Budget Speech 2021 – Speech by Chua Kheng Wee Louis

Delivered in Parliament on 24 February 2021


Mr. Speaker. This past year has been a tumultuous and rather peculiar one. Even as parliament sits now, the recent Chinese New Year celebrations have been a rather quiet affair for many families and friends. While the ongoing vaccination program offers a sliver of hope that we might emerge from this pandemic sooner than later, the task of rebuilding for a new normal begins now.

More than that, we must be cognisant that there has never been a more opportune time to take firm action, to reform our economy and social compact, with a hope that we might all come out of the woods stronger than ever. Beyond the pandemic, we need to look at not just headline economic growth, but instead quality or inclusive growth; to sharpen our focus on how we can uplift our entire country, and maximise the overall well-being of all Singaporeans in a sustainable manner, in the long run.

On this note, I would like to highlight three broad areas we should focus on in my speech.

The urgent need to restructure our economy

The first point I would like to make would be on the urgent need to restructure our economy. Even prior to 2020, our five-year average GDP growth rate through 2019 is at 2.9%, lagging that of the global economy at 3.4%. If we use the public markets as a proxy to the state of corporate performance in Singapore, return on equity for the Singapore market (ex-financials) has also seen a steady decline, falling to a 20-year low of 5.9% in 2019. In the fourth quarter of 2019, 35% of firms listed in Singapore were already loss making, the highest since the 2008-09 global financial crisis. These were even before the effects of COVID in 2020.

With COVID-19 comes a crisis, but also an opportunity for us to use this time to restructure our economy, focusing our growth in areas where we might be able to develop and maintain a competitive advantage. To restructure our economy, efforts should be targeted at the building blocks of our economy, our local enterprises and local workforce.

Supporting our local enterprises, especially SMEs

On local enterprises, I believe the initiatives announced by DPM Heng to accelerate the growth of new digital capabilities are laudable. These include the emerging technology programme, CTO-as-a-service and digital leaders programme to help more businesses adopt increased digitalisation solutions, as part of their core competencies.

These are good solutions to support our local businesses, small or large. We should also however, double down on efforts to better support SMEs to scale up and internationalise. While this could involve Government agencies facilitating access to global markets, while providing technical and financial assistance, could we better incentivise large local GLCs or even MNCs, to partner with our local SMEs in their internationalisation efforts?

Today, SMEs represent 99% of companies in Singapore, and employ 72% of our workforce. However, SMEs contribute just 44% to Singapore’s GDP in 2019, having declined steadily from 50% in 2014. A vibrant SME ecosystem is thus imperative for our future economy, with SMEs’ success key to driving entrepreneurship and innovation in Singapore.

Yet while we look to support local SMEs’ internationalisation efforts, our open economy and transparent business rules also mean that international MNCs, can easily outbid local SMEs in domestic tenders, especially in price-based contracts. Looking around construction sites across Singapore, one cannot help but notice the large number of foreign conglomerates appointed as main contractor for building and infrastructure sites. In 2017, it was revealed in Parliament that while 80% of government contracts in number are awarded to SMEs, only half by contract value is awarded to SMEs. Could more be done to provide greater opportunities to local SMEs, to give them the chance to scale up, and build up a requisite track record in our very own home market?

Supporting our local workers

Supporting our local workers should also go hand in hand with supporting our enterprises. With the shortening of business cycles and hastening of technological disruption, the threat of widespread job losses and rapid job irrelevance is only going to rise in future.

During this crisis, the Jobs Support Scheme or JSS has been an important policy measure to provide direct wage support. Given the uneven economic recovery, in what is called a “K-shaped” recovery, it is important to ensure that the hardest hit sectors and workers are given a fair chance of survival. While there remains debate as to the tiering of sectors and the adequacy of continuing support, the extended JSS support to tier 1 and tier 2 sectors is nonetheless a welcome relief to companies in these selected sectors. The launch of the COVID-19 Recovery Grant to directly support lower to middle- income workers, presently experiencing involuntary job loss or income loss is also a timely and important one.

Whether or not COVID is here to stay for the next few years, there will continue to be redundancies and job losses at any stage of the economic cycle. As the schemes borne out of COVID such as the COVID-19 Recovery Grant are already designed and implemented, could they remain a more permanent feature of our financial assistance schemes to workers?

Ultimately, we may need to think of implementing automatic stabilisers instead of discretionary, ad-hoc schemes to enhance the resilience of our workforce. An example would be unemployment insurance, which can provide workers with resources to alleviate near term anxieties associated with job losses, while reducing the incidence of underemployment. Further, in a working paper published by the Institute of Policy Studies on 9 February this year, the researchers highlighted if the Government issues debt to finance a programme in unemployment insurance, intergenerational equality could be improved. The paper further stated and I quote, “children of unemployed parents have a greater chance of social mobility if their parents are supported by a government provisioned unemployment insurance programme”.

Questions about our fiscal policy

The second point I want to raise is a broader question on the appropriateness of our fiscal policies. Having recognised the challenging terrain that Singapore is in today, our budget and financial policies should then be the key enabler rather than impediment, towards allowing us to chart our roadmap to success, and embark confidently on a journey towards truly emerging stronger from this crisis.

In October last year, I spoke about the continued need for an accommodative fiscal policy. Despite the hopes we pin on a successful vaccination program, we are not out of the woods yet, and the economic recovery we are hopeful of, is a fragile one. We should thus continue focusing on policies that aim to stimulate and boost domestic demand and keep our economy going, keep business and consumer confidence high, while minimising the long-term scarring caused by the pandemic.

As we speak, the largest economy in the world, the US is looking to put through a $1.9 trillion stimulus package, equivalent to about 9% of GDP, on the back of a $3 trillion package in 2020. US Treasury Secretary Janet Yellen has highlighted the case for increased fiscal spending to avoid a ‘longer, more painful recession’. She said and I quote, “the smartest thing we can do is act big. In the long run, I believe the benefits will far outweigh the costs, especially if we care about helping people who have been struggling for a very long time”.

I believe Singapore is no different. In order to reverse the pains from this recession, we must be willing to devote more resources to supporting our businesses and fellow Singaporeans.

I recognise that budget 2021 is said to be an expansionary one, similar to budget 2020. The government expects an overall budget deficit of $11.0 billion, or 2.2% of GDP. But this has to be seen against the context of Singapore’s unique budgetary policies. Had we taken the total estimated receipts of $103.7 billion, less the total expenditure of

$107.2 billion, then the deficit would have been a more modest $3.5 billion or 0.7% of GDP.

If we extend this analysis and took the total receipts less the total expenditure over the last ten years from 2011 to 2020, then the total surplus would have amounted to about

$205 billion. This would be vastly different compared to the reported cumulative deficit of about -$32 billion over the same period from 2011 to 2020.

Such a calculation, while simplistic would also be broadly in line with official data from the department of statistics, where the government cash surplus from 2011 to 2019, the latest available datapoint, is a cumulative $261 billion. In other words, we run on a recurring basis an average of $29 billion of cash surplus a year.

Why is this important? I recognise that the official budget is based on revenues that the Government of the day can spend under the Constitution. Not all Government revenues and receipts collected can be spent by the Government.

But when we say that we need to raise GST sometime during 2022 to 2025 and sooner rather than later, that “without the GST rate increase, we will not be able to meet our

rising recurrent needs”, and that “it is not tenable for the Government to run persistent budget deficits outside periods of crisis”, then these statements ought to be framed in the context of the Government’s recurring cash surplus every year up to 2019. Is the imposition of a broad based, regressive tax then truly justified?

Further, I observe that in the official budget, NIRC contributions are expected to continue its steady path of increase, from $17 billion in 2019 to $18.1 billion in 2020 and $19.5 billion in 2021. Even amidst the crisis of a generation, the NIRC alone is expected to rise by $1.4 billion in 2021. With NIRC estimates supposed to be based off expected long- term real rates of return, and with a draw on the reserves amounting to a generations’ worth of savings, what then has led to the increase, and is the growth in NIRC expected to continue accelerating?

The bottom-line to me then is therefore that we must caution against being overzealous in strengthening our revenue position through multiple pathways, such as the impending GST hike, especially amidst the macroeconomic uncertainties of today.

Spotlight on Retirement adequacy

This brings me to my third point, and that is on a countrywide level, while we quibble over how much excess cash we truly have, and how much of our revenues are not revenues at all, on an individual level, Singaporeans are increasingly worried about their lack of a rainy-day fund, with many of our elderly residents suffering from retirement inadequacy.

Earlier this month, I filed a PQ on the number and percentage of active and inactive CPF members who are able to meet the basic retirement sum. While the proportion of active members turning 55 who have been able to set aside the BRS improved from 62% in 2018 to 66% in 2020, there remains 1/3 of active members today who were not even able to have $93,000 in their retirement account last year.

Last year, DPM Heng shared that about 435,000 Singaporeans aged 55 to 70 have not been able to set aside the prevailing basic retirement sum. This represents about 58% of Singaporeans in that age band in 2019. Despite a lifetime of hard work and contribution to our nation, sadly more than half of our seniors do not appear to have sufficient funds to have the option to retire comfortably.

We can choose to think that outside of CPF balances, our elderly residents are likely to have other means of provision, which the CPF Board has no sight of. We could also fall back on self-reliance through working beyond retirement, or family support.

And I do recognize efforts by CPF to make it easier for members to top-up their own or their loved ones’ CPF accounts. However, this only seem to pass the problem to the younger generation, where they not only have to worry about having adequate CPF balances for their retirement, but they also worry for their parents’ retirement as well. All these while the rising cost of living, increase in property prices continue to erode the disposable cashflow of households, and therefore the ability of the sandwiched generation to contribute more to their own and their parents’ CPF accounts.

What can we do to ensure that we can progress closer to the 100% mark that all Singaporeans are adequately prepared for retirement, with minimal financial stress on the younger generation? With rising life expectancy and an ageing population, how can

we devote resources to ensure that Singaporeans who devoted their lives building the country, can retire with a decent living standard and live their lives in dignity?


Mr. Speaker allow me to conclude in Mandarin.

议长先生,2019 冠状病毒疫情无疑带来了危机,但也同时带来了改变的契机。毫无疑问,我们应该借机重组经济,鼓励企业转型,以确保我国经济能够乘风破浪。但是,我们也因该切记,在制定政策时不能单纯考虑经济层面,而是将所有国人的福利放在优先位置,也着重照顾社会中的弱势群体。