Budget 2020 – An Old Strategy that will not Meet New Challenges
Contrary to his claim, DPM Heng’s strategic financial plan in Budget 2020 will not prepare the country for the long term. It’s an old strategy of an investment-driven, export-oriented economy that was suitable for the past few decades but are either inappropriate or inadequate in meeting new challenges.
These challenges are of a different kind; they are disruptions caused by new factors such as geopolitical rivalries, technology advance, climate change or global epidemics like the current coronavirus. The net effect is to lower demand and supply, usually significantly and sometimes permanently. While we cannot simply wish these disruptions away, we can and should build and develop “anchors” that will stabilize and hold Singapore firmly and not be “blown off”.
To do so, we have to increase domestic consumption and investment significantly so that whatever happens outside Singapore, our economy can still grow and our people can continue to be employed. This extra spending should be targeted at essential sectors such as healthcare and education, help families cope with the rising cost of living, reinvigorate the local neighbourhood economy of shops, markets and eateries, and lower costs of doing business. This boost to essential consumption (which I have estimated at $25 billion) will bring the welfare of our people to First World standards and substantially reduce business cost by removing and replacing the 8 to 10.5% Medisave contribution with full government subsidy on healthcare.
To increase essential investment that will really prepare our country and people for the long term, I have proposed building more schools and hospitals with the necessary increase in manpower, public flats with full land subsidy and a new SERS programme to solve the problem of the 99-year lease expiry. In addition, I have also suggested a Midcareer Change and Upgrade Fund for our PMETs, a Young Enterprise Fund to inspire our young to dream big and a Green Fund to tackle climate change. This investment package will cost $10 billion.
No tax increase, No bankrupting the country
This combined package of $35 billion ($25 billion plus $10 billion) is not one-off boost to the economy but an annual one that is sustainable for the long term. It does not require any tax increase nor a dig into our past reserves (meaning not touching the principal sum of our savings). The consumption part of the package of $25 billion comes from the long term expected real rate of return of 4% on our reserves of over $1 trillion (=$1,000 billion) while the investment package of $10 billion is to be paid out of the revenue from the sale of state land leases (averaging $16 billion a year in the past 10 years).
The details are spelt out in my economic plan “Take Back Our Money, Be True First World” which is available at my website https://tanjeesay.sg