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SINGAPORE: Finance Minister Tharman Shanmugaratnam has unveiled a Budget aimed at helping Singapore become an advanced economy.
A key theme of the Budget: raising the quality of jobs, skills and the workforce so that workers can continue to earn higher incomes, and the economy, grow.
Singapore emerged from the global financial crisis better than expected, with an overall budget deficit of S$2.9 billion for FY 2009 - much lower than the original S$8.7 billion shortfall projected a year ago.
This year, it is expecting a deficit of S$3 billion, as it spends on areas to boost productivity. The government's key focus is to raise productivity by 2 to 3 per cent a year over the next decade.
This will allow Singapore to maintain a healthy rate of economic growth of 3 to 5 per cent a year, even with a slower growth in the labour force.
While the economy saw a return to confidence in the last quarter - resulting in the better fiscal position - many observers have noted that the road to recovery is uncertain.
So the finance minister said the Budget 2010 set out ways to help Singapore succeed with new growth strategies. Hence the plans seemed to focus more on the long-term growth and health of the economy, and not just the short-term position.
The government has set aside S$5.5 billion over the next five years to help enterprises and workers raise productivity.
Mr Tharman said: "Raising skills and productivity is the only viable way we can achieve higher wages and is the best way to help citizens with low incomes. If we achieve this goal, we can raise real incomes by one-third in 10 years."
The minister signalled that some painful decisions may have to be taken. Less-efficient industries may have to exit Singapore, as the economy continues to restructure.
Mr Tharman said the government must rely on the market to achieve this restructuring.
Industries and companies will be given help to upgrade through tax benefits and grants to help to innovate and raise productivity, and invest in R&D and automation.
More will be pumped into raising the skills and tapping the potential of every worker. But this will have to be offset by reducing Singapore's dependence on cheap foreign labour.
To encourage companies to rely less on foreign workers, the government is imposing higher levies on foreign workers in phases over the next three years.
Mr Tharman said: "The government financial support that the business sector will receive for productivity upgrading will be significantly larger than the additional payment they have to make in foreign worker levies."
The government will pump in S$2.5 billion in over 5 years to enhance Continuing Education and Training.
It will also set up a high-level National Productivity and Continuing Education Council - to be headed by Deputy Prime Minister Teo Chee Hean - to develop a comprehensive system for lifelong learning.
In addition, there will be help for older and low-wage workers in a new Workfare Training Scheme.
The scheme is aimed at incentivising employers to send older workers for training by providing companies with up to 95 per cent funding for absentee payroll and course fee outlays.
For companies, there will be a Productivity and Innovation Credit so they can get tax deductions for investments in R&D and automation.
There are also a slew of measures to help grow more globally competitive Singapore companies. These include tax deductions for angel investors, growth capital for SMEs and incentives to expand sectors with high growth potential.
The government also wants to ensure that no one is left out as it pushes for more inclusive growth, by taking care of the lower and middle income. For example, property tax will be tweaked to be more reflective of the annual values of homes.
This means all HDB flat owners and most private property owners can expect to pay lower taxes through the new progressive property tax system introduced for owner-occupied residential property. The new system will apply for property tax payable from January 2011.
There are also tax reliefs geared to support families, and those with elderly and handicapped dependants, as well as for those who take care of their parents and grandparents.
Mr Tharman said: "Taking all our measures together, we will be spending S$1.4 billion this year in direct transfers for households. While most Singaporeans will receive some benefits, more will go to those with lower and middle incomes."
In wrapping up the nearly two-hour speech, Mr Tharman said while the government will commit substantial resources to support the national effort of restructuring the economy and improving the quality of jobs, the success of this will depend very much on the ingenuity and drive of Singaporeans and companies here.
- CNA/ir
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