BUDGET 2016 - Shaping our future together: Speech extract

The future beyond SG50: New world, new challenges

Minister for Finance, Mr Heng Swee Keat, arrives at Parliament House, on March 24, 2016.
Minister for Finance, Mr Heng Swee Keat, arrives at Parliament House, on March 24, 2016.ST PHOTO: MARK CHEONG

This is an extract from the 2016 Budget speech by Finance Minister Heng Swee Keat

Last year, we celebrated all that we achieved together in our first 50 years. This year, we start our journey for the next 50 years.

Our first 50 years tell an extraordinary story of diverse people overcoming great odds together.

Our pioneers had no textbook for success. Every move - whether it was a government policy, a company's investment or a household's family decision - was uncharted.

Through sheer grit, our pioneers braved the odds, brought up families, and built a home and a nation.

On Dec 13, 1965, Mr Lim Kim San presented the first Budget of the independent Republic of Singapore.

Our founding Prime Minister, Mr Lee Kuan Yew, made the rousing call that we must never fear; one day we would be a modern metropolis. Singaporeans rallied to that call.

Year by year, we made progress, and successive generations built on what was achieved. So, we had much to celebrate in SG50.


Today, we are in a much better position than our pioneers. But we also face new responsibilities, new challenges.

Budget 2016 is the beginning of a journey towards SG100. With the spirit of partnership, we will transform our economy through enterprise and innovation, and build a caring and resilient society.



Over the past five years, our economic restructuring journey has focused on raising productivity to achieve quality growth.

  • We tightened the inflow of foreign workers;
  • We invested significantly in broad-based measures such as the Productivity and Innovation Credit (or PIC); and,
  • We introduced the Transition Support Package to help firms adjust to economic restructuring and rising business costs.

Progress has been promising.

  • More firms are engaging in productivity efforts. For instance, a survey has shown that around nine in 10 of our SMEs embarked on productivity initiatives in 2015.
  • The net inflow of foreign workers has slowed significantly from nearly 80,000 in 2011 to less than 23,000 in 2015.
  • With a tighter labour market, we managed to sustain real median income growth for Singaporeans at an average of 2.9 per cent, per year over 2009 to 2015.
  • Productivity growth has not been as strong as we would like. While productivity has grown by an average of 2.7 per cent per year over 2009 to 2015, most of this increase was due to the cyclical rebound in 2010 and 2011. Productivity growth has remained relatively flat over the past three years. We must keep working on this.

While we face weaker prospects overall, MTI expects GDP to grow at 1 per cent to 3 per cent for the year, not very different from the 2 per cent in 2015. So, while conditions are difficult, we should not be overly pessimistic.

Budget 2016 has three key thrusts to address the challenges in our economy:

  • First, to address cyclical weaknesses, we will adopt an expansionary fiscal stance to provide some counter. Taking into account the higher expenditures and additional measures introduced in this Budget, our projection is that this will amount to a positive fiscal impulse of slightly over 1 per cent of GDP. This, together with relief measures targeted at SMEs, will provide support in the near term.
  • Second, as increased spending alone cannot address structural issues, we will target resources towards enabling firms to build deeper capabilities, develop their people, scale up and internationalise. We will launch the Industry Transformation Programme to strengthen enterprises and industry, and to drive growth through innovation. The aim is to enable our firms to emerge stronger to benefit from the broader global recovery when it takes place.
  • Third, we will support our people through change, by enabling them to learn new skills, especially in new, fast growing sectors, and in facilitating employment and job-matching.


The first source of support for firms comes from existing measures and public spending, including public infrastructure projects. This year, total spending is expected to be $5 billion (7.3 per cent) higher than in FY2015. The increases are mainly in healthcare, education, security and urban development.


We can dream, plan and build for a thousand years. We must try.

MR HENG SWEE KEAT, Finance Minister.

The Transition Support Package that was introduced in FY2013 will also continue to support our firms in raising productivity. In particular, this month, firms will receive a total of $1.9 billion for qualifying wage increases given under the Wage Credit Scheme, the largest payout to date.

In addition, public sector demand for construction projects is expected to increase significantly in 2016, helping to mitigate a decline in private sector construction demand. This includes more than $2.5 billion of public sector contracts for smaller projects, which will benefit smaller construction firms.


Second, to help companies, especially SMEs, I will raise the existing Corporate Income Tax (CIT) Rebate, from 30 per cent of tax payable to 50 per cent of tax payable, with a cap of $20,000 rebate each year for YAs 2016 and 2017. The last time we had this 50 per cent rebate was in YA 2001.

The higher percentage rebate is targeted at SMEs. The increased support is expected to cost an additional $180 million over two years, bringing the total support given to companies under the CIT rebate to close to a billion dollars over two years.

  • $4.5 billion

    Amount set aside for the Industry Transformation Programme.


Our third measure to support companies is the Special Employment Credit (or SEC). The SEC is due to expire this year.

I will modify and extend the SEC for three years, to the end of 2019, to provide employers with a wage offset for workers aged 55 and above earning up to $4,000 a month.


The fourth measure will support viable SMEs that may have cash flow concerns or wish to continue growing their business. We will introduce an SME Working Capital Loan scheme, for loans of up to $300,000 per SME. Under this scheme, the Government will co-share 50 per cent of the default risk of such loans with participating financial institutions, to encourage lending to our SMEs.

The SME Working Capital Loan will be available for three years.

This could catalyse more than $2 billion of loans over this period.


Fifth, we will help our heartland shops to be more vibrant, as these shops give our neighbourhoods a sense of community.

MND will enhance the Revitalisation of Shops package, to better support promotional activities and upgrading projects in HDB town centres and neighbourhood centres.

This enhanced initiative is expected to cost about $15 million annually.


Finally, in view of challenging business conditions in the marine and process sectors and the reduction in the number of Work Permit holders in these sectors, we will defer levy increases for Work Permit holders in these sectors for one year. Manufacturing Work Permit levies will remain unchanged for another year, as announced at Budget 2015.

We will proceed with levy increases for services and construction Work Permit holders, as well as S Pass holders in every sector, as announced in Budget 2015. This is in view that the foreign workforce has continued to grow in these areas over the past year.

Taken together, this calibrated set of measures is appropriate to address the near-term concerns of our firms, especially SMEs, while enabling restructuring. Some have asked for a repeat of support measures we saw in 2009. But that was when the economy was already in deep recession, and facing huge uncertainty. For now, while the outlook is soft, MTI expects positive growth in 2016. We must not let pessimism take hold, lest it creates self-fulfilling expectations. The Government will continue to monitor the situation, and stands ready to act if conditions warrant.


Even as we provide immediate relief and support amid the current cyclical slowdown, we must press on with economic transformation.

In Budget 2016, we will launch a new Industry Transformation Programme to take us into the next phase of our development.

This builds on our efforts under the Quality Growth Programme, which was introduced in Budget 2013 to achieve inclusive growth driven by innovation and higher productivity.

The Industry Transformation Programme will help firms and industries to create new value and drive growth in four ways:

  • It will involve integrating our different restructuring efforts. Our efforts to raise productivity, develop our people, and drive research and innovation are working, but we can maximise impact by pulling these together.
  • We will take a more targeted and sector-focused approach to better meet the needs of firms in each sector.
  • We will deepen partnerships between government and the industry, and among industry players to identify challenges, and develop solutions to support transformation.
  • And we will place a stronger emphasis on technology adoption and innovation.The food manufacturing sector is a good example of how such an approach can succeed: As an industry, our food manufacturers built on their innovations and Singapore's trusted reputation for high quality and safe food to jointly create the "Tasty Singapore" brand. Using this brand, they are internationalising and selling to China, India, the Middle East and even Africa. The food manufacturing sector shows the importance of mindset, as one of the industry's leaders told me: "There is no such thing as a sunset industry, only sunset thinking!" It shows that transformation comes not only from individual firms, but the industry as a whole working together. This year, we will set out three key thrusts under the Industry Transformation Programme.
  • First, we will support the transformation of enterprises, to build deep capabilities, deploy technology, develop scale and internationalise.
  • Second, we will support the transformation of industries, to adopt technology and innovate faster, come up with common industry solutions, seek new markets overseas and deepen industry partnerships.
  • Third, we will drive transformation through innovation.


To help SMEs access these schemes, we established SME Centres and stepped up our outreach efforts.

Still, many firms found the range of incentive schemes and agencies confusing. To be more enterprise- centric, we will launch the Business Grants Portal in the fourth quarter of this year. This portal will be organised along core business needs of capability building, training and international expansion. Firms will not need to go from agency to agency to figure out which schemes apply to them.

To support companies to automate, drive productivity and scale up, we will offer a new Automation Support Package for an initial period of three years.


Innovation is critical to the Industry Transformation Programme.

Many of the successful enterprise and industry-level transformations I described earlier have some elements of innovation in the form of new products or services, new processes, or new business or organisation models.

First, we will continue to deepen industry capabilities in innovation and R&D. This will be done under Spring's Collaborative Industry Projects programme.

Of the commitment announced for the Research, Innovation and Enterprise (RIE) 2020 Plan, up to $4 billion will be directed to industry-research collaboration.

To support the RIE 2020 effort, I will provide a top-up of $1.5 billion to the National Research Fund this year.

A second way to transform through innovation is to promote startups, in new and existing industries.

To give these efforts a further boost, we will set up a new entity called SG-Innovate. SG-Innovate will match budding entrepreneurs with mentors, introduce them to venture capital firms, help them to access talent in research institutes and open up new markets.

A third way to transform through innovation is create an open and innovative urban environment. We will launch an exciting new development: the Jurong Innovation District. It will be the future of innovation for enterprise, learning and living.

The Jurong Innovation District will create an environment to house these different activities within a single, next-generation industrial district. This has the potential to transform how we live, work, play, learn and create.

JTC is currently constructing Launchpad @ JID to serve as a space for entrepreneurs, researchers and students to design, prototype and test-bed their new innovations.

JTC has also launched an Open Innovation Call to invite private sector technology owners to test-bed and develop innovative and sustainable infrastructure solutions within the district. In parallel, we will be building Jurong Innovation District progressively, with the first phase targeted for completion around 2022.

Similarly, we are investing in infrastructure for the future such as Changi Airport Terminal 5 to better connect us to the world, and to test innovative solutions.

This year, I will make a further $1 billion top-up to the Changi Airport Development Fund to support this effort.


As a government, we must adopt a more integrated approach to support transformation. Our agencies will work more closely together, integrating their different support schemes to take a more targeted approach to developing each industry. We will work closely with enterprises and at the industry-level to develop transformation maps for each sector. These will help us allocate the resources to develop each sector appropriately.

As a whole, I will set aside a total of $4.5 billion under the Industry Transformation Programme to support enterprises and industries, on top of the amounts for R&D and National Productivity Fund. This includes the next tranche of increased funding to Spring, IE Singapore and EDB to support economic development, as well as new resources for measures announced in this Budget.


SkillsFuture is our long-term game plan. Since we launched SkillsFuture in November 2014, we have put in place many initiatives. These will enable our people to identify and pursue their interests at every stage of life, and to broaden and deepen their skills with better education and training.

Take, for example, Ms Yap Chui Hoon, who will be using the SkillsFuture Study Award to deepen her skills as a social worker.

She has been a lifelong learner. After graduating with an ITE certificate, she worked for more than 10 years. She learnt on the job with the help of multiple part-time courses, including diplomas in social service and disability studies. I am happy to say that she is now embarking on a degree programme in social work to better support her clients with special needs at the APSN Centre for Adults.


To support our people amid softening economic conditions and ongoing restructuring, MOM will enhance employment support through the Adapt and Grow initiative. This will help our people adapt to changing job demands and grow their skills.

  • For workers who may face greater difficulty in finding jobs, we will expand our wage support schemes to encourage firms to hire them. This will benefit more workers who may be affected by retrenchments or business restructuring.
  • For mid-career jobseekers, including retrenched professionals, we will step up professional conversion programmes. New programmes will be launched in sectors such as design and ICT. We will also enhance efforts to help match them in jobs with SMEs. We expect to more than double the current outreach for PMETs from 2,000 to over 4,000. MOM will commit an additional $35 million a year from the Lifelong Learning Endowment Fund and Skills Development Fund to support these initiatives.


The final thrust of our efforts is to support our people to acquire new skills and match them to new opportunities in growing sectors.

We will start with the ICT sector. The demand for ICT professionals is growing because it can enable many new businesses as well as disrupt existing ones. To drive our Smart Nation effort, we will need many more of our own experts, in a wide variety of skills - programmers and coders, cybersecurity specialists, user experience designers.

The current shortage is driving up pay - the average starting pay of fresh computer engineering graduates increased by over 14 per cent last year to around $4,000. IDA estimates that we will have about 30,000 new positions by 2020.


We will introduce a new Child Development Account (CDA) First Step Grant for all Singaporean children. Parents will automatically receive $3,000 in their child's CDA, which they can use for their children's healthcare and childcare needs. This will apply to eligible babies born from today.

Parents who save more will continue to receive dollar-for-dollar matching from the Government, up to the co-savings cap.

Next, we will pilot a new initiative, called KidSTART, for children in their first six years. There is extensive research which shows that experiences in the early years of a child's life significantly influence his or her physical, cognitive and social development.

We have been enhancing development programmes through our preschools and primary schools. However, there is a small group of parents who may need more support to give their children a good start in life.

KidSTART will draw together government and community resources, to help these children receive appropriate learning, developmental and health support.

We will also do more to help families with children in rental housing. The Prime Minister mentioned the Fresh Start Housing Scheme at last year's National Day Rally. There are some families who previously bought a flat, but sold it, and are now living in public rental flats.

These families are not eligible for housing grants for first-timers, as they had received a housing subsidy before. For those who are determined to work hard to own a home again, we want to give them a fresh start.

The Fresh Start Housing Scheme will provide a grant of up to $35,000 to help such families with young children to own a two-room flat, with a shorter lease, which will be more affordable for them. Families will need to demonstrate effort, for example, by staying employed and making sure their children attend school.


The Workfare Income Supplement (WIS) scheme has encouraged workers who are 35 years old and above to join the workforce, by supplementing their income and CPF savings. They can also upgrade their skills through the Workfare Training Support scheme and SkillsFuture.

We will further improve WIS for work done from January 2017.

First, we will raise the qualifying income ceiling from the current average wage of $1,900 a month to $2,000 a month.

WIS will continue to help the bottom 20 per cent of workers, with some support also provided to those in the 30th income percentile. In total, we expect WIS to benefit about 460,000 Singaporeans.

Next, we will increase WIS payouts. Eligible workers will receive higher payouts. Payouts will vary depending on their age and income.


Many persons with disabilities also want the opportunity to contribute through work. We should support them. Today, those who meet the WIS eligibility criteria receive WIS, even if they are under 35 years old.

Employers who hire persons with disabilities who earn up to $4,000 a month will continue to receive the SEC. They get a credit of up to 16 per cent of the employee's wages, twice as large as the SEC for older workers.

Currently, only low wage workers 35 years old and above are eligible for the Workfare Training Support scheme. We will now also enable persons with disabilities who earn low wages and are under 35 years old to be eligible for the Workfare Training Support scheme, so that we can better support them in their learning.


At Budget 2015, we spoke about the introduction of the Silver Support Scheme. Some of our older Singaporeans have fewer resources in their retirement years than others, because they earned low wages even after working consistently throughout their lives, or because they stayed home to raise their families.

The aim of Silver Support is to support the bottom 20 per cent of Singaporeans aged 65 and above, with a smaller degree of support extended to cover up to 30 per cent of seniors. It can be a modest but meaningful supplement to their retirement incomes. It is not intended to substitute for other sources of support, whether from their own savings or family support. Silver Support also complements other forms of assistance they may receive from existing schemes, whether it is Workfare, healthcare subsidies or the GST Voucher.

Over the past year or so, we have deliberated with care on the fairest way of identifying those who are the bottom 20 per cent to 30 per cent of our seniors. As no single criterion allows us to assess needs and operationalise the scheme effectively, we will use three criteria in combination - lifetime wages, housing type and the level of household support.


Those who are permanently unable to work and have little or no means of income and family support currently receive free or highly subsidised social services and free medical treatment in polyclinics and public hospitals.

In addition, they receive a basic monthly cash allowance through the Public Assistance scheme.We will raise the basic monthly cash allowance. For example, a two-person household, where both are on public assistance, will now receive an additional $80 a month, bringing the amount of cash assistance per month to $870.

To help government pensioners who draw lower pensions, the Government will increase the Singapore Allowance and monthly pension ceiling by $20 per month each - to $300 and $1,230 respectively.


We currently have 15 personal income tax reliefs. Each tax relief serves a worthy objective, such as to supplement retirement savings, encourage mothers to work after having children or take up a course.

However, taken together, the tax reliefs may unduly reduce total taxable incomes for a small proportion of individuals.

I will introduce a cap on the total amount of personal income tax relief an individual can claim, at $80,000 per Year of Assessment.

At this threshold, 99 per cent of tax-resident individuals will not be affected. Many can still continue to enjoy reliefs. For instance, among those currently claiming the Working Mother's Child Relief, nine out of 10 are expected to continue to claim it fully, without being affected by this cap.

This cap will make our personal income tax system more progressive.


For FY2015, our Budget is expected to record a deficit of $4.9 billion (1.2 per cent of GDP). This is lower than the deficit of $6.7 billion (1.7 per cent of GDP) we had budgeted a year ago.

In FY2016, total spending is expected to be $5 billion (7.3 per cent) higher than in FY2015.

The rise in expenditure in FY2016 is supported by increases in both Operating Revenue and higher Net Investment Returns (NIR) Contributions.

We are benefiting from an increase in operating revenue this year due to one-off factors which we do not expect to be sustained.

In addition, this year, Temasek will be added onto our NIR framework, and this will be a source of revenue for the long term.

We expect an overall Budget surplus of $3.4 billion (0.8 per cent of GDP) in this first year of the term. This position seeks to strike a balance between being prudent given the continued rise in expenditures we expect in the years ahead, and being accommodating to support enterprises in the current economic climate even as we continue our restructuring efforts.

Should economic conditions turn, we stand ready to adjust and respond.

Madam Speaker, let me conclude.

Eight days after that first Budget was presented, our founding Prime Minister Lee Kuan Yew said that we must keep Singapore here a thousand years from now. And he said: "That is your job and mine."

It is poignant to recall these words one year and one day after Mr Lee's passing. He attended almost every Budget Day since 1959.

Each of us has only so many years on this earth to do our best for one another and for our country. How do we make these years count?

Together, we can make our time count. We can dream, plan and build for a thousand years. We must try.

Budget 2016 is the first step of the next lap in what we hope will be a long, successful journey.

When the new Cabinet was sworn in last year, the Prime Minister said: "The Singapore Story belongs to all of us. If we have faith that Singapore will endure and thrive, and put our heart and soul into building Singapore, then we will prevail and secure our place in history."

That is your duty and mine. The Singapore Story belongs to all of us. There are many chapters yet to be written in that story. Let us put our heart and soul to write our story - together, in partnership.

A version of this article appeared in the print edition of The Straits Times on March 25, 2016, with the headline 'The future beyond SG50: New world, new challenges'. Print Edition | Subscribe