Continual Investment in Ensuring Singapore’s Resilience and Robustness Against Shocks and How the Government Can Encourage Local Entrepreneurial Talents to Participate in the Carbon Credit Value Chain.
In my speech delivered during the debate on the budget statement, I highlighted the need to invest in ensuring our nation’s resilience and robustness against shocks on a continual basis. I acknowledged that there is a cost associated with this but we must assume the cost as it concerns the very survival of Singapore. I also about the need to maintain fiscal prudence and keep social spending lean. Finally, I shared a suggestion on how the Government can encourage local entrepreneurial talent to participate in the carbon credit value chain. My speech is reproduced below.
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Mr Speaker, Sir, the world has changed since the hon Minister for Finance delivered his Budget Statement on 18 February 2022. We heard an account of this from the hon Minister for Foreign Affairs in this House yesterday.
Russia invaded Ukraine on 24 February 2022 in what has been described as the biggest invasion of a European country since World War II. In a flash, blood has been spilled. Families have been displaced. Worryingly, I see no end in sight in the immediate future.
Financial and economic sanctions on an unprecedented scale have been imposed on Russia by the US and EU countries. Singapore decided to follow suit and impose its own sanctions on Russia based on our principled approach to diplomacy. The hon Minister was quick to point out that our decision will come at a cost. We need to be prepared for this.
The consequence for the rest of the world is substantial and serious. Both Russia and Ukraine are substantial commodity producers. We have seen spikes in the prices of oil, gas and agricultural commodities. Singapore is not immune. We are already hit with the inflationary pressures arising from the pandemic and supply chain issues. These pressures are likely to worsen.
I trust that both sides of the House are solidly behind the hon Minister for Foreign Affairs’ condemnation of Russia’s unprovoked invasion of Ukraine and call for the sovereignty, independence and territorial integrity of Ukraine to be respected. As he eloquently highlighted, our own short history as a tiny island city-state informs us that we too will always be vulnerable to machinations of big powers and must continually be prepared to guard against any existential threat to Singapore and fellow Singaporeans.
We have little influence in what happens globally. We are price takers. We have no choice but to take the world as it is. That is why our defence policy is based on the twin pillars of diplomacy which advocates a rule-based approach to settling international disputes in accordance with the UN Charter and international law; and deterrence, which involves a strong defence capability and ensuring that any enemy will know that there will be a big price to pay if they take us on.
It is these developments that have guided me to draw hon Members’ attention to one aspect of the Budget Statement which is not specifically spelt out but is the raison d’etre for a number of initiatives stated in the Budget, that is strengthening our nation’s resilience and robustness.
I am not using these terms interchangeably. I am guided by how Princeton Professor Markus Brunnermeier has defined these terms in his book published last year titled “The Resilient Society”. He described “resilience” as the ability to rebound from a shock, whereas “robustness” is the ability to resist.
Closer to home, at NUS, environmental scholars at the Lee Kuan Yew School have defined “resilience” as R1 and R2. The first being an ability to mitigate and resist; the second, to adapt and flourish in new circumstances.
Whatever their names, the two are ways to respond to external shocks. More importantly, the Lee Kuan Yew School researchers point out that resilience is not a cost-free virtue. In fact, the price of resilience is inefficiency — a point I shall elaborate on below. Investing in both these capabilities are important to ensure Singapore’s survival in this unpredictable and volatile world. What is clear is that we cannot afford to adopt a “feast and famine” approach to building these capabilities.
Thinking long term to secure Singapore’s future has always been the hallmark of the PAP Government. Let me provide a few examples.
Hon Members will recall Prime Minister Lee’s bold plan to build polders and barrages for a period of between 50 and 100 years to save Singapore from rising sea levels costing at least $100 billion.
The hon Deputy Prime Minister Heng Swee Keat spoke last year about efforts to strengthen Singapore’s capabilities in biomedical sciences and health infrastructures to be ready for Disease X. The hon Member Ms Sylvia Lim recounted some of these efforts in her speech just now and aptly described them as a “reassuring development”.
Also last year, the hon Education Minister Chan Chun Sing announced plans for MOE to roll out mental health education lessons to our children at Primary, Secondary and pre-university levels by next year to help them build up their resilience.
These are not short-term plans, with an eye on the next electoral cycle. They are for the protection and flourishing of our children, grandchildren, and generations beyond — but already hardwired into our spending today. I applaud these moves and other Government initiatives aimed at making Singapore and Singaporeans more resilient and robust.
No doubt though, there is a cost — and one we bear today — in developing these capacities.
Let us take grocery supply as an example.
It costs less for a supermarket to stock groceries employing a just-in-time inventory, something that hon Member Mr Seah Kian Peng knows very well. Purchase decisions can be made based on current conditions. It makes the business operations leaner but susceptible to disruptions when the suppliers cannot supply.
The other option is to employ a just-in-case model which will allow the businesses to be more agile and respond to sudden demand increases quickly. It does, however, mean that business costs will be higher. This may not be the most efficient way to use resources. But it may be the better way when dealing with strategic goods.
This is where we, on both sides of the House, must come together and affirm that these costs must be incurred progressively over the long term because what is ultimately at stake is Singapore’s survival and viability.
My question to the hon Minister for Finance is two-fold; first, could he please let us know what are the strategic areas that the Government intends to build resilience and robustness capabilities for the immediate as well as the long term; and two, have we committed sufficient funds and resources for the building of these capabilities?
My hope is that the Government will continue to eschew the natural tendency, when our country’s fiscal position is relatively weak and there is a pressure to increase social expenditure, to cut back on investments to progressively build such capabilities. We cannot be capricious. We must hold fast to our resolve to develop these strategic capabilities.
I now turn to the hon Minister’s decision to increase the tax responsibility on wealthier Singaporeans through personal income tax, property tax, luxury car tax and GST increases.
With respect to GST, I am glad to note the progressive way in which the GST will be implemented. The progressive nature of our policy ensures that low- and middle-income Singaporeans will, on a net basis receive significantly more benefits from tax transfers than what they would have paid. This is provided for under the Assurance Package and the permanent GST Voucher Scheme.
This also means that, on a net basis, it will be the wealthier Singaporeans, who will be bearing the brunt of the impact of the GST increase.
I have carefully considered the reasons provided by the Minister for the tax increases. I support the Minister’s decision requiring those with more to contribute more tax to fund our social programmes and, in particular, help those whom the hon Member Mr Faisal Manap referred to in his speech just now as “marginalised people” and keep our social compact strong.
In fact, such contributions by the wealthier amongst us will so serve as “investment” not just for the future of the less fortunate but also for their own continued economic well-being and growth. After all, the strength of our social compact provides the foundations of our economic growth. In this way, their businesses and wealth will continue to grow, in a society that is stable and fair, where each man feels he has a place.
Not only that, we should also acknowledge that our tax bases are still relatively low, even with the proposed increases.
One point which I wish to emphasise though is the continued need to keep our public expenditure lean.
As the hon Minister mentioned, Government spending today, excluding COVID-19 related expenditure, stands at 18% of our GDP which is the lowest among developed economies but yet it has produced social and economic outcomes that have been better than most. This fiscal discipline must continue. If we do not and we just continue to fund social expenditure for the less fortunate through knee-jerk increases in tax for the wealthy, then I am afraid the social compact will, ironically, weaken. There will be a danger that our society will fracture as a result of an “us against them” mentality taking root. It is a point that hon Members who spoke before me also raised.
Already I see warning signs that this may happen. I note calls amongst persons who own private landed properties but have no steady income streams asking for Government support. Indeed, in the Assurance Package, it is provided that a person who owns a single private landed property but does not have income can get up to $1,600 over five years. This, with other measures such as CDC Vouchers and MediSave top-ups for seniors, will allow them to get more than five times the GST that they would have paid in a year.
The reality, however, is that with the landed property prices as they are, these persons can well afford to fund their own expenses through readily available reverse mortgages from banks which will allow them to live comfortably in their homes until the end of their lives. Thereafter, their homes may be sold and the proceeds applied against loans extended by the bank. It is not easy to make these arguments to people who feel very strongly about their properties, but we must, on behalf of a society where more than 90% live in flats, push back against such claims.
A similar example involves elderly retired couples in an HDB flat which is eligible for the Lease Buyback Scheme. They would again be entitled to Government support because they are living in an HDB flat without income. In reality though, they would be able to fund their expenses through the Lease Buyback Scheme which would again enable them to sell the tail end of their lease to HDB and live comfortably in their homes until the end of their life with the proceeds obtained.
Some time back, I met an elderly couple who sought ComCare assistance because they are retired and their children are not willing to give them any allowance. I suggested the Lease Buyback Scheme to them as a way to resolve their financial woes. After some thought, they came back to me and the answer was that they are not keen. The reason is because they want to pass on their homes as inheritance to their children even though their children are not paying for their upkeep. As parents, they are amazing but as claimants on taxpayers’ monies used in substitution for their upkeep, they become what economists refer to as “free riders”.
Private inheritance comes at a cost of public funds. This also means that there is less money for helping a person who may have a more pressing need for assistance. Again, this may be a hard argument to make to the elderly couple, but if we do not, we will be a nation of ComCarers, with a large budget. And there is no large budget without large taxes.
At some point in time, as our social spending increases, we will have to make hard decisions on whom we should support through social assistance so that we can keep public spending lean and only to be given to the truly need it, while we focus on making our safety “trampoline” — a phrase made popular by Senior Minister Tharman — springier.
The final area I wish to touch on in my speech concerns the development of entrepreneurial talent undertaking sustainability initiatives that can generate carbon credits for use by businesses to offset carbon tax.
I support the move to increase the carbon tax as part of Singapore’s commitment to reduce emissions and tackle climate change.
I note with interest that the hon Minister intends to allow businesses to use high quality, international carbon credits to offset up to 5% of their taxable incomes in lieu of paying carbon tax.
What I wish to explore is whether assistance may be provided to entrepreneurial businesses in Singapore which have promising sustainability projects but lack the scale necessary to attract carbon credit financing.
One suggestion I have is for Government or Statutory Boards to partner these businesses in the provision of services such as waste to energy plants to power lamp posts in business parks.
With established track records, these Singapore businesses would be able to establish good branding and reputation as leaders in this field, venture into the region or beyond, and undertake larger scale projects to reduce carbon emissions that can be financed through carbon credits.
Through this we would have developed a value proposition for Singaporean businesses and allow them an opportunity to participate in the international carbon credit value-chain.
Sir, that I am able to speak of carbon credits, long-term spending on climate resilience and the structure of taxation, in the middle of a global pandemic and a military invasion that has impacted the entire world, speaks to how important peace and stability are to a small state.
We cannot take this for granted. It is not the natural position of price takers. But while we cannot determine our own price, we can continue to write our own destiny as long as we are a sovereign state, with the will and wherewithal to defend it. To continue to write each page, requires resources and careful husbandry of what we have. This is what our Budget does, and this is why I support it.