Budget 2016: No big bang but a startling vision

No one was expecting a Budget with a "big bang" like 2014's $8 billion Pioneer Generation Package, but Finance Minister Heng Swee Keat yesterday managed to have a little something for those most in need of it - and still have enough left in the kitty.

This was cleverly achieved by taking a very targeted and prudent approach to spending, especially on the business front and in contrast to the more broad-based measures to support the economic restructuring of the past decade.

Take small and medium-sized enterprises (SMEs), which have been hard-hit by the economic slowdown. Mr Heng, who has been assiduous at walking the ground with such companies, rolled out measures to help them.

These include corporate income tax rebates capped at levels to benefit small businesses rather than the big boys. And there is a support package helping firms to automate, that takes into account feedback that there has been help at the initial stages but less when a company is expanding. This encourages medium-sized SMEs to expand and grow.

Easy access to financing was also addressed by the higher risk-sharing proportion that the Government will undertake in a bid to encourage banks to lend to these SMEs.

Cooperation and partnerships were clear themes of this Budget, to suggest that collaboration was the way to survive in challenging times.

DBS economist Irvin Seah was in tune with much of the general sentiment when he wrote: "This is in line with our long-held view that a more targeted and collaborative approach to restructuring will yield a more positive outcome in the longer term."

On the issue of productivity, there was a tacit admission that the Productivity and Innovation Credit had, as a broad-based measure, made all companies aware of the need for productivity, but had not delivered any significant productivity gains.

With a targeted approach of rolling out help where it would matter most, despite a hefty increase in overall expenditure of around $5 billion, Mr Heng still managed to balance the books such that there was a very respectable Budget surplus of $3.45 billion.

This is, of course, in no small way thanks to Singapore investment firm Temasek Holdings. With foresight, the Government, knowing that spending would rise, amended the framework last year to allow for substantially bigger contributions by Temasek.

But even as the Budget, in its own cautious and prudent way, builds on the foundation of what has been put in place in previous Budgets, there are risks to this approach.

In his speech, Mr Heng acknowledged the structural challenges that the economy is facing, including how technology is disrupting business models. While he urges Singaporeans not to be overly pessimistic and the economy is clearly not in a recession nor a crisis, Singapore's projected growth of 1 per cent to 3 per cent is nothing to crow about. Private sector economists, too, have also pitched Singapore's growth at the lower end of the range.

And while there are undoubtedly growing opportunities in Asean, China and India - as mentioned by Mr Heng - the benefits of the new Asean Economic Community have yet to emerge in a significant way. Mr Heng also rightly points out that the Trans-Pacific Partnership and China's One Belt, One Road initiatives offer tremendous potential. However, it will be years before the impact will be felt.

There are many medium-term and long-term issues that Singapore faces, such as the competitiveness of SMEs and the upgrading of the workforce, as well as the hollowing out of manufacturing. Already, recent labour market reports have highlighted a rise in PMETs (professionals, managers, executives and technicians) who lost their jobs last year.

To be sure, these will be tackled by the Committee on the Future Economy, which Mr Heng also chairs. Meetings have been held and the committee aims to get its work done by the year-end.

It would not be feasible to expect the Budget to address all these issues. But nevertheless, there is perhaps too much of an "akan datang" - Malay for "coming soon", used in movie trailers - aspect to the Budget.

Overall, Mr Heng may not have delivered a "big bang", but he did conclude with a startling vision. He threw down the gauntlet to Singaporeans, quoting founding Prime Minister Lee Kuan Yew on keeping Singapore here a thousand years from now. Mr Heng added: "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."

No doubt, thought should be given to a fundamental reconsideration of economic strategies but, given the speed of technological change and how volatile the economic cycle is, there is the risk that if Singapore does not move faster, it runs the risk of being left behind.

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A version of this article appeared in the print edition of The Straits Times on March 25, 2016, with the headline No big bang but a startling vision. Subscribe