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Tharman maps out path to transform S’pore economy

Companies, jobs and social norms must change if effort is to pay off

LEONARD LIM on 06 Mar 2014

Singapore Press Holdings Ltd


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DEPUTY Prime Minister Tharman Shanmugaratnam gave a progress report yesterday on Singapore’s economic restructuring journey, and spelt out how companies, jobs and social norms must transform if the national effort is to be a success.

Productivity growth fell 2 per cent in 2012 and was flat last year, and numbers in recent years have been dismal, Mr Tharman, who is also the Finance Minister, acknowledged as he wrapped up two days of debate on his Budget statement.

But, referring to a graph that showed the change in productivity levels in several countries, he argued for a long-term perspective to be taken.

In 1980, Singapore’s productivity was about 40 per cent of that of the United States. Today, it is 70 per cent of the US level.

This was a major shift, he said, adding that it was also slightly higher compared with Japan’s, and was “not a bad achievement”.

He set out how the pace of restructuring is also important, with Singapore avoiding shock therapy and plumping instead for change at a steady clip. Changes to foreign worker limits in specific industries, for instance, have been made in phases.

Singapore’s productivity push also does not come at the expense of shedding jobs as is the case in other countries, but with the employment rate rising, he said.

Mr Tharman outlined a three-pronged approach for the future, with the first priority on transforming small and medium-sized enterprises (SMEs), by helping them tackle high business costs and a tight labour market.

The Government will continue to give them substantial help, he said, but added that the permanent solution to rising business costs is to raise productivity.

Second, Singaporeans will get help to prepare for jobs of the future. The Government will pour resources to create “one of the best systems of lifelong learning” to complement the country’s “world-class” school system.

Third, there needs to be a broad shift in societal norms, a point he made in his Budget statement and which many MPs commented on during the debate.

He cited two examples: Seniors must want to keep working to preserve their self-worth rather than for money; and consumers accepting self-service as a norm.

Almost all the 54 MPs who spoke in the debate since Monday praised the Budget’s centrepiece: The raft of health-care benefits in the Pioneer Generation Package.

Mr Tharman acknowledged their strong support but also cast his eye on the future, stressing that providing good quality health care at affordable prices for all citizens will remain a priority.

It poses a fiscal challenge, however, for the Government.

To give a sense of this, Mr Tharman noted that 450,000 Singaporeans, who are aged at least 65 this year, will benefit from the Pioneer Generation Package. But the next generation, aged 45 to 64, number one million and they will retire in the next 10 to 20 years.

Apart from the ageing population, official spending on health care will also rise as more treatments that improve the quality of life become available, Mr Tharman said.

Finding a balance between how much of the total bill is paid by the individual, employer and Government will be a very important challenge, he added.

He foresees the Government’s annual spending on health care ballooning from $4 billion in 2011 to $8 billion next year, and $12 billion by 2020.

Expenditure on housing, transport and education will go up as well, he said.

But the principle of a fair and equitable tax system, with a low tax burden on the middle income, will underpin how the Government raises more revenue.

Amid murmurs of high living costs, Mr Tharman said the Government will ensure that the incomes of low- and middle-income families grow faster than the cost of living.

Ending on an upbeat note, he referred to a point made by Pasir Ris-Punggol GRC MP Penny Low – that the over-riding goal of the pioneer generation was for their children to do better.

“Because they are like that, Singapore is like that, we are like that. Every Budget must be focused on our future, investing in our young, opening up opportunities and helping them to create a better Singapore,” he said.

Three challenges: Productivity, health and financing

Singapore is taking a middle path and avoiding shock therapy in restructuring the economy
“We have avoided shock therapy. That can work in theory, but in practice, there is high risk of good, viable firms being shaken out, as well as good jobs.”

Providing quality health care at affordable prices for all is a priority
“This is... the key fiscal challenge for our future, controlling total health-care spending and secondly, finding a fair balance in terms of who pays for that bill. A fair balance between the individual, the Government, the employer.”

Three principles will guide planning for future spending:
– maintain a vibrant economy
– ensure a fair and equitable system of taxes and transfers
– keep tax burden on middle-income group low

“We must be prepared for the years ahead and build up our revenues for the spending needs of the next decade and beyond.”

Source: The Straits Times © Singapore Press Holdings Limited. Reproduced with permission.

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