Roundtable panellists

Lawrence Wong, Finance Minister and Deputy Prime Minister

Alvin Liew, senior economist, UOB

K Thanaletchimi, vice-president, National Trades Union Congress

Moderator: Vikram Khanna, associate editor, The Straits Times

These are edited excerpts of the roundtable.

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Vikram Khanna: I’d like to start with the title of the Budget, which is Moving Forward in a New Era. What has changed, and how will it impact Singapore?

Lawrence Wong: Well, the whole world is changing. We are seeing superpower rivalry, the model of globalisation is changing – this will make life more difficult, especially for a small and open economy like Singapore.

While these external changes are happening, we still have to grow our economy to generate the resources we need to uplift the vulnerable, take better care of our ageing population, and make sure that our social compact remains relevant and strong. But this is not the first time that we have had to adapt, and I’m confident we can do it again.

Khanna: Some commentators have suggested that the Budget emphasises redistribution and social issues more than it does growth. Do you agree with that view?

Alvin Liew: Inflation is a real problem, so measures that help people and businesses cope are very welcome. But I don’t think that the Budget has neglected economic expansion. We did see measures that promote innovation, for example, the Enterprise Innovation Scheme.

Wong: Growth remains paramount, because if we do not grow the economy and we have a shrinking pie, I think things will be much more difficult for Singapore.

At the same time, we have never pursued a strategy of growth for growth’s sake, or growth at all costs. We’ve always looked at growth as a means of advancing the well-being of everyone in Singapore. 

Khanna: There’s a lot of angst about rising house prices. Why is this happening?

Wong: Before Covid, the housing market was relatively stable. Covid disrupted the completion of projects, so supply was impacted.

In the past, when we had a crisis, demand came down; this time, it didn’t. Build-to-Order queues got longer, Singaporeans got anxious, so more came forward. Those who couldn’t get their flats on time decided to go to the resale market and that pushed up prices.

In private property, people wanted more space, more wanted to live on their own, and because of the delay in completion, there were more Singaporeans looking for rental. And you’ve got non-residents coming here, also seeking rental.

How do we deal with it? We have to get to the root of the problem and increase supply. From 2023 to 2025, we will have about 100,000 new completions. At the same time, we have been moderating demand with cooling measures. When you combine the steps on both the supply and demand side, I’m confident we will be able to bring stability back to the market.

Liew: These things come in cycles. You’ll see the prices slowing. The concern is that this adds to the cost of business, in terms of rentals. I don’t think it is a permanent issue; the problem is it can be quite acute in the near-term.

Wong: We’re watching the rental market very carefully because it does impact on the cost of doing business. The government agencies are looking at how they might be able to help – particularly for essential workers – ramp up supply of housing to mitigate the cost pressures that employers face.

Khanna: Let’s go on to jobs. We have lots of vacancies. We’ve been pouring resources into training, but it doesn’t seem to have delivered great outcomes. Why is this the case?

K Thanaletchimi: Many jobs are available, many people are looking for jobs – but there is a skill set gap. Training takes time, and we need to link it with placement.

And as businesses transform, it is important that they do not leave out the worker aspect. We urge companies to form a company training committee, make use of the grant.

What is essential is for employers to be part of this: get workers trained into skills that are relevant, not send them for training for the sake of it.

Khanna: Will the new Jobs-Skills Integrators scheme be sufficient to solve this problem?

Wong: We have been trying to help workers move from jobs which may be lower in value, to jobs which are higher-value, and the Jobs-Skills Integrator is yet another step in the process.

It’s about trying to coordinate and integrate all the efforts within the ecosystem. The employer must know their future business model and the skill sets needed; the training provider works with the employer to design courses; then you get the worker on board.

Khanna: The NTUC has recommended financial assistance for retrenched workers. Would it create disincentives to work?

Thanaletchimi: Unemployment support is not to demotivate or disincentivise workers from looking for a job. What it means is to have a short period of support to turn them around. The caveat is they must be active in applying for jobs. 

Khanna: We are still emphasising economic growth, but this is a function of workforce and productivity growth. With sizeable immigration off the table, and the fertility rate being what it is, we have to depend almost entirely on productivity. Is it a bit of a gamble?

Liew: I think for manufacturing it’s fairly easy to make it more capital intensive. For services, it’s not so straightforward. Some areas in the Budget regarding upskilling and reskilling will help.

At the end of the day, we will still need foreign talent to help augment the domestic labour market. To me, that can’t be done away with.

Wong: Our labour force growth will slow – we will top up with foreign workers, but there are limits to that. But that means that we have to focus on productivity and innovation to ensure that Singapore continues to move forward. It’s not a gamble, it is an economic imperative.

How do we achieve it? First, industry-by-industry transformation. Second, attracting high quality investments – not just organic productivity improvement, but bringing in new activities, cutting-edge stuff that would help push our technology frontier.

The third aspect is our workers, because you have firms, you have investments, but we also need our workers to continually reskill and upskill.

Khanna: Is Singapore still a good place to do business from the cost point of view?

Liew: Cost is definitely an important factor, but Singapore also offers many other factors for industries to relocate or invest here. Pharmaceutical industries, for example, are here for the business environment, the intellectual property protection, the legal structure, and the skilled workforce.

But yes, cost would be an increasing concern, especially in an inflationary environment.

Wong: We can’t compete on cost anymore. We have to ensure that we don’t price ourselves out of the competition, but at the same time, redouble our efforts on differentiating ourselves in terms of quality and value.

We can’t assume that just because the Economic Development Board has been doing well all these decades, investments will just automatically come to Singapore, particularly in a new environment where more countries are talking about reshoring and onshoring, or nearshoring.

America is rolling out vast subsidies to re-anchor activities, the European Union has a similar programme. So competition for quality investments – what we need precisely to advance our economy – will only get tougher.

Khanna: Turning to taxes, spending and the fiscal position. So far, we’ve managed to deliver pretty high quality public services with low taxes. Can we really continue to have it both ways?

Wong: Well, we must try. It goes back to being very careful in how we spend money. Whether in healthcare or education, we spend a lot less than many other advanced economies, but we get comparable, or if not better outcomes.

So that discipline must remain in government in terms of how we look at new public expenditures. We typically start by looking at pilots – then if the results are positive, we start putting it in place nationwide.

Khanna: What options are there to raise revenue and/or to cut spending? 

Liew: There might be further increases in the goods and services tax. It really looks like by 2030, there might be at least another one percentage point increase.

Beyond that, we may have a few percentage points to add on for personal income tax, but I think there’s limited room.

This leaves us with corporate tax revenue. But of course, the challenge is the Base Erosion and Profit Shifting 2.0 initiative.

Wong: We continue to look at different options, but we will always make sure that the fiscal system remains fair and progressive. 

Some people say it is like Robin Hood; we are taking from the rich to help the poor. But it’s really not quite the right description. Our philosophy is that we want everyone to do their part – but those who have greater means will contribute more in taxes.

At the same time, everyone benefits from government spending, but the ones who are in greater need will benefit more. 

Khanna: On social mobility, what is the unfinished business here?

Wong: A key aspect of this is how we can make Singapore a truly uplifting society. Investing in SkillsFuture, and a better system that enables workers to bounce back, is something that we can do more of.

A second aspect is ensuring lower income families are not trapped in a permanent underclass. This requires us to think holistically about how to uplift these families, particularly in their children’s early years. Thirdly, we have to take better care of our seniors.

We are thinking about all this as part of our Forward Singapore exercise. We hope we can conclude this by the second half of this year and put out a road map for a more inclusive and a more equal society.