Three challenges for Singapore’s coming turning-point Budget
By Lawrence Loh
The annual national budget day for Singapore is just round the corner on 16 February. It is almost an annual ritual of the Finance Minister presenting the budget in parliament, followed by an intensive series of debate which covers the entire government as well as the respective ministries.
The coming budget will be like no other. It comes at a time after the year-long COVID-19 pandemic which saw an unprecedented four parliamentary budget sessions plus two other finance minister’s statements. The total commitment last year was a whopping S$188 billion or 40 per cent of the gross domestic product to support businesses, households and individuals. More significantly, a drawdown to the tune of S$52 billion was made in the national reserves.
As Singapore is readying a transition to a post-COVID era, Budget 2021 will have to adopt a somewhat different stance. To begin with, the wide range of budgetary measures and schemes should not last indefinitely. Budget 2021 has to be a responsible budget.
While Budget 2021 will be a turning point for Singapore, there are three major challenges.
First, is the question of whether to adopt an approach with market as arbiter.
Out of necessity, the budgets of 2020 have focused on providing assistances. This is particularly so in the suite of schemes related to jobs. These include the Jobs Support Scheme which defrays wages, the Jobs Growth Incentive which co-funds new hires and the various measures in the SGUnited Jobs and Skills Package. Most of the schemes will expire in the first quarter of this year.
The policy dilemma is whether and how to move from an assistance-centric to a more market-based stance. It will not be feasible to sustain many of these schemes indefinitely as they distort labor markets and induce inefficiencies, including the propping up of non-viable and zombie companies.
Second, is the question of the form and extent of safety nets.
If Budget 2021 adopts the rule of market discipline even in a phased manner, measures must be in place to help those which are in so-called strategic sectors like aviation, or who are vulnerable such as older workers.
From a public funding angle, the quandary is complex. Many of the schemes have both broad and specific components. It will be difficult to apply industry or demographic criteria as even within each grouping, there are differences in whether the help is deserving. For example, sector-based assistance may be too blunt as companies vary in each of these sector.
More fundamentally, should the government be using public funds to retain business sectors that are not resilient to changes? Also, will prolonged individual safety nets reduce the incentive for hard work? The last thing Singapore probably wants is to become a welfare state.
Third, is the question of the thrust of capacity building.
In the pandemic, it is clear that businesses have to transform or even pivot to new industries. In this light, policy support has been on specific skills development. For example, there are rightly much assistance given to rapid digitalization.
The predicament is how a balance can be made between the ability to address immediate needs and the ability to adapt to new needs. Training has often been on precise “plug-and-play” skills. In the longer term, however, skills for continuous self-directed skill development will be more critical. Beyond an instruction-manual approach, a “playbook” is desired. Going forward, capacity building will have to include the skill to learn new skills – this is akin to “meta-skills”.
In essence, Singapore’s Budget 2021 will have to address the triple-issue of a right market approach intertwined with purposeful safety nets in the shorter term and calibrated capacity building in the longer term.
Budget 2021 will be a watershed for Singapore to steer the turning-point into a post-COVID world.
Lawrence Loh is Director, Centre for Governance and Sustainability and Associate Professor of Strategy and Policy at NUS Business School, National University of Singapore