MARCH 27 — There’s always a little fanfare around the annual Budget.
The finance minister, this year Heng Swee Keat, gets to take centre stage and basically present the government’s agenda to the public in the language that really counts — dollars and cents.
Of course this year was a little lower key than last year’s SG50 celebratory Budget. Then we saw rebates for everyone, a proto-welfare system in the silver support scheme and an encouraging skills credit scheme opening up the prospect of retraining for the workforce. This year the government isn’t in such a generous mood.
The economy is facing a protracted slowdown — buffeted by years of global crisis and now a slowing China (our leading trade partner) — and we can’t maintain our once stellar growth rates. While our economy isn’t in crisis, the government is predicting a rather vague 1-3 per cent growth rate this year; conditions are tough with several sectors facing stagnation.
The government’s response to the mounting economic challenges has been measured: tax relief and other support for SMEs, which are drivers for growth, and increases in infrastructure and education spending.
Government spending has gone up by about S$5 billion (RM14.7 billion) but this doesn’t amount to the strong stimulus some had been hoping for, though it does mean our nation’s considerable reserves remain largely intact as a war-chest for potentially bleaker times.
Overall the government is grappling with deep structural problems. Basically the game that took us from Third World to First is over.
1. Traditional growth drivers — manufacturing, electronics, construction, shipping and port-related activity — are no longer able to spur national growth rates.
2. Our population is ageing with fertility rates for citizens hovering at just above 1 birth per woman as opposed to the replacement rate of 2.1. The bulk of Singapore’s work force is now in the 40-60 age bracket and as these workers retire, there aren’t enough young people to replace them
3. As the domestic labour force is shrinking and increasingly expensive, our industries and businesses are reliant on imported labour. But with a backlash over the number of foreigners working in the country, the government has introduced curbs on foreign workers leaving businesses struggling for human capital
4. Productivity: To sustain growth with a shrinking workforce, we need to get more out of each worker; we need more skilled jobs and high value industries but Singapore’s productivity growth continues to be weak.
These fundamental problems need to be resolved before Singapore can return to stable and the government clearly acknowledges these issues.
This year’s Budget has seen investment in robotics, and increasing support for firms looking for opportunities overseas — where there are clear growth opportunities.
The government is also throwing money at babies — $$3,000 in credits awarded to every baby born after March 24, and increasing education spending shows clear intent to raise skill levels and productivity.
The initiatives are undoubtedly in the right direction. The government is reacting with targetted measures before we are in recession, in what seems a prudent attempt to pre-empt negative growth.
However, to an extent we’ve seen this before — incentives have been offered to Singaporean parents for years but the aversion to popping out more kids is deep seated.
Overseas expansion support has also been in place for years but the system is reliant on grant incentives which are open to abuse with spurious applications where the grant and not growth is an end in itself.
Foreign worker restrictions have been jigged and rejigged for years but local businesses are still dependent on imported labour and are still gasping for talent.
What is clear from Budget 2016 is the government is still waiting for the next big idea. Playing it safe until it knows which way the wind is blowing rather than burning its reserves and dramatically altering its labour and fiscal policies.
It’s a prudent approach but I wonder if our government can stay defensive forever. Eventually real stagnation will set in and the powers that be will have to reach for the big guns and bring on serious reforms.
Not this year though.
*This is the personal opinion of the columnist.
