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Budget 2012 Debate Round-Up Speech by Deputy Prime Minister and Minister for Finance, Mr Tharman Shanmugaratnam

01 Mar 2012

Deputy Prime Minister and Minister for Finance, Mr Tharman Shanmugaratnam, delivered the Budget 2012 Debate Round-Up Speech in Parliament on 1 March 2012.

Read the full speech here. (icon_pdf355 KB)

Follow-on clarifications by MPs after RUS

Mr Low Thia Khiang:

Thank you, Sir.

1.   Sir, DPM said earlier that the Workers’ Party has shifted its position on foreign workers. This is incorrect. Nowhere, either inside or outside this house, have we said that Singapore does not need foreign workers. The main complaint of the party, as well as people outside this house, is that foreign workers are taking away Singaporean jobs which in turn depress the wages of Singaporeans.

2.   Sir, to clarify further, he refers to our Manifesto. Our Manifesto states that we have to carefully calibrate foreign workers in relation to different industries, and also welcome foreign workers who add value to Singapore.

3.   Sir, nowhere have we said that we do not need foreign workers, or we do not need foreigners to help Singaporeans. That is the first clarification I want to make.

4.   Sir, DPM also said that there is no need to apply an industry-specific dependency ratio or levy. He added that the current lever of control, dependency ratio as well as the foreign worker levy, at the sectoral level is sufficient.

5.   Sir, I'm not convinced with that. I am of the view that if you want to do this productivity successfully, we will need micro-management and not just macro-management. Each industry has its own features and difficulties, and foreign worker is a lifeline to them, at least for now. So I am not convinced that we should just use a macro-lever to manage and to achieve the productivity growth and the targets we want.

6.   Sir, the next clarification is on DPM’s reference to my speech on first-world social safety nets. He said that he is very worried about it because it also means that we must also have the first-world level of taxes to support such a system.

7.   Sir, I suppose DPM know very well that the first-world countries basically look at how to ensure that their own citizens are well looked after whether it is in terms of healthcare or retirement. These are things that we are looking for. Of course, I understand the government is particular about outcomes. The challenge to this government is: Can we have the outcomes of the first world countries' social safety nets, without the same level of taxes?


8.   Let me address your questions in turn. First, the Workers Party has said, and I remember the debates and what was in your Manifesto, that we have let in too many foreign workers at the lower end. Your recent comments in this debate, however, express great concern over how fast we are tightening our dependency ratio ceilings for work permit holders and recognised that there has to be a very careful balance even at the lower end. I think that shares our perspective. We need to manage this balance well.

9.   I hope this sting you have taken out of your earlier criticisms is not just a political strategy because you know the sensitivities on the ground amongst SMEs about having to restructure, but also recognises the more basic reality. The growth of foreign workers in Singapore has not only benefited SMEs, but has also benefitted Singaporean's incomes. I have shown the data three years in a row - shown how low-income and middle-income Singaporeans have fared in the last 5 years, as the demand for workers picked up. There will always be competition for individual jobs. But overall, Singaporeans have benefitted from the dynamic of competitive enterprises and rising labour demand in our economy. Singaporeans have also benefitted more than any other countries. It has been a successful strategy, and that was the reason why you were wrong in criticising the government for a strategy of allowing companies to stay competitive and grow.

10.   Second, on micro-management, this is a practical issue and I think you made the suggestion with the best of intentions. When you are meeting the businessmen, they will often ask you: "Why not give us a bit more? My business is one where I really cannot attract Singaporeans. They will not come as it is too far, or the work is too dirty and so on." How did the Mittelstand in Germany become what they are today? Why were they able to beat lower cost competitors in China? It is by constant upgrading - so that the dirty job can become a cleaner job, with more skills and more knowledge. So our challenges are as what Mr Lim Swee Say said yesterday. Restructuring is unavoidable; the alternative is even more painful. Let's work with the SMEs to help them restructure.

11.   I think you made the suggestion with the best of intentions. However, I have pointed out that the result of that approach will be faster foreign worker growth, lower productivity growth, and some inequity between firms. I am sure you did not intend for this, but that will be the outcome of that strategy.

12.   Third, the issue of the first-world safety nets. The truth of the matter is that this has not just been about the aspirations of first-world Governments to provide this high-level safety net for their citizens. It has, inadvertently, been a trick on future generations. They have postponed the bill to future generations, and precisely at the wrong time. The bill is being borne at a time when the working population is getting smaller relative to the older population. Some politicians knew about this, but continued because that was in the nature of single term democratic politics, where you don't look beyond what happens in one term. Many people did not know about it. Populations were fooled and now populations are paying the price. This is why they are not just going through a financial crisis, but a social crisis that is going to last for many years. So let's avoid getting anywhere even close to that.

Mr. Cedric Foo:

13.   Sir, I would like to ask the DPM about the funding of buses. It is quite reassuring to hear that it is really for the benefit of commuters and not the shareholders of SBS Transit and SMRT. However, the projection that they will make losses as a result of this incremental injection of buses operating costs is an assumption. Ridership can change in many ways as new networks are added and more people may travel on it. We may become a very successful tourism hub. Would the DPM ring-fence the profit and loss from this particular injection, and adjust for it as necessary? Thank you.


14.   I thank Mr. Cedric Foo for his question. We expect the PTOs to make losses based on all existing estimates. If we are lucky and somehow the system is re-engineered so that the losses are less than expected, the $1.1 billion will be reduced. If, in the unlikely circumstance, they turn a profit, the funds will come back to the Government. None of the $1.1 billion will go towards profits for the public transport operators.

15.   It will be ring-fenced and their accounts will be scrutinised. They will be paid according to what the costs actually are. There will be a review in 5 years to check the parameters of the agreement.

16.   There is no reason why we would want to subsidise the profits for public transport operators. We are doing this to help consumers. This is a subsidy to consumers so that, as we wait for the major expansion of our rail system, we can improve service l evels on a daily basis.