIC). The PIC in fact has largely achieved its objective but she raised examples of abuses to make her case. This is mistaken. In fact, those abuses were uncovered because of extensive audits that were done by the agencies, and we should commend the officers for the seriousness in which they undertake this. And in many other countries, those abuses would not even be known. The schemes were done in a way that is broad-based and reaches the right groups of people. The alternative, of course, is to have every detail scrutinised and approved before the businesses can use it. And in fact, in many of the Budget dialogues we had with businesses, their concern was that if you have too many schemes that are just based on approval, things will not move. So it is a delicate balance, and a good balance which the agencies should be commended for.

Besides spending prudently and effectively, we will have to grow our revenues through new taxes or raising tax rates over time. This challenge of raising revenues for growing needs is not unique to Singapore. If you look at many other countries, the need for more revenue to meet spending needs is a common theme that cuts across different systems. For example, Hong Kong announced at its recent budget that it would be setting up a tax policy unit to comprehensively review its tax system. One of its objectives would be, and I quote, to "explore broadening the tax base and increasing revenue, so as to ensure that adequate resources are available" to support sustainable development.

Mr Saktiandi Supaat and Mr Yee Chia Hsing had asked how we intend to review our own tax system. I would like to assure them that we will ensure that our tax system continues to be both fair and sustainable.

First, our tax system must be fair and progressive across income groups. What this means is that those who are better off must contribute more. In recent Budgets, we have continued to make our personal income tax and property tax rates more progressive, even as we introduced or enhanced permanent schemes such as Silver Support and Workfare to provide more support to lower-income groups.

Second, a sustainable tax system is fundamentally one that rewards effort by individuals and enterprise by our companies.

As Ms Foo Mee Har pointed out, the only way to sustain a healthy revenue stream is to have a healthy and growing economy.

In more recent years, more countries have lowered or announced their intention to lower corporate income tax rates. The United Kingdom has lowered its corporate tax rate from 30 per cent to 20 per cent over the last 10 years, and plans to further lower it to 17 per cent by 2020. The new administration in the United States has also indicated plans to cut corporate tax rates. We must ensure that Singapore continues to be an attractive place to work and do business, so that we have a thriving and vibrant economy.

Third, sustainability is also about striking the right balance between current and future generations. We have spent prudently, built up our reserves, and tapped on their returns judiciously. Ms Lim suggested using the proceeds from land sales. Now, the proceeds from land sales go into past reserves, and it is because of this prudence that we are able to build up our reserves, and we can use part of these returns for our expenditure. So we must remain disciplined and prudent in spending the returns of our reserves, so that they remain a stable and sustainable source of revenue over the long term.

We must remain disciplined and prudent in spending our reserves, so that they remain a stable and sustainable source of revenue over the long term. Any decision to raise taxes will not be taken lightly. We will study all options carefully.

While our finances today are sound, we must start planning early. This is the right and responsible way, rather than leaving problems to be dealt with by future governments when Singapore comes under fiscal strain. Planning for the issue now will allow us to better ease in the needed measures, to give our people and businesses some time to adjust.

We must plan for the long term, not five years, not 10 years, but big ambitious plans for decades ahead - like the new airport; new towns, each with distinctive features to attract families; new MRT lines.

We are in a good position today, because we have planned early and invested in the long term. This ability to plan and invest for the long term is a key strategic advantage. We must ensure that we continue to have this capacity to invest in critical programmes and infrastructure with long-term benefits, in a way that is equitable to both current and future generations.

This Budget sets the strategies for building a better Singapore in a sustainable way. We can move forward confidently on these strategies, as we are starting from a position of strength. This is a cumulative effort from previous Budgets:

• We have a well-functioning economy where most Singaporeans have good jobs;

• We have a good social security system that serves the majority of Singaporeans well;

• We have spent prudently so we have the necessary resources.

In this fast-changing world, we cannot predict how the journey ahead will pan out, but we can expect that it will not be always smooth-sailing. There is no step-by-step guide for how to venture into the volatile, unpredictable future that lies ahead for the whole world, not only Singapore.

But for Singapore, we have our compass, a compass of our shared values and our common hope.

In this Budget, we set our minds:

• To seize opportunities to succeed;

• To be part of, to play a part in, a caring and inclusive community; and

• To build, protect and pass on a truly special home to future generations.

Let us develop the deep capabilities, strengthen the spirit of enterprise to adapt and try out new things, work together in partnership, and care for and support one another.

I am confident we can do it. We have been through tougher situations. Each time, despite the naysayers, we emerged stronger and more adaptive, as we held strong together as one people.





An inclusive vision to galvanise the future economy
By Fiona Chan, Managing Editor, The Straits Times, 3 Mar 2017

It was never going to be easy to chart a future direction for Singapore's high-income, high-cost, high-comfort yet still highly vulnerable economy.

Wrapping up the Budget debate yesterday in front of a nearly full House, Finance Minister Heng Swee Keat recapped the strategies presented in last week's Budget to address head-on, the "waves of change sweeping across the world".

At the risk of oversimplification, they can broadly be grouped into four Ps: partnership, proficiency, pliability and prudence.

As the country feels its way forward into an unpredictable future, partnerships between the Government and the larger community will be crucial in dealing with disruptive trends not only at work but also at home, Mr Heng said in Parliament.

Both in designing transformative business plans and in delivering last-mile social services to an ageing population, the Government will have to work closely with industry, trade associations, unions, workers and individuals, he added.

For Singaporean companies and workers to stand out in a competitive and digital world, they need deep proficiency in their chosen fields. This means continual upgrading and going beyond the familiar to try new things.

It also entails pliability: an ability to adapt quickly to shifts in the economy, he added.

"With rapid changes in technology and business models, job roles will be redefined more often, and new skills will frequently be required."

And after two days of impassioned exchanges over water prices, it was fitting that the principle of prudence continued to underscore discussions about Singapore's finances in the future economy.

As spending needs rise, taxes will have to be raised or introduced. But Mr Heng gave the assurance that these will remain progressive and adequately reward labour, and that the Government will also ensure its spending is cost-efficient.

This thrifty stand maintains Singapore's legendary caution in accumulating wealth and spending within its means, which has served it well over the years.

In fact, all the strategies that Mr Heng outlined yesterday from Budget 2017, building on the recommendations in the report by the Committee on the Future Economy that preceded it, are eminently sound and sensible.

So much so that at times they seemed - to borrow more P words - too placid and predictable for what was hoped to be an ambitious road map into an unsettling but exciting digital-driven future.

While Mr Heng did a comprehensive job of outlining how Singapore should move forward, he spent less time explaining why.

Is it simply because our jobs depend on it? If Singaporeans decided that they would be satisfied with low growth and a slower pace of life, would we still need to try so hard to transform?

Or is there another P that should be part of plans for the future economy: a unifying purpose beyond dollars and cents that could better galvanise Singaporeans to move forward together in embracing technological disruption?

Minister-in-Charge of the Smart Nation Initiative Vivian Balakrishnan gave a glimpse into what one such shared vision might look like, during the Committee of Supply debate that also started yesterday.

Elaborating on how the Government has used technology to improve public services, such as in mobile payments and transport, he said the digital economy "is not about technology but really about maximising future job options and ensuring a better quality of life and an inclusive society".

Assistive technologies, for instance, empower marginalised members of society more than ever before. About 3,000 people have benefited from Tech Able, a resource centre to help people with disabilities access technology and devices that make their lives better.

"Our vision is that a visitor to Singapore should come, look, experience and say, 'I have seen the future and it works'," he said.

Challenging though it might be, embracing a future economy that also enables Singapore to be an even more inclusive society would be a worthy pursuit indeed .









Water a critical asset that must be priced right, say ministers
Masagos lays out reasons for price hike, points to rising costs of producing water
By Nur Asyiqin Mohamad Salleh, The Straits Times, 2 Mar 2017

Water is a matter of national security and has to be priced correctly to reflect its strategic importance and scarcity value, two ministers said yesterday.

Speaking on the second day of debate on the Government's Budget for the new financial year, Environment and Water Resources Minister Masagos Zulkifli laid out the reasons behind the hotly debated move to increase water prices by 30 per cent over two years.

The last time that the Government announced a hike in water prices was in 1997, he said, when elements in Malaysia were threatening to block Singapore's supply of water from Johor.

Despite major investments in desalination and Newater since then, Singapore remains a water-stressed nation. And the rising costs of producing water, the need to build and expand desalination, Newater and water reclamation plants, and climate change, make it urgent to have the right price in place to moderate demand, said Mr Masagos.

"The consumer must feel the price of water, realise how valuable water is in Singapore, every time he or she turns on the tap, right from the first drop," he said.



Minister in the Prime Minister's Office Chan Chun Sing said he felt compelled to speak on the topic after hearing the strong reactions to the impending hike, announced during the Budget last week.

"I can understand the angst of our people with the water price increase," he said. But water, he said, is an existential issue, crucial to the country's survival.

"It has been so in 1965. It has been so yesterday. It is so today, and it will be so tomorrow," said Mr Chan.

While Singapore has made great strides in improving its water situation - with 17 reservoirs today, and two-thirds of its land used for water catchment - the country is "nowhere near where we want to be".

Singapore cannot increase its water catchment area by much more, and must depend on technology such as desalination and Newater.

It is also committed to working with the Malaysian government and the Johor authorities to see how the water system can be developed for the benefit of both countries.

Mr Masagos noted that water levels in Johor's Linggiu Reservoir, from which Singapore also draws its water, have been falling in recent years. "What is clear is that Linggiu is operating today at a level way below what we are comfortable with, and it will take years to build up again to a reliable capacity," he said.

Singapore must also contend with rising costs, said Mr Masagos. It must build more desalination plants to increase its supply. As more used water is reclaimed for Newater, the liquid waste is more difficult and costly to treat. Building pipes to deliver water has also become pricier, as Singapore becomes more built up.

It is therefore urgent that water is priced right to moderate demand from businesses and households, while also building infrastructure to ensure Singapore has a secure water supply, he said.

"We hope that through right pricing, everyone will cultivate the habit of water saving as part of Singapore's DNA, whether we are a household or business," he said.

Apart from both ministers, 32 MPs debated the Budget yesterday, tackling issues such as initiatives to help workers and small firms.

The water price hike remained a hot topic, with MPs seeking more details. Ms Joan Pereira (Tanjong Pagar GRC) said residents and businesses were taken aback by the announcement, which was made with "no prior public consultations".

"While price increases are never welcomed, periodic increments with justifications shared in advance would be preferable to a sudden jump," she said.

Finance Minister Heng Swee Keat will respond to MPs when Parliament resumes its sitting today.










Budget 'ensures weakest in society get the most help'
Chan Chun Sing refutes WP's arguments that Budget adopted 'wait-and-see attitude'
By Toh Yong Chuan, Manpower Correspondent, The Straits Times, 2 Mar 2017

Budget 2017 was neither politically motivated nor one that took a "wait-and-see attitude", Minister in the Prime Minister's Office Chan Chun Sing said yesterday when he refuted the arguments of the Workers' Party (WP).

Instead, the two major issues that the Budget sought to address were how Singaporeans could continue to make a living, and how they might look after one another, he said. A key thrust of the Budget was to distribute limited resources in a way that gave the greatest help to those who need it most.

Non-Constituency MP (NCMP) Leon Perera, from the WP, said on Tuesday that it made "political sense" for the Government to introduce price hikes now "because people have three years to forget them before the next general election".

His fellow NCMP Daniel Goh described the Budget as a "wait-and-see" move by the Government as it prepares for the changes that will affect the economy and workers.

Yesterday, Mr Chan, in rejecting their observations, said the Budget is about building "the kind of society that we aspire to be".



He cited the values of inclusiveness and social mobility, saying: "We want to give everybody a fair chance. We want social mobility. And that is what defines Singapore."

As resources are finite, more help given to one person means less for another, he noted.

Hence, when there was a need to raise taxes or prices, it took courage on the part of political leaders to say that those who are richer have to foot a bigger bill so that the poorer people can get more help.

The approach also helps bring about a fairer society, added Mr Chan, who is also the secretary-general of the National Trades Union Congress (NTUC).

It avoids what a fellow union leader called the "sedimentation model" in which resources are distributed such that those who get to dip into the pot first will get to pick the best.

If such an approach takes root, Mr Chan warned, it will become harder to change.

The Government announced increases in water prices and diesel, and plans to introduce carbon taxes because it was the responsible thing to do, Mr Chan reiterated.

"A responsible government is one that prices the essentials properly, not distorts the market, leading to more subsidies that will burden our future generations.

"A responsible government is someone who knows what is not sustainable and will put a stop to it now. This is not a wait-and-see Budget," he said.

If it were a wait-and-see Budget or one motivated by political timing, the Government would not have introduced carbon pricing, diesel and water taxes, he added.

Mr Chan's speech yesterday came one day after Minister for Trade and Industry (Industry) S. Iswaran outlined the Government's broad and targeted measures to help Singapore companies overcome headwinds as well as grow and expand overseas.

Besides responding to the WP MPs, Mr Chan also spoke of the pressures of maintaining a Budget surplus, NTUC's plan to help workers and the water price hike in his wide-ranging, 45-minute speech.

He also distributed a picture of a trimaran sailboat to the MPs to illustrate the seven strategies in the recent report of the Committee on the Future Economy.

Mr Chan also addressed criticisms that the Government had ignored the short-term pain felt by some.

He said the Government had provided targeted help because it feels the people's pain. "If indeed this is a cynical government, then we shouldn't be giving anything at all."

Managing the economy is not like turning the thermostat in an air-conditioned room to make the temperature go up or down, he said, noting that Budget 2017 is about addressing both short-term pain and long-term challenges.

"We know the pressures in the short term, we are doing what we can in a targeted manner. But more importantly, we know the long-term challenges facing our country and we will do what is right, what is necessary to leave behind a better state for our future generations."





Labour movement to work on job creation and placement
By Toh Yong Chuan, Manpower Correspondent, The Straits Times, 2 Mar 2017

Labour MPs are not going to put their hands out and ask for more money from Budget 2017, said labour chief Chan Chun Sing.

Instead, the labour movement will work with employers and the Government to create jobs and help workers get them, Mr Chan told Parliament, in a speech that laid out how the National Trades Union Congress (NTUC) will tackle the scarcity of jobs in a slowing economy.

"Grants and subsidies alone won't create jobs, especially sustainable jobs," he said, adding: "The crux (of job creation) must come from our businesses, our access to markets and our innovation."

Speaking on the second day of debate on Budget 2017, he mapped out the steps that NTUC is taking.

It will consolidate the vacancies and job seekers' databases in the market so that it does not matter which centres those looking for jobs go to, he said.

He added: "We are even prepared to work with (private) agencies like LinkedIn to ensure that we do our placement well and do it faster."

To help workers pick up skills for future jobs, NTUC will work with and even prod institutions of higher learning to produce training modules relevant to employers.

"If we are not satisfied with the speed to market, we will work on it, we will improve, we will fix it," Mr Chan said. "So we are not going to talk about theories. We want to get things done."

Besides helping workers, the unions will continue to work with companies to raise productivity, added the Minister in the Prime Minister's Office. "It is a hard slog, it is not easy, but we are committed to do this."

He believed that the key to raising productivity lies in the 23 Industry Transformation Maps that the unions, employers and government agencies are working on. These plans cover 80 per cent of the economy and can raise productivity in the various sectors if implemented well.

Mr Chan also disclosed that the Manpower Ministry has formed a task force to study the implications of the rising number of freelancers and contract workers in the economy. New mindsets are needed to help protect these workers' legal and financial rights and help them plan for their retirement, he said.

The NTUC will support the ministry review, he added.

More information on the task force and review is expected to be disclosed by the ministry when its Budget is debated in Parliament next week.





Govt spends ‘on the side of caution’ amid volatility, says Chan Chun Sing
By Chia Yan Min, Economics Correspondent, The Straits Times, 2 Mar 2017

In Budget 2017, about $14 billion of the $70 billion for government spending will come from the returns from past savings.

This means that "$1 out of every $5 that we are spending in this Budget comes from the income from our reserves", and this net investment income share looks set to rise with demands going up and revenues possibly shrinking, said Mr Chan Chun Sing, Minister in the Prime Minister's Office.

He also warned that the expected Budget surplus this year hangs in the balance because of the volatile economic situation and rising spending needs.

Some of the top contributors to the government coffers, such as net investment returns and corporate income taxes, are subject to the vagaries of economic cycles that are not within the Government's control, Mr Chan said.

So there is a need to "err on the side of caution" by ensuring government spending remains prudent and sustainable, he added.



Mr Chan made these points yesterday, the second day of the parliamentary debate on Budget 2017, after some MPs expressed concern that the Budget did not provide enough help for households and small and medium-sized enterprises hit by the slowing economy and rising costs.

In particular, Non-Constituency MP Leon Perera, who is from the Workers' Party, asked if the Government held back on spending this year "to keep ammunition in reserve for closer to the election".

He said recent Budgets had followed a pattern of racking up a surplus early in the Government's term, then incurring deficits closer to the general election.

Mr Chan refuted this, saying the Government does not adopt "such a cynical attitude to budgeting".

Budget 2017 contained measures to provide short-term relief to the hardest-hit companies, such as those in the offshore and marine sector, as well as rebates for lower- income households.

"If indeed this is a cynical government, then we shouldn't be giving anything at all," Mr Chan added.

Indeed, the latest Budget was made possible by prudent spending in previous terms of government, as well as judicious management of Singapore's reserves, he said.

He also noted that the net investment returns contribution overtook corporate income tax to be the No. 1 contributor to government coffers for the first time in the 2016 financial year.

But the amount of net investment income - as well as other top contributors to revenue - is subject to the ups and downs in the economy, he said.

"The top four (sources of) revenue are net investment income, corporate tax, goods and services tax (GST) and income tax, but these are all subject to factors outside the Government's control, he noted.

"Net investment income depends on the status of the world economy. Corporate tax and income tax will be similarly cyclical according to the world economy. Even GST, to a less extent, will be cyclical," he said.

This means that the $1.9 billion surplus expected in Budget 2017 could be at risk.

"Will we realise this $2 billion surplus?" Mr Chan said. "What if the economy turns soft and we don't realise the full amount that we have budgeted for the net investment income, but instead we need more money to help fellow Singaporeans? How much can we afford and how much more do we have?"

The Government has to keep spending on a "steady path", he added. "Making sure that we address the short-term pains, while establishing the conditions for our long- term success, is never either or. It is always both."










Price hike reflects scarcity value of water: Masagos
Minister cites examples of how costs have risen, but says water will still be affordable
By Nur Asyiqin Mohamad Salleh, The Straits Times, 2 Mar 2017

After two days of the Budget debate saw many MPs focusing on the impact of the water price hike, Environment and Water Resources Minister Masagos Zulkifli yesterday took the House back to 1997, when water prices were last revised.

Back then, elements in Malaysia were threatening to block the supply of water from Johor, and Singapore was just embarking on desalination.

Hence, the Government needed to register with Singaporeans the strategic importance of water.

It therefore decided to revise water prices substantially to reflect its true scarcity value, he told MPs in his first remarks to the House about the hike since it was announced in the Budget statement last week.

"If we needed any additional water, where would it come from? How much would that additional litre cost? That is what we call the 'long run marginal cost' (LRMC). That is the cost which consumers should see," Mr Masagos said.

Water price increases were introduced progressively between 1997 and 2000.

Since then, water technology has progressed. Newater - which is much cheaper than desalination - came about in 2002, and desalination technology has advanced.

"As a result, we have been able to keep down the cost of water, and to hold water prices unchanged for 17 years," said Mr Masagos. "But costs have gradually gone up. At some point, a price revision becomes essential."

Water prices will go up by 30 per cent in two stages, starting in July.

The magnitude of the hike has ignited much discussion over the past week, but Singaporeans should ask what this 30 per cent translates to in reality, said Mr Masagos.

He noted that 75 per cent of businesses will see a water-bill hike of less than $25 a month - or less than a dollar a day. One- and two-room HDB households will not see any rise on average, while most other HDB households will see bills going up by between $2 and $11 a month.

"Water will still be affordable. It will still remain within 1 per cent of household income," he said.

Mr Masagos also highlighted three examples of how costs have risen, making a price hike essential.

First, more desalination plants will have to be built to increase Singapore's water supply, as there is a limit to reclaiming used water for Newater. Three desalination plants are in fact being built within the next three years, he said.

Second, as the proportion of used water being reclaimed for Newater goes up, effluent - or sewage - becomes more concentrated and more difficult and costly to treat.

Third, building new and replacement pipes to deliver water has become more costly.

Mr Masagos cited how tunnelling below the road to lay pipelines now costs 21/2 times as much as the traditional method.

These point to the need to update the LRMC - which the 30 per cent price increase has reflected, he said. He could not, however, disclose details of the computation owing to "commercial sensitivities".

He said revealing the specifics could prejudice future bids for desalination, Newater and water reclamation plants. "But rest assured that the LRMC reflects the best the market can offer," he added.

While his ministry will continue to plan and build the infrastructure, it is only through the right pricing that people will realise the value water has as a strategic resource, and consciously conserve it, he added.

"With the 30 per cent increase that we have announced, the price will be close to, though still slightly lower than, the price of the next drop (of water) or LRMC today," he said. "This is the best way to emphasise the scarcity value of water."

Addressing a question raised by Mr Pritam Singh (Aljunied GRC) on whether technology is taken into account in computing this cost, Mr Masagos said "technologically, we have squeezed everything we can from the current water processing technology". "It will take several more years to achieve the next breakthrough and bring it to a deployable scale," he added.















Why costs have gone up
The Straits Times, 2 Mar 2017

MORE DESALINATION PLANTS MUST BE BUILT

• Three plants being built in the next three years.

• First-year price for Singapore's first plant, SingSpring, was $0.78 per cubic m in 2005. The first-year price for the latest plant in Marina East is $1.08 per cubic m.

• This is a 40 per cent increase.


MORE USED WATER IS BEING RECLAIMED FOR NEWATER

• As effluent gets more concentrated, it is harder and costlier to treat.


MORE EXPENSIVE TO BUILD, REPLACE PIPES FOR WATER

• Tunnelling below roads costs 21/2 times as much as the traditional method of laying pipes.

• PUB has to renew some 50km of pipes a year, up from 20km today.

• Seventy-five per cent of businesses will see an increase of less than $25 per month in water bills. This is less than $1 a day.

• Additional U-Save rebates mean one- and two-room HDB households will not see any increase on average. Bills for other HDB households will go up by $2 to $11 per month.





Water an existential issue for Singapore, says Chan Chun Sing
By Nur Asyiqin Mohamad Salleh, The Straits Times, 2 Mar 2017

The intense debate on the water price hike over the past two days shows Singapore needs to do much more to raise awareness of its water issues, Minister Chan Chun Sing told the House.

"We need to do much more to socialise our people to the challenges that we are facing on the water front," he said.

"The fact that we have such an intense discussion reflects that we have left this issue off our national psyche for too long."

He said it would be too much for him or the Government to expect everyone to defend the price rise, but added that MPs had to get certain basics right no matter which side they were on.

He asked: "Do we agree that water is existential to our country's survival? Do we agree that we should price water properly? If we agree on these two questions, we can go to the mechanics of how to price it properly, what we should consider."



Mr Chan, a former army chief, said an entire generation that has worn uniform knows what this means, adding that Workers' Party MP Pritam Singh (Aljunied GRC) used to serve with him in the same unit.

The Government spares no effort to manage the risks all these years, he added, recalling how when he was in primary school, there were three reservoirs. Today, there are 17, plus desalination and Newater plants.

"How many more desalination plants and how many more Newater plants must we build in order for water to never be a weapon pointing at our heads?" he said, adding that two-thirds of Singapore's entire land area is now a water catchment area.

A lot of money is also spent to ensure not a drop of water is wasted. "Some countries lose up to 5 to 10 per cent of their water supply through leaky pipes. If we lose 5 per cent of our water through leaky pipes, we need to build one more Newater plant."

There is never an easy way to stress the value of water, he said, noting the 30 per cent increase over two years is the first in 17 years - which works out to about a 1.6 per cent rise each year.

"We can do this every year. We can do this every five years," he said. "We can do this every 10 years but regardless which way we choose, we have to make sure that we never forget - that water is existential."










Masagos Zulkifli: Securing Singapore's water future
The Straits Times, 2 Mar 2017

Among this year's Budget announcements, the planned hike in water prices has stirred the most debate. Yesterday, Minister for the Environment and Water Resources Masagos Zulkifli set out in a speech to Parliament why, after 17 years, a price revision is needed.

In Singapore, water is unlike any other ordinary commodity. We subsidise housing, healthcare, education, but not water consumption.

Water is a strategic issue. It is a national security issue. We must price water fully. Even as we give targeted assistance to households, such as U-Save vouchers to help them pay for their utility bills, we must price water correctly. The consumer must feel the price of water, realise how valuable water is in Singapore, every time he or she turns on the tap, right from the first drop.



Let me take us back to the last time the Government revised the price of water, which was 1997. We had not revised water prices for some time then. Elements in Malaysia were threatening to block our supply of water from Johor. We were embarking on desalination to secure our water supply. We needed to register with Singaporeans the strategic importance of water, and the importance of saving every drop possible.

The Government therefore decided to revise the water price substantially, to reflect water's true scarcity value. If we needed any additional water, where would it come from? How much would that additional litre cost? That is what we call the Long Run Marginal Cost (LRMC). That is the cost which consumers must see.

At that time and even today, the Johor supply was fixed. Local reservoirs had been almost fully developed, maybe except for the Marina Reservoir. Newater was not even invented in 1997. It came later in 2002. Apart from conventional methods of collecting rainwater, the only proven technology then was to produce drinking water through desalination. And desalination was very expensive, at $3 to $3.50 per cubic metre, through the multi-stage flash distillation. This number did not even include cost of pipelines.

There was no way for the Government then to move the water price to the true cost of the next litre - the price of desalination, so it was moved instead in steps, over the period 1997 to 2000, to today's water price.

Since then, water technology has progressed steadily. PUB itself invested in R&D. This resulted in Newater, which was much cheaper than desalination.

Desalination technology has improved, from multi-stage flash distillation to membranes today. As a result, we have been able to keep down the cost of water, and to hold water prices unchanged for 17 years. But costs have gone up gradually over the years. At some point, a price revision becomes essential.

Let me give a few examples of how costs have risen in the recent review. Firstly, the LRMC is a mix of Newater and desalination costs. Now, in the blend between Newater and desalination, we have to depend more on desalination for the next litre as water demand increases. There is also a limit to recycling used water in our Newater plants. Therefore, to increase our water supply further, we must build more desalination plants. In fact, we are building three desalination plants within the next three years.

Secondly, as we increase the proportion of used water being reclaimed for Newater, effluent becomes more concentrated and more difficult and costly to process.

Thirdly, Singapore is becoming more urbanised, so it is costing us more to build the new and replacement pipes to deliver water.

Here are some figures from our recent expenditures, which will give an indication of how it will be in future. Looking at the first-year price of desalination, for instance, while the first-year price for our first plant, SingSpring desalination plant, was 78 cents/cubic metre (2005), the first-year price of our latest plant at Marina East was $1.08/cubic metre, some 40 per cent increase. For conveyance costs, we now tunnel below the road to lay pipelines. This minimises inconvenience to road users and the public, but it costs 21/2 times as much as conventional pipe-laying techniques. Also as our pipelines age, PUB will have to more than double the rate of renewal for old pipelines from the current 20km per year to 50km per year, to minimise pipe leaks and disruptions.

All these point to the need to update the LRMC, which the 30 per cent price increase has reflected. We are unable to provide details of its computation because of commercial sensitivities. We still need to build more desalination plants and Newater plants. As more desalination, Newater and water reclamation plants are yet to be built or expanded, revealing the specifics of the LRMC could prejudice future bids. But rest assured that the LRMC reflects the best the market can offer.

Mr Pritam Singh asked whether technology is taken into account in the computation of LRMC. My answer is a definite yes - it has always been and it is also the case for this review. Technologically, we have squeezed everything we can from the current water processing technology. It will take several more years to achieve the next breakthrough and bring it to a deployable scale.

I thank members for reminding the House that we have had a serious problem with the depletion of Linggiu Reservoir in recent years. It is not clear if the current situation is due to climate change, but we cannot discount the possibility that such dry weather may persist, and in the future when climate change effects become more pronounced, it will be more severe.

As members are aware, Johor is also drawing water from the Johor River, and Singapore is discussing this with Malaysia to ensure that Johor's actions do not compromise our ability to draw the 250mgd that Singapore is entitled to from the Johor River under the 1962 Water Agreement.

What is clear is that Linggiu is operating today at a level way below what we are comfortable with, and it will take years to build up again to a reliable capacity.

Taking all these together, there is therefore urgency to have our policies, including right pricing, in place so that we can moderate demand by both businesses and households, while also building the infrastructure we need to have a secure water supply.

It is the job of my ministry and PUB to plan and build the infrastructure, which we will do, but it is only through right pricing that we can have everyone valuing water as a strategic resource and consciously conserving it. With the 30 per cent increase that we have announced, the price will be close to, though still slightly lower than, the price of the next drop or LRMC today. This is the best way to emphasise the scarcity value of water.

Members have expressed concerns over the magnitude of 30 per cent. Clearly, this 30 per cent increase has generated a lot of discussion on water. I hope it also raises awareness of scarcity and strategic value where water is concerned. But what does 30 per cent translate to in reality? For businesses, 75 per cent will see an increase of less than $25 per month in water bills. This is less than a dollar a day. Indeed, I am heartened that some businesses have taken this increase in context and have explicitly said that they would not increase prices. For households, the Government has provided additional U-Save rebates. One- and two-room HDB households will not experience any increase on average. For other HDB flat types, monthly water bills will go up by between $2 and $11 per month. Overall, water will still be affordable. It will remain at about 1 per cent of household income. So, that is what the 30 per cent price revision translates to - less than a dollar a day for 75 per cent of our businesses, and still within 1 per cent of household income for water expenses.

Let me conclude. Despite our investments in desalination and Newater plants, the truth is that we are still a water-stressed nation. Singapore was ranked first among countries with the greatest risk of high water stress in 2040, according to the World Resources Institute. It is not a description of what we do, it is a description of who we are. We hope that through right pricing, everyone will cultivate the habit of water saving as part of Singapore's DNA, whether we are a household or business.



Just this morning, I attended a water rationing exercise at Woodgrove Secondary School. Many other schools are participating this year, to raise awareness of the value of water and importance of water conservation among our young.

Even during the prolonged dry spell in 2014, Singapore did not face any serious shortages, because we had Newater and desalination plants. There was no water rationing. But water conservation was something earlier generations of Singaporeans had imbibed. Singaporeans back then knew that every now and then, elements in Malaysia were threatening to turn off our taps.

So they bore with water rationing, supported water-saving campaigns and even paid the cost of cleaning up rivers and their catchment areas.

Indeed, it is because of our obsessive focus on water and the collective determination of the earlier generations of Singaporeans and PUB officers that we were able to manage our water vulnerabilities. If we take this same approach, we will secure our water future for ourselves and our children, and that, I think members will agree, is well worth doing.





Chan Chun Sing: Jobs for today and tomorrow, and protection for workers
The Straits Times, 2 Mar 2017

Labour chief Chan Chun Sing joined the Budget debate yesterday. Here is an edited excerpt of his speech.

The core questions in this Budget are: How do we earn a living for ourselves and our country, and how do we take care of each other?

Let us take a look at our Budget position. This year, we have a Budget of about $70 billion. Out of that, $14 billion comes from our net investment income, which means that for every $5 we spend, $1 comes from savings; from the income from our reserves.

The top four revenue streams of our Budget are: net investment income, corporate tax, GST and income tax. This year, the No. 1 income stream out of these four is net investment income.

That was not the position a few years ago. Out of these four, how many of them are really under our control? Net investment income depends on the status of the world economy. Corporate tax and income tax will be similarly cyclical according to the world economy. Is this a sustainable position going forward? I always joke with some friends that our corporate tax rate and income tax rate are not set independently by the Minister for Finance, who has to watch like a hawk what our competitors are doing. Some have commented that we are running a surplus. What if the economy turns soft and we don't realise the full amount that we have budgeted for the net investment income, but instead we need more money to help fellow Singaporeans if the economy turns further south? How much can we afford and how much more do we have? One programme like Workfare costs us $600 million or $700 million. So if the revenue comes down and the needs go up, I am not so confident that the $1.9 billion surplus we have budgeted for will necessarily come true.

Some members in the House say that this Budget is a political Budget, that we spend less this time due to the political cycle.

Then there is a suggestion that we are ignoring the short-term pains of the economy. Is that so? If that were so, why did Finance Minister Heng Swee Keat announce targeted measures to help specific sectors like the offshore and marine sector, or the $700 million we pushed into the construction sector?

If that is so, why do we spend money to increase U-Save rebates to make sure that even though prices may increase on average, we will take care of the lower-income first?

Managing our economy is not like turning the thermostat in an air-conditioned room. The competition across the world is intense. Some countries lose their footing, get into a downward spiral and never recover. Our job is to keep ourselves on a steady path, making sure that we address the short-term pains while establishing the conditions for our long-term success. It is never either or. It is always both.

Next, there is a lot of focus on what this Budget has that is new. But what is ongoing is also important. Every time we make a commitment to spend, it has a long tail, which means that there are future commitments that we need to adhere to, to keep our word to our people. Every time we have a long tail, it eats into what in budgetary terms we call the white space for the future, which means that the more we commit upfront with the long tail, the less degree of flexibility we have in going forward to meet contingencies and to seize opportunities. We must all bear in mind that many things are still ongoing: Workfare, U-Save rebates, the commitment that we have done for SkillsFuture and so forth.



Let me speak on how we earn a living. In NTUC, we have three priorities for this year: jobs, jobs and jobs. Jobs for those people who are displaced today. Jobs for those people who might be displaced tomorrow. Grants and subsidies alone won't create jobs, especially sustainable jobs. Grants and subsidies enable and help, but the crux of the matter are our businesses, access to markets and innovation, how good our workers are to keep pace with the demand for new skills, how good our regulatory environment is to enable new businesses.

And when we look at our Budget, this is what we see. The ministries of Trade and Industry, Manpower and Education and many agencies are all focused on these four basic issues to support our businesses: enable innovation, enable internationalisation, enable SkillsFuture and enable a more progressive regulatory environment for start-up businesses.

What ties these together is our ability to implement our industry transformation maps well because they cover 80 per cent of our sectors. Implementation is key. The labour movement wants to work with our Institutes of Higher Learning (IHLs) and businesses to strengthen the job placement system for everyone. We want to form the national database; we will integrate the back end so that it does not matter which career centre you go to. We're even prepared to work with agencies like LinkedIn to ensure that we do our placements well and do them faster.

But placements are only for today's unemployed. We have to prepare to help tomorrow's unemployed into tomorrow's jobs, to overcome potential structural unemployment. This is why NTUC is raising $200 million on top of what we have in our NTUC education and training fund to work with our IHLs to come up with national modules, stackable modules and just-in-time modules. This will require a national effort. We need to do much better. I have never been entirely satisfied with our speed to market for generating new modules relevant to industry needs.

Protection. Many of the labour MPs spoke about protection for freelancers and contract workers. These are new forms of employment and we need new mental models to help these workers protect their legal rights, financial rights, help them to plan for their retirement and so forth. That is why the Ministry of Manpower is initiating a work group with businesses and the labour movement to study the implications of such long-term structural changes to our employment market. We have to get this right, to make sure that all working people can have peace of mind.

Finally, jobs for tomorrow will require us to work very hard on productivity. I visit one to two companies every week. There's no magic bullet to raise productivity just by macro policy measures. Each and every business has to re-examine its processes together with workers and management to raise productivity. It is a hard slog but we are committed to this. This is where the 23 industry transformation maps come in. They are the amalgamation of the efforts of the Government, businesses and labour movement. We get this right, we move the needle for 80 per cent of the market. If we don't get this right, there will be no productivity gains and no sustainable wage increases for our workers.





Government will help firms seize opportunities: S. Iswaran
SMEs will get all possible help to pursue growth in a changing world, he promises
By Chia Yan Min, Economics Correspondent, The Straits Times, 1 Mar 2017

Amid the challenges they face in a slowing economy - and a changing world - small and medium-sized enterprises (SMEs) will get all possible help from the Government to transform themselves into future engines of growth.

Minister for Trade and Industry (Industry) S. Iswaran gave this commitment on the first day of debate on the Government's Budget for the coming financial year, after several MPs highlighted the squeeze that SMEs were feeling.

After the Committee on the Future Economy report and the Budget statement, he said, the key question was where the opportunities for growth lay and how Singapore could seize them.

Fortunately, Singapore was situated in the heart of the region - Asean, China and India - that was driving global growth, he said.

At the same time, cities in Asia were looking for urban solutions and to build their infrastructure - areas in which Singapore companies were well known.

The digital economy also offered an opportunity for even the smallest company to seek customers in the farthest markets, he said.

"Our challenge is to ensure that our companies are geared up for the longer term so that they can seize these opportunities," said Mr Iswaran.

That is where the Government planned to step in and help firms, especially the smaller players, grasp these chances.

There were schemes being put in place to help SMEs internationalise, he said. This included the Budget's $600 million International Partnership Fund to help firms expand abroad.

The Government also had a suite of loan programmes ready to help SMEs finance their expansion.

The SMEs Go Digital Programme, announced during the Budget, would help SMEs digitise their products and services, he said.

In addition, there was also a variety of schemes available to SMEs to develop the skills of their workers.

He added a caveat. The environment was more uncertain and the Government's emphasis was on broad measures to help industries as a whole.

"Companies that are prepared to go further and faster will get more help," he said. "But that does not mean we are picking winners. The winners are picking themselves and adapting to our schemes."

He cited several companies, such as Memiontec and HipVan, that have seized such opportunities.

Mr Iswaran's speech came after six of the 10 MPs who spoke before him expressed concerns that the Budget did not offer enough aid for SMEs hit by the slowing economy.

He said that in the shorter term, there were targeted measures for sectors that had been harder hit, such as marine and offshore engineering, and construction.

But the most durable solution lay in moving up the value curve, innovating and offering products and services that others were not offering, he said.

"There is no lack of government resolve or resources available to help our companies, especially SMEs, successfully transform."









Businesses feel the pinch of higher costs, say MPs
They understand reason for moves, but hope more can be done to help firms cope
By Charissa Yong, The Straits Times, 1 Mar 2017

The water price hike and new diesel tax announced in this year's Budget are a strain on smaller businesses already grappling with higher operating costs, five MPs said yesterday.

While they acknowledged that the Government had valid reasons for the measures, they hoped more could be done to help companies cope with these new costs.

Such relief would be especially helpful in the current uncertain business environment and slower economic growth, they added.

Said Mr Lim Biow Chuan (Mountbatten): "I don't believe that businesses are hoping for a handout from the Government.

"What they are appealing for is a business climate which is less costly and friendlier to businesses."

About one-third of the 17 MPs who spoke on the first day of the Budget debate addressed the challenges of running a business in Singapore.

Opening the four-hour debate in Parliament, Mr Liang Eng Hwa (Holland-Bukit Timah GRC) said: "The general response from businesses to this year's Budget has not been positive."

Companies are feeling the effects of sluggish growth, added Mr Liang, who is chairman of the Government Parliamentary Committee for Finance and Trade and Industry.

There are fewer orders and "as a result, more competition and compressed (profit) margins". "At the same time, they see business costs continuously creeping up," he said.

"The increase in water prices and the diesel duty do not help the situation, even as the businesses can understand the reasons for the hikes," he added.

In his Budget statement on Monday last week, Finance Minister Heng Swee Keat announced a 30 per cent increase in water prices that will be implemented in two phases, on July 1 this year and July 1 next year. The diesel duty, however, took effect immediately on Budget Day, with 10 cents imposed on every litre for several diesel products to curb usage.

MPs noted that some industries were hit badly and this may, in turn, affect households via higher costs of living.

Mr Liang said food manufacturers were concerned as water and diesel form a significant part of their production chain.

There are also no direct rebates in the Budget to help them.

Similarly, Non-Constituency MP Dennis Tan said transport and delivery costs would go up since diesel oil is the primary fuel for delivery trucks and vans. "This will affect the operating cost of businesses that depend directly or indirectly on transport services," he said in Mandarin.

Non-Constituency MP Leon Perera criticised the hikes as coming too soon, as electricity tariffs, gas prices and parking fees had been raised in recent months. He said: "Why introduce all these price hikes now, at a time of relative economic fragility, when they could tip some SMEs at the margins over the edge?"

Workers' Party MP Pritam Singh (Aljunied GRC) said the Government should reveal more details of how water is priced, so Singaporeans can better understand why water prices are being raised by 30 per cent. For instance, he wanted to know how the cost of maintaining water infrastructure, including pipe networks to transmit water, has changed over the years.

He also asked for the cost of producing water in the different desalination and Newater plants, and whether falling water levels in Johor's Linggiu Reservoir - from which Singapore draws water - was a factor in the decision to adjust the water prices here.

Mr Singh also suggested that water prices be adjusted to reward households that use less water, such as offering a 10 per cent rebate for those who show a corresponding drop in water consumption.

Nominated MP and Singapore Chinese Chamber of Commerce and Industry president Thomas Chua acknowledged that the Government raised water prices to ensure a sustainable supply.

But companies do not see it this way, he said. "The major concerns of businesses are operational costs, while the Government's concern is the nation's mid- to long- term competitiveness."

He hoped the Government would help reduce costs, and urged firms to review their operations if they cannot keep up with these changes in the external environment.

Said Mr Chua: "Singaporean enterprises have to innovate boldly in order to adapt to this new business environment."

Additional reporting by Chong Zi Liang










Opportunities for firms willing to innovate, go global
By Chia Yan Min, Economics Correspondent, The Straits Times, 1 Mar 2017

Singapore's maturing economy is adjusting to a slower pace of growth, but there are still significant opportunities available for companies keen on innovating and expanding abroad, Minister for Trade and Industry (Industry) S. Iswaran said yesterday.

Also, measures have been put in place to help companies in the worst-hit sectors.

He stressed that Singapore's long-term prosperity hinges on it being able to nurture and grow innovative companies, especially small and medium-sized enterprises (SMEs).

Mr Iswaran was speaking during the Budget debate, after several MPs lamented the lack of financial relief for struggling SMEs.

Businesses are hoping for some relief, Mr Lim Biow Chuan (Mountbatten) said, adding: "However, it seems their hopes will not materialise... For most of the smaller businesses, this year's Budget is a non-event."

Nominated MP Thomas Chua, who is president of the Singapore Chinese Chamber of Commerce and Industry, was circumspect. It will be tough to strike a balance between businesses' short-term concerns about operational costs and the Government's longer-term considerations about the country's economic competitiveness, he said.

Mr Iswaran said performance across sectors has been uneven, with some facing significant headwinds.

While the Budget did not introduce additional broad measures for companies, the hardest-hit industries had received some short-term relief.

For instance, measures rolled out last November for the marine and offshore engineering sector aimed to help companies meet short-term cash flow needs and get new loans to continue to take up projects.

Levy hikes for work permit holders in the marine and process sectors were also deferred for another year.

The 2016 SME Working Capital Loan has acted as a catalyst in the disbursement of more than $700 million in loans to about 4,300 SMEs, he noted.

Mr Iswaran stressed that companies need to gear up for the long term and be prepared to take advantage of emerging opportunities in key sectors.

Citing infrastructure and urban solutions, he said: "Our infrastructure and urban solutions companies are held in high regard and can participate... in partnership with their Chinese, Indian and regional counterparts. This is not just an opportunity for big players."

He reiterated that SMEs are at the centre of efforts to transform Singapore's economy. He listed a plethora of schemes to help companies expand overseas, innovate and deepen their capabilities. These include:
- $400 million in grants to companies going international.
- The $36 million Technology Adoption Programme and the $45 million Get-Up scheme to build up innovation capabilities by seconding public-sector researchers to SMEs.
- A suite of loan programmes that will collectively catalyse $5 billion in loans up to 2020.
"The Government is resolute in our commitment to help our SMEs (transform) successfully. Large companies do not necessarily need this breadth of support.

"It is the small companies that need them," Mr Iswaran said.










S.Iswaran: SMEs are 'a central focus in transforming our economy'
The Straits Times, 1 Mar 2017

An edited extract of Minister for Trade and Industry (Industry) S.Iswaran's speech in Parliament yesterday

After the Committee on the Future Economy (CFE) report and last week's Budget statement, there has been much discussion on the economy in the lead-up to this debate. The central questions are where are the opportunities, how do we position ourselves to seize them, and what can we do to deal with short-term challenges. These involved policy decisions and trade-offs. These sentiments have also been echoed by some members today.

THERE ARE SIGNIFICANT OPPORTUNITIES FOR SINGAPORE COMPANIES IN THE REGION

Last year our economy grew at 2 per cent, with growth picking up in the final quarter. Between 2011 and 2016, we averaged 3.1 per cent, which is comparable to other advanced and regional economies. The CFE expects annual growth of 2 to 3 per cent over the next decade. This may be less than what we were accustomed to in the past, but it is consistent with our stage of economic development, our demographic profile, so we need to ensure that within the context of where we are today, we continue to emphasise productivity and innovation as part of the basis for continued growth. This is because with this standard of economic growth, which is not insignificant by international comparisons, it will allow us to continue to create opportunities for our businesses and good jobs for our people.

We are also situated at the heart of a region that is an important driver of global economic growth. Asean, China and India are bright spots, with the Asean-5 countries expected to grow at 4.9 per cent in 2017, China at 6.7 per cent and India at 6.6 per cent. Their growth emanates not just from the key regions and main cities, but increasingly from the next tier of cities and regions with which we might be less familiar. We need to go beyond traditional spaces and deepen our knowledge and acquire a more nuanced understanding of these new markets.

In tandem with this growth in the region, we see rapid urbanisation and the rise of the Asian middle class with greater disposable incomes and sophisticated demand in sectors like retail, lifestyle, F&B, education and healthcare.

These emerging opportunities play to strengths that we have developed over the years. One example is in infrastructure and urban solutions. McKinsey estimates that the demand for infrastructure in emerging Asian markets, particularly China, South-east Asia and South Asia, will grow by US$20 trillion (S$28 trillion) between 2016 and 2030.

China's One Belt, One Road initiative has heightened interest in regional infrastructure projects (road, rail, ports, airports). India's plan to build 100 smart cities needs adaptable and high-quality urban solutions. Our infrastructure and urban solutions companies are held in high regard and can participate in these opportunities, in partnership with their Chinese, Indian and regional counterparts. This is just not an opportunity for big players. In fact, it extends to SMEs like Memiontec and WaterTech Private, which tap into the demand for small-scale water and energy solutions in the region. In this Budget, the key initiative is really the extension of our Internationalisation Finance Scheme (IFS) for non-recourse financing. It is aimed at helping our smaller businesses go regional and seek opportunities.



The digital economy also presents unprecedented opportunities. The smallest company can now seek customers in the furthest markets as long as there is digital access. Companies, regardless of size, can reach out to customers anywhere through digital channels, transact with business partners and seek out payment solutions. Literally transformative. It is transforming industries and offering new ways to overcome our constraints and seek out new opportunities. That is why the CFE has emphasised the importance of enabling our companies to harness digital technologies and platforms. Some companies have already made the move. HipVan, a popular furniture and home decor store, has primarily used e-commerce platforms to build its business. Its customers make their purchases online; their manufacturing is distributed; and they work with logistics partners on delivery. It also deploys data analytics and digital marketing tools to spot trends and expand their reach internationally. HipVan has reinvented the traditional furniture business model through digitalisation. We have also seen initiatives from larger companies to establish digital platforms for the benefit of SMEs. Just today, Singtel, a co-founder of the 99% SME movement along with DBS, announced a partnership with Lazada to set up an SME e-marketplace, and help SMEs tap into a wider online customer base.

HELPING SMES SEIZE THESE OPPORTUNITIES

These are just some examples of the opportunities that lie before us. Our challenge is to ensure that our companies are geared up for the longer term so that they can seize these opportunities. This is especially important to sustain our competitiveness and growth as others are also similarly adapting themselves. Hence, this is a key focus of the Government's economic efforts. The Industry Transformation Maps are a key modality with sector specific strategies that will cover three broad areas:

First, to grow top line and scale, we support companies in internationalisation and financing.

Second, to remain competitive, we support capability development, both to innovate and raise productivity.

Third, we support the development of deep skills in our workers.

In all of these assistance and development efforts, the primary focus and beneficiaries are our SMEs. And for good reasons. First, SMEs are a significant part of our economy. They account for about half of our GDP growth and two-thirds of employment. To effect change and transformation in the economy, they have to accept the reality, embrace the change and be change agents. Second, individually, they often lack the scale to make the investments necessary to cope with the changes taking place and to benefit fully from the opportunities. Finally, they are the key engine of our future growth and integral to the competitiveness of our economic clusters. As SMEs scale, they will create more opportunities and jobs for Singaporeans.

Therefore, the Government is resolute in our commitment to help our SMEs make this transformation successfully. Large companies do not necessary need this breadth of support. It is the small companies that need them. Let me briefly outline five areas in which we support SMEs.

GROWING TOP LINE AND SCALING UP: INTERNATIONALISATION AND FINANCING

First, internationalisation. If you are a company taking the first step towards internationalisation, you can tap on IE's Market Readiness Assistance and the Global Company Partnership Scheme to study and understand the market before growing your international footprint. We have set aside $400 million in grants to support internationalisation. The Government can be an enabler but we cannot make the decision for the companies. In this Budget, we have set up the $600 million International Partnership Fund to co-invest with firms to help them expand overseas.

Second, financing. The Government has a suite of loan programmes which will collectively catalyse $5 billion in loans up to 2020. This includes the SME Equipment Loan and the SME Factory Loan. The Monetary Authority of Singapore has also recently reviewed our regulations to enhance the ability of finance companies to provide financing to SMEs.

Earlier, I mentioned that the infrastructure sector in particular afforded significant growth opportunities for Singapore companies. At this Budget, we also introduced the IFS for Non-Recourse Financing to help SMEs participate in these opportunities. This scheme is designed to encourage financial institutions to provide non-recourse loans to SMEs once projects move into the post-construction stage, so that SMEs can free up their balance sheets to take on new projects. The constraint today is that small businesses tie up their resources through personal or corporate guarantees and it limits their ability to take on new projects.

This scheme is targeted at helping businesses in an effective way. Over the next five years, we expect to catalyse $600 million dollars in loans, which will correspond to approximately $1 billion in infrastructure projects.

HELPING SMES STAY COMPETITIVE: INNOVATION AND CAPABILITY DEVELOPMENT

Third, innovation. Our SMEs want to create new products and services that can differentiate them in the market but they are constrained by resources available for R&D. Hence, we have a range of schemes ($100 million) to help SMEs commercialise intellectual property (IP) through our network of Centres of Innovation; and to help SMEs build up their innovation capabilities through the secondment of public sector researchers to our SMEs ($36 million Technology Adoption Programme and $45 million Get-Up scheme). At this Budget, we announced the A*Star Tech Access Initiative, to help SMEs gain access to costly specialised equipment, user training and advice; and extended the A*Star Headstart Programme, which lets SMEs enjoy royalty-free and exclusive IP licences for 36 months, up from 18 months.

Fourth, capability development. SMEs can tap on the Capability Development Grant (CDG) for larger-scale projects, including automation under the Automation Support Package. CDG also supports projects to raise productivity and develop new competencies. SMEs can also utilise the Innovation and Capability Voucher to flexibly take on smaller upgrading projects. We also have Pact, the Partnership for Capability Transformation scheme, where SMEs collaborate with larger companies to develop new capabilities.

Further, at this Budget, we announced the SMEs Go Digital Programme, which will help SMEs digitalise their products, services and processes. Overall, we have set aside $1.5 billion of grant support for such capability development in SMEs.

HELPING SMES DEVELOP THEIR WORKERS' SKILLS

Finally, skills. We are making a significant investment in developing the skills of our people through SkillsFuture. To help SMEs tap on SkillsFuture, we have put in place initiatives such as the SME Talent Programme, the SkillsFuture Mentors Scheme and the SkillsFuture Earn and Learn programme.

In each of these areas, there are continual efforts to make Government support more accessible to SMEs, through initiatives such as the Business Grants Portal, the SME Digital Technology Hub, as well as the new IP Master Agreement. SMEs can approach the SME centres or go to our SME portal or economic agencies to find out more. There is no wrong door, and they will help you navigate. They key is we have this plethora of support.

Fundamentally, we are in a more uncertain environment. Therefore the emphasis is on a broad range of measures and schemes that are the key platforms to raise the industries as a whole. Companies that are prepared to go further and faster will receive more support. But that does not mean that we are picking winners. The winners are picking themselves and adapting to our schemes.

The impact of such programmes is amplified when the trade associations and chambers come on board to take the lead and get firms in their sector to act together. One good example is the logistics industry - where associations such as the Container Depot Association (Singapore) (CDAS) and the Singapore Logistics Association (SLA) play important roles.

The logistics industry is a traditional strength of ours, and is poised to tap on Asia's rising middle class and the growth of e-commerce. It will harness emerging technologies such as data analytics to improve service delivery. For example, CDAS has launched the electronic container trucking system (with help from Spring) to streamline container logistics operations and improve container supply chain visibility. To go international, SLA has worked with IE to help its members better understand growing markets, including a study mission to understand the investment and business opportunities arising from China's One Belt, One Road initiative.

To help train workers for the new jobs being created, the SLA also plays an active role in attracting and training talent for the industry through its training arm, The Logistics Academy.

As evident, there is no lack of Government resolve or resources available to help our companies, especially SMEs, successfully transform. But we are aware that there is significant variation across sectors and some are facing significant headwinds. For example, the electronics sector grew by more than 15 per cent in 2016, while the transport and storage sector grew by 2.3 per cent. On the other hand, the marine and offshore engineering segment has contracted for nine successive quarters.

These variations exist because sectors face different cyclical and structural conditions. For example, lower oil prices have severely affected demand in the marine and offshore industry.

The retail industry is coping with disruptive technological changes such as e-commerce which threatens to disintermediate some retailers, while creating new opportunities for others. These disruptive forces are playing out in other sectors too. At the start of this decade, Uber and Grab did not exist. Rapid developments in fintech and artificial intelligence (AI) are also disrupting the financial services, manufacturing and other services industries.

HELPING SMES OVERCOME SHORT-TERM DIFFICULTIES

The Government recognises these immediate challenges that our SMEs are facing. We will continue to provide short-term relief where necessary through the system of broad-based support we have built up over the years.
- To help with wage costs, we had introduced the Wage Credit Scheme and the Special Employment Credit (SEC) scheme. We also extended the additional SEC at this Budget until end-2019. Together, these amount to about $1 billion in cash pay-outs to businesses in March 2017.
- To help SMEs with liquidity, we had introduced the SME Working Capital Loan in 2016, which has catalysed more than $700 million dollars in loans to about 4,300 SMEs. We have also extended the corporate tax rebate and raised the rebate cap to $25,000, at 50 per cent of tax payable for year of assessment 2017.
We also closely monitor rental and other business costs. In 2016, industrial, retail and office rentals all fell. We will continue to maintain a steady pipeline of industrial land and space to ensure that there is competitive pressure in the market and rents remain affordable.

We have not introduced further broad-based measures, but we have put in place customised support for specific industries due to their varied circumstances. For example,
- For the marine and offshore engineering sector, we introduced the M&OE Engineering Bridging Loan and the M&OE Internationalisation Finance Scheme in November last year. Not a panacea, but some consolidation is inevitable. The the aim is to preserve the core capabilities that we have built up over the years by helping some M&OE companies to meet short-term cash flow needs, and secure new loans to continue to take up projects. We expect these two schemes to catalyse approximately $1.6 billion in loans over one year.
- For the marine and process sectors, we have deferred levy hikes for work permit holders.
- To support the construction sector, which has been weighed down by the property market slowdown and economic uncertainties, we are bringing forward $700 million of public sector infrastructure projects to start in FY17 and FY18.
These measures are an illustration of a more targeted response and support for SMEs and other businesses from Government, complementing the broad-based measures we already have in place, in response to the varied needs in the economy.

In summary, the opportunities before us are significant. To seize them, we must invest in the capabilities of our economy, people and enterprises, especially our SMEs. The most durable solution lies in moving up the value curve, innovating, offering products and services that others are not offering, and adopting management methods and techniques that will close the big gaps in productivity in some sectors compared to international best practices. The Government is resolute in our support, through broad-based and targeted programmes, to help our SMEs make this transformation successfully. We do not pick winners, but will support companies that are prepared to make these important transitions. And in all of these efforts, SMEs are our central focus.

Ultimately, creating vibrant, competitive industries with strong capabilities is the surest way to ensure the success of all our businesses, including the SMEs. The Government looks forward to working closely with trade associations and chambers, and unions to ensure a diverse enterprise eco-system, a thriving SME community and a strong economy rich with opportunities.





Related
Singapore Budget 2017
Budget 2017: Moving Forward Together
2017 Budget Statement debate in Parliament
Budget 2017 Committee of Supply Debate: MINDEF, MHA, MFA, MTI, MinLaw, PMO
Budget 2017 Committee of Supply Debate: MOE, MND, MOF, MOM, MCI
Budget 2017 Committee of Supply Debate: MOH, MCCY, MOT, MEWR, MSF

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