Budget Casts Eye on the Future, Takes Pulse of the Present25 Mar 2016
Included are S$4.5b programme for restructuring, measures to address short-term pressures
By Kelly Tay
MAKING his first Budget speech as Finance Minister, Heng Swee Keat announced a S$4.5 billion economic programme to integrate Singapore's restructuring efforts, even as he introduced measures to address short-term pressures.
He also placed a strong focus on social policies - a leftward shift started by his predecessor, Deputy Prime Minister Tharman Shanmugaratnam - and rolled out more help for Singaporeans of lesser means.
Private-sector economists applauded the Budget's wide-ranging and inclusive tone.
Calling Budget 2016 a "well-balanced and transformative" one, DBS economist Irvin Seah said: "Efforts were made to address short-term cyclical concerns while maintaining the focus on medium-term economic transformation, and there was something for everyone.
"Though relatively more emphasis was placed on businesses in this Budget, there were measures to address some household and social issues, creating an appropriate balance between the need to transform the economy and the need to foster inclusive growth."
Through his close-to-two-hour speech, Mr Heng repeatedly emphasised the need to remain adaptable, especially in the face of major structural changes abroad and at home.
"We have no instruction manual for our future . . . Together, we must be prepared to change. We can't always know the future, and we won't always have ready answers. But we must have the imagination to forge new paths, the courage to try new ways, and the tenacity to persevere if we don't succeed on the first try," he said.
The government is projecting an overall Budget surplus of S$3.45 billion (0.8 per cent of the gross domestic product or GDP) in FY2016, which is the first year of the new term of government. Said Mr Heng: "Our position seeks to strike a balance between being prudent, given the continued rise in expenditures we expect in the years ahead and being accommodating in supporting enterprises in the current economic climate, even as we continue our restructuring efforts."
Total spending in FY2016 is expected to be S$5 billion or 7.3 per cent higher than in FY2015, with increases mainly in health care, education, security and urban development.
Notably - and unlike what some had been hoping for - none of that spending is going towards counter-recession measures like those seen in 2009.
Mr Heng said: "That was when the economy was already in deep recession, and facing huge uncertainty. For now, while the outlook is soft, MTI (Ministry of Trade and Industry) expects positive growth in 2016. We must not let pessimism take hold, lest it creates self-fulfilling expectations. The government will continue to monitor the situation, and stands ready to act if conditions warrant." Instead, Singapore is channelling S$4.5 billion over five years towards a new Industry Transformation Programme (ITP), which takes a more targeted and sector-focused approach to economic restructuring, unlike the broad-based Productivity and Innovation Credit (PIC) scheme, which will expire after Year of Assessment 2018.
It also pushes for deeper partnerships between government and industry, and places a stronger emphasis on technology adoption and innovation. "Our efforts to raise productivity, develop our people and drive research and innovation are working, but we can maximise the impact by pulling these together," said Mr Heng, even as he acknowledged that productivity growth has fallen short of expectations.
One initiative under the ITP is the Business Grants Portal, which will eliminate the need for firms to go from agency to agency to figure out which government schemes apply to them. It will be launched in the fourth quarter of this year.
Tax experts at KPMG and Ernst & Young Solutions said that small and medium-sized enterprises (SMEs) would welcome the move, since many have found the range of incentive schemes confusing. Indeed, Mr Heng admitted that the current grants landscape "is an alphabet soup" and is "scheme-centric, not enterprise-centric".
Other measures include a package to fund companies' automation projects, as well as efforts to forge closer partnerships with trade associations and chambers.
But beyond more long-term initiatives like the new ITP, Budget 2016 also addressed more immediate concerns - just as companies had hoped. "I am aware that current business conditions are difficult and uncertain," Mr Heng assured firms. In line with this, he announced enhancements to the existing Corporate Income Tax Rebate, and the extension of the Special Employment Credit. And with the challenging business conditions in the marine and process sectors, levy increases for work permit holders there have been deferred for one year.
On the social front, Mr Heng announced several support measures for families with children - including an automatic S$3,000 grant for eligible babies born from March 24 this year. He also introduced details of the Fresh Start Housing Scheme, which provides a grant of up to S$35,000 for eligible second-timer families with young children in rental housing, who are looking to own their own home.
Enhancements were made to the Workfare Income Supplement Scheme as well, with the qualifying income ceiling raised from S$1,900 a month to S$2,000 a month.
Eligibility criteria for the Silver Support Scheme was also announced. It will benefit more than 140,000 seniors and will cost close to S$320 million in the first year.