B. BUILDING OUR FUTURE, STRENGTHENING SOCIAL SECURITY
B.1. We have set new directions for the future. As PM stated in his New Year Message, we are making fundamental policy shifts to give Singaporeans greater assurance at each stage of life, more opportunities, and a better home for all.
B.2. We build on the transformation we achieved in our first fifty years as a nation. Decade by decade, we competed for our place in the world against much larger and more advanced countries, and raised the quality of life for all Singaporeans.
B.3. The older amongst us will remember the Swan brand socks we wore as schoolchildren – tearing off the Swan label that was pasted on each new pair of white school socks. They were made in the Swan Socks factory at Jalan Tukang in Jurong, founded with Japanese investment and opened by Dr Goh Keng Swee in 1964. It was labour-intensive work, but was the first factory offering significant employment for women. The factory no longer exists. Today, the area is quite transformed. Tukang Innovation Park is home to a range of companies engaged in new technologies. It also hosts MedTech One, JTC’s dedicated facility for the rapidly growing medical technology industry.
B.4. The story is the same in other industries. We have moved to advanced and sophisticated products in data storage, chemicals and pharmaceuticals.
B.5. Services have also emerged as a major engine of enterprise and jobs. Starting from the traditional entrepot business, we built a transhipment hub, airport and airline that are each amongst the world’s leaders. Add international logistics, finance, professional services, environmental solutions and hospitality. We have made Singapore a key node in services, for Asia and the world.
B.6. Our home-grown enterprises have made their names around the world. ST Aerospace, which started as a maintenance depot for the Air Force in the 1970s, has become the world’s largest independent MRO (maintenance, repair and overhaul) provider. Hyflux’s membrane systems have been installed in more than 1,300 plants worldwide, including desalination plants in the African continent. BreadTalk has in just 14 years grown from a single outlet at Bugis Junction to more than 700 outlets in 15 countries. It says it sells its signature 'Flosss' bun worldwide at a rate of one every ten seconds. XMI, started in a living room nine years ago, is selling its X-mini pocket-sized, high sound quality speakers in over 80 countries.
B.7. But at the heart of Singapore’s transformation has been our people.
B.8. Among young adults (25 to 34) today, more than 95% progress to post-secondary education. This is more than four times as many compared to the experience of the baby-boomers (55 to 64). The change in just one generation has been dramatic.
B.9. It enabled better jobs and much higher living standards for Singaporeans. Everyone has moved up, including poorer Singaporeans.
B.10. Among the lower-income in the 1960s were the factory employees who made rubber slippers. They were paid about $87 a month in 1965 (around $340 in today’s dollars).4 That was slightly less than half the average wage at the time. Today, a lower-income Singaporean worker (at the 20th percentile of the income range) would earn about $1,860. That is more than five times as much as it used to be, after adjusting for inflation over the years.
B.11. Wages for some of our lowest-paid jobs, like cleaners and security guards, were stagnating a decade ago, but have begun moving up in a tight labour market. Our cleaners have seen a significant increase in pay with the introduction of the tripartite Progressive Wage Model.5
B.12. We achieved the same transformation for middle-income Singaporeans. The median worker’s pay is about six times what it used to be in 1965, after adjusting for inflation. Our nurses are an example - the pay of the average nurse has always been around the median for the workforce or slightly higher. Our registered nurses earn about $3,700 on average today.6 Their jobs too have changed. With greater education, nurses today do initial diagnoses and perform a range of tasks that only doctors used to do.
B.13. We have caught up with many other countries that were well ahead of us. The median Singaporean worker’s wage was about 60% of that in Hong Kong in the mid-70s, and less than half of that in Japan. Our median wage is now the highest among the Asian NIEs (Newly Industrialised Economies), and is only about 10% lower than in Japan. (Refer to Annex A-1)
B.14. However, as the experience of the developed economies shows, as average incomes rise, it becomes harder for them to go up. In the US, Japan, UK and much of Europe, there has been no increase in real incomes over the last decade for the median household. Even in Taiwan, where median household incomes are lower than in Singapore, real incomes remain below where they were at the start of the previous decade. The stagnation in median incomes in all these countries has happened despite the real strengths that they have, some of which exceed our own capabilities in Singapore. Their experiences reflect both the intense global competition and the forces of technology that are challenging a growing range of jobs, in virtually every developed economy.
B.15. Our incomes in Singapore have fortunately continued to grow in the last decade, for both middle- and lower-income households. The median household income per member has in fact increased by 36% in real terms.7 But we face the same global realities and challenges as these countries. We cannot change these realities. We must therefore stay the course in restructuring our economy, lift productivity and develop new capabilities for the future. That is the only way we can sustain income growth and meet aspirations for higher standards of living in the years to come.
Building the Future
B.16. This Budget is focused on building Singapore’s future. We must reach our next frontier as an economy, with firms driven by innovation, and higher incomes coming from deep skills and expertise in every job. We must ensure a society that is fair and just, where everyone has a chance to move up and do well regardless of where they start. And we must complement a culture of personal effort and responsibility with stronger collective responsibility, especially for our elderly.
B.17. To achieve this vision, the Budget takes major steps in four areas:
a. First, we will invest in the skills of the future, and empower every individual to learn and develop throughout life. We must become a meritocracy of skills, not a hierarchy of grades earned early in life. A society where people keep learning and pushing their potential, and are valued for their contributions at each stage of life.
b. Second, we will continue to restructure our economy, and support the next generation of business successes by promoting innovation and internationalisation.
c. Third, we will invest in economic and social infrastructure for the future, to create new competitive strengths, a highly liveable home for Singaporeans, and quality healthcare.
d. Fourth, we will strengthen assurance in retirement, complementing the Pioneer Generation Package and other social policy shifts in recent years. We will also enhance support for our middle-income families.
B.18. Let me elaborate briefly on each of these major directions.
Fostering Deep Skills and Innovation
B.19. First, we must build deep skills and advanced capabilities. It is absolutely crucial that we achieve this, so that we can compete internationally and help Singaporeans do well in their careers, even as the world of work is transformed by new technologies.
B.20. Being small, we cannot achieve expertise and advanced capabilities in every area. We have to build on the strengths we have already developed. We must also focus on areas in growing demand, and where Singaporeans have the capacity to excel. We are well positioned to be amongst the leaders in Asia and globally in five growth clusters of the future:
a. Advanced Manufacturing, aided by new technologies such as advanced robotics and additive manufacturing.
b. Applied Health Sciences, such as developing new medical devices and better nutrition, and transforming healthcare delivery to provide the best care in an affordable way. This cluster will help serve our social goals, but also develop economic leadership.
c. Smart and Sustainable Urban Solutions. There is growing demand in the world for Singapore’s expertise in water and waste management, transport and urban planning. We must also develop new solutions to overcome our own physical constraints.
d. Logistics and Aerospace. We must entrench our position as a leading global hub, by investing in new technological platforms and in our air and seaport infrastructure.
e. Asian and Global Financial Services. Singapore is well positioned to serve the rapid growth of Asian finance, in areas such as infrastructure funding, structured trade finance and wealth management.
B.21. Besides investing in the advanced capabilities that these growth clusters need, we must retain our vibrance as a city by developing creative talents and refreshing our hotel and retail sector. In addition, we must ensure we have people with the skills and empathy needed for our important social priorities, such as strengthening early childhood education for those with weaker starts in life.
B.22. We are therefore embarking on the next wave of investment in our people. Through SkillsFuture, we will help Singaporeans learn at every age, and develop expertise and flair in every field. We will develop a whole array of learning options for individuals to choose as they shape their journey through life. We will support this through higher subsidies and a range of awards and fellowships for those pursuing mastery in their fields. SkillsFuture involves everyone: individuals and families, employers and industry associations, unions, education and training providers, and the Government as an active enabler in the whole initiative.
B.23. Second, we must make innovation pervasive in our economy, and take concerted steps to include as many SMEs as possible. Our industries have to shift from value-adding to value-creating. We have to bring new ideas to the market.
B.24. The Government will refine the pace of increase in foreign worker levies, since foreign worker inflows have slowed down markedly. However, the tight labour market is now a reality. Firms have to devise new ways to survive and grow.
B.25. We will give stronger support to SMEs who innovate and go beyond the norm. Every form of innovation counts, and must be supported – whether it is a new process or brand, developing online marketing or leveraging on big data.
B.26. We will also strengthen support for our SMEs to venture abroad. Compared to a decade ago, many more SMEs are doing well overseas. They are growing and overcoming the constraints of our domestic economy. New technologies now present another opportunity. E-commerce, digitisation, and crowd-sourcing of ideas and funds are levelling the playing field for start-ups and small enterprises, making it easier for them to compete with larger players and expand internationally.
Evolving our Culture
B.27. However, achieving this transformation towards deep skills and innovation will require more than new programmes, or a higher take-up of government incentives. We need a different motivation in our society. Our economic and social culture must change:
a. As individuals, we have to view the education that we get when we are young as but the starting point of a journey of personal learning, and self-renewal throughout our lives. Whichever the job, we must want to master what we do, and gain satisfaction from it. We must also develop a culture of mentoring, where individuals who have developed expertise and experience share their knowledge and passion with others, at their own workplaces, at education centres, and in the community.
b. Employers must recognise what the best companies have found: that people are their biggest opportunity. Every employer must look for the potential in their people, and put time and effort into developing this potential with them. It also means looking out for mid-career Singaporeans who are temporarily dislocated, and helping them to get back in, get re-trained where necessary, and contribute their worth. And it matters greatly too when employees are empowered. The most innovative companies find that ideas come from people from all across the enterprise – whether for an improved workflow, a new colour or design, or a better way to reach customers’ hearts.
c. In industry, we need a new, collaborative culture, to take Singapore’s skills to a much higher level. We do not have the long tradition of collaboration in countries like Germany and Switzerland, where companies join forces to develop skills for the whole industry. We have to develop our own tradition, and find practical means to deepen collaboration, industry by industry. It will be especially critical to developing capabilities among our SMEs, who on their own often lack the capacity to attract and train people.
B.28. It will take time to develop a new economic and social culture. Neither can we within a few years develop the deep pools of expertise that we need, transform our enterprises and achieve innovative breakthroughs in every sector. But we can only get to where we want in the long term by taking steps now, moving ahead relentlessly, and never thinking that the status quo will get us to a better place.
Investing in Infrastructure for the Future
B.29. The third thrust of this Budget involves a major reinvestment in Singapore’s infrastructure, to meet our future economic and social needs.
B.30. First, we are embarking on the development of Changi Airport’s new terminal, T5. Changi is part of the lifeblood of our economy. T5 will be almost as large as T1 to T3 combined. It is a critical investment, that will yield benefits for decades to come. It will enable Changi to keep its role as a leading hub for international transit, and create connections to emerging cities in Asia and globally. We are starting now, but the whole project will take more than 10 years. Together with the development of Tuas seaport over the longer term, we will secure Singapore’s place in Asian and global logistics for many years to come.
B.31. Second, we are investing to make Singapore a highly liveable city. We are making vast improvements in public transport, and developing our heartlands into vibrant homes and communities.
B.32. We are also expanding every dimension of the healthcare system: increasing the number of beds in acute hospitals by 25% by the end of the decade; doubling our community hospital beds; increasing nursing home capacity by about 70%; and investing to bring affordable care into the community so that our seniors can be cared for at home. Each of these efforts will be complemented by our Smart Nation initiative to improve the quality of life of the average citizen.
B.33. These major investments in Singapore’s future will mean significantly higher development expenditures. Our development expenditures have already increased from $12 billion five years ago to about $20 billion (4.8% of GDP) in the coming fiscal year. They will grow further, by 50% to about $30 billion (6% of GDP) by the end of this decade.
B.34. The last time we made such significant investments in infrastructure (in proportion to GDP) was in the 1990s, when we embarked on the development of Jurong Island, built the North-East Line and the Light Rail Transit network, and Changi General Hospital amongst other significant investments.
B.35. Just as these investments two decades ago laid the foundations for better living standards over many years, we must now invest in the next era of jobs and incomes, and a higher quality of life.
Building a Fair and Just Society
B.36. We are taking further steps in this Budget to build a fair and inclusive society.
B.37. They build on the major shifts in social policy that we have introduced in the last five years, to support both middle-income and lower-income Singaporeans.
B.38. In education, we have substantially increased the number of teachers and allied educators in our schools to raise the quality of education for all. Our spending per student has increased by more than a third (in real terms) over the last five years, and with more resources going especially to students with a weaker start. We have also increased subsidies for lower and middle-income students significantly, from pre-school through to tertiary education.
B.39. We have enhanced Workfare, which supplements the incomes of lower-income workers. We have significantly expanded housing grants for both low and middle income couples so they can afford HDB homes.
B.40. In healthcare, we introduced the Pioneer Generation Package (PGP) last year, and introduced permanently higher subsidies for lower and middle-income Singaporeans of all ages.
B.41. We have also transformed our social support networks on the ground. Older Singaporeans will remember the Social Welfare Department or ‘Hock Lee Por’ (福利部) as it was called in Hokkien. It provided some support for the homeless or those suffering from malnutrition. By the end of this year, we will have 24 Social Service Offices (SSOs) in our HDB towns to disburse social assistance and coordinate social services for those in difficulty. That’s 24 ‘Hock Lee Pors’, closer to the ground, and each providing a wider range of support to help Singaporeans when they fall into difficult times. Plus we will have many more Senior Activity Centres and Eldercare Centres to provide recreation and care for our seniors near their homes.
B.42. We will make further moves in this year’s Budget. We will strengthen our social security system, to help Singaporeans supplement their incomes in retirement. It will complement the enhanced healthcare subsidies that we introduced last year.
B.43. First, we will raise the CPF salary ceiling to benefit middle-income Singaporeans, and raise contribution rates for older workers. We will also enhance CPF interest rates further in retirement to benefit those with lower balances. These are important enhancements. They will be on top of the changes recently proposed by the CPF Advisory Panel, aimed at providing more flexibility and certainty to CPF members, which the Government has accepted.
B.44. Second, we will introduce the Silver Support Scheme that PM spoke about at last year’s National Day Rally. It will be a major new feature in our social security system. While Workfare systematically enhances the incomes of the bottom 20% to 30% of lower-wage Singaporeans during their working years, Silver Support will supplement incomes for 20% to 30% of seniors in their retirement years, with greater support going to the least well-off among them. Together with Workfare, Silver Support will help mitigate life’s disparities. It is the fair thing to do, and complements the family support for our elders and the community initiatives that make us a strong society.
B.45. This Budget will in addition encourage the spirit of philanthropy and giving, as part of Singapore’s 50th year. It will also lend further support to families with children, and include a few measures to help Singaporeans with the cost of living.
Moving Ahead with Confidence
B.46. Our total government spending will go up significantly in the coming years. We are increasing development expenditures, as we reinvest in Singapore’s future. We will also see a steady increase in operating expenditures, especially due to higher healthcare subsidies and the care needs of a growing older population. We must therefore strengthen our revenue base to support this increase in spending through the end of the decade.
B.47. Budget 2015 takes us into our future. Our aspirations are attainable. We can build a future that keeps social mobility alive in each new generation. A future that meets the aspirations of young and middle-aged Singaporeans, and enables us to realise the best in ourselves. And a future with greater assurance as we grow old.
B.48. We must go forward with the blend of imagination and practicality that brought Singapore this far in 50 years. With hard heads, but warm hearts too, so that we all move up together.
Last updated on 24 Feb 2015