Budget debate: New govt bonds should also be used to invest in 'human capital', says WP's Jamus Lim

Associate Professor Jamus Lim said he supported Deputy Prime Minister Heng Swee Keat's proposal to issue new bonds under Singa.
Associate Professor Jamus Lim said he supported Deputy Prime Minister Heng Swee Keat's proposal to issue new bonds under Singa.PHOTO: MCI

SINGAPORE - Money raised from the issuance of new government bonds should not only be used to fund long-term infrastructure projects, but also be put towards research and development (R&D), reducing class sizes in schools and to implement unemployment insurance, Associate Professor Jamus Lim (Sengkang GRC) said on Thursday (Feb 25).

These long-term investments in human capital are "low-hanging fruit" and would amount to about $60 billion, a sustainable debt burden for the Government to shoulder, the Workers' Party MP told Parliament.

Prof Lim suggested that these investments can be funded by increasing the total amount that can be borrowed under the proposed Significant Infrastructure Government Loan Act (Singa), or carved out of the existing $90 billion borrowing cap under the proposed law.

"Even if we take the $60 (billion) and $90 billion together, this would represent a little less than a third of our GDP," Prof Lim said during the debate on the Budget statement.

The ESSEC Business School economics professor said he supported Deputy Prime Minister Heng Swee Keat's proposal to issue new bonds under Singa, which Mr Heng announced when he delivered the Budget statement last week.

The new law will be tabled in Parliament later this year.

Prof Lim said his proposals on how the bond issues can be used are consistent with the Government's goal of post-pandemic economic transformation.

"Why would we limit our investments to only bridges and train lines and airports and seawalls, and not consider the equally important long-term investments we could direct towards soft capital, namely, the capabilities of our people?" he asked.

He noted that Singapore devotes less than two per cent of its income towards R&D, behind countries such as Israel and South Korea, and can afford to spend more.

More resources should also be channelled towards reducing class sizes, which today average 33 students for most subjects, he said. The existing Professional Conversion Programme (PCP) and SkillsFuture schemes could also be better weaved into an "end-to-end jobs safety net".

Prof Lim said he would elaborate on these proposals during the Committee of Supply debates in the coming days.

Mr Heng had said in his Feb 16 Budget speech that the new bond issues will fund infrastructure investments with large upfront costs, including new MRT lines such as the Cross Island and Jurong Regional lines, and pumping stations and tidal walls to protect Singapore against rising sea levels.

There are also plans to issue some green bonds under Singa for climate change-related infrastructure.

These bond issues will allow for a fair and efficient way of distributing fiscal responsibility, Mr Heng said, and as a safeguard, borrowing under Singa will be capped at $90 billion based on the expected infrastructure pipeline over the next 15 years.

Prior to this, the Government had been issuing other bonds to develop the domestic debt market and meet Singaporeans' retirement needs through the Central Provident Fund (CPF).

Mr Heng said President Halimah Yacob has been briefed on the proposal. She has given her in-principle support.

Prof Lim suggested that the maturity of Singa bonds be extended to 50, or even 100 years, so as to lock in the current low interest rates for a longer period.

He also called on the Government to benchmark the speed of debt issuance against prevailing growth conditions, and to take note of certain warning signs when deciding when to halt borrowing, such as when interest rates start to consistently outstrip growth.

Prof Lim warned against pulling back financial assistance to families and companies prematurely, noting that in some European countries, austerity measures intended to shore up fiscal positions had instead led to recession.

"There are those who argue... that if we take too long (to wind down Covid-19 support programmes), we run the risk of over-stimulation, stoking the flames of inflation," he said.

But "premature austerity" could result in real economic pain for thousands of workers and businesses, he said.

"We must bear in mind that, at the moment, the economy is very much like Swiss cheese. While it may look solid, it is, in reality, still riddled with holes."