Budget Debate 2017 – Speech by Png Eng Huat

(Delivered in Parliament on 1 March 2017)


Madam, the geopolitical uncertainty and shifts in policy impacting the international economy, balance of power around the region, and free trade may not have fully sunken in yet for the man in the street, but in time to come, it will become a worrying concern in the minds of all Singaporeans, young and old.  What does the future hold for our jobs, our careers, and our cost of living upon retirement, are questions that will creep up eventually.  Budget 2017 is a reflection of the uncertain times we are living in today.

Although this budget attempts to address some of the concerns and outlines measures for our economy and our society to weather the uncertainties, there is just no certainty in dealing with uncertainties.  Some measures may work, and some may not.  Some measures are judgment calls, calculated at best and clutching at straws at worse, all in the hope that some of them will bear fruits for the economy.  Some of the previous budget measures had gone on to become permanent features of the fiscal policy.  Some were given a makeover, hoping that the results will work better this time.  But at the heart of all these measures, we must remain focus on what we want to achieve at the end.

This year’s budget introduces the “SMEs Go Digital Programme”.  The main push is to get the SMEs onto the digital bandwagon to improve productivity.  The targeted sectors are retail, food services, wholesale trade, logistics, cleaning and security.

What does the government hope to see at the end of this initiative?  We have seen this initiative introduced in the past but under different packaging.  What did the government learn from the results of the past initiatives?  Why are the targeted SMEs not embracing the digital revolution despite the many opportunities to do so in the past?  Does the government want every SME to go digital, and is it even necessary to do so?

One of the measures introduced in 2010, the Productivity and Innovation Credit (PIC) scheme, has impacted the food services sector positively.  The tablet computer has replaced the hardcopy menu in many restaurants.  Customers no longer need to wait to be served to place their orders.  The use of technology in this instance is motivated and meaningful.

In 2006, then Second Minister for Information, Communications and the Arts, Dr Vivian Balakrishnan, highlighted an example of a local businessman who had “embraced infocomm to improve his business”.  He shared that the dessert stall owner had invested in a touchscreen computer to allow customers to place their dinning-in or take-out orders at the People’s Park Complex Food Centre.  He cited that the use of technology had brought the owner new business and improved productivity in tracking the stock of the desserts sold and amount of ingredients left.

I visited the dessert shop at the old food centre to see for myself why the shop was worthy of a mention by the Minister at the opening of the 10th Infocomm Commerce Conference.  The dessert shop was manned by 2 persons, a lady at the counter and a gentleman to prepare the dessert right behind her.  Both of them could easily take orders from customers as the shop was very small.  For those who have been to People’s Park Complex, you will know what I mean.  I proceeded to order via the touchscreen and waited.  The lady looked at me in anticipation.  I looked back at her and tried to hint with my eyes that I had just ordered my dessert via the touchscreen system.  There was a queue forming and she snapped suddenly and said, “Ai simi?”, which means “what do you want?”.  The touchscreen system was not broken but it was not much of a use.

A decade on and the use of touchscreen technology in hawker centres had not caught on at all.  It was more of a novelty than an enterprising productivity tool as highlighted by the Minister.

Madam, there is a lesson to be learnt in what the lady at the dessert shop asked me that day – what do I want?  What does the government want from the targeted sectors under the “SMEs Go Digital Programme”?  Technology can cut both ways.  It can be a productivity tool or a glorified novelty.  This government should not waste public funds on the latter.

The fact of the matter is, for some sectors, going digital may not be the sole solution to improve productivity.  Beyond automation and going digital, the cleaning sector, for example, needs a redesign of the way refuse and waste are being collected.  The design of old HDB estates needs a serious relook because it takes too long to clear the many bin chutes for just one block of flats.  Going digital alone is not going to help the cleaning sector.  It also needs a whole of government approach to educate or incentivize the public to generate less waste because no amount of productivity improvement is going to help, if we keep on generating waste at the current rate.

It is important to embrace the digital economy but going digital alone is not going to resolve the productivity issue.  The digital economy needs bricks and mortar support.  It may need the government to relook into all the compliance processes, and to remove them if necessary.  Getting SMEs to go digital is only one part of the equation.  It needs a collective effort for the digital economy to function and flourish.

Next, most of the measures introduced under the objectives to sustain a quality environment for the future will impact Singaporeans, and the aggregate of their impact will add to the cost of living.  The carbon tax, although scheduled to start in 2019, will hit households with an increase in electricity prices when the time comes.  The volume-based diesel tax will impact the earnings of commercial vehicle owners when the rebate runs out in 3 years’ time.

Madam, it is logical to harmonise the tax structure of all motor fuels, including diesel, to be based on how much is used.  Since the government has taken the approach to incentivize users to reduce consumption, and manufacturers to develop more energy efficient vehicles, the Special Tax on diesel cars and taxis should be scrapped completely upon the implementation of the volume-based diesel tax.  Likewise, now that the tax structure for all motor fuels is harmonised, the road tax for petrol vehicle should also be scrapped in favour of the more equitable volume-based usage tax, which was already in place for the longest time.

Road usage is tied to the consumption of fuel.  The more road you travel, the more fuel you burn, and the more tax you will pay, be it petrol duty or diesel tax.  So why are motorists being slapped with a road tax that is based on the engine capacity of their vehicles?  What has engine capacity got to do with road usage?  The current road tax regime is beyond a misnomer to begin with.

Let’s compare 2 cars of the same engine capacity.  If one owner uses his vehicle 7 days a week while the other utilizes his vehicle 3 times a week, why are both drivers paying the same road tax when one is obviously contributing more to road congestion and pollution.  So what is the relevance and purpose of keeping an engine capacity-based road tax, which has no relation to road usage, on top of the volume-based fuel duty which, in my opinion, is the actual and fairer road tax?

Last, the quantum of the water price hike is perhaps the most puzzling measure in the budget.  Can the authority share how much losses it has made supplying water to Singaporeans since 2000 to warrant such a hefty increase?

Minister Masagos has stated in his reply to my PQ that the current national average water consumption for households has dropped about 11 per cent as compared to 10 years ago.  The number of households that consume more water than the national average today remains stable the past decade, at 40 per cent.  And if we look at the per capita usage, water consumption in Singapore is about 5 to 70 per cent lower than that of London, Melbourne, Tokyo, Hong Kong and New York.  What do all these numbers say?  They basically say Singaporeans understand the scarcity of water, and we have been doing our part to conserve this precious element all these while.

The Minister also acknowledged that but he cautioned Singaporeans not to be complacent and to save more water, wherever possible.  Singaporeans had done that before, and I am quietly confident Singaporeans will do just that going forward.

It was reported in the news that the cost of developing and operating Singapore’s water supply system has more than doubled from $500 million in 2000 to $1.3 billion in 2015.  The Public Utilities Board said this cost included water treatment, reservoir operations, Newater production, desalination, used-water collection and treatment, and the maintenance of water pipelines.  In short, it is the entire cost of supplying water to the masses.

It was also reported that homes account for 45 per cent of water used daily.  Using simple ratio, the share of the cost of supplying water to households should be 45 per cent of $1.3 billion, or $585 million.  This will roughly translate to an average cost of about $40 per month to supply water to each household in 2015*.  This is well below the average monthly water bill paid by households of 4-room and above, and I am sure for most private housing as well, before the proposed price hike.

As highlighted by the government, water prices have remained unchanged since 2000.  What that means is that the margin of supplying water to households could be even higher in 2000 than what I have estimated for 2015.  Using the same assumption, it cost about $21 per month to supply water to each household in 2000*.  Since water consumption per household was fairly stable the past decade and water prices have not changed since 2000, and based on available data, the government could not have lost money supplying water to households for the past 15 years.

Madam, this government needs to be more transparent with the justification for the 30 per cent hike in water prices.  Resident households are already facing price pressure in car park charges to transportation to food.  From the proposed carbon tax, volume-based diesel tax, and the 30 per cent hike in water prices, the knock-on effects will be felt by Singaporeans eventually, one way or another.  No time is a good time to increase prices, but if this government is bent on raising the price of an essential commodity by 30 per cent, it is certainly the right time to open the books to Singaporeans to justify the increase in water prices.

I do not support the 30 per cent water price hike.
* number of resident households is 915,100 and 1,225,300 for 2000 and 2015 respectively (Singstat)