SINGAPORE: The world is seeing deep structural shifts today, coupled with near-term concerns over economic uncertainties and the novel coronavirus outbreak, said Deputy Prime Minister Heng Swee Keat as he delivered his Budget statement on Tuesday (Feb 18).
“All nations, big or small, will have to devise strategies and mobilise their people to navigate these changes and turbulence,” he said.
And with that as the background, Mr Heng unveiled an S$83.6 billion Budget in his longest speech as Finance Minister, containing a four-part plan that he said will chart a steady path for Singapore to advance as a united country amid the uncertainties.
This sizeable expenditure, a 7 per cent increase from the S$78.2 billion for financial year (FY) 2019, comes as Singapore deals with COVID-19, and longer-term global challenges like declining support for globalisation, an ageing population and a weakening economy. This is the highest year-on-year increase since FY 2015.
Singapore’s economy grew by a modest 0.7 per cent in 2019, the weakest growth since the 2008 global financial crisis. The Government has also downgraded its economic growth forecast for 2020 to between -0.5 and 1.5 per cent.
But Mr Heng said Singapore can overcome these challenges by standing “as one”.
He said the Government will grow the economy and transform enterprises, care for Singaporeans at every stage of their lives, build a sustainable Singapore, and work together with fellow Singaporeans to build a home they can call their own.
Key highlights of the Budget include the setting aside of S$800 million for ministries to deal with COVID-19, a S$4 billion package to help workers and companies weather near-term economic uncertainties, and deferring the goods and services tax (GST) hike until after 2021.
And when GST is finally raised between 2022 and 2025, Mr Heng said the Government will provide a S$6 billion Assurance Package to cushion the increase for Singaporeans.
Still, Mr Heng said the immediate concern is to protect families and contain the spread of the virus.
The majority of the S$800 million will go to the Ministry of Health, on top of the “substantial resources” already committed each year to public health.
Beyond health concerns, Mr Heng acknowledged that Singaporeans are understandably worried about the impact on business and jobs.
COMPANIES GET HELP
To help local workers stay employed, the Government will defray their wage costs by offsetting 8 per cent of their wages up to a monthly cap of S$3,600 for three months, and raising the monthly wage ceiling for the Wage Credit Scheme from S$4,000 to S$5,000.
As for economy-wide support, the Government will grant a corporate income tax rebate for the assessment year 2020, at a rate of 25 per cent of tax payable capped at S$15,000 per company.
It will also increase the Enterprise Financing Scheme’s Working Capital Loan component from a maximum of S$300,000 to S$600,000 for one year, and explore more flexible rental payments for tenants and lessees of Government-managed properties.
RELIEF FOR HARDEST-HIT SECTORS
To retrain and reskill workers in the hardest-hit sectors of tourism, aviation, retail and food services, the Government will under the Adapt and Grow Initiative extend the funding period for reskilling from three months to up to six months.
The tourism sector will get a property tax rebate of 30 per cent for 2020, specifically for the accommodation and function room components of licensed hotels and serviced apartments, as well as prescribed Meetings, Incentives, Conventions and Exhibitions (MICE) venues.
The aviation sector will get rebates on aircraft landing and parking charges, rental rebates for shops and cargo agents at Changi Airport, and assistance for ground handling agents. Changi Airport will receive a 15 per cent property tax rebate.
Under the retail and food services sectors, stallholders in National Environment Agency-managed hawker centres and markets will get a full month of rental fees waived. Other Government agencies will provide half a month of rental waiver for commercial tenants.
Qualifying commercial properties will also get a 15 per cent property tax rebate, with Mr Heng urging landlords to pass this on to tenants by reducing rentals.
DEFERRING GST INCREASE
On deferring the planned GST hike from seven per cent to nine per cent until after 2021, Mr Heng said the decision came after the Government reviewed its revenue and expenditure projections and considered the current state of the economy.
However, he said the GST increase will still be needed by 2025, after which an Assurance Package - designed to give more help to lower-income households - kicks in.
Under the package, every adult Singaporean will receive a cash payout of S$700 to S$1,600 over five years. In addition, the Government will improve the permanent GST voucher scheme to ensure it continues to offset different amounts of GST for various households.
Mr Heng then moved on to more global challenges, including declining support for globalisation, a shift in global economic weight towards Asia, the rapid advancement of technology as well as the risk of technological bifurcation, and the transition to an ageing society.
Mr Heng warned of growing sentiments about the failure of globalisation and the multilateral system, leading to a rise in protectionism and nativism.
Governments have also struggled to maintain spending on social safety nets and welfare programmes, he said, highlighting that it is happening at a time of weakening global economic growth.
Friction in the US-China relationship is a major source of tension and uncertainty, he added, affecting global growth.
Mr Heng said this year’s Budget is Singapore’s “strategic financial plan” for the country to meet these challenges and seize new opportunities.
GROWING THE ECONOMY
The first part of the plan is to grow the economy through transformation and growth. The Government will allocate a total of S$8.3 billion over the next three years to enable stronger partnerships, deepen enterprise capabilities and develop its people.
Under developing people in the area of pre-employment education, Mr Heng said the Government will introduce a new Asia-Ready Exposure Programme to support local youths’ visits to cities in ASEAN, China or India. It will also improve support for internships under the Global Ready Talent Programme.
READ: Budget 2020: New target for overseas opportunities for students, with focus on SE Asia, China, India
For the working years, the Government will invest in the next bound of SkillsFuture.
This includes a one-off SkillsFuture Credit top-up of S$500 for every Singaporean aged 25 years and above, a new SkillsFuture Enterprise Credit for employers, and a new SkillsFuture Mid-Career Support Package for locals in their 40s and 50s.
For lifelong learning and employability, the Government will introduce a Senior Worker Support Package comprising measures like wage offsets for companies that employ Singaporean workers aged 55 and above, and a grant to support companies that raise their own retirement and re-employment ages ahead of changes to the legislation.
Moving on to foreign worker policy, the Government will reduce the S Pass sub-dependency ratio ceilings of the construction, marine shipyard and process sectors from 20 per cent to 15 per cent.
Mr Heng said the number of S Pass, or skilled job, holders in these sectors has grown by almost 4 per cent over the last two years, adding that this will give local manpower fair opportunities to grow.
In addition, Mr Heng said he will maintain the foreign worker levy rates for all sectors for 2020.
CARING FOR SINGAPOREANS
The second part of the plan is caring for Singaporeans at every stage of their lives.
For the pre-school years, the Government will increase the share of Government-supported pre-school places from the current 50 per cent to 80 per cent by around 2025. It will also spend more than S$2 billion on the early childhood sector within the next few years.
READ: Budget 2020: Enhanced bursaries for low- and middle-income students as part of education measures
For the primary to pre-university school years, it will improve the Ministry of Education financial assistance scheme by raising the annual bursary quantum for pre-university students from S$900 to S$1,000.
For the higher education years, it will improve bursaries for full-time Institute of Technical Education students from Academic Year 2020 by increasing the cash bursary quantum for low- and middle-income households by up to S$200 a year.
READ: Budget 2020: S$1.6 billion Care and Support Package to help Singaporeans with household expenses
To help with living expenses, the Government will provide a S$1.6 billion Care and Support Package for households.
The package includes Workfare special payments, grocery vouchers for needy households, S$100 PAssion Card top-ups for Singaporeans aged 50 and above this year, cash payouts of $100 to $300 for all adult Singaporeans aged 21 and above this year, and a further S$100 cash payout for every adult Singaporean with at least one Singaporean child aged 20 and below this year.
To allow Singaporeans to save enough for their retirement, Mr Heng said the Government will increase the basic retirement sum (BRS) by the same three per cent per year for the next two cohorts. This ensures payouts keep up with basic retirement expenses.
To help those with less CPF savings to save more, the Government will introduce a matched retirement savings scheme from 2021 to 2025 for lower- to middle-income Singaporeans aged 55 to 70 who have not been able to set aside the prevailing BRS.
Under the scheme, the Government will match every dollar of cash top-up made to their CPF Retirement Account, up to an annual cap of S$600.
Under the Silver Support Scheme, the Government will also raise the quarterly cash payouts by 20 per cent, and introduce a new payout tier to provide smaller payouts to some seniors who do not qualify for the scheme currently.
Furthermore, social service agencies will be able to tap up to S$350 million in funds through the setting up of a new trust.
Last but not least, the Mr Heng said the Government will provide top-ups of S$750 milion to the ElderCare Fund, S$500 million to the ComCare Fund and S$200 million to the MediFund.
BUILDING A SUSTAINABLE SINGAPORE
The third part of the plan is to sustain Singapore’s success for future generations, especially through addressing climate change.
Mr Heng said the Government will this year update its commitment to the Paris Agreement and take another step towards its vision of a low-carbon, sustainable future.
To achieve this, the Government will phase out internal combustion engine (ICE) vehicles and ensure all vehicles run on cleaner energy by 2040.
This will be done by introducing rebates for more environmentally friendly light goods vehicles, reducing road tax for electric and some hybrid cars, and providing rebates on the additional registration fee for electric cars.
Nevertheless, Mr Heng said the Government will impose a lump-sum tax – built into the road tax – on electric vehicles to account for the loss in fuel excise duties. This will be phased in over three years starting from January 2021.
Beyond vehicles, the Government will introduce incentives to help lower-income households buy more energy-efficient household appliances.
It will also introduce a new HDB Green Towns Programme, which will focus on areas like reducing energy consumption, recycling rainwater and cooling technology.
READ: Budget 2020: New S$5b Coastal and Flood Protection fund to tackle 'significant' risk of rising sea levels
On a more macro level, the Government will set up a new Coastal and Flood Protection Fund with an initial injection of S$5 billion.
While the environment makes up a huge part of sustainability, Mr Heng said Singapore cannot take its peace and stability for granted.
He said the Government will set aside S$1 billion over the next three years to build up the Government’s cyber and data security capabilities to safeguard citizens’ data and its critical information infrastructure systems.
READ: Budget 2020: ‘More expansionary’ budget to result in biggest estimated overall deficit since 2009
Fiscal sustainability is also important, Mr Heng said.
While the Government expects an overall Budget deficit of S$10.9 billion, or 2.1 per cent of the Gross Domestic Product, for FY 2020, he said it has accumulated sufficient fiscal surplus to fund the deficit.
There will be no draw on past reserves, he added.
WORKING WITH SINGAPOREANS
The fourth and final part of the plan is partnering Singaporeans to build the country’s future, especially through the Our Singapore Fund (OSF), which provides funding for ground-up efforts in the social sector.
Mr Heng said the Government will top up the OSF and extend it beyond 2020 to support more ground-up initiatives that Singaporeans are passionate about, across a wider range of sectors.
The Environment and Water Resources Ministry will also launch an SG Eco Fund to support partnerships with the community and companies for sustainability efforts.
In total, Mr Heng said the Government has set aside S$250 million to boost its partnership efforts, adding that it will help encourage more innovation in areas like supporting children from low-income families and promoting mental health in youths.
“I am excited about the prospect of stronger Government-citizen partnerships in overcoming these challenges, and look forward to the results that these partnerships will yield,” he added.
In closing his speech, Mr Heng said he is confident that “together, we can ensure Singapore remains exceptional”.
“As one Singapore, we will grow our economy and transform our enterprises, creating opportunities for Singaporeans," he stated.
“Our nation has built up the capital – financial, human and social – to go this distance. The Singapore spirit is strong and growing. Together, we will advance, as One Singapore.”