SINGAPORE is doubling down on its economic restructuring push, with Budget 2019 bringing new and extended schemes to help firms and workers - as well as tighter foreign manpower policy for the services sector.
Economic transformation was one of the long-term imperatives flagged by Finance Minister Heng Swee Keat in his Budget speech in Parliament on Monday, alongside concerns such as defence and security, and planning for climate change.
Over the next three years, the government expects to spend S$4.6 billion on these economic measures, with S$3.6 billion going towards helping workers, and the remaining S$1 billion to helping firms build capabilities. Said Mr Heng: "Our workforce growth is tapering, and if we do not use this narrow window to double down on restructuring, our companies will find it even harder in the future."
In the services sector, the foreign worker dependency ratio ceiling (DRC) - the maximum proportion of foreign workers in a firm - will be lowered from the current 40 per cent to 38 per cent on Jan 1, 2020, and again to 35 per cent on Jan 1, 2021. The service sector S Pass sub-DRC will be similarly lowered from the current 15 per cent to 13 per cent, and then to 10 per cent.
To help firms adjust to these changes, the 70 per cent funding support levels for the Enterprise Development Grant and Productivity Solutions Grant will be extended beyond their original expiry dates for three more years, up to March 31, 2023.
New moves include the Scale-Up SG programme that gives customised support to high-growth local firms, and the pilot Innovation Agents programme that provides a pool of experts to tap. To deepen the pool of capital for local small and medium enterprises (SMEs), S$100 million will be set aside to set up the SME Co-Investment Fund III. Existing schemes will be extended, including the SME Working Capital Loan scheme and the Automation Support Package, both of which will now last till March 2021.
To encourage employers to hire long-term unemployed or mature retrenched PMETs (professionals, managers, executives and technicians), and older Singaporeans respectively, the existing Career Support Programme will be extended to 2021 and the Special Employment Credit, till Dec 2020. Help for lower-income workers will be boosted via changes to the Workfare Income Supplement, with a higher qualifying income cap from Jan 2020 and higher maximum payouts.
Economic transformation aside, Budget 2019 underlined the importance of defence, security, and diplomacy in the face of global geopolitical uncertainty and threats such as terrorism and cyber-attacks. Such spending accounts for about 30 per cent of this year's expenditure, and the government "will invest more, if the need arises, to protect the sovereignty of Singapore and the well-being of Singaporeans", said Mr Heng.
On the social front, Mr Heng gave details of the previously-announced Merdeka Generation Package for citizens born in the 1950s, including Medisave top-ups, additional outpatient subsidies, and additional Medishield Life premium subsidies. Budget 2019 sets aside S$6.1 billion for a fund that, with interest accumulated over time, will cover the package's full projected cost of over S$8 billion.
For all Singaporeans, a new Long-Term Care Support Fund will also be set up. This will include the S$2 billion earmarked last year for CareShield Life premiums and other support, as well as S$3.1 billion set aside in this year's Budget.
In line with the Bicentennial commemorations, there will be a S$1.1 billion Bicentennial Bonus, including a 50 per cent personal income tax rebate subject to a cap of S$200 for the year of assessment 2019; Edusave and Post-Secondary Education Account top-ups; help for the lower-income through an additional GST Voucher payment and a Workfare Bicentennial Bonus; and a CPF top-up for some 300,000 eligible Singaporeans.
In the much longer term, Singapore must plan for climate change, said Mr Heng. The government is coming up with measures for mitigating and adapting to its impact, which will include the need for "long-lived major infrastructure". With the country's needs growing significantly on this and other fronts, the government is studying the option of using government debt as part of the financing mix for long-term infrastructure projects that it takes on directly.
Another environment-related move is the continued restructuring of diesel taxes, with the excise duties for diesel to be raised from 10 cents per litre to 20 cents per litre, with immediate effect. To mitigate the impact, there will be reductions to the special tax on diesel cars and taxis, and road tax rebates for commercial diesel vehicles.
For the 2018 financial year, an overall budget surplus of S$2.1 billion or 0.4 per cent of GDP is expected, in contrast to the S$0.6 billion deficit originally forecast a year ago. This was due to the unexpected suspension of the Kuala Lumpur-Singapore High Speed Rail, and higher-than-expected stamp duty collections, said Mr Heng. For FY2019, an overall deficit of S$3.5 billion or 0.7 per cent of GDP is expected. With a sufficient fiscal surplus in this term of government to fund this overall deficit, there will be no draw on past reserves.
For all of our Singapore Budget 2019 coverage, news, analysis, and infographics visit bt.sg/budget19