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Budget 2017 was a wake-up call, a signal for radical change in mindsets

Monday, March 13, 2017 - 11:33

Last week I moderated a Deloitte's panel discussion held at the Grand Hyatt on the Government's latest Budget. Commentators have so far described it as "visionary'', "expansionary'' and "far-sighted''. In my view it is all of these things but my preference is that it is a ground-breaking Budget, a departure from the norm that sends a signal to the economy and population at large. And that signal is that a) the Govt won't pick winners anymore; b) the days of hand-holding are over; c) for companies which opt to digitalise, innovate, regionalise/internationalise and to invest in R&D there is ample financial and advisory support, but for those who wring their hands and opt to complain about the absence of near-term cost-relief measures, then they could very well fail.

Put differently, one of the clearest messages I received from moderating that discussion was that the economy is at a crucial inflexion point. Technological disruption has pushed the local economy to the stage where it's now literally "do or die''. If you like, it looks very much like Singapore will have to undergo economic Darwinism (thanks to SICC CEO Victor Mills for coining that term) over the next few years where numerous SMEs could fail if they don't adapt to the realities of today's disrupted world.

It's a harsh, painful message for a country that's often been described as a "nanny state'' where the all-seeing and all-powerful govt sets policy, direction and strategy, and is often accused of too much interference. Well this time round the message is -  industry will have to pick winners and if you are prepared to do this, then there will be govt assisstance. To succeed, a very significant mindset change will therefore be needed.

 (Thankfully I've also learned that schools are already changing their curriculum to factor in the new economy. For example, my neighbour's 9-year daughter is already learning how to do powerpoint presentations! At 9, I couldn't even tie my shoe laces!)

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There is one other point worth mentioning.  At the Deloitte event, one of the most popular  questions asked by the audience was what the panel thought of the water tax. The popular view is that it is unwelcome because it adds to costs at a time when the economy is slow and so the anti-government, pro-opposition brigade have of course, milked it for all it's worth. The conventional view in the meantime is that it was badly handled - by kicking off with the news that prices will be raised by 30%, it created unnecessary alarm and condemnation, and that if the news had been that most HDB households would only pay up to 30 cents a day to reduce reliance on Johor, it would have been better received.

However, here's my view. If we accept that Budget 2017 was really intended as a signal, a wake-up call to the country about not to take things for granted, then going for 30% in the headline makes perfect sense. If the population has become complacent about water and its true cost, then maybe the sledgehammer approach is correct. Shock everyone with the size of the hike so that we become more aware about water's true value as a strategic resource and hopefully the right outcome will be achieved. Which is why I think the govt went for the jugular, so to speak. 

All told, Budget 2017 was a clever, practical Budget given the circumstances. If there is a phrase to summarise everything, it would be that this was "a no-choice Budget''.

 

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