28.

Although the economic crisis has passed and our economy is now back on track, the budgetary positions in the years to come are expected to remain tight. There are two main reasons for this. First, as the Singapore economy matures, economic growth will slow down and revenue growth will also moderate. Second, with increasing globalisation and the lowering of investment barriers, competition for high value-added economic activities will become keener. This means that as we lower our tax rates to keep our tax system competitive, there will be downward pressure on revenue. The combined impact of these developments is that we can expect operating revenue growth to slow down over time.

29.

On the other hand, with rising affluence, the public will demand more and better services. However, as the budgetary outlook is expected to be tight, ministries can only meet these increasingly sophisticated expectations through more effective use of existing resources rather than through the employment of more resources. In other words, officers in the ministries would have to be managers rather than just staff officers.

30.

From the budgeting angle, the system in the past has been one based on giving more resources on the promise of increased output. However, this has the tendency to get MOF involved in the micro-management of the ministries. The budgeting paradigm has since been shifted to one of encouraging the ministries to get the most out of their allotted resources. Within that budgeting framework, ministries are assured of a built-in increase for their base budget which is dependent on the GDP growth rate. Any increase in budgetary provision beyond that would have to be justified on the basis of the priority of their programmes against others. In tandem with this, ministries have also been moved to looking at the desired outcomes that their programmes are intended to achieve rather than just looking at the outputs generated by the programmes.

31.

This in essence is the next phase of financial reform which MOF has undertaken to ensure that the Government makes the best use of its resources. It will require ministries to look at the total cost of providing services rather than just the cash cost alone. To achieve this, the concept of resource accounting within ministries will be introduced. Over the next couple of years, other resource management concepts and practices will also be introduced in stages.

32.

It is important that we continue to innovate and improve on the way we manage our resources. We have no choice. To remain competitive, we must keep Government expenditure as a percentage of the GDP low. Yet, there are more and more that we have to do in order to cater for the economic and social aspirations of Singaporeans. We can meet these seemingly contradictory requirements only if we continuously innovate and improve on the management of our resources.