A1. Mr Speaker, Sir, I beg to move, that Parliament approves the financial policy of the Government for the Financial Year from 1 April 2018 to 31 March 2019.
Economic Performance in 2017
A2. Riding on the global upturn, Singapore’s economy picked up last year.
a. Our GDP grew by 3.6%1, up from 2.4% in 2016. This exceeded the Government’s forecast of 1% to 3% at the start of 2017.
b. Our productivity growth was 4.5% as measured by real value-added per actual hour worked, and 3.8% as measured by real value-added per worker. These are the highest figures since 2010.
A3. The good productivity growth has enabled firms to pay higher wages while staying competitive.
a. Real median income2 for Singapore citizens rose by 5.3%3 last year.
A4. For 2018, the Ministry of Trade and Industry (MTI) expects growth to be more broad-based across sectors, but moderated from the high of 2017.
A5. The positive near-term outlook shows that the hard work of employers, workers and the Government is paying off.
a. With the support of businesses, Trade Associations and Chambers (TACs) and unions, we have launched 21 out of the proposed 23 Industry Transformation Maps (ITMs). The remaining two will be launched by the end of March. The tripartite Future Economy Council (FEC) is now overseeing the implementation of these ITMs and the strategies laid out by the Committee on the Future Economy (CFE).
b. Though new, the ITMs are helping to prepare our companies for a new phase of growth. For instance, as part of the Precision Engineering ITM, several companies in the sector, like Univac Precision Engineering and Globaltronic Precision, have undertaken projects to make better use of digital technologies in their manufacturing processes. This has enabled them to stay competitive and take advantage of the global economic recovery.
A6. We recognise, however, that some sectors, such as construction and marine & offshore engineering, continue to face headwinds.
Major Shifts in the Longer Term
A7. While we address such near-term concerns, the Budget must be a strategic and integrated plan to position Singapore for the future.
a. Strategic because it should identify future needs and issues, and propose early preparations to meet them.
b. And integrated because it should pull together resources and integrate efforts across all stakeholders – workers, businesses, VWOs, Government and our citizens – to build a better Singapore for everyone.
A8. We must prepare for three major shifts in the coming decade.
A9. First is the shift in global economic weight towards Asia. This will be accompanied by broader shifts in the global order.
a. In recent years, several advanced economies have turned their attention inward in reaction to domestic pressures.
i. For example, Brexit has put a cloud of uncertainty over the UK and its trade with the EU and the world.
ii. And the US’ recent tax changes and review of trade pacts will intensify competition and economic nationalism, fuelling anxieties worldwide.
b. Meanwhile, Asia will play a larger role in global trade and investment flows.
i. China has set up a regional infrastructure bank and laid out bold plans under the Belt and Road Initiative.
ii. India is reforming its economy, easing restrictions on foreign investments.
iii. Closer to home, ASEAN countries are moving up the value chain and their middle-class population is growing rapidly.
iv. All these developments represent significant opportunities for our firms and people. Our economy must be geared to ride on and contribute to Asia’s growth.
c. However, there are also potential threats to the stability and growth of our region.
i. Tensions on the Korean peninsula and in the South China Sea can dampen investor confidence, while the threat of terrorism across the region remains very real.
A10. The second shift is the emergence of new technologies.
a. Robotics and digital technologies are changing the way we live, work and play.
b. They have already enabled the shift to Industry 4.0, and the rapid rise of e-commerce and a sharing economy.
i. These are interacting with traditional businesses in different ways – sometimes as competing substitutes, sometimes as complementary enablers4.
c. New technologies are reshaping the economy and jobs.
i. Firms will compete increasingly not on physical assets, but on intangible assets, such as intellectual property (IP), data, and user networks. First-mover advantage and time to market will be key.
ii. Securing better jobs and higher wages will not be just about how well we did in school, but how well we continue to learn, relearn, adapt and grow throughout our lives.
A11. The third shift is ageing.
a. We are well-placed in Singapore to make the most of the collective wisdom of our seniors, but we must also be prepared for the challenges of an ageing society.
b. There will be a significant increase in healthcare and social expenditure, placing greater demands on families and the Government.
c. Also, our resident workforce will shrink, tightening our labour market and slowing economic growth further – unless we remain dynamic in our outlook, are increasingly productive in the way we work, and supplement our workforce with a calibrated inflow of workers from abroad.
d. In addition to an ageing population, there are other forces that can strain our social fabric. We need to keep a close watch on income inequality and social mobility. We want growth to uplift all Singaporeans and deepen our social compact.
i. That is why we will continue to invest in education and skills upgrading, to give every Singaporean the best chance to realise his or her potential.
ii. We will also promote sports, arts and heritage, and volunteerism and philanthropy, to build common interests and shared activities.
Preparing for a Better Future
A12. These three shifts will not operate in isolation, but interact together to affect us in profound ways. Some of these interactions will bring new opportunities.
a. For instance, technology will help our older workers to stay productive, and assist our caregivers to care for seniors.
b. With many Asian consumers at the frontier of technology adoption, there are also many opportunities for companies to meet the demands of these tech-savvy consumers.
A13. But these shifts can also bring new challenges.
a. The rapid pace of technological change may lead to older workers feeling marginalised.
b. In some advanced economies, there is rising discontent over globalisation and technological disruptions.
c. And as technology becomes more pervasive, the risk of cyber-attacks and online radicalisation will also increase.
A14. Singapore is in a good position to guard against such challenges and capture the opportunities.
a. Geographically, we are well-connected to the world, with flights to over 400 cities and shipping routes to over 600 ports globally. Within Asia, we have extensive connectivity to over 100 Asian cities by air and more than 250 Asian ports by sea.
b. Digitally, we are connected to the world with over 500 terabits per second of potential capacity. And we will continue to enhance our connectivity by investing in digital infrastructure, as well as land links such as the KL-Singapore High Speed Rail.
c. As an economy, we are open and free, with strong trade links and free trade agreements with many economies in the region and beyond.
d. As a society, we are multi-racial with an international outlook, enabling us to operate in the culturally-diverse Asian and global environments. And our people are also well-educated and tech-savvy.
A15. Budget 2018 will build on this strong position.
a. First, we will develop a more vibrant and innovative economy.
i. We must anchor Singapore as a Global-Asia node of technology, innovation and enterprise, welcome investments, talent and ideas to Singapore, and be bold in venturing out into new markets.
ii. To do this, we must make innovation pervasive in our economy, develop deep capabilities in our firms and workers, and establish strong partnerships locally and abroad.
iii. The shifts in the global economy and the emergence of new technologies are to our advantage, because they allow us to seize opportunities beyond our borders.
b. Second, we will build a smart, green and liveable city.
i. We should take full advantage of the latest technology to improve Singaporeans’ quality of life. That is what our Smart Nation movement seeks to achieve.
ii. To improve our liveability as a city, we must also enhance our urban sustainability and enable our economy to be more carbon-efficient.
c. Third, we will continue to foster a caring and cohesive society.
i. This requires our collective effort.
ii. The Government will continue to strengthen our social safety nets and supports, especially in the face of demographic challenges like ageing.
iii. We must also remain a society where all of us – as individuals, members of families, and citizens – take pride in caring for ourselves, our children and seniors, and one another.
d. Finally, we will continue to plan ahead for a fiscally sustainable and secure future.
i. Preparing for the longer-term shifts will require more resources – to take care of our families, keep our people safe, invest in capabilities, and develop new infrastructure.
ii. And we must do this amidst a period of greater geo-political uncertainty and increasing tax competition.
iii. It is therefore our duty and responsibility to plan ahead and ensure that we have enough resources to do all that we need to do.
Last updated on 19 Feb 2018