Feb 23, 2010
The aim: building superior skills, quality jobs, higher incomes

THE Government yesterday unveiled a multi-billion-dollar plan to help companies and workers here work smarter, grow and become globally competitive.

If it is successful, Singapore could see a big leap in incomes and living standards, and become a major force in the explosive growth of Asia and other promising regions.

Delivering the annual Budget speech in Parliament yesterday, Finance Minister Tharman Shanmugaratnam said that although the rebound in the world economy had brightened the outlook considerably, Singapore must look beyond that.

'Our priority during last year's global crisis was to keep jobs. Our priority must now be to improve the quality of jobs,' he said.

'Raising skills and productivity is the only viable way we can achieve higher wages, and is the best way to help citizens with low incomes,' he added.

The key to doing this, Mr Tharman said, is in boosting productivity and managing the economy's dependence on foreign labour.

This is why the Government will devote $5.5 billion over the next five years to help businesses and workers raise productivity. A further $1.5 billion will go towards promoting research and development.

The national effort will be led by a new National Productivity and Continuing Education Council to be chaired by Deputy Prime Minister Teo Chee Hean and will comprise business and labour leaders.

A new National Productivity Fund will also offer grants to any company that wants to improve its efficiency.
But one-quarter of the fund's initial $1 billion will go to the problematic construction sector, which relies heavily on foreign labour and whose productivity is languishing at around one-third of Japan's.

To show it means business, the Government will also give companies an unprecedented 250 per cent tax deduction on any investments they make in innovation, ranging from research and development to automation and worker training.

'Every employer must take the initiative,' said Mr Tharman. 'They have to re-design jobs to make their employees more productive, and keep asking how they can help their people reach further and accomplish more.'

He noted that the best companies were already doing this, and said: 'We must spread this enabling culture across all businesses.'

To equip these companies with better-skilled workers, the Government is committing $2.5 billion over five years to building what Mr Tharman called 'a first-rate Continuing Education and Training system' for adult workers to hone their skills and pick up new ones.

The aim of all this is to raise productivity growth from around 1 per cent to 2 to 3 per cent within 10 years - a target set three weeks ago by the high-powered Economic Strategies Committee (ESC) of public and private sector leaders.

If Singapore achieves this, real incomes could rise by one-third, said Mr Tharman. This transformation of the economy will be important in the next five to 10 years.

That is because this is a crucial window for Singapore companies to expand abroad, while their skill-sets are in high demand. And if they are successful, better jobs can in turn be created back home.

'This will put us onto a virtuous cycle: building superior skills, quality jobs and higher incomes,' said Mr Tharman.
Elsewhere in the Budget, he introduced measures to benefit lower- and middle-income households.
These include a more progressive property tax structure that will see all HDB flat owners and the majority of private property dwellers paying lower taxes.

Various tax reliefs, including for those supporting their parents and grandparents, will also be increased. Wives who are breadwinners can also claim relief.

About a million citizens over 50 will also get top-ups of between $200 and $500 to their Medisave accounts.
In all, the Government is spending $1.4 billion in direct transfers to households, excluding Workfare, this year.
As a result of all this spending, the Government expects to incur an overall Budget deficit of $3 billion, but Mr Tharman said there are sufficient current reserves to fund this deficit