Speeches

Ladies and Gentlemen

1. Good evening everyone. It is that time of the year again when we gear up for the Budget. Thank you all for attending this REACH Pre-Budget 2020 Dialogue.

2. Every year, in preparation for our national Budget, the Ministry of Finance seeks feedback from Singaporeans via different channels. The REACH dialogue is one such channel. 

3. Let me start by sharing the context of Budget 2020.

Increasingly Challenging External Environment

4. The international environment in 2019 has been challenging. This looks set to continue going into 2020. Factors affecting this include: 

• The effects of the US’ and China’s disagreements on trade and technology;
• The slowdown of the Chinese economy; and
• The downswing of the global electronics cycle. 

5. These strong external headwinds have dampened global trade and economic growth.  It is therefore no surprise that our own growth has slowed, and economic sentiment remains soft. 

6. More fundamentally, however, the world is also changing in deep, structural ways. 

• Globalisation and rapid technological advances have led to growing income inequality;
• This has contributed to widening political differences within societies;
• Democracies are experiencing fractures and cracks; and
• In response, many countries have turned inwards while others have seen unrest and uprising.

7. In this scenario, where does Singapore stand and what must we do?

8. We must do as we have always done, which is to navigate our way skillfully and carefully, and choose the paths that will lead us to growth, prosperity, and assurance for the future.

9. We must not go the way some other countries have gone. 

10. We must not turn inward and be insular. We must also guard against polarisation and instead work together as a team to harness our collective strength and abilities to address these challenges. Singapore is different from other countries. We must continue to remain different in order to succeed as a country.

11. We have a lot going for us.

• Our economic foundations are strong. 
• We have a diversified economy. 
• We continue to attract good companies and investments.
• We have a stable and pro-business environment, progressive regulations, and a skilled workforce. 
• These fundamentals allow us to remain nimble, and seize opportunities.
• Asia remains the fastest-growing region in the world. ASEAN countries continue to move up the value chain, and remain attractive destinations for global companies. 
• All these present good opportunities for Singapore. 

12. So the question is:  how do we position ourselves to make the most of these advantages?

13. One of the biggest tools at our disposal is our national Budget. We must see the national Budget as a strategic financial plan to position ourselves for the future. The Budget reflects our values and our priorities, and it deploys finance to achieve our national goals and objectives.  Hence, we want to craft this Budget in partnership with Singaporeans. 

14. The strategies for Budget 2020 can be summarized as follows:

• Transform;
• Support; and
• Sustain.

Transforming Our Industries and Workforce

15. On the economic front, our priority must be to help our businesses to innovate, go regional, and build capabilities. At the same time, we must help our workers upskill and reskill to seize new opportunities and good jobs. 

16. Since we can’t turn back the clock or reverse world events, we must push on with our economic transformation to deal with our new realities, and yet still grow and create good jobs and opportunities for our people. 

17. Our economic transformation is on the right track. All 23 Industry Transformation Maps (ITMs) have been launched, covering 80% of our economy. These have provided a useful roadmap for firms to transform themselves and strengthen their capabilities. 

18. Our firms are at different stages of growth. We need to provide the correct type and level of support to help firms with their ambitions to transform and strengthen their capabilities. The work of economic and business transformation requires many players to row together. We have already started speaking to business leaders and associations for ideas and inputs, and we welcome more from you and others. 

19. Many workers have upskilled and reskilled themselves. We encourage more to do so, and to take advantage of the SkillsFuture movement and the Adapt and Grow initiative. The Government wants to deepen our efforts on this front, and we welcome ideas on how else we can effectively support workers in career advancement.

Supporting Singaporeans 

20. Even as we undertake the transformation of our industries and workforce, we must ensure that our people are supported.

21. We will continue to support and enable young families. 

• Challenges faced by young families include financial costs and the lack of caregiving arrangements. 
• As family sizes decrease, there could also be less family support. 
• We will continue to ensure that families have access to quality and affordable housing, and good caregiving arrangements.  

22. We will also provide support for pre-school education. 

• As mentioned by PM at the National Day Rally, we will be increasing the number of government-supported pre-schools and enhancing subsidies for pre-school education. This will ensure that pre-schools remain accessible and affordable. 
• PM also announced the expansion of KidSTART, a programme that provides children from disadvantaged families with more targeted support, through regular home visits, weekly community-based sessions, and enhanced pre-school support. 
• Singapore’s annual spending of $840m on the preschool sector would more than double in the years ahead.

23. We are also firmly committed to supporting our seniors.  

• We want to help them to earn more, and save more.
• We are taking gradual steps to raise the Retirement Age and Re-employment Age, and plan to reach 65 and 70 respectively by around 2030. 
• This way, seniors who wish to work longer can do so. 
• To help them save more for retirement, we will also be raising the CPF contribution rates for senior workers over the next ten years or so. We will take the first step in 2021, and subsequent steps will depend on economic conditions.

24. We know that many Singaporeans are concerned about the cost of living. In this regard, we have many schemes to help Singaporeans manage cost of living for major expenditure items, including housing, healthcare, and education. 

25. However, despite this, we also know that in this economic situation, some wonder if they will be able to manage going forward. We are considering how best to support Singaporeans through this period. We welcome suggestions from the public on what forms of support might be useful and sustainable.

Ensuring Sustainability

26. Climate change is an existential threat, not just to us, but the whole world.

27. Under the Paris Agreement, Singapore has pledged to reduce our carbon emissions, and to stabilise our greenhouse gas emissions to peak around 2030. 

• In line with this, we introduced a carbon tax of $5 per tonne of greenhouse gas emissions. 
• Moving forward, we must continue to come up with strategies to encourage companies to adopt greener technologies and yet stay competitive, and see how we can further move towards being a low-carbon economy.
• As mentioned by PM, the Government plans to commit $100b or more over the next 100 years to ensure Singapore’s coastlines and infrastructure are protected from the effects of rising sea levels. 
• We will do the right thing and make plans now, for our children and our children's children. We will unveil some of the more immediate plans at Budget 2020. 

28. Even as we prepare for environmental sustainability, we must also ensure financial sustainability, especially if we are to provide care for our loved ones.

29. We have previously said that we will have to raise the GST rate sometime from 2021 to 2025.  

• The major reason for this is because there will be a sharp change in our demographic position. By 2030, 1 in 4 Singaporeans will be aged 65 and above – that is 25% of our population. 
• As people grow older, their healthcare needs will inevitably increase. We must make sure that we have enough to provide for their healthcare and to care for them.
• In addition, we need to invest heavily in pre-school and early childhood education over the next few years, so that every child, regardless of their background, will have a good start in life. 
• Our security spending is also expected to rise. We have to continually invest in our capabilities to counter ever-evolving security threats, including terrorism and cyber-attacks.

30. Over the past decade, government expenditure has more than doubled. While our operating revenue has also grown, it is still out-stripped by our growing spending needs. One main reason why we have been able to increase our social spending is the Net Investment Returns Contribution or NIRC. 

31. The NIRC has grown from $7b in 2009 to more than $17b in 2019. Part of the reason for this increase was the inclusion of Temasek Holdings in the NIR framework in 2015. 

32. These returns have been used for our growing expenditure. This has allowed us to maintain a fair and progressive system of taxes and transfers, where the low-income pay less taxes and receive more. 

33. However, the change in our age profile, and the need to spend more on healthcare, pre-school, and security – all of which are recurrent spending – will require a more sustainable or recurrent source of funding. The GST rate increase will allow us to meet these needs. 

34. To help Singaporeans cope with the increase, the Government will provide support in the form of an offset package to ease the impact of the GST increase during the transition. More details of this package will be announced at Budget 2020.

SGTogether Partnerships

35. The challenges facing Singapore in the years ahead will continue to grow in complexity. We must stay united as we navigate these waters. It will require the wit and wisdom of all Singaporeans to find solutions to these challenges and chart a new course for the future. It will also require us to act in unity – Government with people, and people with people, to see us through.

36. All of us, you and I, feel a sense of ownership of our nation and wish to have some part to play in shaping the future of Singapore. This is the essence of the SG Together movement. 

37. The 4G leaders will strengthen the Government’s partnerships with Singaporeans by engaging more stakeholders in deliberating Singapore’s future, through more direct ways, and by co-creating and co-delivering new policies and programmes, as indeed we are doing today in this dialogue. The suggestions and ideas you contribute today will help us shape ideas and initiatives for Budget 2020, and help plan our future.

Conclusion

38. I hope my remarks have been useful in setting the context for the dialogue, and I look forward to the good discussion ahead.