Budget Speech 2021 – Speech by Leon Perera

Delivered in Parliament on 25 February 2021

Mr Speaker sir, the times, they are-a-changing, so the old Bob Dylan old song goes. The Covid pandemic has thrown longer-term trends into sharp relief, increasing inequality between industries and workers, with some industries basking in the sun even as sunset falls on other industries, some slowly, some more quickly. For example, fossil fuel-related industries will feel the long-term pressures from global decarbonization, especially with the new US administration reinserting the world’s largest economy back into the Paris climate change agreement.

In my speech I shall speak about the changes going on in the world with industry transformation – a theme I have talked about in recent speeches in this House – and what are the strategies we should adopt to help our workers, firms and fiscal institutions adapt to these changes and use them to our advantage as a country.

Let me begin by bringing out several devices. This is my first Blackberry phone, which I obtained in the early 2000s and this is my second Blackberry. I loved these old devices. It took me a very long time to switch to a different device. Because I was comfortable with them, because they worked fine, because it meant I did not have to learn how to operate a new device. It was far more attractive to stay in the comfort zone. I only switched when things reached a point where I was concerned about being able to continue using the devices I had grown so attached to.

I use this example because it tells us a lot about our relationship with technology, but also the economy. So it is with many of us. When things are going well, we like to stay in the comfort zone. Even when you can see change on the horizon, even when you know you can’t go on in the same way forever, you say, well why change today, why not tomorrow?

But how do we nudge people out of the comfort zone to embrace change and face the future, even when things are, for now, going reasonably well?  This is a policy challenge. It’s also a national challenge for all stake-holders.

The WEF Future of Jobs report 2020 noted that Accountants, Auditors, bank tellers and HR Specialists were amongst the highest risk of redundancy. Many workers in delivery industries and many doing driving work will see their jobs displaced by drones and autonomous vehicles. However, for all these jobs, things are all right now.

To take another example – discouraged workers are workers who have given up looking for work because they feel their job search would not yield results, perhaps because of a lack of employable skills or confidence. Discouraged workers made up 0.7% (16,400 people) of the resident labour force in 2020, surpassing the previous high of 0.6% in the 2009 recession. 0.7% is not yet a tsunami by any means but it is a sobering bellweather.

How do we prepare for the storms of change to come, amidst the pockets of sunshine?

Let me address this by making some suggestions for how our policies can be enhanced to make our companies, our workers and our fiscal institutions more future-ready.


I’ll start with companies and as I do so, I declare my interest as the CEO of an international research consultancy.

A look around the world shows that many companies and industry sectors, ironically, did well out of Covid and grew financially as well as in terms of market position. Industries like FMCG, online retail, ICT and biomedical did fairly well.

However, has corporate Singapore, on the whole, fared as well?

In 2020, when the Straits Times Index plunged due to Covid, the US NASDAQ went up 42% and the wider S&P 500 was up 15% at the end of 2020. In fact, during this Covid period, the STI has under-performed the broader MSCI Asia-Pacific index, setting aside US markets. As my Parliamentary colleague Mr Louis Chua mentioned yesterday, 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, before Covid. 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.

Many, not all, but many of our larger firms are facing headwinds due to being in traditional sectors or not yet having been able to innovate their way out. Even a number of homegrown companies have decided to go public on foreign exchanges rather than Singapore.

This calls in question why there are so few examples of local firms drawing on entrepreneurial talent rooted in Singapore who have succeeded in becoming globally competitive? Is the environment conducive to start up and scale up? Or is the talent and motivation not forthcoming?

In past speeches, I have talked about the role of education in fostering an entrepreneurial mindset. Today I would like to focus on the environment to start up and scale up.

It is an important national imperative to cultivate a core of locally-based firms that have the DNA to be globally competitive, to balance our dependence on MNCs who may be fickle and buffeted by the winds of global economics and domestic politics in their home countries.

Have years of schemes like the Productivity and Innovation Credit in the past, as well as a host of other SME development schemes, brought us closer to that goal?

I would argue that we need regular, published audits for our SME schemes to establish what causal effect such schemes have had on the long-term growth and competitiveness trajectory of the local firms who used them. Only then would we understand the Return on Investment (ROI) from such schemes and only then would we be able to design better schemes.

For example, what is the evidence that the PIC scheme substantially catalyzed productivity growth and innovation among the SMEs who were beneficiaries of the scheme? A KPMG report from 2015 stated, “[W]hile take-up rates [of the PIC scheme] have gone up, the scheme’s impact on productivity has been muted.” To take another example, despite concerted policy efforts to digitise, more than 60% of employees and managers in Singapore firms in a 2019 survey said they were unimpressed or undecided about government policies in preparation for the impact of AI on jobs.

Major investments in schemes intended to generate economic outcomes – or, in fact, any outcomes – should be accompanied with regular measures of success. Not just numbers of companies helped but how did the schemes move the needle in terms of productivity or other indicators. And these measures should be published to support public scrutiny, accountability and debate, so that we can meaningfully speak of genuine participation in policy-making.

Before I leave the subject of supporting the development of local firms, I would like to suggest one new approach that can be experimented with in incentive design. We currently award incentives to MNCs and local SMEs. These incentives are tied to fulfilling certain conditions like meeting Total Business Spending, headcount and/or Fixed Asset Investment targets.

Can some of the incentives to MNCs be designed in such a way as to award a more generous degree of incentivisation if the MNC works with local partners to share know-how and gives the local firm a stake in the new investment?  This approach is not novel and has been attempted in other countries. There are risks associated with this, as it might be seen as pursuing a nativist agenda of grooming local champions to compete with the MNC, thus deterring MNC investment. Those risks can be managed by only awarding such a conditional incentive in fields where there are sufficient local firms who could make reasonably good partners to the MNC while not being involved in a domain that is substantially competitive with the MNCs.

It is worth experimenting with such an approach. Incentivizing the development of MNCs and SMEs need not be a zero sum game. Of course, there are various schemes in place to encourage MNCs to work with local firms but this approach, of building in a local partnership conditional element into the package to secure new MNC investments is currently not being used, to the best of my knowledge.


I would now like to talk about how we can help our local workers better adapt to the winds of change that will blow from industry disruption.

As I shared earlier, it is never easy to rally the energy to change when things seem fine. Many of our workers are in jobs that are at risk from industry disruption in 5 to 15 years time. There are a number of programs in place that aim to address this, like the Professional Conversion Program.

However, for workers in at-risk sectors, for example drivers who are at risk from autonomous vehicles in the next 10 years, can we do more to educate them about the need to consider reskilling and switching industries, lest they become unemployed in their forties and fifties?

For example, can MTI’s economic agencies support and catalyze future-ready industry groups in fields like solar, urban farming and AI, for example, to form Trade Associations and Chambers (TACs). These TACs can then be nudged and supported by government to run campaigns to encourage workers from sunset industries with relevant skills to reskill and consider joining their industries. Government agencies can also use social media tools to target reskilling social media ad campaigns specifically at workers in such at-risk industries.

Existing programs require workers to seek them out. We need a national effort that is more proactive rather than reactive, to nudge workers who are at risk to start thinking about their future career journey and how they can mitigate those risks. This effort is needed even in industries that are cyclically doing well under Covid but face longer-term existential threats. For example, while some sections of the retail sector have done well during Covid, wholesale and retail has been identified as the sector most vulnerable to displacement in Singapore due to automation, according to a 2018 study.

Next, I would like to ask whether our education system is producing the skills the economy demands and if not, what is being done to revisit our educational or economic planning. In 2020, Polytechnic fresh graduates found it significantly harder to land good jobs. Six months after graduation, around 12% were unemployed and over 30% were in part-time or temporary jobs. Minister Vivian Balakrishnan said last year that there will be 60,000 new jobs created in the infocomm sector over just the next 3 years, but our education system is only producing 2,800 infocomm graduates yearly. This barely supplies 5% of the demand. We should carefully review our efforts to ramp up capacity in our education system for high-demand skills, and encourage students to consider these.

Next, sir, let me touch on internships and training attachments. This is a subject that is of current concern. Given the current state of the job market, many graduates of IHLs have taken on internships, traineeships and part-time work for their first jobs, partly, one assumes, because of the relative lack of attractive, full-time positions. More than one in five fresh graduates from four local autonomous universities were in part-time or temporary employment in 2020. As a proportion of the newly graduated workforce, they more than tripled from 7 per cent in 2019 to 22.3 per cent.

Recent government efforts have seen the creation of programs such as the SG United Traineeship and SG Mid-Career program. Private firms like Google have also launched special trainee programs during Covid. I have filed a PQ on whether our IHLs can help our students gain sufficient access to internships in future-ready, disruptive industry sectors.

Here I would like to speak about how our economic agencies can possibly engage companies in disruptive industry sectors who have no physical presence in Singapore as yet to take on Singaporeans for traineeships and internships such as the SG United Traineeship.

For years, I used to think of my job in terms of putting on a tie and travelling into a physical office. But in this day and age, to work at a company, you need not report to work in a physical office. You can be an intern or trainee in a company by taking part in online meetings, undergoing online training, engaging with customers, suppliers and stake-holders virtually and so on. And there are companies abroad at the cutting edge of their industries who do not yet have a physical presence here. Can we consider including some of these companies in such programs? We should select only the most promising companies for inclusion. The benefit to Singapore would be that Singaporeans would get the benefit of training in the skills, knowledge and culture that resides in these cutting-edge firms. Another benefit is that the company, if it finds the quality of workers it engages as trainees and interns high, would consider locating a physical presence here.

Before I leave the subject of skills training, I would like to repeat my call to enable Skillsfuture credits to be transferable among family members, a subject on which I have filed a PQ previously. I have received feedback from a number of older constituents who are keen to transfer their Skillsfuture credits to their children, nephews or nieces, to help them navigate the turbulent waters of the current job market.

Next, I would like to speak about the localization of jobs. There has been much discussion on striking a good balance between foreign workers and local Singaporeans. We know that in many industries, such as construction for example, we are more reliant on foreign manpower than other developed countries are. There is a need to ensure a strong core of skilled, capable Singaporeans in key industries. It is also desirable to foster skills transfer from foreigners to locals.

On localizing jobs, I would like to speak about working conditions for lower wage workers. The government has said that the progressive wage model will be rolled out to more industries.

In some jobs, even if we manage to raise wages through some policy device or other, we may find that Singaporeans may not want to take up those jobs because of the conditions of work. Are workers in that role provided with adequate tools, protective gear and training? Are working hours and mandated break times sufficient? Are conditions of work made as physically comfortable and safe as it is in other countries? Is the culture in the workplace sufficiently respectful of the worker?

My point is that even if we increase pay, Singaporeans may still not want these jobs if they perceive that conditions of work are not good. I would suggest that in sectors where we struggle to find enough Singaporeans, the MOM and MTI benchmark conditions of work in other developed countries where there are more locals employed at higher productivity levels, to understand what the gaps are in conditions of work, and take steps to work with industry bodies to plug those gaps.

There is a lot at stake in this drive to raise pay and productivity in low-skilled jobs. Low-skilled workers are especially vulnerable. Workers in such jobs are often one unfortunate accident away from destitution. One man I spoke to on my house visits did everything right, he and his wife saved up, worked hard, lived frugally, only for him to be injured at his job and be plunged into poverty.

Before I leave the subject of workers, I would repeat the call I made earlier in relation to company incentives – for programs that aim to address job market weakness, promote reskilling and so on, like Skillsfuture, SG United Traineeships and so on, let us undertake rigorous audits of outcomes that are made public, to ensure return on investment and facilitate course corrections or enhancements.

Fiscal Resources

Lastly, Mr Speaker sir, I would like to speak about our fiscal stance.

Many have questioned the timing of the hike in petrol duties and the levying of GST on small-value imported items, given the fragile state the economy is still in. The Leader of the Opposition has shared some concerns about the petrol duty hike, with which I agree.

I would like to make the point that before broad-based taxes are hiked that could have an inflationary impact more generally, maybe even opening the door to profiteering, could the government consider raising taxes on transactions in the property sector by way of taxes such as stamp duty and additional buyer’s stamp duties, but only for more expensive properties.

Such a fiscal move would be progressive and would impact the capital gains made by sellers in the higher end of the property market. Hence the impact on the broader economy may be less than say a broad-based tax hike. A tax on such a class of capital gains will not run the risk of unintended inflationary effects, will not damage work incentives.

Of course such a move may not raise as much revenue as a broad-based tax hike such as hiking corporate tax or GST for example, but the former can be considered to reduce the need for and extent of a broad-based tax hike.


In conclusion, sir, as we face an uncertain future, as the Covid pandemic winds its way to what is hopefully its end, as industries get disrupted and uncertainty casts its shadow over our workers and companies, let us bear in mind a few important truths that I have tried to flesh out in this speech.

Let us always anticipate foreseeable change rather than react when change hits, even when things may be fine now. The proactive will succeed over the reactive.

Let us nudge out stakeholders to recalibrate the balance in our economy towards local firms and Singaporean workers but in ways that still embrace the role of MNCs and foreign workers where they add value. It’s not a zero sum game and it’s useful for all of us to bear this in mind, not only in government. There are win-win approaches to drive towards these outcomes.

Let us bear in mind that it is cultures and mindsets that are critical for change to happen. But at the same time let’s not treat culture and mindset as some rigid monolithic entity or a black box. Existing cultures and mindsets, existing behaviour patterns are there for a reason. They are usually not simply irrational. Let’s investigate those reasons – such as work conditions for jobs Singaporeans shun that I spoke about – and try to fix them with the tools we have, so as to catalyse change in cultures and mindsets.

Lastly, let’s never allow schemes to become black boxes into which fiscal resources get poured. Let’s rigorously audit the impact of our policies – and budget and plan for such measurement –  and publish the results, to support informed public debate, consensus formation and genuine policy co-creation. We need to score an A for outcomes, not only an A for effort.

Thank you.